Venture Capital News
IN-vivo Ventures Closes on Fund
IN-vivo Ventures LLC, a Purdue Research Park-based company formed in 2003, has created a founder's fund to provide initial seed capital to the company's projected short-term portfolio of 10-15 Midwestern technology ventures.
The IN-vivo Ventures Founder's Fund was developed from a large group of angel investors who helped launch Quadraspec Inc., an IN-vivo Ventures portfolio biotech company that uses compact-disc technology to cost-effectively diagnose disease. In addition to Quadraspec, IN-vivo Founders Eric Davis and Chad Barden have launched several companies, including Copient Technologies Inc.; Nuron LLC, which was acquired by Intel; Arxan Technologies Inc.; and Kylin Therapeutics Inc. Together, these companies have acquired more than $40 million in angel and venture capital-based funding and employ more than 100 people.
Davis, a managing partner at IN-vivo Ventures, said the new fund was created to respond to a heightened interest in private equity for Midwestern startups. He cites the success of the Purdue Research Park in West Lafayette, Ind., where more than $85 million in angel and venture capital investment flowed into startups in fiscal year 2005.
A recent report by the Corporation for Enterprise Development ranked Indiana the fourth highest state in the percentage gain of venture capital/angel investing over five years (1999-2004). And while total venture capital/angel funding has increased only 7 percent nationwide over the last two years, it's increased 152 percent in Indiana during the same period. Perennial funding hotspots, such as the Silicon Valley and New England, have seen moderate increases, or even decreases, during this period (i.e. the Silicon Valley's funding increased 15 percent and New England's decreased 1 percent).
Big Ten universities also are helping to fuel innovation in the Midwest. Each of these institutions enjoys nationally recognized research programs that, together, attract billions of dollars of sponsored research and produce hundreds of patented technologies annually.
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National Venture Capital Association Warns Congress that SEC
and PCAOB SOX Reform Proposals Do Not Go Far Enough
National Venture Capital Association (NVCA) President Mark Heesen told Congress that last week's proposals by the Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB) to lower the costs of Sarbanes Oxley 404 compliance for small companies are inadequate as currently written. Testifying before the House Small Business Committee, Mr. Heesen's comments highlighted three key areas of concern for small venture-backed companies.
"First, we are gravely concerned that the accounting profession will not change its high cost practices and the recent guidance provided by both the SEC and the PCAOB regarding materiality is not specific enough to compel them to do so," Mr. Heesen testified. "Second, the oligopoly that exists for 404 audits leaves no choice for small companies in terms of service providers. It does not provide any incentive for the Big 4 accounting firms to lower costs. Lastly, because of these first two concerns, it is imperative that prior to adoption, all proposed measures are fully field tested to confirm that they will indeed reduce costs."
Despite waiting longer than four years for SOX 404 reform, the NVCA is willing for the SEC to take additional time to ensure that the recommendations are meaningful and implemented in the spirit in which they were intended - to reduce costs.
"In the last two years, the accounting profession led by the Big 4 has resisted SOX reform while reaping the benefits of lucrative 404 audit engagements. Further, they have publicly warned that the supporters of reform 'shouldn't expect a dramatic reduction in costs' with the adoption of proposals," said Heesen.
The NVCA is asking the SEC to place the needed pressure on the Big 4 to join the cost reduction effort. This can be achieved by raising the threshold for defining what is and what is not material for sound financial reporting and allowing accredited financial professionals beyond the Big 4 to perform 404 attestations. The current proposals do not address these critical issues.
The NVCA remains hopeful that the SEC will move in the right direction, but there is still work to be done.
"We commend the SEC for its recognition of the problems and its effort to enact solutions. Yet, the question ultimately has to be "will small companies finally see relief?" Based on preliminary reviews of the of the SEC and PCAOB proposals, our answer is "no," said Heesen.
The National Venture Capital Association (NVCA) represents approximately 480 venture capital and private equity firms.
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Disney Steams Into China With Venture-capital Firm
The old cartoon "Steamboat Willie" made Mickey Mouse famous in the United States nearly 80 years ago. Now, the venture-capital firm Steamboat Ventures may hold the key to unlocking Mickey's fame in China.
Ever since Walt Disney Co. brought its Magic Kingdom empire into the Middle Kingdom with the 2005 opening of a Hong Kong theme park, the company has been flooding China with its brand through TV shows, movies, theater productions and merchandise. But Disney's characters are far from household names in China, partly because of the government's tight grip on media.
Steamboat Ventures, established a few years ago to invest on behalf of Disney, is working behind the scenes with some big players in the world's second-largest Internet market. The Burbank, Calif., firm opened a Hong Kong office last year and has since taken stakes in three Chinese start-ups with a strong presence in Internet broadcasting. China had 137 million Internet users last year, according to the quasi-governmental organization China Internet Network Information Centre, and a large number of those eyeballs are turning to Internet television for programming not offered on local TV.
Last week Steamboat invested alongside Silicon Valley firms Draper Fisher Jurvetson and Sequoia Capital in CTS Media, a Shanghai-based company that inserts advertisements into streaming online video.
CTS is the exclusive advertising platform provider to Internet TV provider BesTV. Disney and several other studios reportedly have inked a deal with BesTV to distribute movies through a video-on-demand platform in development. That would be a boon for U.S. studios, which are eager to create a new channel for legal film distribution in China.
Steamboat also put money into video-sharing Web site 56.com in December, and in March it invested with Draper Fisher and Sequoia in UUSee, China's largest Web TV operator with more than 36 million registered users. Importantly, UUSee is the only peer-to-peer network approved by China, and it distributes programming from state-run CCTV.
