Abandoning plans to launch its own Internet company dedicated to managing chronic medical conditions, cellular communications provider Nokia Corp. recently committed capital and corporate resources in return for approximately a 20% stake in LifeChart.com.
Last month, Mountain View, Calif.-based LifeChart.com raised $25 million through a combination of debt and venture financing. Nokia, which invested $3 million in the round, has also given the company access to its research lab, 10 employees and a regional office near its headquarters in Helsinki.
The Series C round also included commitments from Johnson & Johnson Development Corp., which owns nearly 10% of the company, the Finnish National Fund For Research and Development (SITRA) and individual investors.
“Nokia approached us with a similar idea about 15 months ago at a disease management trade show,” said Chief Operating Officer John Hyle. “We looked at each other’s products and realized that they were remarkably similar…we were like twins born on opposite sides of the world.”
Nokia will merge its health-related wireless applications businesses, which treat conditions such as diabetes, with LifeChart.com’s core businesses that treat asthma sufferers. LifeChart.com will realize revenue through subscriptions, e-commerce and Internet advertising.
The company, which recently began a pilot program with the Department of Defense, has more than 5,000 subscribers and said Glaxo Wellcome Inc. is the largest of its 15 corporate customers.
Hyle said LifeChart.com may go public as early as the first half of next year. In the interim, the company could raise another strategic round of private equity, he said.
As part of the deal, Tuamo Alamaki of Nokia and Hannu Hanhijarvi of SITRA have joined the company’s board of directors.
“This is a new business and a new concept still open to future development,” Alamaki said. “The company has to be involved in heavy research and development as well as marketing and sales.”
– B.S.
Xoma Knocks Out $17M Financing
Biopharmaceuticals developer, Xoma Ltd. raised $17.4 million last month through the private sale of approximately 3 million common shares, according to documents filed with the Securities and Exchange Commission.
Sutro & Co. and Arnhold & S. Bleichroder acted as placement agents.
The common shares were bought at $5.75 per share.
Proceeds will be used to fund the continued development of products from its bactericidal/permeability-increasing protein drug development platform. – L.M.M.
Birthday Express.com Opens $13M Package
The founders of Birthday Express.com credit the $13.1 million second round of venture financing the company raised last month to more than an ability to blow out candles.
The Seattle-based company, which was incorporated in 1994 and currently ships products to more than 360,000 birthday parties annually, has also allocated $12 million of its own capital to support its e-commerce business.
ARCH Venture Partners of Seattle led the Series B round, which closed last month, with a $5 million investment. Additional commitments came from Advanced Technology Ventures and Sigma Partners. Birthday Express.com raised an angel round last October. The company was originally funded by a $1.5 million investment from its Chief Executive Mike Jewell. No placement agent was used for the deal.
“Most emerging growth companies don’t have a revenue base,” Jewell said. “Our existing direct merchant operations has allowed us to become the leader in the e-commerce party supplies category.”
Proceeds from the investment will be used for the company’s e-commerce marketing campaign, which will include direct mail and advertisements in parenting and lifestyle magazines, and to expand into other celebration categories including milestones, special occasions and holiday party supplies.
Jewell said the company will either go public or become part of a larger e-commerce enterprise focused on building shopping centers or the children’s market in the next 24 months.
As part of the deal, ARCH Partner Bob Nelson joined the Birthday Express.com board of directors.
“We are always more excited about an IPO than acquisition,” Nelson said. “But if you look at how deep their customer base is in the parent demographic, it is a real opportunity for a potential acquirer to leverage into the space.” – B.S.
Daou Becomes One with $12M
Daou Systems Inc. of San Diego, Calif., raised $12 million last month through the private offering of approximately 2.181 million shares of series A preferred stock, according to a Securities and Exchange Commission filing.
The shares were bought by Galen Partners III LP, Galen Partners International III LP and Galen Employee Fund III LP for $5.50 per share.
The shares carry an annual dividend of 6% payable in shares of series A preferred.
Each share is convertible into one share of common stock at $5.50 per share.
Proceeds will be used for working capital purposes.
Daou is a provider of integrated information technology solutions and services to the health-care industry. – L.M.M.
