Mar 14, 2017

Axios Pro Rata

Top of the Morning

• Gametime: As we've done in past, um, locations, it's time for our March Madness Extravaganza. The winner will get the chance to write part of a Pro Rata column (i.e, free promotion), plus hopefully a bit of Axios swag. Plus, and this is most important, bragging rights to the tens of thousands of Pro Rata readers.

We're using ESPN this year. To play:

  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 Thursday at noon ET.
  4. Good luck! If you have any troubles with 1-3, please let me know.

• Spin room: Last week there was a Bloomberg report that Peloton, the "Netflix for bikes" that effectively offers professional spin classes in a user's home, is seeking to raise $120 million in new VC funding at around a $1.2 billion valuation. So I spent some time on the phone with John Foley, Peloton's co-founder and CEO, to better understand how a stationary bike maker could get a software unicorn valuation. He wouldn't talk about the still-active financing, natch, but here are some takeaways:

  • Peloton is best known for hardware, but Foley believes it's more a software and media biz.
  • The company generated $170 million in revenue last year, up from $50 million in 2015.
  • Last month it streamed one million rides. Monthly subscriber churn is just 0.3%.
  • Peloton discussed bringing rivals Soul Cycle and Flywheel onto its platform.
  • Its most popular store isn't in the cold-weather north, but in Dallas, Texas
  • Peloton has a plan to reduce "sticker shock" on its $2k bike, but also believes it can make a "value" argument in the event of a recession.

Read the full interview by going here.

• Attn healthcare investors: Now that we've seen the GOP plan and the CBO score, I'm interested in your thoughts on both the plan and how how feel its implementation would affect your investment strategy. Just shoot me an email by hitting reply, or at For everyone else, we've got continuing coverage in the Axios health stream.

• An elegant solution? Last week I mentioned that Uber's board has no plans to dump Travis Kalanick as CEO, despite the company's many recent troubles. Partially because many directors still want him at the helm, and partially because Kalanick has effective control of the votes (along with Uber founder Garrett Camp and SVP Ryan Graves). Plus, no directors seem interested in forcing the triumvirate's hand by threatening to resign.

But one Uber investor shared with me his idea for a solution: Ask Travis to give up the CEO role, and instead make him chairman (maybe executive chairman?). Camp could stay on as a regular director (since he's primarily focused on Expa), and something could be worked out with Graves (whose operational future is already being questioned by company insiders). This lets Kalanick keep a top position, while still sending a strong culture change message to the troops and critics. Plus, it would make it easier to recruit a top candidate (particularly a female one) for what is currently a #2 role (i.e., make it more appealing). Not saying this is anywhere close to likely. But it sure is interesting...

• Doubling down: Sean Spicer had a chance yesterday to walk back President Trump's "then phony, now real" statement on the monthly BLS numbers, but instead doubled down. He also falsely claimed that OMB director Mick Mulvaney was talking about Obamacare, not BLS, when he said on CNN over the weekend that the Obama Admin "manipulated" data.

The BFD: Okta files for IPO

Okta, a San Francisco-based provider of identity access management solutions, has filed for a $100 million IPO. It plans to trade on the Nasdaq under ticker symbol OKTA, and reports a $65 million net loss on $111.5 million in revenue for the nine months ending October 2016. It has raised around $230 million in VC funding.

Why it's the BFD: Ignore the headline number, since that's likely a placeholder. Instead, focus on how the long-awaited river of enterprise software IPOs is finally beginning to flow. Presidio pricing last week, MuleSoft going this week (after upping its price range) and now new filings from Okta and Yext. Okta also joins MuleSoft on the unicorn IPO train, as it was valued north of $1.1 billion during its last round of VC funding in late 2015.

