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Archive for July, 2009

Here is a good article from The Wall Street Journal Venture Blog.

“After an anemic first quarter, venture capital investments in clean technology rose 73% in the second quarter to a total of $572.1 million, suggesting there is momentum for an industry expected to gain steam from government stimulus funding.

The number of deals in the quarter doubled from the first quarter to 48, according to data from Dow Jones VentureSource, which like VentureWire and The Wall Street Journal is owned by Dow Jones & Co. The latest figures are still below the $1.41 billion spread across 57 deals in last year’s second quarter. (See chart at the bottom.)

But the expected release of stimulus money into the sector through grants and incentives should help get investments back on track, said Joe Muscat, Ernst & Young LLP director of cleantech for the Americas.

“Barring any unforeseen capital markets circumstances, I do think we’re in a period of growth here,” Muscat said. “People are looking both at enacted legislation and at the broader climate change legislation that will be a major enabler for companies” in the sector to grow.

During the second quarter, the largest amount of investors’ money – at $157 million – went into energy and electricity generation, which includes solar, geothermal, wind and hydro power, compared with $56 million in the first quarter.

The lion’s share of the total investment in renewable power generation, or $148.2 million, went into solar deals. One of the largest deals in solar during the second quarter was a $25 million Series A round by Mountain View, Calif.-based Skyline Solar Inc., led by New Enterprise Associates.”

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Here is a thought provoking article from PiOnline.

“Proposed registration, reporting and disclosure laws for alternatives managers — likely to be passed by Congress before year end — could force a swath of smaller managers to close and could have a devastating impact on hedge funds of funds, sources say.

Hedge fund, private equity and venture capital managers and their lobbyists want to strike a deal with legislators to lessen the administrative burden of reporting all investment and trading positions, trading practices, assets and on- and off-balance sheet risks, as is now proposed by the Treasury Department.

“The proposal’s required administrative tasks would be very burdensome for venture capital firms, which tend to be small companies. The chief financial officers in these firms already tend to be very stretched with the existing job of running the firm. I think this proposal … could drive many smaller venture capital firms out of business,” said Emily Mendell, a spokeswoman for the National Venture Capital Association, Washington.

“Smaller hedge fund, private equity and venture capital managers will be disproportionately impacted by the reporting regulations,” agreed Daniel Celeghin, director, Casey Quirk & Associates LLC, Darien, Conn.

“The real panic I’m hearing is from hedge funds of funds, whose executives say the reporting requirements will be a huge problem because they don’t get this level of detail from their underlying managers in order to be able to pass it on to the SEC. They’ve said `What’s coming could sink us,’ ” Mr. Celeghin said.

The new investment manager requirements are part of the Obama administration’s financial reform package first floated in June and designed to increase oversight of systemic risk and to control it.”

Read the full article here.

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Here is a good VC article from Alibaba.

“BURLINGAME, Calif. — Marc Andreessen, in a recent Forbes interview, noted there are hundreds of venture-capital outfits slogging it out right now, trying desperately to squeeze profits out of a terrible investing environment–but only a handful worth their salt.

He’s right. And this week’s news that Amazon.com ( AMZN – news – people ) would buy online-shoe retailer Zappos for $807 million in Amazon stock, plus some cash, highlights the staying power of one of those perennial Sand Hill Road stars, Sequoia Capital.

Sequoia is the notoriously tough firm that backed winners like Google ( GOOG – news – people ), Apple ( AAPL – news – people ), Cisco ( CSCO – news – people ), YouTube and PayPal. (I could go on.) It also owned a big chunk of Zappos, a company with a somewhat unlikely business model that excelled by providing unparalleled customer service and shoe selection on the Web. Sequoia recently told its investors it put about $48 million into Zappos and will get just over $169 million from the Amazon transaction. That’s not a “home run” in VC parlance. But it’s a very respectable return of about three-and-a-half times Sequoia’s original investment, particularly in these depressed times.

In the first six months of this year, there were only four tech-related M&A deals of over $100 million involving companies that took venture capital, according to Thomson Reuters and the National Venture Capital Association. (There were a few VC-backed IPOs in the first half, too, but no blockbusters.) The biggest of the tech M&A deals, Cisco Systems‘ $590 million purchase of camcorder maker Pure Digital Technologies, also involved Sequoia, which owned a small stake.

