Oct 4, 2018

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning
Photo: Wodicka/ullstein bild via Getty Images

The Blackstone Group is getting deeper into drugs, with this morning's announcement that it will buy Clarus, a life sciences-focused growth equity firm with offices in Boston and San Francisco.

Why it matters: Buyout shops don't typically buy earlier-stage firms, particularly ones that focus on pre-revenue companies, but this indicates that Blackstone wants to significantly increase its exposure to the pharmaceutical sector.

  • Blackstone private equity chief Joe Baratta says that his team began exploring the space around three years ago, and was attracted to Clarus because it has developed expertise in partnering with large pharma to help bring promising candidates through Phase 3 trials and commercialization.
  • "It's not an early-stage binary type of investing where you drill 100 holes," Baratta adds. "There's obviously still more risk than with a traditional private equity deal, but it's further down the risk spectrum that what we think of as venture capital."
  • Blackstone in 2003 hired a group of pharma-focused bankers out of DLJ to form something called Blackstone Healthcare Partners, which did three or four deals, but it was focused at much later-stages than is Clarus.
  • Clarus, formed in 2005 by a group of former MPM Capital partners, is still investing out of a $910 million fourth fund raised in early 2017, and is expected to finish investing that fund. In the meantime, Blackstone plans to help the group staff up, which likely means a much larger fundraise next time around.

🎸 KKR is leading a group of bondholders who just received bankruptcy court approval to take over legendary guitar maker Gibson Brands, which is expected to be nearly debt-free once reorganized.

  • KKR head of alternative credit Nat Zillkha, who led his firm's process with Gibson and will take a board seat, was once lead guitarist for a New York City folk act called Red Rooster. They produced three albums before disbanding about eight years ago, but the Red Rooster website remains active.

🚗 Say hi to Joann: Yesterday we noted that Honda plans to invest $2.75 billion into GM's Cruise self-driving unit. So now's a good time to introduce you to Joann Muller, a longtime Detroit auto reporter who just joined us to focus on autonomous vehicles. She digs into the Honda deal here.

This past Sunday I moderated a panel discussion about Tech in the Age of Trump, alongside Anthony Scaramucci and Henrique Dubugras (founder of credit card startup Brex).

  • Scaramucci argued that tech companies, and social media companies in particular, need to create a self-regulatory body around issues like data privacy and content moderation. Kind of similar to FINRA, particularly as Congress talks more and more about implementing its own oversight.
  • Dubugras, who emigrated from Brazil a couple of years ago, said that the Trump administration's tightened rules on legal immigration have had a noticeable (and negative) impact on hiring.
  • Brex, is said to be raising a unicorn-priced round led by DST, but Dubugras would only give a wry smile and decline comment.

🎧 Pro Rata Podcast: Yesterday we focused on the future of digital music, as President Trump is expected to sign a bipartisan bill that was favored by artists, labels and streaming services. Plus, there's some unexpected kudos for Sen. Orin Hatch, who apparently is a songwriter in his spare time. Listen here.

The BFD
Many New Englanders know who this is. But for the rest of you...

ClimaCell, a Boston-based startup that uses cell phone and IoT data for short-term, hyper-local weather forecasting, raised $45 million in Series B funding. Clearvision Ventures led and was joined by Ford Smart Mobility, Envision Ventures and return backers Canaan Partners, Fontinalis Partners, JetBlue Technology Ventures and Square Peg Capital.

  • Why it's the BFD: Because this is about providing vital information to airlines and self-driving cars, not about helping you pick the right type of jacket.
  • Bottom line: "ClimaCell has kept a close hold on its exact methods, saying that it utilizes variations in cellular signals that can point to changing weather conditions other sensors don't pick up on. It has already demonstrated its usefulness for Jet Blue via a project the airline told Axios resulted in improved warning lead times of fog and winter weather conditions at Boston's Logan International Airport, a key hub of theirs." — Andrew Freedman, Axios science editor
Venture Capital Deals

JFrog, a Sunnyvale, Calif.-based provider of software update management solutions, raised $165 million in Series D funding at a post-money valuation north of $1 billion. Insight Venture Partners led, and was joined by Silicon Valley Funds, Spark Capital, Geodesic Capital and return backers Battery Ventures, Sapphire Ventures, Scale Venture Partners, Dell Technologies Capital and Vintage Investment Partners. http://axios.link/f7R5

• ZipRecruiter, a Los Angeles-based online job posting company, raised $156 million in second-round funding co-led by IVP and Wellington Management at a $1.5 billion post-money valuation.

