Venture Capital News
STARTech Portfolio Company Acquired By Cisco Systems
Texas is one of the leading states in the country when it comes to venture capitalism, and with results like these, it's not hard to see why. STARTech Early Ventures, an early stage venture capital firm with business accelerator services facilitating the successful creation of technology companies, has a number of telecom, software, life sciences, and semiconductor, energy and sensor network companies in its portfolio. On Wednesday, representatives of STARTech announced that one of its portfolio companies, Metreos Corporation, has been acquired by Cisco Systems for $28 million.
STARTech gave Metreos its start in March 2003, providing the start-up company with $555,000 and supplying early start-up assistance needed by the company. Metreos leverages the latest infrastructure technology to provide a simple, low-cost foundation for IP telephony solutions. This foundation helps deliver applications that realize the true vision of convergence. The company offers easy-to-use, drag-and-drop application creation/integration environments that will further strengthen Cisco's Service Oriented Network Architecture (SONA). This will enable Cisco's development partners to create and deploy new value-added business applications. The acquisition also will allow customers and partners to build customized communications applications that are fully integrated across the enterprise IT infrastructure, enterprise applications and enterprise contact centers.
The acquisition is also good news for the Entrepreneurs Foundation of North Texas (EFNT). An early grant of Metreos stock was issued to the EFNT. The grant helps to promote entrepreneurship in Texas as the EFNT assists emerging companies in building philanthropy into their business plans. As a designated Fund of Communities Foundation of Texas, EFNT promotes and manages an innovative financial vehicle that makes it possible for companies to donate equity to benefit charitable organizations of their choice.
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Health Care Venture Capital Investors on Track for Record Year, According to Healthcare Corporate Finance News
More than $2 billion in venture capital was invested in health care companies during the second quarter ended June 30, 2006. The average deal size was $20.75 million, reflecting a 29% increase from the first quarter of 2006 and a 26% increase over the year-ago quarter. In each of the top three sectors-Biotechnology, Biopharmaceuticals and Pharmaceuticals-the average deal size was about $23 million, but in Medical Devices the average deal size was just over $15 million. Compared with the first quarter of 2006, during the second quarter the total number of deals decreased by 29%, but the total amount of venture capital invested in health care decreased by just 9%.
"Even as consolidation is occurring among biotechs, biopharmas and pharmaceutical companies, investors are backing new companies that will ultimately feed the M&A pipeline," noted Stephen M. Monroe, Managing Editor of Irving Levin Associates. The largest deal of the second quarter, and also the second-largest deal so far this year, is the $100 million round that newly- formed Pelican Life Sciences secured from Grotech Capitaland Ferrer Freeman & Company. The second-largest deal of the quarter is the $65 million Series E announced by Merrimack Pharmaceuticals. For the six months ended June 30, 2006, the largest deal, a $200 million financing, was announced in February by another start-up company, Graceway Pharmaceuticals. Both Graceway Pharmaceuticals and Pelican Life Sciences are pursuing a business strategy based on growth by acquisition.
For the second quarter ended June 30, 2006, biotechnology companies, with $762 million in funding and 33 deals, secured the greatest amount of funding in one sector as well as the most rounds. In 20 deals, biopharmaceutical companies raised $472 million. Pharmaceuticals accounted for nearly $289 million, with 13 deals announced. Medical device companies announced nearly as much funding, $260 million, in 17 deals. e-Health and other types of companies providing technology solutions or other services to the health care industry account for the remainder of the totals.
Combining the quarters, for the six months ended June 30, 2006, the total number of deals announced is almost the same this year as it was last year, with approximately 230 deals in each six-month period. But the total amount of venture capital committed to health care companies increased by 9% during the first six months of 2006, compared with the first six months of the previous year, and the median deal size for the first six months of 2006 posted a gain of 10% over the year-ago period.
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Angel Groups Growing, Says Angel Capital Education Foundation Analysis
Individual angel investors continued to form organized investor groups with the number of angel groups increasing by nearly 60 percent in the past three years, from an estimated 150 in 2002 to 250 last year, according to an analysis by the Angel Capital Education Foundation (ACEF) and the Ewing Marion Kauffman Foundation.
