Jan 13, 2017

Axios Pro Rata

By Dan Primack
Dan Primack

Happy Friday. Thanks for helping to make this a great beta week for Axios Pro Rata. Be sure to keep sending me news and views (tipline here), and asking friends to subscribe via this link. We're off Monday for the MLK holiday. Go Pats!

Hail to the Chiefs

During the presidential campaign, a common refrain from Trump supporters was that America needed a businessman in the White House. Someone who had met a payroll, operated in the "real world," etc. Even more optimal was someone who had zero experience in public service (sorry, Mitt Romney), since it's hard to shake the reflexive stain of "business as usual."

My gut reaction was always twofold: (1) Running a government shares little in common with running a for-profit enterprise, save for organizational skills. (2) The businessman would likely surround himself with a lot of people who do have public-sector experience, so even a Trump victory wouldn't really test the hypothesis.

On that second part, I was largely wrong. Trump's incoming administration is untraditionally heavy on CEOs who have never before sniffed government. Examples include Rex Tillerson (Sec of State), Wilbur Ross (Commerce), Andy Puzder (Labor) and Steve Mnuchin (Treasury). And that's just Cabinet-level positions (see today's news on Scaramucci, Anthony).

Which brings us back to #1: We're about to test the CEO theory. If the Trump Administration proves successful by objective measures (economic/job growth, foreign/domestic tranquility, etc.), then it's quite likely that the candidate paradigm will have been shifted for decades to come. If you want to become president, first become a CEO ― rather than first run for lower public office. Kind of like how VC firms now prefer to pluck new partners from operating companies than from banks or consulting shops. But if Trump consensus fails, then CEOs will be looking at a long, cold electoral winter. Kind of a double-edged sword for someone like Howard Schultz...

Top of the Morning

More Trumpland: Earlier this week we mentioned that the two leading candidates to lead FDA had venture capital ties (Scott Gottlieb of NEA and Jim O'Neill of Mithril). A third name emerged yesterday, also from the VC space: Balaji Srinivasan, a board partner with Andreessen Horowitz who currently leads bitcoin hardware startup 21 Co. He met with PEOTUS yesterday, and has a colorful Twitter history when it comes to both the FDA (he's not a huge fan) and Trump himself (ditto). While it remains unclear who will get the nod, one thing that seems certain is that FDA is the federal agency where Peter Thiel is having his greatest influence.

Speaking of Thiel: By now, many of you have probably read his sit-down with Maureen Dowd. And you perhaps cringed when he downplayed concerns about sexual assault by arguing that people in Silicon Valley are hypersensitive because they aren't getting laid enough. But in light of the FDA discussion, I was particularly surprised by this Thiel claim: "You're not allowed to develop drugs that could stop aging."

Really? Isn't that the entire conceit behind Calico, into which Google has plugged around $1 billion? Or some of what Novartis is exploring? It's true that FDA doesn't consider aging to be a disease, but that doesn't mean that pharma isn't allowed to work on the issue.

Uh oh: It's not nearly to the level of Theranos, but the collapse of VC-backed drone startup Lily is becoming a serious Silicon Valley scandal. Here's the latest.

The BFD: KKR Powers Up with Hitachi

Kohlberg Kravis Roberts & Co. has agreed to acquire the power tools unit of Hitachi (Tokyo: 6501) for around $1.3 billion.

Why it's the BFD: It wasn't too long ago that global private equity firms were bailing on Japan. Advent International in 2011. Ripplewood in 2012. Cerberus in 2015. TPG no longer has a Tokyo office nor any Japanese portfolio companies. But Japanese buyouts are coming back, spurred on by what Reuters refers to as "a push by Japanese conglomerates to restructure businesses by shedding non-core operations." KKR, for example, spent $4.5 billion last fall on Calsonic Kansei, while private equity firms are said to be circling a minority stake in the Japan business of McDonald's.

It's also worth noting that this isn't just a large-market phenomena. Per Elzio Barreto: "As Japan's population ages, more owners of small and medium-sized businesses are reaching their twilight years without a successor, and are increasingly looking to private equity firms for capital and management expertise."

Venture Capital Deals

• Corephotonics, an Israeli maker of dual camera technologies for smartphones, has raised $15 million in new VC funding. Backers include Samsung Ventures, Foxconn, Horizon Ventures, SanDisk, MediaTek, CK Telecom, Magma VC, Amiti Ventures and OurCrowd. http://reut.rs/2ilbLhS

• Kasisto, a New York-based developer of "conversational AI to enable human-like interactions with smart bots and virtual assistants," has raised $9.2 million in Series A funding. Propel Venture Partners led the round, and was joined by Mastercard, Commerce Ventures and returning seed backers like Two Sigma Ventures. http://bit.ly/2jbh4oA

• Kayrros, a Paris-based provider of predictive analytics for energy markets, has raised €9 million in Series A funding led by Index Ventures.

