peHUB Wire: Wednesday, January 20, 2010

Just a few quick notes, as I’m running a bit behind schedule:

*** In October, I wrote the following after returning from the Quebec City Conference: “Terry McGuire of Polaris Venture Partners said in Quebec that the future of venture capital would be smaller funds and smaller partnerships. He declined to say if that applied to Polaris itself – methinks it does, as the firm is expected to fundraise next year.”

Yup, it does. Polaris is targeting $500 million for its sixth fund, after raising $1 billion for its fifth fund in 2006. I know of at least one current partner who isn’t part of the new effort, but will hold his name for a little while longer in order to give him adequate time to comment. If you’d like a hint, he’s based in Boston and focuses on IT.

In general, however, it appears that most of the inves! tment staff will stay put. This includes the growth equity/buyouts group. One change, however, is that Polaris will no longer use the managing general partner title, which had been shared by McGuire, Jon Flint and Alan Spoon. It’s a bit of organizational flattening that probably plays well with younger partners.

*** Heard some rumors that Battery Ventures had closed its new fund, but it hasn’t. Allocation requests are due by the end of this month, and the firm is targeting late February for a final close.

*** Final VC fund-raising note: Draper Fisher Jurvetson is taking a very long time to raise its tenth fund. It began in late 2008 with a $600 million target and later cut it to $400 million. A regulatory filing from last July shows $200 million in commitments, and an LP source says it’s now closer to $250 million.

Not an awful showing, but not good for such a marquee name that cut its carried interest from 25% to 20 percent. Got! to wonder if all those affiliate funds have diluted the DFJ brand. Al so got to wonder if that brand no longer has the same value to affiliates as it once did…

*** Advanced Equities has removed any mention of its London, New York and San Francisco offices from its website. Not quite sure why, as the old phone numbers still work. I put in a call to Chicago HQ, but didn’t hear back. In unrelated news, the firm was hit with a sexual harassment suit just before Christmas, by a recently-fired female staffer. The boss she claims harassed her no longer works at Advanced Equities.

Top Three

Providence Equity Partners has agreed to sell movie theater chain Kerasotes Showplace Theatres to AMC Entertainment Inc. for an undisclosed amount. Kerasotes owns 96 theaters and 973 screens, primarily in the Midwest. AMC is a portfolio company of JPMorgan Partners, Apollo Management, Bain Capital, The Carlyle Group and Spectrum Equity Investors.

ACTIV Financial, a New York-based provider of financial market data solutions, has raised $23.5 million in VC funding from Bessemer Venture Partners.

David Jackson has resigned as CEO of Isthimar World, the investment arm of state-owned Dubai World. He will be replaced by chief investment officer Andy Watson.

VC Deals

FloDesign Wind Turbine, a Wilberham, Mass.-based developer of wind turbines, has raised $34.5 million in Series B funding. Return backer Kleiner, Perkins, Caufield and Byers was joined by new investors Goldman Sachs, Technology Partners and VantagePoint Venture Partners. The company previously raised $5.5 million, plus an $8.3 million DoE grant.

City Media, a Chinese provider of in-elevator media content, has raised $30 million from Northern Light Venture Capital, according to a Chinese press

Virtify Inc., a Cambridge, Mass.-based provider of enterprise content compliance solutions, has raised $15 million in new funding led by Tudor Ventures. !

FlatFrog Laboratories AB, a Lund, Sweden-based maker of optics-based multi-touch kits and subsystems, has raised €12.5 million in new VC funding. Invus and Promethean co-led the round, and were joined by return backer Sunstone Capital.

SMS GupShup (fka Webaroo), an Indian mobile social network with 26 million users, has raised $12 million in second-round funding. Globespan Captial Partners led the round, and was joined by return backers Charles River Ventures and Helion Venture Partners.

Ecobee, a Toronto-based smart grid startup, has raised C$6.73 million in VC funding. Backers include the Ontario Emerging Technologies Fund, JLA Ventures and Tech Capital Partners. < br>

Sauce Labs, a San Francisco-based developer of open-source, cross-browser software testing solutions, has raised $3.1 million in Series A funding led by the Contrarian Group, Peter Ueberroth’s investment management firm.

Lumigent Technologies Inc., an Acton, Mass.-based provider of data auditing for compliance and security, has raised $3 million in new VC funding from North Bridge Venture Partners. It had raised a $6 million recap round last year from North Bridge.

