Verified Identity Pass, operator of the "Clear" system that allowed members to pass quickly through airport security, is ceasing operations later this evening. In a statement on its website, the company said that it has "been unable to negotiate an agreement with its senior creditor." The company was founded in 2004 by media Steven Brill, and raised around $54 million in VC funding. Most of that capital came last year, when Verified Identity Pass raised $44.4 million at a pre-money valuation of approximately $90 million. Spark Capital led the round (think this is their first big bust), and was joined by Syncom Venture Partners and return backers Lockheed Martin, GE Security, RRE Ventures, Baker Capital and Lehman Brothers.
1 min read · 23 June 2009
Private equity firms have a penchant for naming themselves after rocks, trees or... themselves. But a 1970s jazz-rock band? Pretty sure that's a new one. The firm is Blood, Sweat & Capital LLC, a Texas shop focused on the healthcare services space. "We met with a lot of healthcare executives when we were setting things up, and one of them mentioned that we should run a name contest through the Internet," says Pat Abele, a BS&T partner who has served as CEO for both New West Health Service and the Catholic Health Care Network. "There were probably a thousand different names submitted, and Blood Sweat & Capital really resonated with us. Maybe it's because of our ages, or maybe it's because we're putting lots and lots of sweat in along with our money."
2 min read · 22 June 2009
A couple of months back, I moderated a venture capital panel at the Nantucket Conference, which is an invite-only gathering of technology entrepreneurs and investors. It was a great group, including Brad Feld (Foundry Group), Josh Kopelman (First Round Capital), Jo Tango (Kepha Partners) and Eric Hjerpe (now with Kepha, but an official free agent at the time). Highlights included each panelist telling which firm they'd join if their's didn't exist, Josh comparing troubled portfolio companies to train fires and Brad's argument that the survival of venture capital as an asset class is mostly irrelevant to his business. Conference organizer Scott Kirsner has sent over the audio for your listening pleasure, so apologies for all my uhhs, umms and slightly-manic opening:
1 min read · 22 June 2009
David Mosher is leaving Madison Dearborn Capital Partners after 17 years, as first reported by The Chicago Tribune. Mosher is a firm co-founder and managing director, who focused on investor relations and other non-investing activities. The report quotes Mosher as saying the following in a letter sent last week to investors: "Investor relations, finance, IT, and legal were all areas for which I had main responsibility for years. We're pleased to have staffed out each of these functions with exceptional people." Some of those replacements include Credit Suisse vets John Knutsen and David Pequet, who are serving as head of investor relations and vice president, respectively.
1 min read · 22 June 2009
Venture capital outperformance is correlated to a portfolio company’s distance from a a VC firm’s office, according to new research from The Harvard Business School. But not in the way you might think. Specifically, the paper found that VC firms based in San Francisco, Boston and New York generally return more money on investments outside of their local geographies than on investments close to home. This isn’t to say that such firms do badly on their local deals – a Palo Alto-based firm still does better on a typical Menlo Park deal than would a Cleveland-based firm – nor does it take into account organizational costs (travel, etc.). But, again, that Palo Alto-based firm will probably generate a higher return on a Cleveland-based portfolio company than on one based in Menlo Park. The paper suggests that this differential could be caused by VC firms using higher hurdle rates for long-distance deals. Such portfolio companies may require
2 min read · 22 June 2009
Nearly two months ago, NYC Comptroller/mayoral candidate William Thompson banned certain New York City pension systems from investing in funds that use placement agents. Soon after, he said the following during an interview on CNBC's Squawk Box program: “A lot of these private equity funds, particularly the smaller ones and the mid-sized ones, don’t have marketing sides, don’t know how to reach out. So in some instances, you could say helps. We’re just going to beef up our staffs and work along with our outside consultant to try to create better access.” That was 45 days ago, but Thompson's office is still looking awfully vegan. No advertisements for new private markets positions, nor any evidence that they've even been budgeted for (the only one posted -- for a Director of Private Markets -- has been stagnating for more than a year). Even worse, a source familiar with the situation says that Thompson didn't have enough flexibility to make such a pledge in the first place, given that New York City is in the midst of a major budget
2 min read · 19 June 2009
Retailer Eddie Bauer yesterday filed for Chapter 11 bankruptcy protection, and agreed to be acquired by CCMP Capital for $202 million. So we have 5 Question for Jonathan Lynch, a managing director of CCMP Capital who worked on the deal: 1. Your firm took a hard look at Eddie Bauer five years ago, when you were still known as JPMorgan Partners. Why did you pass back then? Very simply, it was a company that was going in the wrong direction. They were focused on a segment - women's casual apparel - that a lot of other people were focused on, but it was antithetical to what the Eddie Bauer brand was known for. So it was the wrong direction with the wrong management team, which meant we were not compelled to do it. I always tell people that, in order to engineer a successful change in direction, you need to do four things: recognize the problem, set strategy to fix that problem, have the right people in place and then execute really well. Eddie Bauer is three of those four steps into that process right now, and that's very different than where the company was in 2004. Back then, management didn't even recognize the problem, so they certainly couldn't execute against it.
3 min read · 18 June 2009
The Ford Foundation has hired Sherif Nahas to oversee its private equity investment activities, as first reported yesterday by newsletter Private Equity Insider. Nahas will succeed Eric Doppstadt, who was recently promoted to chief investment officer. Nahas previously spent around seven years with the University of Virginia Investment Management Co., but was downsized as the school decided to scale back new general partner relationships. That portfolio continues to be managed by Rob Freer, who shared private equity responsibilities with Nahas.
1 min read · 18 June 2009
When private equity firms raise a fund, they typically pack their LP advisory board with the fund’s largest and most well-known investors. It’s completely understandable, but it also can leave many of a fund’s smaller LPs without a voice. After all, CalPERS or Yale may have very different concerns than a family office or a municipal transit workers’ pension fund. Not saying one group’s concerns are superior to the other’s, just different. So, a proposal: Private equity firms (buyout, venture, etc.) should include a couple of “at large” seats on their LP advisory boards. Any LP could run for these seats, with other LPs to vote at each year’s annual meeting (or by proxy). This may be unworkable in a fund’s first year of operation, but certainly could be done in year two. Not only would it give smaller LPs a voice, but it also would help private equity firms understand what’s going on with the investors who often constitute the majority of their investors (if not the majority of their dollars). In other words, a win-win. Thoughts?
1 min read · 18 June 2009
Did you know that the National Association of Realtors has a venture capital arm called Second Century Ventures? Me neither, until I met managing director Constance Freeman (formerly of Cue Ball) at the Chicago Shindig on Monday night. Apparently the 1.2 million member organization first dabbled in VC by making one-off investments in companies like Move Inc. (online real estate), SentriLock (a realtor lockbox) and ZipLogix (real estate forms software). It then formed Second Century Ventures in 2007, and made an investment in commercial listings platform ePropertyData.
1 min read · 18 June 2009
