Sep 22, 2017

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning

• The new banks: The Sterling Group is a Texas private equity firm that has focused on mid-market buyouts for more than 30 years. But now it's raising up to $225 million for its first-ever private credit fund, according to an SEC filing. This comes one day after Capital Dynamics said it was launching a private credit business, which itself followed numerous similar announcements from firms that look a lot more like Sterling Group than giants KKR or Blackstone (which began building credit arms years ago).

  • Numbers: Private credit funds raised $21.1 billion in Q1 2017, which was up 63% over the same period from last year, according to EY. Over half of that was for direct lending.
  • Why it matters: We hear a lot from politicians about how "banks have stopped lending" to anything but the largest of companies, thus requiring a rollback of financial regulations. But if you buy the first part of that argument, it seems that private equity is moving in to fill the void.

• ICOhNo: Last week we mentioned that Paris Hilton was publicly supporting an initial coin offering from G Chahal, a serial tech entrepreneur and admitted domestic abuser. Then came a Daily Beast article detailing more of Chahal's alleged transgressions. And, with that, Hilton's tweet went poof.

• ICOhNo (cont): This week I got a press release about how "Academy Award-winning actor Jamie Foxx has taken to Twitter to announce his participation in new Cobinhood token," which was described as "a cryptocurrency service platform and the world's first zero fee trading exchange." And, indeed, he had. But when I asked the PR person if Foxx had been compensated for his tweet (in cash or in coin), I got a "no comment."

  • But someone did want to comment: Robinhood, the zero-fee stock trading app, which said: "Robinhood has no affiliation with Cobinhood, which is confusingly similar in name and branding. In order to protect our brand, Robinhood sent a cease and desist letter requesting that Cobinhood cease its use of the Cobinhood name and branding." To this Cobinhood did reply, saying: "Cobinhood is not associated with Robinhood in any way, but are as legitimate as them."
  • Context: Robinhood has been around since 2013 and was recently valued at $1.3 billion by its investors.

• All hail breaks loose: London's transportation regulator this morning said that it will not renew Uber's license when it comes due at month's end, although Uber gets 21 days to appeal (during which time it can continue to operate). At issue, per the regulator, are Uber's "approach in explaining" its use of of the so-called Greyball software in London (which Uber denies it used there) and its approach to reporting crimes and obtaining certain certificates. More info and statements from both sides in the stream.

  • Bottom line: My gut says this is a lot of sound and fury that will ultimately mean little for Uber's 3.5 million users and 40,000 drivers in London. The two sides have clashed repeatedly in the past, but have always worked things out without a service stoppage. If London regulators really intend to shut down Uber, it wouldn't have allowed it to continue operations.

• ICYMI: Kia and I reported last night that Qasar Younis, a former Google product manager who was most recently Y Combinator's COO, is working on a startup that is developing simulation software for self-driving cars. It's also finalizing around a $10 million funding round led by Andreessen Horowitz, with Marc Andreessen to take a board seat. No comment from either Younis or Andreessen Horowitz.

• New math: "More than 100% of the reason for the trade deficit is auto and auto parts." — Wilbur Ross this morning to CNBC.

• Have a great weekend... Go Pats!

The BFD

• Flexport, a San Francisco-based customs brokerage and freight forwarding service, has raised $110 million in Series C funding at an $800 million pre-money valuation, according to TechCrunch. Return backers include DST.

  • Why it's the BFD: Because while VCs get regularly criticized for piling into the shiniest new bauble, they also will pay up for promising businesses in super-boring industries. Moreover, Flexport's growth – in terms of both volume and valuation – reflects how global trade continues to grow in spite of widespread protectionist rhetoric.
  • Bottom line: "The company has over 400 employees in seven offices. It earns roughly 15% of the average $2,000 it costs to move a shipping container around the world, compared to 25% that its competitors charge." – Josh Constine & Katie Roof
Venture Capital Deals

• YH Global, a Chinese logistics and supply chain management startup, has raised around $182 million in Series A funding at a $1 billion valuation. Yonghua Capital and Co-Energy Finance co-led the round, and were joined by Stone Capital, Tangrong Capital and Shenzhen Grandland Group. http://axios.link/5qyF

• HyperloopOne, a Los Angeles-based developer of super-high speed human and cargo transport solutions, has raised $85 million in Series B-1 funding at what Recode reports is a valuation north of $700 million. Participants include DP World, Caspian VC Partners, WTI and OurCrowd.com. http://axios.link/gDCQ

• Gaosi Education, a Chinese online K-12 education platform, has raised $83 million in new VC funding. China Media Capital and AlphaX Partners co-led the round, and were joined by Sinovation Ventures, China International Capital, Loyal Valley Capital and Hina Group. http://axios.link/BOms

• Activehours, a Palo Alto, Calif.-based cash-advance startup, has raised $39 million in Series B funding. Andreessen Horowitz led the round, and was joined by return backers Matrix Partners, Ribbit Capital, and March Capital Partners. http://tcrn.ch/2xqFtwr

