Oct 26, 2021

Axios Pro Rata

Top of the Morning

Illustration: Aïda Amer/Axios

Sequoia Capital, one of the world's oldest and most successful venture capital firms, is forming a single fund to hold all of its U.S. and European investments, including stakes in publicly-traded companies, Axios has learned.

Why it matters: Venture capital is the money of innovation, but the industry itself rarely innovates. This is a radical exception.

  • "We think the VC model is outdated," Sequoia partner Roelof Botha explains. "It creates an odd dynamic between us and founders, where on the eve of an IPO they're asking if we're going to have to get off their boards and quickly distribute the stock. Why should that be the default, particularly when so much value creation happens later?"

Details: The Sequoia Fund will serve as an open-ended capital vehicle and become the sole limited partner for all future Sequoia "sub-funds" (seed, venture, growth, etc.). Sub-fund managers will decide on when to contribute assets into the Sequoia Fund, optimizing for their own return profiles.

  • Limited partners will keep accounts with the Sequoia Fund, with annual redemption rights, and make allocation requests to sub-funds out of those account balances. In other words, the closed-end funds and the open-ended fund will continuously feed each other.
  • Sub-funds will maintain Sequoia's premium fee structure, including a 30% carried interest, while the Sequoia Fund will have a <1% management fee and a long-term performance fee with what I'm told is "a very high hurdle."
  • Sequoia employees will contribute at least 5% of the Sequoia Fund's capital.

More: Sequoia also plans to become a registered investment advisor, which could let it expand its investments in areas like crypto and secondaries. The firm also told investors that it doesn't plan to ever become publicly-traded.

The why: Sequoia argues that all of this is designed to better align interest between itself and founders, and itself and limited partners.

  • In terms of founders, the argument is about being able to remain involved and invested long after a company goes public. Botha, for example, remains on the board of Square.
  • In terms of LPs, Sequoia believes the traditional fund structure has prompted it to sell shares too early (including in companies like Google). One internal analysis of distributions over the past 15 years shows that had Sequoia held onto shares for just 12 additional months, it would have resulted in over $8 billion in added returns.

Tax consequences: Sequoia currently holds around $45 billion of U.S. and European public equities, on a cost basis of just $2 billion, and already has contributed much of that into the Sequoia Fund (including shares of companies like Airbnb).

  • The firm believes it crystalized the carried interest tax treatment upon making those transfers, while any future transfers would be at contemporaneous tax rates. Expect the IRS to take a very detailed look at Sequoia's analysis.
  • In general, there will be taxable events when shares are sold by The Sequoia Fund of the sub-funds.

Timeline: The firm began discussing this concept nearly a year ago, in consultation with a select group of limited partners. Earlier this year it asked LPs to approve some top-level structure changes, without providing details, and this past Monday shared specifics. LP information sessions are scheduled for tomorrow and Thursday.

  • I spoke with three longtime Sequoia LPs, each of whom was supportive of the move. Part of this is because it puts the stock sale onus on Sequoia, rather than on LPs (some of whom might not have active public equities desks), but the bigger part is because Sequoia has never really steered them wrong before.
  • One concern is increased volatility, since the Sequoia Fund's value could be significantly impacted by tech stock swings. It's not something VC portfolio managers typically deal with on a quarterly basis.

The bottom line: Venture capital is often about fast follows, and rival firms might have called management meetings before getting to the end of this story. But the odds are that Sequoia will stand alone on making these sorts of changes, due to its outsized public holdings and its unparalleled brand reputation.

The BFD

Illustration: Sarah Grillo/Axios

CVC Capital Partners and billionaire Sanjiv Goenka each agreed to buy new professional cricket franchises in the Indian Premier League, shelling out a total of $1.69 billion, following an auction process.

  • Why it's the BFD: These prices are very high for nascent clubs, reflecting an era of global sports team values being inflated by excess institutional and individual wealth.
  • Details: CVC will pay $745 million for an Ahmedabad-based team, while Goenka will put up $945 million for one in Lucknow.
  • The bottom line: "Investors have been convinced to pay higher prices to buy into the IPL, which was founded in 2008, as it follows the model of American sports where teams are guaranteed places in the competition each season and because of the anticipated growth of its multibillion-dollar media rights deals." — Samuel Agini and Murad Ahmed, FT
Venture Capital Deals

🚑 Medable, a Palo Alto-based cloud platform for clinical research, raised $304 million in Series D funding at a $2.1 billion post-money valuation from Blackstone Growth, Tiger Global, GSR Ventures, Sapphire Ventures and WTI. http://axios.link/apIt

• Devo, a Cambridge, Mass.-based log management and cybersecurity company, raised $250 million in Series E funding at a $1.5 billion valuation. TCV led, and was joined by General Atlantic and Eurazeo. http://axios.link/g7c3

