March 01, 2021

🎧 Axios Re:Cap spoke with Airbnb CEO Brian Chesky and DoorDash CEO Tony Xu about their companies' post-pandemic future, after they each reported their first earnings since going public. Take a listen.

Top of the Morning

Illustration: AΓ―da Amer/Axios

Private equity is mimicking venture capital, banking on revenue growth instead of cost-cutting.

Why it matters: PE firms may struggle to maintain historical returns, particularly if the bull market slows its rampage and they're stuck with overpriced and overleveraged portfolios.

Driving the news: Bain & Co. this morning released its annual private equity report, highlighting how private equity has been paying dizzying prices:

  • U.S. buyout multiples last year averaged 11.4x EBITDA, a record.
  • A majority of U.S. leveraged buyouts last year were levered above 7x EBITDA, also a record.
  • Some of this is driven by tech, which keeps seeing its sector-leading deal share increase.
  • Per Bain & Co: "The simple math says that GPs buying companies at these prices will have to generate more value if they are to make good on return expectations β€” and they will have to do so in a highly volatile and uncertain business environment. A Bain analysis of hundreds of funds in which we co-invest shows that multiple expansion and revenue growth (not margin improvement) are by far the biggest drivers of PE returns."

But, but, but: Private equity would be quick to remind us that a bear market would mean new buying opportunities and that bondholders were mostly happy to amend-and-extend the last time things went bad.

The bottom line: When everything is going up and to the right, a venture-like returns model for private equity can work. But when things slow, PE investors may quickly remember why their VC peers are loathe to leverage portfolio companies.


Illustration: Sarah Grillo/Axios

Skydio, a Redwood City, Calif.-based autonomous drone-maker, raised $170 million in Series D funding led by existing backer Andreessen Horowitz at a valuation north of $1 billion.

  • Why it's the BFD: It comes just two months after drone-market dominator DJI was put on a U.S. national security blacklist, thus creating new opportunities for homegrown rivals. Plus, it's now notable that an AV unicorn like Skydio opted for a private financing instead of a SPAC.
  • Other investors include Lines Capital, Next47, IVP and UP Partners.
  • Bottom line: "Skydio had been consumer-oriented in its early days, making drones for hobbyists who might want an aerial shot of themselves cycling down a mountain. To avoid trees while maintaining high resolution, it developed obstacle avoidance software that later became critical in its shift towards commercial applications, now the industry's fastest growing segment." β€” Patrick McGee, FT

Venture Capital Deals

β€’ Loggi, a Brazilian delivery company, raised $205 million at nearly a $2 billion valuation. CapSur Capital led, while existing backers include SoftBank and Microsoft.

πŸš‘ Artiva, a San Diego-based developer of cancer-focused cell therapies based on allogeneic natural killer cells, raised $120 million in Series B funding. Venrock led, and was joined by Acuta Capital Partners, Cormorant, EcoR1 Capital, Franklin Templeton, Janus Henderson, Logos Capital, RTW Investments, Surveyor Capital, Wellington, GC LabCell and insiders 5AM Ventures, RA Capital Management and venBio Partners.

πŸš‘ FogPharma, a Cambridge, Mass.-based precision medicines startup, raised $107 million in Series C funding. VenBio Partners led, and was joined by Cormorant, Farallon Capital Management, Invus, T. Rowe Price, HBM Healthcare Investments, Casdin Capital, PagsGroup and insiders GV, 6 Dimensions Capital, Deerfield Management and Blue Pool Capital.

πŸš‘ Tenaya Therapeutics, a South SF-based gene therapy developer focused on heart disease, raised $106 million in Series C funding from RTW Investments, RA Capital Management, Fidelity, T. Rowe Price and return backers Column Group, Casdin Capital and GV.

β€’ Axonius, a New York-based cybersecurity asset management platform, raised $100 million in Series D funding at a $1.2 billion valuation. Stripes led, and was joined by return backers Bessemer Venture Partners, OpenView Venture Partners, Lightspeed Venture Partners and Vertex Ventures Israel.

β€’ Dream Games, a Turkish developer of puzzle games, raised $50 million in Series A funding. Index Ventures led, and was joined by insiders Balderton Capital and Makers Fund.

β€’ Employment Hero, an Australian HR platform, raised A$45 million. SEEK led, and was joined by Salesforce Ventures, OneVentures and AirTreeVentures.

πŸš€ Gitai, a Japanese developer of robots for in-space satellite servicing work, raised $17.1 million in Series B funding. SPARX Innovation led, and was joined by DcI Venture Growth Fund, Dai-ichi Life Insurance Co. and Epson.

πŸš‘ EG 427, a Paris-based gene therapy startup, raised €12 million in Series A funding led by David Lamond.

