Jun 5, 2020

Axios Pro Rata

By Dan Primack
Dan Primack

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  • We'll be doing the 45-minute Black History Month ride from 2/8/20, co-led by Alex Toussaint and Tunde Oyeneyin. To find it, just go to the class library and use the search function.
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🎧 Pro Rata Podcast yesterday aired its 386th and final episode. Sort of.

  • On June 15 we launch a new afternoon show, still 10 minutes long and hosted by yours truly, called Axios Re:Cap. No need to resubscribe (the existing feed will convert). More info to come next week.
Top of the Morning

Illustration: Eniola Odetunde/Axios

Venture capital is beginning a belated conversation about its dearth of black investors and support of black founders, but hasn't yet turned its attention to the trivial participation of historically black colleges and universities (HBCUs) as limited partners.

Why it matters: This can contribute to educational and economic inequality, as the vast majority of venture profits go to LPs, Axios' Kia Kokalitcheva reports.

The big picture: Many college endowments, particularly the richest ones like Harvard and Stanford, invest in alternative assets like venture capital.

  • But HBCUs have relatively small endowments, with none valued at even $1 billion in 2019.
  • Smaller schools often lack robust internal investment teams and lean heavily on outside advisers, and may be less willing to tie up their limited resources in a long-term, high-risk asset class.
  • “In order to execute an asset allocation program, it just becomes easier when you have more dollars to put into it,” says Plexo Capital founder Lo Toney, whose fund is backed by his alma mater, Hampton University.

Established VC firms rarely need new limited partners, which creates an added challenge for interested HBCUs to get their foot in the door.

  • “A lot of the historically successful firms… their existing LPs would invest as much as they can, so there’s not really room... unless you just say, ‘this is important to us,’” explains Unusual Ventures co-founder John Vrionis, whose funds have multiple HBCUs as investors.
  • Equal Ventures co-founder Richard Kerby believes that it’s incumbent on VCs to educate schools about the value in investing in venture capital.
  • VC firms often try to get investments from their alma maters, but there were fewer than 60 HBCU alumni working in VC as of a February 2019 analysis — and nearly 40% of those came from a single school (Howard University).

"It’s compounding the divide in generational wealth," tweets General Catalyst's Megan Maloney.

  • Getting more HBCUs into VC funds can be done — but it requires will and want from both the endowments and the venture funds.
The BFD
Source: Giphy

Rollins (NYSE: ROL), an Atlanta-based pest control company whose brands include Orkin, is exploring a possible sale, per Bloomberg.

  • Why it's the BFD: Rollins is one of the largest independent pest control companies, with more than two million global customers and a market cap north of $14 billion. It also has high cash-flow and relatively little debt, making it an attractive target for private equity.
  • Market reax: Rollins shares yesterday jumped up to 5.3% on the report, but then pulled back and closed down 2.4%.
  • The bottom line: "Rollins had a relatively strong first quarter despite the coronavirus pandemic, which sapped demand for its services in hard-hit states including California and New York, executives said discussing earnings in April. Revenue rose 13.7% year-over-year to $488 million in the quarter while net income fell 2.3% to $43.3 million." — Ed Hammond, Bloomberg
Venture Capital Deals

🚑 Everest Medicines, a Chinese drug licensing and commercialization company, raised $310 million in Series C funding from Janchor Partners, RA Capital Management, Hillhouse Capital, and Jiashan SDIC. http://axios.link/LZTP

🚑 Athira Pharma (fka M3 Biotech), a Seattle-based regenerative medicine startup focused on neurological diseases, raised $85 million in Series B funding. Perceptive Advisors led, and was joined by RTW Investments, Viking Global Investors, Venrock, Franklin Templeton, Rock Springs Capital, LifeSci Venture Partners, Surveyor Capital, Highside Capital Management, Logos Capital, Janus Henderson Investors, Sofinnova, Avidity Partners, and Sahsen Ventures. http://axios.link/2Rll

🚑 Prilenia Therapeutics, a Dutch biotech focused on neurodegenerative and neurodevelopmental disorders, raised $62.5 million in Series A funding. Forbion led, and was joined by Morningside Ventures, Sectoral Asset Management, Talisman Capital Partners, and Genworks 2. www.prilenia.com

Hyperscience, a New York-based data automation startup, raised $60 million in Series B funding. Bessemer Venture Partners led, and was joined by Tiger Global Management and return backers Stripes, FirstMark Capital, Battery Ventures, Felicis Ventures, 3KVC, Gaingels, and Penna & Co. http://axios.link/tOiN

• Atom Power, a Charlotte, N.C.-based digital circuit breaker, raised $17.75 million in Series B funding from Valor Equity Partners, Rockwell Automation, Inc., ABB Technology Ventures, and Atreides Management. www.atompower.com

