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From:

"Dan Primack"

Name:

Dan Primack

Email Address:

Dan_Primack@fortune.chtah.com

Subject:

Term Sheet - - Thursday, September 23

Date:

23-09-2010 14:07:14
Message

Fortune Finance

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The Term Sheet by Dan Primack

Thursday -- September 23, 2010

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Random Ramblings
Yesterday I wrote about how venture capitalists have invested more dollars this year in life sciences companies than in IT companies. In
response, uber-pundit Paul Kedrosky tweeted the following:
Common error in VC analysis by @danprimack: It's about returns, not spending -- absent IT there is no VC
I would have just had this out 140 characters at a time, but my new laptop won't accept TweetDeck (and Twitter.com feels like a rotary
phone). Therefore ...
It is true that the goal of venture capital is to produce returns on investment. Some VCs may tell you it's about building businesses and
helping entrepreneurs, but they're only saying that to further their pursuit of returns.
It also is true that IT investments have generated most of the VC market's greatest hits. Think Kleiner Perkins' investors would be giving it
all that cleantech rope sans Google? If so, think again.
But it is not true that without IT there would be no VC. Or, put better, it is no more true than if I were to say: "Without health care there
would be no VC." They are both vital parts of the same whole, even if they are wildly divergent parts.
When it comes to returns, life sciences has held its own with IT. Just take a look at the data from Cambridge Associates (flip to pg 8). It
shows that life sciences companies receiving initial investment in 2000, 2001 and 2002 actually outperformed IT companies receiving
initial investment during the same period. IT crushes life sciences in 2004 (18.5% vs. 8.3%), but barely eeks out a win in 2005 (15.4% vs.
14.9%).

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Perhaps more importantly, returns for life science VC investments were positive for each listed year (1997-2010), while IT investments
were painted red for two years. Fewer peaks for life sciences, but fewer valleys too. That's the sort of semi-stability -- and consistent ability
to put money to work (i.e., spending) that helps convince institutional investors to keep venture as a regular asset class, thus presenting
opportunities for IT when it comes around again.
Such symbiosis also can work on the GP side. Polaris Venture Partners is one recent example, with strong life sciences returns holding
up weaker IT returns. Another would be Accel Partners, which once was a full-fledged generalist. In fact, life science returns from its early
funds helped raise some later funds which helped give rise to Facebook. No health care VC, no Justin Timberlake as Sean Parker.
I recognize that life sciences VC isn't sexy or easy to blog about. Everyone at TechCrunch can download the latest app and pass snarky
judgment, but no one is going to infect themselves with some disease in order to find out if an experimental new molecule works. So let
there be a perpetual imbalance of attention. I cannot, however, let stand the assertion that IT is what propels venture capital while health
care is just a peripheral concern. If either one of them disappears, so does the other's ability to produce returns.
*** I reported earlier this morning that Steve Fludder is out as head of GE Ecomagination, an $18 billion platform focused on
environmental businesses. No word yet on his next move...
*** AngelGate: There's a peHUB report this morning that law firm Wilson Sonsini sent a note to select clients, warning that they'd be
hearing from the FBI if they attended the now-infamous Bin 33 dinner. I was on the phone this morning with Larry Sonsini for an unrelated
matter, and asked him about it. He said that, to his knowledge, no such note had gone out. It's certainly possible that he's unaware of the
doings of his underlings -- it's a big law firm -- but I figured it was best to relay what came out of the horse's mouth. That same post, by the
way, says that Arrington stands by his original report 100%.
*** Tell your colleagues: We've created a new signup page for this email, which is simple and should not be blocked by corporate
firewalls. Tell your colleagues to get The Term Sheet by going here: http://bit.ly/dycn9r

Five things you should read @Fortune.com

Pre-marketing, including the FBI's interest in super-angel collusion, Zuckerberg does good, VOlcker defends Obama in hostile
territory and the difference between CEO rich and hedge fund rich.
The rebel of the MBA admissions biz
Wanna be the next Larry Summers?
Handicapping the HP CEO selection
Hey hey, it's Blackstone investor day

The Big Deal

Blockbuster has officially gone bust, filing for Chapter 11 bankruptcy protection this morning in New York. In its filing, the video rental
chain said that it had reached an agreement with lenders to shave around $900 million in debt off its books, via a recap.
This obviously has little to do with private equity, nor is it a surprise. But come on, this is Blockbuster we're talking about. It of the
ubiquitous blue-and-yellow signs, and the Blockbuster Bowl. The idea that this company could go broke would have been as
unthinkable 15 years ago as the idea of Google going broke sounds today.
Just another reminder that innovation (NetFlix, in this case) can quickly reduce a corporate icon to relative rubble.

