Benjamin Nye has an eye for the Benjamins. That’s not quite a palindrome, but it does sum up Nye’s track record as a tech investor.

Nye, a managing director with Bain Capital Ventures (see photo, right), has had a string of strong exits—including Network Intelligence (bought by EMC in 2006), SolarWinds (IPO in 2009), and LinkedIn (IPO this year). The latest deal came in the past week, when Waltham, MA-based DynaTrace was snapped up by Compuware (NASDAQ: CPWR), the Detroit software firm.

The technical details of what DynaTrace developed (see below) might not be as important as these numbers: $256 million in cash for the acquisition (on about $22 million total invested by BCV and Bay Partners), translating into a 7.2X return on BCV’s investment, Nye says.

Here’s how it all went down. First, let’s rewind to 2006. Nye had heard from a former CEO of a company he was looking to buy that DynaTrace, an interesting year-old startup, was being run by the “smartest guy” he knew. The only problem was the startup was in Austria, so Nye took the entrepreneur call with what he calls “high skepticism.” By the end of the call, however, he was intrigued: DynaTrace had solved a problem that Nye had run up against at his old company, Precise Software. Namely it had a way to help businesses’ IT departments figure out why their software applications (consumer-facing websites, for example) were running slowly, and what to do about it.

“The way he’s doing it versus the industry standard is the difference between causation and correlation,” Nye says. While other companies could make educated guesses based on time stamps and which parts of the code were calling other parts, DynaTrace could pinpoint exactly “which part in the chain was causing an app to run slowly,” he says—which is tough to do in the midst of Internet-scale traffic and disparate pieces of code running in different programming languages.

Nye led Bain Capital Ventures’ $5 million Series A investment in DynaTrace and helped move the company to the Boston area in early 2007, hiring a U.S. team. The company started signing up big customers in banking, e-commerce, and retail, and its revenues more than doubled each year, reaching $26 million (and being cash-flow positive) over the past 12 months.

So why sell to Compuware now? DynaTrace didn’t need to, Nye says, adding that there was … Next Page »

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Another Boston-area business software company exits the scene today via acquisition. Following in the footsteps of Gomez (and many others), Waltham, MA-based DynaTrace, which helps companies manage the performance of their software applications, has been bought by Detroit-based Compuware (NASDAQ: CPWR) for $256 million in cash. The deal closed on July 1.

DynaTrace has 180 employees worldwide, and “substantially all of these,” including the management team (led by CEO John Van Siclen), are expected to stay with the merged company, according to the press release. DynaTrace started in 2005 and was VC-backed by Bain Capital Ventures and Bay Partners. The company raised about $22 million in total financing, including $4 million at the beginning of this year. So the acquisition looks like a very strong exit for the investors.

DynaTrace had $26 million in revenues over the past 12 months, the release stated, and is expected to add between $35 million and $45 million to Compuware’s top line in fiscal year 2012.

Compuware counts among its big customers Google, Facebook, Yahoo, Adobe, Amazon.com, the BBC, USA Today, and Subaru (and now DynaTrace customers like Zappos, SAS, and Macy’s, if they weren’t already). The firm was founded in 1973 and went public in 1992. By acquiring companies like Gomez and DynaTrace, Compuware is making a strong move in performance management software and user experience for Web and mobile applications.

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Just catching up on a few financings around the state on this fine spring morning.

—Waltham, MA-based CloudFloor, a stealthy cloud-computing startup, announced it has raised more than $3 million in Series A financing from undisclosed investors. The company, which started in 2010, is led by former Gomez execs Jaime Ellertson and Imad Mouline. According to its website, CloudFloor is tackling “one of the key challenges created by the rapid adoption of the cloud for business critical applications,” and its software will be available in June.

—Holliston, MA-based Rypos, a developer of filter and catalytic technologies for reducing emissions from diesel engines, has raised $3.15 million out of a $3.5 million offering of equity and options, according to a regulatory filing. Rypos was founded in 1996 and is led by CEO Peter Bransfield.

—Littleton, MA-based Still River Systems, a maker of proton therapy technologies to treat cancer, has raised $11.5 million from undisclosed investors. Still River was founded in 2004 and is led by CEO Joe Jachinowski.

—Marlborough, MA-based CardioFocus, a medical device firm focused on treating irregular heart rhythms, said it has secured $5 million in debt financing from Silicon Valley Bank. CardioFocus announced a $30.6 million financing round just last month. The company has developed an endoscopic laser ablation system to cook the precise tissues involved in atrial fibrillation.

