Venture Capital News

Nanotechnology Research Funding Up, Venture Capital Down

More than $9.5 billion was spent on nanotechnology research and development worldwide in 2005, a considerable rise as compared to 2004. But $9 billion of that was from governments and corporations, says "The World Nanotechnology Market (2006)" report from Research and Markets. And VC's may be backing off even more in 2006. Venture capital investments in MEMS and nanotech companies in the first half of 2006 were down 15.4% compared to the first half of 2005, according to Bourne Research.

Nanotech start-ups were the hardest hit, with funding down 38.7%.

"I'm scared of anybody with nano in their name," said Kevin Landis, who manages about $700 million at Firsthand Capital Management in San Jose, California. "With any new wave of technology, there's ample opportunity to invest in companies that don't end up being the winner."

Those words of warning fit well with my observation here a few weeks ago that many nano companies are dropping the "nano" from their names.

But don't worry, there are still plenty of success stories. Altair Nanotechnologies' revenues more than doubled in the second quarter of 2006 compared to the second quarter of 2005. Altair is a leading provider of advanced nanomaterials technology for use in energy, pharmaceutical, life sciences and industrial applications.

Despite the venture capital slump, the prospects for nanotech remain good. By 2008, the total global demand for nanoscale materials, devices and tools will cross $28 billion, says the Bourne report.

The report added that silver nanoparticles, chemical sensors, tri-axis accelerometers were product niches bearing close attention.

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Wellington Financial Launches $400 Million Investment Program

Representatives of Wellington Financial LP, a privately held specialty finance firm, announced the first closing of Wellington Financial Fund III, structured to finance up to $400 million in new debt transactions. Fund III is expected to be capitalized with $125 million in re-circulating equity commitments from several leading Canadian institutional investors.

Founded in 2000, Wellington Financial provides bridge, term and venture debt loans and can lead transaction between $1 million and $30 million for a broad range of Canadian business sectors.

Wellington Financial Fund III is a successor fund to two previous entities. Wellington Financial Fund II was capitalized with $83 million in re-circulating equity funding commitments, and led over $104 million via 18 loans over a 28-month period. Wellington Financial Fund I, created in 2000, led $18.5 million in loans to five different companies.
Wellington Financial is a recognized leader in providing unique and flexible financing solutions to private and publicly traded Canadian growth companies.

Wellington Financial's current and prior portfolio companies include many of Canada's most exciting growth firms, including:

• Airborne Entertainment Inc., named the "2005 Venture Capital Deal of the Year" by the Canadian Venture Capital Association;
• Basis100 Inc., acquired by The First American Corporation in 2004;
• MKS Inc., one of Canada's fastest growing publicly traded software companies; and
• Top Aces Consulting Inc., named in June 2006 as "Canada's fastest and fiercest company" by the Globe & Mail's report on (Small) Business Magazine

Wellington Financial LP has led more than $120 million in debt financings via 23 announced transactions since its founding, making it one of the most active funds of its kind in Canada. Fund III will continue to follow the same proven model by assisting both public and private companies with a demonstrated customer following, talented management and well defined growth strategies.

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$100 Million Private Equity Financing Continues Renewable Energy Group's Position in Biodiesel Industry

Representatives of Renewable Energy Group, Inc. (REG) announced Wednesday the successful completion of $100 million financing and two new strategic partnerships. NGP Energy Technology Partners, L.P., an affiliate of NGP Energy Capital Management, led the Series A preferred stock financing. Strategic partners, Bunge North America and E D & F Man Holdings Ltd., also invested in the Series A financing. In addition, Natural Gas Partners VIII, L.P., the Sargents, West Central Cooperative, and other Iowa investors participated in the REG financing. The $100 million financing is one of the largest investments in biodiesel in North America.

REG will use the new capital and strategic partnerships to expand its network of wholly-owned and third-party managed biodiesel plants. REG expects to increase its biodiesel production to approximately 640 million gallons by 2009, including third-party plants.

Viant Group, a San Francisco-based boutique investment bank, advised REG in the transaction.

