Jul 25, 2019

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning

SoftBank Group CEO Masayoshi Son. Photo by Tomohiro Ohsumi/Getty Images

They say that people like sequels less than the original. But, among traditional venture capitalists in Silicon Valley, it's hard to believe there can be more animus toward SoftBank Vision Fund II than there was toward the original.

  • The Wall Street Journal reports that parent company SoftBank Group plans to plug $40 billion into the new fund, up from $28 billion the first time around.
  • Other return investors are expected to include Apple and sovereign wealth funds from Saudi Arabia and the United Arab Emirates.
    • So much for the fanciful idea that Masa Son would break with MBS over Jamal Khashoggi 's murder, either out of moral conviction or because it hindered SVF's ability to do deals.
    • No word on if Fund I investors Qualcomm, Sharp or Foxconn plan to re-up.
  • New investors could include Goldman Sachs, Standard Chartered and Kazakhstan’s sovereign wealth fund.

And then there's possible investor Microsoft, with WSJ reporting: "SoftBank executives told Microsoft they would encourage the fund’s roughly 75 companies to shift from Amazon's cloud platform to Microsoft’s."

  • Word is that talks between the two groups is at very early stages.
  • It's hard to imagine, given the size of companies SVF gravitates toward, that it would push too hard on AWS-to-Azure migrations. Maybe SVF would have that sort of leverage when considering new deals, but not for those that have already cashed checks (unless Microsoft also plans to offer exclusive, and sizable, discounts).

The big question: Can SoftBank raise another $100 billion, even after upping its own commitment. And, if so, will there be enough hungry unicorns to feed.

Uber yesterday announced that Matt Cohler (Benchmark Capital) and Arianna Huffington (independent) have resigned from the ride-hail company's board of directors.

  • This brings the total number of post-IPO board departures to three, following the earlier exit of Ryan Graves.
  • It's also worth noting that SoftBank Vision Fund's two proposed directors, Marcelo Claure and Rajeev Misra, will not be seated. Ever.
    • Those seats were promised during SoftBank massive investment into Uber at the beginning of 2018, but Axios has learned that they were contingent on SoftBank receiving CFIUS approval for the deal by the time of IPO.
    • It's not clear how or why SoftBank couldn't gain that approval after around 15 months.

🕒 It's Day 12 of Leon Black, CEO of Apollo Global Management, refusing to confirm or deny that his family foundation was the source of a $10 million donation to alleged sex trafficker Jeffrey Epstein's charity in 2015. Maybe it will come up during Apollo's Q2 earnings call next Wednesday.

🎧 Pro Rata Podcast digs into big tech's D.C. glitch, with the the Justice Dept launching an antitrust review that could sweep up Amazon, Google and Facebook. Listen here.

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In memoriam: Greg Mazanec, a partner with early-stage VC firm QED Investors, has passed away at the age of 34. He had joined the firm in 2014 after having been a marketing executive at LivingSocial, and is survived by his parents and three siblings. Greg also was an avid Pro Rata reader.

  • In lieu of flowers, the family has asked that donations be made in Greg's honor to Ashley Treatment, 800 Tydings Lane, Havre de Grace, MD 21078 or online here.
The BFD
Source: Giphy

Advent International agreed to buy Cobham (LSE: COB), a British defense and aerospace group known for developing air-to-air refueling technology. The deal is valued at £4 billion, or 165 pence per share (35% premium to yesterday's closing price).

  • Why it's the BFD: The deal could come under severe political and regulatory scrutiny in the UK, just as Boris Johnson takes over as prime minister. Expect particular focus on possible layoffs and broader defense manufacturing sector impact, similar to debate last year when Melrose Industries bought GKN.
  • On the other hand... This is yet another example of how the pending Brexit hasn't scared off many U.S. investors.
  • Bottom line: "Cobham, which employs 10,000 people and also makes electronic warfare systems and communications for military vehicles, was shaken by a string of profit warnings in 2016 and 2017, forcing it to raise cash from shareholders. CEO David Lockwood embarked on a turnaround strategy two and half years ago, focused on improving the company’s financial and operating performance." — Paul Sandle, Reuters
Venture Capital Deals