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Proclaiming the venture model broken is in vogue. The lingering aftereffects of the Internet bubble have cast a shadow over the industry for a decade now; and while venture capital has consistently outperformed most equity asset classes for years, recent returns have not lived up to historical norms. Despite the grim headlines, there are signs of success all around us that prove that the venture model is far from broken.

Venture capital is, at its core, about helping to build innovative, high-growth, market leading businesses. The easiest way to measure success is to look at the exit market for venture-backed companies.

A sampling of transactions since September of 2009 in Massachusetts alone:

• Quattro Wireless was acquired by Apple for $275M

• Gomez was acquired by Compuware for $295M

• Nova Analytics was acquired by ITT for $392M

• E Ink was acquired by Prime View International for $400M

• Gloucester Pharmaceuticals was acquired by Celgene for $640M

• Ironwood Pharmaceuticals had a post-IPO market cap of $1.1B

• A123Systems had a post-IPO market cap of $1.3B

With all of this exit activity and value creation, it’s hard to understand why industry returns have lagged in recent years. The underlying data gives a good sense of the dynamics. The insights below are based on data from Thomson ONE.

There are some clear positive signals:

1. Exit volume is healthy. The IPO market has functioned on an intermittent basis in recent years, but M&A volume for venture-backed companies has taken up the slack and become the predominant exit path. When combining M&A and IPO exits, the activity has actually been fairly consistent over the years: about 300-500 per year since the mid-’90s.

2. Acquisition valuations are healthy. The average reported acquisition value for a venture-backed company hovered around $60M in the mid to late ’90s, and (after a spike in 1999 and 2000) has been averaging far more than $100M in the last few years, including 2009. Pre-IPO valuations for venture-backed companies have similarly increased over the years from around $150M in the mid ’90s to around $400M in the last few years. The increase in average exit valuations confirms that substantial equity value can be created within successful venture-backed companies.

There are negative signals too, of course, including:

1. Too many companies backed. The substantial increase in the number of companies receiving venture funding has created a glut of companies seeking an exit. In the early ’90s, there were about 1,000 companies backed by venture capital firms each year in the U.S. The late ’90s brought a rapid increase in investment activity that peaked at … Next Page »

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Venture investments in Boston-area mobile technology companies decreased in both volume and value in 2009, plummeting to levels not seen since 2005. But payouts from mergers and acquisitions hit a record level, raising overall deal flow to an unprecedented $1.5 billion, according to data compiled by Mobile Monday Boston.

Venture investing started out strong in 2009, according to the report, with $208 million invested in the first quarter. But investors couldn’t keep up the pace. They doled out only $24 million in the third quarter and $40 million in the fourth quarter.

By year’s end, venture capital firms had handed out only $339 million, a decrease of 40 percent from 2008′s record figure of $565 million. The total number of companies in the region receiving venture funding also fell, from 45 in 2008 to 32 in 2009.

The drops—which were paralleled in other sectors, and likely reflect the venture industry’s own travails rather than any fundamental decrease in venture-fundable innovation—brought an abrupt end to a three-year run of increasing venture investments in the region’s mobile industry.

Even as the venture well became drier, though, a number of more established mobile companies were acquired, providing exits for their own investors. The value of acquisitions in the mobile business zoomed upward from $473 million in 2008 to nearly $1.2 billion in 2009, Mobile Monday Boston found.

A single acquisition, 72 Mobile Holdings’ $530 million purchase of Chelmsford, MA-based wireless broadband equipment maker Airvana, accounted for nearly half of the $1.2 billion total. Compuware’s acquisition of Lexington, MA-based Gomez, Prime View International’s acquisition of Cambridge, MA-based E Ink ($215 million), and KPN’s acquisition of Burlington, MA-based iBasis ($93 million) significantly boosted the numbers. (Apple’s acquisition of Quattro Wireless isn’t counted in the figures, since it was announced in early January; in any case, the companies haven’t disclosed how much Apple paid.)

Mobile Monday Boston organizer Kate Imbach, of Skyhook Wireless, presented the investment data at Monday night’s meeting of the group, and plans to detail them further at Xconomy’s Mobile Madness event today.

The report also detailed mobile investments by category. Hardware companies were the luckiest in 2009—19 percent of the 32 companies that won venture investments were in this category. Applications and software companies tied for second place at 15 percent each, followed by voice and advertising companies (tied at 9 percent each), and wireless infrastructure, content and RFID companies (tied at 6 percent each).

