Jan 18, 2017

Axios Pro Rata

It's launch day here at Axios, which means that the entire site is now live. Check it out at www.Axios.com, and be sure to send me feedback. Highlights from this morning include an exclusive sit-down with Donald Trump, a Theranos-focused Q&A with Tim Draper and much more. For Pro Rata, the most immediate change is that all of our sections are now shareable. More updates to come soon. Now let's get to it...

Top of the Morning

• Things that make you go hmmm: Axios yesterday asked Donald Trump if he still opposes the AT&T-Time Warner merger, and here was his reply: "I have been on the record in the past of saying it's too big and we have to keep competition. So, but other than that, I haven't, you know, I haven't seen any of the facts, yet. I'm sure that will be presented to me and to the people within government."

Not too often you hear a politician simultaneously stake out a position and explicitly admit that he has no factual basis for that position. Moreover, it would appear that he did not ask to be briefed on the matter before meeting last week with AT&T CEO Randall Stephenson (who said the two did not discuss the merger).

• Today in Theranos: Federal regulators found "deficiencies" in the troubled blood-testing company's Arizona lab during an unannounced inspection last September, per the WSJ. On the one hand, it doesn't much matter because the inspection came just days before Theranos said it would bail on in-house testing, instead creating "mini-lab" equipment for other companies. On the other, this failure could mean new penalties.

It's also worth noting that we've just published a Q&A with venture capitalist Tim Draper, an early Theranos investor and one of the company's last remaining defenders. Let's just say that he and I agree to disagree. And for Silicon Valley history buffs, we've obtained and posted the Theranos pitch deck from June 2006, when the company was seeking Series C funding (which it also refers to as a "pre-IPO transaction."

• Private equity vs. employment: Whenever people ask me about private equity's impact on the labor market, I refer them back to a landmark 2011 study that used exclusive data from the U.S. Census Bureau's Longitudinal Business Database. It found that private equity had just a 1% net negative impact on portfolio company jobs, although the disruption was significant (i.e., PE firms fired lots of people at first, and then made lots of new hires in subsequent years). You might have heard about this during the 2012 election, when it came to Romney.

Josh Lerner, an HBS professor who was among the study's authors, tells me that he and his peers are working on an updated data set, and that initial results could become publicly available by next quarter. He declined to share any early figures, except to say that we're unlikely to see another "net neutral" conclusion...

• Unexpected: Last week I wrote about how U.S. venture capital fundraising is in for a major decline in 2017, largely because most of the big managers ($500m+ funds) raised last year. I also suggested that fund cycles could begin to widen again, after several years of contraction. So it was pretty surprising yesterday to see a Form D filed by New Enterprise Associates, which seeks to raise $3 billion for Fund 16, less than two years after it raised a whopping $3.1 billion for Fund 15. I'm still working to get draw-down data on the existing vehicle ― and this could certainly be an outlier ― but perhaps my thesis needs some tinkering...

• Shame. Shame. We'll delve deeper into this tomorrow, but a group of ten investments firms (PE, VC and hedge) have settled with the SEC over pay-to-play allegations related to public pension fund investors. Here's the WSJ story.

• Animal spirits: "My concern right now is that the market is pricing in everything [Trump] wants to do as if it's already been done." ― Glenn Hutchins, co-founder of Silver Lake, on CNBC this morning.

• Sign up: Please subscribe to Pro Rata by going here. You also can drop anonymous tips for me at http://axios.com/tips

The BFD: HP Enterprise buys SimpliVity

HP Enterprise (NYSE: HPE) has agreed to acquire SimpliVity, a Westborough, Mass.-based provider of "hyperconverged infrastructure for IT." The deal is valued at $650 million in cash. SimpliVity had raised around $275 million in VC funding since its 2009 formation, from firms like Accel, CRV, DFJ Growth, Kleiner Perkins, Swisscom Ventures, Eastward Capital Partners and Meritech Capital Partners.

Why it's the BFD: This deal seems to reflect that HP Enterprise is done shedding assets, and is back in buying mode. It also is a stark reminder that unicorn valuations and ultimate valuation aren't always on the same level. SimpliVity was valued at over $1 billion when it raised Series D funding in late 2015 (with pari passu liquidation prefs), meaning a major haircut for those holders.

