Feb 27, 2020

Axios Pro Rata

By Dan Primack
Dan Primack

Situational awareness: Food delivery company DoorDash announced this morning that it has filed confidentially for an IPO.

Top of the Morning

Photo by: Edwin Remsberg/VW PICS/UIG via Getty Images

Maryland may become the first state to unilaterally change the tax treatment of carried interest, the investment profits earned by managers of venture capital, hedge, and private equity funds.

  • Driving the news: The bill, introduced in late January by 19 Democratic co-sponsors, would introduce a 17% tax on carried interest earned by those filing in Maryland. Currently, such carried interest is taxed at the state's 5.75% capital gains rate.

The proposal, which you can read here, closely mirrors a similar bill that passed last year in New Jersey. For example, both undercut their "fairness" argument by exempting real estate investments.

One big difference is that New Jersey's tax increase only goes into effect if similar statutes are passed in Connecticut, Massachusetts, and New York — in an effort to prevent New Jersey-based firms from relocating. So far, that hasn't happened.

  • Maryland's proposal doesn't need require buy-in for bordering states, nor from the District of Columbia.
  • This could become a significant challenge, if passed, given that so many Maryland venture and buyout firms are located in the D.C. area, and could relocate without causing their employees much inconvenience. A senior executive with one such Maryland firm already told me that his shop would almost certainly pick up and head a few Metro stops south.

Carried interest is effectively a fee for services — profits earned from investing someone else's money — and should be taxed as ordinary income. In fact, that's one of the few areas of agreement on tax policy between Presidents Trump and Obama, even though neither of them got it changed at the federal level (thanks, in part, to lobbying by many of you, dear readers).

  • As such, Maryland's legislative heart is in the right place here.
  • It's head, however, is a bit tilted. Not only because of the real estate carve-out and disinterest in regional consensus, but also because this would turn carried interest into its own (much) higher tax category, rather than just lumping it into ordinary income.

The hope, therefore, should be that whatever the Democrat-controlled legislature sends to Maryland's Republican governor will be tightened up.

🎧 Pro Rata Podcast digs into space tourism, which could change space industry economics, regulation, and size. Listen here.

The BFD
Source: Giphy

Roblox, a San Mateo, Calif.-based gaming platform, raised $150 million in Series G funding led by Andreessen Horowitz at a $4 billion valuation. Th company also will launch up to a $350 million tender for existing holders.

  • Why it's the BFD: Because if your young kid or tween is paying online social games, chances are they're playing Roblox. The big question for investors, though, is if Roblox can hold onto users as they age.
  • Other investors include Temasek, Tencent, and return backers Altos Ventures, Meritech Capital, and Tiger Global Management.
  • Bottom line: "Many of its most popular games are free, instead monetizing as players spend on in-game items using virtual cash called Robux. Some of its largest games average over 10 million users monthly. Over 10 games have seen more than 1 billion visits." — Sara Perez, TechCrunch
Venture Capital Deals

Pony.ai, a self-driving car startup with offices in California and China, raised $462 million in new funding led by Toyota at around a $3 billion valuation. http://axios.link/I6h7

Rupeek, an Indian online gold loan brand, raised $60 million over two rounds of funding from GGV Capital, Accel, Bertelsmann India Investments, Binny Bansal, KB Investments, Tanglin Venture Partners, and Sequoia India. http://axios.link/Tgw5

Jumo, a South African platform for building fintech products, raised $55 million in second-round funding from Odey Asset Management, LeapFrog Investments, and Goldman Sachs. http://axios.link/okL7

Unqork, a New York-based no-code enterprise app platform, raised $51 million in new Series B funding from Aquiline Technology Growth, World Innovation Lab and return backer Goldman Sachs. http://axios.link/3Ocs

🚑 K Health, a New York-based digital primary care service, raised $48 million in Series C funding. 14W and Mangrove Capital co-led, and were joined by Anthem, Lerer Hippeau, and Primary Ventures. www.health.ai

Tractable, a London-based insuretech startup, raised $25 million in Series C funding. Georgian Partners led, and was joined by return backers Insight Partners and Ignition Partners. http://axios.link/Qs5E

Dahmakan, a Malaysian food delivery startup, raised $18 million in Series B funding from Rakuten, White Star Capital, JAFCO Asia, GEC-KIP Fund, Woowa Brothers, and return backers Partech Partners and YC. http://axios.link/XL6o

🍦 Van Leeuwen, a Brooklyn-based artisanal ice cream brand, raised $18.7 million led by NextWorld. www.vanleeuwenicecream.com

🚑 Qure.ai, a Mumbai-based developer of radiology scanning software, raised $16 million led by Sequoia India and MassMutual Ventures Southeast Asia. www.qure.ai

