Apr 10, 2019

Axios Pro Rata

🎧 Big thanks to everyone who's listened to the Pro Rata Podcast, which has now had over 2 million downloads. Recent episodes have focused on the future of American capitalism, YouTube's house of horrors, Michael Avenatti vs. Nike and The Green New Deal.

Top of the Morning

Illustration: Aïda Amer/Axios

A big part of my job is keeping tabs on state and federal securities filings, but lately I've spent nearly as much time on court filings. Some updates to legal stories we've recently covered:

Bill McGlashan isn't going down without a fight, but the stakes have gotten higher.

Federal prosecutors yesterday added money laundering charges to the original wire fraud complaint, stemming from McGlashan's alleged participation in the college admissions bribery scheme. They did the same for actress Lori Loughlin and other defendants who opted against pleading guilty earlier this week.

  • Among those who did plead guilty was Gordon Caplan, the former co-chair and private equity partner with law firm Wilkie Farr & Gallagher.
  • Same for Napa Valley vintner Agustin Huneeus, who allegedly first heard about the "side-door" from McGlashan.

A Moscow court yesterday extended the pre-trial detention of Philippe Delpal, a French citizen and private equity investor arrested at the same time as his Baring Vostok partner Mike Calvey.

Delpal had been seeking house arrest while he fights the charges, which Baring Vostok argues is a commercial dispute being improperly tried criminally, but instead was given another three months in jail.

Kainos Capital has fired back at co-founder Sarah Bradley, who in January sued the Dallas-based private equity firm for allegedly defrauding her of a 25% ownership stake.

  • Kanois, which reportedly put plans to raise $1.5 billion for its third fund on hold, filed counterclaims for breach of contract and breach of fiduciary duty.
  • In a statement, it claims that Bradley "threatened litigation just days after she held herself out to the investment community as a principal in a fundraising effort and directed the broad distribution of confidential materials so that her lawsuit would inflict maximum harm... At the same time, she was simultaneously deleting thousands of her company emails that could be relevant to the litigation."
  • In short, Kainos argues that Bradley was fully aware and accepting of the reworked ownership terms, and held her fire to "extort a financial settlement."
  • Oddly, Bradley remains listed as a partner on Kainos Capital's website.

Zain Jaffer is suing VC-backed mobile video ad company Vungle, which fired him last fall as CEO after his arrest on charges that included sexual assault of a child. He later was exonerated, with a judge dismissing all charges at the prosecutor's request.

  • Jaffer co-founded Vungle and is believed to be its largest outside shareholder.
  • His complaint is for wrongful termination, arguing that he was removed based only on the arrest and resulting charges, without giving him a chance to tell his side of the story.

On Friday we discussed the burgeoning unionization trend among VC-backed tech companies. Axios' Sara Fischer digs deeper into the revived labor movement's impact on media:

Content creators have become collateral damage in a power struggle between the media industry and technology-driven business disruptions. Now, the talent is trying to fight back.

🏀 March Madness: Congrats to Adam Cromie, the Jones Day lawyer who beat out more than 1,300 other Pro Rata readers to take our 2019 crown. A box of Axios swag is on its way to Pittsburgh.

  • Honorable mentions to Scott Taylor Howard (angel investor, serial entrepreneur) and Brendan Burke (senior analyst at PitchBook).
  • I came up just short in 1,159th place.

Illustration: Aïda Amer/Axios

Uber tomorrow will disclose plans to raise $10 billion in its IPO, as first reported by Reuters. This would set up an investor road-show for the week of April 29, and a listing in early May.

  • Why it's the BFD: Because this should provide us with a much more complete understanding of Uber's finances, which to date have been selectively self-disclosed.
  • Price talk: Bankers reportedly pitched Uber last year on a $120 billion initial public valuation, compared to its last private mark of $72 billion, but word is that expectations have been scaled back below $100 billion (possibly due, in part, to Lyft's soft aftermarket performance).
  • Bottom line: "Contribution margins, a measure that’s meant to show which businesses can operate profitably, will be one tool provided for digging through its spreadsheets. Uber calculates its contribution margin by tacking on more costs than Lyft does, according to people with knowledge of the matter. Uber’s more conservative metric may give investors a better sense of its business, even if it makes direct comparisons with Lyft more difficult." — Eric Newcomer & Olivia Zaleski, Bloomberg
Venture Capital Deals

