November 21, 2023

Top of the Morning

Illustration: Brendan Lynch/Axios

The OpenAI saga appears to be in a holding pattern, although the smart money remains on Sam Altman and Greg Brockman returning to the company instead of becoming official parts of the Bellevue borg.

  • So let's briefly pull back from the palace intrigue:

Why it matters: This episode is highlighting how corporate governance matters. A lot. And how too many venture capitalists have either ignored it or downplayed it in favor of FOMO.

  • A quality board of directors isn't there to oversee day-to-day activities, but can be an invaluable resource for management when it comes to major strategic decisions. It also can help preserve shareholder value, even if not every investor is directly represented.
  • A lousy board of directors, or a nonexistent one (e.g., FTX, Twitter), creates the conditions for chaos. VCs are loudly supporting Altman, but they've got to be kicking themselves for not pushing him harder on refilling director roles that once were filled by folks like Reid Hoffman. The OpenAI board is dysfunctional, but it didn't pick itself.
  • Those invested in OpenAI are still trying to put out the fire. Everyone else should be looking at their own portfolios, and trying to extinguish any corporate governance sparks.

Why it doesn't matter: The core dispute between Altman and the OpenAI board remains unclear, except that it has something to do with the speed of development and commercialization.

The BFD

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Source: Giphy

Alex Rodriguez and Marc Lore are working toward a deal whereby Carlyle would invest in their purchase of the Minnesota Timberwolves NBA franchise and Minnesota Lynx WNBA franchise, Axios has learned from several sources.

Why it's the BFD: This would settle down widespread speculation that the pair's financing might not come together, and reflects the ever-climbing values of pro sports clubs.

Details: A-Rod and Lore agreed to buy the basketball clubs in mid-2021, via a tranched-out purchase at a $1.5 billion valuation. This included an initial 20% stake, which has now grown to 40%.

  • The pair have an option to add another 40%, which they must exercise by year-end and fund by next March. That's the piece Carlyle is expected to help with, although discussions remain ongoing with other investors that might take small pieces.
  • Carlyle's tentative investment would come at around a $2.3 billion valuation. Part of that premium is just tied to NBA price inflation since A-Rod and Lore signed their original deal — based on sales of clubs in Phoenix and Charlotte — but it's also because the T-Wolves have become a much better on-court product, which has translated into significantly higher attendance and TV ratings.
  • The remaining 20% stake would be held by current majority owner Glen Taylor, but Rodriguez and Lore have a future option to buy that piece as well.

Venture Capital Deals

• LucidLink, an SF-based provider of SaaS for connecting creative teams, raised $75m in Series C funding. Brighton Park Capital led, and was joined by Headline, Adobe Ventures and Baseline Ventures. https://axios.link/3MQ1M54

• A121 Labs, an Israeli developer of generative AI products, raised $53m in Series C extension funding from Intel Capital and Comcast Ventures. https://axios.link/40SOn1R

🚑 Quotient Therapeutics, a British somatic genomics startup, raised $50m from founding investor Flagship Pioneering. https://axios.link/46pAMjC

• Indy, a French tax and paperwork platform for freelancers, raised €40m led by BlackFin Capital Partners. https://axios.link/3sLAkyI

• Matsmart-Motatos, a Swiss online grocer focused on reducing food waste, raised €40m led by Circularity Capital. https://axios.link/3MSxXRq

• RED Horticulture, a France and Netherlands-based greenhouse lighting startup, raised €17m in Series A funding. European Circular Bioeconomy Fund led, and was joined by Demeter IM and Unigrains. https://axios.link/40LctvB

• Inclusively, a New Orleans-based workforce inclusion platform, raised $13m in Series A funding. Firework Ventures led, and was joined by Benson Capital. https://axios.link/3SNjE4k

• Le Fourgon, a French sustainable packaging startup focused on reusing food and drink containers, raised €10m in Series A funding from Id4, Teampact, and La Poste Ventures. https://axios.link/40NLrDz

• Malou, a France-based restaurant sales enhancement platform, raised $10m from backers like henQ and Bleu Capital. www.malou.io

