Jul 24, 2020

Axios Pro Rata

By Dan Primack
Dan Primack

🎧 Axios Re:Cap talks to Sen. Josh Hawley (R-Mo.) about his bill to stop the use of forced labor by American corporations — particularly those that operate much of their supply chain through China. Listen via Apple or via Axios.

Top of the Morning

Illustration: Aïda Amer/Axios

The TikTok debate has exposed a deepening fissure among venture capitalists, over their attitudes toward China, Axios' Kia Kokalitcheva reports.

Why it matters: Silicon Valley and China could morph from frenemies into full-blown adversaries.

China skeptics in Silicon Valley are fundamentally opposed not only to the China Communist Party's ideology, but also to its data collection policies (which they say is far more pervasive and pernicious than that of U.S. internet companies).

  • They also are fed up with the asymmetric relationship with it comes to tech, whereby U.S. companies must censor and open the code kimono to operate in China.
  • There's also a belief among many China skeptics that America is falling way behind on consequential technologies like AI.
  • As Founders Fund partner Trae Stephens puts it: "[America's] best engineers are optimizing how to get cat videos .... We have sat back and assumed that our hegemony is infinite."

Globalist VCs argue that those averse to China misunderstand local dynamics, and mistakenly view tech competition as a zero-sum game.

  • A Silicon Valley investor active in China argues that while China's barriers to entry for American companies are unfortunate, its government has actively sought to foster at least some version of capitalism. Banning Chinese products like TikTok, he believes, could prove counterproductive.
  • "The Chinese government cares a lot more about the data about its citizens than U.S. users," he adds.
  • Other U.S. investors suggest to Axios that many of their peers are overreacting to China based on the politics of the moment, which isn't in keeping with a long-term asset class like venture capital. They add that the free flow of ideas more important than the flow of capital, and benefits both countries.

A big variable could be how big tech companies like Apple and Amazon refer to China at the (now-delayed) Congressional antitrust hearings. For example, they may argue that breaking up big U.S. tech companies would cede ground to China, thus emboldening the skeptic class.

The bottom line: Expect VC firms to begin using their "side" of this disagreement as a calling card, when it comes to pitching both entrepreneurs and limited partners.

The BFD

Illustration: Rebecca Zisser/Axios

Vital Farms, the country's largest producer of pasture-raised eggs, set IPO terms to 7.8 million at $15–$17. At the midpoint, it would raise $125 million and have an initial market cap of $627 million.

  • Why it's the BFD: Because this is about real eggs made by real chickens, not pseudo eggs designed in a lab. That might not have seemed to novel a decade ago, but today runs counter to the capital markets' hunger for alt-protein and dairy companies.
  • Shareholders include Manna Tree Partners (8.2% pre-IPO stake), SJF Ventures (8.2%), and Arborview Capital Partners (6.6%).
  • Bottom line: "If consumers keep paying more for products considered ethically produced and more people value those attributes, Vital Farms could have a long runway ahead for growth. It said it has low household penetration of 2% for its pasture-raised shell eggs, compared to the shell egg category penetration of approximately 93%." — Christopher Doering, FoodDive
Venture Capital Deals

🚑 Forge Biologics, a Columbus, Ohio-based viral vector gene therapy startup, raised $40 million in Series A funding. PXV Fund led, and was joined by Drive Capital. http://axios.link/BhrV

Wave.tv, a Los Angeles-based interactive sports media platform, raised $32 million in Series A equity and debt funding. CoVenture and GPS Partners co-led, and were joined by seed backers Golden Ventures and Sweet Capital. http://axios.link/NU7O

IObeya, a French management planning digitization startup, raised $17 million in Series A funding. Red River West led, and was joined by Atlantic Bridge Capital and Fortino Capital Partners. http://axios.link/yZiv

CalypsoAI, a Washington, D.C.-based provider of AI and machine learning security solutions, raised $13 million in Series A funding. Paladin Capital Group led, and was joined by Lockheed Martin Ventures, 8VC, Frontline Ventures, Lightspeed Venture Partners, Manta Ray Ventures, and Pallas Ventures. http://axios.link/fb7p

Vive Organic, a Venice, California-based cold-pressed "wellness shots," raised $13 million in Series B funding. Monogram Capital led, and was joined by Cambridge SPG and Powerplant Ventures. http://axios.link/jcSa

Mira, an AR startup, raised $10 million from Sequoia Capital and Happiness Ventures. http://axios.link/EiaT

Mitiga, a hybrid managed service for incident readiness and response, raised $7 million in seed funding from Clearsky Security. Glilot Capital, Flint Capital, Rain Capital, and DNX Ventures. www.mitiga.io

Claim Genius, an Iselin, N.J.-based provider of instant vehicle damage assessments, raised $5.5 million in Series A funding from Financial Link (Malaysia) and SIRI Info Solutions. http://axios.link/Dwrq

🚑 LuminDX, a Boston-based mobile app for helping frontline health workers identify skin conditions, raised $2 million in seed funding led by Argon VC. www.lumindx.com

The Not Company, a Chilean alt-meat and alt-dairy startup, is raising $85 million at a $250 million valuation, per TechCrunch. http://axios.link/ccwz

