Now Hiring:
During an industry event a few weeks back, I was pulled aside by a public pension fund manager who objected to my blanket characterization of his peers as “dumb money.” He argued that every large group has both good and bad apples, and that it’s unfair to deride the entire bushel.
I had two possible ways to respond. The first was to say something like: “You’re right that there are many exceptions. Look at CalPERS, for example. It is implementing several strategic review recommendations that make a lot of sense, like reducing the number of relationships for each individual staffer, and forming several more outsourced capital pools.”
But I had a few drinks in me, so instead responded: “Forgetting OBWC for a moment, what do you think about
Back to point: The “dumb money” term is not meant to insult individual pension managers, as many of them are extremely well-connected and knowledgeable. After all, that’s why so many of them eventually join private firms. Instead, it’s related to upstream organizational decisions that often leave the private equity departments understaffed or in untenable positions (see Illinois/Sudan or OBWC/disclosure). For NYC, understaffing is the main issue.
That dedicated staff, however, is thinner than Keira Knightly. It once employed five full-timers (or maybe six), but is now down to just two, including senior staffer Tim Kelly. In other words, Kelly is supposed to oversee $3.09 billion in commitments, even though NYC has not gone the
When I first began looking into this several weeks ago, the Comptroller’s Office website did not have a single private equity job listing. It now has two, but no explanation for what took them so long (it’s been over a year). It also will not allow me to speak with Tim Kelly, even though its new press secretary clearly knows little about the issues at hand (more plugged-in press secretary Jeff Simmons is on an indefinite “leave of absence”).
This means that I can’t ask about the system’s future strategy, even though it is supposed to be a public system. For example, does it plan to make greater use of the outsourced pool model (it currently has three), or perhaps give PCG some discretionary authority? Why did it decide to rehire PCG following the most recent RFP process (news not yet official, as both sides are haggling over terms), when the firm was in NYC’s doghouse just last year? Why is Tim Kelly not allowed to speak to the press?
Actually, I think I can answer the last one: He’s just too damn busy.
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Top Three |
EnteroMedics Inc., a St. Paul, Minn.–based developer of medical devices for the treatment of obesity and gastrointestinal disorders, has raised $45.2 million in Series C funding. InterWest Partners led the deal, and was joined by Onset Ventures, Pacific Asset Partners and the Mayo Foundation for Medical Education and Research. Return backers included MPM Capital, Bay City Capital, Aberdare Ventures and Charter Life Sciences. www.enteromedics.com
U.S. Surgical, a subsidiary of Tyco International Ltd. (NYSE: TYC), has agreed to acquire Confluent Surgical Inc., a Waltham, Mass.–based provider of polymer-based technology used in sprayable surgical sealants and anti-adhesion products.The deal is valued at $245 million, and is expected to close by the end of August. Confluent has raised around $60 million in VC funding since its 1998 inception, including a $20 million Series C round in 2000 at a post-money valuation of approximately $53.7 million. www.tyco.com www.confluentsurgical.com
HCA Inc. (NYSE: HCA) was in talks to sell itself to a private equity consortium, but the deal has fallen apart, according to The Wall Street Journal. The hospital operator’s $11 billion debt load was the primary trouble spot for the buyers, who are reported to have included Bain Capital, KKR, Merrill Lynch Private Equity and the family of U.S. Senator Bill Frist (whose father and brother founded the company).
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VC Deals |
Jobster Inc., a Seattle-based provider of online job advertising services, has raised $18 million in Series C funding. Reed Elsevier Ventures led the deal, and was joined by return backers Ignition Partners, Mayfield Fund and Trinity Ventures. www.jobster.com
Newnham, a developer of display-networking technology with offices in both
Glacier Bay Inc., an Oakland, Calif.-based provider of thermal control, sound reduction and DC power management technologies, has raised $8 million from New Enterprise Associates. It is the 16-year-old company’s first institution round of funding. www.glacierbay.com
MaxPreps Inc., a Cameron Park, Calif.–based provider of high school sports information and media services, has raised $7 million in Series B funding. Dolphin Equity Partners led the deal, and was joined by BEV Capital and return backer DFJ Frontier.
