Sep 9, 2020

Axios Pro Rata

By Dan Primack
Dan Primack

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Top of the Morning

Illustration: Sarah Grillo/Axios

Five years ago, Zocdoc was one of New York's hottest tech companies. It raised venture funding at a $1.8 billion valuation, back when that was still rare, and seemed poised to become the industry standard for physician discovery and appointment scheduling.

Fast forward: According to a lawsuit filed yesterday in the New York Supreme Court, there was a behind-the-scenes power struggle that co-founder and former CEO Cyrus Massoumi now refers to as a fraudulent "coup."

  • Since that time, Zocdoc hasn't raised any VC funding, and investors Founders Fund and Khosla Ventures have relinquished their board seats.

Background: Massoumi's late 2015 departure was referred to in press reports as "relinquishing his day-to-day role," with plans that he'd stick around as company chairman.

  • It was a bit eyebrow-raising, given the company's trajectory, but the company was already eight years old and Massoumi was to be succeeded by a fellow co-founder.
  • In other words, it didn't really make waves.

What's happening: Massoumi alleges in his lawsuit that company co-founders (Nick Ganju and Oliver Kharraz) and CFO (Netta Samroengraja) orchestrated a plot to oust him from the company, during a November 2015 board meeting.

  • At the time, Massoumi claims Zocdoc was in the process of finding replacements for both Kharraz (then COO) and CFO Samroengraja. Both allegedly were aware of those plans, with some candidate interviews even taking place the morning of the board meeting.
  • Massoumi expected the board meeting to be run-of-the-mill, based on prepared board books he received ahead of time.
  • Once the meeting began, however, the expected topics were allegedly eschewed in favor of Ganju and Kharraz moving to fire Massoumi as CEO.
  • The company's voting structure effectively gave proxy control to any two co-founders working together. But Massoumi could have individually assumed majority control via an early exercise feature of his options, had he believed there was a reason to do so.
  • Khosla Ventures partner David Weiden allegedly voted in favor of the switch, with Massoumi alleging he appeared to know about the plan (neither Khosla Ventures nor Weiden is named as a defendent, and Weiden declined comment on the situation).
  • Founders Fund's Ken Howery (now U.S. ambassador to Sweden) allegedly did not support the "coup."

What they're saying: Massoumi claims the company has deteriorated in his absence, and his list of required reliefs includes reinstallation as CEO.

  • Zocdoc did not respond to a request for comment.

The BFD

Photo illustration: Aïda Amer/Axios. Getty Images photo: Taylor Hill/FilmMagic

Snowflake, a San Mateo, Calif.-based cloud data warehousing company, disclosed that Berkshire Hathaway and Salesforce Ventures each will purchase $250 million shares as part of its upcoming IPO. Berkshire also said it plans to buy around 4 million additional shares from insiders.

  • Why it's the BFD: It's tough to square Warren Buffett's value investing philosophy with Snowflake, a tech unicorn without profits or a public trading history.
  • IPO details: Snowflake plans to offer 28 million shares at $75-$85, in addition to the direct $500 million purchases from Berkshire and Salesforce. It would have a fully diluted market value of $28.2 billion, were it to price in the middle.
  • ROI: The company has raised around $1.4 billion in VC funding, most recently at a $12.4 billion valuation, from firms like Sutter Hill Ventures (20.3% pre-IPO stake), Altimeter (14.8%), Iconiq (13.8%), Redpoint Ventures (9%), Sequoia Capital (8.4%), and Dragoneer.
  • The bottom line: "In 54 years, I don't think Berkshire has ever bought a new issue." — Warren Buffett, speaking to CNBC in May 2019
Also...

France's LVMH this morning announced that it’s bailing on its $16.2 billion agreement to acquire U.S. luxury jeweler Tiffany & Co.

  • Why it matters: LVMH isn’t claiming pandemic-related retail hardship. Instead, it says the issue is the Trump administration’s threat to slap new tariffs on French luxury goods, which is being done in retaliation for France’s tax on U.S. tech companies.

Yup, a U.S. luxury jeweler is somehow the loser in a battle over how much Google pays in overseas taxes. And not just any U.S. luxury jeweler, but one that has a store physically inside of Trump Tower.

There's also more irony here, in that the original deal was arguably enabled by trade wars. As we wrote last November:

"This is largely about trade war opportunism, as Tiffany has been hammered by decreased Chinese tourism to the U.S. It's tried to offset that by opening more stores within China, but it's been hampered there by new Chinese tariffs on U.S.-made jewelry."