• SeeChange Technologies, a British provider of "retail-focused visual AI," raised £8m in seed extension funding. Crane Venture Partners and Triple Point Ventures co-led, and were joined by Runa Capital, True, Portfolio Ventures and Material Ventures. https://axios.link/3QPwoVv

• Panoptic, a DeFi protocol for perpetual options, raised a $7m seed round. Greenfield Capital led, and was joined by HashKey, Gumi Cryptos Capital, L1D, Heartcore Capital, Comma3 and Zee Prime Capital. https://axios.link/3QND06N

• Craftwerk, a Charlotte, N.C.-based home services platform, raised $6m in seed funding led by Forerunner Ventures. https://axios.link/47nbGn5

🚑 Doccla, a London-based virtual hospital tech provider, raised €5m in convertible note funding from Bertelsmann Investments. www.doccia.com

🚑 Salus, an Istanbul-based telemental health startup, raised $4.7m in seed funding. Northzone led, and was joined by 500 Emerging Europe, Pitch Drive, the CVC arm of İş Bank, and insiders Collective Spark and Wamda Capital. https://axios.link/3uw90on

• Zerve, an Irish coding platform for AI and data sciences development, raised $3.8m in pre-seed funding led by Elkstone Ventures. https://axios.link/3sIXV2V

ğŸŒŽ Floreon, a British bioplastics developer, raised £2m in Series A funding from Northern Gritstone. https://axios.link/3MT3SBd

• Knight Fintech, an Indian banking tech startup, is in talks to raise $25m led by Accel, per the Economic Times. https://axios.link/49JgXGX

Private Equity Deals

Illustration: Annelise Capossela/Axios

🍔 Yesterday we noted that McDonald's (NYSE: MCD) had agreed to acquire Carlyle's minority stake in a group that operates McDonald's business in mainland China, Hong Kong and Macau. Now we have some details, per a source familiar with the deal:

  • McDonald's approached Carlyle with an unsolicited bid, and is paying $1.8 billion for a 28% position. That represents around a 6.7x multiple on invested capital (MOIC) for Carlyle.
  • The business will continue to be majority-owned by CITIC Capital.
  • Beyond the numbers, highlighting this one because it comes as many private equity and venture capital firms are pulling away from China, in part due to fears that they won't have exit avenues. In this case, a fairly vanilla corporate carveout resulted in significant return on investment — even if it was about fries instead of chips.

🚑 Archimed bought and merged two contract research organizations: Symbio (U.S.) and Proinnovera (Germany). https://axios.link/47iWJlO

• Astorg agreed to acquire a 51% stake in Sofico, a Belgian provider of software for the auto leasing and mobility markets. www.sofico.global

• Bregal Unternehmerkapital acquired a majority stake in Netrics, a Swiss provider of cloud-managed services, from Waterland Private Equity. www.netrics.ch

🚑 Colibri Group, a St. Louis-based portfolio company of Gridiron Capital, acquired Therapeutic Research Center, a provider of continuing education and training for health care professionals and institutions, from LLCP. www.colibrigroup.com

• Greenbriar Equity Group recapitalized VIVE Collision, a New York-based multi-site collision repair operator, in partnership with existing backer Garnett Station Partners. www.vivecollision.com

• Professional Fighters League acquired rival mixed martial arts league Bellator from Paramount (Nasdaq: PARA). PFL backers include Waverley Capital, Ares Management, David Blitzer and SRJ Sports Investments. https://axios.link/3GcdDXA

• One Equity Partners agreed to acquire the measurement solutions unit of TechnipFMC (NYSE: FTI). www.technipfmc.com

• Skky Partners, the PE firm led by Kim Kardashian and Jay Sammons (ex-Carlyle), acquired a minority stake in Truff, a Costa Mesa, Calif.-based maker of truffle-infused hot sauces and other condiments. It's the first deal for Skky, which hasn't yet held a first close on its debut fund.

Public Offerings

• Figure, the fintech company led by former SoFi CEO Mike Cagney, is prepping an IPO for its lending arm at a valuation of between $2b and $3b, per Bloomberg. https://axios.link/46pXTLd

SPAC Stuff

• Colombier Acquisition II, a SPAC led by Omeed Malik, raised $150m in an upsized IPO. The first Colombier fund acquired PublicSq, an online marketplace for companies in what it calls "the patriot economy."

