Aug 13, 2021

Axios Pro Rata

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Top of the Morning

Illustration: Annelise Capossela/Axios

Private equity is pouring billions into renewable energy assets. It's what LPs want, it's what society demands — and it's what the world needs. But the classic private equity dilemma has surfaced: too much money chasing too few deals, writes Axios' Kate Marino.

Why it matters: With heated competition for deals, prices for prime wind and solar power assets are getting bid up — and return expectations, in many cases, are coming down.

Zoom out: Private equity raised $52 billion to invest in renewable energy in 2020, a record — and this year is on pace to top that, according to Preqin.

  • Since 2010, these funds have generated a median net internal rate of return of 8%.

State of play: "Now you have every LP, ranging from true LPs to people on the street, wanting what they invest in to be green," says Kaam Sahely, partner in Vinson & Elkins' energy transactions and projects practice.

  • Corporates, especially those in the legacy energy space that are angling to transition, are increasingly throwing their weight around in clean energy-related auctions.
  • The influx of investor interest at the project level has "changed the economics and made it tough for [an auction] winner to really pencil in that return," says Michael Joyce, also a partner in Vinson's energy practice.

Case in point: For a strong portfolio of wind assets, the list of bidders in an auction might include "10 insurance companies, 20 infrastructure funds, 27 sovereign wealth funds and 20 strategics," Sahely says.

Between the lines: Many LPs nowadays get that the returns generated in renewables may not be what they typically expect from a PE investment, he adds.

  • They take the view that, "'I need to invest in this area. Everybody's demanding it. I demand it. And I'm OK with a lower return profile,'" Sahely says.
  • On the plus side, the booming marketplace also means there are exit opportunities aplenty.

The big picture: Funds that can cast a wider net for assets are doing just that.

  • This money goes to earlier stage projects, or the parts makers that feed into renewable projects, or the electric vehicle ecosystem, Carl Fleming, partner at McDermott, Will & Emery, tells Axios.
  • Investors are stretching into looking for companies "that make the screw, that holds the battery, that goes in the EV car," he says.

The bottom line: The onslaught of investor interest has undoubtedly made some assets more expensive.

  • But it's also helped create a more sophisticated market for companies and projects that need funding — from early-stage venture capital to private equity investors willing to step in at different points in a company's growth, says Rob Day, co-founder at Spring Lane Capital.

Illustration: Eniola Odetunde/Axios

Carta, a San Francisco-based cap table management software company, raised $500 million in Series G funding at a $7.4 billion valuation led by Silver Lake

  • Why it's the BFD: Carta says it used its own private stock exchange a few months ago to figure out its new valuation, then picked investors it felt would be the best fit. 
  • The bottom line: The round comes about a year after Carta's last round as the pandemic set in — and it laid off some employees to prepare for what it thought would be a slowdown in startup formation. (As we've since noted, that’s not how things went.) 
Venture Capital Deals

Eruditus, an Indian ed tech company for executives, raised $650 million in new financing led by Accel and SoftBank Vision Fund 2, with the Canada Pension Plan Investment Board also participating.

TaxBit, a Salt Lake City-based provider of crypto tax and accounting software, raised $130 million in Series B funding led by IVP and Insight Partners, with Tiger Global, Paradigm, 9Yards Capital and others also participating.

Honest Networks, a New York-based provider of residential internet services, raised $100 million in new funding led by Newlight Partners, with Fifth Wall also participating.

🚑 Debut Biotech, San Diego-based biomanufacturer, raised $22.6 million in Series A funding led by Material Impact, with Cultivian Sandbox Ventures, Fine Structure Ventures, ACVC Ventures and others also participating.

Aforza, a U.K. cloud and mobile app developer, raised $22 million in Series A funding led by DN Capital, with Bonfire Ventures, Daher Capital and Next47 also participating.

Kronologic, an Austin, Texas-based maker of scheduling software, raised $20 million in seed funding led by Signal Peak Ventures, with Silverton Partners, Next Coast Ventures and Geekdom Fund also participating.

Wonder Brands, a Mexican e-commerce roll-up company, raised $20 million in seed funding led by ALLVP and Mountain Nazca, with CoVenture, Victory Park Capital, GFC, QED (Fontes), Korify Capital and Endeavor Catalyst also participating.

Aalto, a San Francisco-based online marketplace for private home sales, raised $13 million in Series A funding led by Sequoia Capital, with Background Capital, Defy Partners, Maple VC and Greg Waldorf also participating.

Motivo, a Palo Alto, Calif., Austin, Texas, and Singapore-based chip designer, raised a $12 million in Series A funding led by Intel Capital, Storm Ventures and Seraph Group, with Inventus Capital also participating.

🚑 Hagar, an Israeli diabetes startup, raised $11.7 million in Series B funding led by Columbia Pacific.

Youreka Labs Inc., a Baltimore-based developer of robotic assistants for front line workers, raised $8.5 million in Series A funding led by Boulder Ventures and Grotech Ventures, with Salesforce Ventures also participating.

Dune Analytics, a Norwegian open-source cryptocurrency analytics startup, raised $8 million in Series A funding led by Union Square Ventures, with Redpoint, Dragonfly Capital and Multicoin Capital also participating.

Smashcut, a Montclair, N.J.-based digital learning platform and content studio, raised $7 million in Series A funding from Pearson Ventures.