Brilliant Telecommunications Inc., a Campbell, Calif.-based developer of GSM base-station timing and synchronization hardware, has raised $6.9 million in Series A funding. Backers include Onset Ventures and Draper Richards.
Peakstream Inc. (f.k.a. Shakti Computer Systems), a Redwood City, Calif.-based developer of software platforms for next-generation computing, has raised $5 million in Series A funding from Sequoia Capital and Kleiner Perkins Caufield & Byers. www.peakstreaminc.com
Actimagine, a Paris, France-based provider of video compression technologies, has raised €3 million in first-round funding from GRP Partners. www.actimagine.com
InvisibleCRM, a Boston-based provider of desktop appliances to increase user adoption of Salesforce.com and other CRM systems, has raised $1.5 million in VC funding from MartinsonTrigon and ABRT Ventures. www.invisiblecrm.com
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Buyout Deals |
AIG Highstar Capital has agreed to buy Jacksonville, Fla.-based solid waste disposal company Advanced Disposal Inc., according to LBOWire. The deal values Advanced Disposal at $470 million, and is subject to regulatory approval. Advanced Disposal has raised VC funding from firms like ABS Capital Partners, BB&T Capital Partners, New York Life Capital Partners, PNC Equity and Rock Creek Partners. www.aig.com
L Capital has acquired a majority stake in Italian fashion company Piazza Sempione. No financial terms were disclosed. www.piazzasempione.com
The Riverside Company has acquired ActivStyle, a Minneapolis–based distributor of consumable medical supplies with an emphasis on incontinence products. No financial terms were disclosed, except that it is part of
Clarey Technology Group, an Irvine, Calif.-based lower-middle-market buyout firm, has acquired Phoenix Computer Associates Inc., a Fairfield, Conn.-based provider of computer mainframes and peripherals. No financial terms were disclosed. www.phoenixcomputer.com
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PE-Backed IPOs |
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PE Exits |
Clearbrook Capital Partners and RIT Capital Partners have sold Eclipse Scientific Group to Inspicio PLC for £47 million. Eclipse is a UK-based provider of laboratory analysis and testing services. www.eclipsescientific.co.uk
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PE-Backed M&A |
Varig Logistica SA (VarigLog) is offering to buy bankrupt Brazilian airline carrier Viação Aérea
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PIPEs |
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Virgo Capital has closed its inaugural fund with nearly $50 million in capital commitments from limited partners like McClendon Venture Co. and Sammons Capital. The firm has offices in
HarbourVest Partners has purchased the Small Business Administration LP interest – via the SBIC — in Open Prairie Ventures Fund. No financial terms were disclosed. www.harbourvest.com www.openprairie.com
The
Advanced Equities Financial Corp. has agreed to acquire Investors Resources Group Inc. of
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Rob Hayes has joined First Round Capital as the
Foundation Capital has promoted Rich Redelfs to general partner. He joined the firm as a venture partner three years ago, before which he was president and CEO of Atheros Communications. www.foundationcap.com
Trinity Ventures has promoted Patricia Nakache to general partner and Jim Tybur to principal. Nakache joined the firm in 1999 and focuses on Internet services, while Tybur joined as an associate in late 2004, and focuses on the Internet and software sectors. www.trinityventures.com
Jason Mozingo has left Avista Capital Partners to join Centerbridge Partners, according to The Deal.
Robert L. Evans has been named president and CEO of Churchill Downs Inc. (Nasdaq: CHDN). He most recently served as a co-founding managing director of Symphony Technology Group, and is president and founding of a commercial horse breeding operation in
Robert C. Davis has joined Kaye Scholer as a Chicago-based partner focused on private equity. He previously was with Kirkland & Ellis. www.kayescholer.com
Cliff Friedman, senior managing director of Constellation Ventures, has resigned from the board of Savvis Inc. (Nasdaq: SVVS). He originally joined the Savvis board in July 2002, as part of a Constellation Ventures investment. www.savvis.net
Tuesday, July 18
Growing Pains: Changes at ACS
I was the first of my friends to get married, which prompted lots of questions about how I was handling my “new” life. “It’s just the same as it was before,” I said, “except I now have more plates.” After all, I had been living with my girlfriend/wife for several years (yes, slap me for sinfulness), and we each had become accustomed to the other’s quirks, annoying habits, and so on. Had we simply dated before getting married, my answer to my friends’ question probably would have been far more complex and, possibly, negative. Yes, I know there are studies suggesting just the opposite, but I’m trying to make a (long-winded and tedious) point: Long engagements don’t always produce a solid marriage.
