Palm sells 25 percent stake to Elevation for $325M

Palm Inc., the smart-phone maker, will reportedly sell a 25 percent stake to a private equity firm Elevation Partners, of Silicon Valley, for $325 million.

The move, reported by the WSJ, comes after two years of a sideways trading stock (see chart below), a recognition that Palm faces ever increasing competition, and indecision about what strategy it should pursue.

It also comes after a former employee of Palm, Gibu Thomas, argued in a column at VentureBeat recently that Palm should not sell to a private equity firm. There, he argued that Palm should get over aspirations to be the “next Apple,” and sell to a corporate strategic investor — because the forces of competition are too great.

Selling a stake to a private equity buyer keeps Palm’s independent aspirations alive — because a private equity buyer is more likely to try to want to restructure Palm and sell off its stake again down the road.

Notably, Elevation Partners has ties with Apple, and it plans to introduce some former Apple talent to the Sunnyvale, Calif.-based Palm. Jon Rubinstein (pictured above left), Apple’s former head of hardware who helped oversee the creation of the iPod music player, will join Palm as executive chairman and head up product development, according to the WSJ.

Fred Anderson, a partner at Elevation, was a former Apple chief financial officer, will join Palm’s board (recently his relationship has soured with Apple’s Steve Jobs). Another Elevation partner, U2’s Bono, helped introduce the U2 iPod. And of course, Roger McNamee, another partner at Elevation, known for the prolific devices that adorn his belt — now likely to carry both a Palm Treo and an iPod — will also reportedly join the board.

This all comes, of course, just as Apple is to unleash its highly anticipated iPhone. And Palm recently unveiled the rather perplexing Foleo — designed to be a companion to Palm’s smartphones, but never quite making the case as to why it is any better than a laptop (at least in our view).

According to the WSJ, Palm will “pay $940 million in cash, or about $9 a share, to existing shareholders whose ownership of the company will drop to 75 percent under the deal’s terms. The company will fund the restructuring with the $325 million from Elevation, $400 million in new debt and more than $200 million of cash on its balance sheet to complete the transaction.
According to the terms, Elevation is paying a 16 percent premium on Palm’s price, the WSJ said.

Trends in Compensation Packages in Venture-Backed Companies

In general, while compensation is on the rise, the rate of increase slowed between 2005 and 2006. Founder compensation (in whatever role they play) is rising faster than non-founder compensation.

There are some theories on this including ...

(a) founders are becoming more savvy about their compensation packages and
(b) there is increased competition between VCs for good deals and one way to win deals and keep founders happy is to pay them more.

Non-founder CEO compensation has been fairly consistent for the past three years while founder CEO comp is up. As companies mature, these numbers tend to converge, although in general non-founder CEO’s make more cash comp – usually because they have significantly less equity – than founder CEO’s.

Comp for financial executives - both founder and non-founder - is on the rise. Double digit increases in cash and equity compensation for the past three years is not irregular.

Engineering and technical executives have seen a small rise in cash comp over the past couple of years, but equity has remained relatively stable.

Sales executive compensation has remained relatively flat. That being said, our experience is that they are making more incentive and commission compensation which follows the general macro economic uptick the U.S. has seen the past couple of years.

Marketing and business development executives have seen a steady increase in compensation over the past couple of years. Cash comp is up in the low double digits and equity about the same. With companies generally performing better than in past years, they are spending more on marketing and business development functions, as opposed to fulfilling these roles with a combination of the CEO and sales.

One other trend is the apperance of the “management carve out.” Given the recent past of tough times for start ups and dilutive / recap financings, many companies were left in a position whereby the management and employees did not own sufficient equity in the company to keep them motivated.

In some cases, they owned plenty of equity, but due to large amounts of capital raised and the VC’s liquidation preferences, their equity was out of the money in any reasonable liquidation scenario. To solve this issue, investors and management developed the concept of “management carve outs” whereby the employees would receive a certain percentage of proceeds on a liquidation event (usually 5-10%) on top of anything they would receive for their equity.

