Archive for the ‘National Venture Capital Association’ Category

Article from GigaOm.

Venture capital investments picked up significantly this quarter, with a 37 percent increase in funding and 3 percent increase in deals over the previous quarter. The period also saw strong emphasis on mobile investments and seed funding, according to a report released by CB Insights. There was a total of $8.1 billion in financing for 812 companies, the highest totals since Q2 of 2001.

About 13 percent of the activity — or 102 deals — was in the mobile sector, marking an all-time high, with 30 percent of those companies involved in photo or video technology.

“Without being too self-congratulatory, the Instagram Effect we speculated about in Q1 2012 seems to have taken shape as the mobile sector saw 102 deals, an all-time high… For skeptics, it may also be indicative of a VC herd mentality. Time will tell.”

Below is a breakdown of investments by dollar amounts in the different subsets of mobile and telecom industry:

Some other highlights from the report include:

  • Seed investing also hit an all-time high, with 22 percent of all deals happening at the seed stage this quarter, as compared to 12 percent from the same quarter in 2011.
  • The most successful sectors with respect to number of deals were internet companies with 46 percent, healthcare at 17 percent, and mobile and telecommunications at 13 percent. With respect to dollars in funding, the top sectors were internet at 38 percent and healthcare and “other” each at 19 percent.
  • 50 percent of deals occurred at either seed funding or Series A rounds, although they made up only 19 percent of funding dollars.
  • California took the most number of deals per state at 45 percent of deals, up from 40 percent in Q1. New York remained in second place with 10 percent of deals, and Massachusetts in third place with 9 percent.

Read more here.

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May 30 2012
by John Backus

A New Golden Age of Venture Capital

co-authored by John Backus & Todd Hixon

The Venture Capital (“VC”) Model is dead (at least for LPs), proclaimed the Kauffman Foundation recently. Too much available money for the VC model to succeed added Union Square’s Fred Wilson. A blog out there details 25+ stories on why the VC model is broken. Sevin Rosen, a firm known for PC and telecom hardware investments in the 1990s, started this death watch in 2006, when it aborted closing a new fund.

Average VC returns for the last ten years do stink. Cambridge Associates made headlines when its 10-year cumulative U.S. VC return index went negative at (2.0%)/year in December 2010. The index popped up to 3.3%/year for the decade through December 2011. Over the same period the NASDAQ returned 2.9%/year. But, given the illiquid nature of VC investments, investors deserve a 3% – 5% premium, at least, over public markets.

First, a bit of perspective: these are rear-view-mirror analyses, informative but not predictive. In the ’98-‘00 burst of “irrational exuberance”, over $200 billion of capital flooded into the U.S. VC market which had previously absorbed $5-$10 billion per year. This money put a huge supply overhang on the market that has taken time to disappear.

Cambridge Associates, U.S. VC Fund Index Through 12/31/11.

As the chart above shows, over-supply of capital caused returns to plummet in 2002 and 2003. These two years of -20% returns are the main driver of poor returns for the decade. The other downward blip was the global financial crisis, which the VC community weathered easily (no systemic risk here!). For the rest of the decade, VC produced solid returns of 11%-17% net to investors. This is not yet stellar, but it is 4%-10% above the ~7% return most investors expect from public equity markets. And these are average returns; certain funds do much better.

A key lesson learned (or re-learned) from’98-’00 is: venture fund return is higher if the fund size is between $100 and $400 million. The big influx of capital created many $1 billion venture funds. They have not delivered big returns. Harvard Business School‘s Josh Lerner wrote in a recent paper:

“We find that LPs that have higher average IRRs also tend to invest in smaller and slower growing funds …”

Silicon Valley Bank analyzed the “small is better” phenomenon in 2009 and concluded that smaller funds are five times more likely to deliver a “venture return” (2X+ net to investors) compared to on larger funds . The Kauffman Foundation confirmed SVB’s finding with this analysis of its venture fund portfolio:

(“PME” is the return achieved by each fund divided by the return achieved if the same cash flows had been invested in the U.S. small cap index.)