Bottom line: "The IAM segment of the security market is hot, and thus Okta faces many competitors including CA Technologies, which bought IdMlogic two years ago and Ping Identity which was acquired last year by private equity firm Vista Equity Partners. And don't forget frenemies Microsoft and Google, which, partner with Okta but also offer their own multi-vendor IAM products." ― Barb Darrow, Fortune

Venture Capital Deals

• Roblox, a San Mateo, Calif.-based "social platform for play," has raised $92 million in new VC funding co-led by Meritech Capital Partners and Index Ventures.

• Innovium, a San Francisco-based provider of networking silicon solutions for data centers, has raised $38.3 million in Series C funding. Redline Capital led the round, and was joined by return backers Greylock, Walden Riverwood Ventures, Capricorn Investment Group, Qualcomm Ventures and S-Cubed Capital.

• GuestToGuest, a French home exchange platform for travelers, has raised €33 million in new VC funding from groups like Maif. Some of the proceeds were used to acquire Hermosa Beach, Calif.-based HomeExchange for an undisclosed amount.

• iD Fresh, an Indian packaged food delivery company, has raised $25 million in Series B funding from PremjiInvest. The company previously raised funding from Helion Venture Partners.

• Skuid, a Chattanooga, Tenn.-based cloud UX platform, has raised $25 million in new VC funding from Iconiq and return backer K1 Investment Management.

• Evrything, an IoT smart products platform, has raised $24.8 million in Series B funding. Sway Ventures led the round, and was joined by Generation Ventures, Bloc Ventures and return backers Cisco, Samsung, BHLP, Aotomico, Dawn Capital and Advance Vixeid Partners.

• Dyadic Security, a New York-based provider of software-defined cryptography, has raised $12 million in Series B funding from Goldman Sachs Principal Strategic Investments, Citi Ventures and Innovation Endeavors.

• CellAegis Devices, a Toronto-based developer of a no-invasive autoRIC device, has raised US$9.5 million in Series C funding. CTI Life Sciences led the round, and was joined by MaRS Catalyst Fund and Broadview Ventures.

• Autobooks, a Troy, Mich.-based provider of cash management software for small business owners, has raised $5.5 million in Series A funding. Draper Triangle led the round, and was joined by CU Solutions Group, Baird Capital, Detroit Venture Partners, and Invest Michigan.

• Silverfin, a Belgium-based business accounting platform, has raised $4.5 million in Series A funding led by Index Ventures.

• VentureApp, a Boston-based professional chat platform, has raised $4 million in VC funding. Accomplice led the round, and was joined by Boston Seed Capital and Fullstack Ventures.

• StatX, a Santa Clara, Calif.-based mobile business dashboard with push notifications, has raised $2.5 million in VC funding. Backers include Signia Venture Partners, Inventus Capital Partners and XSeed Capital.

• Babel Health, a Pittsburgh-based provider of risk adjustment software for health plans, has raised $1.5 million in new funding led by Mark Pacala, an operating partner with Pamplona Capital.

• ObEN, a Pasadena, Calif.-based developer of "smart avatars" for consumers and celebrities, has raised an undisclosed amount of new VC funding from SoftBank Ventures Korea.

Private Equity Deals

• Bain Capital is in exclusive talks to acquire Diversey Care, the cleaning and chemicals systems unit of Sealed Air Corp. (NYSE: SEE), according to Reuters. The deal could be valued at between $3 billion and $4 billion.

• Borealis Infrastructure and Wren House (an affiliate of the Kuwait Investment Authority) have agreed to buy a 26% stake in British water company Thames Water from Macquarie. No financial terms were disclosed, although earlier reports were that Macquarie was seeking between £1 billion and £1.5 billion.

• Cedar Springs Capital and Crestline Investors have acquired a majority stake in CarePayment, a Nashville, Tenn.-based patient financial engagement company. No financial terms were disclosed.

• Cressey & Co. and Spectrum Equity have agreed to acquire a majority stake in Verisys Corp., an Alexandria, Va.-based provider of regulatory compliance data and software for healthcare providers. No financial terms were disclosed, but a source tells Axios that the combined equity investment was $72.5 million.

