peHUB Wire: Wednesday, July 8, 2009

Lots of news today, so just some quick notes to get us started:

*** Venture capital funds raised just $5.1 billion in the first half of 2009, according to data released this morning by Dow Jones. This represents a 63% drop from the same period last year, and is the slowest first half since 2003.

The decrease was felt across sub-asset class. Early-stage firms raised $2.7 billion for 36 funds, compared to the $5.2 billion raised by 43 funds in the first half of 2008. Late-stage firms were off more than 53%, while multi-stage funds were down more than 68 percent.

Expect these numbers to be largely mirrored in an upcoming report from the National Venture Capital Association and Thomson Reuters. Preliminary data indicates that the overall first-half total will be a bit higher, but the year-over-year change is virtually identical. As of last check in the VentureXpert database, U.S.-based VC funds raised just over $2 bil! lion in Q2 2009. That’s more than a 50% drop from Q1 2009, and a 79% drop from Q2 2008.

*** Quantcast, a San Francisco-based provider of online audience analytics, is looking to raise around $50 million in Series C funding at a $300 million pre-money valuation. One source tells me that the company has already received multiple term sheets, but no word on identities of the lead investors (maybe strategic?) or if the offered terms match what QuantCast is seeking.

The raise coincides with a strategic evolution for Quantcast, which recently rolled out a targeted ad platform that utilizes its direct measuring software. You can get some additional info here.

*** I reported yesterday at peHUB that BlackRock is raising $500 million for its second TALF fund.

Two other pieces of semi-related info: (1) Expect BlackRock to also begin raising a PPIP fund, once Treasury makes its formal announcement — which was supposed to be “any day now,” a bunch of days ago; (2) PE Insider today reports that BlackRock came up short on its latest fund-of-funds offering, closing at $790 million compared to a $1 billion target.

*** There’s been a lot of renewed blog chatter over the vitality/morbidity of the VC model, and I think we need to draw some distinctions.

The VC model itself is okay, as I first wrote when Sevin Rosen Funds declared it dead a few years ago. The issue is that too many “VC” firms strayed from the model. The VC industry, on the other hand, is on death’s door. After all, an asset class is hardly sustainable when its median players have lost money over the past decade.

The real question, therefore, is if the VC industry’s plight will impact those who have stayed true to the VC model.

*** Where in the World: I’ve agreed to moderate a panel at the Fortune Brainstorm: TECH conference, which is being held on July 22-24 in Pasadena, California. Looks like a great program. Also makes me wonder if I should do an LA Shindig on short notice… Thoughts from the SoCal reader gallery?

Top Three

KKR and Bertelsmann are forming a music rights management joint venture, which will launch with a set of European music catalogs that Bertelsmann retains from a prior joint venture with Sony Corp. KKR will hold a 51% stake, with a source telling Reuters that it would invest €50 million up-front, with another €200 million in committed capital to finance acquisitions over the next five years.

Symphony Technology Group and Elliott Management have agreed to acquire MSC.Software Corp. (Nasdaq: MSCS), a provider of simulation solutions for designing and testing manufactured products. The deal is valued at approximately $360 million, with MSC stockholders to receive $$7.63 per share (13% premium to today’s closing price). Wells Fargo Foothill and CapitalSource have committed to provide senior debt financing.

Rapid Micro Biosystems Inc., a Bedford, Mass.-based developer of products for detection of microbial contamination, has raised $18.6 million in Series A funding. Backers include Kleiner Perkins Caufield & Byers, TVM Capital, Quaker BioVentures and VIMAC Milestone Medica Fund.

VC Deals

Zosano Pharma Inc. has raised $30 million in Series B funding. Nomura Phase4 Ventures led the round, and was joined by return backers New Enterprise Associates, Nomura Phase4 Ventures, HBM BioVentures and ProQuest Investments. The Fremont, Calif.-based company was founded in 2006 as a Johnson & Johnson Internal Ventures spinout from the ALZA Co., to work on several product opportunities based on the company’s transdermal microprojection delivery system. It previously raised a $90 million Series A round.

NanoBio Corp., an Ann Arbor, Mich.-based developer of anti-infective products and mucosal vaccines, has raised $10 million in additional Series B funding, closing out the round at $22 million. Venture Investors were joined by return backer Perseus LLC. The company has now raised $52 million in total VC funding, plu! s nearly $40 million in grant funding.

People Capital, an online lending exchange for student loans, has raised $500,000 in Series B funding led by The Serious Change fund.

