Friday, March 28, 2008

Venture Round: Weekly Wrap Up

Welcome to Venture Rounds, IN VIVO Blog-style.

Each week we'll be providing some high level wrap up of the venture scene along with never-before-seen news when we can dig it out. The format may be kind of fluid, but we'll try to break things down as they relate to venture funds, portfolio companies and other bits of miscellanea.

Check in here on Fridays, and if you've got any comments please pass them along. We love reading comments. We do. We really do.

VentureWire reported earlier this week that Morgenthaler is preparing to raise a new $400 million venture-only fund.

Wisely, Morgenthaler is looking to separate its venture and buyout units, which traditionally have invested from the same fund. It's hard to imagine how this arrangement worked in this age of strategic specificity given the very differnet demands--and return potential--of venture and buyouts. But Morgenthaler found a way, until now.

No surprise, the firm isn't talking about or confirming any fund-raising. The article attributes everything to LPs. But in an interview with IN VIVO Blog, Partner Gary Shaffer is revealing that he won't be a partner in any new fund.

Shaffer, who invested in both life sciences and technology companies, says he's leaving VC behind to focus on two things, his family and non-profit ventures. Right now he's heavily involved in Habitat for Humanity and Project Hope, a home-building effort centered around New Orleans. But he has designs on increasing the charitable portfolio to include international efforts as well.

Shaffer produced a pretty good track record during his 15 years as partner. He was involved in the firm's investments in AneuRx, Cardiovascular Imaging Systems, Coalescent Surgical, Menlo Care, and Perclose, all of which were acquired.

Meanwhile, he also played a part in SONIC innovations and Thermage, both of which have gone public, and Emphasys, which has filed to go public. He intends to slowly slip off his current board seats which include CardioMind, Emphasys, OptiScan, Peregrine Semiconductor and Vertiflex.

Morgenthaler's life sciences bench remains pretty deep. According to the VentureWire piece, its senior member, Robin Bellas, will take over management of the venture firm.


Meanwhile, VentureBeat is reporting that CMEA Ventures has closed on its own $400 milllion fund. The report draws on some details from VentureWire, but neither report identifies the firm's life sciences team, which can be found here.


We've done numerous articles about companies pursuing opportunities in pulmonary space. But Breathe Technologies Inc., which announced its Series B financing this week, seems to have a new take.

Breathe Technologies is developing a unique family of compact,ultra-lightweight, ambulatory respiratory ventilator systems for the hospital,homecare and pandemic markets. Annual worldwide sales of conventional respiratory systems that the company's products could enhance or replace are estimated at more than US$2 billion.
A respirator would appear to be the kind of capital equipment investment venture firms might avoid. But Breathe took the modest $15 million round from Kleiner Perkins Caufield & Byers, as well as its first round investors Synergy Partners International, Delphi Ventures and Life Science Angels.


Finally, it's time for our SEC Documents of the Week. Kohlberg, Kravis & Roberts--which made a melting ice shelf-sized splash into biopharmaceuticals by leading the historic $250 million Series B in Jazz Pharmaceuticals Inc.--sold off a tiny piece of its holdings in the newly public company.

According to three Form 4s filed on March 12 (go here, here and here), KKR Financial Holdings III, LLC reaped $17.8 million through the sale of common stock warrants and "15% Senior Secured Notes due June 24, 2001.

However, KKR isn't cashing out. First, Jazz shares aren't doing so hot, with prices bouncing around $10. Second, KKR holds a H-U-G-E stake in Jazz, roughly 35%. According to the 424B4 filed after Jazz's Spring 2007 IPO, KKR had to decide whether or not to exercise warrants to acquire 245,540 shares "within 60 days of March 31." It appears KKR sold 175,384 of the newly public shares and kept the rest, 70,156.

To see who else is beginning to cash out on deals, check the Venture Round in this month's Start-Up magazine.

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