Nov 22, 2019

Axios Pro Rata

Top of the Morning
Illustration: Sarah Grillo/Axios

All eyes have been on national politics (and Total Recall trucks), but I didn't want the week to end without highlighting a pair of lower-level government roadblocks for the gig economy's path to profitability.

New Jersey fined Uber $649 million for years of back-taxes, including $119 million in interest, for allegedly misclassifying its drivers as independent contractors instead of as employees.

  • This is different from the situation in California, where state legislators are seeking to codify gig economy "employment." In New Jersey, the state's labor department believes Uber skirted existing law.
  • It's the first such state lawsuit ever against Uber, which plans to challenge NJ's determination.
  • If NJ is successful, many other states could pursue similar claims against Uber and other gig economy companies — the sort of thing that even the best-capitalized of them would struggle to handle.

Washington, D.C. is suing DoorDash for allegedly misleading customers about how tips factored into delivery worker pay.

  • Again, the contractor vs. employee dichotomy is at issue. D.C. allows "tipped wages," meaning that businesses can pay certain workers like restaurant servers less than standard minimum wage, so long as tips fill the gap.
  • But, the D.C. attorney general's office tells Axios that it views DoorDash as different because a restaurant server is an employee, not a contractor.
  • DoorDash recently decided to change its tipping policy. But it could be on the hook for costly penalties in D.C., let alone in other jurisdictions that follow suit. And it's hardly the only gig economy company to have used a similar tipping process.

• VC land: Axios has learned that NEA partner Dayna Grayson is leaving to launch her own shop, which will be called Construct Capital.

  • She's been at NEA since 2012, leading such deals as OnShape (sold to PTC for $470m), Desktop Metal, and Framebridge.
  • Grayson declined comment, likely because she's in the early stages of fundraising.

• For the record: President Trump this morning referred to cybersecurity firm CrowdStrike as a "Ukranian company," during a Fox News interview. The hosts barely blinked, but:

  • CrowdStrike was founded in Silicon Valley, and remains headquartered there.
  • It went public on the Nasdaq earlier this year. One of its co-founders is from New Jersey. The other was born in Moscow (not Ukraine), and is a U.S. citizen.
  • Its largest outside shareholder is private equity firm Warburg Pincus, which first backed CrowdStrike as a private company. Trump should know Warburg Pincus, because he hired one of its partners to be his top international economics advisor, before later naming him U.S. Ambassador to India.

🎧 Pro Rata Podcast digs into Amazon's habit of identifying popular products, and then creating private-label knockoffs.

  • My guest is Allbirds CEO Joey Zwillinger, who argues that Amazon's wealth lets it control search engine results, including for Allbirds, and makes it very difficult to sue for infringement.
  • Listen here

Source: Giphy

Bumble Bee Foods, a San Diego-based canned tuna company owned by Lion Capital, filed for Chapter 11 bankruptcy protection and disclosed plans to sell its assets to Taiwan's FCF Fishery Co. for $925 million.

  • Why it's the BFD: Because while Bumble Bee earnings have been stung by changing consumer tastes, this is more a result of the company being unable to make interest payments because of its involvement in a price-fixing scheme with rivals Chicken of the Sea and StarKist. Not only did Bumble Bee agree to pay a $25 million criminal fine and can its CEO, but it continues to fight class action lawsuits from customers and retailers.
  • History: Lion Capital paid $980 million to buy Bumble Bee in 2010.
  • Bottom line: "Bumble Bee’s roots date back more than a century when the Columbia River Packers Association began fishing for tuna off the Oregon coast... [It] has 41% of the U.S. canned tuna market and roughly 13% of the U.S. share of sales of canned 'light meat' tuna, according to CFO Kent McNeil. It also has about 40% of U.S. sardine sales." — Alexander Gladstone, WSJ
Venture Capital Deals

Automation Anywhere, a San Jose, Calif.-based robotic process automation startup, raised $290 million in Series B funding at a $6.8 billion post-money valuation. Salesforce Ventures led, and was joined by return backers SoftBank Vision Fund and Goldman Sachs.

