Sep 6, 2019

Axios Pro Rata

Top of the Morning

Illustration: Sarah Grillo/Axios

The head of one of the world's largest cannabis investment firms says he's mostly seeing recycled business plans, but believes the industry's next phase of startup innovation will be around everyday products sold by mainstream retailers.

  • Brendan Kennedy is the Seattle-based executive chairman of Privateer Holdings. He's also CEO of Tilray, the Canadian cannabis company whose stock has mellowed since its red-hot IPO.
  • He and I chatted yesterday on an outdoor bench, occasionally interrupted by tourist cheers as fake boxes of tea were thrown overboard a replica Boston Tea Party ship.

Kennedy says that Cannabis 1.0 related directly to the flower, while Cannabis 2.0 was about beverages. He believes Cannabis 3.0, which is just beginning, will be in all sorts of consumables (shampoos, lotions, cookies, etc.) that will sit alongside more "traditional" versions at places like Walgreens and Target.

  • "Most major retailers will sell cannabinoid products, just as another sort of brand," he says. "There's an enormous amount of opportunity there for new companies."

Kennedy also was agnostic on the 2020 presidential election, even though most of the Democratic Party candidates support federal legalization (note: Joe Biden is an exception).

  • He's more concerned with legalization ballot initiatives in upwards of seven "deep red" states. He believes if those states go legal, then it will put pressure on their GOP senators.
  • Kennedy adds that some in his industry believe that Trump may reverse his anti-legalization position before next November, in order to take that issue off the table. but admits that may just be wishful thinking.

💼 Lots of WeWork IPO buzz after the WSJ reported that the company may go public at a valuation at less than half its most recent private mark of $47 billion. It also revealed that CEO Adam Neumann recently met in Tokyo with SoftBank CEO Masayoshi Son to discuss either a cornerstone IPO investment or a private capital infusion that would allow WeWork to delay its IPO until next year.

  • First, don't bet on the delay. WeWork needs to go public in 2019 in order to receive a $6 billion credit facility, and multiple sources tell me that Neumann is willing to accept a major equity valuation slash.
    • Caveat: If Masa pulls up the Brink's truck — perhaps offering to supplant the proposed IPO proceeds and debt proceeds — then WeWork's calculus changes significantly. Particularly given that it's done early employee tenders already.
  • On the valuation, it's important to remember that WeWork was valued at only $21 billion when it raised its Series G funding in mid-2017. That was the round led by SoftBank Vision Fund.
  • The bump to $47 billion came later from SoftBank Group (not from its Vision Fund), via a convoluted/downsized process in which the Japanese giant seemed to pay up for taking up so much of WeWork's time. And, yes, there are some market sources (cynics?) who believe the $47 billion was, in at least a small part, to help boost fundraising for Vision Fund II.
  • We still don't know when the IPO road-show kicks off. But, when it does, all eyes will be on Neumann. Those close to the process believe that there is lots of buy-side interest in the company, but more than a few outstanding questions about its leader. His performance in those hotel ballrooms could be worth billions.

🏈 Pro Rata Podcast kicks off the NFL season with a new look at the state of legalized sports betting. My guest is DraftKings CEO Jason Robins. Listen here.

The BFD

Source: Giphy

Valence Media, the parent company of Billboard, agreed to buy the music industry data and analytics business of Nielsen Holdings (NYSE: NLSN), per Bloomberg.

  • Why it's the BFD: This would reunite the music industry's top publisher of sales charts with the company that supplies its data. It also could let Billboard expand its data offerings, including possible subscription products.
  • Bottom line: "Billboard began publishing charts based on Nielsen’s data in 1991. The company had previously tracked sales by calling record stores across the country, a laborious and slow process. Nielsen, in contrast, captured sales by scanning the bar codes at retail checkout counters. Nielsen began monitoring digital downloads... in 2003 and has since adjusted the charts to factor in streaming." — Lucas Shaw, Bloomberg
Venture Capital Deals

Happy Money, a Costa Mesa, Calif.-based marketplace that connects borrowers with credit unions, raised $70 million in Series D funding led by CMFG Ventures. http://axios.link/aXsw

BigID, a San Francisco-based privacy platform, raised $50 million in Series C funding. Bessemer Venture Partners led, and was joined by Salesforce Ventures and return backers SAP, Comcast Ventures, Boldstart Ventures, Scale Venture Partners, and ClearSky. http://axios.link/MQb6

Hotel Engine, a Denver-based business travel hotel booking and management platform, raised $16 million in Series A funding led by Telescope Partners. www.hotelengine.com

Exeger, a Stockholm-based solar cell manufacturer, raised $10 million from existing backer SoftBank. www.exeger.com

🚑 Health Recovery Solutions, a Hoboken, N.J.-based provider of remote patient monitoring solutions, raised $10 million led by Edison Partners. www.remoterecoverysolutions.com

RippleMatch, a New York-based recruitment platform focused on recent graduates, raised $6 million in Series A funding. G20 Ventures led, and was joined by Work-Bench, Accomplice, Bullpen Capital, and AlleyCorp. http://axios.link/qERv