Private Equity Deals

β€’ ARX Equity Partners acquired I-Tech, a Slovakian maker of instrumentation for data acquisition and signal processing used in scientific particle accelerators.

β€’ Cerberus Capital Management and Koch agreed to buy the performance chemicals unit of PQ Group (NYSE: PQG) for $1.1 billion.

β€’ KKR and Rakuten (Tokyo: 4755) completed their previously announced purchase of a 85% stake (65/20 split) in Japanese supermarket chain Seiyu from Walmart (NYSE: WMT) at a $1.6 billion enterprise value.

β€’ Partners Group agreed to buy Finnish construction firm Parmaco from Terra Firma Capital Partners and Metric Capital.

β€’ The Sterling Group bought Merchants Metals, an Atlanta-based fence systems distributor, from Atlas Holdings.

β€’ Stir Foods, an Orange, Calif.-based portfolio company of Wind Point Partners, acquired Lancaster Fine Foods, a Lancaster, Pa.-based private label and contract manufacturer of custom sauces, dressings and condiments.

Public Offerings

β€’ Two companies, insurer Oscar Health and senior care provider InnovAge, plan to go public this week on U.S. exchanges.

β€’ ACV Auctions, a Buffalo, N.Y.-based wholesale auto auction site, filed for a $100 million IPO. It plans to list on the Nasdaq (ACVA) and reports a $41 million net loss on $208 million in revenue for 2020. ACV raised $350 million in VC funding, most recently at a $1.7 billion valuation, from firms like Bessemer Venture Partners, Tribeca Venture Partners, SoftBank, Armory Square Ventures and Durable Capital Partners.

β€’ ARA Asset Management, a Singapore-based real estate investment firm backed by Warburg Pincus, is prepping a dual listing plan in Hong Kong and Singapore, per Bloomberg.

πŸš‘ Connect Biopharma, a Chinese developer of therapies for autoimmune diseases and inflammation, filed for a $100 million IPO. The pre-revenue company plans to list on the Nasdaq (CNTB) and raised $225 million in VC funding from firms like RA Capital Management, Advantech Capital Partners, Lilly Asia Ventures, Boxer Capital, HBM Healthcare Investments and Qiming Venture Partners.

πŸš‘ Finch Therapeutics, a Somerville, Mass.-based microbiome drug development company, filed for a $100 million IPO. The company plans to list on the Nasdaq (FNCH) and raised nearly $200 million from Shumway Capital, Baupost Group, Humboldt Fund, MSD Capital, MSD Partners, Octave Group, OMX Ventures, Avenir Growth Capital, OCV Partners, SIG, SymBiosis, TPTF and Willett Advisors.

πŸš‘ Instil Bio, a Dallas-based cell therapy company focused on solid tumors, filed for a $100 million IPO. The company plans to list on the Nasdaq (TIL) and raised $380 million from Vivo Capital (11.1% pre-IPO stake), Venrock (6%), HBM Healthcare Investments and Logos Capital.

β€’ Leonardo (BIT: LDO), an Italian defense and aerospace group, filed to list part of its defense electrics unit (DRS) in New York. Renaissance Capital estimates the float could raise $2 billion.

β€’ Intermedia Cloud Communications, a Sunnyvale, Calif.-based communications and collaboration platform owned by Madison Dearborn, filed for a $100 million IPO. It plans to list on the Nasdaq (INTM) and reports a $22 million net loss on $252 million in revenue for 2020.

β€’ SentinelOne, a Mountain View-based autonomous cybersecurity platform, is prepping an IPO that could value the company north of $10 billion, per Bloomberg. It was most recently valued at $3.1 billion in a Series F round from Tiger Global, Sequoia Capital, Insight Partners and Third Point Ventures.

SPAC Stuff

πŸš€ Rocket Lab, a Huntington Beach, Calif.-based small satellite launch company, agreed to go public at a $4.1 billion valuation via reverse merger with Vector Acquisition Corp. (Nasdaq: VACQ), a SPAC formed by Vector Capital. Rocket Lab raised over $250 million, most recently at a $1.4 billion valuation, from firms like DCVC, Bessemer Venture Partners and Khosla Ventures.

πŸš€ Spire, a provider of satellite-based data and analytics, agreed to go public at a $1.6 billion valuation via reverse merger with NavSight Holdings (NYSE: NSH), a national security-focused SPAC led by Robert Coleman (founder of Six3 Systems). Spire raised around $200 million in VC funding, plus secured a PPP loan. Backers include RRE Ventures, Bessemer Venture Partners, Perennial Investment Partners, Expon Capital, Scottish Enterprise and Seraphim Capital.

β€’ Avalon Acquisition, a financial services SPAC formed by Grail Partners, filed for a $200 million IPO.

β€’ Big Sky Growth Partners, an e-commerce SPAC led by Zulily and Blue Nile co-founder Mark Vadon, filed for a $300 million IPO.

