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Archive for the ‘Silicon Valley’ Category

Daily Report: Wallflowers of Silicon Valley Get Asked to Dance – New York Times

Posted in Inetellectual Property, New York Times, Silicon Valley, Technology, Venture Capital on December 20, 2012| Leave a Comment »

December 12, 2012, 9:03 am Comment

Daily Report: Wallflowers of Silicon Valley Get Asked to Dance

By THE NEW YORK TIMES

After years of being wallflowers at Silicon Valley’s hottest tech conferences and Sean Parker’s after-parties, enterprise technology firms are now part of the “in” crowd.

The flameouts of social media stocks over the last year have left venture capital firms searching for a more measured approach to investing, writes Nicole Perlroth of The New York Times.

That means technology sectors — including mobile security, data analytics and storage companies and mobile payment systems — which previously elicited a shrug or a snooze, are suddenly finding millions of dollars of investments coming at them.

Some of the hottest innovations are in large-scale data mining. With the right analytical tools, big data can be used to solve complex problems quickly.

New storage methods will be critical to harnessing the gigabytes of data now pouring in from those mobile devices, as well as the Web, social networks and video.

Increasingly, employees are taking sensitive corporate data home with them, frustrated with the limits of corporate technology and using their personal phones and tablets to work. That has created huge security and compliance headaches for chief information officers struggling to regain control over corporate data.

It may not be the end of paper money just yet, but more and more commercial products are making mobile payments a huge business.

Apps, with the proverbial “touch of a button,” have converted phones into urban remote controls, allowing customers to order meals, errands, car rides, concert tickets and even cocktails.

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Cambridge NanoTech, Inc. – Date Certain M&A of Assest and Intellectual Property

Posted in "Date Certain M&A Process", Atomic Layer Deposition, Board of Directors, Cambridge NanoTech, Date Certain M&A, Distressed Intellectual Property, Distressed IP, Gerbsman Partners, Inetellectual Property, Jill Becker, Silicon Valley, Technology, tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , on November 20, 2012| Leave a Comment »

SALE OF Cambridge NanoTech, Inc.

Gerbsman Partners – http://gerbsmanpartners.com  has been retained by Silicon Valley Bank (“SVB”), the senior secured lender to Cambridge NanoTech, Inc. (“Cambridge NanoTech”), (http://cambridgenanotech.com) to solicit interest for the acquisition of all or substantially all of Cambridge NanoTech’s assets, including its Intellectual Property (“IP”), in whole or in part (collectively, the “Cambridge NanoTech Assets”).

Please be advised that the Cambridge NanoTech Assets are being offered for sale pursuant to Section 9-610 of the Uniform Commercial Code.  Purchasers of the Cambridge NanoTech Assets will receive all of Cambridge NanoTech’s right, title, and interest in the purchased portion of  SVB’ collateral, which consists of substantially all of Cambridge NanoTech’s assets, as provided in the Uniform Commercial Code.

The sale is being conducted with the cooperation of SVB and Cambridge NanoTech.  Cambridge NanoTech has advised SVB that it will use its best efforts to make its employees available to assist purchasers with due diligence and assist with a prompt and efficient transition at mutually convenient time.

IMPORTANT LEGAL NOTICE:

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 the Cambridge NanoTech Assets has been supplied by third parties and obtained from a variety of sources. It has not been independently investigated or verified by SVB or 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.

SVB and Gerbsman Partners, and their respective staff, agents, and attorneys, (i) disclaim any and all implied warranties concerning the truth, accuracy, and completeness 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 SVB’s or Gerbsman Partners’ negligence or otherwise.

Any sale of the Cambridge NanoTech Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of SVB and GerbsmanPartners. Without limiting the generality of the foregoing, SVB and Gerbsman Partners and their respective staff, agents, and attorneys,  hereby expressly disclaim any and all implied warranties concerning the condition of the Cambridge NanoTech 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 SVB’s Gerbsman Partners’ prior consent. This memorandum and the information contained herein are subject to the non-disclosure agreement attached hereto as Exhibit A.

SUMMARY OF HISTORICAL INFORMATION[1]

Cambridge NanoTech, Inc. (“CNT”) is a materials science company that designs, develops and manufactures high-performance turnkey equipment for Atomic Layer Deposition (“ALD”) from R&D to high volume production. ALD is a cutting edge thin-film deposition nanotechnology and CNT has dominant market share in the number of ALD R&D systems worldwide – a market that CNT created back in 2003.  CNT’s solutions range from lab-based analytical instruments for research to large-format, commercial production systems for high volume production of films used in various sophisticated electronic components such as micro-electromechanical systems (“MEMS”), semiconductors, optoelectronics, photovoltaics, solar, flat panel displays and advanced biomedical devices, among others. The Company also has a services component to its business, offering materials coatings services, contract R&D, as well as materials science solution consulting services.

