• Some funding news from yesterday: Meritech Capital Partners closed its fifth fund with $500 million in commitments. Business as usual, it seems, for the Palo Alto-based firm, as the fund size is about the same, investors are the same, partners are the same, and strategy (late stage IT with some medical device deals sprinkled in) is the same.
Managing Director Paul Madera noted that we’ve been in a “wave of liquidity” since 2009 — or at least Meritech has, seeing 38 exits since then (from a starting point of 35 companies). Five of its exits, including Zulily, Hybris, Rally Software Rickus Wireless and Yammer, came from the prior, $425 million fund, a 2011 vintage.
The other notable fund is Binary Capital, started by Jonathan Teo and Justin Caldbeck, who spun off from Benchmark and General Catalyst, and Lightspeed Venture Partners, respectively. Term Sheet first reported on the fund back in March, and vehicle held a quick first and final close within 3.5 months. Binary targeted $100 million, got more than $150 million in commitments, and closed on its $125 million hard cap. The firm will write $5 million checks to around 20 consumer internet companies over the next few years, Teo said. The pair are known for backing hot mobile deals like Instagram, Snapchat and Tinder.
• The future of venture capital: Scott Kupor of Andreessen Horowitz has a smart follow-up to last week’s guest column from Mark Suster on changes in the venture capital industry. He puts those changes, bifurcation, mainly, in context. Why is this happening? In short, because the cost of starting a software company is as low as ever, but the cost for that company to “win the market” is much higher. Thus, the “death of the middle.”
Kupor notes these changes aren’t only happening in venture capital, but is also playing out in other mature, service-based businesses like investment banks, law firms, accounting firms, advertising agencies, buyout firms, talent agencies, and recruiting firms. Read the full post here.
• Some feedback on the private equity broker-dealer issue, as highlighted in The New York Times over the weekend: The consensus from PE pros seems to be that a broker-dealer requirement makes little sense in the middle market. Outsiders and observers disagreed.
Middle market investor #1 says: The larger firms have evolved beyond private equity firms – they are asset aggregators in the pursuit of multiple sources of earnings and engaging in activities well beyond that of a traditional middle market private equity firms, with their limited resources (and no special divisions set up for consulting or investment banking activities). What is required of these larger, more diverse firms shouldn’t necessarily be required of smaller firms. The one-size-fits-all mentality of regulators could be very detrimental to the middle market private equity industry.
Middle Market investor #2 says: The NYT article completely missed the point—the big PE firms that registered with SEC as broker-dealers have advisory divisions that act as broker-dealers to companies they don’t own on the PE side. (e.g. Blackstone has a big advisory business.) Firms like Bain Capital don’t have separate businesses that provide those services to companies they don’t own. There’s no ambiguity in the law as to who needs to register. Whether PE fees are appropriate or not is a totally separate, unrelated question.
And a dissenting perspective says: Fund managers traditionally receive performance-based compensation, i.e. a carry. Fund managers charging portfolio companies for investment banking work, “advising” in an acquisition, debt financing, or successful IPO (or even in busted IPO!), is without a doubt transaction-based compensation, which the SEC has cited as the hallmark factor in being deemed a broker-dealer. Fund managers also find creative ways to charge their LPs fees (e.g., through affiliates). While large fund registration has helped, broker-dealer registration will help help create greater transparency in the nature and amount of the fees, if not help reign in the funds themselves.
• Hot potato: The big private equity deal of the morning is The Carlyle Group’s buyout of Acosta Sales & Marketing from Thomas H. Lee Partners. No deal terms were disclosed, prior reports put it at $5 billion, making it one of the largest deals of the year. Perhaps more notably, this is the third time Acosta has changed hands between buyout shops. Thomas H. Lee Partners bought the asset in 2011 for a reported $2 billion from AEA Investors, which bought it from Berkshire Partners in 2006. Berkshire Partners acquired the asset in 2003.
