2007 2nd Half & 2008 1st Quarter    


Year In Review

2007 was a great year for Chrysalis and we are off to a strong start in 2008.

  • We closed our fourth venture capital fund, raising $163 million from a combination of returning and new limited partners;

  • We made investments in several exciting new companies, including Mobile Armor and Digitalsmiths;

  • We made follow-on investments in existing portfolio companies to support their growth and development. Several, including Chronicity and Intechra, completed significant acquisitions and have attained scale that presents exciting new opportunities; and

  • We sold our positions in four portfolio companies, realizing in the aggregate handsome returns for investors in prior Chrysalis funds.
To support the significant growth described above, we continued to invest in Chrysalis' team. New additions in 2007 included Operating Partner Richard Vance, Associate Elizabeth Rounsavall, and Analysts Lenny Grover and Juliya Litichevskaya. In addition, Dave Wilkins and John Willmoth joined the firm as Executives-in-Residence. We also promoted David Parento, who joined the firm in 2006, to Senior Associate.

We would like to thank the entrepreneurs, co-investors, and other partners who contributed to our success during the year, and we look forward to an exciting and active 2008.

Sincerely,

David A. Jones, Jr.


P.S. As a reminder, the content below represents news for the latter half of 2007 and the first quarter of 2008. Please click here for a recap of the first half of 2007.




In this issue:

New Developments
  • Chrysalis Closes Fourth Fund at $163 Million
  • John Willmoth Joins as Executive-in-Residence

2007 2nd Half Exits
  • Advanced Academics Acquired by DeVry for $27.5 Million
  • Appriss Recapitalized by Private Equity Firms
  • 2007 Summary of Portfolio Exits

New Investments
  • Chrysalis Participates in $66 Million Financing for Continuum
  • 2007 Summary of New Investments

Follow-On Financings
  • Lab Partners Secures $16 Million Series D
  • SinglePipe Raises $2.5 Million to Fund Expansion Efforts
  • Chronicity Secures $5 Million, Acquires Fibromyalgia & Fatigue Centers
  • 2007 Follow-On Investment Summary

Portfolio Company Developments
  • TechSkills Qualifies for Federal Student Loan Programs
  • RAD Acquires RPM Electronics

Meet Our CEOs
  • Chand Vyas, Mobile Armor
  • Ben Weinberger, Digitalsmiths

Other
  • Upcoming Conferences and Events


New Developments

Chrysalis Closes Fourth Fund at $163 Million

In February 2008, Chrysalis announced the final closing of its fourth investment fund with commitments totaling $163 million, exceeding its $150 million target. The fund attracted commitments from a variety of institutions and high net worth individuals, many of whom have been serial investors in Chrysalis' prior funds. The firm also welcomed such new limited partners as Morgan Stanley, Credit Suisse, and the Kentucky Teachers' Retirement System.

The fund, known as Chrysalis Ventures III, will remain focused on healthcare services and technology, media and communications, and business services investments and will be managed by Chrysalis' three managing directors who have been investing together successfully for more than 10 years -- David Jones, Jr., Koleman Karleski, and Robert Saunders. The managing directors and their affiliates, together with the Chrysalis professional staff, are collectively the second-largest investor in the new fund. In addition, nine of the firm's former portfolio company executives invested in the fund.

Please click here to view the complete press release.

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John Willmoth Joins as Executive-in-Residence

In September 2007, John Willmoth, an expert in wireless telecommunications, joined Chrysalis Ventures as Executive-in-Residence. In this role, John evaluates new business opportunities and assists current portfolio companies in the media and communications sector.

