VentureBeat

Silicon Valley’s Novalux, after eating through about $300 million in capital and debt from at least a dozen investors, has finally found a peaceful end.

The Sunnyvale, Calif. company, which initially wanted to sell laser technology to telecommunications companies building out fiber-optic networks, has been sold for $7 million in stock to electronics maker Arasor.

Novalux was one of those “walking dead” companies you heard about after the last Internet boom. It was founded in 1998. After the internet hype went away in 2000, the company no longer had a business, but it was funded to the gills with venture capital. It was dead, but still walking. So why did investors keep backing it, even after it ran out of money in 2003? It’s easy to find fault in retrospect, but the lesson here may be to know when to cut your losses, and to shut down a company and return money to investors. It’s always difficult to do, though, because of the sweat, blood of starting something, and because you can convince yourself there’s a way out. Novalux, for example, turned to apply its laser technology instead to microdisplay technology, to serve home theaters — a logical move at the time. When the company came out of bankruptcy in 2003, its existing investors returned to splash it with more than $30 million over the next few years to try its new model.
In 2000, the company was valued at more than half a billion dollars, so investors in the company at this valuation have lost a lot of money. This is more unfortunate news for Silicon Valley venture capital firm Crescendo Ventures, one of the few investors to back the company at every step –through the fall, and again when it emerged out of bankruptcy.
Other major backers were DynaFund Ventures, Morgan Stanley Venture Partners and Vanguard Ventures (another struggling venture firm).

Konarka, yet another company experimenting with new-fangled technology to produce more efficient solar cells, hasn’t been able to articulate a clear business strategy in the six years since it started.

However, solar technology is hot, and the company has raised $45 million more in capital to give it more time to keep trying. It has now raised more than $100 million.

Like several other start-ups, the Lowell, Mass. company has been using non-silicon material to produce a more flexible thin-film solar cell to convert light into energy. However, it has continued to dabble on a number of solar projects, while its competitors have remained laser-focused on producing a producing a workable cell for the roofs of large buildings and other expansive areas. Even with focus, those other companies have been delayed.

The financing was led by Toronto investment firm, Mackenzie Financial, along with Good Energies. Other investors were Pegasus Capital and existing investors Draper Fisher Jurvetson, Asenqua Ventures, New Enterprise Associates (NEA) and 3i.

Konarka is using a plastic, or “polymer” for its technology, and is testing it in a variety of areas, including portable and consumer products such as powering PDAs or recharging batteries on the battlefield, and in various parts of housing (windows, for example) other than rooftops. The products aren’t expected to hit the market until next year.

Other participating current investors include Vanguard Ventures, Chevron, Massachusetts Green Energy Fund, NGEN Partners, Angeleno Group and Asenqua Ventures.

Asthmatx, a Mountain View, Calif., developer of a bronchial device for asthma treatment, raised $50 million by selling a 15% stake to Olympus Medical Systems, a unit of Japan’s camera and precision-device maker Olympus.

Last October, Asthmatx withdrew an IPO at the last minute, citing a desire to pursue “alternative strategic options” — that is, better offers. And it seems to have found one; Dan Primack at PE Wire figures that Asthmatx’s current $280 million pre-money valuation is close to twice what it would have been in the planned IPO.

Asthmatx makes an experimental device that uses heat to thin smooth-muscle tissue in the airways of asthmatic patients, with the aim of inhibiting the muscular contractions typical of an asthma attack. (The company gently refers to this process as “delivering controlled thermal energy” to the airway’s smooth muscle.) Known formally as bronchial thermoplasty, the technique involves a catheter and a small heatable wire “basket” that a physician can extend into the airways of the lungs. Patients are sedated during the procedure, but don’t have to be hospitalized.

In March, a team of doctors funded by Asthmatx reported in the New England Journal of Medicine that bronchial thermoplasty with the company’s Alair device appeared to reduce the frequency of asthmatic attacks compared to a control group. That study, however, is difficult to interpret, as a significant number of patients dropped out during a “washout” period in which they had to give up their asthma medications for two weeks prior to the onset of treatment. The researchers also cautioned that thermoplasty “may increase the potential for a strong placebo effect,” which of course would make it difficult to know how much the treatment actually helped patients.

Asthmatx had previously raised $42.5 million in venture funding from a number of backers, including Polaris Venture Partners, Menlo Ventures, Vanguard Ventures, HBM BioCapital, MedVenture Associates, Boston Scientific and Montreux Equity Partners. A release of sorts on the funding is here; VentureWire has more here (subscription required).

Jack Gill, a legendary Silicon Valley venture capitalist, has become a partner at his daughter’s Menlo Park venture capital firm, Maven Venture Partners.

Gill’s move had been rumored in recent weeks, but Gill — who once oversaw one of the best performances ever for a venture firm — told VentureBeat in an interview that his decision is now official. The move is significant for two reasons: One of Maven’s initial partners, Marc Friend, left just as the firm is raising its first fund, targeted at $150 million sometime this fall. Friend’s departure placed the firm’s plans in jeopardy. Gill’s addition brings credibility at a crucial time.

Second, it is a blow to Vanguard Ventures. Gill had worked with legendary venture capitalist Tom Perkins at a start-up called Spectra-Physics more than thirty year ago. Perkins went on to found Kleiner Perkins Caufield & Byers. Gill, in turn, founded Palo Alto’s Vanguard Ventures, a venture firm that performed exceptionally after its debut in 1981, but which has struggled in recent years. Gill stepped back from full-time management of the firm in 2000, and Vanguard invested in bubble-era companies that haven’t produced any results. The firm was forced to shelve fund-raising efforts earlier this year to concentrate on producing returns.

After several interviews with partners and other sources, we think the jury is really still out on whether Vanguard will sink or swim. Vanguard hasn’t produced any hits with its latest fund, but has a couple of medical companies that could do well — depending on how strong the IPO market is over the next few months. Gill, meanwhile, has been active with several non-profit and teaching assignments at Harvard and MIT, and will be pulling back from some of those activities to focus on Maven. But he’ll retain his partnership status at Vanguard, even if it remains drastically reduced.

We double-checked reports Vanguard had moved out of its Palo Alto offices. The report is true, but it is a coincidence, and not a sign of imminent closure. The move out was forced by the landlord’s triggering of a clause that gave it the right to Vanguard’s swank University Ave. offices — boasting an expansive view of Silicon Valley.

The managing partners at Maven will be Jennifer Gill Roberts (formerly of Sevin Rosen Funds) and telecom exec George Richard. They are the people responsible for management of the fund, and will participate in the profits thereof.

Gill got excited by the Maven opportunity, he said, by the mobile technology investment strategy articulated by his daughter and Richard. They convinced him it was the next wave. “They asked me to help them out,” he said, adding the addition makes since given Gill’s relationships and experience.

It will be interesting to see how Maven does. These are very different times. There are thousands of venture firms, compared to the handful when Gill became active. Vanguard’s first five funds raised a total of $155 million in cash. They returned more than $1 billion to investors — or a seven-fold return. The firm’s fourth fund, at $37 million, returned $700 million — or 19 times the amount invested, and it ranked in the top percentile of venture capital firm performances at the time, Gill said. Gill and his wife have created an educational foundation in Texas, and given large healthcare research grants to universities in Kentucky and Indiana. Gill also participates in several other groups, including Project Hope, the President’s Circle and the Horatio Alger Association.