Looking forward, we see five converging forces that will strengthen the venture capital ecosystem:
Disruption: social/local/mobile/web 2.0 is the greatest engine for disruption and innovation man has yet seen
Entrepreneurs: there has never been more energy for creating businesses
Angels: seed funding by angels has bloomed and will grow further
Reduced Supply of venture capital
Exits are way up, and the road is paved for growth

Disruption. Mobile, social networks, the cloud, and the “digital native” generation are changing everything. They are already growing faster, and will be much bigger than the PC wave. Hard goods retailing and media (movies, books, and music) have already been uprooted by this tsunami. Local commerce feels the storm rising now. Healthcare and education don’t believe it will hit them – just wait. Trillions of dollars of existing market value will be destroyed, and the disruptors will create even more value.

Entrepreneurs. One of our sons is going to college next year and wants to be a technology entrepreneur. That was not a mainstream choice when we went to college. But today role models are on IPO road shows dressed in hoodies, student-entrepreneurs have cred, and technology platform companies, like Facebook, Apple, and Google/Android, have dramatically lowered the hurdle for software-based businesses.

Angels Take Flight. In 2010 Angels invested $20.1B into 61,900 companies. When the crowdfunding provision of the JOBS Act goes live in January 2013, we think that number will grow dramatically – into the hundreds of thousands. The crowdfunding bill limits annual fundraising per company from the “crowd” to $1M. That’s enough money to prototype a company, but not enough to commercialize or scale it. There will be huge opportunity for VCs to carry the best companies and entrepreneurs forward.

Data via SVB Analytics & Dow Jones VentureSource

Reduced Supply Of Venture Capital. In contrast to the bountiful angels, the sources of venture capital are drying up. Both the dollars committed to VC funds and the number of active funds has declined by half in the last five years (chart above). In 2010 1,001 companies received initial funding from VC funds . This means that only ~2% of the 61,900 angel funded companies are likely to receive institutional venture capital. And crowdfunding will expand the pool of pre-VC companies. Early stage VCs will see a huge flow of opportunities, many of them high-quality (i.e., companies that have prototypes and meaningful market results when we meet them). That’s a very good thing for the early stage VCs that remain active.

More and Better Exits. The big breakthrough with the JOBS act is the “IPO On-Ramp”, which reduces cost and delay for smaller companies aiming to go public and makes analyst coverage of small-cap companies attractive. The benefit of these changes will emerge over the next five years, as a new generation of boutique investment banks, like Alex Brown and Robertson Stephens, grows up to serve smaller start-up companies that are largely ignored by the “too big to fail” banks.
Finally, timing seems to be on the side of a new golden age of VC. You can’t really time the venture market, because it takes too long to move in and out. But, fund investors can take confidence from the strong fundamentals noted above. Harbourvest founder Brooks Zug and Accel founder Arthur Patterson have both observed a long-term cycle in VC fund performance, and they both see the VC tide rising over the next five years. We’re coming off a period of retrenchment in U.S. VC following the late ‘90s boom and the early ‘00s bust. Now is the time to take a new look at venture capital.

First posted on Fortune/CNN/Money on May 21, 2012

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The Advantages of a “Date-Certain” Mergers and Acquisition Process Over a “Standard Mergers and Acquisitions Process”
Every venture capital investor hopes that all of his investments will succeed. The reality is that a large percentage of all venture investments must be shut down. In extreme cases, such a shut down will take the form of a formal bankruptcy or an assignment for the benefit of creditors. In most cases, however, the investment falls into the category of “living dead”, i.e. companies that are not complete failures but that are not self-sustaining and whose prospects do not justify continued investment. Almost never do investors shut down such a “living dead” company quickly.

Most hope against hope that things will change. Once reality sets in, most investors hire an investment banker to sell such a company through a standard mergers and acquisition process – seldom with good results. Often, such a process requires some four to six months, burns up all the remaining cash in the company and leads to a formal bankruptcy or assignment for the benefit of creditors. In many instances, there are a complete lack of bidders, despite the existence of real value in the company being sold.

The first reason for this sad result is a fundamental misunderstanding of buyer psychology. In general, buyers act quickly and pay the highest price only when forced to by competitive pressure. The highest probability buyers are those who are already familiar with the company being sold, i.e. competitors, existing investors, customers and vendors. Such buyers either already know of the company’s weakness or quickly understand it as soon as they see the seller¥s financials. Once the sales process starts, the seller is very much a wasting asset both financially and organizationally. Potential buyers quickly divide the company’s burn rate into its existing cash balance to see how much time it has left. Employees, customers and vendors grow nervous and begin to disengage. Unless compelled to act, potential buyers simply draw out the process and either submit a low-ball offer when the company is out of cash or try to pick up key employees and customers at no cost when the company shuts down.