Next steps: Expect Tiffany to sue LVMH in Delaware.

The Long-Term Stock Exchange, a platform designed to encourage long-term investments, begins trading this morning.

  • Eric Ries, author of "The Lean Startup," tells me it's the culmination of nearly a decade of work, and that he'll deem today successful if LTSE volume hits several hundred thousand shares.
  • He declined to give details on negotiations with potential issuers.
Venture Capital Deals

Zymergen, an Emeryville, Calif.-based molecular tech company, raised $300 million in Series D funding. Baillie Gifford led, and was joined by Baron Capital Group and Perceptive Advisors. http://axios.link/zBew

Jiangxiaobai, a Chinese liquor distiller, raised around $300 million, per Bloomberg. China Renaissance Holdings led, and was joined by Baillie Gifford and China Merchants Bank International. http://axios.link/aV4T

🚑 Recursion Pharma, a Salt Lake City-based digital biology company, raised $239 million in Series D funding. Bayer led, and was joined by Casdin Capital, Catalio Capital, Laurion Capital, Samsara BioCapital, and return backers Baillie Gifford, Mubadala, DCVC, Lux Capital, Obvious Ventures, Felicis Ventures, EPIC Ventures, Two Sigma Ventures, Advantage Capital, and Intermountain Ventures. www.recursionpharma.com

Snyk, a London-based provider of cybersecurity analysis tools, raised $200 million in new funding led by Addition at a valuation north of $2.6 billion. http://axios.link/kwtT

Sprinklr, a New York-based customer experience management platform, raised $200 million from Hellman & Friedman at a $2.7 billion valuation. It also secured $150 million in convertible securities from Sixth Street Growth. www.sprinklr.com

🚑 Grand Rounds, a San Francisco-based digital health company for self-insured employers, raised $175 million led by The Carlyle Group. http://axios.link/RW7q

Melio, an Israeli startup focused on small businesses managing supplier payments, raised $144 million. Backers include Accel, Aleph, Bessemer Venture Partners, Coatue Management, and General Catalyst. http://axios.link/7dFO

NotCo, a Chilean plant-based protein startup, raised $85 million in Series C funding co-led by Future Positive and L Catterton. http://axios.link/ef3o

🚑 Truepill, a San Mateo, Calif.-based digital pharmacy startup, raised $75 million in Series C funding. Oak HC/FT led, and was joined by Optum Ventures, TI Platform Management, Sound Ventures, and YC. www.truepill.com

Xometry, a Gaithersburg, Md.-based online marketplace for custom-manufactured parts, raised $75 million. T. Rowe Price, Durable Capital Partners, and ArrowMark Partners were joined by return backers BMW i Ventures, Greenspring Associates, Dell Technologies Capital, Robert Bosch Venture Capital, Foundry Group, Highland Capital Partners, and Almaz Capital. www.xometry.com

Ouster, a San Francisco-based LiDAR startup, raised $42 million in Series B funding from return backers Cox Automotive, Fontinalis Partners, and Tao Capital Partners. http://axios.link/3cls

🚑 Inversago Pharma, a Montreal-based developer of CB1 blockades, raised US$35 million in Series B funding. Forbion led, and was joined by Fonds de solidarité FTQ and return backers Genesys, JDRF T1D Fund, Amorchem, Anges Québec Capital, and adMare BioInnovations. http://axios.link/DQBD

Deel, a San Francisco-based payroll and compliance platform for international teams, raised $30 million in Series B funding led by Spark Capital. www.letsdeel.com

Ubicquia, a Ft. Lauderdale, Fla.-based small cell and smart grid startup, raised $30 million in Series C funding from backers like Fuel VC. www.ubicquia.com

Hasura, a San Francisco-based data access infrastructure startup, raised $25 million in Series B funding. Lightspeed Venture Partners led, and was joined by Vertex Ventures US, Nexus Venture Partners, Strive VC, and SAP.iO Fund. http://axios.link/x13R

Pcysys, an Israeli cybersecurity risk validation startup, raised $25 million in Series B funding. Insight Partners led, and was joined by return backers Awz Ventures and The Blackstone Group. www.pcysyscom

Sana Benefits, a manager of self-funded insurance plans for small businesses, raised $20.8 million in Series A funding from Gigafund, Trust Ventures, and Mark VC. http://axios.link/sWZw

Athennian, a Calgary-based provider of legal entity management software, raised C$8 million in Series A funding. Arthur Ventures led, and was joined by Round13 Capital, InterGen Capital, ATB Financial, Thin Air Labs, BlueSky Equities, Viewpoint Capital, and Strategic Equities. http://axios.link/r6EH

