Pond Ventures has completed its fourth portfolio company exit in six months with the acquisition of Nanotech Semiconductor by Gennum Corporation (TSX: GND) for USD34 million, plus a potential earn-out of up to USD6 million if certain revenue targets are achieved by Nanotech over the next 12 months.
The exit followed the same capital-efficient investing model as Pond’s prior exits, and delivered an attractive return over a shorter period of time than the average venture-backed company.
“This exit once again proves the merits of capital-efficient investing and our transatlantic business-development approach in today’s challenging market environment,” says Richard Irving (pictured), co-founder and General Partner of Pond. “It also is gratifying to have now achieved a second successful portfolio acquisition with the same CEO, who was at the helm of Microcosm Communications when we exited that company in 2000. We’ve worked with Nanotech from the seed round forward, and carefully managed our investment so that we could achieve this solid multiple in just over five years.”
Founded in May 2003 by Gary Steele, Nanotech Semiconductor develops, manufactures and sells analog and mixed-signal driver and receiver ICs for fibre-optics-based communications. Steele was also the founder and CEO of Microcosm, which delivered the first high-speed optical networking components based on pure-CMOS process technology. Pond also was an initial investor in Microcosm, which raised USD8 million in first- and second-round funding and was acquired by Conexant Systems Inc. in a stock transaction valued at approximately USD200 million. Steele has founded two other successful companies in the UK.
“I am very pleased to have now achieved not one but two successful exits with the Pond team,” says Steele. “Pond was the first venture firm I talked to when I founded Nanotech, and the team’s experience, guidance, perspective and industry relationships have been invaluable to me and my senior executives at both companies. The Pond partners know how to add value to a portfolio company’s management organisation, and they have the critical domain experience, industry connections, operational background and strategic insights to significantly enhance an early-stage venture’s day-to-day performance and the quality of its exit outcome.”
Nanotech’s acquisition by Gennum follows the exits of Pond portfolio companies Broadway Networks Ltd, 4Home and Gigle Networks in the fourth calendar quarter of 2010. The acquisitions have collectively returned a substantial portion of drawn capital to Pond’s investors.
“Gary and his team have worked extremely hard to build a wonderful success story at Nanotech,” says Charles Irving, co-founder and General Partner of Pond. “Prior to its acquisition, Nanotech was one of the fastest-growing start-ups in the fibre-optics IC segment and yet has required fewer, smaller funding rounds than any other company in its class. Exits like this prove that it is possible to generate excellent returns even in a tough market environment by carefully selecting promising start-ups in the UK and elsewhere, globally commercialising their technology, and providing a well-defined and disciplined route to acquisition.”
Pond has a proven track record for optimising capital efficiency and reducing risk while delivering industry-leading returns in a shorter period of time. Since launching its first fund in 1998, Pond has achieved six exits on 22 investments, its average portfolio exit was achieved in less than five years, and its portfolio companies have created hundreds of jobs in a number of high-growth industries. The firm has seven remaining portfolio companies in its current fund, each with a leadership positions in key growth markets.
