Private Equity Share Discussion Threads

[mattybuoy] 07/1/2006 15:40

Good luck, there are LOTS of them ... :)

[flackwell-raineri] 07/1/2006 08:43

I think thats a fair position to take, although it should be relatively easy to look at the individual funds and see what each holds.

I'll take a look tomorrow.

[mattybuoy] 06/1/2006 21:54

OK that makes sense, but it still doesn't allow us to say with certainty whether any particular company is in PEQ's funds. I am reluctant to assume anything, even with a 90% chance of being right.

[flackwell-raineri] 06/1/2006 20:04

To elaborate further the relationship I think is akin to many Investment Trust groups where there may well be an offering such as;

Henderson UK Equity Fund
Henderson UK Smaller Companies
Henderson European

Where each could hold the same underlying stock, and all come under the Henderson parent umbrella.

[flackwell-raineri] 06/1/2006 19:58

Matty - The following para taken from the main DFJ website perhaps explains;

To that end, DFJ began to build up an affiliate program with other venture firms to give it greater geographic reach. DFJ ePlanet, for instance, scours Europe, Israel and Asia for start-ups, while DFJ Southern Cross focuses on Australia. Some of the affiliates operate fairly independently, while others operate almost like a listening post for the main Menlo Park, Calif., office.

ie DFJ is effectively the main parent, and various funds are created for specific areas. Thus, both DFJ and a related fund could hold the same stock, as was the case with both Baidu and Skype for example. The various funds may involve new partners, and almost certainly a different management team.

[mattybuoy] 06/1/2006 16:35

Hello Fin Man.

Yes the people at Santa Cruz would seem to be proper techies with plenty of history.

I have looked at loads more of the portfolio companies but it's only where I feel I can get a handle on what they do that I have posted anything.

Speaking of which, can we be sure that if a company is listed as "portfolio" at a fund's website that it is actually present in the funds that PEQ holds? Most of the funds are numbered as if part of a series. I do not know enough about how venture capital limited partnerships work to say ...

The companies I have so far commented on are either in un-numbered funds e.g. DFJ ePlanet Ventures or explicitly mentioned in PEQ's reports.

[fin man] 06/1/2006 13:18

Re:Santa Cruz - The key man would seem to be Barry Spencer - here is a copy of his biography from the Reality Fusion website;

Barry Spencer - Founder and CTO

Prior to founding Reality Fusion, Barry Spencer was the founder and CEO of Cool Software Technology. Cool was a 17 person outsourcing company based in Santa Cruz, California. Cool developed software titles and technology for Novell, Borland, Oracle, General Magic, Corel, and Starfish. Barry's technical expertise as a key contributor to some of the world's most popular software also gives Reality Fusion a technical edge. He has designed, built, and invented key technologies for some of the computer industry's most recognized products. At Lotus Development Corporation from January 1983 until July 1987, he was developer and architect for spreadsheets, including 1-2-3 releases 1 and 2, generally considered the "classic" versions of the most famous product in microcomputer history. He was also developer and architect for the initial releases of Symphony.

Barry also has a successful history capitalizing on new hardware technology. At Lotus, Barry wrote the LIM Expanded Memory specification. In addition, he was responsible for its first software implementation in Lotus 1-2-3 version 1a. He also wrote the first application component using the 8087 co-processor, once again in Lotus 1-2-3 version 2.

After leaving Lotus, Barry worked at Borland as architect of the cell engine for Quattro Pro, a product consistently voted as the best spreadsheet in the early '90s.

[mattybuoy] 06/1/2006 12:53

Exit News:

I got the acquiring company wrong, but

Computer Associates to buy Wily Technology for $375m

This was released yesterday and might explain why the share price ticked up a few pence. PEQ's stake (of unknown size) was valued at $0.59m in the last results.

[mattybuoy] 05/1/2006 19:57

SantaCruz Networks ( )

Yet another DFJ ePlanet Ventures company, this firm operates in the live video over the Internet space. They claim to have the best performing technology but I have been unable to verify this. Suffice to say that it definitely does work.

Regardless of that, where I believe they will score is in the way they are not just providing standalone video applications but also making "plug-ins" for IM (Instant Messaging) and VoIP apps. These enable people to add a video link to an existing IM chat session or VoIP phone call rather than having to faff about setting up the video session separately. That has to be a good thing IMHO. Ease of use is a massive thing for non-technical consumers.