The second reason for this sad result is a misunderstanding of the psychology and methods of investment bankers. Most investment bankers do best at selling “hot” companies, i.e. where the company’s value is perceived by buyers to be increasing quickly over time and where there are multiple bidders. They tend to be most motivated and work hardest in such situations because the transaction sizes (i.e. commissions) tend to be large, because the publicity brings in more assignments and because such situations are more simply more fun. They also tend to be most effective in maximizing value in such situations, as they are good at using time to their advantage, pitting multiple buyers against each other and setting very high expectations. In a situation where “time is not your friend”, the actions of a standard investment banker frequently make a bad situation far worse. First, since transaction sizes tend to be much smaller, an investment banker will assign his “B” team to the deal and will only have such team spend enough time on the deal to see if it can be closed easily. Second, playing out the process works against the seller. Third, trying to pit multiple buyers against each other and setting unrealistically high valuation expectations tends to drive away potential buyers, who often know far more about the real situation of the seller than does the investment banker.

“Date Certain” M&A Process

The solution in a situation where “time is not your friend” is a “date-certain” mergers and acquisitions process. With a date-certain M&A process, the company’s board of directors hires a crisis management/ private investment banking firm (“advisor”) to wind down business operations in an orderly fashion and maximize value of the IP and tangible assets. The advisor works with the board and corporate management to:

1. Focus on the control, preservation and forecasting of CASH;
2. Develop a strategy/action plan and presentation to maximize value of the assets. Including drafting sales materials, preparing information due diligence war-room, assembling a list of all possible interested buyers for the IP and assets of the company and identifying and retaining key employees on a go-forward basis;
3. Stabilize and provide leadership, motivation and morale to all employees;
4. Communicate with the Board of Directors, senior management, senior lender, creditors, vendors and all stakeholders in interest.

The company’s attorney prepares very simple “as is, where is” asset-sale documents. (“as is, where is- no reps or warranties” agreements is very important as the board of directors, officers and investors typically do not want any additional exposure on the deal). The advisor then contacts and follows-up systematically with all potentially interested parties (to include customers, competitors, strategic partners, vendors and a proprietary distribution list of equity investors) and coordinates their interactions with company personnel, including arranging on-site visits. Typical terms for a date certain M&A asset sale include no representations and warranties, a sales date typically two to four weeks from the point that sale materials are ready for distribution (based on available CASH), a significant cash deposit in the $100,000 range to bid and a strong preference for cash consideration and the ability to close the deal in 7 business days.

Date certain M&A terms can be varied to suit needs unique to a given situation or corporation. For example, the board of directors may choose not to accept any bid or to allow parties to re-bid if there are multiple competitive bids and/or to accept an early bid. The typical workflow timeline, from hiring an advisor to transaction close and receipt of consideration is four to six weeks, although such timing may be extended if circumstances warrant. Once the consideration is received, the restructuring/insolvency attorney then distributes the consideration to creditors and shareholders (if there is sufficient consideration to satisfy creditors) and takes all necessary steps to wind down the remaining corporate shell, typically with the CFO, including issuing W-2 and 1099 forms, filing final tax returns, shutting down a 401K program and dissolving the corporation etc.

The advantages of this approach include the following:

Speed – The entire process for a date certain M&A process can be concluded in 3 to 6 weeks. Creditors and investors receive their money quickly. The negative public relations impact on investors and board members of a drawn-out process is eliminated. If circumstances require, this timeline can be reduced to as little as two weeks, although a highly abbreviated response time will often impact the final value received during the asset auction.

Reduced Cash Requirements – Given the date certain M&A process compressed turnaround time, there is a significantly reduced requirement for investors to provide cash to support the company during such a process.

Value Maximized – A company in wind-down mode is a rapidly depreciating asset, with management, technical team, customer and creditor relations increasingly strained by fear, uncertainty and doubt. A quick process minimizes this strain and preserves enterprise value. In addition, the fact that an auction will occur on a specified date usually brings all truly interested and qualified parties to the table and quickly flushes out the tire-kickers. In our experience, this process tends to maximize the final value received.

