Aug 23, 2021

Axios Pro Rata

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Top of the Morning

Illustration: Brendan Lynch/Axios

Valuations for U.S. venture-backed companies are at record highs, per data released this morning by PitchBook.

Between the lines: It's the new normal, in which nontraditional investors are traditional, unicorns are pigeons and startups are in the driver's seat.

Inside the numbers: Valuation creep can be seen across all stages of the VC ecosystem, from seed to pre-IPO. It's also showing up in both the medians and averages, and also across quartiles, reflecting how this isn't just a few big deals skewing the data.

  • Early-stage valuations hit all-time records in Q2 2021 of $50 million (median) and $105.4 million (average).
  • Late-stage valuations also hit new highs, with the trendline suggesting that average late-stage valuations could top $1 billion by year-end.
  • Value hunting: Deals in the four major tech hubs of SF, NYC, LA and Boston remain more expensive than deals elsewhere in the U.S.

What's happening: Most of this is just animal spirits running rampant, with price discipline now viewed as passé. Plus a ton of crossover money seeking yield and public equity markets forcing a reverse denominator effects on LP bankrolls.

  • This often means that funds are owning smaller percentages of their portfolio companies, with average late-stage stakes falling below 20% for the first time ever.
  • It's possible that a Fed taper or federal tax increases could grow valuation growth, but neither

What to watch: Fed tapering? Congress raising taxes on the wealthy? Maybe, but we've just lived through 18 months of a global pandemic that freaked out investors for all of five minutes.

  • Until and unless the public markets repeatedly punch venture capitalists in the nose, forcing them to taste their own red ink, startup valuations will continue to rise. And there's no indication that's going to happen, after several years of feeling like it should happen.

Illustration: Aïda Amer/Axios

LumiraDx, a British point-of-care diagnostics provider, reduced the size of its SPAC takeover to $3 billion from $5 billion, citing a decrease in COVID-19 testing demand.

  • Why it's the BFD: The price cut feels both too late and too early. Yes, COVID testing fell sharply between when the merger was announced in early April and late July. But tests now are surging alongside the Delta variant, with daily U.S. totals regularly topping those early April figures.
  • ROI: London-based LumiraDx raised around $800 million in private funding from firms like Morningside Group, North Atlantic Capital, the Bill & Melinda Gates Foundation, U.S. Boston Capital and Petrichor Healthcare Capital Management.
  • Bottom line: "The point-of-care test maker hopes to secure as many as 10 diagnostic approvals over the next two years for its portable platform, built into a small, two-and-a-half pound device capable of running on battery power. This includes tests for tuberculosis, influenza, COVID and troponin, the protein linked to heart damage." — Conor Hale, FierceBiotech
Venture Capital Deals

OPay, a Nigerian mobile payments platform, raised $400 million at a $2 billion valuation. SoftBank Vision Fund 2 led, and was joined by Sequoia Capital China, Meituan, Redpoint Ventures China, Source Code Capital, SoftBank Ventures Asia and 3W Capital.

Zepz (fka WorldRemit), a London-based digital cross-border payments platform, raised $292 million in new funding at a $5 billion valuation. Farallon Capital was joined by insiders Leapfrog, TCV and Accel.

Zerwerk, an Indian B2B marketplace for manufacturing items, raised $150 million in Series E funding. D1 Capital Partners led, and was joined by Avenir, IIFL and insiders Greenoaks Capital, Lightspeed Venture Partners, Sequoia Capital and Accel Partners.

XREX, a Taipei-based provider of business blockchain services like a crypto-fiat exchange, raised $17 million in seed funding. CDIB Capital Group led, and was joined by SBI Investment, Global Founders Capital, ThreeD Capital, E.Sun VC, Systex Corporation, MetaPlanet, AppWorks, BlackMarble, New Economy Ventures and Seraph Group.

Moesif, a San Francisco-based provider of API usage analytics, raised $12 million in Series A funding. Craft Ventures led, and was joined by insider Merus Capital.

Odiggo, an Egypt-based used auto parts marketplace, raised $2.2 million in seed funding from YC, 500 Startups, Plug & Play Ventures, Seedra Ventures and LoftyInc Capital.

Pocket FM, an Indian social audio platform, is in talks to raise up to $25 million in a new funding round led by insider Tencent, per TechCrunch. Other return backers would include Times Internet and Lightspeed Venture Partners.

