PE Week Wire 10/31-11/10

Thursday Throwback

The sky is gray, the beloved Celtics finally won a buzzer-beater and Nanosys proves that VCs can be continually pacified by the promise of products (as opposed to the public markets, which generally like to see the things). In other words, it’s time for Friday Feedback… err, Thursday Throwback.

First up was last week’s discussion of the Internet sector, which I believe is too broadly defined. Eric starts us off: “How can you consider a company like Vonage as not counting as an Internet company. The interface (telephone) is not Internet-based, but the service is unquestionably obtained via the Internet, without which, as is the case with eBay, the service wouldn’t exist. If users of eBay were interfacing with a desktop application (versus the current browser-based interface) that were updated via an internet connection, Vonage and eBay would be more comparable, but I imagine you’d still consider eBay to be an Internet company in that scenario.” Ron concurs: “Any ‘Internet company’ definition that doesn’t include Vonage is a bad definition.”

Janine picks up on a different point, which I mentioned only in passing: “Forget your new definition… Focus on your idea that maybe the whole notion of ‘Internet companies’ is obsolete (except maybe for ISPs). It made sense in 1998, but not today.” D writes: “What’s an Internet company? What’s a bubble? Reminds me of this segment of the Hichhiker’s Guide to the Galaxy film:

Dent retorts by saying, ‘Normality? We can talk about normality till the cows come home.’
Ford asks, “What’s normal?”
Trillian (who has just found out that Earth has been destroyed by Vogons) asks, ‘What’s home?’
And Zaphod, the two headed Galactic President, asks, ‘What’s a cow?’

Moving on to the week’s other big topic (as quantified by numbers of responses): The issue of VC blogging, vis-à-vis my podcast interview/Fred Wilson/etc. C writes: “I think your point on blogging is a valid one, although somewhat hard to fully support as it’s hard to know how much the blogging of a given VC cuts into his or her ‘personal’ time vs. his or her ‘work’ time… Even the most work ethic oriented LPs don’t expect their GPs to work a full 24 hours a day. Perhaps the issue is that blogging is a very visible activity, whereassitting at home, playing golf, etc. are less visible and thus less in the face of LPs (unless, of course, youmake the mistake of bragging onlineabout how your golf handicap has improved). As an aside, I think it’s interesting to note how many blogs seem to be very much ego-driven and thus take a “me-centric” approach to the content (i.e. you’re reading *my* blog, therefore you must be interested in *me*, and therefore you *must* be interested in! anything that is interesting to *me*).

Sam concurs: “I’m neither LP nor GP, but I believe you are correct on the VC blog issue. My gut says that VC blogs are driven primarily by three things: Ego (75%); Extrovert VCs who like the social interactions / it’s a hobby (20%); tting VC work done more efficiently or effectively (5%).”

On the other hand, Mario writes: “In my opinion, the reason why blogging is catching on is because you get to see something from that persons perspective. In order to understand his/her perspective it helps to know what makes them tick.” Billy: “In every endeavor, it takes all kinds – not necessarily to succeed, but to find out what will be successful. I’ve always enjoyed reading Buffet’s annual report – and have never held his stock – but I don’t think the time he takes to create it has detracted from his life-earned reputation for making money.”

Finally, there is fund-of-funds manager H: “We would be very concerned if one of the key GPsof a VC we are investors in was blogging at the expense of his job. However, I am not sure if blogging should be treated any differently from other ‘recreational’ activities a person would be engaged in regardless of his occupation. People cannot work 24 hours a day and need some times to relax or lay backor sleep… I am sure you would watch a Red Sox game from time to timeor engage in other social activities, too…

On the other hand, there have been cases where LPs were actually concerned though that the VC needed to be more focused.I recently heard commentsfrom my fellow LPs about aVC in Japanwhose fund was doing just fine, but the LPs felt that the sole key person was too engaged in political activities andnot focusing his attention enough on his job as a VC. A couple of the majorLPs have told him on numerous occasions that he needs to focuson his jobor they wouldbe uncomfortable about committing. As a conclusion,if the blogging or any other “extra curriculum activity” does not compromise the ability or work product ofa GP, we would not beconcerned.If we were concerned we may well not commit.”

