Aug 8, 2019

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning

Illustration: Lazaro Gamio/Axios

Shasta Ventures, a Silicon Valley-based VC firm whose investments have included Nest and Anaplan, is facing a major fundraising challenge after the unexpected departure of one of its top partners.

  • Doug Pepper, who joined Shasta in 2016 after more than 15 years with InterWest Partners, quit several weeks ago for a job with Iconiq Capital, Axios has learned from multiple sources.
  • Pepper was one of three "key men" on Shasta's sixth fund, which had closed on around $175 million of its $325 million target. The loss of any key man would allow limited partners to cancel their commitments, if they so chose.
    • This is particularly problematic for Shasta, as this is its first fundraise without co-founder Rob Coneybeer as a full-timer.
  • Shasta now is in discussions with those existing investors and, if it can keep them on board, is expected to lower the overall fund size target.
    • There was talk that fundraising sluggishness might have played into Pepper's departure, but the real reason for why he bailed on his partners is unclear. LPs are annoyed at having to repeat some of their due diligence, although it may be tough for them to further punish the jilted.
    • Shasta's second fund is considered to be its blockbuster, while its past couple are weaker performers.
  • There also is talk of at least one more significant departure, albeit not of remaining key men Jason Pressman or Ravi Mohan.

Axios reached out to Pepper and several Shasta representatives, but did not receive a call back.

Also...

SoulCycle is in the midst of an intense customer backlash, following reports that real estate billionaire Stephen Ross plans to hold a pricey fundraiser for President Trump. In short, many prominent SoulCyclers believe Trump is antithetical to the fitness company's values (particularly around LGBTQ rights).

Why Ross: Because he's the owner and chairman of Related Companies, which in 2005 bought Equinox, the fitness chain that later acquired SoulCycle. The result is people threatening to boycott SoulCycle, arguing that their money is being indirectly funneled to Trump.

  • Both Equinox and SoulCycle distanced themselves from Ross and the fundraiser. In its statement, SoulCycle called Ross a "passive investor" who is "not involved in the management of SoulCycle."

So how is Ross, who also owns the Miami Dolphins, a "passive investor" if his company bought Equinox, which owns SoulCycle?

  • The answer is that, over the years, Related has been diluted via new Equinox share sales and some secondary sales by Related itself. For example, private equity firm L Catterton bought in two years ago.
  • An Equinox spokesman tells me that, as of now, Ross and Related are minority shareholders in Equinox.
    • Moreover, SoulCycle's shelved IPO docs show that Ross wasn't on its board of directors, even though he would have been (alongside one other Related rep) had the offering closed.
    • Ross does appear to be on the Equinox board, but not as chairman.
  • There is no publicly-available indication that Equinox or SoulCycle pay dividends or other profit cuts to Ross, although obviously he'd benefit financially were either company to be sold.

The bottom line: When you take on an investor, you sometimes take on more than just their money. And, for investors, your activities can have unintended consequences for your companies.

🎧 Pro Rata Podcast digs into Huawei, which has found itself in the middle of the escalating U.S.-China trade war, hurting both its own business and those of its big U.S. suppliers. Listen here.

The BFD

Illustration: Sarah Grillo/Axios

Transsion, a Chinese mobile phone maker focused on African markets under the Tecno brand, plans to raise upwards of $426 million in a Shanghai IPO.

  • Why it's the BFD: Because it's a reminder of how many Chinese companies have major trading partners besides the U.S., which also was reflected in last night's better-than-expected export data. Sounds obvious, but it can sometimes be lost to myopia.
  • Bottom line: "Transsion sold 124 million phones globally in 2018, per company data. In Africa, Transsion holds 54% of the feature phone market—through its brands Tecno, Infinix, and Itel—and in smartphone sales is second to Samsung and before Huawei, according to IDC." — Jake Bright & Rita Liao, TechCrunch
Venture Capital Deals

Webflow, a San Francisco-based no-code website building platform, raised $72 million in Series A funding. Accel led, and was joined by Silversmith Capital, Rainfall Capital, FundersClub, and Draper Associates. http://axios.link/qXgX

Cloudleaf, a San Francisco-based digital supply chain startup, raised $26 million in Series B funding. Intel Capital and WRVI Capital co-led, and were joined by return backers BluePointe Ventures, Bold Capital Partners, Mahindra Partners, and Tandem Capital. http://axios.link/zLvT

WSC Sports, an Israel-based sports video content startup, raised $23 million in Series C funding. O.G. Tech Ventures led, and was joined by NTT DoCoMo Ventures, HBSE Ventures, Maor Investments, ISF, and Go4it Capital. http://axios.link/uqPH

Pathstream, a San Francisco-based developer of educational programs for colleges in partnership with big tech, raised $12 million in Series A funding from TDM Partners, Hereditas Capital Management, Bisk Ventures, New Ground Ventures, and Rethink Education. http://axios.link/w1Z8