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It’s a nice change from previous weeks this year to be writing about IPOs and big exits for venture firms. At least in Boston and environs, big paydays for investors and entrepreneurs seemed to be materializing. And startups from a variety of innovation sectors secured capital to fuel their movement toward hoped-for exits.

Not sure which transactions we’re talking about? Here’s our weekly roundup of Boston-area deals news:

Boston University apparently made a wise bet on A123Systems when it accepted equity in lieu of cash for office rent in 2002 from the then-fledgling startup. Sources told Bob that BU’s stake in Watertown, MA-based A123 has become significantly more valuable since the developer of next-generation lithium-ion battery systems completed its IPO last month. Base the company’s (NASDAQ:AONE) share price last week, BU’s stake in the firm was estimated to be worth more than $12 million.

Gomez, the Lexington, MA-based provider of performance-management software for Web and mobile applications, gave its investors something to smile about this week. The company accepted a $295 million buyout offer from Canada’s Compuware (NASDAQ:CPWR). The buyout appears to provide a nice exit to the venture firms—ABS Ventures, AdAstra, Dolphin Equity Partners, and Doughty Hanson & Company—who have backed Gomez over the past decade.

Nashua, NH-based eCopy is also going the way of the M&A exit. Burlington, MA-based Nuance Communications (NASDAQ:NUAN) said it has paid $54 million in stock to acquire eCopy and the firm’s printer software for image scanning and indexing. For Nuance, this deal appears to be another in a line of acquisitions that include its buyouts of Seattle-based voice-to-text firm Jott this summer and texting software company Zi, of Alberta, Canada, earlier in the year.

On the life sciences front, Cambridge, MA-based Epizyme took in $32 million in a Series B round of venture capital to fund development of its drugs in the field of epigenetics. San Francisco-based Bay City Capital led the round, which included founding venture backers MPM Capital and Kleiner Perkins Caufield & Byers, as well as newer investors Amgen Ventures and Astellas Venture Partners. Luke noted that Epizyme could be looking more broadly than its main focus on cancer therapies.

There was more talk about the potential for Cambridge, MA-based Alnylam Pharmaceuticals to spin off some of its gene-silencing technology into a new startup, like it did with Regulus Therapeutics back in 2007. Barry Greene, president and chief operating officer of Alnylam, talked about a potential “Regulus-like” deal at the MassBio Investors Forum in Boston, where we picked up some other bits of deals news from biotech startups such as Waltham, MA-based EyeGate Pharma and Cambridge’s Cequent Pharmaceuticals.

We try to leave no stones unturned in this shop. Last week Lebanon, NH-based antibody discovery firm Adimab made headlines because Google Ventures led its fourth-round financing. Adimab CEO Tillman Gerngross declined to tell me how much money was raised in the round, but this week Luke learned from an SEC filing that Adimab raised $8.2 million in the round.

On the smaller side of the deals scale, Farmington, CT-based LegiTime Technologies reported in an SEC filing that it has raised $1.5 million in equity financing. The company is developing software products that organize and secure SMS text messages on mobile phones. Its backers include Connecticut Innovations, which invests in startups in the Nutmeg State, and Montreal’s iNovia Capital.

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It’s good to be Gomez. The Lexington, MA-based software firm has agreed to be purchased by Detroit’s Compuware (NASDAQ:CPWR) for $295 million in cash, the companies report today. Gomez, which provides performance-management software for Web and mobile applications, was already in registration for an $80.5 million IPO and had raised, according to PeHub, $66 million in funding between 1999 and 2004 from its venture backers ABS Ventures, AdAstra, Dolphin Equity Partners, and Doughty Hanson & Company. The deal is expected to close in November.

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New England’s corporate attorneys must have been working overtime, because the last week saw an unusual amount of deals activity—particularly in public and private stock offerings.

—Citing market conditions, Elixir Pharmaceuticals pulled its IPO. The Cambridge, MA-based firm, which is developing treatments for diabetes, obesity, and other metabolic diseases, had already postponed the offering back in January.

—Two other New England firms evidently missed the memo about those market conditions. Essex, CT, wind-power firm Noble Environmental Power filed for an IPO worth up to $375 million. And Lexington, MA’s Gomez, which offers “web experience management services” filed for an offering worth up to $80.5 million.

—Boston-based cellulosic ethanol firm Mascoma announced it has received a $10 million equity investment from oil giant Marathon, as par of its Series C round. The announcement sent Wade on a marathon math session aimed at accounting for all the components of the round, which for months has been a moving (and partially obscured) target.