Cost – Advisor fees consist of a retainer plus 10% or an agreed percentage of the sale proceeds. Legal fees are also minimized by the extremely simple deal terms. Fees, therefore, do not consume the entire value received for corporate assets.

Control – At all times, the board of directors retains complete control over the process. For example, the board of directors can modify the auction terms or even discontinue the auction at any point, thus preserving all options for as long as possible.

Public Relations – As the sale process is private, there is no public disclosure. Once closed, the transaction can be portrayed as a sale of the company with all sales terms kept confidential. Thus, for investors, the company can be listed in their portfolio as sold, not as having gone out of business.

Clean Exit – Once the auction is closed and the consideration is received and distributed, the advisor takes all remaining steps to effect an orderly shut-down of the remaining corporate entity. To this end the insolvency counsel then takes the lead on all orderly shutdown items.

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 69 Technology, Life Science and Medical Device companies and their Intellectual Property, through its proprietary “Date Certain M&A Process” and has restructured/terminated over $800 million of real estate executory contracts and equipment lease/sub-debt obligations. Since inception, Gerbsman Partners has been involved in over $2.3 billion of financings, restructurings and M&A transactions.

Gerbsman Partners has offices and strategic alliances in Boston, New York, Washington, DC, Alexandria, VA, San Francisco, Orange County, Europe and Israel. For additional information please visit http://www.gerbsmanpartners.com or Gerbsman Partners blog.

Email: steve@gerbsmanpartners.com
Web: http://www.gerbsmanpartners.com
BLOG of Intellectual Capital: blog.gerbsmanpartners.com
Skype: thegerbs

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Gerbsman Partners (www.gerbsmanpartners.com) has been retained by Cortical Pty. Ltd. (www.cortical.com.au) to solicit interest for the acquisition of all, or substantially all of, Cortical’s assets.

Headquartered in Melbourne, Australia, Cortical is a discovery-phase, biotechnology company that is focused on the development of inhibitors of MIF (macrophage migration inhibitory factor) for the treatment of inflammation and other diseases.

Cortical has recently overcome a major roadblock in MIF research, resulting in a cellular assay platform that has enabled fast compound ranking, SAR and screening.  Cortical has developed a library of proprietary MIF inhibitors, including a primary scaffold currently in lead optimization.

To date, Cortical has raised more than $5 million in three rounds of venture capital financing, lead by GBS Ventures (Melbourne, Australia).  In addition, Cortical has benefited from more than $1 million in government assisted grants.


The information in this memorandum does not constitute the whole or any part of an offer or a contract.

The information contained in this memorandum relating to Cortical’s Assets (as defined herein) has been supplied by Cortical.  It has not been independently investigated or verified by Gerbsman Partners or their respective agents.

Potential purchasers should not rely on any information contained in this memorandum or provided by Gerbsman Partners (or their respective staff, agents, and attorneys) in connection herewith, whether transmitted orally or in writing as a statement, opinion, or representation of fact.  Interested parties should satisfy themselves through independent investigations as they or their legal and financial advisors see fit.

Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, andcompleteness of any information provided in connection herewith and (ii) do not accept liability for the information, including that contained in this memorandum, whether that liability arises by reasons of Cortical’s or Gerbsman Partners’ negligence or otherwise.

Any sale of the Cortical Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either expressed orimplied, of any kind, nature, or type whatsoever from, or on behalf of Cortical and Gerbsman Partners. Without limiting the generality of the foregoing, Cortical and Gerbsman Partners and their respective staff, agents, and attorneys,  hereby expressly disclaim any and all implied warranties concerning the condition of the Cortical Assets and any portions thereof, including, but not limited to, environmental conditions, compliance with any government regulations or requirements, the implied warranties of habitability, merchantability, or fitness for a particular purpose.

This memorandum contains confidential information and is not to be supplied to any person without Gerbsman Partners’ prior consent. Thismemorandum and the information contained herein are subject to the Confidential Disclosure Agreement attached hereto as Appendix B.

Company Profile

Cortical is a discovery-phase, Australian biotechnology company developing small-molecule inhibitors of MIF for the treatment of inflammation and other diseases.

Macrophage Migration Inhibitory Factor (MIF) is a differentiated disease target:
·     MIF is a unique pro-inflammatory protein.
·     The MIF knock-out mouse has a normal phenotype, except in disease models.
·     MIF plays a pivotal role in immune-inflammatory diseases, atherosclerosis, metabolic disease and cancer.

