Venture Capital News
Allied Capital Commits $63 Million to Leading Distributor of RV Parts and Accessories
Representatives of Allied Capital Corporation announced that it has committed $63 million to support the buyout of Stag-Parkway, Inc. by private equity firm Greenbriar Equity Group LLC. Allied Capital's investment took the form of senior secured unitranche notes.
Stag-Parkway is the largest distributor in the U.S. of aftermarket parts and accessories to the recreational vehicle (RV) industry. The company links over 500 suppliers of RV parts and accessories to a customer base of over 2,000 independent RV dealers and distributors through a network of 16 distribution centers nationwide. Stag stocks over 15,000 SKUs and has access to another 10,000 SKUs through a special order service, giving it advantages over its competitors in purchasing scale, national coverage and high rates of order fulfillment. The company also provides inventory management and merchandising assistance to its large and diverse customer base.
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NEA Invests $18 Million in SolFocus Series A Funding
Representatives of New Enterprise Associates (NEA) announced Tuesday that it has invested US$18 million in SolFocus, a leader in solar concentrator photovoltaic (CPV) systems. NEA led the investment, with NEA General Partner Scott Sandell joining the company's board of directors, and Arno Penzias, NEA Venture Partner, joining the technical advisory board. Funds from the $32 million Series A financing will be used to ramp-up production and for team expansion.
SolFocus' innovative use of CPV technology stands on the forefront of the solar power plane, providing a solution for the silicon bottleneck shortage that has previously hindered solar power technologies. The product's combined use of high-efficiency cells with low cost collection optics significantly reduces the cost of solar power, and its fully enclosed, highly reliable package is ready for large scale field deployment and test.
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Houston Technology Center Announces Funding for 3 Gulf Coast Region Companies
Representatives of The Houston Technology Center (HTC) announced June 21 that itRobotics, Inc., an HTC Client company and one of the companies recommended by the Gulf Coast Regional Center of Innovation and Commercialization (Gulf Coast RCIC) for funding by the Texas Emerging Technology Fund (TETF), was chosen to receive a $750,000 award.
itRobotics, Inc. was awarded the $750,000 grant for the development of robotic in-line inspection systems for tubular plant equipment and non-piggable pipelines.
itRobotics, Inc. is one of three companies within the Gulf Coast RCIC's area currently being funded by the TETF. Other Gulf Coast recipients of the TETF funding are CorInnova Incorporated, an early-stage medical device company developing and commercializing heart assist technologies that lead to heart recovery rather than replacement; and Endothelix, Inc., a company dedicated to bringing endothelial function measurement from research laboratories to the mainstream practice of medicine in a low-cost and operator-independent manner to assist with early detection of cardiovascular disease and monitoring response to therapy.
The $200 million Texas Emerging Technology Fund, was created in June 2005 by Governor Rick Perry to assist small to mid-size technology companies to launch sooner, expedite the commercialization of new life-changing inventions out of the lab and into the hands of consumers and improve research at Texas universities.
HTC, selected in September 2005 to be the Gulf Coast RCIC for the TETF, is collaborating with the Greater Houston Partnership (GHP), Economic Development Organizations (EDO) within its 32-county region, area universities, and community volunteers. The Gulf Coast RCIC, the other six regional centers and the State-wide Texas Life Science Center are responsible for processing funding applications and supporting emerging technology companies.
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Palomar Ventures Adds Two Partners
Palomar Ventures, an early-stage venture capital firm, has promoted Brian Garrett to partner and added Kevin Jacques as a partner at its Santa Monica headquarters.
Garrett joined Palomar in 2001 as an associate and was promoted to principal in 2003. He has been instrumental in evaluating and sourcing new business opportunities for Palomar, with a recent emphasis on digital media deals. His investments in this area include Zannel, a multimodal social entertainment network currently in stealth mode; Encryptanet, a self-managing micropayment content access solution; and Mixed Signals, a leading provider of digital content monitoring solutions.
Additional investments led by Garrett include Entone, SkyeTek, Inc. and Gamma Enterprise Technologies. He is also actively involved at the Board level with Palomar's investments in Lombardi, Alterpoint and Datallegro. Prior to joining Palomar, Garrett held management positions with Zaplet and iNiku.com.
Jacques spent close to six years as a partner with Sevin Rosen Funds, a Texas and California-based early-stage venture firm with nearly $2 billion under management. While at SRF, Jacques led investments or played an active role with TruLogica (acquired by Hewlett Packard), Fuego (acquired by BEA), InnerWireless, Traq Wireless, Clearlinx, and MetaCarta. Most recently, Jacques served as CEO of GlobeRanger, a leading RFID middleware company based in Texas.
Jacques will focus on developing and evaluating new opportunities for Palomar in enterprise software and services, wireless, and information-based businesses.
Formed in 1999, Palomar Ventures has more than $525 million under management and is currently investing from Palomar III, a $225 million fund which is approximately one-third invested. The firm invests across most areas of information technology, including enterprise and infrastructure software, wireless and networking communications, storage, and digital media. Palomar has three California offices, in Palo Alto, Irvine, and Santa Monica.