Sequoia’s profits from that deal were very small, but it still made a nice return: Sequoia told its investors in March that it invested just over $1.4 million in Pure Digital and would receive $13 million in Cisco shares and $1 million in cash after the acquisition. (The biggest VC-related deal in the first half of this year was Medtronic’s ( MDT – news – people ) $700 million purchase of CoreValve, a company with a new catheter technology to improve heart-valve replacements. Sequoia doesn’t do health care investing.) Plenty of other VCs have sold companies in fire sales this year for less than what investors put into them.”

Read the whole article here.

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Here is a possitive article from Green Energy Reporter.

“A widely used catch phrase – or some variation of it – appearing in the media since the official start of the crisis this fall,  goes something like this: “the global economic crisis, has left the [add required sector, in our case clean tech] reeling, unable to tap crucial funding…. ” This generic phrase and its variations have been used over and over to describe a harsh reality, specifically  how the credit crunch has left industries across the board at a standstill, unable tap financing to support their growth.

Then there is Khosla Ventures, the Sand Hill Road clean tech-focused venture fund, which will be announcing sometime this week the closing of two funds totalling $1 billion, all dedicated to supporting early clean tech investments. This is impressive, considering that most don’t expect this sort of capital raising to happen until well into 2010.

But it seems that Khosla Ventures, founded by Silicon Valley veteran Vinod Khosla, can afford shortcuts.  For one,  Khosla is a co-founder of Sun Microsystems and a former partner at Kleiner, Perkins, Caufield & Byers, two leading Silicon Valley pioneers. Also, back in 2004, when clean tech was an afterthought and social media  à la MySpace was all the rage,  he launched Khosla Ventures, one of the sector’s first clean-tech focused VC fund.

Forbes.com reports Khosla is on the verge of announcing two new funds: a $250 million vehicle for seed-stage investments and a $750 million fund for larger deals dubbed “KVIII.” One fund has closed already, and the other could close soon, Forbes reports, citing people with knowledge of the funds. Khosla himself is expected to invest $150 million of his own money in the new funds. Other reported investors include CalPERS, the pension giant with $179.2 billion in assets.”

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Here is an excellent article from SearchStorage.com.

“Dell Inc. executives this week repeated their claims that the vendor is looking for acquisitions, without giving much hint about who’s on the shopping list. But data storage figured prominently in Dell’s analyst day presentations on Tuesday, and execs pointed to EqualLogic as a model acquisition.

Founder and CEO Michael Dell hailed EqualLogic for its solid technology, and said revenue from its iSCSI storage systems has grown four times since Dell acquired it in early 2008.

Dell also said any acquisition target would have to fit into the vendor’s channel sales strategy, be easy to integrate and have financial stability with good profit margins. Dell hasn’t specifically limited its acquisition talk to data storage, and RBC Capital Markets analyst Amit Daryanani wrote in a note to clients, “We do not believe investors received a firm idea of how this might unfold at the analyst day. Management vaguely indicated it would likely look to do a ‘portfolio’ of acquisitions that would augment its penetration in favorable submarkets.”

Nonetheless, Dell’s statements about looking to expand through “inorganic growth” and move deeper into the enterprise and data center is sparking speculation about what companies would be likely candidates. “Given the data presented, we would not be surprised if targets were found in services and software given anticipated near-term annual growth rates of 6% and 8%, respectively,” Daryanani wrote in his note.

Industry insiders are drawing up lists of storage companies that fit Dell’s criteria and might help the vendor expand. Here are some of their candidates:

3PAR Inc.

The high-end disk array vendor’s growth took a hit this week when 3PAR said it expects to report a sequential revenue decline for last quarter. However, analysts see 3PAR as a good technology fit for Dell.

“3PAR would fit nicely into their portfolio,” said Jeff Boles, senior analyst and director of validation services at Hopkinton, Mass.-based Taneja Group. “[Dell] already has the small and medium enterprise and entry-level markets pretty well covered. Their opportunity is to expand their footprint up market.”

3PAR’s InServ Storage Server systems compete with EMC Corp.’s Symmetrix, as well as with systems at the high end of the Clariion platform, which Dell resells. But competing with partner EMC didn’t stop Dell from buying EqualLogic, which competes against the lower end Clariion models.

CommVault Systems Inc.

