Obama critics think they’ve found another solar scandal. They’re wrong. 

Matt Drudge seems to think he has found the next solar scandal to chip away at President Obama’s poll numbers:

The link is to a blog post in The Weekly Standard, about a recent loan $737 million loan guarantee from the Department of Energy to a solar energy company called SolarReserve. More specifically, the post insinuates that DoE approved the loan because Ronald Pelosi, brother-in-law of House Minority Leader Nancy Pelosi, is “number two” at an investment firm that has an interest in SolarReserve.

It is true that Ronald Pelosi is an executive at Pacific Corporate Group, one of the private equity firms that has plugged more than $100 million into SolarReserve. But it is patently false that he will benefit from the loan (as Drudge asserts, although Weekly Standard only implies).

Ronald Pelosi joined PCG this past spring, whereas the firm first invested in SolarReserve three years ago. More importantly, Ronald Pelosi does not have a financial interest in the fund that houses SolarReserve. If the fund generates big profits on its investment, Pelosi gets nothing. If the fund’s investment gets wiped out, Pelosi’s bank account won’t take a hit.

Moreover, a PCG spokesman insists that no member of the firm had any contact with the White House about the SolarReserve loan.

Ronald Pelosi’s political contacts may have been a reason why he was hired by PCG, but not from a federal perspective. The firm has been indirectly caught up in a California pay-to-play scandal, which resulted in it getting fired last fall by the state’s largest pension fund. If Pelosi is supposed to get PCG back in political good graces, it’s a local issue.

Actually, take a hard look at that link I just shared about PCG getting fired by CalPERS. Notice the part where I say that CalPERS had put another firm in charge of the cleantech assets it had originally hired PCG to manage? SolarReserve is one of those assets.

PCG raised a total of $600 million to invest in cleantech: $400 million from CalPERS and $200 million from other investors. PCG only still manages that last $200 million, which basically means its upside (or downside) on SolarReserve is just one-third of what it once was. And, again, Pelosi gets none of it.

All of that said, it seems Drudge and Weekly Standard missed an actual connection between DoE and SolarReserve: Richard Kauffman, the former CEO of venture firm Good Energies — also a SolarReserve investor — who recently joined DoE as a senior advisor.

I do not yet know if Kauffman rescinded his financial interest in Good Energies upon taking the DoE job (they are checking for me), nor if he had any input in the approval of the SolarReserve loan guarantee. And, to be clear, SolarReserve is a better bet than a manufacturing company like Solyndra, since it’s a power generation company that has contractual offsets.

But, like with Solyndra, we wait and see. In neither case have we yet found evidence of actual scandal. Just a lot of  people shouting the word…

Update: As of 4:20pm, Drudge has pulled the story entirely from his site.

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Filed under: Term Sheet, Venture Capital Deals

A fund manager has a message for Cosi shareholders: Fire the board and CEO and elect me. It just may work.

Filed under: Contributors, Term Sheet

No venture firm has gotten more attention over the past month than CrunchFund, the seed-stage vehicle that precipitated Michael Arrington’s departure from AOL (AOL). But Arrington is not alone in CrunchFund. His partner is Patrick Gallagher, Arrington’s former college classmate who most recently was a principal with VantagePoint Venture Partners.

Below is a recent Bloomberg TV interview with Gallagher, in which he discusses the fund’s purpose and what the AOL/TechCrunch debacle means for future deal-flow.

Filed under: Term Sheet, Venture Capital Deals

Does P2P car-sharing really improve on the ZipCar model? I don’t think so.

By Rob Go, contributor

There are now at least three companies that have announced funding from excellent investors pursuing a P2P car sharing model: RelayRides, GetAround and Wheelz. I think there is a sense that these companies are the next evolution of ZipCar (ZIP), which has been around for a long time. But, this is a confusing case for me because I actually think that what P2P models propose to do is much more of an intermediate solution vs. a long term solution. And the long term solution already exists in ZipCar. Couple streams of thought on this:

1. The problem both companies are solving is that cars are expensive and under-utilized assets.  The solutions are the same: Spread the capital expense across multiple users, and increase the utilization of the asset. Let’s fast forward to the “ideal” future of this vision. Is it one where people still buy cars that they rarely use and rent it out? Or is it a world where no one really buys a car they don’t need, and just utilize shared resources with lots of people? I think it’s the latter, and that’s what ZipCar is trying to do.

2. Doesn’t the P2P model become a victim of its success (if it is successful)? Again, if it works, then the next time consumers are thinking of buying a new car, they will decide not to because other options are available. But if that’s the case for lots of people, then there will be fewer and fewer shared options available, and the ones that are available will be older clunkers. The service will inherently degrade, unless the companies start owning and operating their own strategically placed vehicles. And then, presto! You have ZipCar.

