E-Harmony
Business description: The leading and most trusted on-line dating and relationship services provider in the USA
Securities purchased: Common stock
Seller motivation: We were introduced to an eHarmony shareholder seeking partial liquidity by a professional services firm that we had educated on our strategy and focus on individual shareholders in market-leading growth companies. We were subsequently able to identify several interested sellers and transacted with an existing executive who was motivated to sell a small portion of his holdings to generate liquidity and diversify his risk.
Prior venture capital investors: Sequoia Capital, Technology Crossover Ventures, Fayez Sarofim
Benefits to company and prior investors: This transaction replaced an executive who was no longer with the company with an institutional investor bringing capital, industry contacts and relationships, as well as the ability to service additional individual stockholders seeking liquidity.
LifeLock
Business description: The industry leader in the rapidly growing field of identity theft protection for individual consumers
Securities purchased: Preferred bridge and common stock
Seller motivation: A company founder had the majority of his net worth concentrated into one illiquid asset and was experiencing two financial burdens: self funding a new venture and an expensive family medical issue. In order to help fund his new venture and diversify his holdings, he sold us a small portion of his stock. Midway through the due diligence process, after developing a relationship with management, we were able to position ourselves as a preferred source of interim financing for the company, thereby creating a second investment opportunity to purchase convertible bridge notes directly from the company. Viewing us as a value-added investor, the company’s management and existing investor syndicate agreed to preemptively waive the rights of first refusal associated with the common stock we purchased, prior to the negotiation of any transaction.
Co-investor in our transaction: TrueBridge Capital, Legacy Trust
Prior venture capital investors: Bessemer Venture Partners, Kleiner Perkins Caufield & Byers, Goldman, Sachs & Co.
Benefits to company and prior investors: Bessemer, Kleiner and Goldman Sachs were supportive of our transaction because the company preferred the founder's shares go into the hands of a single, qualified institutional investor, instead of several high net worth retail investors. Additionally, the company gained another value-added investor through a bridge note purchase and a nondilutive, nondisruptive common stock purchase.
RenewData
Business description: A leading provider of services for the discovery, archiving and governance of electronically stored information (ESI) to help organizations proactively manage the inherent risks associated with ESI
Securities purchased: Common stock and rights to participate in a preferred stock offering
Seller motivation: Two company founders sold a portion of their shares plus their rights to participate in a preferred stock issuance being offered exclusively to existing shareholders. One seller, a current employee, was seeking cash for family purposes. The second founder had left the company to start a noncompeting business and needed funds to support the new venture. Both sellers needed cash and had no appetite to participate in the preferred offering.
Co-investor in our transaction: Credit Suisse
Prior venture capital investors: ABS Capital, CIBC
Benefits to company and prior investors: The transaction was deemed by existing investors to be too small to initiate their respective investment processes. Both venture capital firms were familiar with us and welcomed our involvement. RenewData’s CEO was confident that we could be a helpful shareholder without disrupting existing governance, and he fully cooperated with the transaction. Concurrent with the purchase of common stock from the two sellers, we purchased preferred stock directly from the company.
Health Market Science
Business description: A leading data and data analytics provider serving every segment of health care including: pharmaceutical manufacturers, biotechs, device manufacturers, payers, providers and pharmacies of every size
Securities purchased: Common stock (all HMS shareholders hold only common stock)
Seller motivation: An executive and an angel group contacted us through an outside board member (who had worked closely with us in the past) about selling a portion of their shares. Due diligence revealed that two distinct shareholder groups existed: the larger, favoring a near-term sale and the smaller (predominantly the sole institutional investor Edison Venture Fund) favoring a continued growth path and a three-plus year exit horizon. We worked closely with Edison to organize a recapitalization that included participation by Edison, ourselves, various Edison LPs and Comerica Bank.
Co-investor in our transaction: Credit Suisse
Prior venture capital investors: Edison Venture Fund
Benefits to company and prior investors: The recapitalization properly aligned shareholder interests with respect to exit timing, as well as risk, R&D, sales and marketing expenditures and new initiatives. The new control group was also able to effect management changes geared to a substantial growth plan.
ANDA Networks
Business description: A leading provider of carrier-class solutions for fiber-and copper-based access networks worldwide
Securities purchased: Common stock (most ANDA investors hold only common stock)
Seller motivation: We targeted ANDA for investment and worked with management to identify potential sellers. An angel investor, who had been invested since 1999, sought partial liquidity to fund his share of a dilutive round in another portfolio company. He also sought to avoid lock-up restrictions in ANDA’s possible IPO. He sold approximately 20% of his holdings.
Co-investor in our transaction: None
Prior venture capital investors: Highland, Venrock
Benefits to company and prior investors: Due to our familiarity with ANDA's CEO and venture syndicate, we were afforded access to the company and forged a strong working relationship. Accordingly, ANDA welcomed our involvement.
Intechra
Business description: One of the world’s leading information technology asset disposition companies
Securities purchased: Preferred stock and bridge note
Seller motivation: An angel investor had invested 10 percent of his fund in a preferred stock round. Continued company growth and acquisitions required his participation in subsequent bridge financings. The seller decided to reduce his position (and his share of future rounds) to enable an investment in another portfolio company facing a new round. Existing institutional investors sought to preserve dry powder for future rounds and waived rights of first refusal.
Co-investor in our transaction: SJF Ventures
Prior venture capital investors: Chrysalis, First Avenue, Oxford, Richland, SJF
Benefits to company and prior investors: The transaction replaced an overextended angel investor with investors that bring domain expertise and capital to participate in future rounds to support acquisitions.