ShopBack, a Singapore-based provider of cashback and other consumer rewards, raised $45 million co-led by Rakuten Capital and EV Growth. http://axios.link/iWfL

• CleverTap, a Mumbai-based user engagement analytics startup, raised $26 million. Sequoia India led, and was joined by Tiger Global and return backer Accel. http://axios.link/WM3e

Movo, a Spain-based e-scooter startup, raised €20 million in Series A funding co-led by Seeya Ventures and insurer Mutua Madrileña. http://axios.link/C6es

🚑 Scout Bio, a Philadelphia-based, raised $20 million in Series B fundijng. Digitalis Ventures and RiverVest Venture Partners co-led, and were joined by Greenspring Associates and return backers Frazier Healthcare Partners, Adage Capital Management and Correlation Ventures. www.scoutbio.co

🚑 Cullgen, a developer of targeted protein degraders, raised $16 million in Series A funding from Sequoia Capital China and Highlight Capital. It has offices in San Diego, China and Japan. www.cullgen.com

🚑 EdiGene, a Japanese developer of CRISPR-based therapies, raised around $15 million in Series B funding from UTokyo Innovation Platform and return backers SBI Investment, Fast Track Initiative, SMBC Venture Capital, Mizuho Capital and CareNet Group. www.edi-gene.com

Make School, a San Francisco-based college degree program that partners with tech companies, raised $15 million in Series B funding led by Venrock. http://axios.link/axy8

iMod Structures, a Mare Island, Calif.-based maker of modular classrooms, raised $11 million in Series A funding led by the Goldman Sachs Urban Investment Group. http://axios.link/FWSp

• Labelbox, a San Francisco-based collaborative training data platform for machine learning apps, raised $10 million in Series A funding. Gradient Ventures led, and was joined by Kleiner Perkins and First Round Capital. http://axios.link/G4XC

🚑 Diameter Health, a Farmington, Conn.-based clinical data integration startup, raised $9.6 million in Series A-1 funding. Optum Ventures led, and was joined by return backers Activate Venture Partners, Connecticut Innovations, Excelerate Health Ventures and LRV Health. http://axios.link/k3pK

Private Equity Deals

Behrman Capital acquired Waterline Renewal Technologies, a Rosemont, Ill.-based provider of products used in the trenchless rehabilitation of wastewater infrastructure, from Bolder Capital portfolio company Triwater Holdings.

Deutsche Boerse will pay $850 million to buy Axioma, a New York-based risk management software company that had raised over $30 million from firms like ThirdStream Partners, Goldman Sachs and Salmon River Capital. The deal will be largely financed by General Atlantic, which will receive a 19% stake in Deutsche Boerse. http://axios.link/g8tG

Eurazeo acquired a 25% stake in Spain’s MCH Private Equity for €100 million. http://axios.link/sv2h

Garda World Security, a Canadian portfolio company of Rhone Capital, said it’s considering a cash takeover offer for British security company G4S (LSE: GFS), a British security company whose market cap climbed to around $5 billion on the news. http://axios.link/zJlQ

🚑 Gemspring Capital invested in Valant Medical Solutions, a Seattle-based provider of behavioral health software for private practices. www.valant.com

Syndigo, a Chicago-based portfolio company of The Jordan Co., acquired Content Analytics, a San Francisco-based e-commerce content management software startup that had raised around $8 million from firms like Almaz Capital and Palapa Ventures. www.syndigo.com

Vista Global, a UAE-based private plane rental company backed by Rhone Capital, agreed to buy JetSmarter, a Fort Lauderdale, Fla.-based online marketplace for private aviation whose shareholders include Clearlake Capital Group, Jefferies and Jay-Z. http://axios.link/hlug

Public Offerings

Adevinta, an Oslo-based online classifieds company, is valued at around $6.2 billion after completing the largest Norwegian IPO since 2006. http://axios.link/gnCV

Network International, a Dubai-based payment processor for Africa and the Middle East, raised £1.1 billion in its London IPO. That’s the largest float in Europe so far this year. http://axios.link/flXL