To illustrate this, their recently released Festoon plug-in has been downloaded 3.7 million times in the approximately six months it has been available.



The business model is a familiar one. Give away the basic product and charge for premium features. This model works well provided that enough consumers use the product. I guess we will see whether or not that is the case over the next couple of years. The Festoon figures would seem to bode well though.

[flackwell-raineri] 05/1/2006 19:29

Matty - You have been busy. I've had a quick look at Liquidnet and like what I see - the stats re:the growth in trades, the majority of which are in the spread makes for an excellent sales pitch.

I also noticed the calibre of the European advisory board - Heads of Global dealing or equivalent in Aegon,AXA,Credit Suisse, Schroders etc. They don't come any more blue chip than that. They seem to be attracted by the anonymous liquidity they can get, and hence this is of great value to them, especially when they deal in such large volumes. The revenue would seem to be transaction driven as there is no upfront fee - this therefore could grow exponentially as its popularity gains a hold.

Today also received an update from Baidu who are building a brand new HQ, which is clearly indicative of the anticipated growth.

Looks better by the day, and thanks again for your works.

[mattybuoy] 05/1/2006 18:41

Chinese Internet companies

The DFJ ePlanet Ventures fund has three more Chinese internet companies in addition to the famous Baidu, which recently went public so successfully.

These are:

BlogCN ( ) - "one of the leading blog sites" in China, with "millions" of blogs and viewers.

etang ( ) - a "vertical portal integrator".

Jeboo ( ) - "providing wireline and wireless broadband Internet content and application services".

Unfortunately, since all these sites are in Chinese language I am unable to find out anything more about them. Still, China is "hot" so you never know ...

[mattybuoy] 05/1/2006 18:30

Ingenio: correction

I incorrectly stated above that Ingenio was a VoIP company. In fact what it does is provide a service whereby businesses without a web presence can advertise their phone number on the net. This "Pay-Per-Call" system seems like a good idea and has recently been adopted by AOL and other web portal sites.

So, it still may be promising but not VoIP. My apologies.

[mattybuoy] 05/1/2006 17:25

LiquidNet could be massive. Stock exchanges are natural monopolies, very much like eBay, although most investment bankers possibly wouldn't appreciate the comparison.

If LiquidNet carries on as it has been it could end up being the monopoly provider for institutional equity trading and possibly the largest stock exchange in the world in terms of monetary value traded. It already rivals the NYSE and Nasdaq in terms of the size of its liquidity pool.

How much is that worth?

Some approximate stock exchange market caps:

Nasdaq $3.0bn
LSE $2.5bn
Deutsche Borse $11.5bn
Euronext $6.0bn

N.B. Deductions should be made from the DB and Euronext values due to them having substantial derivatives operations.

I reckon $2bn might be a reasonable valuation.

[mattybuoy] 05/1/2006 01:18

Wily Technology ( )

Not quite at the same level of loveliness as LiquidNet but still a goodie. This company makes software that is used in the Java/J2EE enterprise applications space. Java/J2EE is software that is used by a lot of large corporates to, in simple terms, connect their existing mainframes to the Internet. It is a large and growing market.

Wily appear to occupy an advantageous position in a segment of this marketplace. Definitely not what you would call a monopoly but their technologies do have some unique qualities and some have been adopted as standards. I won't get any more technical, but from reading the website they obviously know what they're doing. They are also very customer-focused, which is of course important in any business.

Profitability was achieved at the start of 2005 and revenues are growing at a rate of at least 60% a year.

IMHO the company is a prime candidate for a takeover by IBM or maybe Sun Microsystems.

[mattybuoy] 04/1/2006 23:51

OK here's another beauty.

LiquidNet ( )

This company provides an electronic marketplace within existing US and European stock exchanges where institutions can perform anonymous block trades. Similar to the ECNs like Archipelago or Island but for institutions only. From the website (well worth checking out):

"Launched in April 2001, Liquidnet was built exclusively for institutional trading. After less than four years, we are now ranked as one of the top 12 largest NYSE institutional brokers and the 11th largest NASDAQ broker* respectively."

Also, from a poll conducted by Institutional Investor magazine in the US:

"Buy-side community selects LiquidNet as its top execution venue"

Trade volume is growing at c.60% p.a. in Europe and c.80% p.a in the US. Which makes the poor old LSE look a bit sluggish ;)

In Feb 2005 a transaction occurred whereby a "minority stake" in LiquidNet changed hands for $250m. So ... at worst that would value the whole company at c.$500m.