3. I have to imagine that the rise in these models is brought on by the success of AirBnB.  But I think it’s very different for a couple reasons. First, I think there is a bit more perceived safety and control with AirBnB (even after some of the disasters that have been reported). You can actually meet the person you are going to be renting to, or you may even still be in your apartment while they are sharing the spare room. It feels like a bit more risk to give someone the ability to just drive off with your car. The more screening that you enable, the smaller the pool of potential drivers, which will reduce utlization.

4. The economics are pretty different from AirBnB. How much money can you really make sharing your car, and would that be enough to make it worth your while? If someone rents our their car 100x per year, 3 hours per time, $7/hour (assuming the owner keeps $6), that equals: $1800. Not nothing, but is it really worth it? And that is very high utilization. I think it’s very different to assume people will rent their cars for what might be $15-$20/session vs. renting out a spare bedroom for $100+/night. There is also a pretty natural price ceiling on these rentals. For short-term rentals, it’s ZipCar’s $10/hour prices. With long-term rentals, it’s what you can Hotwire with the rental agencies. With AirBnB, you have the potential for long term rentals that can be $5000+ per week.  The price ceiling is just much higher.

5. Maybe there are niches where this makes sense – like renting specialty/luxury vehicles, serving geographies that aren’t dense enough for services like ZipCar to exist. And maybe that’s enough to get scale and expand. Also, it’s true that the capital expenditure is much much less in a P2P business, so again, maybe there are areas where this model will work that are cost prohibitive for ZipCar.

Anyway, I could certainly be wrong here and just missing it.  Maybe it is a low-end disruption of some sort. But the total cost of utilizing a ZipCar is already ridiculously low compared to the cost of owning a car. Not sure if this disruption is really going to move the needle. I’m not placing a stake in the ground, but I’m trying to understand this opportunity better. I thought Netflix was crazy when it started, and I also think Chegg is a intermediate innovation as well ( but they seem to be transitioning to digital pretty well). So please discuss so I can further my thinking on this.

Rob Go is co-founder of NextView Ventures, a seed-stage investment firm focused on Internet-enabled innovation. He previously was with Spark Capital, and blogs over at www.robgo.org

Filed under: Contributors, From the Crowd

Oracle won’t let Autonomy CEO Mike Lynch off the hook

Some advice for Autonomy CEO Mike Lynch: You can obfuscate about what is said in a private conversation. But if you also leave behind a slide-deck, it’s best to either come clean or keep your mouth shut.

Autonomy is the British enterprise software company that HP (HPQ) agreed to buy last month for $10.3 billion. In a subsequent earnings call, Oracle CEO Larry Ellison said: “Autonomy was shopped to us… We looked at the price and thought it was absurdly high.”

Let’s take the second part first. Of course it was absurdly high. An 80% premium to where Autonomy was trading in London! In fact, here is how newly-installed HP CEO Meg Whitman responded when asked if her predecessor overpaid: “It is what it is.”

The first part of Ellison’s statement, however, is the reason for this post. Autonomy CEO Mike Lynch told WSJ that the idea of Autonomy shopping itself to Oracle (ORCL) was “inaccurate… If some bank happened to come with us on a list, that is nothing to do with us.”

Today Oracle laid down the boom, posting a slide-deck that Lynch gave to Oracle president Mark Hurd during an April 2011 meeting. Here is Part 1, and here is Part 2. You’ll notice that a bank is listed on the deck, but it’s not just “some bank.” It’s Qatalyst Partners, the shop retained by Autonomy. Moreover, Oracle says that Qatalyst founded Frank Quattrone was present at the April meeting.

The ball is now in Mike Lynch’s court, but I can’t imagine what he can do at this point but fall on his sword. Or maybe just keep quiet, like he should have in the first place.

Update: Well, Autonomy is fighting back again. And basically suggesting that statements like my lead graph are way off base. In a statement Autonomy says:

In April 2011, there was a meeting for approximately thirty or forty minutes between Autonomy and Mark Hurd, which was set up by Frank Quattrone as an introduction to Mark Hurd. Oracle is an Autonomy customer. It was made clear that Autonomy was not for sale and no sale process was under way. Mr. Quattrone’s company was not engaged by Autonomy at that time. There has been no other contact with Oracle since then.

It may well be that investment banks were independently recommending Autonomy as an acquisition target to industry players – that is standard practice for — but this would not have been at our behest. Qatalyst have informed us that the slides Oracle has recently posted on its website were prepared and sent independently by Qatalyst to Oracle on 26 January (the content is clearly from January). This is the first time we have seen them. Autonomy was not involved in this nor was Qatalyst engaged by Autonomy until mid-year. Autonomy did not present these slides in the meeting.

