I saw a bunch of companies present yesterday at VC in the Rockies. Here are some notes from the first four, including previously undisclosed funding info. I’ll do the rest tomorrow (including the only actual category killer I saw):
Zayo Group: This is the bandwidth consolidator that last year announced $225 million in equity funding. It’s also secured $140 million in debt, including a new facility from CIT that is currently in the process of being syndicated out.
That’s a lot of money, and it hopes to raise another $75 million to $125 million in equity this year (all but one existing backer will re-up more than their pro rata). The company’s Q4 2008 projections are to have $180 million in revenue, with $57 million in EBITDA. That would work out to a valuation of just under $550 million.
Big question here is what stops any other well-funded consolidation startup from forming, or the incumbent carriers from getting back into acquisition mode? The answer is nothing, although I was told by a few different folks not to worry – that the market is plenty big to handle multiple consolidators. In fact, one VC said Zayo had the best homerun potential of all the presenting companies.
WBS Connect: Communications middleman, offering to connect end-users and telecom service providers. Possible acquisition target someday for Zayo, except that it leases its fiber instead of owning it.Company has secured $600k in equity, and is in the process of closing a $2-$4 million debt facility from Silicon Valley Bank. It’s hoping to raise between $4-$6 million in Series A funding in Q2 or Q3 of this year.
Like everyone else in this space, WBS is counting on growing backbone strain due to rising online video usage. Also like everyone else in this space, they could ultimately be thwarted if someone figures out how to make digital video significantly lighter. But that’s a huge “could.”
Filtrbox: Digital news aggregator for the enterprise. Kind of Google Alerts on steroids, with a more personalized/flexible version of Digg thrown in. Currently in private beta, with public launch set for next month. Ad-supported free site with limited functionality, and a sub-based “premium” model that prices out at just $20 per month, per user.
Raised $500k in seed funding from Flywheel Ventures, True Ventures and angels. Seeking to raise a $3 million Series A round later this year.
Very crowded space, although the app seems to be a standout. Big issue is the Google question: What happens if/when it decides to improve alerts. CEO said he doesn’t expect it (too small to move GOOG’s needle), and that such a move would actually serve to validate Filtrbox. There also is a third option: Google as an eventual exit target.
DAZ 3D: An online 3D art studio and marketplace, that allows users (including pro artists) to create 3D characters, landscapes, etc. for use and/or resale. For example, you can create/sell detailed avatars for virtual worlds, or create characters for MMO games.
Backed by a $4.2 million Series A round led by Highway 12 Ventures, and had $10 million in 2007 revenue. Barrier to entry is an issue, although DAZ seems to have done a good job of branding and building its community. Sky may be the limit for this one.
*** The most interesting item to emerge from Super Return had to be Tony James’ assertion that The Blackstone Group plans to bypass banks when it comes time to secure leveraged financing for buyouts. Instead, it’s going to it up hedge funds and mutual funds.
Now a cynic could point out that now is an easy time for James to make such a claim, since there are barely any new buyouts in need of leverage. In fact, perhaps it’s a leverage play all its own, with James looking to push down Wall Street fees a bit.
But, again, that’s baseless cynicism. What we do know is that if Blackstone follows this tact and is successful, then others are sure to follow. That’s very bad news for Wall Street firms like JP Morgan, which grabbed $412 million in buyout-related fees last year. But never fear, says JPMorgan banker Steve Black: ``If they think they can do that themselves without the banks then God bless them. I don't think that will work very well, but let them try.''
Maybe Black is just a bit piqued that he had dinner with Tony James last week, and the issue of disintermediation never came up…
*** Speaking of Super Return, I’ve posted a slideshow of David Rubenstein’s presentation, in which he had ten key questions facing private equity. Here you go.
*** Quiz Time: Can you name the Silicon Valley venture firm that is teaming up with Hollywood talent agency William Morris, for a new seed-stage digital media/entertainment fund? Hint: This isn’t the one being raised by ex-Palomar Ventures guy Brian Barrett and Rick Smith, with the support of Creative Artists Agency (CAA) and Draper Fisher Jurvetson. If you’re the first person to get it right, you’ll be on the list for a PEWear t-shirt (whenever I get around to making them)…
*** VC in the Rockies has the best gift bag… ever. Well, at least so long as you’re checking your bag at the airport.
*** Congrats to Jeff Roberts of Comerica Bank in Seattle. He won last night's poker tourney here in Beaver Creek. I stuck around for an hour, but got knocked out by Rob Shurtleff of Divergent Ventures.
*** Time to head out for an hour on the slopes before hopping a plane back to Boston… Will be in New York for most of next week, at Buyouts East.
Mascoma Corp., a Cambridge, Mass.-based provider of cellulosic biomass-to-ethanol development and production, has raised $50 million in Series C funding, according to a regulatory filing. It includes $30 million in equity, and $20 million in debt. General Catalyst Partners was joined by return backers Khosla Ventures, Atlas Venture, Flagship Ventures, Kleiner Perkins, Pinnacle Ventures and VantagePoint Venture Partners. Mascoma had previously raised around $40 million. www.mascoma.com
Chrysler lost approximately $2.7 billion in the two months after being acquired by Cerberus.
