Jul 22, 2020

Axios Pro Rata

By Dan Primack
Dan Primack

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Top of the Morning

Illustration: Sarah Grillo/Axios

The best way to save ByteDance, the world's most valuable tech "unicorn," may be to break up ByteDance.

  • Driving the news: Some of the Chinese company's U.S. investors are discussing a carve-out of all or part of TikTok, which is under growing geopolitical pressures, according to The Information.

Backdrop: ByteDance was most recently valued at $75 billion by venture capitalists, and at around $95 billion in secondary market trades.

  • ByteDance's core product is a Chinese news content platform called Toutiao, but TikTok is its most popular global offering.
  • TikTok is viewed as a potential national security threat in the U.S., due to alleged data privacy issues tied to the Chinese government, and could soon be banned here (as it already was in India, which had been its top market).
  • Already, the House has voted to ban federal employees from having TikTok on their devices, the Defense Department recommended the same to its staff, and we've seen the same from at least one large company (or two, depending on how you view Amazon's flip-flop).
  • In short, TikTok risks becoming the next Juul — a wildly-successful, VC-backed consumer tech startup felled by targeted government intervention.

How would a carve-out work? This is the $75 billion question. Two sources tell me talks are more embryonic than preliminary, although they acknowledge that political threats could serve as accelerant.

  • For starters, it's unclear that carving out TikTok would make D.C. stand down. Particularly given that many of the U.S. firms reportedly involved, such as Sequoia Capital, have major China operations. Worries about code and conspiracy can't necessarily be solved via cap table.
  • Second, financing the deal could prove challenging. A total buyout would certainly cost double-digit billions, which is daunting for even the deepest-pocketed U.S. venture capitalists.
  • Private equity could get involved (KKR is among ByteDance's backers), but new investors would almost certainly need to be tapped (hi Silver Lake, we see you there). All without any guarantee of CFIUS approval or that the deal would solve TikTok's India and U.S. problems.

The bottom line: Buying TikTok sounds like an elegant solution, but may prove just as thorny as the problem itself.

The BFD

Illustration: Aïda Amer/Axios

Glen Taylor is seeking a buyer for the Minnesota Timberwolves, an NBA franchise that is expected to fetch well north of $1 billion.

  • Why it's the BFD: This is a downright bizarre time to be selling a pro sports franchise, given how revenue has been battered by the pandemic.
  • Suitors include the Wilf family (owners of the Minnesota Vikings) and real estate mogul Meyer Orbach. Former T-Wolves star Kevin Garnett also says he's seeking to put together a bid, and several others are said to be at least kicking the tires. Taylor says he's retained The Raine Group to manage the process.
  • Bottom line: Average NBA franchise value is now above $2 billion, but Forbes estimates Minnesota is near the bottom of the pack with a worth of $1.38 billion. No matter the price, Taylor would recognize a massive return on the $88 million he paid for the team in 1995.
Venture Capital Deals

🚑 CureVac, a German developer of mRNA medicines (including a COVID-19 vaccine), raised $640 million in new funding. This includes previously-announced investments of $343 million from the German government and $171 million from GlaxoSmithKline, plus $126 million from Qatar Investment Authority and undisclosed backers. http://axios.link/9IDt

🚑 Encoded Therapeutics, a South San Francisco-based developer of a precision gene therapy for a rare form of epilepsy called Dravet syndrome, raised $135 million in Series B funding. GV led, and was joined by Matrix Capital Management, ARCH Venture Partners, Illumina Ventures, RTW Investments, Boxer Capital, Nolan Capital, HBM Genomics, Menlo Ventures, Meritech Capital, Farallon Capital Management, and Softbank Vision Fund. http://axios.link/Bstc

Misfits Market, a Philadelphia-based subscription service for “ugly” produce, raised $85 million in Series B funding. Valor Equity Partners led, and was joined by Greenoaks Capital, Third Kind Venture Capital, and Sound Ventures. http://axios.link/TJTV

Dexterity Robotics, a Palo Alto, Calif.-based robot-as-a-service startup, raised $56 million from Lightspeed Venture Partners, Kleiner Perkins, and Obvious Ventures. http://axios.link/6JD6

Scalable Capital, a Munich-based retail investment platform, raised €50 million in Series D funding at a €400 million valuation from BlackRock, HV Holtzbrinck Ventures, and Tengelmann Ventures. http://axios.link/TvyR

AB Tasty, a French e-commerce user experience optimization startup, raised $40 million. Credit Mutuel Innovation led, and was joined by Korelya Capital, Omnes, Partech and XAnge. http://axios.link/M4Pe

Chowbus, a food delivery app for Asian restaurants and grocery stores, raised $33 million in Series A funding. Altos Ventures and Left Lane Capital co-led, and were joined by Hyde Park Angels, Fika Ventures, FJ Labs and Silicon Valley Bank. http://axios.link/SVoa

Insider, a Singapore-based marketing SaaS startup, raised $32 million in Series C funding. Riverwood Capital led, and was joined by Sequoia Capital, Wamda, and Endeavor Catalyst. http://axios.link/Boq2

Branch, a Columbus, Ohio-based home and auto insurance startup, raised $24 million in Series A funding. Greycroft and HSCM Bermuda co-led, and was joined by SignalFire, SCOR Global P&C, Elefund, Foundation Capital, and return backers American Family Ventures and Revolution Rise of the Rest. www.ourbranch.com