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Q2 2006 Venture Capital Investing Reaches Highest Level Since 2002 at $6.3 Billion
In the second quarter of 2006, venture capitalists invested the highest dollar amount into the most deals since Q1 2002, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association based on data by Thomson Financial. During the quarter, venture investing grew to $6.3 billion in 856 deals, representing a 2% increase in dollars and a 5% increase in deals from the prior quarter. The increase was driven by strength in the Biotechnology, Industrial/Energy, and Networking & Equipment sectors, all showing solid gains in the quarter. Seed/Early stage deals and Expansion stage dollars both showed solid growth from Q1 2006. And, first-time financings reached a five- year high.
Driven by an extremely robust quarter for Biotech investing, the Life Sciences sector (Biotechnology and Medical Devices industries, together) increased 10% to $1.8 billion in 185 deals over Q1 2006. In the second quarter, the Biotech sector received 34% more dollars than in Q1 and experienced the highest number of deals in report history at 112. The increase in Biotech investing was offset by a decrease in funding for Medical Device companies, which fell by 22% in Q2 to $549 million but remained well within the investment range of the last 12 months.
Software investment dollars declined in Q2 with $1.3 billion going into 231 deals but remained the largest single industry category with 20% of total dollars and 27% of all deals.
The Industrial/Energy sector showed a 62% dollar increase, with $417 million going into 46 companies, reaching a five-year high. The majority of this increase can be attributed to Alternative Energy deals, which increased 69% in dollars over the prior quarter and nearly quadrupled in terms of deals. Networking and Equipment also experienced a very strong quarter, increasing 45% over Q1 in terms of dollars and 60% in deals.
Internet-Specific companies captured $916 million going into 143 deals in Q2, remaining relatively flat from Q1 and accounting for 14% of total investment. 'Internet-Specific' is a discrete classification assigned to a company whose business model is fundamentally dependent on the Internet, regardless of the company's primary industry category such as Software or Telecommunications.
The Telecommunications industry category, experiencing a drop in investing in Q1, remained flat this quarter. Investments in the Wireless sector continued to decline in terms of dollars but increased slightly in terms of deals, rising 17%. Other major industry categories that experienced increases in investment amounts in Q2 were Electronics/ Instrumentation and Semiconductors, both which have been climbing steadily over the last year, rising 17% and 15%, respectively from Q1 2006.
Venture capital investment in Startup and Early Stage companies remained flat from the prior quarter in terms of dollars but increased 13% in the number of deals to $1 billion going into 268 deals, suggesting that VCs are offering smaller rounds to more companies. Average post-money valuations of Early Stage companies dipped slightly to $14.06 million for the 12 months ending Q1 2006.
Funding for Expansion stage companies hit the highest investment level in four years, reaching $2.9 billion, a 17% increase over the prior quarter. The number of deals rose slightly to 329, a 6% increase from Q1. The average post-money valuation for Expansion Stage companies increased to $59.16 million for the 12 months ending Q1 2006 compared to $56.81 million in the Q4 2005 period.
Investments in Later Stage companies declined by 11% from Q1 with 259 companies capturing $2.4 billion. However, average post-money valuations continued to increase to $96.41 million for the 12-month period ending Q1 2006 from $94.72 million ending Q4 2005. This increase is likely reflective of the maturity of the companies still in the pipeline due to a sluggish IPO market.
Overall for Q2, Startup/Early Stage companies accounted for 31% of the deals; Expansion Stage, for 38%; and Later Stage for 30%. These percentages showed Startup/Early companies snatching percentage points from the Later stage companies.
First-Time Financings
The number of companies received funding for the first-time in Q2 2006 reached a five-year high with 282 companies receiving $1.3 billion. This increase coincides with the recent fundraising cycle and reflects the opportunity to deploy funds into first-time companies early in a fund's life. Dollars invested in first-time financings declined by 2% suggesting that venture capitalists are placing smaller bets in these companies. Startup/Early Stage deals continued to represent the bulk of first-time deals and dollars with 68% and 56% of the total, respectively, which is in line with historical norms. Companies in the Software, Energy, and Biotech industries attracted the highest level of first-time dollars in Q2. Other industry sectors where venture capitalists placed more bets for the first time were Media/Entertainment, Telecom and Medical Devices.
The MoneyTree Report measures cash-for-equity investments by the professional venture capital community in private emerging companies in the U.S. It is based on data provided by Thomson Financial. The survey includes the investment activity of professional venture capital firms with or without a U.S. office, SBICs, venture arms of corporations, institutions, investment banks and similar entities whose primary activity is financial investing. Where there are other participants such as angels, corporations, and governments in a qualified and verified financing round the entire amount of the round is included. Qualifying transactions include cash investments by these entities either directly or by participation in various forms of private placement. All recipient companies are private, and may have been newly-created or spun-out of existing companies.
The survey excludes debt, buyouts, recapitalizations, secondary purchases, IPOs, investments in public companies such as PIPES (private investments in public entities), investments for which the proceeds are primarily intended for acquisition such as roll-ups, change of ownership, and other forms of private equity that do not involve cash such as services-in kind and venture leasing.
Investee companies must be domiciled in one of the 50 U.S. states or DC even if substantial portions of their activities are outside the United States.
Data is primarily obtained from a quarterly survey of venture capital practitioners conducted by Thomson Financial. Information is augmented by other research techniques including other public and private sources. All data is subject to verification with the venture capital firms and/or the investee companies. Only professional independent venture capital firms, institutional venture capital groups, and recognized corporate venture capital groups are included in venture capital industry rankings.
MoneyTree Report results are available online at http://www.pwcmoneytree.com and http://www.nvca.org.
