Top of the Morning
It'll be a spectacle: Snap is expected to hold its analysts day next week, which means there's a very good chance that we'll see a publicly-filed S-1 before month's end (minimum is usually one week after such a meeting). Also worth noting that the company has quietly hired Solebury Group, an advisory firm generally known in IPO circles for helping to determine allocations. Solebury is co-led by a pair of former bankers at Credit Suisse, which is also the former home of Snap chief strategy officer Imran Khan.
Trumpland: Venture capitalists not named Peter Thiel haven't been very visible in Trumpland, but a pair of VC types appear to be finalists to lead the Food & Drug Administration. Sources say the front-runner is Dr. Scott Gottlieb, a former FDA official who has been a venture partner with NEA since 2007 (he's also a resident fellow at conservative think tank AEI). And given yesterday's kerfuffle about POTEUS entertaining vaccine conspiracy theories, it's worth noting that Gottlieb last year told CNBC that "the science around the purported link between autism and these vaccines was debunked years ago."
The other possibility is Jim O'Neill, a onetime HHS official who later hooked up with Thiel at Clarium Capital and, later, Mithril. O'Neill said in a 2014 speech that the FDA should allow commercialization of drugs that have been proven safe, even if they haven't yet been proven effective. Obviously a tricky suggestion, particularly given how dependent it would be on how long the FDA's "safety" tail would be. And it would seem to apply more to drugs for orphan diseases, since large-scale clinical tests usually determine efficacy long before safety. A bigger question would be how insurers respond, including the worrisome prospect that some would only reimburse for cheaper alternative treatments that have not yet been proven effective. Finally, it could seriously change the math for later-stage life sciences VCs.
Slow that roll: In other political news, it appears that Senate confirmation hearings for Steve Mnuchin (Treasury) and Wilbur Ross (Commerce) have been pushed back until next week.
Hot off the presses: KKR chief economist Henry McVey just released his 2017 global macro outlook: "We believe that there are four major potentially secular changes that all investment professionals must consider: fiscal stimulus over monetary, domestic agendas over global ones, deregulation over reregulation, and a broadening of outsized volatility from the currency markets to include global interest rate markets." Get the rest.
Coming attractions: Upfront Ventures has hit the market with its sixth fund, which is targeting around $325 million.
SaaS stuff: It's not news that public equity investors have soured on the "growth-at-all costs" model for SaaS companies, but Credit Suisse analyst Michael Nemeroff yesterday published a research note that put the flip into clearer focus. He writes that "the relationship between cash flow/burn (i.e., operating cash-flow margin) and valuation" nearly doubled year-over-year from 0.16 in 2015 to 0.30 in 2016. Moreover, "profitability (non-GAAP operating margin) vs. valuation" almost tripled from the prior year" (0.05 vs. 0.14). Not too long ago, these year-over-year comps were going in the opposite direction.
But this isn't to say that growth no longer matters. Nemeroff adds that SaaS companies with projected 12-month revenue growth of 20% or more were acquired last year at an average valuation/projected revenue multiple of 6.7%, compared to 4.3x for those below the 20% threshold.
Ouch: Anaplan, a provider of planning and performance management software, yesterday named Frank Calderini as its new president and CEO. Frank is the brother of Anaplan chairman Bob Calderoni (an advisor to Silver Lake). It would seem that former CEO Frederic Laluyaux found out a bit earlier than the rest of us, and was more than a bit miffed, tweeting out in late December: "Nepotism - the practice among those with power of favoring relatives or friends, especially by giving them jobs: the new norm?"
Deal data: Two big 2016 venture capital reports out this morning, one from PwC/CB Insights and the other from NVCA/PitchBook. Both agree that 2016 disbursements were down from 2015 (16% and 12%, respectively), largely driven by Q4 declines.
The US full-year funding total of $58.6 billion represented a 20% drop from 2015, while cumulative deals of 4520 fell 16%.
She's back: After Ellen Pao filed her landmark gender discrimination lawsuit again Kleiner Perkins in 2012, conventional wisdom in Silicon Valley was that ― win or lose ― she was unlikely to ever again work in the VC industry. But, less than one year after a jury found for Kleiner Perkins, she's now joined Kapor Capital as a venture partner and the Kapor Center for Social Impact as chief diversity and inclusion officer. "It's not primarily an investing role, although there might be an opportunity for that," Pao says. "But certainly I'll use my experience in VC and angel investing to help make decisions with the firm."
Sera Prognostics, a Salt Lake City-based developer of prenatal testing solutions, has raised $40 million in Series A funding. LabCorp led the round, as part of a broader strategic agreement whereby it will distribute a blood test for preterm births. Return backers include InterWest Partners and Domain Associates.
Why it's the BFD: The March of Dimes estimates that 1 in 10 babies are born preterm in the U.S., but current tests only catch around 12% of instances.
Bottom line: "If we're able to predict earlier in pregnancy who is at risk, then we can intervene earlier with the goal of improving the chances of the baby staying in utero and developing more normally." -- Sera CEO Greg Critchfield.