Apr 9, 2020

Axios Pro Rata

🚴 Get ready: We'll be doing another Peloton ride for Axios Pro Rata readers this Saturday morning, with proceeds going to a nonprofit that provides meals and childcare to front-line medical workers in New York. Full details tomorrow.

  • We already have some very generous readers who have committed to contribute $5 per rider. If you'd like to match them, or donate a different amount, please let me know today via email.
Top of the Morning

Illustration: Sarah Grillo/Axios

Before the Paycheck Protection Program formally launched last Friday, we knew two things: The rollout would be rocky, and the initial $350 billion wouldn't be enough for America's small businesses.

State of play: Banks and government officials have been working to smooth out the process, and today the Senate will vote to pump another $250 billion into the program.

No sure thing: The supplemental is in response to a request from the Treasury Department, based on initial PPP loan demand, but it isn't guaranteed to pass.

  • Axios' Alayna Treene reports that any single senator can sink the bill just by showing up and objecting, because Sen. Mitch McConnell (R-Ky.) is bringing it to the floor via unanimous consent.
  • The buzz on Capitol Hill is that Democrats will block the bill, and instead propose an alternative that also includes new money for hospitals, state and local governments, SNAP benefits, and community-based financial institutions that otherwise are unable to participate in PPP.
  • In other words: Both sides are headed to the negotiating table, although there is no disagreement that the initial $250 billion was insufficient.

If it passes, this still does nothing to help most private equity-backed companies with fewer than 500 employees, as it does not address existing Small Business Administration affiliation rules.

  • There have been some guidance modifications to help VC-backed companies, although they remain maddeningly subjective and arguably exclusionary.
  • Many banks do now feel more comfortable lending to VC-backed companies, based on updated lender deference rules. But the onus is now on applicants, who must affirmatively certify that they don't trip affiliation rules. For example, if your Series C lead only owns 10% of the company and doesn't have a board seat, it could still become a problem if their stock charter allows it to block dividends.
  • In short: Startups should only apply in consultation with their lawyers.
  • It's possible this will get addressed in supplemental negotiations, but it's more likely at the bottom of a much more consequential list.

The bottom line: This is iterative stimulus, with crescendoing calls for "phase 4" legislation. The big question, though, is how many businesses may fail while waiting for the rules and budgets to change in their favor.


Illustration: Eniola Odetunde/Axios

Pacific Collective, a California retail developer, is suing, asking a court to declare the state's coronavirus lockdown to be an act of God, or force majeure, that prevented it from completing a $4.2 million property purchase from ExxonMobil (NYSE: XOM), per Reuters.

  • Why it's the BFD: This is the leading edge of what could become a flood of similar lawsuits. Force majeure is a common term in M&A contracts, but there is no legal consensus that it covers a pandemic — let alone government action in response to a pandemic.
  • The bottom line: "Clauses that are silent on pandemics, epidemics, or other viral outbreaks are likely to be insufficient for a force majeure defense due to COVID-19, unless, of course, courts liberalize the force majeure analysis to account for market realities." — Paul, Weiss litigation department note
Pro Rata for Kids

Today’s project is to ask your kid(s) to create a business plan. All on a single sheet of paper, preferably with some drawings.

  • What do they want to make and sell? Or is it a service, like dog-walking?
  • How much will they sell it for?
  • What materials/ingredients might they need?
  • Who will their customers be?

Per usual, please send me what they come up with and we’ll share them here.

Yesterday’s project was to create a “stained glass window.” Seems to have caused some messes and stresses, so we’ll deem it a failed assignment. But there was at least one brother/sister pair who made a smart pivot:

Venture Capital Deals

Cohesity, a San Jose, Calif.-based software-defined data management company, raised $250 million in Series E funding at a $2.5 billion post-money valuation. DFJ Growth, Foundation Capital, Greenspring Associates, Wing VC, HP Enterprise, and Cisco were joined by return backers Sequoia Capital and SoftBank Vision Fund. www.cohesity.com

BigBasket, an Indian online grocer, raised $60 million from return backers Alibaba, Mirae Asset Management, and CDC Group. http://axios.link/7O6I

Paidy, a Japanese startup for online payments without credit cards, raised $48 million in new Series C funding from Itochu Corp. http://axios.link/Dyi8

Bugcrowd, a San Francisco-based crowdsourced cybersecurity startup, raised $30 million in Series D funding led by Rally Ventures. www.bugcrowd.com

Teamworks, a Durham, N.C.-based athlete engagement platform for collegiate and pro teams, raised $25 million in Series C funding. Delta-v Capital led, and was joined by Afia Capital, Stadia Ventures, and return backers General Catalyst, Seaport Capital, DUMAC, Steve Pagliuca, and Reggie Love. http://axios.link/8vSl

Tonkean, a San Francisco-based no-code automation platform, raised $24 million in Series A funding led by Lightspeed Venture Partners. http://axios.link/r7ZY

