Top of the Morning
• Sensor stuff: Venture capital investment in the IoT sector is beginning to mature, according to a new report from Silicon Valley venture firm Wing.vc. In short, 2016 saw more money invested into (slightly) fewer companies than in 2015, with an emphasis on automotive and health tech. Investment in security-related IoT startups remains lacking. Kia digs deeper into the data here, and we've got a shareable chart in the Final Numbers section of today's Pro Rata.
• Being charitable: Gurbaksh Chahal, the Gravity4 CEO who currently is appealing a prison sentence stemming from a domestic battery case, recently wrote a Medium post about how his charitable foundation is "transforming the lives of the less privileged children in India and several other countries."
Specifics were a bit fuzzy, however, so I took a look at the nonprofit's federal tax filings, and learned that it did not spend a single dollar on charitable activities (direct donations, indirect donations, grants, etc.) in 2013, 2014 or 2015. It also seems to have received no donations during those years, with a bank balance that usually sat at between around $400,000 and $500,000.
I used an email form on the nonprofit's website to ask if the Chahal Foundation made any charitable donations or related actions in 2016 (for which tax records are not yet publicly available). For example, Chahal posted a YouTube video suggesting a January 2016 trip to India that involved local schools. Rather than providing any actual information, however, @GChahal simply insulted me via social media (including Twitter), referring to yours truly as an "idiot," "POS blogger," "douchebag" and someone "looking for a fake story."
Yeah, he's a charmer. And, as of now, he's also someone unable or unwilling to back up his big philanthropic claims.
• Activism: The most interesting thing about KKR's earnings yesterday wasn't the earnings at all, but rather learning that activist investor ValueAct Capital has acquired around a 5% stake in the private equity giant. ValueAct's Jeff Ubben seems to view this simply as a value play (perhaps echoing Blackstone's Schwarzman's confusion over the low trading multiples), but it would be a bit delicious if the original barbarians get someone knocking on their gate.
• Storyboard: Bloomberg yesterday wrote that New York City's pension system's private equity returns since the late 1990s have fallen short of their benchmarks, and that NYCRS would have generated higher returns had it simply invested that money in the Russell 3000. I'm going to dig into this a bit more, but my gut reaction is twofold (and a bit contradictory):
- Private equity, as an industry, is clearly due for some major GP culling ― just as venture capital was 15 years ago;
- Bloomberg ignores that NYCRS was, for years, one of the worst-managed public pensions in the nation when it came to private equity, leaving its top portfolio manager open for more than a year. It also had a bizarre structure in which sub-pensions made investment decisions without any in-house investment staff. As I've written ad naseum: You often get what you pay for.
• Recommended reading: Around 3.5 million Americans are employed as cashiers, representing more than 2.5 percent of the workforce. But those jobs are at risk as more and more retailers experiment with automation. LinkedIn Managing Editor Chip Cutter is sounds the alarm, pointing out the country's lack of preparedness for such massive economic dislocation.
• Have a great weekend... Go Celtics!
Purdue University has agreed to acquire Kaplan University, the for-profit higher education business of Kaplan Inc., which is owned by Graham Holdings Co. (NYSE:GHC). The upfront cost is just a symbolic dollar, but Purdue would continue to operate Kaplan U's online programs and 15 physical campuses and learning centers (around 32k total students) for at least five years for a cost of $10 million per year. Then there are a bunch of additional reimbursement machinations.
- Why it's the BFD: Public universities aren't usually on the M&A buy-side, at least not of large for-profit corporations (Kaplan U. reported $617 million in 2016 revenue). This also has the potential to shakeup the flailing online education market.
