Sep 7, 2018

Axios Pro Rata

Looking forward to seeing so many fellow Bostonians later this morning for our Gear Up event. Be sure to say hi afterward, so that I can briefly feel more popular than Chris Bosh.

Top of the Morning

Chamath Palihapitiya in 2013. Photo by Brian Ach/Getty Images.

Social Capital arrived in Silicon Valley seven years ago, injecting itself almost immediately into the bloodstream. It became a must-have firm for tech founders — and a must-quote firm for reporters — driven by its charismatic co-founder, former Facebook executive Chamath Palihapitiya.

But after raising more than $1 billion and making early bets on companies like Slack, the firm is imploding. And sources all blame Palihapitiya.

What's remarkable here is that Social Capital's problems don't stem from poor returns or major scandal. Instead it's more about hubris and a hierarchical management style that too often treated partners like the help.

Some highlights from the full story, which can be found here:

  • Palihapitiya is regularly absent from the Social Capital offices, instead spending much of his time in Europe. He also is said by multiple sources to have repeatedly blown off investor meetings, sometimes sending regrets just minutes before they were to begin.
  • Social Capital's hedge fund is shutting down.
  • Previously unreported departures include Eimear Fischer, a former Facebook HR exec who served as Social Capital's chief people officer.

Again, please click here for the full piece.

Disrupt dispatch: Kia spent yesterday at the TechCrunch Disrupt event, and sends two quotes of note.

Sequoia Capital's Doug Leone on raising an $8 billion growth fund:

"There are investors that are now approaching a company, and say 'either you take a billion dollar from us, or we'll invest in your nearest competitor.' And we wanted to make sure that Sequoia companies... didn't face that stick up."

Jina Choi, head of the SEC's San Francisco office, on making false statements (she would not specifically address Elon Musk or Tesla):

'When you talk about fraud, you're talking about a state of mind you're talking about a mens rea, we call it ' scienter ', you have to do something with intentionality. And so the idea of just making a misstatement doesn't necessarily rise to the level of fraud. I think that's what makes our investigations so challenging. I think the idea of trying to understand what people's heads can be very difficult."

🎧 Podcast: Our new episode is on all things NFL, and I'm joined by Hall of Famer and private equity exec Steve Young. We talk anthem protests, brain injuries, how tech has changed QB game prep and the strangest thing he ever autographed. (Listen) (Subscribe).

  • Go Pats!

Source: Giphy

FirstGroup (LSE: FGP), a UK-based train and bus operator with a market cap of around $1.5 billion, is attracting private equity interest after rejecting a takeover attempt from Apollo Global Management.

  • Why it's the BFD: Because for all of our focus on ride-hail, plenty of people still rely on FirstGroup's Greyhound buses for long-distance travel. And it also claims to be the largest yellow school bus company in North America, with nearly a quarter of the total market.
  • Bottom line: "FirstGroup’s pension deficit might be an obstacle to a deal, as could the need for U.K. government approval for a change in control of rail franchises, according to Liberum Capital. If these hurdles can be overcome, it would be difficult for FirstGroup to turn away interest again given its 'relatively lackluster' performance, Liberum analyst Gerald Khoo wrote in a note." — Bloomberg
Venture Capital Deals

GreyOrange, a Singapore-based developer of robotics systems for fulfillment systems automation, raised $140 million in Series C funding. Mithril Capital led, and was joined by Blume Ventures and Binny Bansal.

• Sonatype, a Fulton, Md.-based automated open-source governance startup, raised $80 million. TPG led, and was joined by return backers Goldman Sachs, Accel and Hummer Winblad.

🚑 28-7 Therapeutics, a Cambridge, Mass.-based cancer drug startup focused on tumor-suppressing RNA, raised $65 million in Series A funding. MPM Capital and Novartis Venture Fund co-led, and were joined by J&J Innovation, Vertex Ventures, Longwood Fund and Astellas Venture Management.

Farmer’s Fridge, a maker of vending machines for salads and other healthy foods, raised $30 million in new funding led by Innovation Endeavors.

Private Equity Deals

Crestview Partners acquired Protect My Car, a Clearwater, Fla.-based provider of extended vehicle warranty products.

Mobile Communications America, a Lawrenceville, Ga.-based portfolio company of WJ Partners, acquired Gately Communication, a Hampton, Va.-based provider of wireless and two-way radio communications solutions.

Vista Equity Partners acquired Alegeus, a Waltham, Mass.-based provider of healthcare and benefit payment solutions, from Lightyear Capital.

Public Offerings

EventBrite, a San Francisco-based event ticketing platform, set IPO terms to 10 million shares at $19-$21 per share. It would have an initial market cap of $1.55 billion, were it to price in the middle, and to trade on the NYSE (EB) with Goldman Sachs as lead underwriter. The company raised over $370 million in VC funding, with Tiger Global and Sequoia Capital listed as the largest outside shareholders.

Zekelman Industries, a Chicago-based steel pipe and tube maker, set IPO terms to 41.75 million shares at $17-$19. It plans to trade on both the NYSE and TSC under ticker ZEK, with Goldman Sachs is lead underwriter. The company reports $100 million of net income on $783 million in revenue for the 13 weeks ending June 30, up from $48 million on $564 million for the year-earlier period.

Liquidity Events

Silver Lake will sell 20% of the convertible notes it holds it Motorola Solutions (NYSE: MSI), or a $200 million principal amount, for $369 million in cash. The firm retains around a $1.5 billion position.

More M&A

Airbus is no longer in talks to sell all of part of manufacturing subsidiary Premium Aerotec, which generates around €2 billion in annual revenue, per Handelsblatt.

Assicurazioni Generali, an Italian insurer, said it’s in exclusive talks to buy Sycomore, a Paris-based investment firm with €8.3 billion in AUM.

🚑 BTG (LSE: BTG) acquired Novate Medical, maker of a medical device for managing blood clots, for $20 million upfront and up to $130 million in additional milestone payments.

Rockefeller Capital Management, led by Greg Fleming, is in talks to buy at least part of Silicon Valley wealth management firm CTV/myCFO from Bank of Montreal, per Bloomberg.

🚑 Trinity Partners, a Waltham, Mass.-based life sciences consultant, acquired TGaS Advisors, an East Norriton, Penn.-based provider of benchmarking and advisory services for commercial life sciences organizations.

Pebblebrook Hotel Trust (NYSE: PEB) agreed to buy LaSalle Hotel Properties (NYSE: LHO) for $5.2 billion in cash and stock, besting a $4.8 billion all-cash offer from The Blackstone Group.


Saudi Aramco is considering the formation of a $1 billion global tech venture capital fund, per the WSJ.

It's Personnel

Mary Dillon, CEO of Ulta Beauty (Nasdaq: ULTA), was named an independent director of KKR (NYSE: KKR).

Kayne Partners promoted Leon Chen to partner and Rob Shilton to vice president.

Nick Tusto, former co-head of Internet and digital media for BofA Merrill Lynch, is joining merchant bank LionTree in its San Francisco office.

Final Numbers
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Data: Bureau of Labor Statistics; Chart: Axios Visuals

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