PagerDuty, a San Francisco-based incident resolution platform, increased its IPO price range from $19-$21 to $21-$23. It still plans to offer 9.07 million shares, but now would have an initial market cap of around $1.62 billion, were it to price in the middle. The company plans to trade on the NYSE (PD) with Morgan Stanley as lead underwriter, and reports a $41 million net loss on $118 million in revenue for 2018. It had raised over $170 million from firms like Andreessen Horowitz (18.4% pre-IPO stake), Accel (12.3%), Bessemer Venture Partners (12.2%), Baseline Ventures (6.7%), Harrison Metal (5.3%) and T. Rowe Price. www.pagerduty.com

More M&A

AT&T (NYSE: T) is considering a sale process for HBO Europe, according to the FT. http://axios.link/8fba

🚑 BioTek Instruments, a Winooski, Vt.-based maker of test-tube plate readers and other medical devices, is considering a sale process that could fetch around $1 billion, per Bloomberg. http://axios.link/ZsLx

• Third Point is building a stake in Sony Corp. (Tokyo: 6758), with plans to ask the Japanese company to divest some businesses, per Reuters. http://axios.link/tRB4

Volkswagen may purchase “a big stake” in JAC Motors, its Chinese electric joint vehicle partner, per Reuters. http://axios.link/sHMr

🎨 YieldStreet, a New York-based alternative investment platform, acquired Athena Art Finance from The Carlyle Group for around $170 million. YieldStreet has raised over $70 million in VC funding from firms like Edison Partners, Greycroft, Greenspring Associates and Raine Ventures. http://axios.link/Q6Pn


Adline Capital Partners of Chicago raised $240 million for its third private equity and debt fund. www.adlinecapital.com

Africinvest (Tunisia) and Cathay Capital (Paris) are raising around $170 million for an Africa-focused tech VC fund. http://axios.link/dkaT

Bain Capital is in market with its second life sciences-focused private equity fund, less than two years after raising $720 million for its debut effort, per an SEC filing.

Cinven is closing in on a €10 billion final close for its seventh buyout fund, per Bloomberg. http://axios.link/7x5x

Data Collective is raising $575 million for its fourth flagship VC fund, per an SEC filing. www.dcvc.com

Equal Ventures, an early-stage VC firm co-founded by Richard Kerby (ex-Venrock) and Rick Zullo (ex-Lightbank), is raising $40 million for its debut fund, per an SEC filing. www.equal.vc

LiveOak Venture Partners, an Austin-based VC firm focused on Texas startups, raised $105 million for its second fund. www.liveoakvp.com

Octopus Ventures of London raised £83 million for a new follow-on fund. http://axios.link/2DUO

Shasta Ventures is raising $325 million for its sixth fund, per an SEC filing. Firm co-founder Rob Coneybeer is not listed on the filing, but tells Axios he remains a managing director and active investor.

It's Personnel

Mary Courtney-O'Sullivan joined Palladin Consumer Retail Partners as CFO and chief compliance officer. She previously was with Advent International. www.pcrp.com

Kaitlin Durkosh is joining VC firm Greylock as head of communications. She previously was with Uber. www.greylock.com

Rakesh Kapoor joined Cleveland-based Edgewater Capital Partners as an operating partner focused on advanced materials and components companies. He previously was with Saint-Gobain (Paris: SGO). www.edgewatercapital.com

New Markets Venture Partners promoted Elizabeth Chou to general partner. http://axios.link/URn5

Tess Sprechman is leaving Sun Capital Partners to join AE Industrial Partners as a VP of investor relations. www.aeroequity.com

UBS Group fired James Boland, head of Americas leveraged finance, for allegedly failing to tell “superiors and the bank’s compliance officials that they had reclassified a bond the firm was underwriting as a loan,” per the WSJ. http://axios.link/q6zk

Final Image: Undercorns

Source: @darth, used with permission.

In 2014 I coined the term undercorn, referring to companies valued at $1 billion in the private markets that were subsequently revalued below $1 billion. Examples at the time included Fab and Hortonworks.

  • But just like Aileen Lee's original definition of unicorn was later changed, so too was that of my derivative.
  • The new definition, per multiple stories, is a billion dollar+ startup that goes public at a price below its most recent private market mark. For example, what we're expecting from Pinterest.

All of which led to the above image, created and tweeted out yesterday upon request by Photoshop savant @Darth.