OpenDNS, a San Francisco-basedprovider of anti-phishing, Web content filtering and DNS infrastructure, has raised an undisclosed amount of second-round funding, according to TechCrunch. Greylock Partners and Sequoia Capital came in as new investors, with Greylock’s David Strrohm and Sequoia’s Michael Goguen joining the board of directions. No financial terms were disclosed. OpenDNS previously raised $2.5 million from Minor Ventures.

Tawain Liposome Co., a developer ! of drug development technology based on a lipid formulation platform, has raised an undisclosed amount of funding from Burrill & Co. The company has offices in Taipei and South San Francisco.

CSwitch Inc., a Santa Clara, Calif.-based developer of system-on-a-chip semiconductors, has shut down and is looking for a buyer. The company had raised around $48 million in VC funding since 2004, from firms like ATA Ventures, Bay Partners, Charles River Ventures and Harris & Harris Group.

Buyouts Deals

Actis has agreed to pay $244 million for a 9.3% stake in Egyptian lender Commercial International Bank.

Cinven and Candover have asked private equity firms to resubmit bids for Springer Science and Business Media, after second-round offers came in lower than expected. The sellers are seeking €500 million for a 49% stake in Springer, a German academic publisher. Bidders include TPG Capital, EQT Partners and a pairing of The Carlyle Group with Providence Equity Partners. Apax Partners also remains interested, although did not submit a second-round bid.

Federal-Mogul Corp., controlled by Carl Icahn, is prepping a bid for the assets of bankrupt auto parts supplier Delphi Corp. Federal-Mogul previously held discussions with Delphi, before the comp! any agreed to a deal with Platinum Equity. A bankruptcy court judge has since rules that Delphi must reopen the auction process.

Insphere Insurance Solutions has been launched by The Blackstone Group, Goldman Sachs and Credit Suisse. It will offer life, health, long-term care and retirement products for small businesses and the middle-income market, and be run by former New York Life vice chairman Phillip Hildebrand. No financial terms were disclosed.

Pfingsten Partners has acquired Hy-Bon Engineering Co., a Midland, Texas-based maker of vapor recovery units. No financial terms were disclosed, except that company management will retain an equity position.

Starwo od Capital Group has agreed to buy around 240 of the 260 hotels run by Golden Tulip. No financial terms were disclosed.

Vocollect Inc., a Pittsburgh-based provider of voice solutions for workforce management of mobile workers, has raised an undisclosed amount of growth equity funding from Riverside Partners.

PE Exits

Advantage Partners hopes to find a buyer for convenience store chain am/pm Japan by September, after a proposed sale to Lawson Inc. (T: 2651) fell apart. The firm also plans to list soft drinks maker Pokka Corp. next year.

PE-Backed M&A

All Current Electrical Sales, an electrical products wholesaler owned byHigh Road Capital Partners, has made two acquisitions: Western Controls & Breakers, a Ventura, Calif.-based wholesaler of motor control products and circuit breakers;and Industrial Electric Systems, a wholesaler of circuit breakers and related accessories located near Seattle. No financial termsfor either transaction were disclosed.

Aepona Ltd., an Ireland-based provider of telecom software, has acquired Valista, a Dublin-based provider of payment, settlement and service lifecycle management solutions to mobile and broadband operators. No financial terms were disclosed. Aepona has raised nearly $50 million in VC funding from firms like Amadeus Capital Partners, Invest Northern Ireland, Polaris Venture Partners and Trinity Venture Capital.

Archway, a Rogers, Minn.-based BPO companyowned byTailwind Capital Partners and Black Canyon Capital, has acquired the supply chain management unit of Resolve Business Outsourcing Income Fund. No financial terms were disclosed.

BVK Holdings, publisher of New Track Media, has acquired CK Media LLC, publisher of quilting, sewing, and scrap-booking magazines. No financial terms were disclosed. BVK is a portfolio company of Boston Ventures.

OMNI Home Care, a Medicare home health provider, has acquired certain assets of Boynton Beach, Fla.-based Homecare Solutions Group. No financial terms were disclosed. OMNI was acquired last year by BF Healthcare Partners and the Goldman Sachs Urban Investment Group.

Firms & Funds

Bank of China’s investment banking arm plans to form a private equity fund, focused on the domestic media industry.

Pomona Capital has closed its seventh PE secondaries fund with $1.3 billion in capital commitments, according to AltAssets. It had been targeting $1 billion.

3i Group said that it halved its net debt in its first fiscal quarter, and that realizations exceeded new investments. `

Human Resources

Ken Thompson, former CEO of Wachovia Corp., has joined Aquiline Capital Partners as senior advisor, according to The American Banker. Thompson was ousted from Wachovia last year, and the company was later acquired by Wells Fargo.

Cipio Partners has promoted Diana Meyel has joined to the position of partner, within the firm’s international secondary direct investment team.