Cortical has recently overcome a major roadblock in MIF research, resulting in a cellular assay platform that has enabled fast compound ranking, SAR and screening.  Cortical has developed a library of proprietary MIF inhibitors, including a primary scaffold currently in lead optimization.

To date, Cortical has raised more than $5 million in three rounds of venture capital financing, lead by GBS Ventures (Melbourne, Australia).  In addition, Cortical has benefited from more than $1 million in government assisted grants.

Cortical’s program is lead by Prof Eric Morand who is both a highly respected thought leader in this field and a practicing Rheumatologist.  Dr Morand has published widely; including seminal MIF research and technical reviews: Morand et al., MIF: a new cytokine link between rheumatoid arthritis and atherosclerosis. Nature Reviews Drug Discovery 5, 399–411 (1 May 2006); see Appendix C. The technology originated at Monash University and Cortical was established to exploit its unique know-how around the inflammation target MIF.  Cortical is seeking partners with resources to fully support the MIF program, thereby maintaining its leadership position in the development of MIF-based therapies.

Cortical believes its assets are attractive for a number of reasons:

Cortical has recently overcome a major roadblock in MIF drug development, resulting in a robust cellular assay platform that has enabledCortical to advance their primary MIF inhibitor scaffold to lead optimisation.   Until recently, Cortical and other competitors in the field ranked compounds using various physical assays which were not considered a reliable predictor of in vivo activity.  Utilizing unique target know-how, Cortical has now successfully developed a robust cellular assay to enable drug development against this well validated biological target.

Cortical’s program provides the platform for MIF inhibitor development:

1.    Composition of Matter and Use claims over independent scaffolds
2.    Library of  >1000 compounds, SAR driven program
3.    Lead candidates in optimization phase
4.    Proprietary  assay methodology (TRADE SECRET) – unique in MIF space
5.    X-ray crystallography (TRADESECRET – Cortical compound-MIF co-crystals)
6.    Preclinical oral proof of concept established in several disease models
7.    Mechanistically driven clinical strategy

Impact of Technology on the Market:

Cortical’s program has targeted first-in-class oral cytokine inhibitor drugs with potential applications in inflammatory disease and cancer indications.
The inflammatory disease market is over $60 BN annually with strong recent growth expected to continue[1 – footnote) . Future growth in this sector may be driven by a new wave of targeted therapies based on orally available small molecules.
MIF is a unique cytokine-like molecule which has been validated as a therapeutic target in a wide range of inflammatory diseases (such as RA, asthma/COPD, lupus, MS, SLE colitis, atherosclerosis), metabolic diseases and cancers.

•  The inflammation market has an unmet need for oral targeted small-molecule approaches
•  Small-molecule MIF inhibition offer huge advantages to a developer:

A.  a biologically distinct target, in an uncrowded space
B.  opportunity in a wide breadth of inflammatory indications § blockbuster (e.g. RA) and niche indications (e.g. SLE)
C  oral administration – a competitive advantage compared with biologicals
D.  mechanism-based application to enable steroid sparing therapy
E.  additional roles of MIF in atherosclerosis, metabolic disease and cancer

•  Potential first-in-class line of therapeutics
§  There are no small-molecule targeted therapies currently approved in inflammation.
§  There are no known clinical-stage MIF antagonist programs worldwide.

Cortical’s Pipeline

Cortical is developing first-in-class small molecule cytokine antagonist compounds which directly target MIF.  Cortical’s novel small molecule MIF inhibitors have been discovered through a structure-based drug design approach, proprietary compound-target crystallography data, and proprietary screening assays.
Cortical molecules have good drug development characteristics such as novelty, ease of synthesis, stability, oral bioavailability, lack of off-target interactions and clean non-GLP toxicity profiles.
Cortical compounds have demonstrated preclinical proof of concept with once daily oral activity in in vivo models of rheumatoid arthritis, atheroma, endotoxic shock, delayed type hypersensitivity, and acute liver inflammation.

Cortical’s Intellectual Property and Trade Secret Summary

Cortical Pty Ltd has 4 active patent applications in various stages of approval, allfiled as Composition of Matter applications.  Three applications have been filed around a benzamidazole pharmacophore (Therapeutic molecules and methods 1, MIF inhibitors, and Therapeutic Small Molecules and Uses Thereof).  A fourth patent application has been filed around a bicyclic pharmacophore (Novel methods for treatment of inflammatory diseases).  This is presented in more detail in Appendix B.