• Fabric, a New York-based provider of on-demand fulfillment solutions, raised $200 million in Series C funding. Temasek led, and was joined by Koch Disruptive Technologies, Union Tech Ventures, Harel Insurance & Finance, Pontifax AgTech, CPP Investments, KSH Capital, Princeville Capital, Wharton Equity Ventures. www.getfabric.com

• Augury, an Israeli industrial AI startup, raised $180 million in Series D funding at a post-money valuation north of $1 billion. Baker Hughes led, and was joined by Schneider Electric and insiders Insight Partners, Eclipse Ventures, Qumra Capital, Qualcomm Ventures LLC, the HSB Fund of Munich Re Ventures and Lerer Hippeau. www.augury.com

• CoinList, an S.F.-based platform for crypto offerings, raised $100 million in Series A funding at a $1.5 billion valuation. Accomplice and Agman Partners co-led, and were joined by Alphemy Capital, Continue Capital, CMT Digital, DFG Capital Management, Fenbushi Capital, HashKey Capital, executives from GoldenTree Asset Management, Rising Tide Capital, Imperii Partners and Metaplanet. www.coinlist.com

• Pipefy, an S.F.-based provider of low-code workflow management software, raised $75 million in Series C funding. SoftBank led, and was joined by Steadfast Capital Management, Insight Partners and Redpoint eventures. www.pipefy.com

🚑 Juventas, a Cleveland-based biotech focused on blood cancer, raised $63 million in Series C funding led by CICC Capital. http://axios.link/5CjJ

• Y24, a German low-code data platform, raised $31 million in Series A funding. Atomico and Insight Partners co-led, and were joined by La Famiglia and Data Community Fund. http://axios.link/lrba

• Yokoy, a Zurich-based spend management platform, raised $26 million in Series A funding. Left Lane led, and was joined by Balderton Capital. http://axios.link/R3AY

• Selfbook, a New York-based hotel payment startup, raised $25 million in Series A funding. Tiger Global led, and was joined by Valia Ventures, Fin VC and Lachy Groom. http://axios.link/gYlc

• Bridgit, a Toronto-based workforce intelligence startup, raised C$24 million in Series B funding from backers like Storm Ventures and Camber Creek. www.gobridgit.com

• Autochek, a Lagos-based auto marketplace, raised $13.1 million in seed funding. TLcom Capital and 4DX Ventures co-led, and were joined by Ask Capital, Mobility 54 Investment SAS, Golden Palm Investments, Enza Capital and Lateral Capital. http://axios.link/n4En

🚑 Gencove, a New York-based low-pass genome sequencing platform, raised $10 million in Series A funding. Lewis & Clark AgriFood led, and was joined by Spero Ventures, Techammer, Third Kind Venture Capital and Version One Ventures. www.gencove.com

• Flowerbx, a British DTC flower delivery startup, raised £8 million in Series A funding. Capstar Ventures led, and was joined by Lumar Ventures and Shortlist Ventures. www.flowerbx.com

• Vopero, a fashion resale marketplace in Latin America, raised $7.5 million from Grupo Axo and ThreadUp. www.vopero.com

• Poladrone, a Malaysian provider of crop protection tech, raised $4.3 million in seed funding led by Wavemaker Partners. http://axios.link/c2ME

• Pop Market, a Greece dark store grocery delivery startup, raised $3.5 million in seed funding co-led by Global Founders Capital and 468 Capital. http://axios.link/5juA

• AtomChat, a conversational sales AI focused on Latin America, raised $3.2 million in seed funding. Mucker Capital led, and was joined by TechStars. http://axios.link/qftq

• Bild, a hardware design collaboration platform, raised $3 million in seed funding. Tola Capital led, and was joined by Lux Capital, Shasta Ventures, Counterview Capital, Frontier Ventures and Techstars. http://axios.link/rWpi

Private Equity Deals

Affinity Equity Partners will invest $360 million for a stake in Towngas China, a Hong Kong-listed gas investment and management firm. http://axios.link/08ed

• Aspida, a unit of Ares Management, invested in Archwest Capital, a direct commercial lender. www.archwestcapital.com

• Core Industrial Partners formed a Grand Rapids, Mich.-based additive manufacturing platform via the acquisitions of 3Dxtech, Triton 3D and Gearbox3D. www.3dxtech.com

• Golden Gate Capital bought Carrollton, Texas-based All My Sons Moving & Storage. www.allmysons.com

🚑 Great Hill Partners invested in Clearwave, an Atlanta-based digital patient management SaaS company. www.clearwaveinc.com

• IK Investment Partners bought CONET, a German provider of digital transformation solutions to the public sector, from H.I.G. Capital. www.conet.de

• Novvia, a portfolio company of Kelso & Co., bought Fox Valley Containers, a Crystal Lake, Ill.-based packaging products distributor. www.novviagroup.com