 

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    Top Three

 

The Blackstone Group has agreed to acquire hotelier La Quinta Corp. and La Quinta Properties Inc. (NYSE: LQI). The total deal is valued at $3.4 billion, with Blackstone paying $11.25 per share in cash (37% premium to Tuesday’s closing price). Debt financing will be provided by Bank of America, Bear Stearns and Merrill Lynch, while Morgan Stanley served as La Quinta’s advisor. The transaction is expected to close in the first quarter of 2006. www.blackstone.com www.lq.com

PTC Therapeutics Inc., a South Plainfield, N.J.-based drug company focused on post-transcriptional control mechanisms, has raised $26.6 million in Series E-2 funding. Return backers CSFB Private Equity and HBM BioVentures co-led the deal, and were joined by Vulcan Ventures, Novo A/S, Delphi Ventures, Bay City Capital, Novartis BioVentures, Amgen Ventures and HealthCap. PTC has raised over $133 million in total VC funding since its 1998 inception. www.ptcbio.com

Candover has closed its latest European buyouts fund with 3.5 billion euros in capital commitments. New limited partners included Temasek, Partners Group, SPF Beheer and Massachusetts PRIM, while returning LPs included CalPERS, Canada Pension Plan, The Metropolitan Museum of Art, HarbourVest Partners, Princeton University and funds controlled by Standard Life. Candover used three placements agents: Benedetto, Gartland & Co. for North America, Konomi Inc. for Japan and UBS AG for the rest of the world, including Europe. The firm’s previous fund was capped at 2.7 billion euros in 2001. www.candover.com

 

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    VC Deals

 

Firefly Mobile Inc., a Lincolnshire, Ill.-based maker of mobile phones for children, has secured $26 million of a $31.8 million Series D funding round, according to a regulatory filing. Backers include Sevin Rosen Funds and ComVentures. www.fireflymobile.com

Nanosys Inc., a Palo Alto, Calif.-based developer of nanotech-enabled products, has raised $40 million in Series D funding. El Dorado Ventures led the deal, and was joined by Masters Capital, Medtronic, Wasatch Advisors and return backers Alexandria Equities, ARCH Venture Partners, CDIB BioScience Ventures, CW Group, Harris & Harris Group, In-Q-Tel, Intel Capital, H.B. Fuller Co., Lux Capital, Polaris Venture Partners, Prospect Venture Partners, UOB Hermes Asia Technology Fund and Venrock Associates. www.nanosys.com

Siimple Corp., an Arcadia, Calif.-based developer of integrated optical microsystems, has secured $20.13 million of a $23.4 million Series C funding round, according to a regulatory filing. BA Venture Partners joined return backers like Draper Fisher Jurvetson, Global Catalyst Partners, Portage Venture Partners and Zone Venture Partners. www.siimpel.com

Payment Processing Inc., a Newark, Calif.-based provider of integrated payment processing solutions, has raised $20 million in funding from the private equity arm of BlackRock Inc. (NYSE: BLK). The deal is in exchange for a minority ownership position. www.paypros.com

Quantum Leap Packaging Inc., a Wilmington, Mass.-based developer of liquid crystal polymer packaging solutions, has agreed to sell a 20% company interest to Sumitomo Chemical Co., in exchange for a $20 million equity investment. Quantum Leap previously had raised $12.5 million in VC funding from Battery Ventures. www.qlpkg.com

Ovalis Inc., a Mountain View, Calif.-based medical device startup, has raised $2.52 million in Series A-3 funding, according to a regulatory filing. Backers include De Novo Ventures, Abbot Labs and Latterell Venture Partners.

    Buyout Deals

 

Triton Pacific Capital Partners has acquired Safe Sedation Inc., a provider of anesthesiology services to ambulatory surgery centers in the greater Washington D.C. area. No financial terms were disclosed. www.tritonpacific.com www.safesedation.com

Safeguard Scientifics Inc. (NYSE: SFE) has agreed to acquire Acsis Inc., a Marlton, N.J.-based provider of enterprise data collection solutions to global manufacturers.. The deal is valued at $26 million in cash, and is expected to close by year-end. www.safeguard.com www.acsis.com

Cerberus Group has agreed to become the largest shareholder in Japanese railway company Seibu Group. The private equity firm will invest 94 million yen ($800 million) in exchange for a 30% stake, while Nikko Principal Investments Japan Ltd. will receive a 15% stake in exchange for a 47 billion yen infusion. Seibu last month said that it is looking to raise a total of 160 billion yen.

