Jan 20, 2017

Axios Pro Rata

Greetings from New York City, where I'm in town to do a conference interview (assuming I can snake my way past the expected protests near Trump Tower). Thanks for subscribing to Pro Rata, and be sure to keep sending feedback. If you hit "reply" to these missives, I'll get it. Go Pats!

Top of the Morning

• Big money contract: I have a love-hate relationship with The Players' Tribune, which yesterday announced $40 million in new funding (led by IVP, which was joined by GV and existing backer NEA). The love is getting unfiltered content straight from athletes, and an advertising model that shares a lot of similarities to what we're doing here at Axios (no banners, etc). The hate... well, it was founded by a New York Yankee.

Anyway, let's move the story forward a bit: The round was done at a pre-money valuation of approximately $100 million, per a source familiar with the situation. That's around a 10x multiple on 2016 revenue.

• Say it ain't so: BJs Wholesale Club, a retailer owned since 2011 by CVC Capital Partners and Leonard Green Partners, is pitching a $2.45 billion dividend recap. The cov-light deal is split between first-lien ($1.85b) and second-lien ($600m) tranches, per LevFin Insights. More importantly, Bloomberg reports that this is the third time that BJs' private equity owners have done a dividend recap, and this one could mean they've effectively tripled their original $630 million equity check (without selling any shares).

To be sure, the debt markets are saying that BJs is plenty strong to handle this sort of transaction. Then again, debt markets also thought that once about The Limited. Companies can always handle a dividend recap until it can't. For those who don't struggle, the private equity sponsors likely could have still gotten paid out in the end, since the underlying balance sheet would have far fewer liabilities. For those who do, the recap is a knot in the noose. Juicing IRRs just isn't worth the risk...

• Why NEA returned: Earlier this week I expressed surprise that New Enterprise Associates was back in market for a new mega-fund ― $3 billion target, per SEC filing ― less than two years after raising $3.1 billion. Particularly given that PitchBook reports that $3.1 billion was less than 40% called through the end of Q2 21016.

So I've asked around, and learned that the new effort is more about macro than the micro: (1) NEA recognizes that 2017 is going to be a pretty light year for big VC fundraises, which basically means there could be some opportunity cost to waiting until 2018. Particularly among LPs with vintage year allocation desires. (2) Despite current economic conditions, there is some concern at NEA about the uncertainty that accompanies Donald Trump into office today, and would prefer to be fully-stocked while the store remains open.

• Obamacare and entrepreneurs: There has been a lot of talk about how ACA repeal could affect American companies, particularly those in the healthcare space. But Sam Altman of Y Combinator has a different perspective: He believes that repeal without adequate replacement will result in fewer new companies being created.

Altman recently emailed YC founders to ask how ACA helped them get started, and posted a small selection of the replies. Here's how he summed it up to Axios: "There are plenty of people who want to become entrepreneurs and have plenty of money in the bank, but they don't because they don't have health insurance... I'm not someone who believes ACA is perfect or that it shouldn't be improved, but repealing it without a replacement will certainly make it harder for founders."

He adds that, if ACA is indeed repealed without adequate replacement, that YC might try to create some sort of health insurance plan for founders in its program. But, he warns, most other accelerators and VC groups don't have the same sort of scale to pull that off.


Bitcoin Investment Trust, founded by Barry Silbert, has filed for a $500 million IPO. It plans to trade on the NYSE Arca under ticker symbol GBTC. No banks are listed. In its S-1, the group says its investment objective is for its shares "to reflect the performance of the value of a bitcoin as represented by the Index, less the Trust's liabilities and expenses."

Why it's the BFD: This is basically a public market mainstreaming of bitcoin exposure, as Silbert's trust previously was issuing shares via 506(c) private placements. More importantly, it comes at a complicated time for the cryptocurrency. On the one hand, bitcoin values ― while still volatile ― have mostly risen for the past year. On the other, hacking and other cybersecurity concerns have never been more omnipresent, and much investor and financial services interest in blockchain technologies seems to have moved beyond bitcoin.

Bottom line: "Best part of having invested in 19 bitcoin exchanges around the world is we get to see their monthly volumes. Folks, it is happening." ― Barry Silbert

Venture Capital Deals

• UrWork, a Chinese co-working space operator, has raised around $58 million in new VC funding from Tianhong Asset Management, Ant Financial, Junfa Group, Tianming Shuangchuang Technology and Shanghai Chuanghehui Fund. http://bit.ly/2kamwIU

• Huangbaoche, a provider of "tour packages and travel guide booking services for outbound Chinese tourists," has raised $30 million in Series B funding. Matrix Partners China and GF Xinde Investment Management co-led the round, and were joined by Concord Investment and existing backer SSC Fund. http://bit.ly/2iSpDQG

• Flirtey, a Reno, Nev.-based drone delivery startup, has raised $16 million in Series A funding. Backers include Menlo Ventures, Qualcomm Ventures, Lowercase Capital, World Innovation Lab and Y Combinator. http://tcrn.ch/2jzKNHf

• Shenma Finance, a Shanghai-based financial services platform for rural populations in China, has raised nearly $14 million in new VC funding. ChinaEquity Group led the round, and was joined by Shunwei Capital, China Growth Capital and Frees Fund. http://bit.ly/2j1GTWW