Internet Broadcasting Raises $12M Round
If you can’t beat em, joint venture with em?
Local television broadcasters, fearful that increased Internet usage will further erode their audience share, are aggressively extending into online services to ensure their relevance in interactive media. To date, five local broadcasters have allied with Internet Broadcasting Systems Inc. (IBS) of New York to build new media properties.
On July 27, IBS raised $12.8 million in its second round of venture financing. The round was led by strategic investor CanWest Global, a Canadian broadcaster. Additional commitments were made by St. Paul Ventures, the lone investor in the IBS’ first institutional round that closed in 1998, Global Communications Ltd., Key Enterprises LLC, Brightstone LP and Dougherty Summit Opportunity Fund. The company’s angel investors also participated in the round.
“We anticipate spreading to 50 out of the top 75 markets in the next two years,” said Chief Executive Tolman Geffs. “We will likely raise another private round from strategic and institutional investors prior to a likely public offering in 2000.”
IBS currently co-manages Internet sites with stations owned by CBS Corp. and Scripps Howard & Co., both active venture investors in new media. Geffs would not confirm whether IBS has discussed equity deals with either media corporation. IBS retains 50% ownership in all new media properties it creates with broadcast partners and derives revenue from advertising, sponsorships and e-commerce. – B.S.
Buyingedge.com Squares Away $10M
After formally spinning off from its parent, Information Management Associates (IMA), in May, Buyingedge.com, a reverse auction e-commerce company, raised $10 million August 12 in its first round of venture financing.
@Ventures, the venture capital arm of Andover, Mass.-based CMGI Inc., led the Series A round with a $7.5 million investment in the Menlo Park, Calif.-based company. Buyingedge.com also received a $2 million commitment from original IMA investor Wand Partners Inc., as well as a $500,000 investment from Madrona Investment Group LLC. The investment syndicate controls approximately 29% of the company.
“We wanted an investment partner that provides financial resources in addition to Internet contacts and Internet financial intelligence,” said Buyingedge.com Chief Executive Gary Martino. “CMGI was one of the few names that hit that radar.”
Publicly traded IMA designs software for telephone call centers. Last year Martino, who also serves as IMA’s chairman, and IMA CEO Al Subbloei began incubating Buyingedge.com. Subbloei is chairman of the Buyingedge.com board of directors, which also includes Brad Garlinghouse of CMGI and Eric Jeck of Wand Partners.
“This is the first spin-off we have done from a publicly-traded company,” Garlinghouse said. “It is kind of like a start-up in that people within a small public company had a great idea and began building it internally.”
Buyingedge.com provides more than 20,000 members with the opportunity to negotiate for the lowest prices possible from more than 4,000 vendors of consumer goods and services. Unlike other reverse auction services, Buyingedge.com does not force users to name their price before making a purchase decision, and enables buyers to terminate a transaction at any time.
“Buyingedge.com has a low-touch business model similar to eBay and Priceline.com,” Garlinghouse said, adding that the customer does not have to go through many layers to consummate a purchase. “High-touch factors typically have comparatively lower gross margins.”
Proceeds from the investment will be targeted to sales and marketing, including direct marketing and print and radio advertising, Web site development and strategic alliances.
Martino said the company will likely raise another private round that would include a combination of existing investors and strategic partners, although he did not say when this would occur. – B.S.
eCommercial.com Nears Close of $8M PIPE
Claiming an advantage in growing an early-stage company through the public markets rather than private equity financing, eCommercial.com earlier this month raised $5 million through a private placement. The Aliso Viejo, Calif.-based company plans to raise an additional $3 million by Aug. 31.
eCommercial.com produces interactive video advertisements via the Internet for customers that include Autobytel, MCA Records and the pop-rock band Hanson. Formally incorporated April 19, the company’s shares have been traded over the counter since April 28.
“We did not want to be incubated through traditional VC rounds,” said Chief Financial Officer Mike Frigdl. “It’s hard to build a profile as a private company, this is a quicker road to take.”
eCommercial.com sold 625,000 shares of Series B preferred stock, at the offering price of $8 per share, to a group of strategic and financial investors led by KSH Investment Group of New York. The Series B investors purchased approximately 10% of the company, Frigdl said. He added that the company may raise an additional round of private financing before it secures a Nasdaq listing, which is planned for November. – B.S.