    PE-Backed IPOs

CombinatoRx Inc., a Boston-based drug company focused on immuno-inflammatory diseases and cancer, priced 6 million common shares at $7 per share (low end of revised $7-$9 range), for an IPO take of approximately $42 million. SG Cowen and Pacific Growth Equities served as lead underwriters. The company had raised around $105 million in total VC funding since its 2000 inception, including a $15 million Series E infusion last month. Backers include Canaan Partners, TL Ventures, Boston Millennia Partners, Flagship Ventures, BioVentures Investors, Global Life Science Ventures and Adams Street Partners. www.combinatorx.com

    PE-Backed M&A

SkyTerra Communications Inc. (OTC BB: SKYT), a portfolio company of Apollo Management, has agreed to acquire the remaining 50% of Hughes Network Systems Inc. that it doesn’t already own from The DirecTV Group Inc. (NYSE: DTV). The deal is valued at $100 million in cash, which SkyTerra will finance via a $100 million short-term debt financing from Apollo. SkyTerra acquired the initial 50% interest from DirectTV earlier this year for $246 million in cash and approximately $11.4 million worth of SkyTerra stock. Hughes provides broadband satellite networks and services to enterprises. www.skyterracom.com

Emcore Corp. (Nasdaq: EMKR) has acquired Phasebridge Inc., a Pasadena, Calif.-based photonics company. No financial terms were disclosed. Phasebridge has raised around $17 million in venture capital funding since its 2000 inception, from firms like Clearstone Venture Partners, Intel Capital and TriQuint Semiconductor Inc. www.emcore.com www.phasebridge.com

    Firm & Fund News

Versant Ventures, a Menlo Park, Calif.-based VC firm focused on the healthcare industry, has closed its third fund with $400 million in capital commitments. In other firm news, Versant has promoted Kevin Wasserstein to the position of managing director. www.versantventures.com

Opus Capital has been chosen as the name for the spinout firm from Lightspeed Venture Partners. PE Week has the story.

Impulso Desarrollo Empresarial, a Spain-based private equity firm, has been launched by four former executives of Santander Central Hispano, according to Expansion. The executives are Angel Corcostegui, Baldomero Falcones, Fernando Gumuzio and Concha Osacar.

    Human Resources

J. Michael Lawrie has joined ValueAct Capital as a partner. He previously served as CEO of Siebel Systems Inc. and, before that, in various executive positions with IBM. www.valueact.com

Bob Kavner and Fredric Harman have joined the board of Shop.com, a Monterey, Calif.–based online marketplace operator. Kavner serves on the board of several other technology companies, while Harman is a general partner with Shop.com shareholder Oak Investment Partners. www.shop.com
___________________

Correction: Alta Partners should have been listed as an investor in Portola Pharmaceuticals’ $46 million Series B round, with Alta’s Farah Champsi joining the Portola board of directors.

Random Ramblings

Deadlines fast approaching, so just time for a few notes:

*** Visto Corp. today announced that it has raised $70 million in new venture capital funding. If this sounds familiar, it might be because this space first reported on the deal back in September (actually, we reported that Visto had raised “more than $66.6 million”). At the time, the Redwood City, Calif.-based mobile access company was authorized to raise upwards of $92.5 million, and one source close to the deal suggested that the ceiling could rise higher due to intense investor interest. So what happened?

Nothing, actually. It just seems that they wanted to get a press release out there. I spoke with Visto CFO Steve Anderson this morning, who says that the round remains open with the $92.5 million authorization in place. Visto continues to speak with potential new investors, and no final close date has been set. He also adds that Rustic Canyon Partners should have been included as a deal participant, and that its omission from the press release was just an oversight. DFJ ePlanet Ventures led the eighth-round deal (Series BB), and was joined by Rustic Canyon, Oak Investment Partners, Meritech Capital Partners, Draper Fisher Juvertson, VantagePoint Venture Partners and Allegis Capital. All $70 million closed in Q3, making it the quarter’s second-largest venture capital deal.