In essence, these employees were receiving a liquidation preference that sat along the liquidation preferences held by investors. As general economic conditions improve, these are becoming less common, but are still a valuable tool to keep management and employees incentivized.

from askavc

First Step Towards Google Antivirus?

FYI - Google Acquires GreenBorde!

Google’s acquisition spree shows no signs of stopping: now the company has acquired Mountain View-based GreenBorder, which creates security software. It’s an interesting idea: the software creates a kind of sandbox for your web browsing, so that any viruses, spyware and trojans you pick up during your session are deleted as soon as the browser is closed. The name comes from the green border applied to your browser window when the service is active, letting you know that the whole session is being contained and no changes will be made to your PC by websites (even downloads are opened in a virtual environment).

In their own words, GreenBorder has created an “easy solution to virus, spyware, and trojan threats by isolating each Internet session from the rest of the PC and earlier Internet sessions. The beauty of the GreenBorder Pro software is it doesn’t need to be updated to guard against new virus signatures or new types of malware. It creates a secluded, virtual Internet session and when you are done, it flushes everything away, in your cache and in temporary files.” GreenBorder Pro costs $29.95, but will most certainly become free now that Google is in charge.

The question is: does this mark Google’s first step into the security and anti-virus game? It’s an area of web browsing that Google hasn’t yet ventured into, but the company’s relentless march would seem to put it in competition with virtually everyone

Structuring Venture Capital and Other Investments in India

Many U.S. and other foreign investors are evaluating alternatives for structuring investments into software development, business process outsourcing, drug discovery and other tech and non-tech companies based in India.

Here's a whitepaper from Fenwik & West, a Cali based legal firm covering 2007 update to Structuring Venture Capital and Other Investments in India.

The primary structures for investing in India are:

1. Direct investment in an India company from outside India(usually through a Mauritius or a Cyprus subsidiary fortax reasons)
2. Investment in a U.S. company with a services fulfillmentsubsidiary in India
3. Investment in a Cayman Islands or Mauritius companywith a services fulfillment subsidiary in India
4. Direct investment in an India company from outsideIndia through a venture capital fund registered with theSecurities and Exchange Board of India.

The primary business considerations in determining how tostructure such an investment are:

1. Relative valuations in the U.S. and India capital marketsfor the type of investment in question, particularly aservices business;
2. Ease of IPO exit including any currency exchangerestrictions, the impact of Sarbanes-Oxley in the U.S. andoverseas company listing requirements in India;
3. Ease of acquisition by the likely set of acquirors as an exit-strategy
4. Investor “comfort” with the limitations on preferenceshares under the India Companies Act of 1956, asamended (the “Companies Act”)

It also covers the IPOs, Company act, Mauritius Financial Services Commission strategy, Cyprus and other key areas. Download the paper here

Nasscom to launch Venture Fund

Nasscom is set to launch a Venture Fund along with Hyderabad-based ICICI Knowledge Park, an arm of the ICICI bank.

Rajdeep Sehrawat, vice president of Nasscom, said the new Venture Fund will be under the trade body but will run as a professional Venture Fund.

“We have earmarked Rs 100 crore ($22million)to fund IT start-ups in India, which are involved in IP-creation. These companies could be anyone who is working on automotive electronics, wireless and broadband, life sciences, medical devices and the like,”

he informed.

Stating that the venture fund will be in place by October this year, Sehrawat said the fund will be looking at disbursing seed capital or angel funding, which other venture capital firms hesitate to enter.

“We will be financing early start-ups, in their ideation stage, as this is where money is a problem. When the idea takes the prototype stage, then other VCs will be interested and we will be exiting,”

he said.

“We have not limited on the number of projects, but have earmarked Rs 100 crores. Our vision for the Venture Fund will be on long-term, high-risk categories,”

he added.

via: CIOL

Launching pad for new start-ups?

Like many venture capital firms, the people at General Catalyst Partners don’t like to talk about themselves - at least not publicly.

The firm’s partners prefer to keep the attention on the businesses they back.

