Axios Pro Rata
March 06, 2020
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Top of the Morning
Sequoia Capital yesterday issued a dire warning to portfolio company CEOs about the business impacts of the coronavirus, suggesting that they "question every assumption" about their businesses, including cash runway, headcount, sales forecasts, and the availability of future funding.
- Why it matters: Sequoia, an early investor in Airbnb and Google, is no Chicken Little. The last time it did something similar was more than 11 years ago, at the peak of the financial crisis, via its famed "RIP Good Times" slide deck.
Sequoia partner Roelof Botha tells me that the firm's goal is to "sensitize" companies to the potential for compounded risks, something that most people don't intuitively contemplate. He adds that Sequoia isn't recommending layoffs or hiring freezes, but does believe that companies should "become more deliberate about decisions you might otherwise make casually."
Why now? Botha recalls being CFO of PayPal in mid-2000s, when Sequoia partner Michael Moritz raised alarms during a board meeting about the rapidly dehydrating funding environment.
"He told us we needed to focus on cash runway immediately, and suddenly we're wondering if we'll ever be able to raise money again. Man, did that cause us to get our stuff together quickly. It was the same for companies in 2008. This time we might only be helping buy companies two or three or four weeks instead of six months, but it's better than doing so once it's already too late."
Botha does not currently expect portfolio companies to fail due to the economic fallout from coronavirus — believing it was a more present danger in 2008/2009 — although Sequoia's memo does note how some companies have seen sharp growth rate decreases and are now at risk of missing their first quarter projections.
Sequoia is also making some changes of its own. The global firm had already relocated its annual limited partner meeting from India to Silicon Valley, but now has decided to do it virtually.
- It also is curtailing international travel (albeit not banning it entirely), and also cutting back on domestic trips. Sequoia's U.S. offices remain open for now, but Botha believes that the "Bay Area is at risk of people being asked to work from home if they can."
The bottom line: Sequoia is saying publicly what many investment firms have been telling CEOs privately: It's now prudent to prepare for the worst.
Arweave, a London-based blockchain startup focused on permanent data storage, raised $8.3 million in tokenized funding from Andreessen Horowitz, Coinbase Ventures and Union Square Ventures.
- Why it's the BFD: The company's technology is designed to create permanent record of web content — a boon to fighting government censorship, but a possible nightmare for "right to be forgotten" advocates.
- The bottom line: "The Chinese government has been removing criticism of its coronavirus response from apps like Weibo, the local equivalent of Twitter. But before it can, that content is being saved, decentralized, and highlighted thanks to Arweave’s permaweb." — Josh Constine, TechCrunch
Venture Capital Deals
• Pager, a New York-based virtual health care companion, raised $33 million in Series B equity and debt funding. Health Catalyst Capital led, and was joined by Horizon BlueCross BlueShield of New Jersey and return backers Goodwater Capital, NEA, Lux Capital, Three Fields Capital, and SVB. www.pager.com
• HaulHub, a Boston-based heavy construction logistics startup, raised $30 million in Series B funding co-led by T. Rowe Price and Durable Capital Partners. http://axios.link/XSYL
• Spindrift, a Charlestown, Mass.-based maker of sparkling waters and seltzers, raised $29.8 million in new funding, per an SEC filing. Existing backers include Almanac Insights, KarpReilly, Prolong Ventures, and VMG Partners. http://axios.link/vty3
• Airbase, a San Francisco-based spend management platform, raised $23.5 million in new Series A funding. Bain Capital Ventures led, and was joined by return backers First Round Capital and BoxGroup. www.airbase.io
• SiLC Technologies, a Monrovia, Calif.-based developer of LiDAR chips, raised $12 million in seed funding led by Dell Technologies Capital. www.silc.com