LinkSquares, a Boston-based SaaS contract management and analysis tool, raised $14.5 million in Series A funding. Jump Capital led, and was joined by First Ascent Ventures and return backers MassMutual Ventures and Hyperplane VC. www.linksquares.com

Dray Alliance, a Los Angeles-based digital drayage marketplace, raised $10.2 million in Series A funding. Matrix Partners led, and was joined by Moving Capital, Craft Ventures, Act One Ventures, and Wonder Ventures. http://axios.link/vdQG

Made Renovation, a San Francisco-based bathroom renovation platform, raised $9 million in seed funding. Base10 Partners led, and was joined by Felicis Ventures. www.maderenovation.com

Cioplenu, a German startup focused on digitizing production floor processes, raised €4.2 million in seed funding led by Cherry Ventures. http://axios.link/PUFA

Private Equity Deals

Adaptas Solutions, a Palmer, Mass.-based portfolio company of Ampersand Capital Partners, agreed to buy the applied kilovolts and analytical instrumentation unit of L3Harris Technologies (NYSE: LHX). www.adaptas.com

BlackRock Long Term Private Capital acquired Creed, a London-based luxury fragrance company. http://axios.link/w4KF

Brookstone Partners invested in Hudson Valley, a New Hampton, N.Y.-based mitigation and restoration company. www.hudsonvalleydki.com

BV Investment Partners invested in TopBloc, a Chicago-based Workday services partner. www.topbloc.com

InMoment, a South Jordan, Utah-based portfolio company of Madison Dearborn Partners, acquired MaritzCZ, a Lehi, Utah-based customer experience management company. www.inmoment.com

Pacific Equity Partners and Visy reportedly are the remaining bidders for the Australia and New Zealand business of glassmaker Owens-Illinois (NYSE: OI), which likely will fetch just under A$1 billion. The Blackstone Group recently left the process. http://axios.link/iGhh

Sverica Capital Management acquired Cytracom, an Allen, Texas-based provider of cloud-based voice and messaging solutions for MSPs. www.cytracom.com

Liquidity Events

Freshworks, a San Mateo, Calif.-based customer support software company that recently raised VC funding at a $3.5 billion valuation, agreed to buy AnsweriQ, a Bellevue, Wash.-based customer support platform that raised over $5 million from Madrona Venture, Kernel Labs and GE Ventures. www.freshworks.com

Ridgemont Equity Partners is considering a sale process for ZenFi Networks, a New York-based communications infrastructure company that could fetch around $750 million, per Bloomberg. http://axios.link/6lWa

More M&A

The Brink’s Co. (NYSE: BCO) agreed to buy the cash operations business of G4S (LSE: GFS) for around $860 million. http://axios.link/JZ5B

🚑 Takeda (Tokyo: 4502) exercised its option to buy PvP Biologics, a San Diego-based developer of drugs for celiac disease, in a deal that could be worth up to $330 million (including earnouts). www.pvpbio.com

United Airlines (Nasdaq: UAL) and Lufthansa (DE: LHAG) each are considering takeover offers for TAP-Air Portugal, per a German news report. http://axios.link/N5VV

Walmart (NYSE: WMT) said it’s in talks with a “small number” of potential buyers for its stake in British supermarket chain Asda, which it unsuccessfully tried merging last year with Sainsbury’s (LSE: SBRY). http://axios.link/NEQn

Williams Cos (NYSE: WMB) is seeking an investment partner to form a JV for its western U.S. pipelines, in a deal that could be worth upwards of $5 billion, per Reuters. http://axios.link/56Ur

Fundraising

Corsair Capital raised $1 billion for its fifth private equity fund focused on the financial services market. www.corsair-capital.com

QED Investors, an Alexandria, Va.-based VC firm, raised $350 million for its sixth fund. www.qedinvestors.com

Ridgewood Infrastructure raised $600 million for its debut private equity fund focused on water and other strategic infrastructure. www.ridgewoodinfrastructure.com

It's Personnel

Fiona Blakemore joined London-based VC firm Balderton Capital as CFO and head of portfolio financial services. She previously led IR for Man Group. http://axios.link/eP6G

Chris Scoggins, a former Oracle exec, joined VC firm SignalFire as a venture partner. www.signalfire.com

Summit Partners promoted Scott Ferguson and Sergio Mur to principals, and Chris Bon, Olivia Ley, and Jono Pagden to vice presidents. www.summitpartners.com

Final Numbers
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Data: The Center for Systems Science and Engineering at Johns Hopkins, the CDC, and China's Health Ministry. Note: China numbers are for the mainland only and U.S. numbers include repatriated citizens.
Dan Primack

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