In addition to patents, Cortical has developed and holds a number of trade secret data packs:

(1)  The cellular assay:
Following feedback from large pharmaceutical company partners, Cortical focused on reducing to practice a cellular assay amenable to high throughput screening, and has been successful. Other players in the field have not succeeded in solving this technical problem; literature biological assays do not reliably predict activity against the MIF target.  Physical assays such as tautomerase and biacore show binding of compounds to MIF but these have been shown to not be directly predictive of MIF in vivo activity inhibition.
Cortical has strategically elected not topatent or disclose this assay system to any parties so that this unique ability to successfully rank compounds based on in vitro cellular data remains a competitive advantage.

(2)  The crystal structures:
Cortical holds a number of high resolution proprietary compound-protein X-ray co-crystallography data-sets which demonstrate how Cortical compounds bind to MIF.  At 1.6 Å, these crystal structure data-sets further strengthen the SAR rationale.


Nicole Fowler –CEO:

Nicole Fowler was appointed CEO of Cortical in October 2008.
Nicole has a BSc (Hons) from Monash University, an MBA from Melbourne Business School, with over 15 years experience in biotech. Previous roles include big pharma early discovery (SmithKline Beecham, USA), clinical trial management (Parexel, USA and ICTI, Europe) and the manufacture of generic sterile injectables and biologicals (Southern Dental Industries, Australia and Southern Cross Biotech, Australia). During the last 8 years Nicole has focused on working within young biotech companies managing the translation of academicwork into preclinical and clinical development, capital raising, and in-licensing/out-licensing of intellectual property.

Professor Eric Morand, MD, PhD – Scientific Co-Founder and Chief Scientific Officer

Eric is a Professor of Medicine at the Monash University Centre for Inflammatory Diseases at Monash MedicalCentre, Melbourne. Eric’s laboratory first identified the role of MIF in rheumatoid arthritis and SLE. He is an acknowledged expert in research on MIF research and glucocorticoid-regulated proteins, and is an author of over 100 papers in peer-reviewed journals in the area of inflammatory diseases. His academic research group has won grants from the NIH, National Health and Medical Research Council Australia, Royal Australasian College of Physicians, and Arthritis Foundation of Australia. He is also the Deputy Director, Rheumatology Unit, Monash Medical Centre, Melbourne, Australia and heads the Monash Lupus Clinic.

Board of Directors

·     Nigel Stokes, Chairman: Sydney, Australia
·     Brigitte Smith: Managing Partner, GBS Ventures – Melbourne, Australia
·     Prof Eric Morand: Founder – Melbourne Australia

The assets of Cortical will be sold in whole or in part (collectively, the ” Cortical Assets”). The sale of these assets is being conducted with the cooperation of Cortical. Cortical will be available to assist purchasers with due diligence and a prompt, efficient transition to new ownership. Notwithstanding the foregoing, Cortical should not be contacted directly without the prior consent of Gerbsman Partners.

The Bidding Process for Interested Buyers

Interested and qualified parties will be expected to sign a Confidential Disclosure Agreement (attached hereto as Appendix A) to have access to key members of management and intellectual capital teams and the due diligence “war room” documentation (“Due Diligence Access”). Each interested party, as a consequence of the Due Diligence Access granted to it, shall be deemed to acknowledge and represent (i) that it is bound by the bidding procedures described herein; (ii) that it has had an opportunity toinspect and examine the Cortical Assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon anywritten or oral statements, representations, or warranties of Gerbsman Partners, or their respective staff, agents, or attorneys; and (iv) all such documents and reports have been provided solely for the convenience of the interested party, and Gerbsman Partners (and their respective staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.

Following an initial round of due diligence, interested parties will be invited to participate with a sealed bid, for the acquisition of the Cortical Assets. Each sealed bid must be submitted so that it is received by Gerbsman Partners no later than Wednesday, January 18, 2012 at 5:00pm Pacific Daylight Time (the “Bid Deadline”)  to Gerbsman Partners office at 211 Laruel Grove Avenue, Kentfield, CA 94904. Please also email steve@gerbsmanpartners.com <mailto:steve@gerbsmanpartners.com> with any bid.

