Mar 16, 2017

Axios Pro Rata

Top of the Morning

President Trump recently nominated Scott Gottlieb, a venture partner with NEA, to lead the U.S. Food and Drug Administration (FDA). This isn't terribly surprising, as we had previously noted that Gottlieb was the front-runner in a process that also included a pair of other folks with venture capital credentials (Jim O'Neill of Mithril and Balaji Srinivasan of Andreessen Horowitz). I spent some time discussing Gottlieb with David Mott, the former MedImmune CEO who now leads NEA's healthcare practice, for some thoughts:

  • Selling point: Mott argues that Gottlieb was the best person for the job because he has a "360 degree" view of the healthcare system, given that he is a practicing physcian, has worked with healthcare entrepreneurs and investors via NEA, has been a paid consultant to big pharma, has worked in a medical academic institution, has past FDA (and CMS) experience and is a cancer survivor. In short, he understands the pressures each group is under.
  • On conflicts: "Yes, he's been paid by drug companies and been on startup boards in the past, but he won't be going forward... He will help set direction, but he's not going to be the person overseeing a review, say, of an NEA portfolio company's product." Mott adds that Gottlieb does not have carried interest in NEA funds, and that there already have been discussions of how to manage/sever any other economic ties to NEA (although he declined to provide details).
  • In general: Mott agrees with many other healthcare VCs that the FDA approval process for both medical devices and pharma has improved substantially over the past several years, and he expects Gottlieb to keep moving such improvements forward. He also is pleased that the GOP healthcare plan (which he has not yet studied in detail) eliminates the so-called "medical device tax," which he believes had a "destructive impact on people's confidence in dedicating time, capital and resources to medical devices."

• Follow-up: Yesterday we discussed the seed funding for Parker Conrad's new startup, Rippling. Multiple sources tell me that the notes come with a $25 million cap.

• Personnel scoop: Sandeep Bhadra has stepped down as a principal with Menlo Ventures, in order to become the third partner at Vertex Ventures, whose limited partners include Singapore sovereign wealth fund Temasek. Also joining Vertex as a principal is Eva Khoo, who most recently was with startup Luxe Valet.

Vertex was launched a couple years back by Jonathan Heiliger (ex-Facebook, ex-North Bridge Venture Partners) and In Sik Rhee (ex-Rembrandt Venture Partners), to focus on early-stage opportunities in the enterprise SaaS and Internet infrastructure spaces. It raised around $151 million for its debut fund (10 portfolio companies so far), and expects to return to market in 2018 for a slightly larger fund.

• Budgetary: President Trump unveiled his proposed fiscal 2018 budget this morning. Three quick thoughts for the Pro Rata world, with the caveat that none of this is carved in stone until Congress pulls out its giant chisel:

  • Infrastructure: There are proposed cuts in here for infrastructure spending via the Department of Transportation, with OMB director Mick Mulvaney telling reporters: "We believe those programs to be less efficient than the infrastructure package that we're working on for later on this year." Not so sure how governors and mayors are going to react, given that there still is no infrastructure package.
  • Health: NIH gets slashed by around 20%, which will not be welcome news to venture capitalists in the life sciences space (particularly after Trump lauded orphan drug development during his recent Congressional address). Also worth noting that FDA user fees will approximately double, thus increasing the cost of drug development.
  • Americorps: I'm including this one because: (a) It's personal, as I was part of the inaugural class in 1994; (b) Americorps programs have long been supported by the private equity community, including Bain Capital's longstanding support of City Year (which was the broader program's model). The proposed budget would kill the entire program, even though it is a working example of the sort of public/private partnership that Trump has rhetorically favored for infrastructure. In fiscal 2015, the federal government appropriated $1.05 billion to the Corporation for National Service, while the program generated $1.26 billion in outside resources from private business, foundations and individuals.

• Gametime: More than 550 Pro Rata readers have already signed up for our March Madness Extravaganza, which officially kicks off at noon ET today. A reminder of how to join:

  1. Log in to your account, or sign up for one on the homepage. Either option is in the top-right corner, and you can register via your Facebook account. It's pretty simple.
  2. Go to the Tournament Challenge group page and search for the Pro Rata group. The password is: clawback
  3. Create your bracket before the games begin noon ET today.
  4. Good luck!
The BFD: eGenesis raises $38 million

eGenesis, a Cambridge, Mass.-based xenotransplantation startup, has raised $38 million in Series A funding. Biomatics Capital and ARCH Venture Partners co-led the round, and were joined by Khosla Ventures, Alta Partners, Alexandria Venture Investments, Heritage Provider Network, Berggruen Holdings North America, Uprising and Fan Ventures.