ALD is a process by which thin-films, a few nanometers in size, are used to coat an object (“substrate”) one atomic layer at a time. CNT’s proprietary ALD technology is used to apply a wide array of coating materials, creating virtually perfect, uniform films both on surfaces and inside microscopic pores, trenches and cavities. ALD-based coatings improve the performance of a broad variety of materials, offering improved anti-wear properties, increased water vapor resistance, as well as enhanced optical, mechanical, and electrical properties. ALD has broad applications across a number of industries, including electronics, energy, healthcare, and textiles. ALD adoption has been driven by the decrease in technology form factors as an enabler for smaller and faster electronic devices and the subsequent need for nanoscale coatings given that traditional thin-film deposition techniques are reaching their technological limits.
Cambridge NanoTech  is headquartered in Cambridge, MA, and was boot-strapped in 2003 by Dr. Jill S Becker, directly out of the Gordon Lab at Harvard University (www.chem.harvard.edu/groups/gordon/), Since then, CNT has experienced tremendous revenue growth and profitability in almost every year since inception, serving a variety of world-leading enterprises as customers across a variety of end markets

Target Market:
Cambridge NanoTech (CNT) pioneered the development of compact ALD systems for the research and development sector, and in doing so created the market for affordable R&D systems. Based on the success of its R&D systems, CNT expanded its product lines to meet the needs of both R&D and Production customers. Within the span of the application space, CNT’s products target a diverse set of technologies, including Energy (Solar, Li-ion Batteries, Fuel Cells), Lighting and Display (OLEDs, LED), MEMS/ MOEMS, Electronics, and Nanotechnology.

Customers:
CNT has strong customer relationships with blue-chip customers across a variety of end markets. Key manufacturing customers CNT has served include leading producers of displays, solar technology, MEMS, and R2R flexible displays. CNT is the R&D systems leader with more than 300 R&D systems sold worldwide. A key factor in CNT’s success has been the Company’s end-to-end customer support throughout the sales process, providing consultative services on systems design, contract R&D services and installation / post-installation support. CNT’s knowledgeable team of scientists, who come from an assortment of research disciplines, can provide knowledgeable insight and offer material science solutions to address customer needs. CNT’s customers span a wide range of business and academic sectors and include, Texas Instruments, 3M, IBM, GE, DuPont, Toyota, Northrop Grumman, Harvard University, Stanford University, and Sandia Laboratories.
The accounts receivable base of CNT is diverse, as no client had represented over 10% of its accounts receivable balance.

1INTERESTED PARTIES SHOULD SATISFY THEMSELVES THROUGH INDEPENDENT INVESTIGATIONS AS THEY OR THEIR LEGAL AND FINANCIAL ADVISORS SEE FIT. Any sale of the Cambridge NanoTech Assets will be made on an “as-is,” “where-is,” and “with all faults” basis, without any warranties, representations, or guarantees, either express or implied, of any kind, nature, or type whatsoever from, or on behalf of SVB and GerbsmanPartners. Without limiting the generality of the foregoing, SVB and Gerbsman Partners and their respective staff, agents, and attorneys,  hereby expressly disclaim any and all implied warranties concerning the condition of the Cambridge NanoTech 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.

Intellectual Property
CNT has generated a substantial body of intellectual property in the form of patents, trademarks, know-how and trade secrets.  The Company currently has 1 issued US patent and 6 issued international patents, 8 pending patent applications in the US and 9 pending international applications and is continuously inventing and expanding its IP portfolio in a manner that protects markets and enhances shareholder value. The patent portfolio includes a separate patent family for each of its product lines. Moreover each patent family  specifically sets forth ALD process and reaction chamber innovations that resulted from a ground up ALD design as opposed to converting a non-ALD deposition system to an ALD deposition system.
The patent families include:
•  Savannah Patent Family (R&D lab equipment)
•  Fiji Patent Family (R&D lab equipment with plasma and additional in-situ diagnostics)
•  Phoenix & Tahiti Patent Family (Production equipment for high volume manufacturing)
•  Preboost Patent Family (To proliferate the use of more precursors in any ALD system)
•  Roll2Roll Patent Family (Fast ALD; high throughput; atmospheric ALD)
Details of the issued patents and trademarks are shown in Appendix A

ALL INFORMATION PROVIDED HEREIN RELATING TO THE OPERATIONS OF CAMBRIDGE NANOTECH’S BUSINESS AND THE MARKET POSITIONS AS IT RELATES TO PERIODS ON OR PRIOR TO NOVEMBER 9, 2012, WHEN THE COMPANY CEASED OPERATIONS.

