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From:
"Dan Primack"
Name:
Dan Primack
Email Address:
Dan_Primack@fortune.chtah.com
Subject:
Date:
29-11-2010 17:25:38
Message
Fortune Finance Street Sweep Term Sheet Economics Tech Wall Street Washington
Random Ramblings
Still trying to wipe away the long weekend cobwebs, so just a few couple notes to kick us off:
*** Fred Wilson had an interesting post late last week about the concept of chasing returns. That might
sound like a noble or obvious job of professional investors, but Wilson uses the phrase in reference to
folks who plug money into hot sectors they dont fully understand. Think certain (most?) investment banks
during the CDO boom. Or the dotcom era.
The latest iteration, Wilson says, revolves around early-stage Web services investing.
Now weve heard this concern before including from Wilson, I think as a brick in the seed-stage
bubble argument. What interests me, however, is that there isnt yet much of a track record of returns for
investors to chase. Instead, they are chasing expected returns.
There obviously have been some big hits in the early-stage Web space Groupon looks to be the latest,
based on reports of a $2.5b acquisition by Google but the vast majority of highly-valued Web services
companies remain valued only by their VCs or secondary trading exchanges (where the buyers have
virtually no knowledge of company financials).
Just take a look at Wilsons firm, Union Square Ventures. According to recent data from UTIMCO, Union
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Squares first fund has a whopping IRR of 54.71 percent. When you look at cash-in/cash-out, on the other
hand, youll notice that USV has not yet returned principal to its investors, let alone a positive return.
Instead, most of the IRR is based on sky-high valuations for private, un-acquired companies like Twitter
and Zynga.
This is no knock on USV. There is no reason why a 2004-vintage fund should have emptied out its portfolio
yet, and there is speculation that it has generated some liquidity via later-round financings for some of its
still-private portfolio companies.
Instead, its simply to point out that return chasers are banking on the anticipated rather than the
demonstrated. To me, that feels even more problematic. At least those trying to copy real returns can get in
early enough to catch the tail end of the boom I fear this new breed wont even get that early morsel
before starving.
*** Quiz Time: Can you name the private equity exec who is trying to raise billions of dollars to inject into
Spanish banks? Hint: Its been a while since this exec, or his firm, has raised a traditional private equity
fund.
*** Housekeeping: You might have noticed that we've begun accepting outside advertisers for the Term
Sheet emails (thanks American Airlines). If you're interested in sponsoring (particularly for 2011), just let
me know via email, and I'll connect you to one of our reps.
Pre-Marketing, including VC return chasers, tips for fund-raising GPs, hysterical opposition to
QE2, Goldman makes a mockery of Volcker Rule and the decade of entrepreneurial revolution.
Katie Benner: Insider trading is the least surprising development of 2010
VC Deals
SuperSonic Imagine, a France-based developer of ultrasound medical imaging, has raised 34.5 million
in Series C funding. Mrieux Dveloppement led the round, and was joined by Canon Inc., InnoBio and
return backers Edmond de Rothschild Investment Partners, Auriga Partners, Crdit Agricole Private
Equity, NBGI Ventures, BioAm, Wellington Partners and IXO Private Equity. www.supersonicimagine.com
CloudBees, a developer of a Java cloud computing platform, has raised $4 million in Series A funding.
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Matrix Partners led the round, and was joined by individual angels like Marc Fleury and Bob
Bickel. www.cloudbees.com
FXecosystem, a New York-based provider of trading infrastructure to the global foreign exchange market
has raised an undisclosed amount of Series A funding from Richfield Capital Partners and undisclosed
European private equity firms. www.fxecosystem.com
PE-backed IPOs
First Wind Holdings Inc., a Newton, Mass.-based developer of wind power projects, formally withdrew its
IPO registration. The company had canceled the offering late last month due to soft investor demand, after
having originally planned to sell 12 million common shares at between $24 and $26 per share.
Shareholders include D.E. Shaw and Madison Dearborn Partners. www.firstwind.com
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RigNet Inc., a Houston-based provider of data network infrastructure for offshore oil and gas rigs, has set
its IPO terms to five million common shares being offered at between $14 and $16 per share. It would have
an initial market cap of approximately $227 million, were it to price at the high end of its range. RigNet
plans to trade on the Nasdaq under ticker symbol RNET, with Deutsche Bank Securities and Jefferies &
Co. serving as co-lead underwriters. Shareholders include Cubera Private Equity, Altira Group and
Sanders Morris Harris Group. www.rig.net
Sky-mobi Ltd., a Chinese mobile apps store, has set its IPO terms to 7.25 million American depository
shares being offered at between $8 and $10 per share. It plans to trade on the Nasdaq under ticker symbol
MOB, with Citi serving as lead underwriter. The company reports nearly $90 million in revenue for the fiscal
year ending March 31, 2010. Sequoia Capital holds more than a 28% ownership position.
Exits
The Blackstone Group earlier this year sought to sell sock-maker GoldToeMoretz, but was unable to
obtain bids at the $450 million asking price, according to The NY Post. Blackstone now is seeking to secure
an asset-backed loan for the company. www.blackstone.com
Camelot Information Systems Inc. (NYSE: CIS), a Beijing-based provider of enterprise application
services and financial industry IT services in China, has filed for a secondary offering of 7.16 million
American depository shares. The company raised $146.7 million in an IPO earlier this year, and closed
trading last Wednesday at $17.70 per share. All of the shares are being offered by Citigroup Venture
Capital and Lehman Brothers Offshore Partners.
EQT Partners has hired J.P. Morgan and Deutsche Bank to manage a sale or flotation of German cable
operator Kabel Baden-Wuerttemberg, according to Reuters. The company had 409 million in sales for
the first nine months of 2010.
HgCapital has retained Macquarie to manage a possible sale of German lighting company SLV Group,
according to Reuters. The deal could be worth more than 400 million. HgCapital bought SLV in 2007 for
320 million. www.hgcapital.com
Ratos AB has agreed to acquire KVD Kvarndammen AB, a Swedish independent auto broker, for SEK
550 million ($78m). Sellers include the Sixth AP Fund and the companys founders. www.ratos.se
Other Deals
Husky Energy Inc. (TSX: HSE) has agreed to acquire certain Canadian oil and gas assets from
ExxonMobil Canada for C$860 million.
Sara Lee Corp. (NYSE: SLE) has agreed to acquire Brazilian coffee company Cafe Damasco for
around $60 million. www.saralee.com
SemiSouth Laboratories Inc., a Starkville, Miss.-based maker of high-voltage, silicon-carbide
semiconductor devices, has raised $30 million from Power Integrations (Nasdaq: POWI).
www.powerint.com
Teleflex Inc. (NYSE: TFX) has agreed to sell its Actuation unit to TransDigm (NYSE: TDG)
for $94 million in cash. The business makes components for commercial and military aircrafts.
www.teleflex.com
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