Mar 10, 2017

Axios Pro Rata

By Dan Primack
Dan Primack

Friday greetings from the home office. Just a quick reminder that our morning tech newsletter, Axios Login, launches on Monday. Be sure to sign up by going here. Okay, here we go...

Top of the Morning

• Moneyball: Fantasy sports site DraftKings yesterday announced that it has closed an undisclosed amount of Series E-1 funding led by Eldridge Industries. Bloomberg reported that the round amount was around $100 million, which I've also confirmed with sources.

This one seemed a bit odd at first, given that DraftKings is still awaiting regulatory approval on its proposed merger with rival FanDuel. After all, why would DraftKings accept new dilution in exchange for equity, while FanDuel would ultimately get the benefit of new cash without the dilution (presuming the merger goes through)?

Sources tell me the answer is that FanDuel also is raising a new round of funding, but is still a few weeks away from closing. The two processes are independent of one another, although it wouldn't be too surprising if Eldridge ― a firm led by LA Dodgers part owner Todd Boehly ― participates in both. No comment from Fanduel, natch.

• Trumpland: (1) Sean Spicer yesterday reaffirmed that President Trump wants to restore Glass-Steagall, which was in both the Republican and Democratic Party platforms last summer. (2) Treasury Sec. Steve Mnuchin this week sent a letter to House leaders, asking them to raise the federal debt ceiling.

• Bizarro Trumpland: (1) Trump has loudly advocated for eliminating financial regulations, and Glass-Steagall would certainly be financial regulation. Moreover, he's been a vocal critic of Dodd-Frank, which includes sections (e.g., Volcker Rule) that are backdoor installations of some Glass-Steagall principles. (2) During the big debt ceiling showdown in 2013, Trump argued that Republicans should be willing to let the U.S. default on its obligations (something new OMB director Mick Mulvaney agreed with, and effectively voted to do).

• Secondary stuff: NASDAQ announced this week that it has received regulatory approval to expand its secondaries platform to allow auctions of feeder funds into private equity. The effort to date has mostly been focused on shares of privately-held companies, but this new effort would focus on the area of LP fund sales that is usually too small to interest traditional secondaries players.

It isn't fully launching the program quite yet, but the idea is to aggregate supply into a single trade, both for increasing buy-side demand and for improving sell-side prices. Auctions would last 30 days, with buyers possibly being able to win across multiple sellers or among small groups of individual sellers. Like with the private company share sales, this is being done in consultation with, and as a benefit for, the original issuers (general partners in this case).

• Just saying: There's a new piece in Forbes about on-demand delivery company Postmates, which says it's at a $1 billion annualized run rate (albeit without profits) and that CEO Bastian Lehmann is "charging ahead to forecast an initial public offering by 2019, skeptics be damned." At the risk of being damned, any company that says in March 2017 that it's going public by 2019 has absolutely no idea when it's going public.

• Send scoop: Remember that you can send me info anonymously via http://axios.com/tips

• Have a great weekend!

The BFD

Airbnb disclosed in an SEC filing yesterday that it has raised nearly $448 million in new Series F funding, bringing the overall round total to just over $1 billion. This does not include related secondary transactions, nor were any new investors identified.

Why it's the BFD: Airbnb continues to be the Silicon Valley "mega-unicorn" with the lowest likelihood of being disrupted itself, despite ongoing municipal regulatory battles over taxes and affordable housing. Moreover, a source close to the company says that Airbnb turned profitable on an EBITDA basis in the second half of 2016, and expects it to persist throughout 2017. This means it should have greater operational and investment flexibility.

Going forward: There continues to be no indication that Airbnb plans to go public in 2017, in part because it still needs to sort out the aforementioned regulatory issues in big media markets like New York. Plus, it's regular secondary tenders to early shareholders and vested employees means that it has less internal pressure to ring the bell.

Venture Capital Deals

• OncoResponse, a Houston-based immune-oncology antibody discovery startup, has expanded its Series A funding to $22.5 million with a new investment from the HT Family Office. Existing backers include ARCH Venture Partners, Canaan Partners, and MD Anderson, Shire, Alexandria Real Estate Equities and Helsinn Investment Fund. http://bit.ly/2m72yLU

• Turnkey, an Austin, Texas-based vacation rental management company, has raised $21 million in Series C funding. Adams Street Partners led the round, and was joined by Altos Ventures and Silverton Partners. http://bit.ly/2ndixtx

• VATBox, an Israel-based provider of VAT recovery solutions, has raised $20 million in equity funding. Target Global Fund led the round, and was joined by return backer Viola Private Equity. http://bit.ly/2makeXN

• Crealytics, a New York-based provider of paid search solutions, has raised $9.3 million in Series C funding led by Optima. http://bit.ly/2lbvQJE