🚑 nThrive, a revenue cycle management SaaS owned by Clearlake Capital, agreed to buy the healthcare data and analytics business of TransUnion (NYSE: TRU) for $1.74 billion. http://axios.link/5cS9

🚑 Wellspring Capital acquired Caring Brands International, a Sunrise, Fla.-based franchisor of home healthcare services, from Levine Leichtman Capital Partners. www.interimhealthcare.com

Public Offerings

• Delimobil, a Russian car-sharing company with $125 million in revenue for its most recent fiscal year, set IPO terms to 20 million shares at $10-$20. The company plans to list on the NYSE (DMOB) and Moscow Exchange. http://axios.link/3EH5

• Iris Energy, an Australian bitcoin miner mostly powered by renewable energy, filed for an IPO. It plans to list on the Nasdaq (IREN). http://axios.link/uE6I

• Sweetgreen, an L.A.-based quick-serve restaurant chain, flipped its S-1. The company plans to list on the NYSE (SG) and reports an $87 million net loss on $243 million in revenue for the first 39 weeks of 2021. It raised around $670 million in VC funding, most recently at a $1.8 billion valuation, from backers like Anchorage Capital Group, Lone Pine Capital, Revolution, T. Rowe Price, Red Sea Ventures, Collaborative Fund, Signatures Capital, Scott Belsky, Danny Meyer and Daniel Boulud. http://axios.link/lVBI

SPAC Stuff

• Jaguar Global Growth I, a prop-tech SPAC formed by Jaguar Growth Partners, filed for a $200 million IPO. http://axios.link/616X

Liquidity Events

• Chalo, a VC-backed bus service digitization startup in India, bought Shuttl, an India-based shuttle bus operator that had raised $120 million from firms like Amazon, Susquehanna Asia Investments, Lightspeed Venture Partners, Times Internet, NAV.vc, Sequoia Capital India, Dentsu Ventures, Toyota Tsusho, Sparx Group. http://axios.link/Aabg

• Platinum Equity agreed to sell Orbit Irrigation, a Salt Lake City-based provider of watering equipment, to Stockholm-listed Husqvarna Group for $480 million. http://axios.link/xN7M

More M&A

• Cameo, a celeb video messaging company valued at $1 billion by VCs, agreed to buy Represent, an LA-based celeb merch and marketing company. http://axios.link/GNdQ

• DraftKings (Nasdaq: DKNG) walked away from efforts to buy Entain, the listed British sports betting firm that owns Ladbrokes and Coral, for around $20 billion. http://axios.link/l90m

⚡ Energias de Portugal is in talks to buy a majority stake in Singapore-based renewables company Sunseap Group at a US$742 million valuation, per Reuters. http://axios.link/osdM

• FC Porto, a Portuguese soccer club, hired Certus Capital Partners to explore the sale of a minority stake, per Bloomberg. http://axios.link/wWtk

🧀 Granarolo, an Italian dairy group, acquired East Haven, Conn.-based cheese producer Calabro Cheese. http://axios.link/IfFw

Fundraising

Source: Giphy

• Marcy Venture Partners, a VC firm co-founded by Jay-Z, raised $325 million for its second fund. http://axios.link/1zbn

• Builders Fund, an S.F.-based growth equity impact investing form, held a $50 million first close for its $100m-targeted second fund. www.thebuildersfund.com

• Khosla Ventures raised $1.4 billion for its latest early-stage and seed funds. www.khoslaventures.com

• KSL Capital Partners, a Denver-based PE firm focused on travel and leisure, is raising $3 billion for its sixth flagship fund, per Bloomberg. http://axios.link/Hnwu

• Lexington Partners agreed to buy a portfolio of PE fund stakes from State Teachers Retirement System of Ohio, with Secondaries Investor reporting a value north of $1 billion. http://axios.link/adTh

• Pantheon of London raised $624 million for a GP-led secondaries fund. http://axios.link/eNAu

• Promus Ventures of Chicago raised $139 million for a space-focused VC fund called Orbital Ventures. http://axios.link/bOye

🐯 Tiger Global held an $8.8 billion first close for its next flagship growth equity fund, which is targeting $10 billion, per Bloomberg. http://axios.link/R8bu

• Timber Bay raised $305 million for its second fund focused on GP-led secondaries of lower midmarket buyouts and growth equity. www.timberbaypartners.com

• Vintage Investment Partners of Israel raised $500 million for its sixth fund-of-funds and $312 million for its fifth direct secondaries fund. http://axios.link/HSmC

⚡ World Fund, a decarbonization VC firm created by the founders of Ecosia, raised €350 million for its debut fund. http://axios.link/OaSP

Final Numbers
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Data: Axios/Ipsos poll; Chart: Kavya Beheraj/Axios

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