BoostUp, a Santa Clara, Calif.-based revenue intelligence platform, raised $6.25 million in Series A funding. Canaan Partners led, and was joined by Emergent Ventures, BGV, MFV Partners, and Correlation Ventures. http://axios.link/zqys

Sumsub, a London-based identity verification platform, raised $6 million in Series A funding led by MetaQuotes. http://axios.link/WcvN

🚑 Manifold Bio, a Boston-based protein barcoding platform to speed drug discovery, raised $5.4 million in seed funding. Playground Global led, and was joined by Fifty Years, GETTYLAB, and Allston Venture Fund. www.manifold.bio

Partake Brewing, a craft non-alcoholic beer brand, raised $4 million. CircleUp Growth Partners led, and was joined by Export Development Canada, Natural Products Canada, McLean & Associates, and Barrel Ventures. www.drinkpartake.com

PopSQL, a San Francisco-based collaborative SQL editing tool for teams, raised $3.4 million in seed funding. Gradient Ventures led, and was joined by FundersClub and YC. http://axios.link/DsSA

Private Equity Deals

Apax Partners agreed to acquire MyCase, a San Diego-based provider of legal practice and case management software, from AppFolio (Nasdaq: APPF) for $193 million. http://axios.link/jNbr

Compass Precision, a Charlotte-based portfolio company of Main Street Capital, acquired Gray Manufacturing Technologies, a Denver, N.C.-based manufacturer of precision metal components for the aerospace and defense industries. www.compassprecision.com

Cove Hill Partners acquired part of Vista Equity’s stake in SecureLink, an Austin, Texas-based third-party remote access software company. http://axios.link/6m8O

🚑 FTV Capital invested in 6 Degrees Health, a Hillsboro, Ore.-based provider of healthcare cost containment solutions for self-employed insurers. www.6degreeshealth.com

GTT Communications (NYSE: GTT) is in talks to sell its European fiber assets for more than $2 billion to a consortium that includes Macquarie Group, AustralianSuper, and 3i, per Bloomberg. http://axios.link/xnNM

Levine Leichtman Capital Partners acquired Tropical Smoothie Café, an Atlanta-based franchisor of fast casual cafes with over 870 stores. www.tropicalsmoothiecafe.com

• Reliance Retail, an Indian retail giant, confirmed that it raised $1 billion from Silver Lake for a 1.75% equity stake. In related news, Bloomberg reports KKR is in advanced talks to invest $1 billion into Reliance Retail. http://axios.link/VF6x

Wynnchurch Capital acquired Labrie Environmental Group, a Canadian manufacturer of refuse collection vehicles. www.labriegroup.com

Public Offerings

🚑 Amwell, a Boston-based telehealth company, set IPO terms to 35 million shares at $14-$16. It would have a fully-diluted value of $3.6 billion, were it to price in the middle, and plans to list on the NYSE (AMWL) with Morgan Stanley as lead underwriter. It reports a $113 million net loss on $122 million in revenue for the first half of 2020, while shareholders include Allianz and Teva Pharmaceutical Industries. http://axios.link/1PbY

• ChinData Group, a Chinese data center operator owned by Bain Capital, filed for an IPO that Renaissance Capital estimates could raise $400 million. It plans to list on the Nasdaq (CD) with Morgan Stanley and Citi as lead underwriters, and reports a $4 million net loss on $115 million in revenue for the first half of 2020. http://axios.link/fn17

🚑 Grail, a Menlo Park, Calif.-based cancer detection company, filed for an IPO. The pre-revenue company plans to list on the Nasdaq (GRAL) with Morgan Stanley as lead underwriter, and raised around $2 billion in VC funding from firms like Illumina (14.6% pre-IPO stake), Arch Venture Partners (9.5%), Johnson & Johnson (7.6%), Hillhouse Capital, Sequoia Capital China, PSP Investments, CPP Investments, and Amazon. http://axios.link/qI00

iHuman, a Chinese maker of children’s edu-tainment products, filed for a $100 million IPO. It plans to list on the NYSE (IH) with Credit Suisse and Citigroup as lead underwriters, and reports less than $1 million of profit on $26 million in revenue for the first half of 2020. http://axios.link/9e8U

