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Venture Capital Deals

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In memoriam: Harvest Partners this morning announced the unexpected passing of firm president Jay Wilkins. A 1999 graduate of Vanderbilt University who joined Harvest in 2010, Jay is survived by his wife McCartney and son Jack.

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Pro Rata

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Dive into the world of dealmakers across VC, PE and M&A

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SPAC Stuff

🔮 Axios is hosting our second annual What’s Next Summit on March 29 in Washington, D.C. Request an invite.

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Final Map

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Final Numbers: Unicorn population

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National

Oil giants for years have said that they'll pave the path toward energy transition, investing in everything from renewable projects to climate tech startups. 

Now, some of them are sounding more like speed bumps. 

Driving the news: BP plans to "dial back" some of the company's renewable energy initiatives, due to disappointment over return on investment, per the WSJ. 

Dutch rival Shell said it will keep renewable energy investments at 2022 levels, despite blockbuster profits.

Exxon CEO Darren Woods argued that energy transition "is not a game for startups," despite the energy industry's significant participation in venture capital rounds for climate tech startups. 

Zoom out: We're guilty of a little conflation here. European energy companies have focused most of their investment on utility-scale renewables, like solar and wind, whereas U.S. energy companies have gone more toward decarbonization technologies (capture, storage, etc.).  

The commonality, however, is that both seem to be making a 2009-era sort of argument that the ROI is lacking. 

The big picture: There's justifiable skepticism that oil majors have sincere interest in energy transition, given that they continue to earn billions of dollars by burning dinosaurs the old fashioned way. 

For evidence, critics would point to the amount of capital invested in  renewables and/or climate tech, compared to oil and gas spend.

Look ahead: There continues to be growing political and societal pressure toward decarbonization, no matter the short-term spending strategies of legacy industry. 

These recent pronouncements may make upstarts less likely to partner with incumbants, or to accept their investment. They also could spark some brain drain. 

Or perhaps the oil majors will again reverse course, as quickly as they're doing now, deciding that their own survival depends on it.

Oil giants slow down their energy transition talk

BP is cutting renewable energy investments, while Shell won't increase despite record profits.

Climate change

Oil giants for years have said that they&#x27;ll pave the path toward energy transition, investing in everything from renewable projects to climate tech startups. <ul><li>Now, some of them are sounding more like speed bumps. </li></ul>

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

Ominous forecasts about the impact of climate change serve as the backdrop for the world — led by U.S. lawmakers and companies — to debate big action on the problem, which could upend energy systems and our way of life.

Energy & Environment

When news recently leaked that Stripe is in talks to raise new funding, most of the chatter was about a $60 billion valuation that's well below what the payments giant previously fetched. 

And that made sense, given how much weight we typically attach to nosebleed prices.

Between the lines: What also deserves attention, however, is that Stripe appears to be handling the tech deflation with humility, empathy and prudence, unlike some of its tech industry peers.

The new investment, which still remains in the negotiation stage, isn't being structured so as to artificially retain the company's last valuation. Stripe is accepting that it's worth less than it was before.

The potential round's purpose is to cover "double-trigger" tax liabilities for both Stripe and Stripe employees, tied to restricted stock units that are set to expire at year-end. The latter isn't something Stripe necessarily needs to do — it could tell affected workers that times are tough, etc. — but it's the right thing to do.

Stripe, founded in 2010, has done several tender offers for employees holding stock options (i.e., those hired prior to the implementation of RSUs), although this deal wouldn't be tied to another such tender.

Yes, Stripe recently fired around 1,110 workers, which certainly was gut-wrenching and fear-inducing for those affected. The only (small) silver lining here was that Stripe included 14 weeks of severance pay, six months of health care coverage, some accelerated vesting and an acknowelegment that the co-founders made "errors of judgment."

Look ahead: Stripe isn't rushing into the round, which reportedly would be led by existing investor Thrive Capital. It's also continuing to explore an IPO, whose proceeds could be used for the same purpose.

Its only real deadline is Dec. 31, and the company could catch a break if the Nasdaq continues to rebound. Rival PayPal is also up for the year.

