Aug 29, 2019

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning

Illustration: Sarah Grillo/Axios

WeWork isn't the world's first co-working space operator. But it is the one that spawned a glut of VC-backed copycats, many of which want to tell you why they're superior to their beer-tapped forefather.

  • Why it matters: These follow-on founders are playing preemptive defense against WeWork's IPO, which many expect to be a dud.

Knotel CEO Amol Sarva, after his company raised $400 million: “Some of the largest asset managers in real estate have doubts about the WeWork model... In 18 to 24 months they’ll be behind us. It’ll be like EBay and Amazon, Myspace and Facebook.”

Industrious CEO Jamie Hodari, after his company raised $80 million: “If a business appears that's capital efficient, doesn't have liabilities, is profitable and has clean. clean governance, I like being in that position."

  • It's a major contrast to what I've heard in the past 24 hours from Peloton clones, who have largely used the connected bike company's IPO filing as validation for their own models.

This is a dangerous rhetorical game that feeds into the negative narrative of a company that, for better or worse, is the sector's first horse out of the gate.

  • Knotel and Industrious are unlikely to talk their way out of WeWork's comp bucket, and neither wants to mirror the low multiples of something like London-listed IWG/Regus (which is said to be considering its own U.S. spinout/IPO).
  • Plus, what if the WeWork IPO goes well? And you just told everyone that you're nothing like WeWork?

The bottom line: These hubristic founders might view WeWork more like an incumbent than a startup, but few outside investors will see it that way.

🎧 Pro Rata Podcast digs into Elon Musk's broken promises in upstate New York, and broader questions about what SolarCity means for the future of Tesla. I'm joined by Vanity Fair's Bethany McLean. Listen here.

The BFD
Source: Giphy

Le Tote, a San Francisco-based clothing rental subscription company, agreed to buy the operations of Lord & Taylor from Hudson's Bay Co. for around $100 million (including $75m in upfront cash). The deal does not include Lord & Taylor's underlying real estate.

  • Why it's the BFD: Because 7 year-old startups like Le Tote were founded to disrupt 193 year-old retailers like Lord & Taylor, not to absorb them. But Le Tote is betting that it can revive the iconic brand by adding its tech layer to the brick-and-mortar customers, while also boosting its own brand inventory.
  • For your spreadsheets: Le Tote has raised around $52 million in VC funding from firms like Azure Capital Partners, Arsenal Growth, Korea Investment Partners, and Sway Ventures. It will take over operations at 38 stores, which cover 4.5 million square feet.
  • Bottom line: "Lord & Taylor's 2018 revenue was $1.4 billion, so it's very small compared to people's awareness of it." ⁠— Phil Wahba, Fortune
Venture Capital Deals

Credijusto, a Mexico-based provider of asset-backed loans and equipment leases to SMEs, raised $42 million in Series B funding co-led by Point72 Ventures and Goldman Sachs PSI. http://axios.link/b9NA

Vedantu, an Indian online tutoring platform, raised $42 million in Series C funding. Tiger Global and WestBridge Capital co-led, and were joined by return backers Accel, Omidyar India, and TAL Education. http://axios.link/30wf

Inkitt, a crowdsourced publishing platform, raised $16 million in Series A funding. Kleiner Perkins led, and was joined by Xploration Capital, Redalpine Capital, Speedinvest, and Earlybird. http://axios.link/HEHA

Chargebee, a San Francisco-based subscription management platform, raised $14 million in Series D funding. Steadview Capital led, and was joined by return backers Accel and Insight Venture Partners. http://axios.link/WgIW

Koru Kids, a London-based platform for finding childcare, raised £10 million in Series A funding. Atomico led, and was joined by AlbionVC, Forward Partners, Samos, JamJar, Global Founders Capital, and 7Percent. http://axios.link/t32I

Orbion Space Technology, a Houghton, Mich.-based developer of small satellite propulsion systems, raised $9.2 million in Series A funding. Material Impact led, and was joined by Invest Michigan, Invest Detroit, Wakestream Ventures, Ann Arbor Spark, and Boomerang Catapult. http://axios.link/GG8N

ReadMe, a San Francisco-based startup that helps companies customize their API documentation, raised $9 million in Series A funding led by Accel. http://axios.link/TEj6

VoiceOps, a San Francisco-based training platform for call centers, raised $9 million in Series A funding. Bain Capital Ventures led, and was joined by Accel and YC. http://axios.link/vAEC

Residently, a British property rental startup, raised £7 million in seed funding from Felix Capital, LocalGlobe, and A/O PropTech. http://axios.link/Rdye

CodeCombat, a San Francisco-based provider of gamified computer science education, raised $6 million in Series A funding. Hone Capital led, and was joined by Andreessen Horowitz, Extol Capital, and OceanOne Capital. http://axios.link/wSlc