Such is the case with Andy Fillat and American Capital Strategies. Fillat is the former VC chief of Advent International, who was hired by ACS earlier this year to launch and run a new venture capital program focused on the IT market. The move came after nearly three months of negotiations — I held the story until papers were signed, although did offer a blind item – and resulted in what seemed like a well-planned and amicable partnership. Fillat already had experience as a venture capitalist within a buyout-focused firm, and genuinely dug the idea of an evergreen capital pool that didn’t have strict deal size/stage or industry cycle limitations. He also hired Tony Abate, a former Battery Ventures and Ironside Ventures pro with whom he earlier had been contemplating a private partnership.
But the long engagement was for naught. Boston-based Fillat was quietly sacked by ACS last month, after a series of contentious disagreements over investment philosophy and other “business culture” issues. Neither side is publicly commenting on the move, but multiple sources say that the fit was a bad one from day one. “You had two sides that knew how they wanted things done, and they just kept butting heads,” says someone familiar with the situation. “Everyone knew that ACS held the cards and that it wasn’t working out, although the firing was sudden and, I think, surprised everyone.”
Tony Abate almost immediately followed Fillat out the door, due to a combination of loyalty and the fact that he was one of “Andy’s guys.” Neither has yet signed on elsewhere.
It’s a bit hard to understand how this all happened, considering how long Fillat had been in discussions with ACS. Maybe it really is true that certain problems don’t appear until you’ve actually gotten married, or perhaps both sides mistakenly thought they could just agree to disagree on certain issues.
Before the final showdown, however, Fillat managed to recruit two managing directors to launch a new office in
Unlike in so many of these cases, there are no evil culprits here. Most folks pin a bit more of the blame on Fillat’s irascibility, but the realty is that the two sides realized it wasn’t working before the endeavor became entrenched. What ACS will have to do, however, is be more forthcoming with entrepreneurs than it was with me. It’s ok for ACS president and CEO Malon Wilkus to tell a reporter that the firm doesn’t comment on staffing matters. Not so with entrepreneurs.
Prospective portfolio companis have every right and need to know why two managing directors left just five months after joining. They often make VC decisions based more on individual investors (i.e. board members/advisors) than on term sheets or brand, and the smart ones already have instinctive concerns about taking cash from hierarchical corporate/financial venture arms. ACS is not AIG, but it still will need to reemphasize the point.
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Top Three |
Terra Firma has agreed to sell the waste disposal division of UK-based Waste Recycling Group to
Trinity BioSystems Inc., a Menlo Park, Calif.-based developer of a platform to produce vaccines and oral delivery of proteins and other peptide products, has raised $21 million in Series B funding. Amgen and S.R. One Ltd. were joined by return backers Sanderling Ventures and Tenex Greenhouse Ventures.
Viisage Technology Inc. (Nasdaq: VISG) has agreed to acquire Iridian Technologies Inc., a
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VC Deals |
Virgo Engineers, a Pune, India-based maker of ball valve and valve automation systems, is close to raising $20 million from Tano Capital, according to The Economic Times of
Emphasys Medical Inc., a Redwood City, Calif.-based medical device company focused on emphysema, has secured $18.14 million in Series E funding. Return backers include Advanced Technology Ventures, Morgan Stanley Venture Partners, New Enterprise Associates and St. Paul Venture Capital. Emphasys Medical has raised around $63 million in total VC funding since its 2000 inception. www.emphasysmedical.com
Availigent, a San Jose, Calif.-based provider of transparent and automatic application virtualization software for Linux platforms, has raised $12.2 million in Series B funding. Intel Capital led the deal, and was joined by return backers Diamondhead Ventures and Smart Technology Ventures. www.availigent.com
VoiceObjects Inc., a San Mateo, Calif.-based, has raised $10.8 million in recap funding. Return backers include Telesoft Partners, Wellington Partners, SAP Ventures, Deutsche Telekom’s T-Venture and Enjoyventure. www.voiceobjects.com
Calisolar Inc., a Sunnyvale, Calif.-based solar technology startup, has raised $9 million in first-round funding from Advanced Technology Ventures and Globespan Capital Partners.