- Bottom line: "Like most large for-profits, Kaplan University has lost students and revenue in recent years. The sector faces rising competition from nonprofits and a stigma due to high-profile investigations and lawsuits over some companies' misleading of students." ― Paul Fain & Rick Seltzer
Venture Capital Deals
• Paytm, an Indian e-commerce platform, reportedly is in talks to raise more than $1.8 billion in new funding at a $9 billion valuation from SoftBank. Just last month the company raised $200 million from Alibaba Group ($177m) and SAIF Partners. http://bit.ly/2qdpHzu
• Zeta Global, a New York-based SaaS marketing cloud, has raised $115 million in Series F equity funding at a $1.3 billion valuation. It also has secured $25 million in new debt financing. Backers include GPI Capital, Franklin Square Capital Partners and funds sub-advised by GSO Capital Partners. http://cnb.cx/2oANrAt
• Domo, a Utah-based data management and analytics company, has raised more than $100 million in a new funding round that could total up to $200 million, according to an SEC filing. The company confirmed to Axios the new funding, an extension of its Series D2 round, and a post-money valuation of $2.3 billion. Existing investor BlackRock, along with family offices across Europe and Asia, provided the new money. http://bit.ly/2oQ22TH
• Epic Sciences, a developer of blood-based tests that predict drug response in cancer, has raised $40 million in Series D funding. Hermed Capital led the round, and was joined by Altos Capital Partners, Domain Associates, Genomic Health, Pagoda Investment, Reach Tone Limited, RMI Partners, Sabby Capital and VI Ventures. http://bit.ly/2qeqtMC
• Grove Collaborative (d.b.a. ePantry), a San Francisco-based e-commerce platform for sustainable household products, has raised $13.5 million in new VC funding, per an SEC filing. New directors include Mayfield's Tim Chang.
• RiskMethods, a German provider of supply chain risk management software, has raised €13.5 million in Series B funding. Digital+ Partners led the round, and was joined by return backers EQT Ventures, Senovo and Bayern Capital. www.riskmethods.net
• Evidation Health, a San Mateo, Calif.-based developer of digital biomarkers, has raised $10 million in new VC funding. Sanofi-Genzyme BioVentures led the round, and was joined by return backers GE Ventures and B Capital Group. http://bit.ly/2pquUWF
• HealthVerity, a Philadelphia-based medical data marketplace, has raised $10 million in Series B funding. Return backers Flare Capital Partners and Greycroft Partners co-led the deal, and were joined by Foresite Capital. http://bit.ly/2qm6Z89
• Lynk, a Hong Kong-based curation and knowledge sharing platform for enterprise users, has raised $4 million in Series A funding. Hong Leong Group led the round, and was joined by Cyberport, DHQ and CRE Venture Capital. http://bit.ly/2qgVoa6
Private Equity Deals
• Apollo Global Management is in exclusive talks to acquire West Corp. (Nasdaq: WSTC), an Omaha-based phone conferencing company with a market cap of around $2.3 billion, according to Reuters. http://reut.rs/2psQ2eU
• Bloomin' Brands (Nasdaq: BLMN) has sold and refranchised 45 Outback Steakhouses in four states to Cerva Trova Restaurant Concepts, a portfolio company of H.I.G. Capital. It also sold 8 Outback restaurants and one Carrabba's Italian Grill to Evergreen Restaurant Group. No financial terms were disclosed. www.bloominbrands.com
• CDH International and Hillhouse Capital have offered to acquire Belle International (HK: 1880), China's largest retailer of women's shoes, for around $6.8 billion (around a 20% stock price premium). http://reut.rs/2ptd9pQ
• CVC Capital Partners is nearing an agreement to acquire Swiss watchmaker Breitling for more than €800 million, according to Bloomberg. https://bloom.bg/2pb9lZE
• GlobeLTR Energy, a Snyder, Texas-based portfolio company of Clearlake Capital, has acquired West Texas H2O, a provider of water solutions for the Permian Basin. www.globeenergyservices.com
• KKR and Macquarie Group no longer plan to continue pursuing a takeover of Australian lottery operator Tatts Group (ASX: TTS), after their A$4.6 billion cash bid was rejected. http://reut.rs/2qdWQuI
• Levine Leichtman Capital Partners has acquired HomeVestors of America, a Dallas-based real estate investment franchisor. No financial terms were disclosed. www.homevestors.com
• Randy's Worldwide, an Everett, Wash.-based maker of aftermarket auto parts owned by Linsalata Capital Partners, has acquired Zumbrota Bearing & Gear, a Zumbrota, Minn.-based maker of transmission components and remanufactured units. No financial terms were disclosed. http://bit.ly/2paSlTg