REG was formed through the combination of West Central's biodiesel business and REG, LLC's biodiesel plant construction business, and has produced and sold biodiesel for more than ten years through its predecessor companies. REG is the biodiesel industry leader of B100 sales and is the only full-service biodiesel company offering plant management, risk management, raw material procurement, plant construction, biodiesel production, and biodiesel sales and marketing services. All planned facilities will utilize patented continuous-flow biodiesel production technology featuring water recycling and methanol recovery and be BQ-9000 Accredited. REG serves hundreds of customers including on-highway fleets, original equipment manufacturers, maritime, military, home heating and agriculture industries.

Bunge North America and E D & F Man Holdings Ltd. selected REG as a strategic partner in the biodiesel industry and elected to invest in the company. These partnerships provide a dedicated supply of various raw materials, site locations, and risk management and logistics expertise and enable growth in biodiesel production capacity to volumes necessary to meet the consumption demands of large customers nationwide.

More than 80 percent of the production cost of biodiesel occurs in the procurement and transportation of feedstock to the biodiesel production plant itself. With Bunge, the largest oilseed processor in the world, and with E D & F Man Holdings Ltd., a major trader of fats and oils such as palm oil and tallow/yellow grease, REG expands its transportation and distribution network both domestically and globally.

Facilitating further production and transportation efficiencies, REG intends to co-locate several biodiesel production facilities with Bunge North America oilseed processing facilities.

This agreement continues REG's leading position in the biodiesel industry. The investment and partnerships will allow REG, Inc. to create 496 jobs by 2010 in its network of plants nationwide. In the state of Iowa, REG will increase its current staff of 52 employees to 82 by 2009.

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Triangle-Based Startup Pharmaceutical Firm Focused on Anti-infective Medicines Lands $14 Million

Cempra Pharmaceuticals, which launched as a company in January, is off to a fast financial start, having closed on $14 million in venture financing.

Intersouth Partners and I. Wistar Morris III, an investment banker from the Philadelphia area, co-led the round.
The company had already raised an unspecified amount of financing from angel investors.

Cempra is focused on developing drugs that can tackle bacteria, which have developed resistance to antibiotics.

As part of the deal, Intersouth's Garheng Kong and Morris will join Cempra's board of directors.

The company has proprietary chemistry technology related to macrolides, which are antibiotics that fight a wide range of bacterial infections. The firm's founders have backgrounds in discovering and developing anti-infective treatments.
Cempra has already licensed a pipeline of macrolides and ketolides, which are effective against macrolide-resistant bacteria, from Optimer Pharmaceuticals in San Diego, CA. According to the company it has a number of compounds at various stages of development.

The global market for anti-infective drugs is estimated to be greater than $30 billion, according to Cempra.
Cempra is led by Prabhavathi Fernandes, who has more than 25 years of experience related to drug discovery and development at such pharmaceutical firms as Squibb and Abbott. She also has served as chief executive officer at DarPharma, Ricera Biosciences and Small Molecule Therapeutics. Fernandes founded Small Molecule Therapeutics and was involved in discovery of three potential drug compounds.

Campra also has a scientific advisory board of eight members, all of whom have extensive backgrounds in pharmaceuticals.

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SAP Announces Strategic Investment in Questra Corporation

Representatives of SAP AG announced Tuesday it has made an investment in Questra Corporation, a leader in intelligent device management (IDM). The announcement marks the first investment for SAP's $125 million global SAP NetWeaver.

Questra, based in Redwood City, California, recently received "SAP xApps Certified – Powered by SAP NetWeaver" status for the Questra RemoteService Composite Application. Developed in conjunction with joint SAP and Questra customer Heidelberger Druckmaschinen AG, the Questra composite application enables manufacturers to monitor remote devices and automatically generate service notifications in their SAP Service and Asset Management solution.

The SAP NetWeaver Fund was established in May 2006 and focuses on strategic investments in select companies that choose to leverage the SAP ecosystem and build innovative solutions based on the SAP NetWeaver platform. Funded out of SAP's corporate development funds, the $125 million SAP NetWeaver Fund complements the efforts of SAP's venture arm, SAP Ventures, and is managed jointly by Zia Yusuf, executive vice president of platform ecosystem at SAP, and Jim Mackey, head of corporate finance at SAP.

There are currently more than 400 "Powered by SAP NetWeaver" solutions and more than 1,000 independent software vendors (ISVs) actively developing on the SAP NetWeaver platform today.