·       Attractive Industry – Material science industry, and ALD in particular  is growing at a rapid rate, as material science solutions pervade the electronics and nanotechnology sectors

·       Best in Class Technology – CNT’s ALD systems are the dominant tool of choice for researchers and offer leading edge capabilities

·       Diversified Base of Customers – CNT’s ALD systems are used in academic, and manufacturing environments, and cover a range of technologies including – Electronics, MEMS/MOEMS, Display/Lighting, and Energy. Systems have been purchased by universities, research institutes, government and military labs, and industry

·       Excellent Relationships – CNT’s strength has always been predicated on strong relationships within and outside the ALD industry

·       Opportunity for Future Growth  – Opportunities for growth can be realized by fully exploiting the need for thin film material science solutions, and in taking advantage of the Intellectual property contained within its patent portfolio.

The reasons why Cambridge NanoTech’s assets are attractive are:

CNT has historically experienced strong growth and has been the leader in the field of R&D ALD systems. However, recent working capital constraints and an overly leveraged balance sheet have created the opportunity for all or a portion of CNT’s assets to be sold.  The acquisition of these assets can enable the purchaser to realize significant short and long term value from the CNT assets as CNT maintains the ability to quickly scale within the context of sufficient working capital and a stronger balance sheet.

Robust Growth: CNT achieved profitability in 2004, within its first 12 months of being established. Since that time, revenues have grown at an 85% CAGR through 2011, and while net income performance has been lumpy, the Company has sustained profitability during periods of high growth and during periods of significant investment in product development.

Market Position: CNT is the dominant ALD company in a group of 3 other major companies participating in the ALD sector for R&D applications,  in terms of market size and presence. While CNT is not the biggest of the group, it has the advantage of superior scientific an engineering expertise, and a exceptionally strong reputation for providing material science solutions, which is not true of its competitors.

Dominant ALD R&D Platform: The Company’s R&D ALD platform is renowned for its affordability and performance – a blend which makes the Company’s products the most sought after in this competitive market. The platforms are robust, easily serviceable,  and maintainable, and meet the extraordinary needs for research level flexibility.

Diversified Customer Base: The Company has over 300 ALD systems deployed in the field in a wide variety of  industries. This allows the Company to avoid fluctuation in its revenues caused by adverse changes affecting any particular industry.

Potential Backlog and Pipeline: Prior to ceasing company operations, the Company had a backlog of purchase orders, and a sales pipeline. This information is available in the Due Diligence War Room, and is subject to an NDA.

Management Team at Cambridge NanoTech Inc (for information purposes only)[2]:

Jill Becker Ph.D, Founder and CEO: Jill founded Cambridge NanoTech in 2003 and continues to successfully lead the Company’s technical, sales and operational functions. Dr. Becker holds a Hon. B.S. from the University of Toronto and completed her Ph.D in Chemistry at Harvard University under the supervision of Professor Roy Gordon. Dr. Becker is a specialist in inorganic and metal-organic chemistry, ALD system design, precursor synthesis, and thin-film characterization techniques. She has published extensively and holds numerous patents

Ray Ritter, President: Ray has extensive experience managing and growing technology companies. Prior to joining Cambridge NanoTech, Ray was a founder and the vice president of Sales and Marketing at BlueShift Technologies in Andover, MA, a venture-backed startup delivering manufacturing automation products to the semiconductor market. Ray was the principal at Ritter Consulting Group, where he assisted private and publicly-traded corporations in driving product and service revenues through greater brand awareness and targeted sales strategies. Ray has an M.S. from Rensselaer Polytechnic Institute and a B.S. from Rutgers University

Don Farquharson, Acting CFO: Don is the acting Chief Financial Officer at Cambridge NanoTech.  Don has extensive financial and general management experience in both public and privately held companies. During the past five years, Don held positions as Chief Financial Officer and Director of Operations of Service Point USA, Inc. Prior to joining Cambridge NanoTech, Don served as CEO and CFO of Cambridge-Lee Industries, Inc., the US and European metals manufacturing and distribution operations of privately held Industrias Unidas, SA de CV.   Early in his career, Don was a treasury analyst at Digital Equipment and a CPA for Arthur Andersen.   Don has a B.A. in Mathematics from Indiana University and an MBA from The Wharton School, University of Pennsylvania.

Ganesh Sundaram Ph.D, Vice-President of Technology: Ganesh is Vice President of Technology for Cambridge NanoTech.  Prior to joining Cambridge NanoTech, Dr. Sundaram held positions at Veeco Instruments, Schlumberger Technologies, Micrion Corporation and Texas Instruments, ranging from scientific to product management roles. Dr. Sundaram received his Ph.D in Physics from Oxford University, where he specialized in low temperature, high magnetic field physics of low dimensional semiconductors. His industrial experience encompasses processing of Si and compound semiconductors, lithography, particle beam technology, metrology and thin-film applications.

Roger Coutu, Vice-President of Technology: Roger is Vice President of Engineering for Cambridge NanoTech. Roger spent the previous six years consulting with companies in the semiconductor, automotive, materials and vacuum-handling industries. He has extensive experience designing substrate handling and advanced vacuum systems. Prior to starting his own company, Roger held numerous engineering management positions at MKS, Eaton, Millipore, Bruce Technology International and other companies. Roger has a B.S. from the University of Massachusetts, Lowell in Mechanical Engineering.