Private Equity Deals

The Blackstone Group agreed to buy nearly $1 billion in infrastructure investment assets from Alaska Permanent Fund Corp., per WSJ. http://axios.link/uksm

Clayton, Dubilier & Rice acquired a minority stake in Cheney Bros, a family-owned food distributor serving the Southeastern U.S. www.cheneybrothers.com

Fortress Investment Group, a unit of SoftBank, completed its cash tender for all outstanding shares of East Palo Alto-based cybersecurity company Finjan Holdings (Nasdaq: FNJN). http://axios.link/x30F

Marlin Equity Partners acquired social insights software provider Nielsen Social, and will merge it with existing portfolio Talkwalker. http://axios.link/X7QV

Tenex Capital Management acquired Consolidated Label, a Sanford, Florida-based provider of custom-printed, pressure-sensitive labels and shrink sleeves. www.consolidatedlabel.com

Public Offerings

Duck Creek Technologies, a Boston-based provider of insurance industry SaaS, filed for a $200 million IPO. It plans to list on the Nasdaq (DCT) with Goldman Sachs and JPMorgan as lead underwriters, and reports an $8.5 million net loss on $153 million in revenue for the nine months ending May 31. The company has raised $350 million in VC funding from firms like Kayne Anderson, Apax Partners, Accenture, Dragoneer, Insight Partners, Temasek, and Neuberger Berman, and Whale Rock Capital. http://axios.link/1Jan

🚑 iTeos Therapeutics, a Belgian immuno-oncology company, raised $201 million in its IPO. The pre-revenue company priced 10.6 million shares at $19, versus plans to offer 8.9 million shares at $16–$18, for a fully-diluted market value of $681 million. It will list on the Nasdaq (ITOS), JPMorgan as lead underwriter, and raised $200 million in VC funding from MPM Capital (15.1% pre-IPO stake), RA Capital, (13.4%), Boxer Capital (13.4%), UBS Oncology Impact Fund (9.4%), Janus Henderson (6.8%), and Fund+ (6.3%). http://axios.link/B0v4

🚑 Nurix Therapeutics, a San Francisco-based oncology biotech, raised $209 million in its IPO. It priced 11 million shares at $19 (above upwardly-revised range), for a fully-diluted market value of $754 million. It will list on the Nasdaq (NRIX), used JPMorgan as lead underwriter, and raised $224 million in VC funding from such firms as The Column Group (26% pre-IPO stake), Third Rock Ventures (20.9%), and Foresite Capital (7.5%). http://axios.link/9LmQ

🚑 Tigermed, a Shenzhen-listed clinical research services firm, will seek to raise at least $1 billion via a Hong Kong IPO launching Monday, per Reuters. http://axios.link/hD3K

Liquidity Events

Autodesk (Nasdaq: ADSK) agreed to buy Pype, a Herndon, Va.-based provider of automation software for construction project management that had raised VC funding from firms like Blackhorn Ventures. www.autodesk.com

🚑 Clearlake Capital Group is seeking to sell upwards of a 50% stake in Symplr, a Houston-based provider of healthcare governance, risk and compliance software, per PE Hub. Clearlake paid $550 million for the company in 2018, but would now be seeking an enterprise value of around $2 billion. http://axios.link/xJnC

Office Depot Europe, a portfolio company of Aurelius Equity Opportunities, agreed to sell its Spanish contract business to France’s Lyreco.

More M&A

Degussa Bank, a German retail and corporate lender, is seeking a buyer for upwards of €400 million, per Reuters. http://axios.link/t37p

Eneva, a listed Brazilian power company, offered $1.44 billion to buy a control stake in smaller peer AES Tiete Energia, representing around a 10% premium. http://axios.link/LUjt

NRG Energy (NYSE: NRG) agreed to buy Direct Energy, the North American subsidiary of Centrica (LSE: CAN) for $3.63 billion. http://axios.link/eXda

PetroChina and Sinopec agreed to sell $55.9 billion worth of Chinese oil and gas pipelines and storage facilities to newly-formed PipeChina, in exchange for cash and equity. http://axios.link/H0Yz

🚑 Sorrento Therapeutics (Nasdaq: SRNE) agreed to buy SmartPharm, a Cambridge, Mass.-based developer of non-viral DNA and RNA gene delivery platforms for COVID-19 and rare diseases. www.smartpharmtx.com

It's Personnel

• Gus Coldebella joined crypto-focused VC firm Paradigm as general counsel, Axios has learned. He previously was chief legal officer for Circle, and is a former acting general counsel for the U.S. Department of Homeland Security.

• Pete Hess, former CEO of Khoros, joined Welsh, Carson, Anderson & Stowe as an operating partner focused on tech and healthcare. www.wcas.com

👀 Worthy of your time: Bloomberg's Heather Perlberg goes behind the scenes of The Carlyle Group's recent CEO shakeup.

Final Numbers
Data: FactSet; Chart: Naema Ahmed/Axios

Go deeper: Big tech's Congressional antitrust hearing has been postponed

Dan Primack

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