Cloud9 Technologies, a New York-based trader collaboration and analytics platform, raised $17.5 million in Series B funding. UBS led, and was joined by return backers J.P. Morgan and Barclays. http://axios.link/qmPo

🛴 Superpedestrian, a Boston-based scooter fleet developer, raised $15 million led by Edison Partners. It also acquired the assets of Zagster, which had raised over $30 million from firms like Edison, Launchpad Venture Group, and Fontanalis Partners. http://axios.link/Mjfl

Play One Up, a Cleveland-based e-gaming app that lets users compete for cash, raised $3.1 million in seed funding led by Three Curve Capital. http://axios.link/xL4x

Ethena, an Albany, N.Y.-based developer of anti-harassment software, raised $2 million in seed funding. GSV led, and was joined by Homebrew and Village Global. http://axios.link/3BDb

Private Equity Deals

Effectual, a Hoboken, N.J.-based portfolio company of Catalyst Investors and Luminary Capital, acquired Five Talent, a Bend, Ore.-based AWS consultancy and tech services provider. http://axios.link/TvDX

Kinderhook Industries bought Original One Parts, a Dallas-based provider of recycled and refinished OEM auto parts. www.originaloneparts.com

🚑 KKR and Ampersand Capital Partners offered to buy British medical diagnostics company Oxford Immunotec Global (Nasdaq: OXFS) for $400 million, per Reuters. http://axios.link/hiIs

Orange (Paris: ORA) said it will not make a rival takeover bid for Spanish telco MasMovil, which earlier this week received a €3 billion offer from Cinven, KKR, and Providence Equity Partners. http://axios.link/wcf3

Public Offerings

🚑 Applied Molecular Transport, a San Francisco-based biotech focused on immune-mediated inflammation and metabolic diseases, raised $154 million in its IPO. The company priced 11 million shares at $14, versus plans to sell 10 million shares at $12–$14, for an initial market cap of $440 million. It will trade on the Nasdaq (AMTI), used BofA Securities as lead underwriter, and had raised nearly $100 million in VC funding from firms like EPIQ Capital (25.91% pre-IPO stake) and Founders Fund (20.74%). http://axios.link/h6MN

Dada Nexus, a Chinese on-demand retail and delivery platform, raised $320 million in its IPO. The company priced 20 million shares at $16, versus plans to sell 16.5 million at $15-$17, and will trade on the Nasdaq (DADA). It reports a $236 million net loss on $438 million in revenue for 2019. Shareholders include Sequoia Capital China (11.4% pre-IPO stake) and DST Global (9.4%). http://axios.link/pKKn

Shift4 Payments, an Allentown, Penn.-based payment tech company owned by Searchlight Capital Partners, raised $345 million in its IPO. The company priced 15 million shares at $23 (above range), and will trade on the NYSE (FOUR). It used Citigroup as lead underwriter, and reports a $5.2 million net loss on $199 million in revenue for Q1 2020. http://axios.link/osja

Liquidity Events

Puig, a Spanish perfume-maker, agreed to buy London-based makeup brand Charlotte Tilbury for more than £1.2 billion. Sellers would include Sequoia Capital. http://axios.link/DK09

VMWare (NYSE: VMW) agreed to buy Lastline, a Redwood City, Calif.-based cybersecurity and malware protection platform, per TechCrunch. Lastline had raised over $50 million from firms like Thomvest Ventures, Redpoint Ventures, e.ventures, Barracuda Networks, NTT Finance, and Dell Technologies Capital. http://axios.link/KLlZ

More M&A

Charles Schwab (NYSE: SCHW) received antitrust approval from the U.S. Justice Department for its $26 billion purchase of TD Ameritrade (Nasdaq: AMTD) http://axios.link/k9AD

Sberbank is in talks to acquire upwards of a 30% stake in Russian ecommerce company Ozon, per Reuters. http://axios.link/L3V2

Fundraising

🚑 Atlas Venture, a life sciences-focused VC firm, raised $400 million for its twelfth fund. It also promoted Michael Gladstone to partner. www.atlasventure.com

Lachy Groom, former head of Stripe's issuing business, is raising upwards of $100 million for his second VC fund, per an SEC filing.

Mercato Partners of Salt Lake City raised a $90 million fund for restaurant concepts. http://axios.link/Nxqu

It's Personnel

🚑 Philippe Gallone, a veteran European health care banker, is leaving Morgan Stanley to join Moelis & Co., per Bloomberg. http://axios.link/u6YQ

🚑 McKesson (NYSE: MCK) named Tom Rodgers to head of strategy and business development. He previously led the company’s corporate venture arm, which now will be led by Dave Schulte. www.mckesson.com

President Trump nominated Hester Peirce to her second term as an SEC commissioner, but did not nominate anyone to fill an empty seat that is supposed to be held by a Democrat.

Final Numbers
Data: Bureau of Labor Statistics; Chart: Axios Visuals

Go deeper: Unemployment rate falls in May

Dan Primack

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