Venture Capital Deals

• Collibra, a New York-based provider of data governance software for business users, has raised $50 million in Series C funding. Iconiq Capital led the round, and was joined by Battery Ventures and return backers Dawn Capital, Index Ventures and Newion Investments. www.collibra.com

• InsideSales, a Provo, Utah-based predictive sales acceleration platform, has raised $50 million in growth equity funding. Polaris Partners led the round, and was joined by fellow return backers Microsoft, Kleiner Perkins Caufield Byers, Hummer Winblad, U.S. Venture Partners, Epic Ventures and Zetta Venture Partners. New investors include QuestMark Partners and the Ireland Strategic Investment Fund. http://bit.ly/2jYGkLs

• AppsFlyer, a San Francisco-based mobile attribution and marketing data analytics company, has raised $56 million in Series C funding. Qumra Capital led the round, and was joined by Goldman Sachs PCI, Deutsche Telekom Capital Partners and Pitango Growth. http://bit.ly/2jtDzFl

• Upside.com, a small business traveler discount website founded by Jay Walker (founder of Priceline), has raised $50 million in new VC funding at a valuation north of $200 million. Backers include Red Ventures and Leucadia National Corp. http://bloom.bg/2johecl

• Pipedrive, a CRM platform for small and mid-sized businesses, has raised $17 million in Series B funding. Atomico led the round, and was joined by Bessemer Venture Partners and Rembrandt Venture Partners. http://tcrn.ch/2jwIp4D

• Measure, a Washington, D.C.-based enterprise drone-as-a-service startup, has raised $15 million in Series B funding. Cognizant (Nasdaq: CTSH) led the round, and was joined by Hudson Bay Capital and an unidentified sovereign wealth fund. http://tcrn.ch/2jkiISl

• Neurala, developer of a deep learning neural networks platform, has raised $14 million in Series A funding. Pelion Venture Partners led the round, and was joined by Pelion Venture Partners, with participation from Sherpa Capital, Motorola Solutions Venture Capital, 360 Capital Partners, Draper Associates Investments, SK Ventures and Idinvest Partners. www.neurala.com

• SilverCloud Health, an Ireland-based provider of online mental health and behavioral healthcare solutions, has raised $8.1 million in Series A funding. B Capital Group led the round, and was joined by ACT Venture Capital and return backers Investec Ventures and AIB Seed Capital Fund. www.silvercloudhealth.com

• Fraugster, a developer of AI for eliminating payment fraud, has raised $5 million in new VC funding. Earlybird led the round, alongside return backers Speedinvest, Seedcamp and an unidentified Swiss family office. http://tcrn.ch/2it1aWR

• Starburst Labs, a New York-based provider of digital services for wealth managers, has raised $6.25 million in its first round of institutional funding from firms like Bel45 Capital Partners. http://tcrn.ch/2jsEVjz

• TellusLabs, a Boston-based earth monitoring and machine learning startup, has raised $3.1 million in seed funding. IA Ventures led the round, and was joined by including Hyperplane Venture Capital, Founder Collective, and Project 11 Ventures. http://tcrn.ch/2iL4n2v

• TinyStep, a parenting advice platform and social network, has raised $2 million in VC funding from Indian e-commerce company Flipkart. http://tcrn.ch/2jvnhMe

• Ascent360, a Golden, Colo.-based customer data platform startup, has raised $1.9 million in VC funding from Access Venture Partners, Bialla Venture Partners, Service Provider Capital and the Rockies Venture Club. www.ascent360.com

Private Equity Deals

• Abraaj Group said that it is in talks to acquire a stake in the South African business of Barclays. http://bloom.bg/2jU1XfQ

• Bain Capital has agreed to acquire PSA Healthcare, an Atlanta-based provider of pediatric and adult home care, which it will merge with Epic Health Services (which Bain agreed to acquire in December). Existing PSA shareholder J.H. Whitney Capital Partners will roll its equity over into the new platform. No financial terms were disclosed. http://bit.ly/2jwj3DX

• Bain Capital has acquired a majority equity stake in Daymon Worldwide, a Stamford, Conn.-based provider of retail services, for around $413 million. http://reut.rs/2k3VVNH

• Coral Reef Capital has invested an undisclosed amount into Krewe Energy, a Covington, La.-based oil and gas exploration company. www.krewe-energy.com

• Indulge Desserts, a New York-based portfolio company of AUA Private Equity Partners, has acquired the assets of Love & Quiches, a manufacturer of gourmet desserts and quiches. No financial terms were disclosed. www.auaequity.com

• Safe Fleet, a Belton, Mo.-based portfolio company of The Sterling Group, has acquired Randall Manufacturing, a Chicago-based maker of safety products used in refrigerated semi-trailers. No financial terms were disclosed. www.safefleet.com

• San Francisco Equity Partners has acquired a majority stake in Red Monkey Foods, a Springfield, Mo.-based maker of organic spices and seasonings. No financial terms were disclosed. www.redmonkeyfoods.com

• Tritium Partners has formed a new information and digital services acquisition platform to be led by Jason Hogg, former CEO of Revolution Money and B2R Finance. www.tritiumpartners.com

• Warburg Pincus has acquired a 14% equity stake in Indian cinema chain PVR for approximately $120.5 million. Sellers include Multiples Alternative Asset Management and PVR's founders. http://reut.rs/2jw63OI

Public Offerings

• Braeburn Pharmaceuticals, a Princeton, N.J.-based CNS drug company owned by Apple Tree Partners, has set its IPO terms to around 7.7 million shares being offered at between $18 and $21 per share. It would have an initial market cap of around $575 million, were it to price in the middle of its range. The company plans to trade on the Nasdaq under ticker symbol BBRX, with J.P. Morgan and BofA Merrill Lynch serving as lead underwriters.