Update II: Frank Quattrone is backing the timeline of his client, via a statement to Alphaville:

“The slides Oracle posted publicly were sent by me to Mark Hurd in January, were prepared by Qatalyst and were for the purpose of our independently pitching Autonomy as an idea to Oracle. These slides were not used in our April meeting with Mark and Doug.”

Don’t be surprised if there is a third update, with some sort of rebuttal from Oracle (which has gone from offense to defense in a matter of hours).

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Filed under: Term Sheet

Seed funding is just the beginning, but for some startups it’s becoming an end.

By Ed Sim, contributor

“No Man’s Land” is traditionally known as the area between two trenches on a battlefield. Increasingly I am seeing many seed-funded startups get caught in “No Man’s Land” between the seed round and a true Series A round led by a venture capitalist.

This can happen for many reasons, including not raising enough capital in the seed round to begin with or not getting your product out the door. So what does an entrepreneur do when caught in this predicament?

Many try to do an additional seed round or add-on to the prior round. While not a bad idea, this is rarely successful because many seed-funded startups have way too many investors who are more apt to write off the investment then to bridge more seed money. Moreover, many angel investors would rather invest in that shiny new car or first seed round then add more capital to a used car or startup that did not “get there” on its first seed financing.

Smarter entrepreneurs are increasingly doing two things to make sure they don’t caught in “No Man’s Land.” First, rather than getting 20 great names as seed investors, they are making sure to get at least 3/4 or more of the round invested by a couple institutional seed folks that may have deeper pockets and more ownership in the startup to really care about what happens in the future. Second, the smarter entrepreneurs are really thinking carefully about what milestones need to be hit to raise that first Series A round and work backwards to determine how much financing they need to get there. While not an exact science, it is imperative to think like this as you don’t want to be one of the many seed-funded companies that will linger in “No Man’s Land.”

Ed Sim is founder of BOLDstart Ventures and co-founder of Dawntreader Ventures.

Filed under: Contributors, From the Crowd

Women remain absent from the top echelons of private equity and venture capital.

Fortune today released its annual list of America’s most powerful businesswomen. Chief executives, chairwomen and vice presidents from most walks of corporate life. But only five of the 50 were from finance, and none were involved in private equity or venture capital.

Maybe you could someday call Blackrock’s (BLK) Susan Wagner a private equity pro, but non-hedge alternatives are still less than 5% of Blackrock’s assets under management. And Dominique Senequier of AXA Private Equity made the international list, but her influence may wane once AXA PE gets sold.

None of this should be terribly surprising. Only two women made this year’s Midas List of the top 100 venture capitalists, and some top firms like Sequoia Capital don’t feature a single female investment professional. And every major American buyout firm is led by men, with only a smattering of women at senior levels. It’s an inequity the industry readily acknowledges, but does little to correct (even when investing in female-centric companies).

But this isn’t to say you can’t find women in VC/PE firms. They’re in the back office.

As hard as it is for women to get partner-track jobs on investment teams, it’s relatively easy to find work as a chief financial officer or controller. Last week I was at a Merrill Lynch-hosted conference for such folks, and more than 40% of the registered attendees were women.

“I think that some firms, all else being equal, prefer to hire women for financial or accounting jobs because it makes their websites look more gender-balanced,” one female CFO of a VC firm told me. “But they don’t mention on there that we not only get paid a lot less, but often don’t even share in fund economics. I love the guys I work with, but I’m obviously not part of the club.”

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Filed under: Private Equity Deals, Term Sheet

AXA Private Equity is on the block. There are several likely suitors.

The big private equity story right now is that insurance giant AXA is shopping its $28 billion private equity unit. AXA Private Equity does a whole lot of everything, including mid-cap LBOs, co-investments, funds-of-funds, secondaries, mezzanine and infrastructure. Some of the money it manages is for AXA, but the majority comes from third-party investors. So this is a bit like when AlpInvest went on the block, except a bit smaller and with a more diverse investor base.

I spent part of yesterday talking with industry folks about potential buyers, albeit not anyone directly involved in the process (which is being managed by Credit Suisse). Here’s my stab at playing oddsmaker:

Kohlberg Kravis Roberts & Co. (3:1)
“They are definitely looking and interested,” says one source. And it makes a lot of sense. The keys to publicly-traded PE are twofold: Diversity and recurring revenue. AXA would give KKR (KKR) a bunch of business practices it doesn’t currently have, and would increase its assets under management by around 46%. Plus, it could use a big splash as North American fundraising slogs alone.

Carlyle Group (5:1)
I hear Carlyle also has a team looking at AXA PE, perhaps in an effort to put more distance between itself and Blackstone. Maybe that becomes Carlyle’s IPO pitch: “We’re better because we’re (much) bigger.” Carlyle also has recent experience integrating a large group (AlpInvest). The caveats here are that Carlyle did just pay out for AlpInvest, and it doesn’t need AXA from a business line standpoint.