• Harmony Merger Corp. (Nasdaq: HRMN) and NextDecade LLC, a Texas-based LNG developer, have agreed to a reverse merger valued at around $1 billion. NextDecade is owned by York Capital Management, Valinor Management and Halcyon Energy Investors.

• Harvest Partners has acquired an undisclosed equity stake in Material Handling Services, a Perrysburg, Ohio -based provider of fleet management and asset management services, from CI Capital Partners. No financial terms were disclosed.

• Ideal Cures, an India-based provider of maker of coating products and excipients for tablets and capsules to the pharma market, has raised an undisclosed amount of private equity funding from TA Associates.

• Misys, a British financial software company owned by Vista Equity Partners, has agreed to acquire DH Corp. (TSX: DH), a Canadian payments and lending software company, for C$4.8 billion.

• Platinum Equity has agreed to acquire the Australia and New Zealand business of Staples (Nasdaq: SPLS) for an undisclosed amount.

• Shore Capital Partners has formed EyeSouth Partners, an eyecare practice acquisition platform whose first addition is Georgia Eye Partners, which has four locations around Atlanta. No financial terms were disclosed.

• XLerate Group, an Indianapolis-based portfolio company of Huron Capital, has acquired CADE, a Corry, Penn.-based auto auction company. No financial terms were disclosed.

Public Offerings

• Colony Global Acquisition, a blank check acquisition company created by Colony Capital's Tom Barrack, has withdrew registration for a $300 million IPO.

• MuleSoft, a SaaS integration company valued at $1.5 billion by venture capitalists, has raised its IPO price range from $12-$14 to $14-$16. It still plans to offer 13 million shares and price later this week.

• Yext, a New York-based "knowledge engine" that helps local businesses sync their data across services like Apple Maps and Instagram, has filed for a $100 million IPO. It plans to trade on the NYSE under ticker symbol YEXT, with Morgan Stanley listed as left lead underwriter. It reports a $28.5 million net loss on $89 million in revenue for the nine months ending October 2016. It has raised over $100 million in VC funding from firms like Sutter Hill Ventures (23.6% pre-IPO stake), IVP (16%), Marker Financial (13.6%) and Insight Venture Partners (10.3%).

Liquidity Events

• Parthenon Capital has agreed to sell Eliza Corp., a Danvers, Mass.-based provider of health engagement management and analytics solutions, to HMS Holdings Corp. (Nasdaq: HMSY) for $170 million in cash.

• Pershing Square, the hedge fund led by Bill Ackman, has sold its entire stake in Valeant Pharmaceuticals (NYSE: VRX), booking around a $4 billion loss on his overall investment in the troubled drugmaker.

• TechStyle Fashion Group, an El Segundo, Calif.-based online fashion styling and retail platform, is considering a sale that could value the company at more than $1.5 billion (including debt), according to Reuters. TechStyle has raised over $330 million in VC funding from firms like TCV, Crosscut Ventures, Matrix Partners, Shining Capital, KEC Ventures, Broadway Video Ventures, Point Nine Capital and SevenVentures.

More M&A

• Citrix Systems (Nasdaq: CTXS) is considering strategic alternatives that could include a sale of the company, according to Reuters. Thoma Bravo reportedly is among those with interest in Citrix, which in 2015 gave a board seat to activist investor Elliott Management. The company's current market cap is around $13.3 billion.

• JBS of Brazil has agreed to acquire Plumrose USA, a Downers Grove, Ill.-based ham and bacon producer, for $230 million.

It's Personnel

• Peter Coroneos has joined Z Capital as a managing director and global head of corporate development. He previously was a managing director in the private capital group of Jefferies.

• Platte River Equity, a Denver-based private equity firm, has promoted Derria Banta to managing director. She also will remain the firm's CFO.

Final Numbers