Private Equity
Apple yesterday acquired Siri, a virtual personal assistant for the iPhone. No financial terms were disclosed, but a source tells peHUB that it was in the ballpark of $200 million. Siri was a VC-backed spinout of SRI International, a non-profit R&D lab whose past hits include Nuance Communications and Intuitive Surgical. The person in charge of the group's ventures, licensing and strategic programs is Norman Winarsky, who also sat on the board of Siri. So we've got five questions for him: 1. Siri was borne of the much-larger CALO project. What convinced you that this sliver was right for spinout and commercialization? Our venture process innovates constantly not simple of technology, but on what are the disruptive technological solutions we can help provide. And, typical of any tech solution, you must have a market vertical that makes sense and where there is a terribly important need. In the information technology space it was clear, even during CALO, that the concept of a virtual personal assistant was a great market opportunity. We originally wondered if we should go into the mobile phone or PC space, but we had one very telling offsite where we decided mobile because of the market pain. It’s so difficult to ask for Web services when on a phone – particularly if you’re in motion -- whereas on a PC you can just type.
3 min read · 29 April 2010
Softbank Capital has quietly raised $100 million for a new fund, which will focus on early-stage investments in the social computing space. The entire capital commitment came from Tokyo-based namesake Softbank. This is different from Softbank Capital's prior fund, a $230 million pool in which Softbank was joined by several other limited partners. That fund is now fully-committed, although there is still dry powder for follow-on investments. I last reported on Softbank Capital in June 2009, when co-managing partner Eric Hippeau left to become CEO of portfolio company HuffingtonPost. At the time, remaining managing partner Ron Fisher said that the firm
2 min read · 29 April 2010
Well, it's official: Palm will not go bankrupt. Nor will it be Palm for much longer. The troubled PDA maker today agreed to be acquired by HP for $1.2 billion, or $5.70 per share. That's a 23% premium to Palm's closing price today, and a 54% premium to where Palm was trading when I last wrote about its prospects. The technorati already is trying to figure out the strategic purpose of this deal, with early consensus being that HP wants Palm's well-regarded OS to serve as the basis for an upcoming tablet. I don't pretend to know, although that makes sense (HP certainly isn't looking to acquire the throngs of Pre owners because, well because there aren't throngs of Pre owners). What I can say, however, is that this deal is terrific news for Elevation Partners, the private equity firm that had invested more than 25% of its $1.8 billion debut fund into Palm. No one at Elevation is going to pretend this is a homerun, or even a single, but it certainly is a save.
4 min read · 28 April 2010
Earlier today, iPhone assistant maker Siri confirmed that it has been acquired by Apple. No financial terms were disclosed by the startup, which had raised $24 million in VC funding from Menlo Ventures, Morgenthaler Ventures and SRI International (from which it spun out in 2008). Some notes: 1. Robert Scoble first spotted the deal, based on an early termination of Hart-Scott-Rodino by the SEC. Good eyes, although it saddens me that this could prompt other reporters to regularly begin sifting through FTC notices (saddens me more that I hadn't done my own regular sweep). 2. Scoble also wrote the following, vis-a-vis price: If previous acquisitions by Apple are an indicator this would have gone for 8x to 10x investments, which would have put the price at about $200 million. Since this company/product just came out this year (I named it one of the startups to watch in 2010) it would have had to go for that amount or more to get the investors interested in selling so soon. I've spoken to a source familiar with the deal, who says that Scoble "is a very smart guy." It's not $200 million on the nose, but it's very, very close.
2 min read · 28 April 2010
I recently ran across a regulatory filing from HealthCare Ventures, which has been making early-stage and growth-stage deals since 1985. It suggests that the firm is targeting upwards of $250 million for its ninth fund, which would be a step down from the nearly $380 million raised for Fund VIII in 2005. More interesting than what's included in the filing, however, is what's missing. Namely, managing directors James Cavanaugh and Hal Werner. Both were listed as principals in a Fund VIII filing, but not this time around. They also happen to be HealthCare Ventures' only investment pros in Princeton, N.J., while the rest are based in Cambridge, Mass. (the new filing lists the Cambridge address, whereas past ones list Princeton).