2 THE BIOGRAPHICAL INFORMATION CONCERNING THE CURRENT MANAGEMENT OF CAMBRIDGE NANOTECH IS INCLUDED FOR INFORMATION PURPOSES ONLY.  ALTHOUGH THIS SALE IS BEING CONDUCTED WITH CAMBRIDGE NANOTECH’S COOPERATION, THIS SALE IS STRICTLY AN ASSET SALE OFFERED BY SVB AS CAMBRIDGE NANOTECH’S SENIOR LENDER PURSUANT TO ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE.  SVB HAS NO ARRANGEMENT PURSUANT TO WHICH BUYER OF THE CAMBRIDGE NANOTECH ASSETS COULD BE ASSURED OF THE FUTURE SERVICES OF ANY CAMBRIDGE NANOTECH OFFICERS OR EMPLOYEES.

The Bidding Process for Interested Buyers

Due Diligence:
Interested and qualified parties will be required to sign a nondisclosure agreement in the form attached hereto as Exhibit A to have access to the due diligence “war room” documentation (the “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 an opportunity to inspect and examine the Cambridge NanoTech Assets and to review all pertinent documents and information with respect thereto; (iii) that it is not relying upon any written or oral statements, representations, or warranties of SVB or 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 SVB or Gerbsman Partners (and their respective, staff, agents, or attorneys) do not make any representations as to the accuracy or completeness of the same.

Qualifying to Bid at Auction:
The Cambridge NanoTech Assets will be sold pursuant to a secured party’s public auction sale.  In order to qualify to bid at the public auction sale, interested parties must submit initial bids for the Cambridge NanoTech Assets so that they areactually received by Gerbsman Partners via email to steve@gerbsmanpartners.com no later than Wednesday, December 12, 2012 at 3:00 p.m. Eastern Standard Time (the “Initial Bid Deadline”) with a copy to Riemer and Braunstein LLP, 3 Center Plaza, Boston, MA, 02108. Attention: Donald E. Rothman, Esq. and via email to drothman@riemerlaw.com.

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 where applicable.  In order to qualify to bid at the public auction sale, all initial bids must be accompanied by a refundable deposit check in the amount of $200,000 (payable to Silicon Valley Bank). All deposits shall be held in a non-interest bearing account.  Non-successful bidders will have their deposit returned to them within three (3) business days following the completion of the public auction sale. The deposit of the Successful Bidder (as defined below) shall be held by SVB pending the consummation of the sale.

Initial bids should identify those assets being tendered for and in a specific and identifiable way. The attached Cambridge NanoTech fixed asset list (Exhibit “B”) may not be complete.

SVB shall be deemed to be a qualified bidder.

Public Auction Sale:
On Friday December 14, 2012, a public auction sale (the “Auction”) of the Cambridge NanoTech Assets will be conducted among all qualified bidders commencing at 11:00am Eastern Standard Time at the offices of Riemer & Braunstein LLP, 3 Center Plaza, Boston, MA, 02108.  Prior to the start of the Auction, the auctioneer will advise all qualified bidders of what SVB believes to be the highest or otherwise best qualified bid with respect to the sale (the “Stalking Horse Bid”).  Only qualified bidders are eligible to participate in the Auction.  Bidding at the Auction shall begin initially with the Stalking Horse Bid and shall subsequently continue in such minimum increments as the auctioneer determines.

Bidding will continue with respect to the Auction until SVB determines that it has received the highest or otherwise best bid(s) for the Cambridge NanoTech Assets.  After SVB so determines, the auctioneer will close the Auction, subject, however, to SVB’s right to re-open the Auction if necessary.  SVB will then determine and announce which bid has been determined to be the highest or otherwise best bid (the “Successful Bid”) and the holder of the Successful Bid shall be deemed to be the “Successful Bidder”.

SVB reserves the right to (i) determine in its reasonable discretion which bid is the highest or best bid and (ii) reject at any time prior to the execution of a purchase agreement, any offer that SVB in its reasonable discretion deems to be (x) inadequate or insufficient, or (y) contrary to the best interests of SVB.  In determining which bid is a Successful Bid, economic considerations shall not be the sole criterion upon which SVB may base its decision and SVB shall take into account all factors it reasonably believes to be relevant in an exercise of its business judgment.

The Successful Bidder will then be required to immediately execute and deliver a purchase agreement to SVB in the form attached hereto as Exhibit “C” (this will be forwarded at a later date). SVB will require the successful bidder at the public auction sale to close within 7 days after the public auction sale. Any or all of the assets of Cambridge NanoTech will be sold on an “as is, where is” basis, with no representation or warranties whatsoever.