THE BIG DEAL
• Flipkart, the largest e-commerce site in India, has raised $1 billion in funding co-led by existing investors Tiger Global and Naspers, with participation from GIC, DST Global group, Accel Partners, ICONIQ Capital, Morgan Stanley Investment Management and Sofina. The company has already raised $700 million in funding, which valued it at $6 billion to $7 billion prior to today’s news. www.flipkart.com/
VENTURE CAPITAL DEALS
• Centric Software, a Los Gatos, Calif.-based provider of software for the retail and consumer goods industries, raised $24 million in Series D financing, co-led by Fung Capital and Silver Lake Waterman. Prior investors Oak Investment Partners and Masthead Partners participated. www.centricsoftware.com/
• BaubleBar, a New York-based online jewelry startup, has raised $10 million in new venture funding led by Burch Creative Capital, the investment firm run Chris Burch, who co-founded the fashion label Tory Burch, with his ex-wife of the same name. The round included participation from Aspect Ventures, Triplepoint Ventures, Comcast Ventures, and existing investors Accel Partners and Greycroft Partners. www.baublebar.com/
• Enertiv, an energy-efficiency hardware and software startup that recently graduated from the R/GA Connected Devices accelerator run by Techstars, raised $700,000 in a seed convertible note funding round. www.enertiv.com/
• ThetaRay, Tel Aviv-based provider of big data analytics for cyber security, has raised $10 million in a Series B round of investment from new and existing investors including General Electric, Jerusalem Venture Partners and Poalim Capital Markets. www.thetaray.com
• CP Exploration II, a newly formed oil and gas company based in Dallas and Lafayette, La., has secured $150 million in capital commitments from Post Oak Energy Capital. www.cpexploration.com
• Knoa Software, a New York-based provider of user experience management software, raised $5.1 million in Series B funding from existing investors Ascent Ventures, Gefinor Capital, Advantage Capital Partners and Rand Capital. www.knoa.com/main/
• Peel-Works, a Mumbai-based big-data analytics company for salesforces, has raised a Series A round worth $2 million from Inventus Capital Partners and IDG Ventures India. www.peel-works.com
• Voyat, a New York-based maker of a CRM-system for hotels, has raised $1.8 million in seed funding from Metamorphic Ventures, Eniac Ventures, BoxGroup and angel investors. voyat.com/
• Thinknum, Inc., a web platform for financial analysis, raised $1 million in seed funding led by Pejman Mar Ventures, with participation from Signature Capital, Green Visor Capital, 645 Angels, HKB Capital, and 500 Startups. www.thinknum.com/
• Admedo, a UK-based programmatic advertising startup, has raised a $2 million in a Series A round of funding led by Sussex Place Ventures with participation from Playfair Capital, Encore Capital and Kima Ventures.www.admedo.com/
• Bright Computing, a provider of cluster management software, raised $14.5 million in Series B financing co-led by DFJ and DFJ Esprit with participation from Prime Ventures and existing investor ING Corporate Investments. www.brightcomputing.com
• Baifendian Corporation, a Beijing-based big data tech company, raised $25 million in a Series C round of funding. Investors were not disclosed. www.baifendian.com/
• Mediander.com, a media content site based in New York, has raised an investment of undisclosed size from JRI Ventures LLC. www.mediander.com/
• PaxVax, Inc., a San Diego-based specialty vaccine company, has raised $12 million in an extension of its Series B preferred stock, alongside $50 million in secured debt financing from Pharmakon Advisors. www.paxvax.com/
• Snapeee, Japan-baed photo sharing app maker, raised $4 million new funding led by Kodansha, Energy and Environment Investment, and Global Brain. snape.ee/
• SkyKick, a Seattle-based service provider to Office 365, has raised $3 million in funding from Tim Ferriss, Navin Thukkaram and Ironfire Capital. The company has raised a total of $7.2 million. www.skykick.com/
• Knowlarity Communications, a Singapore-based cloud telephony company, raised $15 million in a Series B funding round led by Mayfield Fund, with participation from existing investor Sequoia Capital. www.knowlarity.com/
• SportsManias, a Miami-based mobile app maker, raised $3.5 million in Series A funding from Jorge Mas from Mas Equity Partners and a private investor. www.sportsmanias.com/
• Kurbo, a San Francisco and Palo Alto-based maker of mobile tools for battling childhood obesity, has raised raised $5.8 million in Series A funding, led by Signia Venture Partners with participation from Data Collective, Bessemer Venture Partners and Promus Ventures, as well as angel investors Susan Wojcicki Greg Badros. Kurbo is part of the Rock Health seed fund. www.kurbo.com
• Spire, a San Francisco-based aerospace startup formerly known as NanoSatisfi, Inc., has raised $25 million in venture funding, according to VentureWire. The company’s prior backers include Grishin Robotics, Shasta Ventures, Lemnos Labs, Emerge and Beaumonte Investments. www.spire.com/
• Paidy, a Tokyo-based e-commerce payment and instant credit service built by parent company Exchange Corporation, has raised $3.3 million in Series A funding led by Arbor Ventures with participation from CyberAgent Ventures and Recruit Strategic Partners. Existing investors, 500 Startups and Cherubic Ventures, also participated.