But General Catalyst in Harvard Square is quickly becoming a top player in the world of new media and marketing. Only seven years old, the firm has invested in some of the most-talked-about start-ups to come out of the Boston area.

From online video distributor Brightcove to word-of-mouth marketing agency BzzAgent, from Jeff Taylor’s Eons - a baby boomer social networking site - to online travel company Kayak.com, General Catalyst has played a role in some of the more intriguing companies to launch in recent years.

General Catalyst was one of the top three venture capital firms investing in Web 2.0 companies last year based on the number of deals it made, said Valerie Foo, research manager at Dow Jones VentureOne, which tracks venture capital firms. That would put General Catalyst at the top of the Web 2.0 heap in the Northeast.

Many of the companies General Catalyst have backed have been born out of the firm’s own office. A recently launched company that provides text-based music reviews and news to cell phones, 80108 Media, used office space at General Catalyst. But not everyone has come from the inside.

IBM VC group eyes India

IBM’S venture capital group which works with venture capital firms to build an ecosystem of start-up partners for developing innovative solutions and products, is now eyeing India as a potential geography. The group is in the process of identifying four-five VC firms in the country for the programme.

“Innovation in India is growing at a rapid pace, in fact faster than how it was in China when we went there a couple of years ago. So we are looking to tie up with a few VC firms including a couple of local VC players to help us identify innovative companies and technology,’’

IBM Venture Capital Group MD Claudia Fan Munce told ET. She was speaking on the sidelines of the company’s first India Innovation Forum held on Wednesday in Bangalore.

read the Economic Times news here

Reliance Entertainment’s Social Networking Portal Big Adda Goes Live

Reliance Entertainment’s social networking portal "Big Adda” has gone live. The company ran a series of polls over the past few months, ever since ContentSutra broke the story of it’s impending launch, asking users to select logos and templates.

On the face of it, the site has addas (forums), photos, videos and blogs. Nothing spectacular so far. Looks like they didn’t go with my choice of logo. (Bah!) Update: It’s a closed beta, by invitation only, I’m told.

However, there is an overview available here. More importantly, do take a look at the terms and conditions, particularly the parts in bold, dealing with user generated content. An excerpt:

You are solely responsible for the content...that you post on or through the BigAdda Website, and any material or information that you transmit to other Members and for your interactions with other Users...

BigAdda makes no warranties, express or implied, as to the Content or to the accuracy and reliability of the Content or any material or information that you transmit to other Members.

Orkut, MingleBox, DesiMartini, Fropper, now BigAdda - Ohhh - Please No! btw Myspace entered china last week, targeting India soon - Please!!!!

Report On Opportunities In Indian Electronics Manufacturing

If you are an investor or if you are a potential entrepreneur looking to start up in electronic manufacturing, the UK-based consulting firm Plan B Manufacturing has released a free 83-page report titled - "Indian Electronics Manufacturing: Where are the startup opportunities?"

Download here (3MB)

Social Networking Site Minglebox Receives $7 Million In Funding Fron Sequoia Capital

Indian social networking site Minglebox has received $7 million in funding from Sequoia Capital India. Minglebox was started by three IIT Delhi alumni - Kavita Iyer, Sanjay Aggarwal and Sushma Abburi, who have previously worked in companies like Yahoo, i2, ICICI, Wipro, HLL and Infosys. R.Ramaraj, ex-CEO and co-founder of Sify has joined the board of Minglebox.

The company has apparently adopted a different approach to populating its social network - they’ve focused on creating communities for colleges and trying to emulate a college hangout online, which is one of the things people use Orkut (yeah, we keep going back to Orkut, don’t we?) for.

Minglebox has a bunch of other usual stuff: blogs, photos and videos. Most videos are from YouTube, and there is (again) some copyrighted Bollywood content embedded from YouTube...I wonder who’s liable in this case - the user who uploads; YouTube, which publishes and facilitates sharing; or Minglebox, where the video is embedded...that’s a problem that many social networks with video content are facing today.