• Salaryo, a New York-based online lending platform for U.S. freelancers and startups in co-working spaces, raised $5.5 million from Ruby Ventures. www.salaryo.com

Amazon (Nasdaq: AMZN) is in talks to invest in a new funding round for Indonesian ride-hail company GoJek, per Bloomberg. http://axios.link/YtNZ

Private Equity Deals

Apollo Global Management and affiliate Athene Holding agreed to buy aviation lending business PK AirFinance from General Electric (NYSE: GE). http://axios.link/cHrM

BazaarVoice, an Austin, Texas-based portfolio company of Marlin Equity Partners, acquired Influenster, a New York-based product discovery and reviews platform that had raised $8 million in VC funding from groups like Ebates.com. www.influenster.com

Bravo Sports, a Santa Fe Springs, Calif.-based portfolio company of Transom Capital, acquired Dwindle Distribution, an El Segundo, Calif.-based skateboard manufacturer, from Globe International (ASX: GLB). www.dwindle.com

ClearCourse Partnership, backed by Aquiline Capital Partners, acquired BrightOffice, a UK-based provider of enterprise CRM software. www.brightoffice.co.uk

Tinicum acquired PRV Metals, a Denver-based maker of forged titanium and steel products, from Platte River Equities. www.prvmetals.com

Public Offerings

The Carlyle Group is considering a U.S. listing for British minicab company Addison Lee, per Bloomberg. It likely would do so via a reverse merger with a SPAC, and comes after Carlyle failed to find a buyer. http://axios.link/YmIo

EQT Partners, a Swedish private equity firm, plans to launch its IPO within the next week, per Reuters. It may seek to raise around $1 billion at a $4 billion valuation. http://axios.link/GlMU

🛥️ Ferretti, an Italian yacht-maker owned by China’s Weichai Group, is prepping a Milan IPO in October, per Reuters. http://axios.link/GYcv

Liquidity Events

Temenos (Swiss: TEMN) agreed to buy Kony, an Austin, Texas-based provider of digital banking SaaS, for upwards of $572 million ($559m upfront). Kony had raised around $200 million from firms like Georgian Partners, Diebold Nixdorf, SoftBank, Insight Venture Partners, Telstra Ventures, Georgian Partners, Delta-V Capital, and Hamilton Lane. http://axios.link/qdsI

More M&A

🚑 CareeDx (Nasdaq: CDNA) acquired XynManagement, a Boerne, Texas-based provider of organ transplant quality tracking and waitlist management software. http://axios.link/KDp6

DXC Technology (NYSE: DXC) acquired Syscom, a Norway-based provider of service management and security consulting. http://axios.link/g91v

Forever 21, a Los Angeles-based apparel retailer, is considering a bankruptcy filing, per CNBC. http://axios.link/I6qA

🚑 Sony (Tokyo: 6758) is selling its 5% stake in Olympus (Tokyo: 7733) back to the Japanese medical equipment company for $763 million, following pressure from activist investor Dan Loeb. http://axios.link/vXoA

Fundraising

Counterpart Ventures is raising $100 million for its second fund, per an SEC filing. www.counterpart.vc

Kaszek Ventures, a Latin America-focused VC firm, raised $375 million for its fourth flagship fund and $225 million for its first opportunities fund. http://axios.link/lYyA

XYZ Ventures is raising $75 million for its second fund, focused on early-stage fintech and enterprise startups, per an SEC filing. We also hear XYZ founder Ross Fubini will step back from being a general partner at Village Global, although he'll continue to be a "network leader" there (i.e., a fund scout). http://axios.link/4EoT

It's Personnel

Bennett Goodman, co-founder of Blackstone Group credit affiliate GSO Capital Partners, will step down from his full-time role at year-end. He’ll remain a senior advisor to the firm, and chairman of GSO’s business development company. GSO will be led by Dwight Scott, who was named group president in 2017.

Baris Aksoy joined AV8 Ventures, an early-stage VC firm backed by Allianz, as a general partner. He previously led biz dev for Google Cloud’s tech, media, and telecom vertical. http://axios.link/2Mlv

Ravi Gupta is stepping down as CFO and COO of grocery delivery company Instacart, in order to join Instacart investor Sequoia Capital as a partner on its growth equity team. Prior to joining Instacart, Gupta was with KKR. http://axios.link/cbMH

James Paterson joined Ares Management as managing director of biz dev, per his LinkedIn page. He was previously was with PNC.

Final Numbers: European take-privates
Source: PitchBook European M&A Report. * Data as of June 30, 2019.

More from PitchBook:

"Generally, M&A take-privates have been in decline in Europe since 2016. However, we have seen a few examples of publicly-listed companies acquiring, delisting and then consolidating other publicly-listed companies as subsidiaries under one entity."
Dan Primack

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