peHUB Wire: Wednesday, February 25, 2009

There has been lots of back-and-forth this week about how venture capitalists are “paralyzed,” or at least how seed-stage companies are starving for dollars (more than usual, that is). Some of this has played out in the NYT and WSJ editorial pages, some has played out in the VC blogosphere and some has played out in my inbox.

So I figured it was worth doing some MoneyTree data runs, in order that we may all argue with a common set of numbers. Each run includes the years 1995-2008, and only relates to investments in U.S.-based companies. For context, Yahoo was first funded in 1995, eBay and in 1997, Google in 1999, EqualLogic in 2001 and Facebook in 2005. The spreadsheets can be found here. For the link-averse, what follows are three quick (and surprising) takeaways:

• The number of seed-stage companies funded in 2008 was higher than in any year between 2001 and 2006.

• The number of early-stage companies (non-seed) funded in 2008 was higher than in any year between 2002 and 2006.

• Overall VC investment did drop in Q4 2008, but the number of seed and early-stage deals (combined) done in Q4 was greater than in any quarter between 2002 and 2006.

To be clear, I’m perfectly willing to acknowledge that this data is imperfect. But, that said, any methodological faults should be fairly consistent over time. In other words, pay more attention to the trend-lines than to the specific numbers. And then feel free to comment on how the above data points seem totally betrayed by anecdote.

*** More tough news from the mid-market lending world, where Chicago-based Freeport Financial has laid off most of its employees. The remaining skeleton crew will continue to manage the existing portfolio, but new loans seem unlikely. More info here, including a statement from Freeport sponsor Stark Investments. We also expect to have similar info from other firms up at peHUB later this morning.

*** I had lunch Tuesday with a local venture capitalist, who asked me if I thought the personnel shakeout would be more severe in the VC or buyout industry. In terms of bodycount, it would have to be buyouts, just because the typical buyout firm has so many more employees than does the typical VC firm. But in terms of percentages, I don’t really have an educated guess.

Word keeps coming in about VC firm layoffs, but they’ve been particularly tough to pin down (save for certain situations, like Atlas Venture). We also hear that some buyout firm layoffs have been worse than the firms have let on…

*** Follow-up: Seems US Air will no longer charge for sodas or bottled water, beginning next month. About time. Still, Virgin Atlantic is my new favorite thing. Too bad it doesn’t fly to Denver…

*** We’ve got a spiffy new media kit for peHUB and peHUB Wire. If your firm has interest in advertising, shoot me an email and I’ll send over a copy.

Top Three

Welsh Carson Anderson & Stowe has acquired a majority stake in GeoDigm Corp., a provider of provider of rapid-prototyping production technology for the fabrication of dental prosthetics. WCAS said that it plans to invest at least $100 million of equity capital to support GeoDigm acquisitions, including a new deal for Green Bay, Wis.-based dental lab Lord’s Dental Studio.

Dynogen Pharmaceuticals Inc., a Waltham, Mass.-based drug company focused on gastrointestinal and genitourinary disorders, has filed to liquidate under Chapter 7 bankruptcy protection. It listed liabilities of $10.6 million, and assets of less than 20,000. The company last year scrapped plans to go public via a reverse merger with a SPAC called Apex Bioventures Acquisition Corp., and said it would seek out new funding. As of that time, Dynogen had raised around $67 million from firms like Atlas Venture, HealthCare Ventures, Oxford Bioscience Partners, Abingworth Management, Medica Venture Partners and Pappas Ventures.

Julian Horn-Smith, former deputy CEO of Vodafone, has joined CVC Capital Partners as a senior advisor.

VC Deals

Ocarina Networks, a San Jose, Calif.-based developer of online storage optimization solutions, has raised $20 million in Series B funding. Jafco Ventures led the round, and was joined by return backers Kleiner Perkins Caufield & Byers and Highland Capital Partners. The company previously raised $11.3 million.

Selecta Biosciences Inc., a Watertown, Mass.-based biopharma company focused on the development of immunomodulatory nanoparticles, has raised $15.1 million in Series B funding. Return backers Polaris Venture Partners and Flagship Ventures were joined by NanoDimension and Timothy Springer. The company previously raised $2.3 million.

Imagini, a UK-based developer of technology that helps online publishers and retailers understand their target market, has raised $13.5 million in second-round funding. Backers include Horizon Ventures, NorthZone Ventures and Atomico.

