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From:

"Dan Primack"

Name:

Dan Primack

Email Address:

Dan_Primack@fortune.chtah.com

Subject:

The Term Sheet - - Wednesday, Sept. 22

Date:

22-09-2010 14:42:58
Message

Fortune Finance

Street Sweep

Term Sheet

Economics

Tech

Wall Street

Washington

The Term Sheet by Dan Primack

Tuesday -- September 21, 2010

Email Dan | Follow Dan on Twitter | Subscribe

Random Ramblings
Greetings from New York City, which today is tornado-free. No time to write a real column this morning - tons of news to compile, new
laptop to get used to - but here are two notes from the VC blogosphere:
*** Fred Wilson wrote a blog post last week about how the VC industry has bifurcated into two distinct spheres: IT and the rest of it. The
former gets all the buzz, and has experienced some fundamental changes (the rise of super-angels, the fall of startup costs, etc). The
latter is virtually ignored outside of select trade press, and today looks pretty much how it looked five, ten or twenty years ago.
He's right, of course. It's still virtually impossible to do lean life sciences, let alone lean pharma. Let me add a couple of thoughts to the
conversation:
Venture investment in IT not only has changed over time, but also has changed relative to life sciences investing. A decade ago, IT deals
dominated the VC landscape. According to MoneyTree, over 86% of all venture dollars invested went into technology companies (Internet,
software, hardware, chips, etc). If you only include Internet-specific and software deals, the figure still stands at nearly 62 percent (and
represents 65% of al companies funded).
So far in 2010, however, the situation has been reversed. Investments in IT deals now represent just 41% of all VC dollars disbursed, and
the more limited category stands at a paltry 31 percent. Life sciences investments, however, come in just a smidge higher. And if you were
to include something like cleantech in the "other" sample, the disparity begins to grow.
IT continues to lead in terms of "most companies funded," but the gap is narrowing. Obsessing over the valuations/exit prospects of
companies like FourSquare or Twitter is great fun (and great for pageviews), but the real money is being made or lost elsewhere.

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*** Speaking of misplaced attention, the VC world is abuzz this morning with Mike Arrington's report of a "secret meeting" of superangels in San Francisco. He alleges collusion against both entrepreneurs and traditional VCs.
One of the meeting participants, Dave McClure, has already written a screed against Arrington's report, and I don't have enough inside
knowledge to take sides. However
There seems to be an inherent contradiction in Arrington's story: If super-angels are planning to price-fix, wouldn't that enable the very
"traditional" VCs that they are purporting to thwart? If McClure, et. all begin offering below-market terms, wouldn't the large checkbooks be
emboldened?
Moreover, the very reason that so many individual angels became super-angels was to reduce the need for deal syndication. This would
seem to encourage it, since meeting participants would need to work together in order to preempt the aforementioned competition.
Finally, I rarely believe in collusion reports. Sure it sometimes happens (see Gedman, Rich), but usually it's a lot of hot air (see buyouts,
big). That said, I'm interested in your thoughts

Five things you should read @Fortune.com

Pre-marketing, including Facebook revenge, seed-stage collusion, corporate defaults decrease, Mark Cuban's insider trading case
is revived and LPs sue a buyout firm for using it as "a personal piggy-bank."
Secrets of the Undercover Bosses
Madison Avenue warms to electric cars
The disconnect between productivity and hiring
The Fed promises more inflation

The Big Deal

Sharp Corp. has agreed to buy Recurrent Energy, a San Francisco-based developer of solar energy projects, for up to $305 million in
cash. Recurrent Energy had raised over $85 million from Hudson Clean Energy Partners, Mohr Davidow Ventures and JEM Partners.
Just across the Bay, Oakland-based thermal power plant developer BrightSource Energy reportedly has hired Goldman Sachs and
Morgan Stanley to prepare for an IPO. The company has raised over $320 million in private equity funding from Alstom, CalPERS,
VantagePoint Venture Partners, Morgan Stanley and Draper Fisher Jurvetson.
These are big deals because they represent -- or could represent -- positive returns on VC investments in utility-scale clean-energy
investments. There has been a meme about how many cleantech VCs made a fundamental mistake several years back, by backing
capital-intensive projects rather than more IT-like efforts (e.g., smart grid software). There's still lots of truth to that criticism, but successful
exits for companies like Recurrent and BrightSource could cause some VCs to reconsider the conventional wisdom.