The survey of angel group members of the Angel Capital Association also revealed that the average angel group invested US$1.45 million and that the average angel group invested $266,000 per round and $387,000 per company during calendar 2005.
Angel investor groups are composed of wealthy individuals who pool resources and investment expertise. The groups, which are distributed in most U.S. states, are creating a new type of capital for high-growth, early-stage entrepreneurs who need $100,000 to $1 million in equity financing to grow their firms. During the last decade, this range of equity financing has been difficult for entrepreneurs to obtain, as venture capitalists have tended to make larger sized investments in later-staged companies.
While investments by angel groups are a small fraction of the estimated $23.1 billion in total angel investment last year, the analysis indicates that the professionalism and sophistication of angel groups is increasing along with the number of groups.
For example, angel groups are not only getting more formalized within their own organizations, they are developing standard processes to work together to co-invest in entrepreneurial ventures on jointly negotiated terms. This new concept of angel syndication should benefit entrepreneurs as it appears to provide for larger investments and may eventually reduce the number of presentations entrepreneurs need to make before each angel group they meet.
Angel groups are also working more closely with venture capitalists. According to the report, 45 percent of the reported angel group deals had co-investment with venture capital firms last year.
The analysis was released at the ACEF's recent annual North American Summit. The PowerPoint noting the statistics is available the ACEF's website.
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Florida Venture Forum Names Brekka to Board of Directors
The Florida Venture Forum, the oldest, largest, and most prestigious statewide support group for venture capitalists and entrepreneurs, Monday announced that Richard Brekka, founder of Dolphin Equity Partners, has joined the organization's Board of Directors.
Brekka founded Dolphin in 1998. He is Chairman of the Board of Gomez, Inc. and a member of the Board of Directors of Adapt Media. Brekka has specialized in communications investing for nearly 15 years --from 1988 until 1992 at Chase Manhattan Bank, and from 1992 until 1997 at CIBC, both in New York.
Prior to founding Dolphin, Brekka was a Managing Director of CIBC's private equity investment unit and the President of CIBC's U.S. private equity investment subsidiaries. On behalf of CIBC, he served as a director on the board of 10 communications companies. Representative investments included Nextel Communications, Telesystems International Wireless, Orion Network Systems, Transit Communications and OneComm Communications. Prior to becoming a private equity investor, Brekka was an account officer at Swiss Bank Corporation from 1984 until 1987.
Brekka holds a Bachelor of Science degree in Finance from the University of Southern California and a Master of Business Administration degree from the University of Chicago.
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Grubhub.com Wins the University of Chicago New Venture Challenge
A national panel of venture capitalists awarded Grubhub.com, a website founded in Chicago by two friends, first place out of over 60 entries in the 10th Annual Edward L. Kaplan New Venture Challenge at the University of Chicago Graduate School of Business. Winners were selected based upon the uniqueness of product and services, fulfilling an unmet need, exceeding customer expectations and the likelihood of market success.
Grubhub.com is the only way for people to find all of the restaurants that deliver to them. Users simply enter their address into the website and Grubhub.com returns the menus, coupons, and delivery information for all of the restaurants that deliver to that location. Grubhub.com is totally free for users because it is in the business of lead generation for delivery restaurants.
Today Grubhub serves over 75,000 users per month and is growing by 30% every month. Last year, Chicagoans placed over 2 million dollars in orders for delivery through Grubhub.com. Users can call the restaurants to place a delivery order or use Grubhub’s online ordering system.
Founded by Mike Evans and Matt Maloney, both of whom have masters degrees in computer science and used to work at Apartments.com, Grubhub has been a labor of love until now.
Grubhub.com is using the prize money to fund a national expansion to San Francisco, Seattle, New York City, Boston, and Washington D.C.
Widely held as the premier business school for budding entrepreneurs, the University of Chicago Graduate School of Business created The New Venture Challenge in 1996 as a way to promote entrepreneurship. Now in its 10th year, the competition has launched 30 new companies that have attracted more than $100 million in funding. The Illinois Department of Commerce and Economic Opportunity also supported the competition by donating a portion of the prize money.
Contestants were judged based on their prospects for success, quality of their business plan, and a final presentation to a panel of 19 distinguished judges and over 200 spectators at the University of Chicago on May 25, 2006.