SVB reserves the right to (i) extend the deadlines set forth herein and/or adjourn the Auction without further notice, (ii) withdraw portion of the Cambridge NanoTech Assets at any time prior to or during the Auction, to make subsequent attempts to market the same, (iii) reject any or all bids if, in SVB’s reasonable business judgment, no bid is for a fair and adequate price, and (iv) otherwise modify the sale procedures in its reasonable discretion.

All sales, transfer, and recording taxes, stamp taxes, or similar taxes, if any, relating to the sale of the Cambridge NanoTech Assets shall be the sole responsibility of the Successful Bidder.

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

Steven R. Gerbsman
Gerbsman Partners
(415) 456-0628
steve@gerbsmanpartners.com

James McHugh
Gerbsman Partners
(978) 239-7296
Jim@mchughco.com

Kenneth Hardesty
Gerbsman Partners
(408) 591-7528
ken@gerbsmanpartners.com

Donald Rothman, Esq.
Riemer Braunstein LLP
(617) 880-3556
drothman@riemerlaw.com

Steven R. Gerbsman
Principal
Gerbsman Partners
Phone: 415.456.0628
Fax: 415.459.2278
Cell: 415.505.4991
steve@gerbsmanpartners.com
thegerbs@pacbell.net
http://www.gerbsmanpartners.com

BLOG of Intellectual Capital
http://blog.gerbsmanpartners.com
Skype: thegerbs

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Fenwick & West – Silicon Valley Venture Survey – Second Quarter 2012 by Barry Kramer and Michael Patrick

Posted in Fenwick & West, Silicon Valley, Venture Capital on August 24, 2012| Leave a Comment »

Silicon Valley Venture Survey – Second Quarter 2012

August 23, 2012

Background—We analyzed the terms of venture financings for 115 companies headquartered in Silicon Valley that raised money in the second quarter of 2012.

Overview of Fenwick & West Results

  • Up rounds exceeded down rounds in 2Q12, 74% to 11%, with 15% of rounds flat. This was better than 1Q12, when up rounds exceeded down rounds 65% to 22%, and the best quarter since 2007. Series B rounds were especially strong, although we note that the percentage of Series B financings in the survey has declined for three straight quarters, perhaps indicating that companies are having difficulty securing Series B funding, but those that do are being rewarded with substantial valuation increases. This was the twelfth quarter in a row in which up rounds exceeded down rounds.
  • The Fenwick & West Venture Capital Barometer™ showed an average price increase of 99% in 2Q12, an increase from 52% in 1Q12. This was the highest Barometer result since we began calculating the Barometer in 2004. That said, we note that there were two financings (one in the internet industry and one in the software industry) that were each up over 1000% (i.e. over 10x), and if they were excluded, the Barometer result would have been 70%. The median price increase in 2Q12 was 30%.
  • The results by industry are set forth below. In general, internet/digital media and software continued to be the strongest industries by far, with Barometer increases of 248% and 123% respectively (which would have been 176% and 86% respectively if the two aforementioned 10x deals were excluded). The median price increase for internet/digital media and software financings were 105% and 56%, respectively. Cleantech and life science trailed significantly.

Overview of Other Industry Data

    • Venture investment was up in the software and internet/digital media industries in 2Q12 versus 1Q12, while cleantech and life science lagged. However, overall venture funding in 2012 is modestly lagging 2011 to date.
    • M&A was up slightly in 2Q12 versus 1Q12, and 2012 is generally flat in dollars compared to 2011.
    • The number of IPOs was down in 2Q12 compared to 1Q12, but dollars raised were up, as the Facebook IPO dominated the quarter. 2012 is ahead of 2011 year to date.
    • Venture fundraising in dollars was up, but the number of funds raising money declined in 2Q12, compared to 1Q12. Fundraising in 2012 is ahead of 2011 in dollars.The venture environment continues to be a “tale of two cities” with software and internet/digital media thriving and life science and cleantech lagging. Additionally, we note that venture investment, M&A and IPOs have all returned to 2007 (pre financial industry meltdown) levels, but fundraising by venture capitalists continues to be significantly below those levels.

The effects of the increasing concentration of venture capital in fewer funds also bears watching. There are understandable reasons for this trend (capital moving to managers with the best results, early stage companies going global sooner and benefitting from venture capitalists with a more global reach) but this increased financial concentration could leave companies with fewer alternatives. However, the growth of super angels and micro VCs discussed below, and the commitment of some of the larger funds to continue making smaller investments, may offset this trend.

    • Venture Capital Investment.Dow Jones VentureSource (“VentureSource”) reported that U.S.-based companies raised $8.1 billion in 863 venture deals in 2Q12, a 31% increase in dollars and a 20% increase in deals compared to 1Q12, when $6.2 billion was raised in 717 deals (as reported in April 2012). However, investment in the first half of 2012 slightly lags the first half of 2011. Over half of all venture capital was invested in California in 2Q12, with 42% of the total in Northern California.