In a Q&A with SearchStorage.com last year, Dell storage vice president and general manager Darren Thomas downplayed the idea of buying a storage software vendor. But CommVault has the profitability, high margins and recurring revenue streams that Dell wants. It’s also a Dell partner. Boles sees similarities to where CommVault is as a company and where EqualLogic was when Dell picked it up for $1.4 billion. “Dell has tended to buy someone with revenue ramping pretty aggressively,” he said.”

Read the full article here.

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Here is an excellent analysis from The Wall Street Journal.
“The average length of unemployment is higher than it’s been since government began tracking the data in 1948.

The recent unemployment numbers have undermined confidence that we might be nearing the bottom of the recession. What we can see on the surface is disconcerting enough, but the inside numbers are just as bad.

The Bureau of Labor Statistics preliminary estimate for job losses for June is 467,000, which means 7.2 million people have lost their jobs since the start of the recession. The cumulative job losses over the last six months have been greater than for any other half year period since World War II, including the military demobilization after the war. The job losses are also now equal to the net job gains over the previous nine years, making this the only recession since the Great Depression to wipe out all job growth from the previous expansion.

Here are 10 reasons we are in even more trouble than the 9.5% unemployment rate indicates:

– June’s total assumed 185,000 people at work who probably were not. The government could not identify them; it made an assumption about trends. But many of the mythical jobs are in industries that have absolutely no job creation, e.g., finance. When the official numbers are adjusted over the next several months, June will look worse.

– More companies are asking employees to take unpaid leave. These people don’t count on the unemployment roll.

– No fewer than 1.4 million people wanted or were available for work in the last 12 months but were not counted. Why? Because they hadn’t searched for work in the four weeks preceding the survey.

– The number of workers taking part-time jobs due to the slack economy, a kind of stealth underemployment, has doubled in this recession to about nine million, or 5.8% of the work force. Add those whose hours have been cut to those who cannot find a full-time job and the total unemployed rises to 16.5%, putting the number of involuntarily idle in the range of 25 million.

– The average work week for rank-and-file employees in the private sector, roughly 80% of the work force, slipped to 33 hours. That’s 48 minutes a week less than before the recession began, the lowest level since the government began tracking such data 45 years ago. Full-time workers are being downgraded to part time as businesses slash labor costs to remain above water, and factories are operating at only 65% of capacity. If Americans were still clocking those extra 48 minutes a week now, the same aggregate amount of work would get done with 3.3 million fewer employees, which means that if it were not for the shorter work week the jobless rate would be 11.7%, not 9.5% (which far exceeds the 8% rate projected by the Obama administration).

– The average length of official unemployment increased to 24.5 weeks, the longest since government began tracking this data in 1948. The number of long-term unemployed (i.e., for 27 weeks or more) has now jumped to 4.4 million, an all-time high.”

To read the full article, click here.

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Steven R. Gerbsman, Principal of Gerbsman Partners, Kenneth Hardesty and Dennis Sholl, members of Gerbsman Partners Board of Intellectual Capital, announced today their success in maximizing stakeholder value at Pegasus Biologics Inc., a venture capital backed medical device company. Pegasus Biologics focuses on the development of advanced biologic solutions. Applications range from the repair, augmentation, reinforcement and reconstruction of soft tissues to advanced wound management.

Gerbsman Partners provided Crisis Management leadership, facilitated the sale of the business unit, associated Intellectual Property and assets and recovered receivables. Due to market conditions, the senior lender and the board of directors made the strategic decision to maximize the value of the business unit and Intellectual Property. The senior lender recovered 100% of its principal.

Gerbsman Partners provided leadership to the company with:

  • Crisis Management and medical device expertise in developing the strategic action plans for maximizing value of the business unit, Intellectual Property and assets;
  • Proven domain expertise in maximizing the value of the business unit and Intellectual Property through a targeted and proprietary “Date Certain M&A Process”;
  • The ability to “Manage the Process” among potential Acquirers, Lawyers, Creditors Management and Advisors;
  • The proven ability to “Drive” toward successful closure for all parties at interest.

About Gerbsman Partners

Gerbsman Partners focuses on maximizing enterprise value for stakeholders and shareholders in under-performing, under-capitalized and under-valued companies and their Intellectual Property. Since 2001, Gerbsman Partners has been involved in maximizing value for 55 Technology, Life Science and Medical Device companies and their Intellectual Property and has restructured/terminated over $770 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception in 1980, Gerbsman Partners has been involved in over $2.2 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in Boston, New York, Washington, DC, San Francisco, Europe and Israel.

For additional information please visit www.gerbsmanpartners.com.

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