*** Some of you read Fred Wilson’s blog post yesterday, which was prompted by some comments I made during a recent podcast interview. The comments were essentially a disapproval of Wilson’s blogging efforts, which I suggested focused too much on diary-style entries, and too little on business. I said this fully understanding the importance of personality in blogging, but that certain LPs might not appreciate one of their VCs spending so much time on extra-circular content production. Blogging takes real time, no matter how fast a thinker or writer you may be, and a VC’s primary responsibility is money management, not content production. Perhaps this is why so many VC-written blogs are becoming more sparsely populated…

Many of Fred’s readers politely suggested that I’m out to lunch on this one, with an entrepreneur adding that he would want Fred (via Union Square Ventures) as an investor because he knows Fred as a flesh-and-blood person (or at least as a TypePad entity). I also submitted a comment, trying to extrapolate my views and to apologize for what sounded like an overly-harsh tone on the podcast (Fred later wrote that he didn’t take offense, which is quite magnanimous of him). I’ve been wrestling with this one all morning, and still believe that I’m generally correct, but some doubt is gnawing away at my ankles. What say you?

*** ABRY Partners is suing Providence Equity Partners, alleging that Providence fudged the books on a company it sold to ABRY. I’ll write more about this soon, as I’m currently immersed in a wholly-unrelated story about private equity litigation based, in part, on allegations of financial trickery…

 

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    Top Three

 

Apollo Management has agreed to acquire retailer Linens ‘n Things Inc. (NYSE: LIN) for approximately $1.3 billion or $28 per share. The deal also includes equity commitments from NRCC Real Estate Advisors, and debt financing commitments from Bear Stearns & Co. and UBS Securities. It is expected to close in either the first or second quarter of 2006, pending shareholder approval.

Mersana Therapeutics Inc., a Cambridge, Mass.-based developer of novel oncology agents, has raised $21 million in second-round funding. Fidelity Biosciences and ProQuest Investments co-led the round, and were joined by Rho Ventures and return backers PureTech Ventures, Cape Family Fund, Harris & Harris Group and Lansing Brown Investments LLC.

Saifun Semiconductors Ltd., an Israel-based developer of nitride-read-only memory technology, priced five million shares at $23.50 per share (above $20.50-$22.50 range), for an IPO take of approximately $117.5 million. It plans to trade on the Nasdaq under ticker symbol SFUN, while Lehman Brothers and Deutsche Banc Securities served as lead underwriters. VC backers include Gemini Israel Funds, Concord Ventures and Argos Capital. www.saifun.com

 

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    VC Deals

 

Tekion Inc., a Champaign, Ill.–based developer of micro fuel cells for mobile products, has raised strategic funding from Motorola Ventures. No financial terms were disclosed, although a regulatory filing shows that Tekion recently secured $6.42 million of an $11.45 million Series B-2 round.

FlowMedica Inc., a Fremont, Calif.-based developer of a catheter-based systems to prevent and treat kidney dysfunction, has raised $15 million in Series D funding. De Novo Ventures and Palo Alto Investors co-led the deal, and were joined by return backers AMRO Capital, Medica Venture Partners and Oxford Bioscience Partners. The company has raised over $25 million in total VC funding since its 2002 inception, including a $5.6 million Series C infusion in mid-2004 at a post-money valuation of approximately $14.64 million. www.flowmedica.com

ONI Medical Systems Inc., a Wilmington, Mass.-based, has raised $7 million in Series B funding. Return backer Galen Partners led the deal, and was joined by Ivy Healthcare Capital and The Hospital for Special Surgery Fund. www.onicorp.com

iQur Ltd., a UK-based developer of liver disease treatments, has raised Gbp2.6 million in third-round venture funding from firms like return backer IP2IPO. The company previously raised a Gbp350,000 seed round, and then Gbp1.6 million in Series A funding. www.iqur.com

Ethertronics Inc., a San Diego-based developer of embedded antennae solutions, has raised $4.75 million in Series C funding, according to a regulatory filing. Backers include Sevin Rosen Funds and Excelsior Venture Partners (US Trust). www.ethertronics.com

