Dec 17, 2019

Axios Pro Rata

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"The venture capital party is over."

  • That was the gist of countless mainstream and social media predictions in October, following WeWork's IPO collapse and SoftBank's difficulties in raising over $100 billion for its second Vision Fund.
  • It was wrong.

Today's issue of Axios Pro Rata includes 23 venture deals, totaling over $1.1 billion. Moreover, PitchBook data shows that startups have raised more venture dollars in November and December (to date) in 2019 than they did for the same period in 2018.

  • PitchBook also this morning released a series of 2020 VC predictions, one of which was that U.S. mega-venture deals will hit another record.
  • It argues that the driving trend of low global interest rates persists, and adds that funds are flush with capital due to both rising public equities (e.g., denominator effect on VC allocations) and an active exit environment that generates large distributions that can be recycled.

Yes, there have been some changes to what sorts of companies VCs seek to support, including increased emphasis on financial fundamentals, but that's just about aiming the fire hose in a slightly different direction. Not about shutting the spigot.

Only widespread calamity, beyond the private markets, has historically proven to deter venture capital. A few high-profile flame-outs won't do the trick, particularly when there are still multi-billion dollar sales (see today's BFD below) and IPOs are still outperforming what could be the S&P 500's best-ever year.


Bob Mylod, the managing partner of Annox Capital who's best known for helping to successfully steer Priceline through the dotcom bust as CFO, is concerned by the number of tech companies that don't consider stock-based compensation to be a tangible expense.

If a company gives stock in lieu of cash, he argues via email, it should be valued like cash:

"The vast majority report 'adjusted EBITDA and EPS' (i.e., excluding a massive annual operating expense) or free cash flow (again, because SBC is not technically an actual cash outlay—it is another form of currency—it's not included in FCF). Amazingly, many analysts and investors go right along with this convention when speaking about valuation multiples... thereby perpetuating the practice and understating just how extraordinarily expensive some of these companies actually are on a multiple of GAAP EPS or FCF minus SBC basis."

ICYMI #1: The New York Stock Exchange last week filed a new proposal with the SEC, aimed at allowing companies to raise money via direct share listings. This came after its initial proposal was rejected.

ICYMI #2: A firefighters pension fund in Florida filed a lawsuit on Friday against Carl Icahn over allegations that he bought $1.2 billion of stock in HP after learning that Xerox Corp. wanted to buy HP at a premium.

  • Icahn already was Xerox's largest shareholder, with an 11% stake, and now is HP's fifth-largest shareholder. Xerox offered to buy HP for $33.5 billion, but was rebuffed and now plans to go hostile.

🎧 Pro Rata Podcast digs into the growing number cities held ransom by cyber-attacks. Listen here.


Illustration: Aïda Amer/Axios

Intel (Nasdaq: INTC) paid around $2 billion to acquire Habana Labs, an AI processor startup based in Israel.

  • Why it's the BFD: Intel continues buying big to succeed in the AI chip market, which it expects to be worth more than $25 billion by 2024, even if some past acquisitions haven't yet worked out as planned.
  • ROI: Habana had raised $120 million over two rounds of VC funding, from Intel, Bessemer Venture Partners, Samsung, Walden International, and WRV Partners.
  • Bottom line: "The microprocessor giant is hell-bent on getting internet giants and enterprises to use its neural-network math coprocessors, rather than GPUs and specialist custom parts from Nvidia and others, and it's hoping this Habana upstart will help that dream come true." — Katyanna Quach, The Register
Venture Capital Deals

🚑 Bright Health, a Minneapolis-based health insurance company, raised $635 million in Series D funding. NEA led, and was joined by return backers Bessemer Venture Partners, Cross Creek Advisors, Declaration Partners, Flare Capital Partners, Greenspring Associates, Meritech Capital, Redpoint Ventures, and Town Hall Ventures.

WeLab, a Hong Kong-based mobile lender, raised US$156 million in Series C funding from backers like Alibaba and China Construction Bank.

Odoo, a Belgium-based provider of all-in-one management software, raised $90 million led by Summit Partners.

🚑 Triplet Therapeutics, a Cambridge, Mass.-based developer of drugs for repeat expansion disorders (e.g., Huntington’s), raised $49 million in Series A funding. MPM Capital and Pfizer Ventures co-led, and were joined by Invus, Partners Innovation Fund, Alexandria Venture Investments, and founding backer Atlas Venture.

Gecko Robotics, a Pittsburgh-based maker of auto inspection robots, raised $40 million led by Drive Capital.

HqO, a Boston-based tenant experience platform for commercial real estate, raised $34 million in Series B funding. Insight Partners led, and was joined by return backers Accomplice and Navitas Capital.

• Arbe, an Israeli maker of radar chips for autonomous vehicles, raised $32 million in Series B funding from BAIC Capital, Catalyst CEL, MissionBlue Capital, AI Alliance, and return backers Canaan Partners Israel, iAngels, 360 Capital Partners, O.G. Tech Ventures, and OurCrowd.

Solve, a maker of mobile crime mystery games, raised $20 million from Lightspeed Venture Partners, Upfront Ventures, and Advancit Capital.

AllCloud, an Israeli cloud services startup, raised $18 million. Eastside Partners led, and was joined by Salesforce Ventures.

🚑 Immuneering, a Cambridge, Mass.-based drug startup whose lead candidate is aimed at cancer cachexia, raised $17 million in Series A funding led by Boxcar PMJ.