Private Equity Deals

Illustration: Sarah Grillo/Axios

Apollo Global Management is circling British supermarket chain Sainbury's (LSE: SBRY), which could fetch bids north of £7 billion, per The Sunday Times.

  • Apollo also reportedly continues to talk with Fortress Investment Group about a sweetened takeover offer for rival grocer Morrisons (LSE: MRW), which just agreed to be acquired for £7 billion by Clayton Dubilier & Rice.

CVC Capital Partners is in talks to sell around a 10% passive ownership stake to Blue Owl (fka Dyal Capital Partners) at around a $15 billion valuation, per Bloomberg.

Kongsberg PCS, a Belgian portfolio company of OpenGate Capital, acquired MultiCam, a Dallas-based maker of computer numerical code cutting machines, from Rosewood Private Investment.

SK Capital Partners acquired a majority stake in Deltech, a Baton Rouge, La.-based maker of aromatic monomers.

Spark Infrastructure (ASX: SKI), an Australian electricity distributor, agreed to be acquired for A$5.2 billion by KKR, Ontario Teachers' Pension Plan Board and PSP Investments.

Public Offerings

🏖️ The IPO market continues its August vacation this week, with no pricings expected on U.S. exchanges.

🛑 More than 40 IPOs and share sales in Shanghai and Shenzhen have been halted, as part of a regulatory probe into intermediaries.

🚑 Definitive Healthcare, a Framingham, Mass.-based healthcare commercial intelligence software provider, filed for an IPO. It plans to list on the Nasdaq (DH) and reports a $26 million net loss on $77 million in revenue for the first half of 2021. Backers include Advent International and Spectrum Equity.

Dutch Bros, a Grants Pass, Ore.-based drive-thru coffee chain with over 450 shops, filed for an IPO. It plans to list on the NYSE (BROS) and reports $6 million of net income on $181 million in revenue for the first half of 2021. Backers include TSG Consumer Partners.

On Holding, a Swiss sneaker and athletic apparel brand, filed for an IPO. It plans to list on the NYSE (ONON), and reports $4 million of net income on $315 million in revenue for the first half of 2021. Backers include Stripes Group and Hillhouse Capital.

Thoughtworks, a Chicago-based software development and digital transformation consultancy, filed for an IPO. It plans to list on the Nasdaq (TWKS) and reports $37 million of net income on $498 million in revenue for the first half of 2021. Backers include Apax Partners and Siemens.

🚑 Tyra Biosciences, a Carlsbad, Calif.-based developer of therapies targeted at drug-resistant cancer cells, filed for an IPO. The pre-revenue company plans to list on the Nasdaq (TYRA) and raised over $150 million from firms like RA Capital (19.9% pre-IPO stake), Boxer Capital (19.9%), Canaan Partners (14.6%), Alta Partners (13%) and Nextech (6.3%).

SPAC Stuff

🚀 Virgin Orbit, Richard Branson's satellite launch company, agreed to go public at a $3.7 billion valuation via NextGen Acquisition Corp. (Nasdaq: NGCA), a SPAC led by former Goldman Sachs banker George Mattson, per the WSJ, which adds that Boeing plans to participate in the PIPE.

Direct Selling Acquisition, a direct sales SPAC, filed for a $200 million IPO.

More M&A

Ampol (ASX: ALD), Australia's largest fuel distributor, offered to buy New Zealand peer Z Energy (NZ: ZEL) for NZ$1.97 billion (24% premium to Friday’s closing price).

British antitrust regulators said they're investigating S&P Global's (NYSE: SPGI) proposed $44 billion acquisition of IHS Markit (NYSE: INFO).

Canada Pension Plan Investment Board invested $350 million in Advanced Drainage Systems (NYSE: WMS), increasing its ownership stake to 4.6%.

Nexstar (Nasdaq: NXST) agreed to buy politics publication The Hill for $130 million.

🚑 Pfizer (NYSE: PFE) said it would buy the stake it doesn't already own in cancer drug developer Trillium Therapeutics (Nasdaq: TRIL) at a US$2.26 billion valuation.


Ares Management is targeting $4 billion for its second distressed debt and equity fund, per Reuters.

FinTech Collective raised $200 million for an early-stage fund and $50 million for a DeFi-focused fund.

It's Personnel

GTCR promoted John Kos to managing director.

Final Numbers
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Data: NABE; Chart: Sara Wise/Axios

"The business community's love affair with the Fed's unusually accommodative monetary policy may be over," Axios Markets editor Sam Ro writes. Go deeper.

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