WiChorus Inc., a San Jose, Calif.-based developer of mobile services and applications, has raised $8.5 million in Series B funding, according to a regulatory filing. Backers include Accel Partners and Redpoint Ventures. www.wichorus.com
ShopWiki, a New York-based online shopping search engine and buying guide, has raised $6.2 million from Generation Partners. www.shopwiki.com
HotGigs, a Minneapolis-based provider of an on-demand staffing exchange for both contract and fulltime employees, has raised $5.3 million in Series A funding from Updata Partners. www.hotgigs.com
Azteq Mobile Corp., a Walnut Creek, Calif.-based mobile technology company, has raised around $4.05 million in Series A1 funding. Backers include The Ignite Group, Japan-Asia Investment Co. and iSherpa Capital.
Zeugma Systems Inc., a Vancouver-based provider of broadband networking solutions, has raised US$2.25 million in additional second-round funding from BDC Venture Capital and company employees. This brings the round total to $15.75 million, including earlier participation from Granite Ventures, GrowthWorks, Ventures West and Yaletown Venture Partners. www.zeugmasystems.com
Don’t Blink Media Inc., a Seattle-based provider of interactive advertising services, has raised an undisclosed amount of private equity funding from Highmark Investments LLC. Mercanti Securities served as financial advisor to Don’t Blink. www.dontblink.com
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Buyout Deals |
Istithmar PJSC has completed its $300 million acquisition of New York-based fashion retailer Loehmann’s Holdings from Arcapita. www.loehmanns.com
Bridgepoint has agreed to acquire CVC Capital Partners’ stake in Spanish sports management and marketing company Dorna Sports SA. No financial terms were disclosed for the deal, which will make Bridgepoint the largest single Dornia shareholder.
The Riverside Co. has acquired the American Safety & Health Institute, a
Greenbriar Equity Group has acquired a majority stake in Stag-Parkway Inc., an Atlanta–based distributor of recreational vehicle (RV) parts and accessories. No financial terms were disclosed. Allied Capital and Bank of America arranged financing for the transaction, while Stag-Parkway was advised by Brookwood Associates. www.stagparkway.com
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PE-Backed IPOs |
GlobalStar Inc., a Milpitas, Calif.-based provider of voice and data communications services via satellite, has filed to raise $100 million via an IPO of common stock. Wachovia Securities is serving as lead underwriter. Shareholders include Thermo Funding Co., Columbia Ventures Corp., Banc of America Securities and Qualcomm. www.globalstar.com
Osiris Therapeutics Inc., a Baltimore-based stem cell therapeutics company focused on the inflammatory, orthopedic and cardiovascular areas, has set its proposed IPO terms to 3.5 million common shares being offered at between $11 and $13 per share. It plans to trade on the Nasdaq under ticker symbol OSIR, with Deutsche Bank Securities serving as lead underwriter. Osiris has raised around $50.3 million in VC funding from firms like Venturetec and Friedli Corporate Finance. www.osiristx.com
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PE Exits |
3M (NYSE: MMM) has agreed to acquire UK-based Security Printing and Systems Ltd. from Authentos GmbH, for an undisclosed amount. Authentos is a German holding company controlled by Apax Partners. www.3m.com
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PE-Backed M&A |
Stonehouse Capital Partners has sponsored a management buyout of JHT Holdings Inc., a
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Jake Nunn has joined New Enterprise Associates as a Menlo Park, Calif.-based partner focused on specialty pharmaceutical, biotech and medical device opportunities. He previously was a partner with MPM Capital. www.nea.com
Durant “Randy” Schwimmer has joined Churchill Financial as senior managing director and head of capital markets. He most recently served as a managing director and head of leveraged finance syndication for BNP Paribas. www.churchill-financial.com
Doug Cameron has joined Khosla Ventures as chief scientific officer. He previously was with Cargill, where he was recruited in 1998 to launch and lead the company’s corporate biotech R&D group — now called the
Charlesbank Capital Partners has promoted Tami Nason to general counsel, and also promoted Ryan Carroll to vice president. www.charlesbank.com
George Holder
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