OmniSci (fka MapD), a San Francisco-based developer of an “extreme analytics platform,” raised $55 million in Series C funding. Tiger Global led, and was joined by In-Q-Tel, New Enterprise Associates, Vanedge Capital, Nvidia and Verizon Ventures. www.omnisci.com

Ualá, an Argentinian mobile banking app, raised $34 million in Series B funding. Goldman Sachs led, and was joined by Ribbit Capital, Jefferies, Point72 Ventures and Soros. http://axios.link/Syub

Glassbox, an Israeli customer experience analytics platform, raised $25 million. Updata Partners led, and was joined by Ibex Investors and Gefen Capital. http://axios.link/8hx4

Strivr, a Menlo Park-based VR training startup, raised $16 million led by GreatPoint Ventures. http://axios.link/AT8a

FEG, a Chinese mobile e-sports startup, raised $15 million. China Sports Capital led, and was joined by SAIF Partners and Sea of the Stars Capital. http://axios.link/W3vx

Coolfire Solutions, a St. Louis-based developer of a situational awareness delivery platform, raised $11.5 million in Series B funding. An undisclosed strategic investor led, and was joined by return backer Clayton Venture Partners. http://axios.link/Df6t

Chasm, a Canton, Mass.-based maker of advanced materials for printed electronics and battery applications, raised $11 million in Series A funding co-led by Wave Equity Partners and NXT Ventures. www.chasmtek.com

iDonate, a Dallas-based provider of donor engagement software, raised $10 million in Series A funding led by PerformanceEdge Partners. www.idonate.com

Skale Labs, a San Francisco-based developer of blockchain scalability infrastructure, raised $8.86 million via SAFT funding led by Multicoin Capital. http://axios.link/BeZo

GoodTime, a San Francisco-based interview process management platform, raised $5 million led by Bullpen Capital. http://axios.link/n22Q

Siilo, a Dutch instant messaging app for healthcare professionals, raised €4.5 million led by EQT Ventures. www.siilo.com

🚑 Basis, a San Francisco-based mental health app, raised $3.75 million. Bedrock led, and was joined by Wave Capital and Lightspeed Venture Partners. www.mybasis.com

Stoplight, an Austin, Texas-based enterprise API lifecycle startup, raised $3.25 million in seed funding. Bill Wood Ventures led, and was joined by NextGen Venture Partners, Next Coast Ventures, Social Starts, and Capital Factory. www.stoplight.io

Private Equity Deals

🚑 HIG Capital acquired Eruptr, a Lakewood Ranch, Fla.-based provider of digital marketing patient engagement and customer acquisition software for hospitals and healthcare systems. www.eruptr.com

• KKR and Tencent agreed to invest up to $175 million into Voyager Innovations, a Philippines-based digital finance and marketing company that’s majority-owned by PLDT (NYSE: PHI).

Versalift, a Waco, Texas-based portfolio company of The Sterling Group, acquired Aspen Aerials, a Duluth, Minn.-based provider of specialty equipment used to inspect the safety and integrity of bridges. www.timemfg.com

Warburg Pincus is in talks to buy the Belgian business of Italian bank Paschi for around €50 million, per Bloomberg. http://axios.link/5yi5

Public Offerings

🚑 Change Healthcare, a Nashville-based healthcare technology company majority-owned by McKesson (NYSE: MCK), hired underwriters for an IPO that could value the company at upwards of $12 billion, per Reuters. Minority shareholders are Blackstone and Hellman & Friedman. http://axios.link/5ycf

LeasePlan, a European vehicle fleet operator, will seek a valuation of €7.5 billion via an Amsterdam IPO, per Bloomberg. Shareholders include TDR Capital and GIC. http://axios.link/ldeQ

🚑 Guardant Health, a Redwood City, Calif.-based liquid biopsy company, raised $238 million in its IPO. The company priced 12.5 million shares at $19 (above range), for an initial market cap of around $1.6 billion. It will trade on the Nasdaq (GH) and reports a $35 million net loss on $36 million in revenue for H1 2018. Guardant had raised around $540 million in VC funding from firms like SoftBank Vision Fund (39.3% pre-IPO stake), Sequoia Capital (11%), Khosla Ventures (10.1%) and Lightspeed Venture Partners (5.4%).