      Similarly, the PwC/NVCA MoneyTree™ Report based on data from Thomson Reuters (the “MoneyTree Report”) reported $7.0 billion of venture investments in 898 deals in 2Q12, a 21% increase in dollars and a 18% increase in deals from the $5.8 billion invested in 758 deals in 1Q12 (as reported in April 2012). The MoneyTree reported that the software and internet industries were especially strong, while life science was weak.

    • Merger and Acquisitions Activity.Dow Jones reported 110 acquisitions of venture-backed companies in 2Q12 for $13.6 billion, a 7% increase in transaction dollars, and a 12% increase in transactions, from the 98 acquisitions for $12.7 billion in 1Q12 (as reported in July 2012 – the initial April 2012 numbers were subsequently revised substantially and so are not being used). The largest acquisition in the quarter was Facebook’s acquisition of Instagram for $1 billion.

      Thomson Reuters and the NVCA (“Thomson/NVCA”) reported 102 transactions in 2Q12, a 19% increase from the 86 transactions reported in 1Q12 (as reported in April 2012). IT companies dominated, with 77 of the 102 deals.

    • IPO Activity.VentureSource reported 11 venture-backed IPOs raising $7.7 billion in 2Q12 ($6.8 billion from Facebook), compared to 20 IPOs raising $1.4 billion in 1Q12 (as reported in April 2012). 72% of the companies going public were based in Silicon Valley, as opposed to 35% in 1Q12.

      Similarly, Thomson/NVCA reported 11 IPOs raising $17.1 billion in 2Q12 ($15.8 billion from Facebook) compared to 19 IPOs raising $1.5 billion in 1Q12. (It appears that Thomson/NVCA includes shares sold by shareholders in the IPO amount, while VentureSource does not.) Nine of the eleven IPOs were IT companies and all were U.S. based.

    • Venture Capital Fundraising.Dow Jones reported that for the first half of 2012, 82 U.S. venture capital funds raised $13 billion, a 31% increase in dollars over the first half of 2011.

      Thomson/NVCA reported that 38 U.S. venture capital funds raised $5.9 billion in 2Q12, a 20% increase in dollar commitments and a 10% decrease in the number of funds compared to the $4.9 billion raised by 42 funds in 1Q12 (as reported in April 2012). The top 5 funds accounted for almost 80% of the total fundraising in the quarter. Mark Heesen, President of the NVCA, noted that this concentration of capital in fewer funds has narrowed the field of venture funds for both entrepreneurs seeking venture capital, and limited partners looking to invest in venture capital.

      Some traditional investors in venture capital are also indicating a reduction in commitment to the asset class when they cannot get into the best funds. For example, the Mercury News has reported that CalPERS will likely decrease its venture commitment from 6% of its private equity portfolio to 1%, due to poor returns on its investments. And the Kauffman Foundation has indicated similar plans (see “Kauffman Foundation Venture Capital Report” below).

      Venture fundraising by venture capital funds in 2Q12 was again less than the amount of venture capital invested in companies in the quarter.

      The SBA, after 8 years out of the market, has recently allocated $1 billion over the next five years to increase access to early stage venture capital – i.e. companies looking to raise $1‑4 million.  Early stage venture funds can borrow from the SBA an amount equal to what they can raise privately.

    • Secondary Trading.Secondary trading was estimated to be $10 billion in 2011.  The Venture Capital Journal reported that 80% of such trading occurred in negotiated one-on-one transactions (as opposed to on secondary exchanges), and that half of late stage primary financings included a secondary component, triple the amount from five years ago.

      That said, secondary exchanges had a good year in 2011, with Second Market reporting $558 million in trades and SharesPost reporting $625 million.  However, with the IPOs of Zynga, LinkedIn, GroupOn and now Facebook, it seems doubtful that secondary exchange trading of other venture-backed companies will be able to take up the slack in 2012.  Some exchanges are working to address this by proactively working with late stage companies to facilitate liquidity arrangements for the companies’ employees and early stage investors with the exchange’s investor base.

      In general, it seems that late stage companies are becoming more comfortable with secondary sales, and are leaning towards negotiated sales where information provided to investors can remain confidential, the purchasers are known and the transaction can be combined with a primary sale, if desired.

    • Seed Investment.Although concern continues that the valuations of seed stage companies are getting frothy, the expansion of the accelerator/incubator model continues.  Accelerators focused on Swiss, Danish, Israeli and German entrepreneurs have each been started in the past year, or are in the process of being started, in Silicon Valley.  And General Catalyst Partners has joined Yuri Milner, SV Angel and Andreesen Horowitz in the Start Fund which commits to loan $150,000 to each Y Combinator company (foregoing information from Venture Wire).

