Axios Pro Rata

A green watering can with a dollar sign painted on it.
July 11, 2017

Top of the Morning

• Lockjaw: Last week's news of Jawbone's liquidation was met with a collective shrug from most in Silicon Valley, likely because the failure took absolutely no one by surprise. But many of its investors are quietly fuming. Some because they've been unable to get information from Jawbone about the liquidation plans, or if Jawbone co-founder and CEO Hosain Rahman plans to bid on some of the assets for his new startup. Some just because of the size of the loss and frustration over what they believe was profligate spending while the company struggled to meet its product delivery goals.

  • Context: Jawbone raised around $950 million in total funding, around $440 million of which was traditional venture capital. The rest was debt provided by firms like BlackRock ($300m, not yet repaid), J.P. Morgan and Silver Lake Waterman (both of which were rapid a while back). If you use the $950 million figure, it would seem to make Jawbone the second-largest VC-backed bust of all time, only behind solar panel maker Solyndra (even if you exclude its gov't loan guarantee).
  • SMH: A fascinating part of this story is that Rahman hasn't become a Silicon Valley pariah. In fact, he found a new investor to back his startup (yes, he's an amazing fundraiser). We still aren't sure who it is, so we'll use a placeholder of Dumb Money Capital until further information becomes available.
  • Buying the farm: J.P. Morgan's investment bank got repaid on its debt, but J.P. Morgan Asset Management is getting wiped out on its big equity check into Jawbone. Interestingly, JPM also had a third exposure of sorts: The bank in early 2015 made a pair of personal loans to Rahman and his partner Alicia Engstrom, totaling nearly $17 million, to help finance his purchase of a property in Montana's Yellowstone Club. One was required to be repaid in just eight months, while the other had a one-year term. He defaulted on both, and JPM sued. Rahman's defense was that JPM "knew when entering into the Notes that repayment of the Notes was dependent on Defendants selling shares in Jawbone, and that there was uncertainty regarding whether such sale could be accomplished within the original maturity dates." In a subsequent deposition, however, Rahman admitted that no one from JPM ever said he wouldn't be liable in the event that he couldn't sell Jawbone stock." The two sides agreed to settle in May, without disclosing terms.

• Deal data: Venture capitalists disbursed $21.78 billion into 1,958 companies in Q2 2017, according to the PitchBook-NVCA Venture Monitor. That represents around a 36% dollar jump over Q1 2017 while the number of companies backed was basically flat. Median round sizes rose for both seed and early-stage companies, but fell for later-stage companies (it also found a decrease in Series D+ pre-money valuations).

• Ephemeral returns: Snap shares closed at $16.99 yesterday, the first time that the company has broken below its $17 per share IPO price.

• Job killer: The Department of Homeland Security yesterday confirmed that it is delaying implementation of the International Entrepreneur Rule until the middle of March 2018. Once its new rule is formally published, it will be soliciting comment via the Federal eRulemaking Portal, or directly to USCIS. DHS said that its decision is rooted in part of a January executive order signed by President Trump:

The Secretary shall take appropriate action to ensure that parole authority under section 212(d)(5) of the INA (8 U.S.C. 1182(d)(5)) is exercised only on a case-by-case basis in accordance with the plain language of the statute, and in all circumstances only when an individual demonstrates urgent humanitarian reasons or a significant public benefit derived from such parole.

It is true that IER used the DHS parole authority, but yesterday's decision is a very narrow reading of the EO, as one could certainly interpret the program to satisfy both the "case-by-case" and "public benefit" requirements. I continue to struggle to find any cogent public policy argument in support of the DHS decision, from either side of the aisle. If you've got one, please let me know.

• Unconventional wisdom: TPG Capital has quietly taken sides on a pair of hot-button political issues. First, it added its name to a letter opposing President Trump's withdrawal of the U.S. from the Paris climate accord. Second, it joined a group opposing the Texas legislature's proposed "bathroom bill." The former is particularly notable, given how most other large private equity firms either have cozied up to the Trump Administration or stayed silent.


Elliott Management said it is putting together a superior offer to Berkshire Hathaway Energy's $18 billion bid for the bankrupt parent company of electric grid giant Oncor, of which Elliott is the largest creditor.