🚑 Kodiak Sciences, a Palo Alto, Calif.-based developer of antibodies for treating age-related macular degeneration, raised $90 million in its IPO. The pre-revenue company priced 9 million shares at $10 (low end of range), for an initial market cap of $375 million. It will trade on the Nasdaq (KOD) with Morgan Stanley as lead underwriter, and raised over $30 million from firms like Baker Brothers, Perceptive Advisors and ArrowMark Partners.

🚑 Twist Bioscience, a San Francisco-based startup focused on synthetic DNA, filed for an $86 million IPO. It plans to trade on the Nasdaq (TWST) with JPMorgan as lead underwriter. The company has raised around $280 million from firms like Arch Venture Partners (14.8% stake), Illumina (14.8%), Tao Capital Partners (7.7%), Fidelity (5.7%), Paladin Capital Group (4.9%), Foresite Capital Management and Yuri Milner. www.twistbioscience.com

Upwork, a Mountain View, Calif.-based online marketplace for freelancers, raised $187 million in its IPO. The company priced 12.5 million shares at $15 (above range), and traded up over 41% to close its first day at $21.18. It reports a $7 million net loss on $122 million in revenue for H1 2018, and lists shareholders like Benchmark (15% pre-IPO stake), Sigma Partners (14.2%), Globespan Capital Partners (12.9%), T. Rowe price (10.6%), FirstMark Capita,l (5.7%) and SG Growth Partners (5.5%). http://axios.link/91JU

Liquidity Events

Arlington Capital Partners is selling United Flexible, a Romeoville, Ill.-based maker of aircraft engine parts, to Smiths Group (LSE: SMIN) for $345 million. http://axios.link/KlLR

• CDI, a Philadelphia-based portfolio company of AE Industrial Partners, sold its talent and technology unit to Morristown, N.J.-based workforce tech company Artech. www.cdicorp.com

• Cognizant (Nasdaq: CTSH) agreed to buy Softvision, an Oakland-based provider of IT services to retailers, from Tower Arch Capital. No terms were disclosed, but earlier reports suggested around a $550 million price-tag.

• CVC Capital Partners hired Lazard to find a buyer for French chemical company ParexGroup, which could fetch €2.5 billion, per Bloomberg. http://axios.link/T815

Palo Alto Networks (NYSE: PANW) will pay $173 million to buy RedLock, a Menlo Park-based cloud security startup that had raised around $11 million from Sierra Ventures, Storm Ventures, Xtelli Holdings, Palm Drive Ventures and Dell Ventures. http://axios.link/mxUQ

More M&A

Barnes & Noble (NYSE: BKS) said it would explore strategic options, after receiving possible takeover interest from several parties, including chairman Leonard Riggio. It also adopted a poison pill to fend off hostile takeover bids. http://axios.link/Y0iT

Cloudera (NYSE: CLDR) and Hortonworks (Nasdaq: HDP) announced an all-stock merger that would create a $5.2 billion provider of data management solutions in the cloud. http://axios.link/8uez

Peabody Energy (NYSE: BTU) is in talks to buy a majority stake in Colombian coal miner Drummond International at an enterprise value of between $4 billion and $4.5 billion, per the WSJ. http://axios.link/lkYY

Saudi British Bank agreed to buy Alawwal Bank, to create Saudi Arabia’s third-largest lender with a $17.2 billion market cap. http://axios.link/X1qW

Fundraising

Epiris, a London-based private equity firm, raised £821 million for its debut fund. http://axios.link/To18

MidOcean Partners raised $1.2 billion for its fifth private equity fund focused on the business services and consumer sectors. www.midoceanpartners.com

Trinity Hunt Partners, a Dallas-based private equity firm, closed its fifth fund with $350 million. www.trinityhuntpartners.com

It's Personnel

Charles Fellers joined Colchester Partners as a director and partner. He previously was a partner in the M&A and private equity group of Kirkland & Ellis. And, way before that, he and I worked together in the trenches of a venture capital trade publication.

Vicki Peng is leaving New York-based venture firm Thrive Capital, which she joined two years ago as an investor from Dropbox. No word yet on future plans.

Mitch Theiss is joining Rockefeller Capital Management as vice chairman of strategic advisory. He previously was chairman of global industrials for BofA Merrill Lynch.

Final Numbers
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Data: Survey Monkey online poll conducted Sept. 28–30, 2018 among 2,291 U.S. adults. Total margin of error is ±3.0 percentage points. Modeled error estimates: African-American women ±9.0, age 18 to 34 ±6, suburban white women ±6.5, “Never Hillary” Independent voters ±11.0, Rural voters ±5.5. Poll methodology; Chart: Harry Stevens/Axios
Dan Primack