Juniper Square, a San Francisco-based investment management platform for commercial real estate, raised $75 million in Series C funding. Redpoint Ventures led, and was joined by Felicis Ventures, Ribbit Capital, and Zigg Capital.

🚑 Rightway Healthcare, a New York-based health benefits navigation platform, raised $20 million in Series B funding led by Thrive Capital.

Group14 Technologies, a Seattle-based developer of materials for electric vehicle batteries, raised $18 million from Aperex Technologies, Showa Denko, Cabot Corp., BASF, and OVP Venture Partners.

Route, a Lehi, Utah-based shipping insurance platform, raised $12 million in seed funding from Album VC and Peak Venture Capital.

ZecOps, a San Francisco-based digital forensics and incident response platform, raised $10.2 million in seed funding from CEAS Investments, Evolution Equity Partners, KPN Ventures, Plug and Play Ventures, and Stormbreaker Venture Group.

Linear, a bug-tracking startup, raised $4.2 million in seed funding. Sequoia Capital led, and was joined by Index Ventures.

Pawp, a New York-based direct-to-consumer pet supplies startup, raised $3 million in seed funding from Digitalis and DCM.

MontyCloud, a Seattle-based cloud management platform, raised $2.85 million in seed funding led by Madrona Venture Group.

Searchlight, a software platform for helping companies hire diverse teams, raised $2.5 million in seed funding from Accel, Founders Fund, and Soma Capital.

Private Equity Deals

Advent International and Cinven are among those kicking tires on a $7 billion portfolio of beauty brands, including Clairol, that Coty (NYSE: COTY) is expected to sell, per Reuters. Othger suitors are expected to include Unilever and Henkel.

The Blackstone Group again extended the deadline for Japanese hotelier Unizo (Tokyo: 3258) to respond to its $1.6 billion buyout offer.

Crescent Point Capital invested $36 million for a minority stake in N Kid, a Vietnamese operator of family entertainment centers.

• Harvest Partners bought Service Express, a Grand Rapids, Mich.-based provider of post-warranty data center equipment maintenance services, from Pamlico Capital.

Levine Leichtman Capital Partners agreed to buy Milton Industries, a Chicago-based maker of tools and accessories for pneumatic applications, from Crimson Investment and Maranon Capital.

Vision, a Chicago-based portfolio company of H.I.G. Capital, acquired SourceLink, an Itasca, Ill.-based provider of personalized marketing solutions, from Aterian Investment Partners.

Public Offerings

BAM, Thailand’s largest distressed debt management firm, plans to raise upwards of $888 million in a local IPO.

🚑 Genetron, a Beijing-based cancer genomics company, filed for a $100 million IPO. It plans to trade on the Nasdaq (GTH) with Credit Suisse and CIC as lead underwriters, and reports a $76 million loss on $31 million in revenue for the first nine months of 2019. The company raised nearly $80 million in VC funding from groups like Zhongjin Kangrui Medical Industrial Fund, V Star Capital and Shenshang Xingye Fund.

Nitro Software, a San Francisco-based provider of online document creation software, plans to raise A$110 million via an Australia IPO. The company has raised around US$37 million in VC funding from firms like Battery Ventures and Starfish Ventures.

Liquidity Events

Aon (NYSE: AON) agreed to buy CoverWallet, a New York-based digital insurance platform for SMEs that had raised over $30 million from firms like Foundation Capital, Index Ventures, USV, and Zurich Insurance Group.

More M&A

Exxon Mobil (NYSE: XOM) plans to sell up to $25 billion of oil and gas fields in Europe, Asia, and Africa, per Reuters.


China Reform Holdings, a state-owned group, is working with government officials to launch a $7 billion investment fund focused on the domestic security industry.

Next Coast Ventures, an Austin, Texas-based seed firm, raised $130 million for its second fund.

Tony Huang (ex-NXT, WI Harper) has launched a San Francisco-based venture debt shop called Kiso Capital, per his LinkedIn page.

Y Combinator is closing its China outpost, saying it will serve international companies out of its Silicon Valley headquarters.

Final Numbers
Source: Renaissance Capital. Data through 11/22/19.

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