Apr 4, 2018

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning
Source: Giphy

"Even shooting wars end in negotiations."

That was Wilbur Ross on CNBC this morning, arguing that the stock markets are acting irrationally toward China's announcement of reciprocal tariffs on such items as airplanes, autos, chemicals, cotton, soybeans and whiskey. Ross is right, but blithely glossed over what happens during the shooting part.

  • Ross on March 7: "We're not looking for a trade war."
  • Ross today: "I'm a little surprised that Wall Street is surprised."

President Trump, for his part, tweeted that this isn't actually a trade war — just one month after tweeting that "trade wars are good, and easy to win."

Bottom line: White House messaging is all over the place on this, and traders have noticed. The S&P 500 was down more than 1.4% at the open.

Recommended reading: Forbes has a new cover story on All Raise, a new organization founded by three dozen female VCs:

  • "The stated mission is to double the percentage of women in VC partner roles over the next ten years and increase total VC funding to female founders from 15% to 25% in five years."
  • "We're taking away the question that you don't know who to hire," says Rebecca Kaden, a partner at Union Square Ventures.

Canary alert from Fitch Ratings: "Cov-lite loans account for almost 80% of U.S. institutional loan issuance today versus just 25% at the credit cycle peak before the last recession."

Not part of a bus tour: Firebrand Ventures, a Kansas City-based firm focused on startups in the "Greater Midwest," has closed its debut fund with nearly $18 million. It's not a huge amount of cash, but plays into the growing trend of homegrown VC firms between the coasts.

Today in SoftBank: The FT reports that CFIUS forced SoftBank to give up plans for day-to-day control over Fortress, prior to approving the $3.3 billion takeover.

Capital chasm: The WSJ reports that 2017 was the sixth straight year that U.S. companies raised more money from private markets than from public markets, and the gap is growing (in part thanks to new structures like ICOs).

The BFD

Impossible Foods, a Redwood City, Calif.-based maker of plant-based meat alternatives, raised $114 million in convertible note funding from Sailing Capital and existing backer Temasek.

  • Why it's the BFD: Because more than 5 billion pounds of beef was sold last year in the U.S., and companies like Impossible Foods and peer Beyond Meat are trying to eat into market share.
  • Other shareholders: Bill Gates, Khosla Ventures and Horizon Ventures.
  • Bottom line: "[Impossible] has found its legs in the fast-casual restaurant chains that now dot the country, serving up mass-marketed, higher price point gourmet burgers. Restaurants including FatBurger, Umami Burger, Hopdoddy, The Counter, Gott’s and B Spot all hawk Impossible’s meat substitute in an increasing array of combinations." — Jonathan Shieber, TechCrunch
Venture Capital Deals

Alisports Group, the sports affiliate of Alibaba Group, has raised around $191 million in Series A funding led by Yunfeng Capital (a firm co-founded by Alibaba’s Jack Ma). http://axios.link/LnHG

Welltok, a Denver-based health optimization platform, has raised $75 million in Series E-2 funding. Future Fund Management Agency, Ziff Davis, NF Trinity Capital and ITOCHU were joined by return backers like NEA, Bessemer Venture Partners and Georgian Partners. http://axios.link/prMU

SalesLoft, an Atlanta-based sales engagement platform, has raised $50 million in Series C funding. Insight Venture Partners led, and was joined by LinkedIn and return backer Emergence Capital. http://axios.link/kHtz

OrderMyGear, a Dallas-based provider of e-commerce and payments software to the team sports and affinity groups markets, has raised $35 million in funding from Susquehanna Growth Equity. www.ordermygear.com

🚑 Poseida Therapeutics, a San Diego-based gene editing startup focused on CAR-T immunotherapies, raised $30.5 million in Series B funding. Longitude Capital led, and was joined by Vivo Capital and the Tavistock Group. http://axios.link/9BOp

🚑 Terns Pharmaceuticals, a startup drug developer focused on nonalcoholic steatohepatitis, raised $30 million in Series A funding from firms like Lilly Asia Ventures. http://axios.link/HzC5

6 River Systems, a Boston-based collaborative fulfillment solution, raised $25 million in Series B funding. Menlo Ventures led, and was joined by return backers Norwest Venture Partners, Eclipse Ventures and iRobot. www.6river.com

Red Balloon Security, a New York-based provider of embedded device security solutions, raised $21.9 million in Series A funding. Bain Capital Ventures led, and was joined by Greycroft, American Family Ventures and Abstract Ventures. http://axios.link/YNuo

DriveWealth, a Chatham, N.J.-based digital brokerage, raised $21 million in Series B funding from Raptor Group, SBI Holdings, Point72 Ventures and return backer Route 66 Ventures. http://axios.link/YdeG

DeepScale, a Mountain View, Calif.-based developer of perception software for autonomous vehicles, raised $15 million in Series A funding. Point72 and next47 co-led, and were joined by Autotech Ventures and Trucks Venture Capital. www.deepscale.ai

Insider, a Singapore-based provider of digital marketing solutions for brands, has raised $11 million in funding led by Sequoia India. http://axios.link/6tDI

Ubiquity6, an AR services startup, raised $10.5 million in Series A funding. Index Ventures led, and was joined by First Round Capital, Kleiner Perkins, Gradient Ventures, LDVP, A+E and WndrCo. http://axios.link/Npku

Threat X, a Denver-based provider of web app firewall solutions, raised $8.2 million in Series A funding co-led by Grotech Ventures and Access Venture Partners. www.threat-x.com