Hippo Insurance, a Mountain View, Calif.-based home insurer, raised $100 million in Series D funding at a $1 billion valuation. Bond Capital led, and was joined by Comcast, Lennar, Felicis Ventures and Fifth Wall Ventures. http://axios.link/3obF

🚑 TScan Therapeutics, a Cambridge, Mass.-based developer of t-cell therapies, raised $48 million in Series B funding. Novartis led, and was joined by GV, Longwood Fund and Bessemer Venture Partners. http://axios.link/qpt3

Tile, a San Francisco-based provider of of item-tracking products, raised $45 million in Series C funding. Francisco Partners led, and was joined by Bryant Stibel, SVB Financial Group, GGV Capital and Bessemer Venture Partners. http://axios.link/dDxJ

Standard Cognition, a San Francisco-based autonomous checkout startup, raised $35 million in Series B funding at a $535 million post-money valuation. EQT Ventures led, and was joined by return backers CRV, Initialized Capital and YC. http://axios.link/DFcf

🚑 AeroSafe, a Rochester, N.Y.-based provider of cold-chain services for the biopharma market, raised $31.5 million from Peloton Equity, Hamilton Lane and return backer Flexstone Partners. http://axios.link/u3iV

Brainly, a New York-based P2P learning platform for students, parents and teachers, raised $30 million. Naspers led, and was joined by Runa Capital and Manta Ray. www.brainly.com

🚑 ArunA Bio, an Athena, Ga.-based developer of neural exosomes for treating neurodegenerative diseases, raised $13 million from backers like Eshelman Ventures. http://axios.link/0hUF

Agrivida, a Missouri-based developer of animal feed additiives, raised $8 million. Open Prairie Rural Opportunities Fund led, and was joined by Arch Venture Partners, Batios Holdings, Cultivian Sandbox, Syngenta Ventures, Maschhoff and Middleland Capital. www.agrivida.com

Replicant, a San Francisco-based developer of voice chat bots, raised $7 million in seed funding from Atomic, Bloomberg Beta, Costanoa Ventures, and Norwest Venture Partners. http://axios.link/4wsD

Bobo’s, a Boulder, Colo.-based maker of whole grain snacks, raised $5.5 million led by Boulder Food Group. www.eatbobos.com

Intelligent Node, a -based provider of retail pricing analytics, raised $5.5 million in Series B funding. Cornerstone Fund and Calibre Ventures co-led, and were joined by MegaDelta Capital Advisors and Orios Venture Partners. www.intelligencenode.com

Private Equity Deals

Petrobras confirmed it will sell two shallow-water oilfields for $851 million (plus up to $200m in oil price-based earnouts) to Trident Energy, backed by Warburg Pincus. Petrobras also is selling another shallow-water oilfield to Australia’s Karoon Energy for $665 million. http://axios.link/xaEQ

Pritzker Private Capital completed its purchase Valicor Environmental Services, a Cincinnati-based provider of non-hazardous wastewater treatment services, from Wind Point Partners. www.valicor.com

Stonepeak Infrastructure Partners is in advanced talks to buy a minority stake in the Lightpath fiber business of Altice USA (NYSE: ATUS), at an enterprise value of around $3 billion, per Bloomberg. http://axios.link/K1ld

Public Offerings

🚑 Livongo, a Mountain View, Calif.-based digital health startup focused on managing chronic conditions like diabetes and hypertension, raised $355 million in its IPO. It priced shares at $28 (above upwardly-revised range) for an initial market cap of $2.49 billion, and will trade on the Nasdaq (LVGO) with Morgan Stanley as lead underwriter. Livongo reports a $30 million net loss on around $71 million in revenue for the six months ending June 30, 2019, and raised $237 million from firms like General Catalyst (25.4%), Kinnevik (12%), Kleiner Perkins (8.9%), Merck (7.6%) and 7WireVentures (7.1%). http://axios.link/b6CF