PEQ's stake was valued at $1.14m in the last annual results. Unfortunately, since we don't know what percentage of LiquidNet's equity that represents it is impossible to do a comparison.

[mattybuoy] 04/1/2006 22:23

Thanks :) Thought I was alone there for a minute ...

One way DivX make money is by licensing the software for use in embedded devices e.g. mobile phones, PDAs, digital cameras. There are far more of these devices in the world than there are PCs.

Something not generally realised outside the industry is that it is having the "standard" file formats for office software that has been responsible for a lot of Microsoft's success over the years. It is an immense thing to leverage off.

I will probably put up some more info over the next few days. There are to my techie mindset many superb companies in the vast PEQ portfolio.

--
My only concern is that Laxey will push for a forced realisation. Hopefully they will just prevent new investments and start a process of returning cash while allowing the existing 2000 vintage VC funds to run their natural course.

[flackwell-raineri] 04/1/2006 19:42

Matty - Excellent research which has prompted me to take a look at Divx.

This looks to be a brilliant market- and world-leading company, in an area of the market most suited to the net. The company has certainly developed a regular and knowledgeable clientele who can only serve to improve the companies offerings and spread the word. It amazes me how these companies can offer so much to us consumers, who by receiving this free, create demand from those publishing the content. An almost virtuous circle which I guess long-term will mean we have to pay to use - However, like google the sheer demand/popularity is what the company can sell to the commercial users.

I've also heard of Vonage, which as a non-techie I'm pleased about as this can only be good news imo.

No doubt if other gems are spotted, you'll give us the headlines, but thanks for those to date.

[mattybuoy] 04/1/2006 17:18

You know VoIP might even be a long-term threat to the cellular incumbents too.

Vonage release Wi-Fi VoIP phone:

[mattybuoy] 04/1/2006 16:42

DivX

Another no-brainer, this company owns what is the de facto video file format standard for the net and, increasingly, in the mobile and digital camera world too. They are apparently already profitable.

I wouldn't be at all surprised to see Microsoft snap them up if anti-trust doesn't get in the way. Or HP, or even perhaps Sony or someone like that.

Regardless, the future is bright for this company. Looks more like a 2007 exit though than this year to me.

[mattybuoy] 04/1/2006 16:15

I've been doing a bit more research into the under-lying portfolio companies.

Vonage (held by at least two of PEQ's under-lying VC funds) could be another Skype. It is a large VoIP infrastructure player with a market-leading position in the US. There were several US business press articles last year which mentioned an "imminent IPO" at valuations ranging around the $1bn level. Obviously this didn't happen but nevertheless I believe that we should see an exit of some sort this year at a substantial premium to carrying value.

Other PEQ held VoIP-orientated firms that I have identified are TellMe.com, Ingenio and Ensim. There may be more too amongst the hundreds of under-lying companies, I haven't managed to look at all of them.

It is my opinion that the eBay-Skype takeover is the first act of a "land grab" within the VoIP space. The reason being that the VoIP industry should be able, in time, to effectively take-over a large part of the existing $300bn a year conventional land-line telecoms business. That's quite a chunk of change, as they would say in America :)

Happy New Year.

[mattybuoy] 19/12/2005 13:19

Interims are out. NAV pretty much unchanged but as we know it takes a while for the full effects of liquidity events to show up.

Interesting comment:

"We are particularly pleased to have reversed the Company's over-commitment
position which now places the Company in an excellent position to consider its
future."

They have now gone into "under-commitment" and have a surplus of $7m.

So maybe I won't get my wish to hold for a long time and they'll start dishing out the cash and wind up instead. Not that I would complain too much ;)

[mattybuoy] 18/12/2005 17:27

You can find out about all the underlying companies for this investment trust by visiting the component VC funds websites. These are all listed on the PEQ website at

Many possible gems there. I've even heard of some of them, lol.

FWIW I think we are at the start of another (less bubbly) tech bull market. So I will be holding this one for years to come ...

[royaloak] 15/12/2005 22:54

mangal

Great stuff, you live and learn, many thanks.

Regards, ro.

[mangal] 15/12/2005 22:49

royaloak, to include charts in the header:
1) Select the edit button of the header; this takes you to the screen for editing the header
2) Tick the boxes "chart" & "long-term chart" at the top of the page; you might as well select the other two boxes: "news" & "fundamentals"
3) click the "update" button & bingo, the charts should be there !

& yes, will definately have a look at BBA.