Why it's the BFD: Because "xenotransplantation" is a process by which you take the organs of one species (i.e. pigs) and putting them in another species (i.e. humans). Obviously this isn't just a cut-and-paste job, which is why eGenesis is using CRISPR gene editing tools to modify the pig organs. It's also worth noting that eGenesis isn't the only company working in this space, as I indirectly reported last year in a piece that began as an investigation into something else entirely.

Bottom line: "This pig may save your bacon." -- slogan on eGenesis t-shirts

Venture Capital Deals

• Livongo Health, a Mountain View, Calif.-based digital health startup focused on managing chronic conditions like diabetes, has raised $52.5 million in Series D funding co-led by General Catalyst and Kinnevik. Existing backers include Merck Global Health Innovation Fund, Cowen Private Investments, Sapphire Ventures, Zaffre Investments, Wanxiang America and return backers General Catalyst, Kleiner Perkins Caufield & Byers, DFJ and 7wire Ventures.

• Visier, a workforce analytics company with offices in Vancouver and San Jose, has raised $45 million in Series D funding. Sorenson Capital led the round, and was joined by return backers Foundation Capital, Summit Partners and Adams Street Partners.

• AliveCor, a Mountain View, Calif.-based provider of mobile electrocardiogram technology, has raised $30 million in new VC funding led by new investors Omron Healthcare and the Mayo Clinic.

• Makeblock, a Chinese provider of robot-building kits for kids and teenagers, has raised $30 million in Series B funding co-led by Evolution Media China and Shenzhen Capital Group.

• WayRay, a Swiss developer of holographic AR technology for connected cars, has raised $18 million in Series B funding led by Alibaba Group.

• 908 Devices, a Boston-based provider of devices for chemical and biomolecule analysis, has raised $20 million in growth equity funding. Tao Capital Partners led the round, and was joined by Saudi Aramco Energy Ventures , ARCH Venture Partners, Razor's Edge Ventures, Schlumberger and Casdin Capital.

• Flow, a Hoboken, N.J.-based platform for enabling cross-border ecommerce, has raised $13 million in Series A funding from Bain Capital Ventures.

• Helpling, a Berlin-based platform for booking home services, has raised €10 million in new VC funding led by Asia Pacific Internet Group (an affiliate of existing Helpling backer Rocket Internet).

• CareDox, a New York-based platform for connecting children's healthcare providers with families and schools, has raised $6.4 million in Series A funding. Digitalis Ventures led the round, and was joined by First Round Capital, Giza Venture Capital, TEXO Ventures and Prolog Ventures.

• TimeTrade, a Tewksbury, Mass.-based provider of "appointment-driven personalization" solutions, has raised $6.3 million in Series E funding. Origami Capital Partners led the round, and was joined by return backers like Ascent Venture Partners.

• Launcher Solutions, a Jacksonville, Fla.-based loan origination system for auto finance companies and credit unions, has raised $5 million from Lucor Holdings.

• NeuraLace Medical, a San Diego-based developer of non-opioid pain reduction treatments, has raised $2 million in VC funding. FusionX Ventures led the round, and was joined by Mooring Ventures.

• ShopChat, a San Francisco-based maker of a mobile shopping keyboard, has raised $1.25 million in seed funding led by Rakuten.

• CNEX Labs, a San Jose, Calif.-based developer of solid-state storage controllers, has raised an undisclosed amount of Series C funding led by Microsoft Ventures. The company said it has raised a total of $60 million to date.

Private Equity Deals

• EQT Partners has agreed to acquire Dorner, a Hartford, Wis.-based maker of conveyor belts, from Incline Equity Partners. No financial terms were disclosed.

• Lone Star Funds has offered to invest up to €1 billion for a 75% stake in Portugal's Novo Bank.

• PSA Healthcare and Epic Health Services have completed their previously-announced merger, creating an Atlanta-based company called Aveanna Healthcare that will become the country's third-largest pediatric home healthcare provider. Backers include Bain Capital and J.H. Whitney Capital Partners.