Liquidity Events

• Home Depot (NYSE: HD) agreed to buy International Designs Group, a provider of tile and other materials to contractors, from Mill Point Capital. https://axios.link/3QMY79o

• Petal, a New York-based credit card startup valued by VCs like Valar Ventures at $800m in 2022, is seeking a buyer, per Fortune. https://axios.link/3SPUt1c

• TPG is seeking to sell its 35% stake in Singapore Life Holdings (Singlife) at around a US$3b enterprise value, per Bloomberg. https://axios.link/49N7Sx8

More M&A

⚽ Ackerley Partners, a family office that owns part of the NHL's Seattle Kraken, acquired a minority stake Leeds United F.C. from 49ers Enterprises. https://axios.link/3syUfAU

• Bullish, a crypto exchange led by former NYSE president Tom Farley, acquired crypto media outlet CoinDesk from Digital Currency Group. https://axios.link/47CNNaL

• First Financial (Nasdaq: THFF) agreed to buy Tennessee-based SimplyBank for $73.4 million in cash. https://axios.link/3sQz9xI

🚑 Merck & Co. (NYSE: MRK) agreed to buy Caraway Therapeutics, a Cambridge, Mass.-based biotech focused on rare neurodegenerative diseases, for upwards of $610m. Caraway had raised over $20m from firms like Amgen Ventures, AbbVie, SV Health Investors, MRL Ventures and the Dementia Discovery Fund. https://axios.link/3G7YlmD

• Vencora, a Toronto-based fintech acquisition platform, agreed to acquire Crealogix (Swiss: CLXN), a Swiss banking software provider, for $95m. https://axios.link/3G2F8T9

Fundraising

ğŸŒŽ Kinterra Capital, a private equity firm focused on minerals critical to EVs, raised $565m for its debut fund. It's co-led by Waterton Global co-founders Cheryl Brandon and Kamal Toor. www.kinterracapital.com

• Riverwood Capital, a Menlo Park, Calif.-based growth equity firm, raised $1.8b for its fourth fund. www.riverwoodcapital.com

It's Personnel

Illustration: Sarah Grillo/Axios

RedBird Capital Partners has lost its heads of sports team and energy investing, plus several junior members of those teams, Axios has learned.

  • Behind the scenes: The moves come after the nine-year-old firm decided to stop focusing on both areas. In sports, that means emphasizing adjacencies but no longer buying into actual clubs. In energy, RedBird hasn't done a new deal in years.
  • Sports: Alec Scheiner, who came to RedBird after time with the Cleveland Browns and Dallas Cowboys, has launched a Cleveland-based firm called Otro Capital. His co-founders include fellow RedBird vets Isaac Halyard, Niraj Shah and Brent Stehlik.
  • Energy: Hunter Carpenter has formed Arete Energy, a Dallas-based private equity firm launched with other ex-RedBirders Alex Goheen and Griffin White. The firm is partnered with commodities trading firm Mercuria Energy Group, which is providing initial capital.
  • My understanding is that the transitions are amenable. RedBird is helping to seed Otro Capital, kind of like a Tiger Cub situation, while Arete is leasing space in RedBird's Dallas office.

• Medha Agarwal and Amy Yin joined Defy.vc as a general partner and venture partner, respectively. Agarwal previously was a partner with Redpoint Ventures and Yin was founder and CEO of former Defy portfolio company OfficeTogether (acquired by Envoy). www.defy.vc

• Stephen Withnell, former head of European metals and mining banking for Goldman Sachs, joined Evercore as a London-based senior advisor. https://axios.link/3R792Mr

Final Numbers

Data: Yahoo Finance; Chart: Axios Visuals

Microsoft stock hit an all-time high yesterday, after its announcement that Sam Altman and Greg Brockman would be joining to launch an in-house AI lab.

  • Shares are off a bit in this morning's open, perhaps because Microsoft CEO Satya Nadella hedged a bit in Monday afternoon TV interviews about if Altman and Brockman will really end up at Microsoft, or if they'll wind up back at OpenAI.

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