  • Why it's the BFD: Oncor is the largest electric utility in Texas, and one of the country's largest power transmission companies. Plus, the spectacle of Paul Singer vs. Warren Buffett (getcha popcorn ready).
  • Bottom line: "The offer... would be a rare challenge to Buffett, who avoids auctions for companies and has told his investors he does not like to participate in bidding wars. But even without a competing bid, Buffett's deal faces a difficult road securing the approval of a bankruptcy court judge without Elliott supporting it." – Jessica DiNapoli, Reuters

Venture Capital Deals

• Darktrace, a UK-based cybersecurity startup, has raised $75 million in Series D funding at an $825 million post-money valuation. Insight Venture Partners led the round, and was joined by return backers Summit Partners, KKR and TenEleven Ventures.

• Movile, a Brazilian mobile marketplace, has raised $53 million in new funding from Naspers and Innova Capital.

• Brandless, a San Francisco-based direct-to-consumer commerce platform, has raised $35 million in Series B funding led by NEA. Other shareholders include GV, Sherpa Capital, Cowboy Ventures and Slow Ventures.

• CompareAsiaGroup, a Hong Kong-based online comparison shopping engine for financial, telecom and utility products in Asia, has raised $50 million in Series B funding. International Finance Corp. led the round, and was joined by the Alibaba Entrepreneurs Fund, SBI Group, H&A Asia Pacific and return backers Nova Founders Capital, ACE & Co., Route 66 Ventures and the Lisa and Douglas Goldman Fund.

🚑 Evelo Biosciences, a Cambridge, Mass.-based developer of monoclonal microbials, has raised $50 million in Series B funding. Founding investor Flagship VentureLabs led the round, and was joined by GV, Celgene, Alexandria Venture Investments and the Mayo Clinic.

• Hytrust, a Mountain View, Calif.-based workload security provider, has raised $36 million in Series E funding led by Advance Venture Partners. It also said that it has acquired DataGravity, a Portsmouth, N.H.-based company that had raised around $92 million in VC funding from firms like Accel, Andreessen Horowitz, CRV and General Catalyst. No terms of the acquisition were disclosed, although a source says that DataGravity's backers are not expected to recoup all of their original investment.

• Advanced Microgrid Solutions, a San Francisco-based provider of energy management solutions, has raised over $34 million in Series B funding. Energy Impact Partners led the round, and was joined by Southern Company, GE Ventures, AGL, Macquarie Capital and return backers like DBL Partners and Arnold Schwarzenegger.

• Lastline, a Redwood City, Calif.-based cybersecurity and malware protection platform, has raised $28.5 million in Series C funding led by Thomvest Ventures.

• AutoLotto, a San Francisco-based mobile lottery service, has raised $17 million in Series A funding from individual investors like Jason Port, Bruce Gibney and Tom Arrix.

• Intuition Robotics, an Israel-based maker of a robotic elder care assistant, has raised $14 million in new funding from Toyota Research Institute.

• Buoyant, a San Francisco-based developer of "service mesh" cloud infrastructure software, has raised $10.5 million in Series A funding. Benchmark led the round, and was joined by Twitter Angels and seed backers A Capital Ventures, Data Collective, Fuel Capital, SV Angel and the Webb Investment Network.

🚑 Genoox, an Israel-based genomics analytics startup, has raised $6 million in new VC funding from Inimiti Capital Partners and Glilot Capital Partners.

• Choice Pet, a Norwalk, Conn.-based per retailer, has raised $2.7 million from Petros Connecticut Fund.

Private Equity Deals

• Affinity Equity Partners has matched KKR's informal A$2.2 billion (A$3.50 per share) takeover offer for Australian telecom company Vocus Group (ASX: VOC), which now will open up its books to due diligence in the hopes of a superior bid.

• Audax Private Equity has acquired an equity stake in EnviroVac, a Savannah, Ga.-based provider of industrial cleaning and maintenance services, from RLJ Equity Partners. No financial terms were disclosed.

🚑 Becker's Healthcare, a Chicago-based B2B media and information platform for the healthcare industry, has raised an undisclosed amount of funding from Pamlico Capital.

• Convergint Technologies, a Schaumberg, Ill.-based portfolio company of KRG Capital Partners, has acquired SigNet Technologies, a Beltsville, Md.-based security systems integrator. No financial terms were disclosed.

⛽ EnCap Investments has made a $500 million equity commitment to form Silverback Exploration II, a San Antonio-based oil and gas exploration company.

🚑 EQT Partners has agreed to acquire Certara, a Princeton, N.J.-based provider of drug development consultancy, from Arsenal Capital Partners at an enterprise value of $850 million.

🚑 Galen Partners has sponsored a majority recap of CDx Diagnostics, a Suffern, N.Y.-based anatomic pathology laboratory focused on the esophagus and oral cavity. No financial terms were disclosed.