🚑 Bellen, a Chinese medical contract research organization, has raised $38 million in Series B funding. Legend Capital and China International Capital co-led the round, and were joined by firms Gefeiyueren, Dachen Chuanglian and Dianjing Shijie. http://axios.link/Yvdn

• Securonix, a security analytics startup, has raised $29 million in Series A funding. Volition Capital led the round, and was joined by Eight Road Ventures. http://axios.link/UBej

• Yi+, a Chinese provider of digital marketing solutions, has raised $15 million in Series B funding. Haitong Securities led the round, and was joined by BRJ Group and the Bank of Beijing. http://axios.link/GGC6

Private Equity Deals

• The Blackstone Group has acquired Schenck Process, a German measuring technology company, from IK Investment Partners. No financial terms were disclosed, but Reuters values the deal north of €700 million. http://reut.rs/2xX0uQW

• Falfurrias Capital Partners has invested in SixAxis, an Andrews, S.C.-based manufacturer of worker safety and productivity products. No additional terms were disclosed. http://axios.link/qJSz

• FirstLight, an Albany, N.Y.-based bandwidth infrastructure services provider, has acquired Victor, N.Y.-based Finger Lakes Technologies Group for an undisclosed amount. FirstLight is owned by Oak Hill Capital Partners. www.fltg.com

• Lovell Minnick Partners has agreed to acquire CenterSquare Investment Management, a Plymouth Meeting, Penn.-based real estate and infrastructure investment management firm with around $90 billion in AUM, from BNY Mellon for an undisclosed amount. www.centersquare.com

• Ogden Ventures has acquired Westland Distributing, a Confier, Colo.-based distributor of manufactured housing supplies. No financial terms were disclosed. www.westlanddistributinginc.com

• Procera Networks, a Fremont, Calif.-based network intelligence company owned by Francisco Partners, has completed its C$562 million take-private acquisition of Sandvine Corp. www.sandvine.com

• Trimlite Mfg, a Canadian doormaker backed by TriWest Capital Partners, has acquired Codel Entry Systems, a Tacoma, Wash.-based maker of residential door entry systems, from Prospect Partners. No financial terms were disclosed. www.codelentrysystems.com

• Waud Capital Partners has acquired Anovia Payments, an Irving, Texas-based provider of payments acceptance solutions, for an undisclosed amount. http://axios.link/GkYB

Public Offerings

• MongoDB, a New York-based open source database system, has filed for a $100 million IPO. It plans to trade on the Nasdaq under ticker symbol MDB, with Morgan Stanley listed as left-lead underwriter. The company reports a $46 million net loss on $68 million in revenue for the first half of 2017, compated to a $45 million net loss on $45 million in revenue for the year-earlier period. The company has raised over $300 million in VC funding, most recently at a post-money valuation of around $1.7 billion, from firms like

Sequoia Capital (16.9% pre-IPO stake), Flybridge Capital (11.6%), Union Square Ventures (9.7%), NEA (7.2%), Future Fund (6.2%), Fidelity, Altimeter Capital Management and T. Rowe Price.

• VM Holding, a Brazilian zinc miner, has filed for a $100 million IPO. It plans to trade on the NYSE and TSX under ticker symbol NEXA, with JPMorgan listed as left lead underwriter. http://axios.link/7sEQ

Liquidity Events

🚑 New Harbour Capital is seeking a buyer for PT Solutions, an Atlanta-based provider of physical therapy services, according to Dow Jones. www.newharbourcap.com

• TPG Growth has agreed to sell Angie's Artisan Treats, a Minnesota-based maker of ready-to-eat popcorn, to Conagra Brands (NYSE: CAG) for an undisclosed amount. www.boomchickapop.com

More M&A

• General Electric (NYSE: GE) is in advanced talks to sell its industrial solutions business to ABB Ltd. (Swiss: ABBN) for between $2.5 billion and $3 billion, according to Bloomberg. https://bloom.bg/2wbjS86

🚑 Impax Laboratories (Nasdaq: IPXL) is in talks to merge with privately-held generic drugmaker Amneal Pharmaceuticals, according to the WSJ. http://on.wsj.com/2xxSCV3

• Pladis, the Turkish owner of Godiva chocolates, is considering a big for Nestle's U.S. confectionary business, which could be valued at around $2 billion, per Reuters. http://reut.rs/2waBXDr

• Time Inc. (NYSE: TIME) said in a regulatory filing that it is seeking to sell several assets, including Time Inc. UK, Time Customer Service and a majority stake in Essence. http://reut.rs/2fllkBN

Fundraising

• Baidu (Nasdaq: BIDU) has formed a $1.5 billion investment fund focused on autonomous driving technology. http://tcrn.ch/2fmHrbc

• Deutsche Bank has sold its U.S. Private Equity Access Fund platform to iCapital for an undisclosed amount. The platform includes 33 funds with around $2.5 billion of invested assets. http://axios.link/PGUh

• East Ventures has raised its sixth Indonesia-focused VC fund with $30 million in capital commitments. http://tcrn.ch/2xkhKiq

It's Personnel

• Jessica Jackley, co-founder of microlending site Kiva, has joined SparkLabs Global Ventures as a venture partner. www.sparklabsglobal.com

Final Numbers
Dan Primack