• Pogoseat, a Los Angeles-based seller of seat upgrades at sporting events and “in-game experiences,” has raised $2.3 million in seed funding from Structure Capital, SK Ventures, Zelkova Ventures, KDDI and Global Brain Open Innovation Fund, Jillian Manus’ Broad Strategy Fund, Tylt Lab, Universal Music Group, Kodak CEO Jeff Clarke, Joshua Schacter, Kima Ventures, XG Ventures, and the owners of several professional sports teams. www.pogoseat.com/
PRIVATE EQUITY DEALS
• Acosta Sales & Marketing, a Jacksonville, Fla.-based outsourced sales and marketing company, has agreed to sell itself to The Carlyle Group. The company was previously backed by Thomas H. Lee Partners. GIC, a current investor, will re-invest in the company. Terms of the deal were not disclosed, but prior reports noted the deal to be worth $5 billion. www.acosta.com
• Kendra Scott, an Austin, Texas-based jewelry brand sold in Nordstrom, Neiman Marcus, Bloomingdales and specialty boutiques, has taken a minority investment from Norwest Venture Partners. Terms were not disclosed. http://www.kendrascott.com/
• Thoma Bravo has completed its acquisition of Sparta Systems, a Hamilton, N.J.-based enterprise quality management company, from current investors Summit Partners and Altaris Capital Partners. The deal was announced in early July. www.spartasystems.com
• Margaritaville, the Orlando, Fla.-based restaurant chain and licensing company associated with Jimmy Buffet, has sold a minority stake to Raine Group. The company generates more than $1 billion in gross annual revenue. www.margaritaville.com/
• Energy Capital Partners will acquire Wheelabrator Technologies Inc., operator of 17 waste-to-energy facilities and a subsidiary of Houston, Texas-based Waste Management, Inc. (NYSE:WM), for $1.94 billion in cash. Barclays and Centerview Partners acted as advisors to Waste Management. www.wheelabratortechnologies.com
• Integrity Custom Processing, Inc., a British Columbia-based subsidiary of Kasten Energy, Inc., will be acquired by Aqua Terra Water Management, an operator of salt water disposal facilities owned by private equity firm Bregal Partners. www.bregalpartners.com/
• Tectum Holdings, Inc., an Ann Arbor, Mich.-based maker of tonneau covers, bed liners and related truck accessories, has sold to TA Associates, minting a 23x return for its previous owner, Kinderhook Industries. Kinderhook invested in 2007 and the deal returns more than $300 million to Kinderhook Capital Fund II, L.P. www.thicorp.com.
• Independence Contract Drilling, a Houston, Texas-based provider of land-based contract drillingservices for oil and natural gas producers targeting unconventional resource plays in the U.S., has filed for a $172.5 million IPO. It plans to trade on the NYSE under ticker symbol ICD, with Morgan Stanley and Barclays serving as lead underwriters. Shareholders include Sprott Resource Corp. (TSX: SCP), 4D Global Energy Advisors, Lime Rock Partners and the Northwestern Mutual Life Insurance Co.www.icdrilling.com
• Independence Contract Drilling a Houston, Texas-based provider of land-based contract drillingservices for oil and natural gas producers, will raise $150 million in an IPO on NYSE under the ticker symbol ICD, selling 10.0 million shares at a range of $14 to $16, valuing the company at $348 million at the midpoint of the range. Shareholders include Sprott Resource Corp. (TSX: SCP), 4D Global Energy Advisors, Lime Rock Partners and the Northwestern Mutual Life Insurance .www.icdrilling.com
• The Hilsinger Company, a Plainville, Mass.-based maker of optical accessories, and professional optical tools, has sold to an undisclosed buyer. The company was owned by Incline Equity Partners. www.hilco.com/
FIRMS & FUNDS
• Binary Capital, a new venture firm started by Jonathan Teo, formerly of Benchmark and General Catalyst, and Justin Caldbeck, formerly of Bain Capital and Lightspeed Venture Partners, has raised $125 million for its first fund, topping its initial target of $100 million. binarycap.com/
• Clairvest Group Inc., a private equity firm based in Toronto, held a final closing for Clairvest Equity Partners V Limited Partnership at $600 million, above its fund target size of $500 million. The fund consists of $180 million from Clairvest with $420 million in outside commitments. www.clairvest.com/
• Accelerator Corp., a Seattle based life science investment vehicle, held a first closing of Accelerator IV with $51.1 million in capital commitments to invest in life sciences and biotech companies and expand to New York. www.acceleratorcorp.com
• Microsoft Corp. (Nasdaq: MSFT), Akamai Technologies (Nasdaq: AKAM), and Jerusalem Venture Partners, have announced a Tel Aviv-based accelerator focused on cybersecurity. www.microsoftventures.com/
• Vogo Fund, a vehicle managed by Korean private equity firm Vogo Investment Group, is in danger of default, according to BusinessKorea. The company is unable to repay 200 billion won ($195.1 million) in debt purchased for the acquisition of LG Siltron. www.vogo-fund.com/
• Meritech Capital Partners has closed its fifth private equity fund, Meritech Capital Partners V, with $500 MM in commitments. The fund follows Meritech’s fourth fund, a 2011 vintage with $425 million in commitments. www.meritechcapital.com
• GenNx360, a New York-based private equity fund, has raised $535 million for its second fund, which had a hard cap of $750 million. gennx360.com/
MOVING IN, UP, ON & ON
• Amy Schulman has joined Polaris Partners as a venture partner based in Boston. Schulman was previously General Counsel, EVP, and Business Unit Lead of Pfizer Consumer Healthcare. www.polarispartners.com
• Arman Pahlavan has joined Perkins Coie as partner its emerging companies & venture capital and private equity practice groups in Palo Alto, Calif. Pahlavan was previously a partner at Squire Patton Boggs. www.perkinscoie.com/
• Clifford Chiu has joined Neuberger Berman as Senior Adviser to Neuberger Berman Asia, based in Hong Kong. Chiu formerly was a partner member at KKR & Co. www.nb.com
• Marc P. Berger has joined Ropes & Gray as a partner in the firm’s government enforcement practice in New York. Berger previously served as Chief of the Securities and Commodities Fraud Task Force in the U.S. Attorney’s Office for the Southern District of New York. www.ropesgray.com