Hotlinks Nets $2M Seed Round
Another early-stage company has raised venture capital without having to divulge the full scale of its product.
Hotlinks, a new company in the midst of developing an Internet navigation system that aggregates Web sites and eases navigation, recently raised $2 million in its Series A financing from @Ventures, the venture capital arm of CMGI.
“They allow people to build personal directories where they can go out and cut different pieces of the Web into their own search engine,” said Jon Callaghan, an @Ventures partner and Hotlinks board member.
The company’s service, which focuses on the personal interests, knowledge and favorite Web sites of its users, creates a simpler way to navigate the Internet. Abrams said the idea came from experiences gathered during his time as an engineer at Netscape.
The Mountain View, Calif.-based company has slated proceeds from the financing to build out the corporate infrastructure and prepare for a full product launch later this quarter, said Jonathon Abrams, founder of Hotlinks. Following initial expenditures on marketing and hiring additional staff, Abrams said the company will follow an aggressive fundraising program, although he would not disclose details.
“A portion will go into initial marketing plans, but we will have a different plan following the launch,” Abrams said. – G.M.
Chase Strikes Two LatAm Internet Deals
Chase Capital Partners has just closed on two Internet deals in the Latin American region, said Susan Segal, Latin American group head at Chase Capital Partners (CCP).
Segal said both sites – Viajo.com, and Sportya.com – are regional plays, rather than country-specific, and both are start-up companies. The firm invested a small amount of money in each deal, she said, declining to provide further details. Currently, both sites are available only in Spanish.
Last spring, Segal announced Chase would be actively seeking to invest in vertical, or single-subject portals. Both Viajo.com and Sportya.com are vertical portals.
CCP’s strategy in the region is to invest in Latin Internet companies at all stages, including start-ups. Chase enlisted its affiliated fund, Flatiron Partners for its Internet expertise for the ventures.
Chase Capital has invested $25 million in StarMedia Networks, and owns slightly under one-third of the company (PEW Oct. 19, 1998, p. 3). StarMedia held its initial public offering three months ago.
“It IPOd at 15, now it’s trading at about $30 a share,” said Mark Yung, an analyst with CCP’s Latin American group.
Three-year-old StarMedia operates the largest Internet portal in Latin America. StarMedia offers 16 “channels” in both Spanish and Portuguese on everything from sports and entertainment to breaking news.
CCP’s investments come at a time when many private equity investors for the region are investing in risk-averse industries and sectors, most notably infrastructure. Regarding Internet investing itself, some GPs and LPs feel business-to-business investing makes more sense right now in Latin America.
“Businesses have faster access to lines,” said Ernest Bachrach, chief executive of Advent International Corp.’s Latin American group. “The disposable income [of the major Latin American economies], is still too low to make widespread use of the Intenet [feasible]. And there’s a more immediate economic return in systems integration and software,” he added.
Boston-based Advent bought a 25% stake in Microsiga Software S.A., in April. Sao Paulo-based Microsiga produces Enterprise Resource Planning software for midsize companies.
Jacques Gliksberg, a managing director in the Latin American group of BancAmerica Equity Partners, said, “It’s not clear what segments of the Internet business are going to be successful in Latin America. [For example] Telefonica is saying it’s going its going to provide free ISP access in Brazil. We don’t know what effect that will have.”
Still, Segal and her team are not deterred. Although the estimated number of Internet users in Latin America ranges from less than 1 million to as much as 7 million, that number is predicted to grow to nearly 35 million by 2001, according to a Nazca Satchi & Satchi survey. – H.M. Werner
Yupi Closes Sony Financing
Miami Beach-based Yupi.com received an equity commitment two weeks ago as part of a new strategic relationship with three divisions of Sony Corp. – Sony Corp. of America, Sony Pictures Entertainment and Sony Music Entertainment.
Oscar Coen, Yupi’s president and chief executive, said the new relationships were intended to help his company access Sony’s technology and entertainment expertise. In particular, he cited Sony’s Internet service provider in Japan, as well as the strength of the Sony brand in Latin America.