VC Deals

Aster Data, a San Carlos, Calif.-based provider of big data management and advanced analytics, has raised $30 million in Series C
funding. An undisclosed strategic investor was joined by returns backers Sequoia Capital, Jafco Ventures, Institutional Venture Partners
and Cambrian Ventures. www.asterdata.com
CytomX Therapeutics, a San Francisco-based developer of proteolytically-activated antibodies, has raised $30 million in Series B
funding. Third Rock Ventures led the round, and was joined by Roche Venture Fund. www.cytomx.com

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RightScale Inc., a Santa Barbara, Calif.-based cloud computing company, has raised $25 million in third-round funding. Tenaya Capital
led the round, and was joined by DAG Ventures and return backers Benchmark Capital, Index Ventures and Presidio Ventures.
www.rightscale.com
Watermark Medical Inc., a Boca Raton, Fla.-based provider of sleep diagnostics SaaS, has raised $6 million in funding from Ballast Point
Ventures. www.watermarkmedical.com
Fits.me, an Estonia-based operator of a virtual fitting room for clothing retailers, has raised 1.3 million in a VC funding round led by the
Estonian Development Fund. www.fits.me

Private Equity Deals

Black Diamond Capital Management has won the auction for the operating assets of newsprint manufacturer White Birch Paper Co.
Also participating on the equity is Caspian Capital Advisors. No financial terms were disclosed. www.whitebirchpaper.com
Energy & Minerals Group has launched a hostile takeover of Baffinland Iron Mines (TSX: BIM), valuing the Canadian mine exploration
company at around C$274 million.
Mid Europa Partners is in talks to buy up to 25% in publicly-traded Slovenian food retailer Mercator, according to Reuters. Sellers would
include Nova Ljubljanska Banka, a Slovernian bank that holds a 10.75% position. Mercator has a market cap in excess of $750 million.
www.mideuropa.com
WL Ross & Co. has acquired 24.9% of the outstanding common stock in Sun Bancorp (Nasdaq: SNBC), after leading a $106.7 million
PIPE. www.sunnb.com

PE-sponsored M&A
MerchantCircle, a Los Altos, Calif.-based online network of local business owners, has acquired TimeBridge Inc., a Berkeley, Calif.based provider of a personal meeting scheduler application. No financial terms were disclosed. MerchantCircle shareholders include
Rustic Canyon Partners, Scale Venture Partners, Steamboat Ventures and IAC. TimeBridge had raised around $10 million from Mayfield
and Norwest Venture Partners. www.mrchantcircle.com

Exits
Wolters Kluwer Financial Services has acquired FRSGlobal, a Brussels-based global financial regulatory reporting and risk
management business. Sellers included The Carlyle Group and Kennet Partners. No financial terms were disclosed.

Other Deals
Amedica Corp., a Salt Lake City, Utah-based orthopaedic implant company, has acquired Boca Raton-based US Spine. No financial
terms were disclosed. Amedica recently raised $30 million in equity and debt financing, with the debt coming from Zions First National
Bank.
LinkedIn has acquired ChoiceVendor, a provider of ratings and reviews of B2B service providers. No financial terms were disclosed.
LinkedIn shareholders include Bain Capital Ventures, Goldman Sachs, McGraw-Hill Cos., SAP Ventures and Bessemer Venture Partners.
ChoiceVendor had raised an undisclosed amount of funding from Battery Ventures. www.choicevendor.com
Think Finance, a developer of financial products for the "unbanked," has secured a $90 million credit facility from Victory Park Capital
Advisors. Company shareholders include Sequoia Capital and Technology Crossover Partners. www.thinkfinance.com

Firms & Funds

The CalCEF Angel Fund has held a final close on $11 million in capital commitments. The San Francisco-based group focuses on seedstage opportunities in the clean energy space. www.calcefangelfund.com
CapMan PLC has held a 60 million first close on its fifth mezzanine fund, which will focus on mid-market companies in the Nordic region.

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It is targeting a total of 150 million.

KKR has sold $500 million of senior secured notes, in an offering that IFR Thomson Reuters reports was two-times oversubscribed.
Proceeds will be used for general corporate purposes. www.kkr.com

Moving In, Up and On

Hilkka-Maija Katajisto is leaving Nordic private equity firm CapMan PLC, where she was head of HR and a member of the firm's
management group. www.capman.com

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