• Tree Two: Oak HC/FT has raised $600 million for its second fund, Axios has learned. This is the VC and growth equity firm focused on healthcare and financial technology, which spun out of legacy Oak Investment Partners back in 2014. This is a bit larger than the firm's $500 million debut vehicle, which is partially a reflection of wanting to bring in some new strategic LPs, like an association for retirees and some insurance companies. Two notes:
Oak HC/FT appears on first glance one of the few non-biotech VC firms that directly aims at regulated industries, although it mitigates such risk on the healthcare side by not going after anything with binary FDA or reimbursement risk.
There has been a theory that fintech startups could soon face M&A challenges because Trump-era deregulations could remove a lot of the banking sector's incentive to innovate. But Oak HC/FT partner Tricia Kemp (speaking to Axios from Slovakia, where her son is competing in a hockey tournament) isn't worried: "I'd argue that the digitization of payments and transactions and needing to know your customers -- in terms of things like anti-money laundering -- are only going in one direction. Trump is mainly talking about capital requirements for banks, which could possibly affect the direct lending space, but not most of fintech."
• Enterprising: The FT yesterday delved into the burgeoning world of tech-focused private equity, with a particular focus on Vista Equity Partners. So some scoop to move the story along: Vista has quietly closed its first "Endeavor" fund with $500 million in capital commitments. This is like other Vista funds in that it will buy up enterprise software companies, but different in that it will focus on companies too small to fit into the flagship funds (the latest of which still is not quite closed). Endeavor is co-led by René Yang and James Zubok.
• Crossed-off border: It used to be that regulatory problems on cross-border deals went in one direction, depending on that particular moment's geopolitics. When it comes to recent Chinese purchases of foreign entities, however, the roadblocks are being installed on all of the rotary exits. Just look at what happened in the past 24 hours:
- China's Lander Sports bailed on a deal for British football club Southampton, due to a Chinese crackdown on overseas purchases.
- China's Anbang Insurance Group abandonned its $1.6 billion purchase of Iowa-based Fidelity & Guaranty Life, due to opposition from U.S. state regulators (not from the feds).
- China's Ant Financial sweetened its bid for MoneyGram by 36%, in part because MoneyGram seemed partial to a rival offer from U.S.-based Euronet because it expects the Ant Financial deal to face possible CFIUS pushback. The theory now is that MoneyGram will lobby CFIUS particularly hard, given the the increased value.
• Misdirection: The WSJ uses this subhead in a piece about the ongoing private equity tumult at CalPERS (which we've discussed here): "Pension fund's private-equity returns were 12.3% over 20 years, but they would have been 19.3% without fees and costs."
Well. Ummm. Not really. Those fees are inextricably linked to participating in the funds that generated those returns. That's like saying I'd be $5 richer if I hadn't paid for E's ice cream yesterday and that her explicit desire for ice cream would have still been satisfied. Arguably I could have gotten a better deal, but to ignore the transactional relationship is sophistry.
The WSJ subhead encapsulates so much of the wrong-headed thinking about private equity fees at public pensions. The paramount issue should be producing top net returns for pensioners, not paying the lowest fees (as we discussed last week in regards to North Carolina).
• Know your audience: Uber on Friday shared top-line financials with Bloomberg.
- Top line: Gross bookings its 2016 doubled to $20 billion. Net revenue was $6.5 billion and adjusted net losses were $2.8 billion (excluding China, which it sold to Didi, and certain other expenses). In short, "revenue growth is outpacing losses."
- Bottom line: Releasing these financials wasn't to better inform the public. It was aimed at Uber employees and contractors, trying to calm concerns that all the recent scandals could be hurting business. Morale matters, and it's smarter to control the messaging than to share numbers internally and then watch them leak (when you can't know the interpretation of the leaker).