Bids should identify those assets being tendered for in a specific and identifiable way.

Any person or other entity making a bid must be prepared to provide independent confirmation that they possess the financial resources to complete the purchase.  All bids must be accompanied by a refundable deposit in the amount of$200,000 (payable to Cortical Pty. Ltd.).  The deposit should be wired to Gerbsman Partners Trust Account.  The winning bidder will be notified within 3 business days of the Bid Deadline. The deposit will be held in trust by Gerbsman Partners.  Unsuccessful bidders will have their deposit returned to them within 3 business days of notification that they are an unsuccessful bidder.

Cortical reserves the right to, in its sole discretion, accept or reject any bid, or withdraw any or all assets from sale.  Interested parties should understand that it is expected that the highest and best bid submitted will be chosen as the winning bidder andbidders may not have the opportunity to improve their bids after submission.

Cortical will require the successful bidder to close within a 7 day period. Any or all of the assets of Cortical will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the Cortical Assets shall be the sole responsibility of the successful bidder and shall be paid to Cortical at the closing of each transaction.

For additional information, please see below and/or contact:

Steven R. Gerbsman
Gerbsman Partners
(415) 456-0628

Kenneth Hardesty
Gerbsman Partners
(408) 591-7528

Philip Taub
Gerbsman Partners
(917) 650-5958

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Article from GigaOm.

It’s no secret that the larger economy has hit a rough patch in recent months. Although Silicon Valley has — in general – fared better than many other parts of the world, the venture capital industry is not immune to the negative effects of the macro-economic slowdown.

In the third quarter of 2011, venture capital investment activity fell 12 percent in terms of dollars and 14 percent in terms of deals compared to the previous quarter, according to the latest edition of the MoneyTree Report assembled by accounting giant Pricewaterhouse Coopers (PwC) and the National Venture Capital Association (NVCA).VCs invested $6.9 billion in 876 deals during the July through September timeframe in 2011, the MoneyTree report says, a notable decline from the $7.9 billion invested in 1,015 deals during the second quarter of 2011.

To be fair, the industry is still up compared to last year. For the first three quarters of 2011, VCs invested $21.2 billion, which is 20 percent more than VCs invested in the first three quarters of 2010. And 2010 saw an even bigger drop between the second and third quarters of the year. But VC funding is not exactly predictable according to the time of year — in 2009, for instance, the third quarter of the year was stronger than the second.

The VC industry is not as predictably cyclical as others because it generally takes its cues from a fluctuating variety of places: the worldwide economy, the entrepreneurial environment, the stock market’s appetite for IPOs, and larger companies’ appetite for acquisitions. It’s a complicated mix, but at the moment, it seems venture capitalists may be nervous about the larger environment of financial unrest, and the IPO window that opened earlier this year seems to be closing.

Seed funding takes a hit

Seed funding — which has recently been the hotshot of the industry as more angel and individual investors have become active in funding the startup scene — took a major hit in the third quarter of 2011. Seed stage investments fell a whopping 56 percent in terms of dollars quarter-over-quarter, and 41 percent year-over-year, to $179 million. It’s not just the total amount of seed investment that’s fallen, it’s also the amount of money per deal: The average seed deal in the third quarter was worth $2 million, a 43 percent drop from the average seed deal in the second quarter of 2011, which was $3.3 million.

And late stage deals have started to see major declines as well. Later stage startup investments decreased 20 percent in dollars and 30 percent in deals in the third quarter compared to the second, MoneyTree reported. Middle, or expansion, stage deals were relatively robust: Expansion stage dollars increased two percent quarter-over-quarter and 43 percent year-over-year, with $2.5 billion going into 260 deals.

Software is still strong

It’s not all doom and gloom, though. The software space has held up fairly well, receiving the highest level of funding for all industries during the third quarter with $2 billion invested from venture capitalists. That’s a 23-percent increase in dollars from the second quarter, and according to MoneyTree, the highest quarterly investment in the sector in nearly a decade, since the fourth quarter of 2001.

The web industry had a relatively soft quarter, as investments in Internet-specific companies fell 33 percent quarter-over-quarter during the third quarter to $1.6 billion. But it’s not exactly time to cry for Internet startups; the third quarter had a very tough act to follow, because Internet-specific VC deals hit a 10-year high in the second quarter of 2011.

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