• Leeds Equity Partners has invested in Money Education, a provider of certified financial planning education and exam test prep solutions. No financial terms were disclosed.

🚑 Nexcore Technology, a Waldwick, N.J.-based portfolio company of Kidd & Co., has acquired Phase 2 Medical Manufacturing, a maker of single-use instruments and disposable medical devices. No financial terms were disclosed.

🚑 Premise Health, a Brentwood, Tenn.-based portfolio company of Water Street Healthcare Partners, has agreed to acquire eHealthScreenings, a San Antonio, Texas-based provider of biometric screenings. No financial terms were disclosed.

• Providence Strategic Growth has acquired a majority stake in SignUpGenius, a Charlotte-based online registration tool for event organizers. No financial terms were disclosed.

• Vintage Capital has offered to acquire Rent-A-Center (Nasdaq: RCII) for around $800 million, or $15 per share, according to Reuters. Of course the deal would be financed.

• WILsquare Capital has acquired Walcro, a Bloomington, Minn.-based distributor of flooring installation products. No financial terms were disclosed.

Public Offerings

🚑 Jamieson Laboratories, a Canadian vitamin-maker owned by CCMP Capital, priced its Toronto IPO at C$16.50 per share (above C$15.75 per share offering price), and closed up nearly 10% on its first day of trading for a market cap of around C$628 million.

• Torrid, a City of Industry, Calif.-based plus-sized women's fashion, has filed for a $100 million IPO. It plans to trade on the NYSE under ticker symbol CURV, with BofA Merrill Lynch and Morgan Stanley serving as co-lead underwriters. The company reports a $29 million net loss on $640 million in revenue for its most recent fiscal year. Sycamore Partners spun Torrid out of Hot Topic two years ago.

Liquidity Events

🚑 Sanofi (Paris: SAN) has agreed to acquire Protein Sciences, a Meriden, Conn.-based vaccines developer. The deal includes a $600 million upfront payment and up to $100 million in earn-outs. Sellers include Pacific Rim Ventures and Ropart Asset Mangement.

More M&A

Abercrombie & Fitch (NYSE: ANF), a New Albany, Ohio-based apparel retailer, said that it has ended talks to sell itself. Company shares sank more than 21% yesterday on the news, bringing its market cap down to just around $1 billion.

• Cogeco Communications (TSX: CCA) has agreed to acquire the assets of Pennsylvania-based MetroCast for around $1.4 billion. The deal would include a $315 million equity participation by Caisse de dépôt et placement du Québec.

• Eddie Lampert, CEO of Sears Holdings, said that he is considering a possible deal with bankrupt Sears Canada, which spun off of Sears Holdings in 2012.

• Pearson (LSE: PSON) has agreed to sell a 22% stake in book publisher Penguin Random House to joint venture partner Bertelsmann for around $1 billion.

🔨 True Value, a Chicago-based home improvement retailer, is considering a sale that could value the privately-held company at around $800 million, according to Bloomberg.


• Blackhorn Ventures, a Boulder, Colo.-based VC firm focused on "resource efficient technologies," has secured over $13 million for its $25 million debut fund, per an SEC filing.

• Loup Ventures, a Minneapolis-based early-stage VC firm focused on AI and VR, is raising $20 million for its debut fund, per an SEC filing. Partners include Gene Munster, a longtime Piper Jaffray analyst known for his Apple coverage.

⛽ NGP Energy Capital Management, an oil and gas private equity firm backed by The Carlyle Group, is seeking to raise between $5.3 billion and $5.8 billion for its twelfth fund, per the WSJ.

It's Personnel

• Rob Carlson has joined Sidley Austin as a Palo Alto-based partner in the law firm's M&A practice. He previously was with Paul Hastings.

• Fairview Capital has promoted Cynthia Tseng to partner. She has been with the Connecticut-based firm since late 2008.

• The Institutional Limited Partners Association has named Mike Mazzola as interim CEO. He is ILPA's former board chair, and recently stepped down as head of alternative investments at MetLife.

• TSG Consumer Partners has promoted Edward Wong to principal and Erik Johnson to SVP.

• Randal Quarles is expected to be nominated by President Trump to become the Federal Reserve's vice chairman of supervision (i.e. top regulator). Quarles is a former Treasury Department official under George W. Bush and ex-Carlyle Group managing director who currently leads a Salt Lake City-based private equity firm called The Cynosure Group.

Final Numbers