John has over 20 years of business development, strategic planning, and financial experience, most recently as Vice President, Business Development of Sprint Nextel Corporation in Reston, Virginia. As a member of Nextel's senior management team since 1989, he was instrumental in leading the company through an intensive growth phase via a series of mergers and acquisitions, and completed several significant new business transactions including the creation of Nextel Partners, Inc. and Boost Mobile, LLC. In recent years, John managed Nextel's private equity investments and led the negotiations with technology, infrastructure, and device partners for the company's planned rollout of Wimax technology in the 2.5 Ghz spectrum band. Before joining Nextel, John worked for First Chicago Corporation in various capacities, principally in the areas of venture capital, mezzanine capital, and private equity.



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2007 2nd Half Exits

Advanced Academics Acquired by DeVry for $27.5 Million

In November 2007, Oklahoma City, OK-based Advanced Academics, Inc., a leading provider of online secondary education, was acquired by DeVry, Inc. (NYSE: DV) for $27.5 million. DeVry, a global provider of educational services, is a leader in career-focused education through its network which includes DeVry University, Ross University, Chamberlain College of Nursing, and Becker Professional Review. The company plans to leverage Advanced Academics' programs to attract high school graduates to its postsecondary offerings while enhancing the company's existing relationships with high schools. Since its inception, Advanced Academics has delivered online learning programs to more than 20,000 students in more than 200 school districts.

Please click here to view the complete press release.




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Appriss Recapitalized by Private Equity Firms

In July 2007, Appriss Inc., the leading provider of innovative technology solutions that assist law enforcement efforts and improve the efficiency and effectiveness of criminal justice agencies, announced a strategic investment from Bain Capital Ventures and JMI Equity to recapitalize the company. One of Chrysalis' prior funds achieved a very satisfactory exit in this transaction.

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2007 Summary of Portfolio Exits



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New Investments

Chrysalis Participates in $66 Million Financing for Continuum

In March 2008, Chrysalis participated in a $66 million financing of Continuum 700, LLC, a newly formed telecommunications syndicate that bid successfully in the recent FCC wireless spectrum auction. Co-investors in the financing included Pharos Capital Partners, Court Square Ventures, Claritas Capital Partners, and Clayton Associates, as well as management and other individuals.

This investment reunites Chrysalis with a strong and experienced management team that we have backed in a prior success: Billy Mounger and E.B. Martin, who were CEO and CFO, respectively, of Tritel Communications, a regional wireless telecom provider in which Chrysalis invested in 1999. Tritel which went public, subsequently merged with TeleCorp PCS, and later was acquired by AT&T Wireless in 2002.

John Willmoth has joined Continuum's board of advisors.


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2007 Summary of New Investments



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Follow-On Financings

Lab Partners Secures $16 Million Series D

In December 2007, Chrysalis participated in the $16 million growth capital financing of Laboratory Partners, Inc., a Midwest-based provider of clinical diagnostic testing services. Co-investors in the financing included Primus Capital Funds, Fort Washington Capital Partners Group, and Oxford Bioscience Partners.

Lab Partners is one of the largest full-service laboratory services companies for hospitals, healthcare facilities, and physicians in the Midwest. Proceeds from the financing will be used to continue the company's acquisition program and to expand the company's testing platform.

Chrysalis Managing Director David Jones, Jr. serves on Lab Partners' board of directors.


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SinglePipe Raises $2.5 Million to Fund Expansion Efforts

In October 2007, Lexington, KY-based SinglePipe Communications, Inc., a facilities-based wholesale communications provider, raised $2.5 million in equity funding to support its aggressive entry into the rapidly expanding VoIP market. Chrysalis led the financing with Meritus Ventures, L.P., a Rural Business Investment Company (RBIC), participating as a co-investor.

SinglePipe provides residential and business VoIP services through wholesale and agent channels to clients across the United States with points of presence throughout the Southeast.

Chrysalis Principal Wright Steenrod serves on the company's board of directors.

Please click here to view the complete press release.

