Last month, Senator John Ensign (R-NV) introduced legislation that would have provided a temporary suspension of income taxes for companies buying back their own distressed debt. The plan did not make it into the Senate’s economic stimulus package, but Ensign nonetheless managed to get a compromise that would amount to a massive bailout for private equity-backed companies. For the uninitiated, companies are required to pay income tax on any “gains” made by buying back their own debt at reduced prices. For example, imagine that Wire Corp. negotiates with its lenders to buy back $1 billion worth of notes for $700 million. Wire Corp. would then be required to pay income tax on the $300 million difference. The original Ensign bill would have eliminated those taxes for 2009 and 2010, but the compromise would defer 2009 and 2010 payments until 2011 (at the earliest), and then allow them to be paid out over an eight-year period.
3 min read · 04 February 2009
* Dark days for green energy: Just when we need more, we're making less. * The top 10 cities for small businesses. * Morning Call: U.S. futures rise, European stocks extend rally and both the Nikkei and Hong Kong break losing streaks. * N2N Commerce is the latest VC-backed bust, although Kirsner reports that the shutdown decision wasn't actually made by the lead VC (General Catalyst). Instead, it was made by strategic investor/partner Limited Brands. * The Uggconomy: What furry footwear tells us about our economic future. * Steve Syre: How has Boston Scientific fallen so far, so fast? * HuffingtonPost co-founder Ken Lerer teaches journalists to think like VCs.
1 min read · 04 February 2009
2 min read · 03 February 2009
Email of the Day comes from Sean, who doesn't seem thrilled with how VC funds have been lumped into the Hedge Fund Transparency Act. Specifically, he took issue with a Senate staffer, who told me: "The bill takes this approach to avoid getting into the impossible task of distinguishing between hedge funds, private equity funds, venture capital funds, and other types of funds, while providing a low-cost, reasonable means for the SEC to obtain basic information about these investment companies." Sean writes: *Impossible* to distinguish between hedge and venture funds? Any person who is unable to articulate such a distinction has no business drafting legislation to regulate these entities. This is a cop-out, plain and simple, and highlights the misunderstanding of the venture industry and its role in job creation. On the one hand, Sean's analysis seems obvious. It's hard to confuse a $2 million investment in WidgetWidget with a $300 million short of Ford Motor Co. On the other hand, the lines
1 min read · 03 February 2009
CMEA Ventures has quietly changed its name to CMEA Capital. Jim Watson, a CMEA managing director, says the move was made to better reflect the firm’s plan to broaden its investment strategy. It will continue doing early stage deals, but also plans growth-stage and other sorts of funds in specific sectors. For example, CMEA is currently raising a Green Growth fund, and soon could do similar things in spaces such as IT or healthcare. CMEA historically has invested around 75% of its capital into early-stage deals, with the remainder going to growth or late-stage opportunities. "It's all about how you attract the best talent," Watson says. "You could do one big fund, or look for people to come in and fund a more specialized fund. We debated both sides of it
1 min read · 03 February 2009
At 11am ET, the will be a teleconference to discuss how private equity “may cause the next global financial meltdown.” The participants are all organized labor bigs, including SEIU president Andy Stern, UNITE general secretary Jack Dromey and UNI Global Union general secretary Philip Jennings. I plan to live-blog the call, and encourage your participation. Find it after the jump.
1 min read · 03 February 2009
Carlyle Group co-founder David Rubenstein gave the opening keynote at a Harvard Biz School conference this past weekend, and reportedly said the following about private equity: "I analogize it to sex. You realize there were certain things you shouldn't do, but the urge is there and you can't resist." That's right David, but couldn't more of you have used protection? After all, that's the difference between a novice and a professional...
1 min read · 02 February 2009
For years, part of my morning newshounding has been to check www.SEC.gov for any new S-1 or RW filings. Basically looking for new IPO filings or withdrawals.Of late, however, I've only been searching for withdrawals, since new IPO filings seem to have gone the way of the dinosaur (or, perhaps, the way of completed IPOs). In fact, the last IPO filing from a VC-backed or PE-backed company had been Bridgepoint Education on December 22, 2008. Before that, you had to skip November to find a few October strays. But could all that be changing? We've had two new filings since last Wednesday: One for Medidata Solutions, a VC-backed provider of electronic data capture and data management software for clinical researchers; and one for OpenTable, a VC-backed operator of an online network for restaurant reservations (which I happen to use, and love). It's not exactly a flood, but relatively speaking...
2 min read · 02 February 2009
"Long Tail" author Chris Anderson today wrote a WSJ piece called The Economics of Giving It Away, arguing that most online businesses can no longer succeed if CPM-based ads are their only revenue stream. I agree, which is why we at peHUB offer both Premium Subscriptions and host various events (like the Shindigs). But I do take issue with one line in Anderson's piece, in which he says: For the first time since 2001, the overall tide of investment and advertising won't rise. Indeed, it will almost certainly fall. Venture capital has dried up... It is true that venture capital activity has slowed down, but to say it has "dried up" is a massive overstatement. In fact, it's closer to a canard. Venture capitalists funded 833 U.S.-based companies in Q4 2008, for a total of $5.47 billion. That's well off the $8.08 billion invested in Q4 2007, but it's hardly "dried up." In fact, it's pretty close to where the VC market was at the end of 2005, when just $5.79 billion was invested in 810 companies. Moreover, not a single quarter in 2004 even broke the $5 billion mark.
2 min read · 02 February 2009
* Sequoia Capital China loses one of its founding partners, and the other is being sued for $206 million by The Carlyle Group. George Chen has the story. * RIP Mike Homer. * Morning Call: U.S. futures sink, European shares fall on banks and oil, the Nikkei slips 1.5% and Hong Kong drops 3.1 percent. * Wall Street's hottest employer is... Lehman Brothers? * Joe wants to know if GE shareholders are still paying for Jack Welch's toilet paper.
1 min read · 02 February 2009