🚑 Castle Biosciences, a Friendswood, Texas-based provider of genetics tests for early cancer screening, raised $64 million in its IPO. The company priced at $16 per share (high end of range), for a fully-diluted market value of $288 million, and will trade on the Nasdaq (CSTL) with SVB Leerink as lead underwriter. Shareholders include HealthQuest Capital (16.3% pre-IPO stake), MGC Partners (16.3%) and Industry Ventures (11.5%). www.castlebiosciences.com

🚑 Health Catalyst, a Salt Lake City-based provider of healthcare data warehousing and analytics, raised $182 million in its IPO. It priced at $26 per share (above $24-$25 range), for an initial market cap of $912 million, and will trade on the Nasdaq (HCAT) with Goldman Sachs as lead underwriter. Health Catalyst reports a $62 million net loss on $112 million in revenue for 2018, and had raised nearly $400 million from firms like Sequoia Capital (21.9% pre-IPO stake), Norwest Venture Partners (21%) and UPMC (6.3%). www.healthcatalyst.com

IFS, a Swedish ERP software company owned by EQT Partners, told Bloomberg that it plans to IPO in 2020 or 2021. http://axios.link/E7sx

Sunnova, a Houston-based provider of residential solar energy solutions, raised $168 million in its IPO. It priced at $12 per share (low end of range), for an initial market cap of $1 billion, and will trade on the NYE (NOVA) with BAML as lead underwriter. The company reports a $68 million net loss on $104 million in revenue for 2018. Shareholders include Energy Capital Partners and Quantum Strategic Partners. www.sunnova.com

Wanda Sports Group, a live sports and events business being spun out of China’s Wanda Group, cut its proposed IPO size from 33.3 million shares at $12-$15, to 28 million shares at $9-$11 per share. It plans to trade on the Nasdaq (WSG) with Morgan Stanley as lead underwriter, and reports a $2.7 million net loss on $276 million in revenue for Q1 2019. http://axios.link/IHeO

Liquidity Events

Navis Capital Partners and Oaktree Capital have paused an auction for Asia-focused gym chain Fitness First Clubs, after failing to secure bids near their $1 billion asking price, per the WSJ. http://axios.link/86Jr

🚑 Zambon, an Italian pharma company, agreed to buy Breath Therapeutics, a German developer of drug-aerosol therapeutics in pulmonary orphan indications, for up to up to €500 million (including €140m upfront). Breath in 2017 raised €43.5 million from GIMV, Sofinnova Partners and Gilde Healthcare. www.breath-therapeutics.com

More M&A

ABB (Swiss: ABBN) hired Citigroup to find a buyer for a power-conversion unit that works with telecom and tech companies, acquired by ABB via last year’s $2.6 billion deal for GE Industrial Solutions, per Bloomberg.

Alimentation Couche-Tard (TSX: ATD), owner of the Circle K convenience stores, invested $26 million to increase its stake in Canadian cannabis products retailer Fire & Flower (TSCX: FAF) to 50.1%. http://axios.link/Yw4J

Ionic Brands (CNSX: IONC) completed its US$11 million purchase of Seattle-based cannabis edibles maker Zoots.

🏄 Nike (NYSE: NKE) is considering a sale of surf-wear brand Hurley International, per Reuters. http://axios.link/KpDR

Toyota agreed to invest $600 million into Chinese ride-hail company Didi Chuxing, with the two companies also setting up a joint venture to provide vehicle-related services to Didi’s drivers. Didi has now raised over $23 billion in private funding. http://axios.link/XK5r

• Vivendi (Paris: VIV) today is expected to pick bankers for a sale of up to a 50% stake in Universal Music Group, per Reuters. It originally announced the divestiture plans last year. http://axios.link/qMMV

Fundraising

Sun Capital Partners raised $2.3 billion for its seventh flagship buyout fund, per an SEC filing. http://axios.link/wqsD

VMG Partners raised $250 million for a VC fund focused on early-stage, tech-enabled consumer product startups. www.vmgpartners.com

It's Personnel

Yukon Partners, a Minneapolis-based private equity firm, promoted David Sampair to principal and Andrew Walker to vice president. www.yukonpartners.com

Final Numbers
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Data: Forbes; Chart: Harry Stevens/Axios
Dan Primack

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