Mar 29, 2018

Axios Pro Rata

Top of the Morning

Source: Giphy

Tech startups aren't the only ones in Silicon Valley that want to be unicorns. More and more VC firms are seeking to raise new funds of at least $1 billion, either for new flagships or growth-focused sidecars.

If you're over 40 and feeling a bit of nausea creep up, that's just a symptom of dotcom PTSD.

Why this time it's different:

  • Startups are staying private longer, thus requiring more capital.
  • VCs need deeper pockets to at least avoid major dilution. Even Sequoia Capital has seen its original Airbnb ownership fall from 20% to around 13%, per a source.
  • SoftBank, even though none of these new funds is really seeking to compete with it.
  • There has been intense valuation inflation for venerable tech stocks —yes, even compared to the bubble days — so private valuations are really just following their public market peers.
  • There are viable markets for new tech product (i.e., the startups aren't ahead of consumer and enterprise demand/willingness to try).
  • Increased fund sizes in 2000-2002 were to write bigger checks for the same early-stage strategies, whereas this time it's for complimentary strategies.

Why this time it's the same:

  • Per a longtime LP: "Never get confused. It's almost always a fee grab."
  • Everyone is still judged on comparative returns, so individual funds won't be exorcised for broad-based growth-stage carnage.
  • Fund capital is widely available, in part, because of a reverse denominator effect.
  • The business just looks so easy right now, which is why so many novices (and corporates) are pushing in.
  • Overcapitalizing startups hasn't become any smarter of an ROI strategy.
  • Fund sizes tails will wag check size dogs, no matter how often VCs tell themselves they won't.

Bottom line: We won't know who's right for at least five years, if not longer. But for now we do know that the stakes have become much, much higher.

Antitrust: The judge overseeing DoJ vs. AT&T yesterday chastised both sides for moving too slowly, particularly when it came to what he referred to as witness redundancy. DoJ lawyers also pushed Turner CEO John Martin to acknowledge that his high-profile sports content would give AT&T a powerful competitive cudgel — but Martin wouldn't bite.

  • More: The American Antitrust Institute sent a 10-page letter to DoJ, arguing that the proposed CVS/Aetna merger "will potentially harm competition and consumers." It also isn't a big fan of Cigna buying Express Scripts.

Bad date: Bumble yesterday sued Match Group, which had previously sued Bumble. The new claim is that Match asked for, and received, confidential Bumble information for the purpose of possibly increasing its takeover offer. But Bumble now believes Match's expressed intent was fraudulent, and is suing for $400 million.

Calling all startups: If you're raising a Series A/B round, or plan to do so in the near future, please consider pitching your company on April 6-7 in Chapel Hill as part of the annual VCIC Finals. It's the end of an an international competition in which biz school teams form "VC funds," conduct due diligence with founders, write up term sheets, negotiate with founders and get grilled/judged by a panel of real VCs.

  • It's a great dry run for founders — a dozen due diligence sessions in an afternoon — and you also get to mingle with the VC judges (including at an amazing North Carolina bbq while the teams are working). If interested, please email
Source: NASDAQ

iQiyi, a Netflix-style service in China that is owned by Baidu (Nasdaq: BIDU), raised $2.25 billion in its IPO. It priced 125 million shares at $18 (middle of range), for a filly-diluted market value of $13.7 billion, and will trade on the Nasdaq under ticker IQ.

  • Why it's the BFD: Because iQiyi is hitting the U.S. markets at the exact same time that FANG stocks are getting hammered (including Netflix, down 8.5% in the past week). It obviously doesn't face the same threats of U.S. regulation or American privacy concerns, but it does have serious censorship challenges.
  • Bonus: Trump this morning tweeted confirmation of his antipathy toward Amazon, although he still got the U.S. Postal Service piece wrong.
  • Bottom line: "IQiyi is in an increasingly expensive battle for content and users against Tencent Video and Alibaba’s service Youku-Tudou. All three have burned through billions of dollars buying and making the movies and TV shows needed to attract China’s viewers." — Crystal Tse, Bloomberg
Venture Capital Deals

Branch International, a San Francisco-based mobile bank for emerging markets, raised $70 million in Series B funding. Trinity Ventures led, and was joined by Victory Park, IFC, Andreessen Horowitz and CreditEase Fintech Investment Fund.

🚑 Tempest Therapeutics, a San Francisco-based immune-oncology company, has raised $70 million in Series B funding. Versant Ventures led, and was joined by F-Prime Capital, Quan Capital, Lilly Asia Ventures, Foresite Capital and Eight Roads Ventures.

FoodLogiQ, a Durham, N.C.-based provider of food safety and traceability SaaS, raised $19.5 million in new funding from Testo, Tyson Ventures, Pontifax AGTech, Nicola Wealth Management and Greenhouse Capital.

🚑 Bigfoot Biomedical, a Milpitas, Calif.-based developer of connected insulin delivery optimization solutions for Type 1 diabetics, has raised $18 million in new Series B funding from investors like Abbott (round total now $55m). Janus Henderson Investors and Quadrant Capital Advisors co-led the initial tranche.

