bloggingbuyouts

Venture capital-backed IPOs are nonexistent lately (there were zero in Q2). The M&A market has been soft for VC-backed deals. And the economy is slowing.

All in all, this is the recipe for big-time problems in the VC space. Yet, according to a recent survey from Thomson Reuters and the National Venture Capital Association, VCs were actually able to raise 3% more in funds in Q2, to $9.1 billion.

True, the typical kind of investor in VC fund include long-term players, such as endowments, insurance companies, pensions and other types of institutions. And, if history is any guide, VC returns can be lucrative.

But, if you look deeper into the figures, you'll see that there is a flight to quality. That is, the tier-1 VCs are grabbing most of the investment dollars. For example, Kleiner Perkins raised a $700 million fund and Foundation Capital scooped up $750 million.

Despite all this, there could be tough times for the VC industry. Some of the less-noteworthy firms may disappear. More important, if returns continue to lag, it seems inevitable that even the larger firms will eventually feel the pain.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

Following a trend in new fund formation that has seen the rich get richer, Kleiner Perkins Caufield & Byers Thursday announced that it has hit up eager limited partners for $1.2 billion, closing two new funds.

The blue-chip Sand Hill Road firm launched its 13th general interest fund, KPCB XIII, garnering $700 million for investment across all the firm's investment sectors of energy and environmental technologies ("which it terms greentech"), information technology and life sciences ventures. It also raised a $500 million Green Growth Fund, which will support later stage greentech companies.

The greentech fund is a tacit acknowledgment that as an industrial sector, much of the new energy and environmental development being funded is fundamentally different from traditional venture areas such as life sciences and information technology. While ideally built on breakthrough technologies, greentech companies are typically more capital intensive in later-stage development, requiring more flexible funding models than traditional venture capital.

Continue reading at TechConfidential.com.

2007 Nobel Prize Winner and 2000 Presidential election winner Al Gore has another notch on his belt -- partner at Silicon Valley's most prestigious venture capital firm -- Kleiner Perkins. (Thanks to the Supreme Court, Gore -- who won the 2000 Presidential vote -- did not serve.)

But he handled the disappointment well. His work on the documentary An Inconvenient Truth -- easily the highest payoff PowerPoint presentation ever made -- has helped make the world aware of the threat it faces from global warming and what people can do about it. Gore insightfully points out that climate change is a matter of war and peace. It has created conflict -- the drying up of a lake in Sudan contributed to genocide there and the melting of the polar icecap has set off an international sea grab at the top of the world.

So what's the deal with Gore at Kleiner Perkins? According to the New York Times, President-elect Gore's part-time job at Kleiner will be to assess the potential of alternative energy companies and to opine on whether Kleiner Perkins should invest in them. Gore plans to donate his salary from the venture to the Alliance for Climate Protection, a nonprofit policy foundation. But he was not clear about whether he'd get the partner's share of the 2% of assets under management and 20% of the profits from successful "exits."

He was clearer about his political aspirations -- noting "I don't expect to be a candidate again."

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

One of the hottest IPOs of the year is Aruba Networks Inc. (NASDAQ: ARUN), which is up 82.5% since its debut in late March. The company builds technologies to secure large corporate wireless networks. After all, with the proliferation of devices – such as Research in Motion's (NASDAQ: RIMM) BlackBerry – it is a big market opportunity.

Well, another firm wants a piece of the action: Aerohive Networks.

In fact, the company recently raised its second round of venture capital for $20 million. The lead investor is the venerable Kleiner Perkins

Aerohive develops so-called "cooperative control" wireless LAN (WLAN) access points. Basically, it makes it easier for companies to deploy wireless services – and at lower costs. This is done by sharing information in optimized groups, which are called "hives."

No doubt, Aerohive faces intense competition, such as from Cisco Systems Inc. (NASDAQ: CSCO). But, in the WLAN market, there is always room for a better product.

Besides, Aerohive has a top notch management team. Keep in mind that their last deal – NetScreen – sold for a cool $4 billion to Juniper Networks (NASDAQ: JNPR).

To check out more recent venture capital funding news, click here.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

I talk to lots of VCs. Lately they have been fairly glum -- it's been a long drought since the dot-com implosion. But, there are signs that things are improving. An example is Microsoft Corporation (Nasdaq:MSFT)'s buyout of Tellme.

According to a report from Red Herring, it looks like the deal was a big score for Benchmark Capital and Kleiner Perkins Caufield & Byers. The investors got into the deal during the heady days of 1999. The round was about $47 million.

OK, so what was the return? It looks like about 6x to 8x.

That's pretty good considering that there are many 1999 deals that are zeros.

No doubt, it's still going to take time for the VC business to get its footing. But, I have a feeling that – within about five years or so – it's going to be cool to be a VC again.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.