• Sparta Science, a Menlo Park, Calif.-based provider of injury prediction and recovery monitoring technologies, raised $16 million in Series B funding. GSR Ventures US led, and was joined by Arsenal Growth. www.spartascience.com
• Dexai Robotics, a Boston-based commercial kitchen automation startup, raised $5.5 million in seed funding. Hyperplane VC led, and was joined by Rho Capital, Harlem Capital, Contour Venture Partners, and NextView Ventures. http://axios.link/E1bK
• Jassby, a Waltham, Mass.-based family finance app, raised $5 million from Moneta Capital, Needham Bank, and return backers Blumberg Capital, Correlation VC, and PnP Ventures. http://axios.link/ZPka
• Mailprotector, a Greensville, S.C.-based email security and encryption startup, raised $5 million in Series A funding from Ballast Point Ventures. http://axios.link/OnSg
• Professional Credential Exchange, a Tampa-based digital marketplace for healthcare organization credentialing, raised $3.5 million in seed funding. Spectrum Health Ventures led, and was joined by Martin Ventures, The Hardenbergh Group, and Florida Funders. http://axios.link/yowl
• WorldWatch Plus, a know-your-customer risk screening startup, raised $2.9 million in Series A funding led by Naples Technology Ventures. http://axios.link/HqGE
Private Equity Deals
• Marlin Equity Partners acquired Heimdal, a Denmark-based provider of cloud-based cybersecurity solutions. www.heimdalsecurity.com
• Petershill, a unit of Goldman Sachs, is in talks to pay around $560 million for a minority stake in private equity firm Permira, per the WSJ. http://axios.link/xDg1
• Shoreline Equity Partners acquired Engelman Baking Co., a Norcross, Va.-based wholesale bakery focused on breads and rolls. www.engelmansbakery.com
• Safe Auto Insurance Group, a Columbus, Ohio-based auto insurer, withdrew registration for a $50 million IPO. It had planned to trade on the Nasdaq (SAIG) with BAML as lead underwriter. www.safeauto.com
• SBI Cards, the credit card arm of The State Bank of India, said a planned $1.4 billion IPO has been oversubscribed 20x. http://axios.link/1uVd
• The Carlyle Group is considering a sale process for its control stake in Oyatsu, a Japanese noodle snack maker that could fetch between $300 million and $400 million, per Bloomberg. http://axios.link/piHE
• Equinix (Nasdaq: EQIX) completed its $335 million purchase of Packet, a New York-based bare metal cloud provider that had raised over $36 million from Third Point Ventures, Dell, SoftBank, JA Mitsui Leasing, Samsung, and Battery Ventures http://axios.link/bXX8
• Nvidia (Nasdaq: NVDA) acquired SwiftStack, a San Francisco-based data storage and management platform that had raised around $40 million from firms like OpenView Venture Partners, Mayfield, UMC Capital, Storm Ventures, and Rally Ventures. http://axios.link/ajJy
• GroupM, a unit of WPP (NYSE: WPP), acquired Sandtable, a London-based data science startup focused on behavioral analytics. http://axios.link/YRGd
• HP (NYSE: HPQ) rejected Xerox’s (NYSE: XRX) increased takeover bid of $35 billion, or $24 per share. http://axios.link/aYch
• Beijing Kunlun Tech agreed to sell gay dating app Grindr for $609 million to a holding company called San Vicente Acquisition LLC. Kunlun bought Grindr in 2016, but was then last year was ordered by U.S. regulators to sell the company. http://axios.link/QR81
🛴 Peixe Urbano, a Brazilian e-commerce company controlled by Baidu, denied a Reuters report that it’s in talks to buy Brazilian e-scooter company Grow Mobility. http://axios.link/YaRJ
⛽ Seven & i Holdings (Tokyo: 3382), the Japanese parent company of 7-Eleven, has pulled out of talks to buy Marathon Petroleum’s (NYSE: MPC) Speedway gas stations in the U.S., after balking at a reported $22 billion asking price. http://axios.link/UcVh
• TechTarget (Nasdaq: TTGT) acquired Data Science Central, a Chicago-based digital publisher focused on data science and business analytics. http://axios.link/j28p
• Frontline Ventures, a VC firm with offices in Dublin and London, raised $80 million for a new fund that will focus on U.S. tech startups seeking to expand into Europe. http://axios.link/Cv9C
• Tom Lounibos joined Accenture Ventures as its managing director. He’s a serial entrepreneur who most recently co-founded and led SOASTA, which was acquired by Akamai. http://axios.link/cVM3
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