Eight years ago, Vikram Kashyap left his job as an associate with Battery Ventures, in order to get the type of operating experience he felt was required to become a “world class” investor. After stops at eMeta and American Express, Kashyap launched Canopy Financial, a company whose technology helps streamline the administration of Health Savings Accounts. Canopy raised over $88 million in VC funding, including $62.5 million this past summer from Spectrum Equity Investors and return backer Foundation Capital. Today, Kashyap is unemployed and Canopy executives are likely to face both criminal and civil accusations of fraud (although no charges have yet been filed). As first reported this morning by TechCrunch, Canopy Financial appears to have largely been a facade. Its technology is real, but many of its tax statements, customer records and financial results were bogus. Sources tell peHUB that the company laid off approximately 100 of its 120 employees last Thursday, after an investor audit showed signs of severe impropriety. "The entire company thought everything was going great until two or three weeks ago," says a former employee who asked not to be identified. "Once that happened things moved very fast. The last week in our office was like going to a funeral."
3 min read · 24 November 2009
Hot Potato, a social networking startup focused on connecting friends and fans through live events, has raised $1.42 million in first-round funding. First Round Capital and RRE Ventures co-led the deal, with Josh Kopelman of FRC and Will Porteus of RRE taking board seats. Also on the Hot Potato board is Allen Morgan, the former Mayfield Fund partner who now operates as an angel investor. Other investors include: Ron Conway, Betaworks, Ken Lerer (independent of Betaworks), Chris Dixon and Founders Collective. Strauss Zelnick, Scott Banister, Ben Lerer Josh Kushner and Zach Klein. Brooklyn-based Hot Potato is the brainchild of Justin Shaffer, who had spent the past seven years working on digital media initiatives for Major League Baseball. On his LinkedIn page, Shaffer describes the company thusly: We’re building tools for real-time social collaboration amongst groups who share an interest in any event or experience as it’s happening. Whether checking in, recording your perspective, or just enjoying others contributions, it’s more fun to participate in events with Hot Potato. "What we're building is the intersection of Facebook and Twitter, but around live events in real-time," Shaffer explains. "Facebook and Twitter are personal monologues telling the story of me, whereas we're building an environment of collective storytelling by people at an event, or watching an event."
2 min read · 24 November 2009
NYPPEX Private Markets tomorrow will release new research, arguing that secondary market investors are overvaluing VC-backed Internet juggernauts Twitter and Facebook. Specifically, the New York-based group believes that individual investors using private-market stock exchanges are paying VC-sized valuations without the corresponding benefits. Take Twitter, which recently raised around $98.2 million of Series E funding at a $1.13 billion post-money valuation ($15.98 per share). NYPPEX says recent “odd lot” bids for the company have been at a $1.29 billion valuation, or $20 per share. A big different, of course, is that the Series E round consists of convertible preferred stock with a 1x liquidation preference. The “odd lot” shares, on the other hand, are plain vanilla common stock. In other words, folks buying on secondary exchanges are paying more for less.
2 min read · 24 November 2009
Winning Harvard Business School's annual business plan competition is officially worth $50k and a silver fruit bowl (sans fruit). For this past April's winner, it also helped foment a VC feeding frenzy. "We almost immediately began getting a lot of interest from VC firms around the world," says Matthew Prince, president and CEO of CloudFlare, an Internet security startup focused on website access control. "We were in a really luxurious position to be able to look around to see who made the most sense for us to work with, from both an expertise and personality perspective." CloudFlare went with Venrock and UV Partners, which recently provided a $2.05 million Series A round. Ray Rothrock of Venrock and Carl Ledbetter of UV Partners joined the CloudFlare board of directors.
2 min read · 23 November 2009
What follows are five VC deals culled from recent Regulation D filings with the SEC. None of them has been otherwise disclosed: * Siri Inc., a San Jose, Calif.-based developer a Web-based personal assistant, has raised $15.5 million in Series B funding. Return backers include Menlo Ventures and Morgenthaler Ventures. Siri previously raised $8.5 million, and lists INQ Mobile CEO Frank Meehan as a new board member. www.siri.com
1 min read · 23 November 2009
BackBay Communications, a PR shop representing a number of mid-market buyout firms, recently conducted a survey on the importance of private equity "brands." Not surprisingly, the results showed that brand matters, particularly when raising new capital or sourcing new deals. Dowload the results here (.pdf), or view them after the jump...
1 min read · 23 November 2009
Apollo Global Management today filed an amended S-1 filing with the SEC, as it continues its march toward a public listing. Not much in terms of new IPO information -- no pricing expectations, for example -- but Apollo did disclose new fund performance data through the end of Q3:
1 min read · 23 November 2009
* Incoming New Jersey Gov. Chris Christie asks the state not to make any new private equity investments, pending review (top link). Worth noting that a member of Christie's budgetary task for is Bob Grady, who left The Carlyle Group a few months back. * Gillian Tett: Will sovereign debt become the next subprime? * Wikipedia is getting older, and an unprecedented number of its volunteers are quitting. * Morning Call: U.S. futures point higher, London rises early, Europe looks up and both Hong Kong and China jump. * Green shoot #1: PayNet finds that the smallest U.S. businesses -- those with less than $100k in outstanding debts -- have begun borrowing again. * Green shoot #2: S&P reports that distressed debt hits a 17-month low. * Man arrested for not using Twitter. * 16 year-old Charles Allatt thinks he has created Napster 2.0 (i.e., a free P2P music sharing site that isn't illegal).
1 min read · 23 November 2009
Tom Danis of RCP Advisers suggested yesterday that one reason Charlesbank Capital Partners had an oversubscribed fundraise was that the new vehicle’s terms gave 100% of transaction fees to limited partners (rather than a split). It wasn’t so much the expected dollars, Danis said, but more that Charlesbank was responding to what is broadly seen by LPs as a fairer alignment of interests. Handing 100% of transaction, portfolio monitoring and other fees is a key tenant of the ILPA guidelines proposed earlier this year. But here is my question: If most firms adopt the ILPA guidelines on fees, will that end the taking of fees? In other words, will GPs still have incentive to pilfer from portfolio companies if they can’t stuff any of it in their back pockets?
2 min read · 20 November 2009
Greetings from the Beverly Hills Hotel, where the Buyouts West conference is well underway. Next up is going to be an LP panel, which includes Chris Douvos of The Investment Fund for Foundations, Jordan Robinson of Pomona Capital and Mike Dutton from CalPERS (yup, that CalPERS). Get a live-blog after the jump:
1 min read · 19 November 2009