🚑 Outset Medical, a San Jose, Calif.-based maker of hemodialysis system for kidney diseases, set IPO terms to 7.6 million shares at $22-$24. It would have an initial market cap of $911 million, were it to price in the middle, and reports a $47 million net loss on $19 million in revenue for the first half of 2020. The company raised over $500 million in VC funding from firms like Warburg Pincus (28.2% pre-IPO stake), Fidelity (15%), D1 Capital (12.1%), T. Rowe Price (11.7%), Aurora Investment Co. (9.1%), Partner Fund Management (7.5%), and Perceptive Investors (6.5%). http://axios.link/FKSS

Yalla Group, a Dubai-based social network and entertainment platform, filed for a $100 million IPO. It plans to list on the NYSE (YALA) with Morgan Stanley as lead underwriter, and reports $25 million of net income on $53 million in revenue for the first half of 2020. Backers include SIG. http://axios.link/Bobw

SPAC Stuff

Photo: Saul Loeb/AFP via Getty Images

• Cohn Robbins, a SPAC co-led by former top Trump economic adviser Gary Cohn and veteran ESG investor Clifton Robbins, raised $720 million in an upsized IPO. http://axios.link/C6fi

• GPM Investments, a Richmond, Va.-based convenience store chain, agreed to go public via a reverse merger with Haymaker Acquisition Corp II (Nasdaq: HYAC), in a deal worth $1.4 billion. http://axios.link/eueP

• FinTech Acquisition IV, a fintech-focused SPAC led by The Bancorp, filed for a $200 million IPO. http://axios.link/1xOR

• Goldenbridge Acquisition, an AI-focused SPAC, filed for a $50 million IPO. http://axios.link/1bDK

IG Acquisition, a leisure industry-focused SPAC chaired by Bradley Tusk, filed for a $300 million IPO. http://axios.link/POcC

Recharge Acquisition, a SPAC led by former MTC Technologies and Marathon Petroleum execs, filed for a $200 million IPO. http://axios.link/1UzM

Vector Acquisition, a tech-focused SPAC led by Vector Capital, filed for a $300 million IPO. http://axios.link/xiir

More M&A

Arch Capital Group (Nasdaq: ACGL) led around a $500 million takeover offer for reinsurer Watford Holdings (Nasdaq: WTRE), per Reuters. http://axios.link/3dKr

Deloitte is seeking a buyer for its U.K. restructuring practice, per the FT. http://axios.link/GcKj

Elliott Management acquired a stake in Noble Energy (Nasdaq: NBL), the Houston-based oil and gas producer that in June agreed to be acquired by Chevron for $5 billion. http://axios.link/9XSc

Fundraising

Benford Capital Partners, a Chicago-based lower mid-market private equity firm, raised $130 million for its debut fund. It’s led by Ed Benford (ex-Prospect Partners) and Benjamin Riefe (ex-Roundy’s Supermarkets). www.benfordcapital.com

Bridgepoint raised £1.5 billion for its fourth lower mid-market buyout fund. http://axios.link/8vmy

Dawn Capital, a London-based VC firm focused on B2B software startups, raised $400 million for its fourth fund. http://axios.link/x2n4

DNX Ventures, a VC firm that focuses on B2B startups in the U.S. and Japan, raised $315 million for its third flagship fund. http://axios.link/TVvK

Stellex, a New York-based mid-market private equity firm, raised $1.78 billion for its second fund. www.stellexcapital.com

It's Personnel

🚑 Catherine Arnold, former portfolio manager and biopharma analyst for Wellington Management, joined Centerview Partners as a partner. www.centerviewpartners.com

Christopher Fraser, former chairman and CEO of KMG Chemicals, joined SK Capital Partners as a senior director. www.skcapitalpartners.com

Fred Fresta, former chairman and CEO of W.R. Grace & Co., joined Clayton Dubilier & Rice as an operating advisor. www.crd-inc.com

Sonu Johl joined Raymond James as a managing director and co-head of exploration & production energy banking. He previously was with UBS. www.raymondjames.com

Eric Mullins, the founder of energy-focused PE firm Lime Rock Resources, joined the board of ConocoPhillips (NYSE: COP). www.conocophillips.com

Andy Silverman joined Parkway Capital Investors as a managing director. He previously spent over 14 years with Capital Resource Partners.

Final Numbers
Data: Goldman Sachs; Chart: Axios Visuals
  • State of play: Senate Republicans yesterday included around $250 billion in second-round PPP funds as part of its "skinny" stimulus proposal. But the bill appears to be DOA, with Senate Minority Leader Chuck Schumer referring to it as "emaciated."
  • In other words, small businesses continue to suffer while Congress and the White House dither.
  • Go deeper: Small businesses are losing confidence in their survival
Dan Primack

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