VC Deals

Boston Heart Lab, a Framingham, Mass.-based provider of specialized diagnostics for patients with heart disease, has raised $10 million
in Series C funding. Bain Capital Ventures led the round. The company also announced that Susan Hertzberg has joined as CEO. She
previously ran the North American unit of France's Ipsogen SA. www.bostonheartlab.com
Rocket Fuel Inc., a Redwood City, Calif.-based provider of online ad optimization solutions, has raised $10 million in Series B funding.
Nokia Growth Partners led the round, and was joined by Northgate Capital and return backers Mohr Davidow Ventures and Labrador
Ventures. www.rocketfuel.com
Private Outlet, a French operator of an online private sale site for brand-name clothing and accessories, has raised 9 million in secondround funding. GIMV and Turenne Capital co-led the round, and were joined by return backers BayTech Venture Capital, Kreos Capital
and GP Bullhound. www.privateoutlet.com
Arterial Remodeling Technologies, a French developer of bioresorbable coronary polymer stents, has raised $8.5 million in new VC
funding. InnoBio Fund was joined by return backers Matignon Technologies and Amundi Private Equity Funds. The company has now

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raised $17 million. www.art-stent.com

Ubiquisys, a UK-based developer of 3G femtocells, has raised $5 million in VC funding. SerComm Corp., UMC Capital Corp. and Pacific
Venture Partners were joined by return backers Advent Venture Partners, Accel Partners and Atlas Venture. The company previously
raised more than $40 million. www.ubiquisys.com
OtherInbox Inc., an Austin, Texas-based company focused on separating important emails from the rest, has raised $1.5 million in new
VC funding. Backers include Dave McClure, Naval Ravikant, Kenny Van Zant, Ash Patel, Dave Nakayama and law firm Wilson Sonsini.
www.otherinbox.com
Coda Automotive, a Santa Monica, Calif.-based electric car and battery company, is planning to raise $125 million in Series D funding,
according to VentureWire. A first close on $60 million in expected shortly. The company previously raised over $130 million in VC funding,
from groups like Aeris Capital, EDB Investments, Angeleno Group and Countryline LLC (Tony Pritzker and J.B. Pritzker). It also received
$394 million in capital commitments as part of a joint venture with Lishen Power Battery (including $100m in equity from undisclosed
backers). www.codaautomotive.com

Private Equity Deals

3i Group has agreed to sell NSL, a British provider of outsourced traffic enforcement and transport management services to government
agencies, to AAC Capital Partners. The deal values NSL at 120 million. www.3i.com
Activa Capital has sold Franoise Saget Linvosges, a French mail order company specializing in household linens, to Alpha Private
Equity. No financial terms were disclosed.
Bertram Capital has invested in Sanare LLC, a Reno, Nev.-based provider of care management solutions for people with diabetes. No
financial tewww.betramcapital.com
MedExpress Urgent Care, a Morgantown, W.V.-based operator of walk-in urgent-care facilities, has raised an undisclosed amount of
growth equity from General Atlantic and Sequoia Capital. No financial terms were disclosed. The deal represents an exit for Excellere
Partners. www.medexpress.com
Quad-C Management has acquired Durcon Inc., a Taylor, Texas-based provider of work surfaces and related products, from
Stonebridge Partners. No financial terms were disclosed. Harris Williams & Co. advised Durcon on the deal. www.labtops.com
Quantum Utility Generation LLC has launched as a Houston, Texas-based power generation company with $1 billion in capital
commitments, including $500 million from Quantum Energy Partners. The company's CEO is Larry Kellerman, who most recently was
with Goldman Sachs as a partner and president of Goldman's wholly-owned power generation business Cogentrix Energy.
www.quantumug.com
RBS has received bids of less than 1 billion for Priory Group, a UK operator of mental-health and addiction clinics, according to
Bloomberg. It had been seeking around 1.1 billion. Bidders included Advent International, Bain Capital and Blackstone Group.
www.rbs.com
TPG Capital and Silver Lake Partners have held preliminary talks about offering to buy hard-driver maker Seagate Technology
(Nasdaq: STX), according to Bloomberg. Seagate has a market cap of around $5.3 billion. www.seagate.com
Warburg Pincus and Tarpon Investimentos have agreed to lead a R$350 million investment into Brazil's Omega Energy.
www.warburgpincus.com

