Feb 22, 2019

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning

Illustration: Lazaro Gamio/Axios

When venture capitalist Aileen Lee coined the term "unicorn" five years ago, there only were 39 such companies founded in the prior decade. And that included both private and public VC-backed companies valued at $1 billion or more (e.g., Facebook was on the list, despite having already IPO'd).

  • Today there are over 150 privately-held unicorns, per WSJ.
  • More remarkably, there are 56 privately-held companies that have raised $1 billion or more in equity, with both DoorDash and Flexport joining the list just yesterday.
  • It's a group that we at Axios have decided to call minotaurs. They've got the head and tails of mythical bulls, but the very mortal (and arguably overfed) bodies of men.
    • DoorDash raised $400 million at a $7.1 billion post-money valuation co-led by Temasek and Dragoneer, in a rare case of raising big money after already taking a SoftBank Vision Fund check.
    • Most of DoorDash's rivals either are public (GrubHub) or are about to be public (Uber Eats, Postmates), but CEO Tony Xu says staying private lets the company better invest in new products — and adds that public investors wouldn't know how to properly value a company with delivery value that grew 325% year-over-year. Insert your 🤣 here.
    • Flexport raised around $1 billion led by SoftBank Vision Fund at a reported post-money valuation of $3.2 billion. Yes, these figures are different than what we'd been hearing.

This will be the year that many minotaurs and their growth equity backers either get validated or exposed, with expected IPOs for such $1 billion+ raisers as Uber, Lyft, Slack, Pinterest and Palantir.

Also...

Trend watch: Leveraged buyout firms are using less leverage, particularly on large deals in the tech sector. Per Reuters:

"Wall Street bankers have been referring to the Ultimate Software, Ellie Mae and Scout 24 deals as equity buyouts."

🌊 Testing the waters: SEC chairman Jay Clayton wants more companies to go public, and now his agency has proposed new rules that would allow all potential issuers to communicate with certain accredited and institutional investors prior to filing. More from Axios' Kia Kokalitcheva:

  • This relates to the so-called "test the waters" provision that was originally introduced in the 2012 JOBS Act, but only applicable to companies with less than $1 billion in annual revenue (aka "emerging growth companies").
  • The idea was to help companies get a better sense of the market before they commit to the full process—and costs—of an IPO.
  • This would be the second expansion of something originally set up for EGCs, following a 2017 decision to let all companies file confidential IPO paperwork with the SEC in order to get early feedback (something recently utilized by non-EGC Uber, for example).
  • Bottom line: This would be a meaningful change for certain companies and reflects Clayton's mission, but don't overstate its importance as the vast majority of IPOs still come from EGCs (including 94% of U.S. listings in the first nine months of 2018, per EY).

Just linking around: Some weekend reads for you:

🌎 Pro Rata Podcast: Our latest episode focuses on a possible tipping point in the U.S. debate over climate change. Listen here.

The BFD
Source: Giphy

Panda Selected, a shared kitchen operator in China, raised $50 million in Series C funding. Tiger Global led, and was joined by return backers DCM and Glenridge Capital.

  • Why it's the BFD: Because "cloud kitchens" are a secondary effect of the restaurant delivery boom, and independent efforts like Panda Selected are eventual acquisition targets.
  • Bottom line: "Kitchens are shared between restaurants to reduce their overheads with Panda Selected providing the venue, supplies and marketing. The company makes money through monthly fees as well as additional charges for services such as data analytics to help merchants adjust menus to boost sales on delivery platforms Meituan and Ele.me." — Selina Wang, Bloomberg
Venture Capital Deals

Casavo, an Italian online real estate buying platform, raised $7.9 million in new funding led by Project A Ventures. http://axios.link/VQTa

Zenloop, a German provider of customer experience management software, raised $6 million led by Nauta Capital. http://axios.link/0jsj

WaitWhat, a New York-based podcast startup whose titles include Reid Hoffman’s Masters of Scale, raised $4.3 million in Series A funding co-led by Cue Ball and Burda Principal Investments. http://axios.link/S7ar

Back to the Roots, an Oakland-based indoor organic gardening startup, raised $3 million in Series C funding. Central Garden & Pet led, and was joined by Blue Scorpion Investments. http://axios.link/ArpW

Zoba, a Boston-based provider of demand prediction analytics for mobility companies, raised $3 million in seed funding led by CRV. http://axios.link/xBEP

Private Equity Deals

Ardian agreed to buy a majority stake in Study Group, a -based operator of educational courses for students wishing to enter English-speaking universities, from Providence Equity Partners. http://axios.link/qTgg

Red Collar Pet Foods, a Franklin, Tenn.-based portfolio company of Arbor Investments, acquired Hampshire Pet, a Joplin, Mo.-based maker of baked and cold formed pet products and treats. www.redcollarpet.com

Public Offerings

🚑 Centogene, a German rare disease diagnostics startup, is prepping a New York IPO for later this year, per Reuters. It raised a €25 million Series A round in 2017 led by TVM Capital Life Science. http://axios.link/jMv0

Pinterest filed confidential IPO docs with the SEC, with plans to be initially valued at a minimum of $12 billion, per the WSJ. http://axios.link/LytV

Liquidity Events

BlackBerry (TSX: BB) completed its $1.4 billion purchase of Irvine, Calif.-based cybersecurity company Cylance which had raised over $320 million from firms like The Blackstone Group, Insight Venture Partners, Capital One Growth Ventures, Citi Ventures, KKR, Asadel Venture Partners, In-Q-Tel, Draper Nexus, Ten Eleven Ventures, Khosla Ventures, Fairhaven Capital Partners, DFJ Growth and Founders Equity Partners. http://axios.link/1aLQ

Corsair Components, a Fremont, Calif.-based keyboard and computer peripherals maker owned by Hauser Private Equity, is considering a sale or IPO that could value the company north of $1 billion, per Reuters. http://axios.link/B9vO

DoublePoint Energy is considering a sale process that could fetch upwards of $5 billion (including debt), per Reuters. The Permian Basin oil producer is owned by Apollo Global Management, GSO Capital, Magnetar Capital and Quantum Energy Partners. http://axios.link/Rz1l

Uber is in talks to sell its Indian Uber Eats business to local rival Swiggy, per The Economic Times. http://axios.link/7iDN

More M&A

Coinbase, the digital currency change most recently valued at $8 billion by its VCs, acquired Neutrino, an Italian blockchain analytics platform. http://axios.link/r5p6

🚑 Merck & Co. (NYSE: MRK) is launching a tender offer to buy Seattle-based vaccine and immunotherapy company Immune Design (Nasdaq: IMDZ) for around $300 million, or $5.85 per share (premium of over 300%). http://axios.link/vQg1

• Non-Standard Finance (LSE: NSF) offered to buy rival UK consumer lender Provident Financial (LSE: PFG) for £1.3 billion. http://axios.link/sqfL

• Saputo (TSX: SAP), Canada’s largest milk processor, agreed to buy UK-based Dairy Crest Group (LSE: DCG) for £975 million. http://axios.link/2g1i

Fundraising

Jerusalem Venture Partners raised $220 million for its eighth fund. www.jvpvc.com

It's Personnel

David Richman left Guggenheim Partners to joined The Carlyle Group as a managing director for direct lending. www.carlyle.com

Ted Tobiason, a former Morgan Stanley managing director of tech equity capital markets, is joining e-scooter company Lime as CFO. http://axios.link/CgUr

Final Numbers
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Data: PitchBook; Chart: Chris Canipe/Axios. Go here for interactive version.
Dan Primack