Spirable, a London-based customized video ad platform, raised £6 million in Series A funding. Smedvig Capital led, and was joined by seed backers Frontline Ventures, Downing Ventures, and 24 Haymarket. http://axios.link/K5vK

Flat, a Mexican home-buying and selling platform (e.g., OpenDoor), raised $4.5 million. ALLVP led, and was joined by Liquid 2 Ventures and NextBillion. http://axios.link/aztN

🚑 Aural Analytics, a Scottsdale, Ariz.-based speech analytics platform, raised $4.3 million in seed funding co-led by Morningside Ventures and Tamarisc Ventures. www.auralanalytics.com

Superside (fka Konsus), a crowdsourced design platform, raised $3.5 million. Freestyle Capital led, and was joined by High Alpha Ventures, YC, and Alliance Ventures. http://axios.link/mBOg

Zippity, an at-workplace car maintenance company, raised $3 million in seed funding. Schooner Capital led, and was joined by BP Ventures and LaunchPad Ventures. http://axios.link/CngU

Upflow, a French payment processing automation startup, raised €2.5 million from Kima Ventures and eFounders. http://axios.link/547f

🦐 New Wave Foods, a San Francisco-based developer of a plant-based shrimp substitute, raised an undisclosed amount of funding from Tyson Ventures. http://axios.link/QgTB

Private Equity Deals

🚑 Advarra, a Columbia, Md.-based portfolio company of Genstar Capital, agreed to buy Forte, a Madison, Wis.-based provider of clinical research software, from Primus Capital Funds. www.chesapeakeirb.com

Apollo Global Management and The Carlyle Group are prepping rival takeover offers for Arriva, the European transportation unit Deutsche Bahn, Germany’s state-owned railroad operator, per Reuters. The final deal is expected to be worth around €3.4 billion. http://axios.link/Hg1q

Ascensus, a portfolio company of Wind Point Partners, agreed to buy Callery, a Pittsburgh-based producer of boranes and specialty alcoholates, from BASF.

Banner Solutions, a Kansas City-based portfolio company of High Road Capital Partners, acquired Specialized Builder’s Hardware, an Anaheim, Calif.-based regional distributor of door locks and hardware. www.bannersolutions.com

Genstar Capital completed its previously-announced purchase of Worldwide Facilities, a Los Angeles-based wholesale insurance broker, from Lovell Minnick Partners. www.wwfi.com

LB Equity invested in Herb Essentials, a New York-based maker of cannabis-infused skin care products. http://axios.link/RGAo

Luminate Capital Partners invested in Thought Industries, a Boston-based provider of customer training and learning software. www.thoughtindustries.com

Permira agreed to invest in Axiom Global, a New York-based corporate legal services company that had been considering an IPO. Existing Axiom shareholders include Carrick Capital Partners. http://axios.link/GWAn

More M&A

Alibaba (NYSE: BABA) agreed to buy NetEase’s (Nasdaq: NTES) import e-commerce platform (Koala) for around $2 billion. http://axios.link/QOHs

HNA Group is considering the revival of a sale process for Seaco, its container-leasing business, per Bloomberg. http://axios.link/SA07

Enel (Milan: ENEI) hired BNP Paribas to find a buyer for its Romania assets, which could fetch around €1 billion, per Reuters. http://axios.link/1Bg4

Exxon Mobil (NYSE: XOM) reportedly agreed to sell its Norwegian oil and gas assets to Var Energi for up to $4 billion. http://axios.link/TBHC

Opendoor, the VC-backed home-buying and selling platform, acquired OS National, a Duluth, Ga.-based title and escrow company. http://axios.link/N058

Sotheby's (NYSE: BID) shareholders approved a $3.7 billion buyout from cable mogul Patrick Drahi. http://axios.link/lSFI

🚑 Sumitomo Dainippon Pharma (Tokyo: 4506) agreed to pay $3 billion for a 10% stake in Roivant Sciences, a Swiss drugmaker backed by such firms as Founders Fund, Viking Global Investors and SoftBank. http://axios.link/7Jyq

Fundraising

Vista Equity Partners closed its seventh flagship tech buyout fund with $16 billion in capital commitments, per the WSJ. http://axios.link/a3hQ

Valor Capital Group is raising $150 million for its third fund, plus another $150 million for its first opportunities fund, per an SEC filing. www.valorcapitalgroup.com

It's Personnel

Brendan Baker joined Ridge Ventures as a partner. He previously was a director with Greylock and, before that, was the second employee at AngelList. www.ridge.vc

Ben Hughes joined Sky Island Capital as director of business development. He previously was with Wells Fargo. www.skyislandcap.com

Marc Leferman joined energy company White Rock Oil & Gas as a managing director and head of investor relations, per his LinkedIn page. He previously spent 23 years leading IR for Wexford Capital.

Final Numbers
Expand chart
Data: Bureau of Labor Statistics; Chart: Axios Visuals
  • The U.S. economy added 130,000 non-farm jobs in August, short of 150,000 estimates.
  • Excluding government jobs, it was +96,000 (lowest mark since February).
  • Unemployment rate held steady at 3.7%.
  • Average hourly earnings rose 0.4% for the month and 3.2% year-over-year, which beat expectations.

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