The U.S. Department of Energy has chosen three venture capital firms to participate in the Department’s new entrepreneur-in-residence pilot program, which aims to accelerate deployment and commercialization of advanced clean energy technologies from three DOE National Laboratories into the global marketplace. The three firms are: Kleiner Perkins Caufield & Byers, ARCH Venture Partners and Foundation Capital.
TyRx Pharma Inc., a Monmouth Junction, N.J.-based commercializer of implantable combination drug devices, has raised $25 million.in first-round funding from Clarus Ventures and Pappas Ventures.
PhaseRx, a Seattle-based biotech startup focused on delivering therapies via sIRNA, has raised $19 million in first-round funding. Backers include 5AM Ventures, Arch Venture Partners and Versant Ventures. The company was founded by Robert Overall, a former general partner with Frazier Healthcare Ventures.
ClearTrip Travel Services, a Mumbai, India-based travel website operator, has raised $18 million in Series C funding, according to VC Circle. Draper Fisher Jurvetson led the round with $10 million, and was joined by The Mahindra Group and return backers Sherpalo Ventures and Kleiner Perkins Caufield & Byers. No mention of whether Series B lead DAG Ventures also participated. www.cleartrip.com
WideOrbit Inc., a San Francisco-based provider of sales, traffic and billing software for the global media market, has raised $14.5 million in Series C funding. Participants included Khosla Ventures, Greycroft Partners and Hearst Ventures. VentureWire reports that the company already has term sheets out on a follow-on round that could net up to $50 million.
Helpsteam, a Mountain View, Calif.-based provider of on-demand collaborative customer service solutions, has raised $8.6 million in Series B funding. Mohr Davidow Ventures led the round, and was joined by return backers Foundation Capital and former Informix CEO Roger Sippl. Helpstream was previously known as Pathworks Software.
Alert Logic Inc., a Houston-based provider of on-demand IT network security solutions, has raised $8.25 million in Series C funding, according to a regulatory filing. Updata Partners led the round, and was joined by return backers Hunt Ventures, DFJ Mercury, Access Venture Partners and OCA Ventures. The company had previously raised $7.5 million. www.alertlogic.com
ABC Learning Centres Ltd., a listed Australian operator of child-care centers, said that it has received approaches for parts of its business. It did not disclose specific suitor names. ABC watched its stock price plummet 43% on Tuesday, due to concerns over leverage levels and margin calls on director shares. It also requested that it shares stop trading on the ASE, while it holds discussions with possible buyers. www.childcare.com.au
American Capital Strategies has arranged a $75 million recapitalization of insurance brokerage Tanenbaum-Harber Co. Holdings Inc., an ACS portfolio company that is majority owned by Olympus Partners (which also participated).
Champlain Financial Corp. has acquired a control position in Les Produits Neptune Inc., a Quebec-based designer and manufacturer of luxury bathroom fixtures. No financial terms were disclosed for the deal, which also includes participation by Neptune founders and management.
CIVC Partners has acquired Innovative Aftermarket Systems LP, an Austin, Texas-based provider of vehicle finance and insurance (F&I) aftermarket programs to auto dealers. No financial terms were disclosed. www.iasdirect.com
Forte Netservices, a Finnish managed service provider for networking and security solutions, has raised €3.5 million from Eqvitec Partners. The investment is part of a management buyout, with Eqvitec taking a minority stake.
CardioNet Inc., a San Diego-based provider of wireless mobile cardiac outpatient monitoring solutions, has set its IPO terms to six million common shares being offered at between $22 and $24 per share. It would have an initial market cap of approximately $512 million, were it to price at the high end of its range. The company plans to trade on the Nasdaq under ticker symbol BEAT, with Citi serving as lead underwriter. CardioNet has raised around $163 million in total VC funding, including a $110 million infusion last year. Shareholders include H&Q Healthcare Investors, Sanderling Ventures, Guidant Corp., Foundation Medical Partners and IngleWood Ventures. www.cardionet.com
Ancor Capital Partners has sold disposable medical device maker Avail Medical Products Inc. to Flextronics (Nasdaq: FLEX). No financial terms were disclosed.
Microsoft has agreed to acquire YaData Ltd., an Israeli provider of online advertising solutions. No financial terms were disclosed, although press reports peg the price at between $20 million and $30 million. YaData was founded in July 2006, and has raised around$4 million in VC funding from Giza Ventures and Ofer Hi-Tech.
Vitruvian Partners has closed its debut fund with €925 million in capital commitments. The UK-based firm plans to focus on buyouts, growth buyouts and growth equity opportunities in Northern Europe. Monument Group served as placement agent. www.vitruvianpartners.com
Shinsei Bank and the Development Bank of Japan have formed a $141 million private equity fund, which will focus on buyouts and growth equity for mid-sized Japanese companies.
Gene Ramirez has joined Nollenberger Capital Partners, an emerging growth-focused I-bank, as a managing director. He previously was a director with Stanford Group Co., where he co-founded the firm’s tech I-banking practice.
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