—Javelin Pharmaceuticals (AMEX: JAV), a developer of pain treatments in Cambridge, MA, announced it plans to raise up to $27.6 million in a registered direct offering of stock. The purpose of the deal, which is expected to close on May 13, is to “enhance our balance sheet as we proceed in our ongoing partnership discussions,” the company said in a press release.

—CHiL Semiconductor of Tewksbury, MA, closed a $16.68 million Series C round led by Panorama Capital.

—Waltham, MA-based InnoCentive, an Eli Lilly spinoff formed to farm out challenging projects to the a community of “solvers” on the Web, raised $6.5 million in a round led by Spencer Trask Ventures.

—Virtualization software firm Leostream of Waltham, MA, raised $3 million in a Series A round led by Meakem Becker Venture Capital.

—Boston energy demand aggregator EnerNOC acquired Baltimore’s South River Consulting for $3 million in cash and $1.75 million in EnerNOC common shares, with additional payments on the table if the acquired unit hits certain revenue targets over the next two years.

—Educational software firm Certica Solutions of Wakefield, MA, took in $3.3 million in a financing round led by Brook Venture Partners.

—Wellesley, MA’s Frame Media announced a Series A-1 investment round worth $3 million. The deal was led by Longworth Venture Partners and CommonAngels and brings the company’s total funding to $5.2 million.

—Semiconductor firm AmberWave Systems of Salem, NH, announced it’s acquiring Aonex Technologies, a subsidiary of Pasadena, CA-based Arrowhead Research, for $7.95 million plus royalties.

—Cambridge, MA-based Alnylam Pharmaceuticals (NASDAQ: ALNY) announced that Novartis had exercised an option to purchase approximately $5.4 million worth of the RNAi leader’s unregistered shares. The deal increases Novartis’s stake in Alnylam from 13 percent to 13.4 percent.

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It’s not just pollen in the air these days. Renewable energy projects are blooming throughout New England. Now, Noble Environmental Power, a fast-growing wind-power company based in Essex, CT, has filed for an initial public offering worth up to $375 million. (On the heels of yesterday’s IPO filing by Lexington, MA-based web management services firm Gomez, maybe the market for IPOs really is coming back).

According to its filing with the SEC, Noble Power is “focused on developing, financing, constructing, owning and operating windparks in attractive energy markets in the United States.” The company’s plan is to sell energy and energy-capacity generated by its wind parks. Its first three parks have been up and running in New York since March, and the firm hopes to quadruple its total power capacity by the end of 2009, with more parks under construction in New York and Texas. By 2012, it may expand to Maine, New Hampshire, Vermont, and other states.

To date, the company has not yet generated significant revenue—it reported $72 million in net losses as of the end of 2007. It is also dependent on state policies and regulations that support wind parks—not always the easiest projects to push through.

Founded in 2004, Noble Power has more than 150 employees and a total capitalization of $1.1 billion. JPMorgan Partners, Lehman Brothers, and Credit Suisse are leading the underwriting. The principal shareholder is JPMorgan. When the time comes, Noble Power intends to trade on the NASDAQ market under the ticker symbol NEPI.

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“IPOs: Back from the Dead?” BusinessWeek asked this morning—and, as if to answer, Lexington, MA-based Gomez filed for an offering worth up to $80.5 million. (And if that combination of events bizarrely fills your head with images of the dancing zombies from the “Thriller” video, well, you’re not alone.)

In its filing with the SEC, Gomez bills itself as a “leading provider of web experience management services, which customers use to test their web applications while in development and to monitor their web applications after deployment.” Those customers number more than 2,000 worldwide, according to the filing, and include Adobe Systems, Capital One, CBS Sportsline, DoubleClick, Expedia, Facebook, Home Depot, JPMorgan Chase, MTV Networks, Orbitz, USA TODAY, and Yahoo. Gomez sells its services on a subscription basis, pulling in revenue of $32.6 million in 2007. The firm was profitable in 2005 and 2006, but had a net loss of $2.3 million last year.

Gomez was formed in November 2001 to acquire the assets of Internet research and analysis firm Gomez Advisors. The firm’s largest stockholders include New York’s Dolphin Equity Partners, Germany’s AdAstra Erste Beteiligungs, the U.K.’s Doughty Hanson & Co., and Waltham, MA’s ABS Ventures. Gomez hopes to trade on the NASDAQ Global Market under the symbol “GOMZ.”

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