The bottom line: Silicon Valley may not have founders less enthusiastic about going public than Stripe's John and Patrick Collison, and there's now a compelling case that they waited too long. Mistakes are important, but so is how they are recognized and rectified.  

Stripe's new investment talk is an effort to rectify past mistakes

The payments giant is considering a massive valuation cut.

Venture capital

When news <a class="gtmContentClick" data-vars-link-text="recently" data-vars-click-url="https://www.wsj.com/livecoverage/stock-market-news-today-01-26-2023/card/stripe-held-talks-for-new-funding-at-60-billion-valuation-aHC2sG3rw0wXjoTotK4S" data-vars-content-id="9773442f-9e21-489f-b470-f838d20862b5" data-vars-headline="Stripe&#x27;s new investment talk is an effort to rectify past mistakes" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.wsj.com/livecoverage/stock-market-news-today-01-26-2023/card/stripe-held-talks-for-new-funding-at-60-billion-valuation-aHC2sG3rw0wXjoTotK4S" target="_blank">recently</a> <a class="gtmContentClick" data-vars-link-text="leaked" data-vars-click-url="https://www.nytimes.com/2023/01/30/technology/stripe-thrive-funding.html" data-vars-content-id="9773442f-9e21-489f-b470-f838d20862b5" data-vars-headline="Stripe&#x27;s new investment talk is an effort to rectify past mistakes" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.nytimes.com/2023/01/30/technology/stripe-thrive-funding.html" target="_blank">leaked</a> that Stripe is in talks to raise new funding, most of the chatter was about a $60 billion valuation that&#x27;s well below what the payments giant previously fetched. <ul><li>And that made sense, given how much weight we typically attach to nosebleed prices.</li></ul>Between the lines: What also deserves attention, however, is that Stripe appears to be handling the tech deflation with humility, empathy and prudence, unlike some of its tech industry peers.

From the Valley to D.C., Big Tech players like Facebook, Google and Amazon are under more scrutiny than ever as new technology develops and privacy and antitrust concerns grow in lockstep with companies’ ambitions.

Technology

America's safe harbor could be closing for "unicorn" companies, which currently aren't required to provide investors with audited financial statements.

Driving the news: SEC Commissioner Caroline Crenshaw, a Democrat nominated by former President Trump, said in a speech that regulators haven't kept up with the private markets' dizzying growth. 

She noted that Rule 506 of Regulation D, which exempts private issuers from most disclosures required of publicly traded issuers, was designed more than 40 years ago when such companies were so small that the public benefits of such disclosure would be "too remote." Moreover, "sophisticated" investors in such deals have access to said information.

Obviously those conditions have changed. Some startups raise billions of dollars from a wide swath of investors, with the safe harbor often acting as a deflecting shield. FTX is the most obvious example, but it's hardly alone.

Crenshaw's proposal is to rework Reg D so that it looks more like Reg A, a tiered system in which reporting requirements increase with an offering's size.

What she's saying: "Through decades of legal, regulatory, and market developments, private companies now have access to increasing amounts of private capital, inflating their sizes and significance to investors and our economy, and all without the concomitant safeguards built into the public markets."

Crenshaw also likened private markets to the titular character in the children's book "The Very Hungry Caterpillar." 

Look ahead: The SEC previously announced that it will consider changes to Reg D, as part of its rulemaking agenda.

The bottom line: Venture capital has changed significantly in the past five years, after decades of funding innovation without doing much innovation of its own. The industry's regulators haven't done the same.

This isn't an endorsement or repudiation of Crenshaw's specific proposal. But it is an acknowledgment that startups and their investors are operating under an antiquated set of safe harbor rules.

"Unicorn" companies may lose their safe harbor protections

The SEC will revisit rules that treat private companies very different from public ones.