Cairo Inc., a San Ramon, Calif.-based provider of online services for customers of brick-and-mortar retailers, has raised $7.5 million in Series A-2 funding, according to a regulatory filing. Company backers include Redpoint Ventures and Greylock Partners. www.cairo.com

ProTrade Sports Inc., a San Mateo, Calif.-based operator of a statistics-focused sports website, has raised around $10.13 million in Series B funding, according to a regulatory filing. Company backers include Radar Partners, NCD Partners, Deerwood Associates and Maverick Sports Ventures. www.protrade.com

BioPassword Inc., an Issaquah, Wash.-based provider of authentication software solutions, has raised $8 million in second-round funding, as first reported by The Seattle Post-Intelligencer. OVP Venture Partners and Ignition Partners participated. www.biopassword.com

Gynesonics Inc., a San Francisco-based medical device company, has raised around $3.93 million in Series A funding from firms like Abingworth Management, according to a regulatory filing.

    Buyout Deals

 

Nordic Capital has agreed to sell Ahlsell AB to Cinven and Goldman Sachs Capital Partners for a reported 1.4 billion euros. Ahlsell is a Sweden-based wholesaler of installation-related products to the heating and plumbing, electrical, tools and machinery, refrigeration and do-it-yourself markets. www.nordiccapital.se www.ahlsell.com

Bridgepoint has agreed to sell its majority stake in German coffee and water dispenser company Kaffee Partner AG to Odewald & Compagnie for an undisclosed amount. Bridgepoint acquired the position in October 2002. www.bridgepoint-capital.com www.kaffee-partner.com

Marwit Capital has acquired Women’s Diagnostic of Texas, a Plano, Texas-based breast care organization. No financial terms were disclosed for the deal, which also included Capital Resource Partners. www.marwit.com www.womensdiagnosticoftexas.com

KRG Capital Partners has acquired Focus Corp. Ltd., an Edmonton, Canada-based multidisciplinary consulting firm. No financial terms were disclosed. RSM EquiCo Capital Markets advised Focus Corp. on the deal. www.krgcapital.com www.focus.ca

Varian Inc. (Nasdaq: VARI) has acquired UK-based scientific instrument and vaccum technology company PL International Ltd. for Gbp24 million. The sellers include 3i Group, which received Gbp6.5 million.

    PE-Backed IPOs

iRobot Corp., a Burlington, Mass.-based maker of the Roomba floor vacuuming robot, priced 4.3 million common shares at $24 per share (above $21-$23 range), for an IPO take of approximately $103.2 million. It will trade on the Nasdaq under ticker symbol IRBT, while Morgan Stanley and JPMorgan served as lead underwriters. VC backers include Acer Technology Ventures, Trident Capital, First Albany and Fenway Partners. www.irobot.com

Molecular Insight Pharmaceuticals Inc., a Cambridge, Mass.-based developer of molecular imaging pharmaceuticals and targeted radio-therapeutics, has filed to raise $57.5 million via an IPO of common stock. It plans to trade on the Nasdaq under ticker symbol MIPI, with Piper Jaffray and SG Cowen serving as lead underwriters. The company has raised over $35 million in VC funding from firms like Cerberus Capital Management and Siemens Venture Capital. www.molecularinsight.com

CombinatoRx Inc., a Boston-based drug company focused on immuno-inflammatory diseases and cancer, has reduced its proposed IPO pricing range from $10 to $12 per share, to $7 to $9 per share. It still plans to offer six million shares, with SG Cowen and Pacific Growth Equities serving as lead underwriters. The company has raised around $105 million in total VC funding since its 2000 inception, including a $15 million Series E infusion last month. Backers include Canaan Partners, TL Ventures, Boston Millennia Partners, Flagship Ventures, BioVentures Investors, Global Life Science Ventures and Adams Street Partners. www.combinatorx.com

    PE-Backed M&A

Thomson Corp. (NYSE: TOC) has acquired NexCura Inc., a Seattle–based provider of medical patient education and communication solutions, No financial terms were disclosed. NexCura has raised around $20 million in VC funding since its 1999 inception, from firms like ARCH Venture Partners, Cardinal Partners and Lilly Ventures. (Note: PE Week Wire is published by Thomson Financial, a unit of Thomson Corp.) www.thomson.com www.nexcura.com