BlackRock (8:1)
Yes, the Rock not the Stone. BlackRock (BLK) has been expanding its alternatives group of late, including in private equity. This would be a giant step toward that goal, a not-so-gentle poke from Larry Fink at rival Schwarzman and something that is easily affordable.

Blackstone Group (9:1)
Blackstone (BX) has been acquisitive on the public equities side, and there is no way they aren’t looking if both Carlyle and KKR are nosing around. Plus, it could certainly use the likely stock price bump.

The Caisse de dépôt et placement du Québec (10:1)
Canada’s largest pension fund came up twice yesterday, although it doesn’t make too much sense to me. The Caisse has been pushing for more direct private equity investment and less indirect, but AXA has a lot of both. In fact, it bought more than $6 billion worth of secondary interests in the past two years alone (AXA corporate trying to increase the value of the PE business in advance of a sale?).

Onex (15:1)
This is the other Canadian player I’m hearing. Obviously it’s possible – as are a number of firms not on this list – but I see them more as driving up the price for someone else rather than the ultimate winner.

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Filed under: Private Equity Deals, Term Sheet

Inexpensive Indian IT labor has been the face of globalization for more than a decade. Now, its industry giants are facing a sea change similar to the one they helped create.

By Vishesh Kumar, contributor

FORTUNE — Y2K wasn’t all bad. The millennial hysteria surrounding the dreaded glitch pushed the Indian IT industry onto the world stage, its armies of low-cost technical labor ideally suited to checking endless lines of potentially bad code. Giants Infosys, Wipro and Cognizant took the boost and, over the next decade, cemented their positions as go-to service providers for companies around the world. The industry saw export revenue climb roughly tenfold to an expected $68 billion in the coming year. Infosys even sparked Thomas Friedman’s influential “flat world” argument.

But now, the industry finds itself fast approaching another crucial juncture, possibly its most significant in more than a decade. Indian wage inflation is the highest in Asia; salaries have posted double-digit gains over much of the last decade. Increasing competition from low-wage countries like the Philippines, Eastern Europe and Latin America is putting more pressure on pricing. At the same time, expensive and complex software deployments are quickly losing ground to lighter, far less lucrative models. Setting up Salesforce.com (CRM), for example, doesn’t bring in what a Siebel implementation from Oracle (ORCL) would. Simply put, the industry faces changes similar to the ones it helped launch a decade ago.

The current services-based model is likely to keep losing appeal as margins crumble and logistics become increasingly complex. Infosys (INFY), for example, would have to quintuple recruiting to 100,000 new employees a year within five years to sustain current growth rates, according to William Blair & Co. analyst Bhavan Suri. “Recruiting, training and managing this many people is an incredibly hard and almost unmanageable task,” Suri says.

In order to evade the coming crunch, the industry is pinning its hopes on being able to tack from services to products. The jump will be difficult and there are few results to show so far. As far as products are concerned, it has two options: build them or buy them.

Developing traditional products that allow companies to grow revenue without bringing in and renting out new headcount is quickly becoming the goal for the industry. Getting to this “non-linearity” of revenue would be akin to the fountain of youth, according to Nabil Elsheshai, an analyst at Pacific Securities. That companies with services cultures will flourish in creating products is questionable, though. Infosys’ banking application Finacle is one standout.
There have been some niche applications too, like a Wipro (WIT) wireless device that can be used to monitor patients remotely even over older networks, an example of a product created in conjunction with an existing client. Aside from these, however, examples are few and far between.

Buying could trump building from scratch. A vast stockpile of cash helps; Infosys, Wipro and Cognizant (CTSH) have amassed $8.6 billion between them. What’s more, cash accounts for about 12% of the total market cap for all three, rivaling the proportion of US internet companies like Yahoo (YHOO) and eBay (EBAY). Indian companies have signaled a willingness to buy overseas before. But the appetite for bigger deals may be on the rise.

Last week, the CEO of Tata Consulting Services said the company was looking to make purchases around the world. But it’s the increased aggressiveness on the part of Infosys that could prove more noteworthy. Seen as gun-shy for having lost deals to more aggressive competitors before, the company’s recently appointed chairman previously ran India’s biggest private bank — a good background for deal-making. Indeed, reports swirled earlier in the month that Infosys was close to buying the healthcare arm of Thomson Reuters (TRI) for as much as $750 million. On Friday, the company was also cited as a potential acquirer for business analytics company Core Logic.

What’s missing? Concrete action. The Indian IT industry has been facing fundamental changes for years. Now, rumors and speculation are swirling more than usual, as the industry’s cash hoard puts it in a position to make bold bets. So far, few such bets have been placed. A wave of big acquisitions could indeed mark the turning point, much the way Y2K did many years ago.

Filed under: Contributors