XOi Technologies, a Nashville-based provider of field service communication solutions, raised $11 million in Series C funding. PeakSpan Capital led, and was joined by Grotech Venntures and return backers Vocap Investment Partners and Nashville Capital Network. http://axios.link/DrGO

Morty, a New York-based housing finance startup for first-time buyers, raised $8.5 million in Series A funding. Prudence Holdings led, and was joined by Lerer Hippeau and Thrive Capital. http://axios.link/W83k

Rookout, an Israeli debugging platform, raised $8 million in Series A funding. Cisco led, and was joined by return backers TLV Partners and Emerge. http://axios.link/CBwN

🚑 PurpleLab, a Furlong, Penn.-based healthcare data and analytics platform, raised $3 million from Edison Partners. www.purplelab.com

• Sunday, a direct-to-consumer lawn care startup, raised $6 million in Series A funding. Tusk Venture Partners led, and was joined by Forerunner Ventures and Bullish. http://axios.link/QzKR

🚑 Dadi, a New York-based male fertility testing and sperm storage startup, raised $5 million from The Chernin Group. www.dadikit.com

FlixMobility, a Germany-based low-cost bus service, said it has extended a Series F round that originally raised $531 million co-led by Permira and TCV at a valuation north of $2 billion. No numbers were provided, but new investors include Baillie Gifford, Luxor Capital Group, Odyssey 44. http://axios.link/3ZU7

Private Equity Deals

Allianz Global Investors, which holds a 9.3% stake in listing German lighting company Osram, said it will oppose a €3.4 billion takeover offer for Orsam from Bain Capital and The Carlyle Group. http://axios.link/HlML

Altamont Capital Partners agreed to acquire Calabasas, Calif.-based property and casualty insurer Topa Insurance Group from Topa Equities (which retains a minority stake). http://axios.link/eUpp

Epic Insurance, a portfolio company of Oak Hill Capital Partners, acquired Pleasanton, Calif.-based Trumark insurance & Financial Services. www.epicbrokers.com

Public Offerings

🚑 InMode, an Israeli maker of medical devices for aesthetic surgery, raised $70 million in its IPO by pricing at $14 per share (low end of range). It will trade on the Nasdaq (INMD) with Barclays as lead underwriter, and reports $6.4 million of net income of $31 million in revenue for Q1 2019. Shareholders include Israel Healthcare Ventures and SpaMedical International. http://axios.link/rc7z

Liquidity Events

🚑 Bayer agreed to buy Cambridge, Mass.-based cell therapy company BlueRock Therapeutics for upwards of $1 billion ($240m upfront). BlueRock in 2016 raised $225 million in Series A funding from Bayer and Versant Ventures. http://axios.link/gWBF

J.C. Flowers plans to sell around $700 million worth of shares in Japan’s Shinsei Bank (Tokyo: 8303), bringing its stake down below 4%. http://axios.link/1SJN

More M&A

Broadcom (Nasdaq: AVGO) is in “advanced talks” to buy Symantec’s (Nasdaq: SYMC) enterprise unit for around $10 billion, per the WSJ. Broadcom previously had discussed buying all of Symantec, but that broke down last month. http://axios.link/fXri

Elliott Management completed its $476 million takeover of bookseller Barnes & Noble. http://axios.link/TSSz

Salesforce (NYSE: CRM) confirmed that it will buy Israeli workforce management software provider ClickSoftware from Francisco Partners for around $1.35 billion in cash and stock. http://axios.link/Ssnf

Saudi Arabia’s Public Investment Fund is in talks to invest in Dubai-based gourmet date producer Bateel, per Reuters. http://axios.link/rXTD

🚑 Siemens Healthineers agreed to buy Waltham, Mass.-based Corindus Vascular Robotics (AMEX: CVRS) for $1.1 billion, or $4.28 per share (77% premium to yesterday’s closing price). http://axios.link/SQwq

Fundraising

Barings raised €1.5 billion for a new Europe-focused private credit fund. http://axios.link/kDI3

CITIC Capital raised $2.8 billion for its fourth China-focused buyout fund. http://axios.link/USQG

It's Personnel

Damian Blazy joined OpenGate Capital as a principal on the firm’s North American portfolio operations team. He previously was with Kelso & Co. www.opengatecapital.com

Caitlin Fiordorosa and Van Jones joined Ohio-based VC firm Drive Capital as partners. Fiordorosa previously was a VP for Vista Equity’s credit team, while Jones co-founded Hello Tractor. www.drivecapital.com

Christian Munafo joined SharesPost as chief investment officer. He previously was with HQ Capital as co-head of global private equity secondaries. www.sharespost.com

Lovell Minnick Partners promoted Scott Shelbelsky to CFO.

Final Numbers
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Data: Bloomberg, Compustat, Standard & Poor’s, FactSet, J.P. Morgan Asset Management; Chart: Axios Visuals
Dan Primack

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