Stackery, a provider of governance and management software for serverless architecture, has raised $5.5 million in new funding. HWVP led and was joined by Voyager Capital, Pipeline Capital Partners and Founders’ Co-op. http://axios.link/nNPl

Private Equity Deals

Bain Capital has acquired World Wide Packaging, a Florham Park, N.J.-based provider of cosmetic packaging products, from backers like Fidus Investment Advisors. It also has acquired an unidentified Chinese plastic packaging company, and will merge the two. http://axios.link/RHX5

Davey Coach, a Denver-based portfolio company of Progress Equity Partners, has acquired Intermountain Coach, a Colorado Springs-based dealer and lessor of mid-sized busses. www.daveycoach.com

GenNx360 Capital Partners has acquired Subsea Global Solutions, a Miami, Fla.-based provider of underwater ship maintenance and repair, from Lariat Partners. http://axios.link/ZJwb

Francisco Partners has agreed to buy Bomgar, a Johns Creek, Ga.-based provider of secure access solutions, from Thoma Bravo. www.bomgar.com

🍸 H.I.G. Capital has acquired a majority interest in Puerto de Indias, a Spanish gin distillery. www.ginpuertodeindias.com

🚑 LLR Partners has invested in MedBridge, a Seattle-based provider of patient engagement and clinical education solutions. www.medbridgeeducation.com

Pritzker Private Capital has acquired C.H. Guenther & Son, a San Antonio, Texas-based maker of branded and private label food products for commercial markets. http://axios.link/mEJV

Sumeru Equity Partners has acquired a majority stake in Azuga, a San Jose, Calif.-based provider of connected vehicle, fleet and telematics software. www.azuga.com

White Oak Equity Partners has acquired a minority stake in FCO Advisors, a New York-based alternative municipal strategies investment firm with over $1 billion in AUM. www.fundamentaladvisorslp.com

Public Offerings

GrafTech International, a Brooklyn Heights, Ohio-based maker of graphite electrodes for use in steelmaking, set its IPO terms to 37.78 million shares at $21-$24 per share. It plans to trade on the NYSE under ticker EAF, with J.P. Morgan as lead underwriter. The company reports $8 million of net income on around $551 million in revenue for 2017, and is owned by Brookfield Capital.

HeadHunter Group, a Russian online job recruitment platform, filed for a $250 million IPO. It plans to trade on the Nasdaq under ticker HHR, with Morgan Stanley as lead underwriter.

nLight, a Vancouver, Wash.-based maker of semiconductor lasers, filed for an $86.25 million IPO. It plans to trade on the Nasdaq under ticker LASR, with Stifel as lead underwriter. The company reports $1.9 million of net income on $139 million in revenue for 2017. Shareholders include Menlo Ventures (21.5% pre-IPO stake), Oak Investment Partners (20%) and Mohr Davidow Ventures (18.9%).

Zuora, a Foster City, Calif.-based provider of subscription billing software, set its IPO terms to 10 million shares at $9-$11. It would have a fully-diluted value of around $1.1 billion, were it to price in the middle. The company plans to trade on the NYSE under ticker ZUO, with Goldman Sachs as lead underwriter. It has raised around $250 million in funding from backers like Benchmark (11.1% pre-IPO stake), Wellington Management (9.4%), Shasta Ventures (8.3%), Tenaya Capital (6.6%) and Redpoint Ventures (6.5%).

Liquidity Events

☕ La Colombe, a Philadelphia-based premium coffee brand whose shareholders include Goode Partners, has hired Moelis & Co. to explore strategic options that could include a stake sale at a valuation north of $1 billion, per Bloomberg. http://axios.link/grBI

More M&A

CBS (NYSE: CBS) reportedly has submitted a below-market bid to merge with Viacom (Nasdaq: VIAB), its former sister company, which was immediately rejected.

  • Bonus detail from WSJ: To communicate, Viacom's ailing Sumner Redstone "has an iPad loaded with snippets of his voice, connected to buttons for words or phrases including 'yes,' 'no,' and 'f—you.'"

Elliott Management disclosed a $1 billion stake in Hyundai Motor Group. http://axios.link/niAp

Procter & Gamble (NYSE: PG) is in talks to buy Pfizer’s (NYSE: PFE) consumer products business, according to CNBC. Pfizer originally wanted between $15 billion and $20 billion for the unit, but that was before suitors like GSK, J&J and Reckitt Benckiser all passed. http://axios.link/HoNI

Fundraising

Congruent Ventures has raised for its debut fund, which is focused on early-stage cleantech opportunities. http://axios.link/J6nn

It's Personnel

• Michael Doppelt has rejoined Irving Place Capital as a partner and head of fundraising and LP relations. He had spent the past seven years at Lightyear Capital. www.irvingplacecapital.com

Jeremy Naylor has joined Proskauer as a New York-based partner focused on tax issues for private investment funds. He previously was with Cooley. www.proskauer.com

Final Numbers
Expand chart
Data: Money.net; Chart: Axios Visuals

Music streaming giant Spotify stock closed its first day of trading at $149.01 per share, giving it a market cap of around $26.6 billion. That's well above where Spotify ever raised money or traded in the private markets, but around 10% off its opening price (and shares slid further in aftermarket trades).

  • Pro: The process appears to have gone smoothly, without the up-and-down volatility spikes that many had expected.
  • Con: Spotify still paid pretty hefty fees and the stock traded lower.

Thought bubble: Leave aside the IPO vs. DPO issue for a moment, and remember that this is now the third tech "unicorn" in the past month to go public at a valuation higher than what it received in the private markets, following Dropbox and ZScaler. It's the sort of thing that should help a lot of growth equity investors sleep better at night.

Dan Primack