• Iyzico, a Turkish online payment platform, has raised $13 million in Series C funding. Vostok Emerging Finance led the round, and was joined by the IFC. http://bloom.bg/2jTTB8N

• Knock, a New York-based online real estate trading platform, has raised $12.24 million in new VC funding led by RRE Ventures, per an SEC filing. http://bit.ly/2jU7HH1

• Credible, a San Francisco-based multi-lender marketplace for student and personal loans, has raised $10 million in Series B funding. Regal Funds Management led the round, and was joined by return backers like Carthona Capital. http://bit.ly/2k5h0rc

• Bought By Many, a British insurance platform for unusual coverage, has raised $9 million in Series A funding. Octopus Ventures led the round, and was joined by Munich Re. http://bit.ly/2jwx3uP

• Fig, a game crowdfunding platform, has raised. Spark Capital and Greycroft co-led the round, and were joined by Resolute Ventures, NextView Ventures and Draft Ventures. http://bit.ly/2jD3nhZ

Private Equity Deals

• Abraaj Group has agreed to acquire a majority stake in Cadaideas, a Chilean retailer of home furnishings. No financial terms were disclosed. http://reut.rs/2k7rulP

• Clayton Dubilier & Rice is in talks to acquire the employee benefits outsourcing unit of Aon PLC for nearly $4.5 billion, beating out a rival bid from The Blackstone Group, according to Reuters. http://reut.rs/2iScc36

• Ethypharm, a French portfolio company of PAI Partners, has agreed to acquire Martindale Pharma, a British provider of medicines in the fields of opioid addiction, emergency care and sterile injectables, from AAC Capital Partners. No financial terms were disclosed, except that the combined company will generate more than €300 million in revenue. http://bit.ly/2j1mWzB

• Falconhead Capital and M3 Outdoor Investments have agreed to acquire Kwik Tek, a Denver-based provider of outdoor branded products for recreational watersports and winter sports, from Guardian Capital Partners and Yukon Capital Partners. No financial terms were disclosed. http://bit.ly/2jfF2LQ

• National Arbitration and Mediation, a Garden City, N.Y.-based provider of alternative dispute resolution services, has raised an undisclosed amount of growth equity funding from Sageview Capital. www.namadr.com

• Starwood Capital Group has agreed to acquire Dallas-based landlord Milestone Apartments Real Estate Investment Trust for approximately $1.3 billion in cash, or $16.15 per share (8.6% premium over Wednesday's closing price). http://bloom.bg/2k722B5

• Thoma Bravo has agreed to acquire Planview, an Austin, Texas-based provider of work and resource management software, from Insight Venture Partners. http://bit.ly/2k7RJIW

Public Offerings

• Keane Group, a Houston-based provider of well completion services for the hydraulic fracturing industry, raised $508 million in its IPO. The company priced 26.8 million shares at $19 per share, compared to plans to offer 16.7 million shares at between $17 and $19 per share. It will trade on the NYSE under ticker symbol FRAC, with Citigroup leading a group of 10 underwriters. Keane Group is owned by Cerberus Capital Management. http://bit.ly/2iJdRgw

• MBK Partners is prepping an IPO for insurer ING Life Korea sometime in 2017, according to IFR. The offering could raise more than $1 billion, with Morgan Stanley and Samsung Securities managing the process. http://reut.rs/2iSeFLg

Liquidity Events

• Colony Capital has sold its remaining 11.2% stake in French prepaid card company Edenred (Paris: EDEN) for approximately €257.5 million. http://reut.rs/2iSebEZ

More M&A

• Fairfax Financial Holdings (TSX: FFH) is in talks to sell a 25% in Indian insurance company ICICI Lombard for upwards of $1 billion, according to Reuters. http://reut.rs/2jGsela

• Toshiba Corp. is preparing to sell "a minority stake in its core chip business," according to Reuters. http://reut.rs/2jfGPk2


• Joseph Chang, head of private investments for Lockheed Martin Investment Management Co., said at a conference that the corporate pension plans to eventually increase its private equity exposure, but reduce its number of GPs from the current level of 80. http://bit.ly/2jfGjCE

• EQT Partners is targeting $800 million for a new Latin America-focused private equity fund, according to Dow Jones.

• Raine Ventures has closed its second fund with $100 million in capital commitments, according to the WSJ. http://on.wsj.com/2iJebfj

• Saama Capital, an Indian VC firm, has closed its third fund with $58 million in capital commitments. http://bit.ly/2jGYG79

• Tenzing Private Equity, a London-based private equity firm focused on the lower middle markets, has closed its debut fund with £200 million in capital commitments. http://bit.ly/2j1jcy9

• Translink Capital, a Palo Alto, Calif.-based tech VC firm, is raising its fourth fund, per an SEC filing. http://bit.ly/2jGBepY

It's Personnel

• Rachel Lam is leaving Time Warner Investments, which she has led for the past 14 years. No word yet on her future plans. She will be succeeded by Allison Goldberg, who is being promoted to senior vice president. http://bit.ly/2kab2p9

• Joshua Pang has joined The Blackstone Group as a principal in its private equity group, after having spent six years with BC Partners.

• Edison Partners has promoted Tom Vander Schaff to general partner and David Nevas to partner.

• Five Points Capital, a Winston-Salem, N.C.-based private equity firm, has promoted Marshall White to partner.

Final Numbers