1 min read · 28 April 2010
Bertram Capital last month began raising its second fund with a $500 million target, peHUB has learned. The Silicon Valley-based growth equity firm originally planned to begin marketing in early 2009, but deferred due to smaller deal sizes. “Everything we’re buying right now is substantially under 5x EBITDA, but we originally forecasted paying 8x EBITDA or more," Bertram managing director Jeff Drazen explained at the time. " Trafford is a good example. It’s a $10 million business we’re buying for a couple hundred thousand… I just don’t feel we can go out until Fund I is 75% committed, and we’re just not there yet.”
1 min read · 27 April 2010
You've got to love Jon Moulton, the UK buyout pro who quit Alchemy Capital last year to launch a new shop called Better Capital. Well, maybe not if you're the Alchemy partner he flogged for being unfit to lead the firm, but certainly if you're a blogger who relishes such conflict being brought out into the open. Anyway, Moulton has now lobbed a tongue-in-cheek grenade at the entire private equity industry, via an A-Z glossary on the Better Capital website. Here are a few highlights: C: Carried interest. The percentage of the profit on a transaction that goes to the partners of the PE firm. Known as 'carry' as in 'too much money to carry'. E: Envy ratio. The ratio between how much money a management team makes and how many workers they make unemployed. Also: Exit. The only door a VC can see. S: Ski trip. Winter activity for many megafund personnel. Moulton also doesn't spare his former firm, with "A" standing for:
1 min read · 27 April 2010
Ten days ago, private equity firm Quadrangle Group was in the news for all the wrong reasons. It was sued by the SEC for its alleged role in a pay-to-play pension scheme in New York, and then settled for $5 million. It also settled with New York for another $7 million, and threw in a public statement about how firm co-founder Steve Rattner's actions were "wrong, inappriate and unethical." Quadrangle had been hoping to settle for quite some time, in order to put the ugliness behind it and refocus on making new investments and selling old ones. And it would appear to be mission accomplished, as the firm today announced an agreement to sell portfolio company Protection One (Nasdaq: PONE) to GTCR for approximately $828 million, via a tender offer.
2 min read · 26 April 2010
I'm a veteran of hundreds of private equity panels. And I've edited hundreds of blog posts authored by industry insiders. Both are flush with unflattering anecdotes, but very rarely is the subject identified. Instead, it's a lot of: "There was this guy..." or "We once invested in a company..." But there are exceptions to every rule, as evidenced by a recently email newsletter from executive recruiter Pinnacle Group (and sent to me by multiple readers). The author, Pinnacle managing director Joe Logan, writes about the increased value -- and declining examples -- of trust in business relationships. And then comes this: So, imagine my surprise when I learned that Thomas Vo, a candidate who accepted an offer from one of our clients in February, announced this week that he was reneging on his acceptance. According to Thomas, although he had signed an agreement accepting our client's offer and agreed to a start date for this summer, he was contacted "out of the blue" by the HR department at a PE firm he declined to name (not surprising) after accepting an offer with our client and, although he tells us "he wasn't looking", he continued on interviews with this unnamed PE firm and has now accepted an offer with them – leaving our client in the lurch, months after they thought they had concluded their search. To be clear, I have no idea who Thomas Vo is. I've done some Google and LinkedIn searching, but so far have come up empty. I asked Logan where Vo was going, but apparently
2 min read · 26 April 2010
Lots of press coverage today of Raj Gupta, an independent Goldman Sachs director who reportedly agreed to step down after learning that the Feds had intercepted phone calls implicating him in the Galleon insider trading case. What the stories neglect to mention, however, is that Gupta currently helps run an India-focused private equity firm called New Silk Route. Moreover, he's not the only New Silk Route pro who knows his way around an insider trading investigation.
2 min read · 23 April 2010