• Snow Software, a Stockholm-based provider of software asset management solutions, has raised $120 million in equity funding from Sumeru Equity Partners and the Ontario Pension Board. The company will continue to be majority-owned by Vitruvian Partners and company employees. www.snowsoftware.com
• Appian, a Reston, Va.-based provider of a software development platform, has filed for an $86.25 million IPO. It plans to trade on the Nasdaq under ticker symbol APPN, with Morgan Stanley listed as left lead underwriter. The company reports a $14 million net loss on around $133 million in revenue for 2016, compared to a $6.6 million net loss on $111 million in revenue for 2015. Shareholders include Novak Biddle Venture Partners (21.5% pre-IPO stake) and NEA (11.7%). www.appian.com
• Carvana, a Phoenix-based online and offline used car platform, raised $225 million in its IPO. The company priced 15 million shares at $15 per share (middle of its range), for a fully-diluted market value of around $2.1 billion. It will trade on the NYSE under ticker symbol CVNA, while Wells Fargo served as lead underwriter. Carvana reports a $93 million net loss on $365 million in revenue for 2016. http://bit.ly/2qesStB
• China Rapid Finance, a Chinese online P2P loan marketplace, raised $60 million in its IPO. The company priced 10 million American depository shares at $6 per share (low end of downwardly-revised range), and will trade on the NYSE uner ticker symbol XRF. Morgan Stanley was listed as left lead underwriter. Shareholders include Broadline Capital (14.1% pre-IPO stake). www.chinarapidfinance.com
• Cloudera, a Palo Alto, Calif.-based provider of enterprise big data software, raised $225 million in its IPO. The company priced 15 million shares at $15 per share (above $12-$14 range). It will trade on the NYSE under ticker symbol CLDR, while Morgan Stanley was listed as left lead underwriter. The company reports a $187 million net loss on $261 million in revenue for its most recent fiscal year. Cloudera had raised more than $1 billion in VC funding, from firms like Intel (22% pre-IPO stake), Accel (16.3%), Greylock (12.5%), GV and In-Q-Tel. http://bit.ly/2ptpVoa
• NCS Multistage Holdings, a Houston-based maker of oil well completion tools, raised $162 million in its IPO. The company priced 9.5 million shares at $17 per share (within $15-$18 range), and will trade on the Nasdaq under ticker symbol NCSM. Credit Suisse was listed as left lead underwriter. The company is owned by Advent International, and reports nearly an $18 million net loss on $98 million in 2016 revenue. www.ncsmultistage.com
• Pirelli, an Italian tire maker, said that it plans to move forward with a Milan IPO in Q4, and that controlling investor ChemChina has agreed to let its stake fall below 50% via the offering. http://reut.rs/2pFTMKV
• Zymeworks Inc., a Vancouver-based developer of bi-specific antibodies and antibody drug conjugates for the treatment of cancer, autoimmune and inflammatory diseases, raised $59 million in its IPO. The company priced 4.5 million shares at $13 per share (low end of $13-$16 range), and will trade on both the NYSE and TSX under ticker symbol ZYME. Citigroup was listed as left lead underwriter. Shareholders include Eli Lilly (17.5% pre-IPO stake), CTI Life Sciences (14.6%), Celgene (6.1%), BDC Capital, Lumira Capital, Perceptive Advisors, Teralys Capital, Northleaf Venture Catalyst Fund, Brace Pharma Capital, Merlin Nexus and the Fonds de solidarite FTQ. www.zymeworks.com
• BC Partners has agreed to sell its remaining 18.5% stake in Swedish broadband provider Com Hem to Kinnevik for around $417 million. http://bit.ly/2pt5Azm
• HgCapital has sold Qundis, a German maker of heating and water consumption meters, to Kalorimeta AG & Co. for around €400 million. www.kalo.de
• Invesco has agreed to acquire a majority stake in Source, a provider of European ETFs with around $18 billion in managed assets, from Warburg Pincus. No financial terms were disclosed. http://bit.ly/2ptlvO1
• SiriusXM (Nasdaq: SIRI) has acquired Automatic, a San Francisco-based maker of connected car products, for more than $100 million. Automatic had raised over $20 million in VC funding from firms like Amicus Capital, Anthemis Group, CDK Global, Comcast Ventures, USAA, Lumia Capital and Y Combinator. http://tcrn.ch/2prLVzD
• Chris Leavy, a former BlackRock managing director, has joined Los Angeles-based cannabis investment firm MedMen as co-chair and a partner. www.medmen.com
• Joshua Ruder has joined the investment team at Marlin Equity Partners. He previously was an associate with German Lehrman Group.