πŸš‘ Blueprint Health Merger, digital healthcare SPAC, filed for a $200 million IPO.

β€’ Build Acquisition, a software SPAC formed by BuildGroup, filed for a $200 million IPO.

β€’ BYTE Acquisition, an Israeli tech SPAC, filed for a $300 million IPO.

β€’ Cornerstone Investment Capital, a financial services SPAC, filed for a $250 million IPO.

β€’ FAST Acquisition II, a hospitality SPAC led by Ruby Tuesday founder Sandy Beall, filed for a $200 million IPO.

πŸš‘ Foresite Life Sciences, the third SPAC from Foresite Capital, filed for a $250 million IPO.

β€’ HCM Acquisition, a fintech SPAC formed by ex-Cantor Fitzgerald execs, filed for a $250 million IPO.

β€’ Kadem Sustainable Impact, a SPAC led by former U.S. Navy Sec. Ray Mabus, filed for a $175 million IPO.

β€’ RMG Acquisition, a SPAC platform led by former Carlyle Group energy investor Robert Mancini, filed for three IPOs. Targets are $725 million, $425 million and $275 million.

β€’ StoneBridge Acquisition, an Asia-Pacific β€œnew economy” SPAC, filed for a $200 million IPO.

β›½ Switchback III, a sustainable energy tech SPAC led by former RSP Permian execs, filed for a $275 million IPO.

β€’ Tiga Investments filed to raise two SPACs, targeting $300 million and $200 million.

TortoiseEcofin Acquisition III, an energy SPAC led by Vincent Cubbage, filed for a $300 million IPO.

Liquidity Events

β€’ Atlassian (Nasdaq: TEAM) agreed to buy Chartio, a San Francisco-based data analytics and visualization platform that had raised around $8 million from backers like Avalon Ventures and Bullpen Capital.

πŸš‘ Axonics Modulation Technologies (Nasdaq: AXNX) acquired Contura, a London-based developer of an injectable hydrogel for urinary incontinence, for $200 million in cash and stock. Contura had raised over $50 million from Advent Venture Partners, Beringea, BSI and Merifin Capital.

πŸš‘ Roivant Sciences agreed to buy Silicon Therapeutics, a Boston-based computational drug discovery platform, for at least $450 million in stock. Roivant is valued at around $9 billion by backers like SoftBank and SK Group, while Silicon Therapeutics had raised nearly $50 million from Sequoia Capital and Beth Israel Deaconess Medical Center.

πŸš‘ TVM Capital Healthcare sold long-term care firm Cambridge Medical and Rehabilitation Center to Dubai-listed Amanat Holdings for $232 million.

More M&A

πŸš‘ AstraZeneca (LSE: AZN) has sold off its 7.7% stake in COVID-19 vaccine developer Moderna (Nasdaq: MRNA) for more than $1 billion, per The Times of London.

β€’ CAE (TSX: CAE) agreed to buy the military training unit of L3Harris Technologies (NYSE: LHX) for US$1.05 billion.

πŸ„ Danone (Paris: BN) took an initial step toward selling its stake in Chinese dairy partner China Mengniu Dairy (HK: 02319), by converting its indirect stake into a 9.8% direct holding.


β€’ 4DX Ventures, a pan-Africa-focused VC firm, is raising $50 million for its second fund, per an SEC filing.

β€’ Firebolt Ventures is raising $50 million for its fourth fund, per an SEC filing.

β€’ Hannah Grey Ventures, a Denver-based VC firm led by Kate Beardsley (ex-Upslope Ventures) and Jessica Peltz-Zatulove (ex-MDC Ventures), is raising $25 million for its debut fund, per an SEC filing.

β€’ JMI Equity raised $1.7 billion for its 10th growth equity fund.

β€’ KarpReilly is raising $200 million for its fourth growth equity fund, per an SEC filing.

β€’ is raising $50 million for its debut fund, per an SEC filing.

β€’ Serena, a French VC firm, raised more than €300 million for its third fund.

β€’ Tribecca Venture Partners is raising $150 million for its third fund, per an SEC filing.

It's Personnel

β€’ Molly Fitzpatrick rejoined PE firm The Halifax Group as a VP. She previously was with Rallyday Partners.

β€’ Paul Murphy of Northzone Ventures is in talks to join Lightspeed Venture Partners as a London-based partner, per TechCrunch.

β€’ Storm Ventures promoted Pascale Diaine and Frederik Groce to partner.

Final Numbers

Private equity deal value by year.
Source: Bain & Co. Global Private Equity Report 2021. Notes: Includes add-ons; excludes loan-to-own transactions & acquisitions of bankrupt assets; based on announcement date; geography based on target location; average deal size calculated using deals with disclosed value only via Dealogic data.

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