🚑 SilverCloud Health, a Boston-based digital mental health platform, raised $16 million in Series B funding. MemorialCare Innovation Fund led, and was joined by LRVHealth, OSF Ventures and UnityPoint Health Ventures, and return backers Act Venture Capital and B Capital Group. http://axios.link/5P0E

SourceDay, an Austin, Texas-based direct purchasing automation platform, raised $12.5 million in Series B funding. Baird Capital led, and was joined by Silverton Partners, ATX Ventures, and Draper Associates. http://axios.link/vgLx

Codemotion, a Rome-based community platform for software developers, raised €6 million in second-round funding from P101, Primomiglio, and CDP VC. http://axios.link/MO8H

Node, a San Francisco-based provider of self-service AI solutions, raised $6 million. Mark Cuban led, and was joined by Artco, NewView Capital Partners, Canaan Partners, Gingerbread Capital, Galaxy Ventures, and Ken Goldman. http://axios.link/KgUg

Living Security, an Austin, Texas-based provider of enterprise security awareness software, raised $5 million in Series A funding. Silverton Partners led, and was joined by Active Capital, Rain Capital, and SaaS Venture Partners. http://axios.link/S1R4

ClimateView, a Swedish developer of monitoring and visualization tools for greenhouse gas emissions, raised $2.5 million from Norrsken Foundation and Nordic Makers. http://axios.link/jMBs

Private Equity Deals

Alpine Air Express, a Provo, Utah-based air cargo company owned by AE Industrial Partners, acquired the assets of Great Lakes Airlines. http://axios.link/YCOw

Bayou City Energy Management and Mach Resources received U.S. bankruptcy court approval for their $220 million purchase of Oklahoma shale company Alta Mesa Resources. http://axios.link/mZOZ

Bernhard Capital completed its acquisition of Ascension Wastewater Treatment, a private sewer utility operator in Louisiana. www.awtla.com

🚑 Veronis Suhler Stevenson and NewSpring Health Capital acquired BRC Healthcare, a Texas-based addiction treatment services company. http://axios.link/p5ld

🚑 Webster Equity Partners committed $80 million to form a gastroenterology practice platform called One GI, including an initial acquisition of Memphis-based Gastro One, per PE Hub. http://axios.link/LCtX

Public Offerings

🚑 WeDoctor, a Chinese mobile medical scheduling and information company backed by Tencent, added Citi to its list of IPO underwriters. This replaces Credit Suisse, which was dropped Credit Suisse after the Luckin' Coffee scandal broke. http://axios.link/xwfT

More M&A

iFood, a Brazilian food delivery startup controlled by Naspers, acquired a control stake in Colombian rival Domicilios. http://axios.link/CFNl

Investcorp acquired German cybersecurity company Avira for $180 million. http://axios.link/lPgW

Sabre (Nasdaq: SABR) will be allowed to move forward with its $360 million acquisition of Miami-based airline industry software provider Farelogix, after successfully defending itself against a U.S. Justice Department antitrust lawsuit. http://axios.link/pHqQ

Sony paid $400 million to acquire a 4.98% stake in Chinese animation streaming company Bilibili (Nasdaq: BILI). http://axios.link/FGpb


The Blackstone Group raised €9.8 billion for its sixth European real estate private equity fund, the largest ever of its kind. http://axios.link/IaWK

Index Ventures raised $800 million for its tenth early stage VC fund, and $1.2 billion for its fifth growth fund. http://axios.link/ztQC

Monogram Capital Partners, a Beverly Hills-based private equity firm focused on the consumer and retail sectors, is raising its second fund, per an SEC filing. www.monogramcapital.com

Qiming Venture Partners, a China-focused VC firm, raised $1.1 billion for its seventh fund. http://axios.link/kvFp

Spectrum Equity is raising $1.5 billion for its ninth fund, plus $150 million for an overage fund, per SEC filings. www.spectrumequity.com

Correction: Yesterday's issue erred in the amount StepStone Group raised for its fourth private equity secondaries opportunity fund. The correct amount is $2.1 billion.

It's Personnel

Khaled Habayeb joined Barclays as a managing director of health care equity capital markets. He previously was with Deutsche Bank. www.barclays.com

Matthieu Pigasse, former head of France for Lazard, joined Centerview as head of a new Paris office. http://axios.link/Dirc

Judy Wade and Adam Grosser joined Canada Pension Plan Investment Board as a San Francisco-based managing director and senior adviser, respectively. Wade previously was with McKinsey & Co., while Grosser was with Silver Lake. www.cppinvestments.com

Final Numbers
Source: PitchBook. Data as of April 7, 2020.

Venture funding for biopharma hit an all-time record in Q1 2020, although the number of first-time deals decreased.

Go deeper: Bruce Booth, a partner with Atlas Venture, dives into the data.

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