Venture Capital News
MPM Capital and Reliance Life Sciences Partner to Build Biotechnology in India
MPM Capital, L.P., a US-based global investment management firm focused solely on healthcare investing, and Reliance Life Sciences (RLS), part of India's largest private sector business group, announced Thursday a partnership to build India's life sciences sector. Making its first investment in venture capital, Reliance has become a Limited Partner in MPM Capital's newest fund, MPM BioVentures IV. Working closely with RLS, MPM Capital said it expects to target a portion of the BioVentures IV fund's international allocation to invest selectively in emerging life science companies in India, to provide office space for a RLS investment professional dedicated to the MPM/RLS partnership, and to explore the potential for a new India-only seed fund.
MPM Capital General Partner William Greene, M.D. explained that MPM is initially planning to help RLS grow its clinical research group globally. He also noted that MPM and RLS will explore investments in Indian-based companies with a focus on more conventional pharmaceutical products as well those within novel arenas including molecular diagnostics, biosimilars, and stem cells.
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European Capital Opens Frankfurt Office
Representatives of European Capital Financial Services Limited ("European Capital") announced Thursday the opening of its Frankfurt office. The office will concentrate on mezzanine investments. European Capital is an affiliate of American Capital Strategies Ltd., a United States based publicly traded alternative asset manager with approximately $10.9 billion in assets and capital commitments under management as of December 31, 2006. Leading European Capital in Frankfurt is Robert von Finckenstein, Managing Director, reporting to Nathalie Faure Beaulieu, Managing Director and Head of Pan European Mezzanine, based in London. The Frankfurt office is the third European Capital office, in addition to London and Paris.
European Capital investments in Germany total EUR42 million (US$57.1 million) (based on portfolio company headquarter locations), including investments in Deutsche Connectors, a designer and manufacturer of customised environmentally sealed connectors for harsh environments; Moeller, a supplier of low voltage electrical distribution and automation components for industrial, commercial and residential use; Flint Inks, an inks producer; Iglo Birds Eye, a manufacturer of frozen foods; and Metall Technologie Holding, a manufacturer and marketer of furnaces for heat treatment applications. European Capital has investments in the U.K., Germany, France, Luxembourg, the Netherlands, Sweden, Norway, Spain, Switzerland and Italy.
Mezzanine investments have been in consumer and leisure, healthcare, business and financial services and the industrials sector.
The sponsors which European Capital has worked with include: 3i, Apax Partners, AXA Private Equity, Bain Capital, Blackstone Group International, Candover Partners, Cinven, Doughty Hanson & Co., Electra Partners Europe, Investcorp International, Kohlberg Kravis Roberts & Co., Legal & General Ventures, Lehman Brothers Merchant Banking, Permira and WENDEL Investissement.
Prior to European Capital, Mr. von Finckenstein was Managing Director and Co-Head of DAM Advisors Ltd. in London. At DAM Advisors he originated mezzanine and subordinated debt transactions for German Mittelstand companies. Prior to DAM Advisors, he was a Director of Global Loan Products at Dresdner Kleinwort Wasserstein's Acquisition Finance Group in Frankfurt where he structured and arranged complex transactions, particularly in the telecommunications, media and technology sector.
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Pennsylvania Governor Rendell Announces Venture Capital Partnerships in Emerging Technology, Life Science Companies
On Tuesday, Governor Edward G. Rendell said that even as Pennsylvania continues to be a hot spot for venture capitalists, the state is actively working to attract new investments that will create opportunities in rapidly growing industries.
The governor said the commonwealth will leverage $20.2 million to attract an additional $60.6 million from five venture capital firms. The venture capitalists will use the state's investments to inject fresh funds in companies facing rapid growth, such as clean energy development, life sciences, security and information technology.
The New PA Venture Capital Program, part of the governor's innovative $2.8 billion economic stimulus package, addresses the growing needs of Pennsylvania businesses by providing $60 million in loans to venture capital managers, which leverages another $180 million in private equity, for a total investment of $240 million.
To date, the Commonwealth Financing Authority, or CFA, has committed more than $50 million of the $60 million available through the New PA Venture Capital Investment Program.
The CFA is a seven-member board created to administer and fund projects from programs created by Governor Rendell's Economic Stimulus Package. In addition to the Venture Capital Investment program, the CFA also oversees Building PA, Business in Our Sites, the Tax Increment Financing Guarantee, First Industries Fund, New Pennsylvania Venture Guarantee, PennWorks, and the Second Stage Loan programs.
During the next several years, nearly $1 billion in venture capital funding will be available to Pennsylvania's companies as a direct result of public/private partnerships, which will enable the commonwealth to continue attracting and retaining high-growth firms. The available capital, coupled with early-stage investments and Pennsylvania's strong university research and development presence, has created an ideal environment for venture capital investments throughout Pennsylvania.
