Nov 2, 2018

Axios Pro Rata

By Dan Primack
Dan Primack

Sunday! Sunday!! Sunday!!! Don't miss the premiere of Axios on HBO. It's like a monster truck rally, but with fewer monster trucks. 6:30pm ET, and then replayed again at 11:30 pm.

Top of the Morning
Source: Giphy

I came today to bury The Blackstone Group. But after learning a bit more, I'll just throw a shovel at it.

There have been numerous reports this week about how the investment giant is helping to bankroll the opposition to Proposition 10 in California, which would allow cities to expand rent control. More specifically, Blackstone has been doing so via real estate investment funds whose limited partners include California public pension funds — i.e., groups that represent some of the very people who could benefit from expanded rent control.

  • At first glance, it appears that Blackstone is calling capital that is then funneled to political groups. And that's indeed what some media outlets have suggested.
  • But a deeper reading of the disclosure documents shows that it's Blackstone portfolio companies footing the bill, with the Blackstone funds listed first on disclosure documents only because they are the portfolio companies' ultimate owner (admittedly, the docs are needlessly confusing).

One could certainly argue that this is a distinction without more than a legal difference, but Blackstone portfolio companies do have a fiduciary duty to... well, themselves. And any limited partner in a generic real estate investment fund should expect that portfolio companies will take actions to maintain/increase the value of its properties (whether directed by the PE owner or not).

It's also worth noting that a Blackstone spokesman emailed:

"We agree steps should be taken to address housing affordability in California, but virtually all independent economists agree this measure exacerbates California's existing shortage by discouraging new construction and reducing new investment in affordable housing.”

So why the shovel? First, because the above rhetoric is empty. There are three other ballot initiatives aimed at increasing affordable housing in California, and Blackstone portfolio companies donated to none of them.

Bigger picture, I also see no evidence that Blackstone warned the public pensions that it might indirectly lobby against the immediate interests of pensioners — let alone that it had done so — and the firm is savvy enough to know that most public pension oversight of PE investments is inadequate at best. Just because LPs should know something doesn't mean they do, and that goes triple for public pension LPs.

Also...

Election Day: We'd be remiss to not highlight how the Illinois governor's race not only is about an incumbent Republican vs. a well-known Democrat, but also about a big buyout executive vs. a venture capitalist.

  • Polling puts Gov. Bruce Rauner (ex-GTCR) well behind challenger J.B. Pritzker (on leave from Pritzker Group).

Recommended reading from Bloomberg's Misyrlena Egkolfopoulou : Only candy-eating rats survived private equity's Necco takeover:

"Francesco D’Amelio, a former factory worker on the maintenance team, recalls catching 112 rodents in one weekend this past August. In the past, he said he saw bathrooms with no toilet paper and using water instead of unavailable chemicals to sanitize kettles that were used to cook the candy."

Per Kia: Ryan Zurrer has left Polychain Capital, where he has been a principal and venture partner since late 2016, the firm confirmed to Axios. No word yet on his future plans.

  • Polychain Capital was founded by Olaf Carson-We, the first employee at Coinbase. It has since expanded from a hedge fund investing in digital tokens to also raising a traditional VC fund that invests in startup equity.

October jobs report: Non-farm payrolls +250k. Unemployment steady at 3.7%. Wages +3.1% year-over-year. Go deeper.

🎧 Podcast: I talk with PR exec Aaron Gouveia (aka @DaddyFiles) about what happened when his 5 year-old son was bullied at school for wearing nail-polish, and Aaron tweeted about it. Listen here.

The BFD
Source: Giphy

Astroscale, a Singapore-based developer of space debris removal services, raised $50 million. INCJ led, and was joined by SBI Investment and Mitsubishi Estate Co.

  • Why it's the BFD: Because there are an estimated 750,000 pieces of space debris at least one centimeter long, and that poses a major danger for the growing number of commercial space companies — particularly those focused on low Earth orbit satellite clusters.
  • Go deeper: Yes, there really is a lot of space junk
  • Bottom line: "The company is currently working on its first debris capture demonstration mission, which is scheduled to launch in early 2020. [It] will consist of two spacecrafts, a Chaser and a Target, stacked together. The Chaser will repeatedly release and capture the Target in a series of demonstrations, including rendezvous and docking, and proximity operations." — Annamarie Nyiradi, Via Satellite
Venture Capital Deals

🍕 Zume, a Mountain View-based robotic pizza delivery and logistics startup, is in the process of raising upwards of $750 million led by SoftBank Vision Fund at a $2.25 billion valuation, per the WSJ. http://axios.link/052T

HashiCorp, a San Francisco-based developer of open-source tools for managing cloud infrastructure, raised $100 million at a $1.9 billion valuation. IVP led, and was joined by AppDynamics, Slack, Snap, Bessemer Venture Partners and return backer GGV Capital, Mayfield, Redpoint Ventures and True Ventures. http://axios.link/vgEk