🚑 LetsGetChecked, a Dublin and New York-based medical health testing platform, has raised $12 million in Series A funding co-led by Optum Ventures and Qiming Venture Partners.

Scotty Labs, a developer of “teleoperations” for remotely controlling driverless cars, has raised a $6 million round led by Gradient Ventures.

Sentieo, a San Francisco-based financial research platform, has raised $6 million co-led by Clocktower Ventures and Long Focus Capital.

Atidot, an Israeli predictive analytics startup focused on the life insurance sector, raised $5 million in Series A funding led by Vertex Ventures.

SpyCloud, an Austin, Texas-based account takeover prevention startup, raised $5 million in Series A funding from return backers Silverton Partners and March Capital Partners.

Chia, a cryptocurrency that claims it doesn’t use up excessive electricity, has raised $3.4 million in seed funding. Naval Ravikant led, and was joined by such firms as Andreessen Horowitz and Greylock.

Siren, a developer of fabric with embedded microsensors, raised $3.4 million from DCM, Founders Fund and Khosla Ventures.

Private Equity Deals

🚑 Apposite Capital has acquired OrthoD Group, a British maker of orthopedic medical devices, from The Riverside Company.

Comvest Partners has acquired Systems Control, an Iron Mountain, Mich.-based maker of equipment enclosures and control and relay panels for electrical transmission and distribution substations.

Florac Investissements is in exclusive talks to purchase a stake in Bricoprivé.com, a French private sales site for gardening and home improvement projects, from Ardian.

SK Capital has completed its previously-announced $1 billion purchase of the fire safety and oil additives business of Israel Chemicals.

Public Offerings

AMC Entertainment (NYSE: AMC) has hired Citi to prep an IPO for British cinema unit Odeon, according to Reuters.

Docusign, a San Francisco-based e-signature platform, has filed for a $100 million IPO. It plans to trade on the Nasdaq under ticker DOCU, with Morgan Stanley as lead underwriter, and reports a $115 million net loss on $381 million in revenue for the year ending January 31, 2018. DocuSign has raised over $550 million in VC funding, most recently at a valuation of around $3 billion, from firms like Sigma Partners (12.9% pre-IPO stake), Ignition Partners (11.7%) and Frazier Technology Ventures (7.2%).

IBEX Holdings, a Bermuda-based provider of outsourced customer support services, has indefinitely postponed an IPO of 4 million shares at $14-$16.

OneSmart, a Chinese provider of K-12 after-school education, raised $179 million in its IPO. The company pieced 16.3 million shares at $11 (low end of range) and will trade on the NYSE under ticker ONE. Morgan Stanley was lead underwriter. Shareholders include Goldman Sachs.

Liquidity Events

Siris Capital Group has agreed to sell video conferencing equipment maker Polycom to Plantronics (NYSE: PLT) for $2 billion.

More M&A

CME Group (Nasdaq: CME) has agreed to acquire NEX Group (LSE: NXG), an operator of currencies and treasuries trading markets, for around $5.5 billion in cash and stock.

🚑 Fujifilm (Tokyo: 4901) has agreed to acquire two cell culturing businesses, Irvine Scientific Sales Co. (California) and IS Japan Co. (Japan), from JXTG Holdings (Tokyo: 5020) for around $800 million.

General Dynamics (NYSE: GD) is expected to win the auction for rival defense contractor CRSA (NYSE: CRSA) with a $9.7 billion bid, as CACI International (NYSE: CACI) abandoned its bid.

India said it plans to sell a 76% stake in Air India, including around $5.1 billion of the carrier’s debt.

Nestlé has agreed to sell its Brazilian bottled water business to Grupo Edson Queiroz.

Renault SA and Nissan Motor Co. reportedly are in merger discussions.

SoftBank is seeking to acquire a 25% stake in reinsurance giant Swiss Re, which would be worth around $9.6 billion, according to Bloomberg.

TomTom, a listed Dutch navigation technology maker valued at around $2.2 billion, is considering strategic options that could include a sale of all or part of the business.

Warner Music Group has acquired Sodatone, an algorithmic platform for identifying unsigned musical talent.


Bedrock Capital, a new VC firm led by Geoff Lewis (ex-Founders Fund) and Eric Stromberg (ex-Google), closed its debut fund with $122 million.

⛽ Five Point Energy, a Houston-based private equity firm focused on the midstream and energy infrastructure sector, closed its third fund with $750 million.

U.S. Venture Partners is raising up to $300 million for its twelfth fund, per an SEC filing.

Zhen Partners is raising up to $190 million for its fifth VC fund, per an SEC filing.

It's Personnel

Jérome Joaug, co-founder of Nymbly and Cambridge Nanosystems, has joined French VC firm Aster as a principal.

Karin Kovacic has joined Monroe Capital as a managing director of originations. She previously was an SVP with Alcentra Capital.

Final Numbers
Expand chart
Adapted from MedPAC, "Report to the Congress", March 2018; Note: CHIP was created in 1997, only included in 2016 share. Chart: Axios Visuals