      Additionally, the two most active venture capitalists in 2Q12 were 500 Startups and First Round Capital (tied for second with NEA), both of whom are seed investors.  (VentureSource)

      And perhaps most interestingly, a significant number of super angels/micro VCs are seeking to raise larger funds or taking on LPs, which if successful could act as a counterweight to the decreasing number of venture capital funds (Venture Capital Journal).

    • The Kauffman Foundation Venture Capital Report.In May 2012 the respected Kauffman Foundation issued a report that concluded, based on their 20 year history of venture investing experience in nearly 100 funds, that “the Limited Partner investment model is broken.”  The report based its conclusion on, among other things, poor returns from most venture funds, incentives for managers to create larger funds to increase management fees, the increasing length of life of venture funds and the relatively small amounts invested personally by many fund managers.  It recommended that limited partners require a better alignment of interests between LPs and GPs, more transparency and better governance provisions.

      The Kauffman Foundation has indicated that it intends to focus its future venture investment in funds of less than $400 million, with historical performance above what could be achieved in equivalent public market funds (which it believes are better performance measures than IRR, top quartile, vintage year and gross return measurements), and in which GPs commit at least 5% of the capital.  They also plan to increase their direct investing and to move a portion of their capital allocated to venture capital into the public markets, as they do not believe that there are enough strong venture capitalists to absorb the available capital.

      Other suggestions from the Kauffman report include (i) that management fees should be based on a budget, not a percentage of funds under management, (ii) that investors should receive their funds back plus a preferred return before venture capitalists share in profits, and (iii) that there should be more transparency in how the venture capital management company is structured to understand how the individual venture capitalists are incented.

    • Venture Capital Return.Cambridge Associates reported that the value of its venture capital index increased by 4.7% in 1Q12 (2Q12 information has not been publicly released) compared to 18.7% for Nasdaq, although for the 12 month period ended March 31, 2012, the venture capital index was up 12.8%, which slightly beat Nasdaq which was up 11.2%.  The Cambridge venture index is net of fees, expenses and carried interest.

      For the ten years ended March 31, 2012 the Cambridge venture capital index was up 4.4% per year, while Nasdaq was up 5.30%.

    • Venture Capital Sentiment.The Silicon Valley Venture Capitalist Confidence Index® produced by Professor Mark Cannice at the University of San Francisco reported that the confidence level of Silicon Valley venture capitalists was 3.47 on a 5-point scale in 2Q12, a decrease from the 3.79 reported in 1Q12.  Reasons given for the decrease in confidence were primarily macro oriented (global economy, life science regulation), as there was general agreement that the entrepreneurial environment viewed in isolation was strong.

      The Deloitte/NVCA Global Confidence Survey reported that global venture capitalists were most confident about the prospects of the cloud computing, software, new media, healthcare IT and consumer businesses (in order of higher confidence to lower) and were least confident about the medical device, financial services, biopharmaceuticals, cleantech, telecom and semiconductor industries (in order of higher confidence to lower).

  • Nasdaq.
    Nasdaq decreased 4.9% in 2Q12, but has increased 2.8% in 3Q12 through August 10, 2012.

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Institutional Venture Partners Raises $1 Billion Fund

Posted in Board Of Intellectual Capital, Economy, Entrepreneurship, FaceBook, Gerbsman Partners, Investments, IPO news, Market research, Silicon Valley, Social Networks, Startups, Strategy, tagged , , , , , , , on June 29, 2012| Leave a Comment »

Article from NYTimes.

 

Institutional Venture Partners has another billion to play with.

The venture capital firm, an investor in Twitter, Zynga and LivingSocial, has raised $1 billion for I.V.P. XIV, its 14th and largest fund to date.

According to a partner, Sandy Miller, the firm initially set a $750 million target but increased it on robust demand. The fund, which was raised over four months, relied mainly on capital from previous investors.

Unlike some of its peers, Institutional Venture Partners does not write a lot of checks, usually not more than a dozen a year. As a later-stage investment firm, it invests $10 million to $100 million in seasoned start-ups in three main buckets: Internet, enterprise technology and mobile.

“I hate to sound dull but we’re doing the same strategy,” Mr. Miller said.

Mr. Miller, a longtime technology investor and co-founder of Thomas Weisel Partners, is optimistic despite recent setbacks in the technology sector.

Skepticism in the public markets, most recently highlighted by Facebook‘s underwhelming initial public offering, has damped enthusiasm for some late-stage start-ups. Zynga, for instance, an Institutional Venture Partners portfolio company, has tumbled more than 44 percent since its debut last year. And plenty of experts question whether another start-up it has backed, LivingSocial, is worth such a high valuation after Groupon, its far bigger rival, has fallen about 50 percent since its I.P.O.

Mr. Miller acknowledges that some valuations may pull back, but he says he invests for the long term.

“I’ve watched the technology market over a 30-year period,” he said. “There’s more interesting, high quality companies today than there has ever been and by a very wide margin.”

He added, “In every market, most deals don’t make sense, and that’s true now, but that’s always been true.”