• DeepMap, a Palo Alto-based mapping startup for autonomous autos, raised an estimated $60 million in Series B funding at a $475 million valuation. Backers include Generation Investment Management, Nvidia, Robert Bosch VC, Andreessen Horowitz, Accel Partners and GSR Ventures. http://axios.link/1J3i

Hydrofarm, a Petaluma, Calif.-based maker of hydroponics equipment and horticultural products, raised $55 million from Serruya Private Equity, Hawthorn Equity Partners and Broadband Capital. http://axios.link/YFFo

Compare.com, a Richmond, Va.-based car insurance comparison site, raised $35 million in equity and debt funding from Admiral Group and Admiral CEO Henry Engelhardt. http://axios.link/wnc9

• Airobotics, an Israeli developer of automated industrial drones, raised $30 million in Series D funding. Temasek led, and was joined by BlueRun Ventures, CRV and OurCrowd. http://axios.link/gARg

• Shape Security, a Mountain View-based cybersecurity company focused on imitation attacks, raised $26 million in Series E funding. Norwest Venture Partners led, and was joined by Kleiner Perkins, Allegis Capital, JetBlue Ventures and Singtel. http://axios.link/twOJ

Molekule, a San Francisco-based developer of connected indoor air purifiers, raised $25 million in Series B funding. Foundry Group led, and was joined by return backers Crosslink Capital, Uncork Capital and TransLink Capital. http://axios.link/rx4Q

• Rockset, a San Mateo, Calif.-based serverless search and analytics engine, raised $18.5 million in Series A funding co-led by Greylock and Sequoia Capital. http://axios.link/uqRE

🚑 Omeicos Therapeutics, a German drug developer focused on cardiovascular and ophthalmic disease, raised €17 million in Series C funding. Forbion led, and was joined by Vesalius Biocapital, Remiges BioPharma Fund, SMS Group, KFW, VC Funds Technologie Berlin, High-Tech Gründerfonds and The Falck Revocable Trust. www.omeicos.com

Edo, a New York-based provider of real-time analytics for TV commercials, raised $12 million led by Breyer Capital. http://axios.link/anHH

• PeopleFund, a South Korean P2P lending startup, raised $11 million in Series B funding led by Kakao Pay. http://axios.link/UupF

Validere, a Toronto-based IoT and AI platform for the oil and gas industry, raised C$7 million in seed funding from Sallyport Investments, YC, Real Ventures, Moment Ventures and ZhenFund. www.validere.com

Private Equity Deals

CenterOak Partners acquired a majority stake in GNAP, a Byron Center, Mich.-based distributor of industrial abrasive products, equipment and specialty ceramics. www.grandnorthern.com

iCapital Network, a New York-based fintech platform for alternative investments, raised an undisclosed amount of funding from Blackstone, BlackRock, Credit Suisse, Morgan Stanley and UBS. www.icapitalnetwork.com

LLR Partners invested in Edmunds & Associates, a Northfield, N.J.-based provider of software for local governments. www.edmundsassoc.com

Rotunda Capital Partners acquired a majority stake in MacQueen Equipment, a St. Paul, Minn.-based seller of street sweepers, snow removers and refuse trucks. www.macqueeneq.com

Liquidity Events

IQMS Software, a Paso Robles, Calif.-based manufacturing software company backed by Bannekar Partners and TCV, hired Harris Williams to find a buyer, per PE News. http://axios.link/XTJx

More M&A

Canada Goose (TSX: GOOS) acquired Ontario-based winter-boot maker Baffin for C$32.5 million in cash and stock. http://axios.link/dhku

🚑 Illumina (Nasdaq: ILMN) agreed to buy smaller gene sequencing company Pacific Biosciences of California (Nasdaq: PACB) for $1.2 billion in cash, or $8 per share (77% premium to Thursday close). http://axios.link/YRGF

🚑 Pfizer (NYSE: PFE) is considering a sale of its women’s health unit, which could fetch around $2 billion, per Bloomberg. http://axios.link/Fa4m

🚑 Sanofi (Paris: SAN) is paying $125 million upfront for a stake in two RPIK1 inhibitors owned by Denali Therapeutics (Nasdaq: DNLI), with potential milestone payments of $1 billion. http://axios.link/AyTC

Fundraising

H Capital, a China-focused VC firm, is raising up to $700 million for its fifth fund, per an SEC filing.

• Shavit Capital, an Israeli VC firm, raised $100 million for its fifth fund. http://axios.link/mSOb

It's Personnel

• Scott Schwarzhoff, former VP of marketing at Okta, joined Usual Ventures as an operating partner, per his LinkedIn.

Final Numbers
Source: Thomson Reuters Deals Intelligence; Data through Nov. 1
Dan Primack