• Superior Capital Partners has acquired the assets of Wilson-Hurd Manufacturing, a Wausau, Wis.-based maker of customized electronic control products. No financial terms were disclosed. Superior will merge Wilson-Hurd with existing portfolio company Nelson-Miller.

• Z Capital Partners has agreed to acquire Premier Thermal Solutions, a metal heat treating company with plants in Ohio, Michigan and Indiana, from Gerdau (NYSE: GGB). No financial terms were disclosed.

Public Offerings

Canada Goose, an outerwear maker and retailer owned by Bain Capital, raised C$340 million in its IPO. The company priced 20 million shares at C$17 per share (above C$14-C$16 range), and will trade on both the NYSE and Toronto Stock Exchange. CBIC Capital Markets was listed as left lead underwriter for Canada Goose, which reports $45 million of net income on $353 million in revenue for the last nine months of 2016.

• Solaris Oilfield Infrastructure, a Houston-based provider of mobile proppant management systems, has filed for a $100 million IPO. It plans to trade on the NYSE under ticker symbol SOI, with Credit Suisse and Goldman Sachs serving as underwriters. The company reports $2.8 million of net income on $18 million in revenue for 2016. Shareholders include Yorktown Energy Partners.

• Veritone, a Newport Beach, Calif.-based AI platform for analyzing audio and video data, has filed for a $15 million IPO. It plans to trade on the Nasdaq under ticker symbol VERI, with Wunderlich serving as lead underwriter. The company reports a $23 million net loss in 2016 on nearly $9 million in revenue.

Liquidity Events

• Chow Tai Fook Enterprises (HK: 1929) has agreed to acquire Alinta Energy, an Australian gas and electricity retailer in a deal that Reuters reports to be valued at around A$4 billion. TPG Capital holds around a 30% stake in Alinta, which had been preparing for file for an IPO.

• Focus Products Group, a Lincolnshire, Ill.-based portfolio company of Centre Lane Partners, has sold its housewares and wine units to Florida-based The Legacy Cos. for an undisclosed amount.

• GE Healthcare has acquired Monica Healthcare, a UK-based provider of wearable devices for fetal monitoring. No pricing terms of the all-cash deal were disclosed. Sellers include Catapult Ventures.

•, a subsidiary of Wal-Mart, has acquired Modcloth, a San Francisco-based online retailer of women's fashion. No financial terms were dislcosed. Modcloth had raised nearly $80 million in VC funding from firms like First Round Capital, Floodgate, Norwest Venture Partners. and Harrison Metal.

• Starboard Value has sold its nearly 1% stake in Macy's Inc. (NYSE: M), after having unsuccessfully pushed the company to separate its retail business from its real estate, according to Reuters.

More M&A

American Media, owner of the National Enquirer, has agreed to pay around $100 million to acquire celebrity magazine US Weekly from Wenner Media.

• Campaign Monitor, a provider of email marketing and design solutions, has acquired Tagga, a Toronto-based customer data platform. No financial terms were disclosed. Campaign Monitor in 2014 raised $250 million from Insight Venture Partners.

• Virtu Financial (Nasdaq: VIRT) reportedly has offered to acquire fellow high-frequency trading firm KCG Holding (NYSE: KCG) for more than $1.2 billion.


• Kuo-Chuan Kung, co-founder of MBK Partners, is launching a new Chinese buyout firm called Nexus Point Partners, according to the WSJ.

• Lone Star Funds, a Dallas-based investment firm, is planning to open a new office in Argentina, according to Bloomberg.

• Pivotal BioVenture Partners, a new San Francisco-based biotech VC, has closed its debut fund with over $300 million in capital commitments from the Nan Fung Group.

• TTV Capital, an Atlanta-based VC firm focused on financial services, has closed its fourth fund with $93 million in capital commitments.

It's Personnel

• Shawn McMenimen has joined Gen II Fund Services, a private equity fund administrator, as senior managing director. Her previously was with State Street.

• TowerBrook Capital Partners has hired two new senior principals: Walter Weil (NYC, ex-GSO) and Ron van Loo (London, ex-AlixPartners). It also hired Jeroen Bischops as a principal (London, ex-Balyasny Asset Management).

Final numbers