America&#x27;s safe harbor could be closing for &quot;unicorn&quot; companies, which currently aren&#x27;t required to provide investors with audited financial statements.Driving the news: SEC Commissioner Caroline Crenshaw, a Democrat nominated by former President Trump, said in <a class="gtmContentClick" data-vars-link-text="a speech" data-vars-click-url="https://www.sec.gov/news/speech/crenshaw-remarks-securities-regulation-institute-013023" data-vars-content-id="9ba9daf3-cf20-48a9-8c40-ea93ee9fbf53" data-vars-headline="&quot;Unicorn&quot; companies may lose their safe harbor protections" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.sec.gov/news/speech/crenshaw-remarks-securities-regulation-institute-013023" target="_blank">a speech</a> that regulators haven&#x27;t kept up with the private markets&#x27; dizzying growth.

Public Storage made an unsolicited offer to buy rival Life Storage for around $11 billion in stock, after being rebuffed in private discussions.

Why it matters: This one has antitrust risk written all over it. 

Public Storage already is the country's largest self-storage operator, with over 2,800 facilities in 40 states, while Life Storage ranks No. 4 with over 1,100 facilities in 37 states.

Backstory: Much of Public Storage's growth has been inorganic, kicking off with a $4.7 billion deal for Shurgard Storage Centers in 2006, and then followed by a stream of local and regional acquisitions.

Details: The deal would value Life Storage at $129 per share, which represents around a 17% premium to Friday's closing price. Also worth noting that Public Storage yesterday announced a common stock dividend increase, which effectively sweetens its takeover bid.

The bottom line: Life Storage on Dec. 29 told Public Storage that it was "not for sale," and then reaffirmed its position one month later. In a statement this morning, Life Storage says the new proposal "appears to be substantially similar in all material respects" to the prior offer, but adds that it will undergo a board review.

Public Storage makes hostile takeover bid for self-storage rival

The $11 billion announcement comes after Life Storage rebuffed Public Storage's private approach.

Mergers and acquisitions

Public Storage made an unsolicited offer to buy rival Life Storage for around $11 billion in stock, after being rebuffed in private discussions.Why it matters: This one has antitrust risk written all over it.

David Cahn has agreed to join Sequoia Capital as a partner on its growth team, Axios has learned. He previously was a general partner and COO of venture capital with Coatue Management.

Why it matters: This reflects how top VC firms are seeking to bolster their AI and data expertise, which Cahn focused on at Coatue.

The 27 year-old Cahn spent the past five years with Coatue.

His Coatue investments have included Abacus, Databricks, Kubecost, Stability AI, Starburst Data and Supabase, Weights & Biases, and UiPath. 

It is unclear if Cahn will retain any of those responsibilities after leaving Coatue.

Cahn's educational background includes degrees in both finance and computer science.

What they're saying: “David is a force of nature," says Sequoia Capital partner Pat Grady. 

"He is equal parts commercial and technical, which makes him a uniquely impactful partner for founders. After intersecting with him on Notion and Hugging Face and repeatedly hearing his name from many of the best founders, we are eager to have him on Team Sequoia.”

A Coatue spokesperson declined to comment. 

Sri Viswanath, the fomer Atlassian CTO who joined Coatue last year, is expected to continue serving as its AI venture practice lead. 

Scoop: David Cahn leaves Coatue for Sequoia Capital

Top VC firms are seeking to bolster their AI and data expertise.

David Cahn has agreed to join Sequoia Capital as a partner on its growth team, Axios has learned. He previously was a general partner and COO of venture capital with Coatue Management.Why it matters: This reflects how top VC firms are seeking to bolster their AI and data expertise, which Cahn focused on at Coatue.

Dan Primack

Stories

"Unicorn" companies may lose their safe harbor protections

Oil giants slow down their energy transition talk

Public Storage makes hostile takeover bid for self-storage rival

Stripe's new investment talk is an effort to rectify past mistakes

Scoop: David Cahn leaves Coatue for Sequoia Capital

Newsletter editions

Axios Pro Rata: Unsafe harbor

Axios Pro Rata: Energy transition

Axios Pro Rata: Oh my jobs!

Axios Pro Rata: Stripe story

Axios Pro Rata: Subway's breadcrumbs