StatusPRO, a Miami-based sports technology and gaming company, raised a $5.2 million seed funding led by KB Partners and TitletownTech, with Greycroft, Verizon Ventures, Haslam Sports Group, 49ers Enterprises and SC Holdings also participating.

Nitricity, a San Francisco-based renewable nitrogen fertilizer startup, raised $5 million in seed funding led by Energy Impact Partners, with Fine Structure Ventures, Lowercarbon Capital and MCJ Collective also participating.

Terzo, a Los Angeles-based maker of vendor relationship management software, raised $3.2 million in seed funding led by Great Oaks Venture Capital, with NJF Capital, Innovation Global Capital and Abnormal Security Ventures also participating.

Anthill AI, a Chicago-based maker of HR software for deskless workers, raised $3 million in seed funding led by Rethink Education, with Origin Ventures, BBG Ventures, The Fund, JFF, and others also participating.

⛽️ Sicona Battery Technologies, an Australian maker of battery materials, raised approximately $2.7 million in a seed funding led by Artesian and Riverstone Ventures, with Chaos Ventures, Bandera Capital, SDGx Ventures and others also participating.

Contact, a U.K. agency and marketplace for creatives, raised a $1.9 million seed funding led by Founders Fund, with LAUNCH, Sweet Capital, Rogue VC and others also participating.

Private Equity Deals

L Catterton will acquire a majority stake Beauty Industry Group, a Salt Lake City-based hair extensions company.

Clearlake Capital Group has completed its strategic equity investment in RSA Security, becoming an equal partner with Symphony Technology Group. Terms of the transaction were not disclosed.

Fairchild Capital Partners' portfolio company Weco Manufacturing Group has acquired the assets of FTT Manufacturing and Electro Surgical Instrument, manufacturing companies based in Henrietta, N.Y.

33 Holdings has agreed to acquire interest in Beers Housing, a Woodstock, Ga.-based general contractor and a provider of mortgage field services, maintenance, rehab, construction and development.

MERGE, backed by Keystone Capital Management, acquired Blue Moon Digital, a Denver-based digital marketing agency.

PNC Riverarch Capital acquired Fresh Direct Produce, a Canadian distributor of fresh fruits and vegetables, from HKW.

Newfold Digital, backed by Clearlake Capital Group and Siris Capital Group, acquired Yoast, a Dutch search engine optimization plugin provider for WordPress.

Warburg Pincus and FTV Capital invested in A-LIGN, a Tampa, Fla.-based cybersecurity and compliance company.

Public Offerings

FinWise Bancorp, a Utah-based digital bank, has postponed its IPO that was targeted to raise $58 million.

🚑 Dermata Therapeutics, a San Diego-based Phase 3 biotech company developing therapies for skin conditions, raised $18 million by offering 2.6 million units at $7, the low end of the range. It offered 0.7 million more units than anticipated.

SPAC Stuff

TG Venture Acquisition, a blank check company targeting the space technology, fintech, and TMT industries, filed on Friday with the SEC to raise up to $100 million.

Kensington Capital Acquisition V, a blank check company led by the founder of Kensington Capital targeting industrials, raised $240 million by offering 24 million units at $10.

Armada Acquisition, a blank check company led by the former CEO of Cantaloupe Inc. targeting fintech, raised $150 million by offering 15 million units at $10.

⛽️ CENAQ Energy Corp., a blank check company led by industry veterans targeting the energy industry in North America, raised $150 million by offering 15 million units at $10.

Jupiter Acquisition, a blank check company formed by SPAC veteran James Hauslein targeting the consumer sector, raised $150 million by offering 15 million units at $10.

PHP Ventures Acquisition, a SPAC targeting consumer-facing businesses with exposure to Africa, has raised $50 million by offering 5 million units at $10.

Insight Acquisition, a SPAC targeting the fintech or financial services industry, plans to raise $240 million by offering 24 million units at $10.

Liquidity Events

U.S. Bank has acquired Bento for Business, a San Francisco-based employee spending management company, from Edison Partners.

More M&A

GS Retail, along with Affinity Equity Partners and Permira, agreed to acquire Delivery Hero’s food delivery app, Yogiyo, in a deal valued at 800 billion won ($685 million)., short-form video clipping service and social network for gamers, has acquired, a Dubai-based Twitch rival. 🌎

KingsCrowd has acquired Crowdrise, a Detroit-based provider of educational materials for equity crowdfunding investors.


🌎Lowercarbon Capital has closed on $800 million to focus on climate-tech.

VentureSouth closed raised $5 million for its fourth sidecar investment fund, VentureSouth Angel Fund IV.

It's Personnel

Apollo Global Management has hired Vikram Mahidhar as an operating partner. He was previously a senior vice president at Genpact.

B. Riley Financial has named Renée E. LaBran to its board of directors, serving on the audit and governance committees.

Ara Partners has hired Robert Bond and Adam Hodgson as associates.

Ernst & Young has promoted Bill Stoffel as its new EY Global Private Equity Leader.

Hidden Harbor Capital Partners has hired Daphna Shamash as vice president of business development and marketing, Suzanne DeTore and Matthew Goracy as vice presidents, and Matt Wash as senior associate.

Final Numbers

Chart: PitchBook

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