Propeller, a Denver-based developer of 3D mapping and worksite analytics hardware and software, raised $18 million in Series B funding co-led by Blackbird and Costanoa Ventures. http://axios.link/OFqc

Belkin Laser, an Israeli developer of a laser treatment for glaucoma, raised $12.3 million in Series B funding. Rimonci Capital and Santen Ventures co-led, and were joined by BioLight Life Sciences, CR-CP Life Science Fund, and C-Mer Eye Care. http://axios.link/mIkK

Meemo, a San Francisco-based social finance app, raised $10 million from Saama Capital, Greycroft, Monashees, and Sierra Ventures. http://axios.link/ESp0

Joywell Foods, a Davis, Calif.-based sweet proteins startup, raised $6.9 million in Series A funding. Evolv Ventures led, and was joined by Khosla Ventures, SOSV, and Alumni Ventures Group. http://axios.link/rngV

Sora, an HR automation startup, raised $5.3 million co-led by First Round Capital and Elad Gil. http://axios.link/StH9

Rah Rah, a New York-based provider of community engagement software for higher ed, raised $2.8 million in seed funding from Workday co-founder Dave Duffield and vice chairman Phil Wilmington. http://axios.link/D6uD

Mercado, a Dallas-based provider of international trade SaaS, raised $2.5 million. Ironspring Ventures led, and was joined by Supply Chain Ventures. http://axios.link/C5Pp

Private Equity Deals

🚑 HealthEdge Software, a portfolio company of The Blackstone Group, acquired The Burgress Group, an Alexandria, Va.-based provider of healthcare payment integrity software. www.healthedge.com

KPS Capital Partners agreed to buy AM General, a South Bend, Ind.-based maker of specialized vehicles for military and commercial customers, from MacAndrews & Forbes. www.amgeneral.com

Olde Thompson, an Oxnard, Calif.-based portfolio company of Kainos Capital, acquired Gel Spice, a Bayonne, N.J.-based importer and maker of spices and bakery ingredients for the retail and foodservice markets. www.gel-spice.com

One Equity Partners acquired Spartronics, a Watertown, S.D.-based manufacturing and design services business, from Sparton Corp., a portfolio company of Cerberus Capital Management. www.sparton.com

PCF Insurance, a Woodland Hills, Calif.-based portfolio company of HGGC, acquired four commercial insurance brokerages: First Fidelity (New York), Horizon Insurance (Bradenton, Fla.), Moulton Insurance (Belchertown, Mass.), and Avidity Insurance (Overland Park, Kan.). www.pcfoy.com

Public Offerings

Jamf, a Minneapolis-based Apple device management company owned by Vista Equity, raised $468 million in its IPO. The company priced 16 million shares at $26, which was well above its upwardly-revised range of $21-$23, for an initial market cap of $3 billion. It will list on the Nasdaq (JAMF) and used Goldman Sachs as lead underwriter. http://axios.link/Uwj6

Pershing Square Tontine Holdings, a SPAC formed by Bill Ackman to acquire "mature unicorns," raised $4 billion in its IPO. That makes it the largest IPO ever for a SPAC. http://axios.link/DbRk

🚑 4D Molecular Therapeutics, an Emeryville, Calif.-based gene therapy company, withdrew registration for a $100 million IPO. This comes after it raised $75 million in Series C funding led by insider Viking Global Investors. http://axios.link/7qsK

Property Solutions Acquisition, a real estate-focused SPAC, raised $200 million in its IPO. http://axios.link/wEH9

More M&A

Lockheed Martin (NYSE: LMT) agreed to sell its 40% stake in AMMROC, a UAE-based military repair and maintenance company, to state-owned defense group EDGE. http://axios.link/Ygjd

Prysmian (Milan: PRY) agreed to buy EHC Global, a Canadian maker of elevator components, for US$97 million. http://axios.link/IvfY

Royal Philips is seeking a buyer for its home appliance unit, which could fetch upwards of $4 billion, per Bloomberg. http://axios.link/W80K

Fundraising

J.F. Lehman raised $1.35 billion for its fifth mid-market buyout fund focused on the aerospace, defense, maritime, and government sectors. http://axios.link/6Vkt

One Peak, a growth equity firm focused on the European tech sector, raised €443 million for its second fund. www.onepeakpartners.com

Pomona Capital is raising $2 billion for its 10th secondaries fund, per an SEC filing. www.pomonacapital.com

Rogue Capital Partners, a New York-based VC firm led by Alice Lloyd George (ex-RRE Ventures), is raising $40 million for its debut fund, per an SEC filing.

WRVI Capital, an early-stage VC firm, is raising $500 million for its fourth fund, per an SEC filing. www.wrvi.com

It's Personnel

Michael Brofft joined Fort Point Capital as a VP. He's a recent Wharton grad who previously worked at Sigular Guff. www.fortpointcapital.com

Benjiman Godbout left Summit Investment Management to rejoin Carl Marks Advisors as a director focused on I-banking and distressed transactions. www.carlmarksadvisors.com

Jason Neal joined Pomona Capital as a New York-based VP and senior regional director. He previously led biz dev and IR for FlowStone Partners. www.pomonacapital.com

Final Numbers
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Reproduced from Forbes; Chart: Axios Visuals
Dan Primack

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