IPOs
Betfair, a UK-based online gaming exchange, is planning to raise around 1.5 billion via an IPO in London. Shareholders include
Softbank and Balderton Capital.
Restoration Hardware, a hardware retailer taken private two years ago by Catterton Partners, is planning to raise up to $300 million in an
IPO, according to Reuters.

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Exits
3i Group has sold its 6.6% stake in Welspun Corp., a listed Indian steel pipe-maker, according to the Economic Times. No additional
information was disclosed. www.3i.com
AXA Private Equity has agreed to sell its majority stake in global chemical company Eliokem to Omnova Solutions (NYSE: OMN), for
227.5 million. www.axaprivateequity.com
PAI Partners is planning to sell its majority stake in Italian department store chain Gruppo Coin, according to Reuters. The auction is
expected to launch before year-end, and could be valued at around 1.5 billion. www.paipartners.com
TPG Capital is planning to sell its 9.3% stake in Malaysia-based Parkway Life REIT (SI: PWLR), according to IFR Asia. The deal could
be worth nearly $70 million.

Other Deals
Sinochem Corp. reportedly has hired Deutsche Bank and Citigroup to advise it on how to rival BHP Biliton's $39 billion bid for Potash
Corp.
VideoEgg Inc., a San Francisco-based provider of Web-based video publishing, has agreed to acquire Six Apart, a San Francisco-based
provider of blogging software and services. No financial terms were disclosed for the deal, which will result in a single company named
SAY Media. VideoEgg has raised around $40 million in VC funding, from from August Capital, First Round Capital and Maveron. Six Apart
has raised around $22 million in VC funding from August Capital, Focus Ventures and Intel Capital. www.videoegg.com
Bonanzle Inc. has acquired the assets of 1000 Markets Inc., to expand its online marketplace for artisan goods, coins and other items. It
also has changed its name to Bonanza. No financial terms were disclosed. Bonanzle had raised a small amount of VC funding from firms
like Ignition Partners, Matrix Partners, Voyager Capital and Founder's Co-op, while 1000 Markets was backed by Founders Fund and True
Ventures. www.bonanzle.com

Busted
Thompson Publishing Holding Co., a Washington, D.C.-based professional publisher for business and government executives, has filed
for Chapter 11 bankruptcy protection. The company also entered into an agreement with stalking-horse bidder PNC Bank, which has
agreed to provide debtor-in-possession financing. Avista Capital Partners is the company's majority shareholder. www.thompson.com

Moving In, Up and On

Eric Keen has joined DW Healthcare Partners as a vice president. He previously was a vice president with The Riverside Company.
www.dwhp.com
Laurence Garrett has joined Highland Capital Partners as a general partner. He will work out of Geneva, and is a former partner with 3i
Ventures. www.hcp.com
Mary Lou Christy has joined Washington, D.C. public relations firm The Collingwood Group as a senior vice president, with a focus on
private equity and hedge fund clients. She previously was senior VP of investor relations for Fannie Mae.
www.collingwoodcommunications.com
PwC has named Martyn Curragh as head of its U.S. transaction services group. He succeeds John McCaffrey, who is relocating
overseas for a different role. www.pwc.com
LNK Partners has promoted Kayvan Heravi to managing director. He has been with the consumer/retail-focused private equity firm since
its inception, having previously worked with the founding team at Apax Partners. www.lnkpartners.com
John Veatch, a veteran of Salomon Brothers, DLJ and Bear Stearns, has joined Southwest Securities as a managing director of
corporate finance. www.swst.com

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