Read more here.

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FACEBOOK FALLOUT: Y Combinator’s Paul Graham Just Emailed Portfolio Companies Warning Of ‘Bad Times’ In Silicon Valley

Posted in Business models, Distressed Intellectual Property, Distressed IP, Economy, FaceBook, Inetellectual Property, Investments, Management, Silicon Valley, Startups, Technology, Uncategorized, Venture Capital on June 5, 2012| Leave a Comment »

FACEBOOK FALLOUT: Y Combinator’s Paul Graham Just Emailed Portfolio Companies Warning Of ‘Bad Times’ In Silicon Valley

Nicholas Carlson     | Jun. 5, 2012, 12:01 AM | 58,513 |


Facebook has flopped on the public markets, and now we have vivid evidence of how badly Silicon Valley is reeling in the fallout.

Paul Graham, cofounder of Silicon Valley’s most important startup incubator, Y Combinator, has sent an email to portfolio companies warning them “bad times” may be ahead.

He warns: “The bad performance of the Facebook IPO will hurt the funding market for earlier stage startups.”

“No one knows yet how much. Possibly only a little. Possibly a lot, if it becomes a vicious circle.”

He says that startups which have not yet raised money should lower their expectations for how much they will be able to raise. Startups that have raised money already may have to raise “down rounds,” or at lower valuations than they previously had.

“Which is bad,” he writes, “because ‘down rounds’ not only dilute you horribly, but make you seem and perhaps even feel like damaged goods.”

He warns:

“The startups that really get hosed are going to be the ones that have easy money built into the structure of their company: the ones that raise a lot on easy terms, and are then led thereby to spend a lot, and to pay little attention to profitability. That kind of startup gets destroyed when markets tighten up. So don’t be that startup. If you’ve raised a lot, don’t spend it; not merely for the obvious reason that you’ll run out faster, but because it will turn you into the wrong sort of company to thrive in bad times.”

Graham’s email is eerily reminiscent of the infamous “RIP Good Times” presentation another Silicon Valley investor, Sequoia Capital, gave its portfolio startups in fall 2008.

Here’s a full copy:

Jessica and I had dinner recently with a prominent investor. He seemed sure the bad performance of the Facebook IPO will hurt the funding market for earlier stage startups. But no one knows yet how much. Possibly only a little. Possibly a lot, if it becomes a vicious circle.

What does this mean for you? If it means new startups raise their first money on worse terms than they would have a few months ago, that’s not the end of the world, because by historical standards valuations had been high. Airbnb and Dropbox prove you can raise money at a fraction of recent valuations and do just fine. What I do worry about is (a) it may be harder to raise money at all, regardless of price and (b) that companies that previously raised money at high valuations will now face “down rounds,” which can be damaging.

What to do?

If you haven’t raised money yet, lower your expectations for fundraising. How much should you lower them? We don’t know yet how hard it will be to raise money or what will happen to valuations for those who do. Which means it’s more important than ever to be flexible about the valuation you expect and the amount you want to raise (which, odd as it may seem, are connected). First talk to investors about whether they want to invest at all, then negotiate price.

If you raised money on a convertible note with a high cap, you may be about to get an illustration of the difference between a valuation cap on a note and an actual valuation. I.e. when you do raise an equity round, the valuation may be below the cap. I don’t think this is a problem, except for the possibility that your previous high cap will cause the round to seem to potential investors like a down one. If that’s a problem, the solution is not to emphasize that number in conversations with potential investors in an equity round.

If you raised money in an equity round at a high valuation, you may find that if you need money you can only get it at a lower one. Which is bad, because “down rounds” not only dilute you horribly, but make you seem and perhaps even feel like damaged goods.

The best solution is not to need money. The less you need investor money, (a) the more investors like you, in all markets, and (b) the less you’re harmed by bad markets.

I often tell startups after raising money that they should act as if it’s the last they’re ever going to get. In the past that has been a useful heuristic, because doing that is the best way to ensure it’s easy to raise more. But if the funding market tanks, it’s going to be more than a heuristic.

The startups that really get hosed are going to be the ones that have easy money built into the structure of their company: the ones that raise a lot on easy terms, and are then led thereby to spend a lot, and to pay little attention to profitability. That kind of startup gets destroyed when markets tighten up. So don’t be that startup. If you’ve raised a lot, don’t spend it; not merely for the obvious reason that you’ll run out faster, but because it will turn you into the wrong sort of company to thrive in bad times.

http://www.businessinsider.com/facebook-fallout-y-combinators-paul-graham-just-emailed-portfolio-companies-warning-of-bad-times-in-silicon-valley-2012-6?nr_email_referer=1&utm_source=Triggermail&utm_medium=email&utm_term=Business%20Insider%20Select&utm_campaign=Business%20Insider%20Select%202012-06-05#ixzz1wxLb6QS

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