• Luxendo, a German developer of single-plane illumination microscopy technology for biomedical research, has raised €8 million in Series A funding. Life Science Partners, EMBL Ventures and EMBL Enterprise Management Technology Transfer. http://bit.ly/2jovD5h

• Iguama, a Miami-based developer of cross-border ecommerce solutions for Latin America, has raised $5 million in Series A funding co-led by Kibo Ventures and PeopleFund. www.iguama.com

• Stadium Goods, a New York-based sneaker and apparel marketplace, has raised over $4.6 million in new equity funding. Forerunner Ventures led the round, and was joined by Chernin Group. http://tcrn.ch/2j4oKGw

• Staffjoy, a San Francisco-based business scheduling startup, has raised $1.2 million in seed funding. Caffeinated Capital led the round, and was joined by Haystack and Brainchild Holdings. www.staffjoy.com

Private Equity Deals

• The Blackstone Group and Sanchez Energy (NYSE: SN) have formed a 50/50 partnership to acquire around 318,000 gross acres of oil and gas shale assets in the Western Eagle Ford from Andarko Petroleum (NYSE: APC). The deal is valued at approximately $2.3 billion. http://bit.ly/2jqVgT1

• Clearview Capital has acquired Wilson Orchard & Vineyard Supply, a Yakima, Wash.-based provider of equipment and supplies for commercial orchards and vineyards. No financial terms were disclosed. http://bit.ly/2jovD5h

• Linkem, a provider of fixed wireless broadband services in Italy, has raised €100 million in equity funding from BlackRock and return backers Leucadia National Corp. and Cowen Group. www.linkem.com

Liquidity Events

• Kinderhook Industries has sold San Jamar, an Elkhorn, Wis.-based provider of dispensing systems and food safety solutions for the foodservice and hygiene markets, to Carlisle Cos. (NYSE: CSL). No financial terms were disclosed. http://bit.ly/2iMnA1v

• Madison Dearborn Partners has sold SeaStar Chemicals, a Canadian manufacturer of reagents used in the research, laboratory and microelectronics industries, to VWR (Nasdaq: VWR). No financial terms were disclosed. http://bit.ly/2jrjSuP

More M&A

• ClubCorp (NYSE: MYCC) has hired Jefferies and Wells Fargo to seek a buyer, according to Reuters. The Dallas-based golf club owner and operator has a current market cap of around $1.1 billion. http://reut.rs/2im5WQZ

• Clutch, an Ambler, Penn.-based provider of customer management and marketing analytics solutions, has acquired Persio, a Chicago-based mobile promotions platform. No financial terms were disclosed. Clutch has raised over $20 million in VC funding from firms like NewSpring Capital and Saferguard Scientifics, while Persio had raised over $3 million from Serra Ventures, Hyde Park Venture Partners, OCA and Illinois Ventures. http://bit.ly/2jos5Qk


• Ben Gray, TPG Capital's former co-head of Asia operations, later this year plans to launch a new fund focused on Australia and New Zealand, per Bloomberg. It would target A$2 billion, with Gray joined be fellow TPG vet Simon Harle. http://bloom.bg/2j6tiw7

• JMC Capital Partners, a Boston-based private equity firm, has closed its second fund with $206 million in capital commitments. www.jmccp.com

• Northwestern Mutual has launched a $50 million venture capital fund focused on "startups whose technologies have the potential to transform how consumers experience and achieve financial security." www.nmfutureventures.com

• Prudential Capital Partners has closed its fifth mezzanine fund at $1.8 billion. http://bit.ly/2irMeXp

• Yellow Wood Capital Partners, a Boston-based private equity firm focused on the consumer sector, is raising upwards of $360 million for its second fund, per an SEC filing. http://bit.ly/2jBO4CV

It's Personnel

• Joseph Chee is leaving UBS, where he serves as head of corporate client solutions for Asia, according to Reuters. The report says that he plans to launch a new fund, although it doesn't say what type of fund it will be. http://reut.rs/2iOUDSJ

• Benita Warmbold is stepping down as CFO of Canada Pension Plan Investment Board in June, per a statement from the public pension giant. A successor has not yet been named.

• Behrman Capital has promoted Jeffrey Wu to partner. He currently sits on the boards of portfolio companies Tresys Technology and ILC Dover. www.behrmancap.com

Final Numbers
Dan Primack