The following venture capital investments were approved by the CFA:
- Allegheny County:
Birchmere Ventures received $5 million in capital commitments for Birchmere Ventures IV. The fund will invest in early stage technology and life science companies. Birchmere, with offices in Pittsburgh, plans to invest in companies with a focus in advanced technologies, software, communications, medical devices, and durable medical equipment. - Erie County:
SB3 Capital and Erie Management Group received $7 million in capital commitments to invest in financial services, logistics, security, renewable energy, and information technology companies. Northwestern Pennsylvania will be the target area for the majority of the fund's investments. - Lehigh County:
Originate Ventures received $5 million in capital commitments to seek investment opportunities with a focus on medical devices, healthcare, diagnostic technology, and product distribution companies. Originate will focus their investments in early stage and emerging growth companies in Eastern Pennsylvania. - Philadelphia County:
Blue Hill Investment Partners received $1.25 million in capital commitments to make investments into early stage advanced energy and industrial technology companies. Blue Hill's specialty is making investments that help companies improve their sales operations and recruit senior level staff. - SVM Pennsylvania-Israel Development Fund received $2 million in capital commitments to make investments in growing Israeli companies that pledge to establish their United States presence in Pennsylvania. The fund will target investment for research and development, product improvement, marketing, and management recruitment to ensure these companies prosper in the commonwealth. In January, the Ben Franklin Technology Development Authority or BFTDA also committed $3 million to the Pennsylvania-Israel Development Fund to strengthen the state's ability to attract Israeli economic development opportunities. The BFTDA is dedicated to fostering innovation and strengthening the commonwealth's economy, while creating and retaining good- paying jobs that require advanced skills.
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Venture Capital Investment Surpasses $7 Billion in Q1 2007
In the first quarter of 2007, venture capitalists invested $7.1 billion into 778 deals, the highest quarterly dollar amount since the fourth quarter of 2001, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association based on data by Thomson Financial. Deal volume actually declined in the quarter compared with the fourth quarter of 2006, indicating venture capitalists' willingness to put more dollars into each round.
The Life Sciences sector had an extremely strong quarter, with Biotechnology ranking as the number one industry for investment, while Medical Devices was at an all-time high. Later Stage investing also jumped in the quarter to the highest dollar level since the fourth quarter of 2000. First time financings remained relatively steady, increasing slightly over last quarter.
Sector and Industry Analysis
Medical Device investing skyrocketed to an all-time high in the first quarter, with $1.08 billion going into 96 deals, a 60 percent increase in dollars over Q4 2006. Biotechnology was the single largest industry sector with $1.5 billion going into 102 deals, unseating software, which is traditionally the largest sector. Life Sciences (Biotechnology and Medical Devices together) accounted for 36 percent of the quarter's dollars, an all- time high.
Software investments fell 10 percent from Q1 of 2006 to $1.1 billion into 193 deals in Q1 2007. The decrease can be attributed to lower deal volume. However, Software still had the highest deal level of all industries and was the second-largest industry sector for dollar value this quarter.
The Media and Entertainment sector increased 16 percent in dollars to $489 million into 72 deals. Telecommunications increased 27 percent in dollars over Q4 2006 with $588 million going into 63 deals. Within the Telecom sector, Wireless Communications captured $356 million for the quarter.
Internet-specific companies captured $1.3 billion going into 167 deals, a 31 percent increase in investment dollars over Q4 2006 and the highest quarterly level in five years. However, the number of Internet Specific deals decreased since the fourth quarter indicating more dollars being invested in each round. '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.
A new Clean Tech category, which crosses traditional MoneyTree sectors and comprises alternative energy, pollution and recycling, power supplies and conservation will be reported going forward. In the first quarter, venture capitalists invested $264 million dollars into 23 deals in the Clean Tech category, a 41 percent increase in dollar value over the fourth quarter. For the full year 2006, Clean Tech investments were $1.5 billion or an average of $383 million per quarter.
Other major industry categories that experienced dollar increases in Q1 2007 include IT Services, Networking and Equipment, Retailing/Distribution, Industrial/Energy, Electronics/Instrumentation, and Computers/Peripherals. Other industries experiencing declines were Semiconductors and Consumer Products.
Stage of Development and 12-Month Average Valuations
Investments in Later Stage companies increased significantly in the first quarter of 2007 with $3.0 billion dollars going into 245 deals. This was the highest dollar level in over six years. Average post-money valuations were $95.33 million for the 12-month period ending Q4 2006.
Funding dollars for Seed and Early Stage companies declined 30 percent in Q1 to $1.1 billion in 259 companies, a 26 percent decline in deals. Average post-money valuations of Early Stage companies were $11.13 million for the 12 months ending Q4 2006.
Investments in Expansion Stage companies experienced a modest dollar increase in Q1, rising nearly 9 percent to $2.9 billion invested into 274 deals. The average post-money valuation for an Expansion Stage company was $68.9 million for the full-year 2006. Overall for Q1, the number of deals was spread relatively evenly among the stages. Seed/Early Stage companies accounted for 33 percent of the deal volume; Expansion Stage for 35 percent; and Later Stage for 32 percent.
First-Time Financings
Fewer companies received funding for the first-time in Q1 2007 compared with the previous quarter. However, the dollar value of the rounds was collectively higher. A total $1.5 billion went into 223 deals this quarter compared with $1.4 billion going into 266 deals in Q4 2006. Seed/Early Stage deals continued to represent the bulk of first-time deals and dollars with 72 percent and 48 percent of the total, respectively, which is in line with historical norms.
Software companies continued to attract the most first time deals at 48 followed by Media and Entertainment companies at 31 and Medical Devices & Equipment at 27. Another industry sector where venture capitalists placed more bets this quarter was Industrial/Energy.
International Investing
In the first quarter of 2007, U.S.-based venture capitalists invested $137 million into 18 deals in China and just $83 million into 2 deals in India. Both countries had slower quarters than those seen in 2006. These figures are reported separately and are not included in the aggregate totals above.