• Astro, a Palo Alto, Calif.-based email app with an AI assistant, has raised $8.3 million in VC funding from Redpoint Ventures, Harrison Metal, Aspect Ventures and Upside Partnership. http://bit.ly/2ma5lVv

• Farmhouse Culture, a Watsonville, Calif.-based probiotics maker, has raised $6.5 million in Series D funding. 301 INC led the round, and was joined by return backers White Road Investments and Renewal Funds. http://strib.mn/2mOFCFn

• RealConnex, a platform that connects real estate professionals to capital and services, has raised $3.5 million in strategic funding from Silver Portal Capital. http://tcrn.ch/2nj9KFH

• Kidzen, a Minneapolis-based online marketplace for used children's clothes, has raised $3.2 million in Series A funding. Origin Ventures led the round, and was joined by Royal Street Ventures, Corigin Ventures, MergeLane and seed backers Sofia Fund and Gopher Angels. http://tcrn.ch/2m4tyLQ

Private Equity Deals

• Admiral Permian Resources, a newly-formed E&P company focused on oil and gas properties in the Permian Basin, has secured a $600 million line of equity from Pine Brook and Riverstone Holdings. http://bloom.bg/2n4Zapz

• Genstar Capital has acquired Power Products, a Menomonee Falls, Wis.-based maker of branded aftermarket electrical systems and components, from Sentinel Capital Partners. No financial terms were disclosed. www.powerproductsllc.com

Pamplona Capital Management and Jahm Najafi (CEO of Najafi Cos.) are considering an offer for Time Inc., according to the WSJ. This comes one daty after a group that included Edgar Bronfman Jr. and Access Indsuries dropped out of the process. http://reut.rs/2m7YM4X

• Pinnacle Dermatology, a Joliet, Ill.-based dermatology practice organization, has raised an undisclosed amount of equity funding from Chicago Pacific Founders. www.pinnacledermar.com

• Wind Point Partners has acquired Vee Pak, a Hodgkins, Ill.-based white label manufacturer" of beauty and personal care products. No financial terms were disclosed. www.veepak.com

Public Offerings

• J. Jill, a Quincy, Mass.-based women's apparel retailer acquired less than two years ago by TowerBrook Capital Partners, raised $152 million in its IPO. The company priced 11.67 million shares at $13 per share (below $14-$16 offering range), with shares closing their first day of trading (NYSE: JILL) at $12.97 a piece. BofA Merrill Lynch served as lead underwriter. http://for.tn/2maD4hp

• NCS Multistage Holdings, a Houston-based maker of oil well completion tools, has filed for a $100 million IPO. It plans to trade on the Nasdaq under ticker symbol NCSM, with Credit Suisse 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

• Presidio, a New York-based IT services provider owned by Apollo Global Management, raised $233 million in its IPO. The company priced 16.67 million shares at $14 per share (bottom of $14-$16 range), for an initial market cap of approximately $1.24 billion. It will trade on the Nasdaq under ticker symbol PSDO, while J.P. Morgan and Citigroup served as lead underwriters. www.presidio.com

• Tocagen, a San Diego-based developer of cancer-selective gene therapy products, has filed for an $86.25 million IPO. It plans to trade on the Nasdaq under ticker symbol TOCA, with Leerink Partners listed as left lead underwriter. http://bit.ly/2m7DNiJ

More M&A

• CCR SA, a Brazilian toll road operator, has acquired a 15% stake in a São Paulo subway line from construction conglomerate Odebrecht SA. http://reut.rs/2mt1RQj

• HNA Group of China is seeking to increase its stake in Germany's Deutsche Bank, in which it already holds a 3.04% stake, according to Reuters. http://reut.rs/2msRRGG

Fundraising

• Ardian is targeting €1.1 billion for its fifth co-investment fund, according to the WSJ. http://on.wsj.com/2mP6CVe

• Marlin Equity Partners disclosed in SEC filings that it is seeking upwards of $2.5 billion for its fifth flagship fund and upwards of $750 million for its second lower middle-market fund. www.marlinequity.com

• Pioneer Capital, a New Zealand-based VC and private equity firm, held a NZ$210 million first close on its third fund. The hard cap is NZ$260 million. www.pioneercapital.co.nz

It's Personnel

• Simon Anderson, former CEO of DreamHost and co-founder of Inkank, has joined growth equity firm Great Hill Partners as an entrepreneur-in-residence. www.greathillpartners.com

• Wes Owen has joined private equity firm Cyprium Partners as a New York-based managing director. He previously was a managing director with Praesidian Partners. www.cyprium.com

Final Numbers: Digital Divide
Dan Primack