• Chuck E. Cheese, a kid's restaurant chain owned by Apollo Global Management, is prepping an IPO, according to Reuters. http://reut.rs/2iPTpZP

• Claire's Inc., a Hoffman Estates, Ill.-based retailer of jewelry for teens, has withdrawn an IPO registration that it first filed for in 2013. No explanation was provided. Apollo Global Management took Claire's private in 2007 for approximately $3 billion. http://read.bi/2jned9G

• Laureate Education Inc., a Baltimore-based for-profit education company owned by KKR, has set its IPO terms to 29 million shares being offered at between $17 and $20 per share. It would have an initial market cap of around $3 billion, were it to price in the middle of its offering range. The company plans to trade on the Nasdaq under ticker symbol LAUR, with Credit Suisse listed as left lead underwriter. Laureate reports around $327 million in net income on just over $3 billion of revenue for the nine months ending Sept. 30, 2016.

Liquidity Events

• DataBank Ltd., a portfolio company of Digital Bridge Holdings, has agreed to acquire C7 Data Centers, operator of three data centers in the Salt Lake City market. No financial terms were disclosed. Sellers include Signal Peak Ventures, Kickstart Seed Fund, BYU Cougar Capital and Canopy Group. http://bit.ly/2iym86D

• GTCR has agreed to sell NewWave Communications, a Sikeston, Mo.-based cable operator, to Cable One (NYSE: CABO) for $735 million in cash. http://reut.rs/2jwHRvB

• Sentinel Capital Partners has hired Piper Jaffray to find a buyer for Checkers Drive-In Restaurants, a burger chain that could be valued at around $500 million, per Bloomberg. http://bloom.bg/2iE1mOm

Other M&A

• Bertelsmann said that it may increase its stake in book publisher Penguin Random House from joint venture partner Pearson (LSE: PSON), which said that it may sell due to earnings pressure. http://bloom.bg/2jxE2pw

• Diageo (LSE: DGE) may increase its majority stake in United Spirits, the British maker of Johnnie Walker scotch, according to Bloomberg. http://bloom.bg/2k3d2PZ

• Elliott Management and Bluescape Energy Partners have acquired 5.4% and 2.5% stakes, respectively, in NRG Energy (NYSE: NRG). http://reut.rs/2j8FdZr

• HomeServices of America, a unit of Berkshire Hathaway, has acquired Rye Brook, N.Y.-based residential real estate firm Houlihan Lawrence. No financial terms were disclosed. www.houlihanlawrence.com

• ServiceNow (NYSE: NOW) has agreed to acquire DxContinuum, a Fremont, Calif.-based machine learning startup. No pricing terms of the all-cash deal were disclosed.

• TomTom (Amsterdam: TOM2) has acquired Autonomos, a Berlin-based developer of self-driving technology. No financial terms were disclosed. http://tcrn.ch/2iA51BK

Fundraising

• Causeway Media Partners is raising upwards of $175 million for its second venture capital fund, according to a regulatory filing. http://bit.ly/2jI0cTO

• Kline Hill Partners, a Connecticut-based secondaries firm, has closed its debut fund on $180 million in capital commitments. www.klinehill.com

• New Enterprise Associates is raising upwards of $3 billion for its sixteenth venture capital fund, according to a regulatory filing. http://bit.ly/2iMFXpD

• Vestigo Ventures, a Cambridge, Mass.-based VC firm focused on fintech, is raising up to $75 millio for its debut fund, according to a regulatory filing. The team includes Mark Casady (former CEO of LPL Financial). http://bit.ly/2jnnmyV

It's Personnel

• Brian Barnum has joined Shamrock Capital Advisors as an operating partner. He most recently was COO of Brighter. www.shamrockcap.com

• Matt Gullen has joined Comvest Partners as a partner. He previously was a principal with H.I.G. Capital. www.comvest.com

• Jim Moran has quietly left North Bridge Growth Partners, where he had been a managing director for more than seven years. No word yet on his future plans.

• David Olson has joined Piper Jaffray as vice chairman of the bank's financial institutions group. He previously was chairman and CEO of River Branch Holdings.

• Robert Vassel, former VP of corporate development at The Clorox Co., has joined Swander Pace Capital as a principal. The consumer product-focused private equity firm also promoted Tyler Matlock to SVP and Tara Hyland to senior associate. www.spcap.com

Final Numbers