Random Ramblings: Cortina, Cilion & More

Cortina Systems yesterday announced that it had raised $132 million in fourth-round venture funding, in order to help finance its $115 million acquisition of Intel Corp.’s optical network components business. Since this is the third-largest VC deal of the year — following ClearWire and Cilion — a few notes are in order: 

  • I initially assumed that a VC deal of this size would be led by a billion dollar-plus firm like Oak, NEA or VantagePoint. Or perhaps by a generalist like Warburg Pincus. But you know what they say about those who assume… Instead, the deal was co-led by three VC shops – new Cortina backer Institutional Venture Partners and existing shareholders Canaan Partners and Morgenthaler Ventures. IVP committed $20 million to the deal, which comes out of its $300 million eleventh fund. 
  • Had Cortina lost the Intel auction to other bidders – which included both strategics and private equity firms – it would not have raised the new venture capital round. “Cortina’s interest in the Intel thing came from synergies with customers and products,” explains Dave Furneaux, a Cortina board member and managing general partner of Kodiak Venture Partners. “There was greater than a 90% overlap between Cortina’s existing customers and those that the Intel business had.” 
  • Cortina previously had raised around $85 million in VC funding. This included a $13 million Series A round at a $22 million post-money valuation, a $42 million Series B round at a $91 million post-money valuation and a $30 million Series C round last year at a post-money valuation of around $115 million. The company has no immediate plans to raise additional capital, but may need to do so in order to fund future acquisitions. It also is expected to begin considering an IPO. 

*** Speaking of giant deals, some additional details have been released for the massive $200 million startup round for ethanol producer Cilion (broken into $40m and $160m tranches). The company originally announced its formation as a partnership between Western Milling and Khosla Ventures, and now says that additional backers include Virgin Fuels (newly-formed part of Virgin Group), Yucaipa Cos. and Advanced Equities. 

*** WebLoyalty.com, a portfolio company of General Atlantic, is the subject of a class action lawsuit

*** The LA Times has more on the ITU Ventures saga, with a new report suggesting that LPs may have pulled commitments because ITU principals had “solicited political contributions from the fledgling firms they financed, and several obliged.” PE Week previously reported that the decision had been prompted by LP concerns over several staff departures.