Ember Corp., a Boston-based provider o! f wireless “smart meter” technologies, has raised $5 million in venture debt funding from Wellington Financial. It previously raised around $89 million in VC funding from Chevron Technology Ventures, Stata Venture Partners, Polaris Venture Partners, GrandBanks Capital, RRE Ventures, Vulcan Capital, DFJ ePlanet Ventures, New Atlantic Ventures and WestLB Mellon Asset Management.

Buyouts Deals

Baird Capital Partners has formed American Auto Auction Group LLC, as an acquisition platform focused on the whole-car auction market. Its first two portfolio additions are Charleston Auto Auction of Moncks Corner, S.C., and Rea Brothers Mid-South Auto Auction of Pearl, Mississippi. No financial terms were disclosed.

RHEA Investments has agreed to acquire a majority stake in SETA Medical Products, a Turkish maker of disposable medical products like surgical drapes and gowns. The investment will be made via RHEA’s venture capital trust, Vakýf Girisim (Istanbul Stock Exchange: VKFRS).

THL Credit has sponsored a recapitalization of Anytime Fitness, in partnership with the company’s founders. No financial terms were disclosed. Anytime Fitness is a fitness club franchisor with over 1,200 clubs and 800,000 members.

PE-Backed IPOs

Ironwood Pharmaceuticals Inc. (f.k.a. Microbia), a Cambridge, Mass.-based antibacterial drug company focused on gastrointestinal disorders, has set its IPO terms to 16.67 million common shares being offered at between $14 and $16 per share. It plans to trade on the Nasdaq under ticker symbol IRWD, with Credit Suisse, J.P. Morgan and Morgan Stanley serving as co-lead underwriters. The company has raised over $250 million in total VC funding since 1998, from firms like Ridgeback Capital (13.41% pre-IPO stake), Venrock (11.27%), Polaris Venture Partners (8.14%), Morgan Stanley (6.9%), Fidelity Biosciences and Paperboy Ventures.

PE-Backed M&A

PacketExchange Ltd., a London-based provider of wide-area Internet exchange services, has agreed to acquire network services provider Mzima Networks.No financial terms were disclosed. PacketExchange has raised around $17.5 million in VC funding, from firms likeDFJ Esprit and Bank of Scotland Growth Equity.

Tegra Medical, a portfolio company of Riverside Partners, has acquired CTW Inc., a Hernando, Miss.-based outsourced manufacturer for medical device OEMs with a particular focus on orthopedics. No financial terms were disclosed.

PE Exits

Verari Systems, a San Diego-based provider of data center consolidation platforms, said that most of its assets have been purchased by company founder David Driggers. No financial terms were disclosed. Verari laid off most of its employees last month, as part of what the company called a “controlled reorganization.” It had raised over $80 million in VC funding, from firms like Celerity Partners, Carlyle Venture Partners, Sierra Ventures and Voyager Capital.

Firms & Funds

CBPE Capital, a UK-based mid-market private equity firm, has closed its eighth fund with £405 million in capital commitments. The firm began fundraising in Q4 2008, and held a £270 million first close last April. Its seventh fund closed on £360 million in 2004.

Clearlake Capital has closed its second fund with more than $410 million in capital commitments. The New York-based turnaround firm was founded in 2006, in partnership with Reservoir Capital Group.

Human Resources

CIT Group Inc. named director Peter Tobin as acting CEO, while the board looks for a permanent successor to Jeffrey Peek, who stepped down as chairman and CEO last Friday.

Justin Bastian has joined the Palo Alto, Calif. office of law firm Sidley Austin as a partner. He previously was a partner with Morrison & Foerster.

Dan Golding has joined boutique investment bank DH Capital as a managing director, with a focus on the Internet infrastructure sector. He previously was a VP of research with Tier1 Research.

Neil Harvey has joined Credit Suisse’s asset management group as a managing director and head of Asia-Pacific and emerging markets. He previously was with Renaissance Group as deputy CEO and chairman of international operations.

Barbara Jones, Stephen Adams and Robert Puopola have joined the Boston office of Greenberg Traurig LLP as shareholders in the law firm’s corporate and securities practice. Jones previously was co-chair of capital markets with McDermott Will & Emery, while Adams and Puopola were with Goodwin Procter.

John Novak has joined Paine & Partners as a princ! ipal in the firm’s Chicago office. He previously was a vice president with Swander Pace Capital.

Bruce Schulman has joined NGP Energy Technology Partners as a managing director. He previously was with Saw Mill Capital.