Apparent Networks Inc., a Wellesley, Mass.–based provider of IT performance management solutions, announced that it has raised $12 million in Series C funding. Egan-Managed Capital led the round, and was joined by return backers Bain Capital Ventures, JMI Equity and Business Development Bank of Canada. The round closed last November, and brings Apparent’s total venture capitalization up to around $36 million.

Appirio, a San Mateo, Calif.-based provider of products and services that help businesses accelerate adoption of on-demand solutions, has raised $10 million in Series C funding from GGV Capital and return backer Sequoia Capital. Appirio raised a $5.6 million Series B round last year led by Sequoia Capital, and before that raised $1.1 million from and individual angels.

Aveksa Inc., a Waltham, Mass.-based provider of enterprise access governance solutions, has raised $10 million in Series C funding. FTV Capital led the round, and was joined by fellow return backers FirstMark Capital and Charles River Ventures. Aveksa had previously raised around $20 million.

Aster Data Systems, a Redwood City, Calif.-based provider of analytic databases for frontline data warehousing, has $5 million in additional Series B funding from Institutional Venture Partners. This brings the round total to $17 million, following a first tranche from Jafco Ventures, Sequoia Capital, Cambrian Ventures and First Round Capital. The company had previously raised $10 million.

Topaz Bridge Corp., a Bellevue, Wash.-based provider of a software application that integrates SAP software with Microsoft SharePoint, has raised $2 million in the first tranche of its Series B round. No investor information was disclosed. The company plans to raise up to $10 million.

Buyout Deals

Chris Flowers said yesterday that his firm, JC Flowers & Co., is prepared to accept dilution of its 24% stake in troubled German bank Hypo Real Estate (DE: HRXG), depending on terms of the deal.

Fortunoff Holdings could begin liquidating as early as today, after a group of six liquidators won a bankruptcy auction for the company on Monday. The company filed for Chapter 11 last month, around one year NRDC Equity Partners had bought the company out of a previous bankruptcy.

A Hong Kong court has deferred a hearing on the $2.2 billion take-private for telecom company PCCW Ltd. The move was made to give securities regulators time to submit evidence on an investigation into alleged vote buying.

Shenzhen Development Bank is expected to return to local ownership, if TPG Capital can unload its 17% stake, once a lock-up expires next year. TPG owns the position via its Newbridge Capital affiliate. One potential buyer could be China Development Bank.

PE-Backed M&A

SchoolNet Inc., a New York-based developer of instructional management software for K12 school districts, has merged with CampusWare, a San Antonio, Texas-based provider of a Web-based and standards-aligned district grade book. No financial terms were disclosed. SchoolNet has raised around $41 million in VC funding from The Carlyle Group, Ascend Ventures, Hamilton Lane and the New York State Common Retirement Fund.

PE Exits

Corpak MedSystems has sold selected assets of its Stackhouse division – which makes surgical helmet filtration and smoke evacuation systems — to Ecolab Inc. for an undisclosed amount. Corpak is a portfolio company of Linden LLC.

CSG Openline has acquired BlueRoads Corp., a San Mateo, Calif.-based provider of partner opportunity management solutions. No financial terms were disclosed. BlueRoads had raised around $31 million in VC funding from firms like ArrowPath Venture Capital, Cardinal Venture Capital, El Dorado Ventures and ZenShin Capital.

Netezza Corp. (NYSE: Arca: NZ) has acquired Tizor Systems Inc., a Maynard, Mass.-based provider of enterprise data auditing and protection solutions for the data center. No financial terms were disclosed. Tizor Systems had raised around $26.6 million in VC funding, from firms like Hummer Winblad Venture Partners, Longworth Venture Partners, Masthead Venture Partners, Navigator Technology Ventures and Common Angels.

Firms & Funds

Hellman & Friedman has held a $6 billion first close on its seventh fund, according to LBO Wire. The firm is targeting $10 billion.

Locust Walk Partners has launched as a strategic and transactional advisory firm for the life sciences market. It has offices in Boston and Philadelphia, and is led by industry vets Geoff Meyerson and Jay Mohr.

Human Resources

Northern Trust has named James MacDonald as chief investment strategist. He previously was director of equity research.

David Welp has joined Morgan Creek Capital Management as a vice president. He previously was with the Lehman Brothers fund-of-funds team.

Mike Andres has joined BIA Capital Strategies as a managing director. He was previously with BMO Capital Markets.