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Chronicity Secures $5 Million, Acquires Fibromyalgia & Fatigue Centers

In August 2007, Dallas, TX-based Chronicity, Inc., a retail-focused provider of integrative treatment for chronic diseases, secured an additional $5 million in equity financing contemporaneous with its acquisition of Fibromyalgia & Fatigue Centers, Inc. (FFC), a national network of medical centers that specialize in treating patients with Fibromyalgia and Chronic Fatigue Syndrome. The acquisition supplements the company's current operations, ADD Health & Wellness Centers which treat Attention Deficit Hyperactivity Disorders (ADHD) and related conditions.

Chrysalis Managing Director Koleman Karleski serves on the company's board of directors.

Please click here to view the complete press release.


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2007 Follow-On Investment Summary



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Portfolio Company Developments

TechSkills Qualifies for Federal Student Loan Programs

In February 2008, Chrysalis portfolio company TechSkills, LLC, a national provider of post-secondary education and training, received approval to participate in the Title IV federal loan financing program at three of its campuses. This will provide access to Stafford loans and Pell Grants to its students at these locations.

Austin, TX-based TechSkills is a nationally recognized innovator in technical education, specializing in vocational skills and certification training for information technology, allied healthcare, and professional business services careers. The company operates over 30 campuses across the country using its unique Facilitated Learning Method, which combines the best elements of traditional classroom-based education, the latest online learning methodologies, and extensive hands-on skill building. TechSkills has over 40,000 active students and alumni.

Chrysalis Managing Director Robert Saunders serves on TechSkills' board of directors.



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RAD Acquires RPM Electronics

In March 2008, Chrysalis portfolio company RAD Electronics, Inc., an outsource provider of electronics manufacturing services, acquired Ft. Collins, CO-based RPM Technology, now RPM Electronics.

RAD Electronics is a full service contract manufacturing company serving the OEM marketplace, specializing in the complex assembly of printed circuit boards, custom and molded cable assemblies, and over molded embedded electronics. The acquisition of RPM, which offers similar contract manufacturing services, expands RAD's customer base and geographic footprint.

Chrysalis Managing Director Robert Saunders serves on RAD's board of directors.


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Meet Our CEOs

Chrysalis is privileged to work with a group of talented, seasoned, and exciting CEOs. In this newsletter, we profile two CEOs who joined the Chrysalis portfolio in 2007:


Chand Vyas, Mobile Armor

Chand Vyas is Chairman and CEO of St. Louis-based Mobile Armor, a managed services provider of Enterprise Mobile Data Security. Chand founded the company in 2002 recognizing an ever-increasing need for the protection and security of data and information in an environment of rapidly expanding technology for mobile computing and communications. A serial entrepreneur, from 1982 until 1998, he served in various senior management positions, ultimately as CEO and director of Ziegler Coal Holding Company. After leading a management buyout in 1985 and becoming CEO, Chand took Ziegler public in 1994, making it the second-largest publicly traded U.S. coal company. The company was acquired by AEI Resources Inc. in 1998 for about $855 million.



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Ben Weinberger, Digitalsmiths

Ben Weinberger co-founded Digitalsmiths in 1998 and has grown the operation since college into a market-leading technology company. The company's technology indexes video efficiently, allowing it to be searched based on spoken word and video content, while serving advertising relevant to the content. Ben has assembled an incredibly talented team and under his leadership, Digitalsmiths products have become the cutting edge of online advertising and marketing technology. The company was recently named one of the 45 "Companies to Watch in 2008" by Dow Jones.

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Other

Upcoming Conferences and Events

Please look for Chrysalis team members at the following conferences and events that we are pleased to sponsor this spring:

3 Rivers Venture Fair (April 16 - 17, 2008)

CED Venture 2008 (April 16 - 18, 2008)

Michigan Growth Capital Symposium (May 14 - 15, 2008)





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Chrysalis Ventures
101 South Fifth Street
Suite 1650
Louisville, KY 40202-3122

Phone: (502) 583-7644
Fax: (502) 583-7648
Web site : www.chrysalisventures.com
E-Mail: info@chrysalisventures.com

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