“The spirit of the agreement is to use the technology and promotional activities within each group,” Coen said. “
The size of the round was not disclosed, but Coen said each division took a minority stake. No other investors participated in the round. Yupi raised $13 million in April from Interprise Technology Partners and IFX Corp. (PEW May 31, p. 3).
Yupi operates a network of Spanish language content sites that includes a search engine, 12 navigational changes, e-mail, chats, forums, greeting cards, homepage creation and hosting. – G.M.
Veronis Suhler Notches First Two Fund III Deals
In its first transaction since closing earlier this year, VS&A Communications Partners III acquired HCIA, a Nasdaq-listed health care information service company, in a deal set to close late in the third quarter or beginning of the fourth quarter. The deal, in which HCIA shareholders will receive $11 a share, is valued at $135 million, said Jeffrey Stevenson, Veronis Suhler president and managing general partner. HCIA has approximately 11.851 million shares outstanding.
Stevenson said Baltimore-based HCIA is the first health-care information company his group has acquired, and it will serve as a platform company for other health-care, hospital, pharmaceutical, and managed-care company add-ons.
HCIA, with approximately 500 employees and $65 million in 1998 sales, collects data from hospitals, managed care and insurance companies, federal and state governments, physicians and patients. It distributes this information to its 7,000 customers that include hospitals, insurance companies and pharmaceutical companies.
HCIA’s share price dropped to approximately $3.75 per share this Spring, driving management to seek alternative avenues to increase shareholder value, said George Pillari, chairman and chief executive of HCIA. In May, the company hired Deutsche Banc Alex. Brown to evaluate alternatives that resulted in this agreement with VS&A, Pillari said.
Managed by Veronis, Suhler & Associates, VS&A Communications Partners III closed on $1 billion earlier this year to focus on investments in the media, new media, publishing, broadcasting and communications industries (PEW Feb. 15, p. 6).
Following the close of the transaction, which is expected late this quarter or early in the fourth quarter, HCIA intends begin acquiring additional health-care content providers.
“The Internet and pharmaceutical spaces are underserved with quality content providers,” Pillari said. “There is a decent field of candidates, but those [sectors] would be the ones we lean toward.”
VS&A Communications Partners III this month also saw action on a second deal, agreeing to purchase Hanley-Wood, a Washington, D.C.-based business-to-business publishing company in a deal reportedly valued at $250 million.
This comes three months after Michael Hanley, chairman of the board of Hanley-Wood, announced his decision to retire and seek a buyer for the company.
The company retained Morgan Stanley Dean Witter to manage the sale. With access to more capital, the company will be looking for acquisitions in and outside its core business market, the residential construction industry. Hanley-Wood employs 380 people and publishes 26 different titles. – Leslie Green/G.M.
SKM’s ATP Completes Four Deals in a Short Time
Applied Technology Partners (ATP), a Saunders Karp & Megrue holding company, in the last three months has completed the acquisition of four companies in the plastic and rubber industry, said Thomas Deas, ATP’s chief financial officer.
Radnor, Pa.-based ATP, which focuses solely on rubber and plastics manufacturing companies, targets companies that are preferred suppliers to their industrial customers. The four recent acquisitions – Tri-Molded Plastics, Apollo Packaging, Cascade Die Molds and A.K. Rubber Products Co. – all fit this profile, Deas said.
ATP financed the acquisitions with $100 million in equity from Saunders Karp & Megrue and a $113 million syndicated credit facility arranged by Gleacher & Co. Harvey & Co. also provided equity on the deals.
Saunders Karp & Megrue Principal James Dworkin said these deals have been good for ATP because each add-on has a senior executive that has stayed with the company through the acquisitions – thereby making the consolidation easier for ATPs’ president and CEO Raymond Langton, he said.
Since forming in 1997, ATP has acquired six companies and invested approximately $120 million in an effort to become an integrated supplier of plastic and rubber components. The six manufacturing companies under the ATP umbrella all are located in the Northeastern and Midwestern U.S. The company plans to acquire four to six companies per year for the next several years, Deas said. – L.G.
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