Alchemy, a San Francisco-based startup that helps companies build apps on top of blockchain tech, raised $15 million in Series A funding from Pantera Capital, Stanford University, Coinbase, Mayfield, SignalFire, Samsung, StartX, Kenetic, and Dreamers.

ProdPerfect, a San Francisco-based provider of autonomous E2E web app testing, raised $13 million in Series A funding. Anthos Capital led, and was joined by Fika Ventures, Eniac Ventures, Entrepreneurs Roundtable Accelerator, and aCrew Capital.

HungerBox, an Indian provider of management software for corporate cafeterias, raised $12 million in Series C funding from Paytim, NPTK, and return backers Sabre Partners and Neoplux.

🚑 RecoveryOne, a Walnut Creek, Calif.-based musculoskeletal recovery startup, raised $12 million. Cigna Ventures led, and was joined by return backer 7wire Ventures.

EfficientIP, a French network security and automation startup, raised $11 million in Series B funding from Jolt Capital.

PlayerMaker, an Israeli provider of international soccer player performance analytics, raised $10 million in Series B funding led by FengHe Group.

🚑 Sofregen, a Boston-based developer of medical devices based on silk protein, raised $8 million in Series B funding led by Anzu Partners.

Terradepth, an Austin, Texas-based developer of autonomous submersible vehicles, raised $8 million led by Seagate Technology.

🚑 Promethera Biosciences, a Belgian developer of a liver disease cell therapy, raised €7.5 million in new Series D funding (round total €47.2m) from new backers Sony Innovation Fund and Pegasus Tech Ventures.

Ender, an Austin, Texas-based provider of rental property management software, raised $7 million in seed funding led by Global Founders Capital.

Chipper Cash, a San Francisco-based provider of P2P payment services in six African countries, raised $6 million in seed funding led by Deciens Capital.

Dusty Robotics, a Mountain View, Calif.-based construction automation startup, raised $5 million in seed funding. NextGen Venture Partners led, and was joined by Baseline Ventures, Root Ventures, and Cantos Ventures.

Machfu, a Rockville, Md.-based industrial IoT platform, raised $3.75 million in Series A funding. CSL Ventures led, and was joined by Blu Ventures, Texas Ventures, and Texas Halo Fund.

Private Equity Deals

Accel-KKR acquired a majority stake in Duett, a Norwegian provider of SaaS to professional accountants and their clients, from Procuritas Partners and Armada Mezzanine Capital.

Apollo Global Management is nearing a deal to buy the auto classifieds unit of German classifieds group Scout24 for more than €2.5 billion, per the FT. Apax Partners and Permira also bid.

🚑 Aspen Surgical Products, a Caledonia, Mich.-based portfolio company of Audax Private Equity, acquired Beatty Marketing & Sales, a Redmond, Wash.-based provider of orthopedic products.

The Halifax Group acquired Maverick Fitness, owner of over 30 Orangetheory fitness studios in the Dallas-Fort Worth area.

LLR Partners acquired a majority stake in Geoforce, a Plano, Texas-based provider of traceability solutions for field equipment and vehicles. Geoforce had raised $19 million in VC funding from firms like Bison Capital Asset Management and Houston Ventures.

Lone Star Funds agreed to buy the tile-coatings business of Ferro Corp. (NYSE: FOE) for $460 million.

• Lovell Minnick Partners invested in Fortis, a Novi, Mich.-based provider of payments and merchant solutions to businesses and software developers.

• Ohio Transmission Corp., a Columbus, Ohio-based portfolio company of Genstar Capital, acquired Keller Electrical Industries, a Phoenix-based provider of provider of industrial electrical services and equipment.

🚑 Partners Group agreed to buy Eyecare Partners, a U.S. optometry and ophthalmology services group, from FFL Partners for $2.2 billion (including debt).

Tallgrass Energy (NYSE: TGE), a Kansas-based midstream energy infrastructure company, accepted a sweetened takeover offer from existing backer The Blackstone Group.

• Thoma Bravo completed its purchase of J.D. Power, a Wilmington, Del.-based customer survey and car ratings company, which has been merged with existing Thoma Bravo portfolio company Autodata Solutions.

Liquidity Events

• Frontenac Co. sold Liquid Technologies, a Chino, Calif.-based contract formulator and manufacturer of professional hair and skin care products, to PLZ Aeroscience.

More M&A

• FS Investments agreed to buy Chiron Investment Management, a multi-asset investment firm with around $1.8 billion in AUM.

🚑 Fujifilm (Tokyo: 4901) said it may bid for Hitachi’s (T:6501) medical imaging unit, valued at around $1.5 billion.

• Mikayel Israyelyan, the U.S.-based CEO of Muse Lifestyle Group, acquired a majority stake in Russian-language TV network RTVI, in which he held a minority stake, from Ruslan Sokolov.

• Zilingo, a Singapore-based fashion supply chain startup that’s raised over $225 million in VC funding, acquired nCigna, a Sri Lankan provider of SaaS for monitoring factory production, for $15.5 million in cash and stock.


Alpha JWC Ventures, an Indonesian tech-focused VC firm, raised $123 million for its second fund.

Gryphon Investors raised $300 million for its second mezzanine fund.

It's Personnel

The Blackstone Group promoted Amit Jain to senior managing director for India, per Bloomberg.

TorQuest Partners, a Canadian private equity firm, promoted Darin Brock to partner.

Christopher Yip joined RET Ventures, a Utah-based VC firm focused on real estate tech for the multifamily and single-family rental markets, as a partner. He previously was a principal with TPG.

Final Numbers
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Data: Morningstar Direct; Chart: Andrew Witherspoon/Axios

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