Week 01/23/2006 through 01/29/2006

Prepared by Capital Hunter analysts

Venture capital investment, at least in terms of total dollars, remained fairly strong, as over $396 million was invested in 30 companies last week, many of them headquartered in California. However, two deals constituted almost half of this week’s funding, which if removed from the totals above, would produce a different picture than what is suggested by the above aggregates. ITA Software, a decade-old provider of IT software and services to the airline industry, received a $100 million investment (the round is currently unknown, but for reporting purposes this week we have it classified as a first round investment. This may change when we can gather more information) from a bevy of well-known private equity firms including Battery Ventures, Sequoia Capital, General Catalyst Partners, PAR Investment Partners and Spectrum Equity. The other major investment of the week was placed into Pay by Touch, a provider of biometric authentication devices used by retailers, which raised $60 million in Series C financing from a collection of hedge funds and private individuals, including Plainfield Asset Management, Sprout Capital, Quince Associates and Global Trust Partners. Removing these two investments would leave only $236 million invested in 28 companies, a far more humble sum.

There were four initial public offerings last week, the same number as the week before. The four companies are as follows:

Incredimail, which priced at $18.75 million on the NASDAQ SmallCap Market, is a provider of customized and entertaining email software products for the consumer or home user markets.

Regency Energy Partners, which priced at $275 million on the NASDAQ, is a limited partnership which gathers, processes, markets and transports natural gas liquids.

H&E Equipment Services, which priced at $196.9 million on the NASDAQ, is a provider of integrated equipment services to the heavy construction industry.

Fortunet, which priced at $22.5 million on the NASDAQ, is a provider of multi-game and multi-player server-based gaming platforms.

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CapitalHunter.com was able to verify that $396 million of venture capital was invested in 30 U.S.-based companies during the past two weeks. The average deal size was approximately 13.20 million. The amount of venture capital invested this period decreased by 5% compared to last periods $415 million.

California was the largest recipient of venture capital funding this week. Seventeen California companies raised $197.9 million in new equity financing, which accounted for 50% of the total venture capital invested this reporting period. The largest private venture financing in California was placed into Pay by Touch. Pay by Touch raised $60 million in Series C financing and is a provider of biometric authentication equipment to the retail industry.

The software sector raised the most venture capital this reporting period, with fifteen companies raising $204.2 million in venture financing, which accounted for a whopping 51% of the venture capital this period. The largest private venture financing in the software sector this period was invested into ITA Software . ITA Software raised $100 million from a consortium of private equity and venture capital firms (see above) and is a provider of IT software and services to the airline industry.

By the chart below, companies receiving their first round of investment received almost half of this reporting period’s funding. However, as was mentioned above in the highlights section, we are unsure as to the round of ITA Software and as such we have it classified as a Series A round for the purposes of this newsletter. We have it classified as a first round investment due to the fact that we had no information on ITA before this recent funding. However, as VC firms will sometimes have early-stage companies operate in stealth mode in order to conceal information about their investments, a first round classification may not be correct. Removing ITA from the equation, however, would leave companies raising their Series C rounds as the victor. The two largest Series C financings are listed in the top three VC investments below.

The three largest venture deals this period are as follows:

The following twelve companies and other unnamed investors funded the above mentioned top three venture capital investments for $187.56 million:

A total of 69 equity financings of private and public companies occurred during this reporting period. Each of the 69 equity financings are profiled in a weekly (in this case biweekly) report which include venture financings, private placements, secondary offerings, PIPE’s, and IPO’s.

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