Feb 26, 2020

Axios Pro Rata

By Dan Primack
Dan Primack

Greetings from the Boston home office, where it's good to be back after a day trip to San Francisco. Quick reminder that you can send me feedback and tips via email (dan@axios.com), anonymously (http://tips.axios.com), or Signal/Telegram (857.472.3072). Okay, here we go...

Top of the Morning

Illustration: Rebecca Zisser/Axios

The latest season of Red Scare has come to Sacramento.

Driving the news: Rep. Jim Banks (R-Ind.) has repeatedly accused Ben Meng, chief investment officer of the California Public Employees' Retirement System (CalPERS), of tacitly working on behalf of the Chinese government.

  • Banks also says that, were it up to him, Meng would be fired — and has questioned the patriotism of California Gov. Gavin Newsom for not at least investigating Meng.

The most important thing to know is the charge against Meng is mostly baseless. And even if Banks' theories were corroborated, it still doesn't make much sense.

Rep. Banks claims Meng has "steered" $3.1 billion into 172 Chinese companies, based on CalPERS investment reports.

  • Meng doesn't pick the companies in which CalPERS invests. Neither does anyone at CalPERS, which doesn't have an internal stock trading desk. Almost all CalPERS equity investments, both domestic and international, are done via third-party passive indexes. CalPERS also has a few active equities managers, although again those are third parties.
  • Some increase in CalPERS exposure to Chinese equities could be based on the FTSE last year deciding to include China A shares, but CalPERS' user of FTSE as a benchmark index (alongside MSCI) long predates Meng's employment.
  • But let's imagine Meg was "steering" this money. It works out to $18 million per company. Big money for most of us, but not for some of the large Chinese companies at issue.

Banks acknowledges that other public pensions have similar exposure, but argues CalPERS is different because Meng once was part of the 1,000 Talents Program — a Chinese program to recruit and retain the country's best and brightest. The FBI has argued that the Chinese government has sometimes used 1,000 Talents for "unofficial espionage."

  • Meng was born in China, and he remained there until his mid-20s. He moved to the U.S., where he became a citizen and held various jobs on Wall Street. He then spent seven years at CalPERS before returning to China as deputy CIO of China's State Administration of Foreign Exchange (SAFE), which oversees around $3 trillion of currency reserves. He rejoined CalPERS as CIO in January 2019.
  • Meng claims his involvement with the 1,000 Talents program was limited to recruitment for the SAFE role, and there is no known evidence to the contrary.
  • In one breath, Banks is simply asking Gov. Newsom to investigate Meng. In the next, he's saying there's already enough smoke to have him fired.
    • Quick note: California's governor does not control CalPERS executive employment. That is done by the CalPERS board, which is something CEO Marci Frost makes clear in her public response to Banks.

Outside of the personal attacks, Banks is basically arguing for divestment from China — or at least from companies at all involved with China's military and/or government intelligence community. Similar to what we heard last year from Sen. Marco Rubio, in terms of the MSCI index.

But the proper place to make that case is at the U.S. Treasury Department, or inside the Oval Office. Not on cable news, at the reckless expense of a U.S. citizen tasked with generating financial returns for pensioners.

The BFD
Source: Giphy

The Blackstone Group agreed to buy British student housing company iQ for £4.66 billion from Goldman Sachs Merchant Banking and Wellcome Trust.

  • Why it's the BFD: It's Britain's largest-ever private real estate acquisition, and it's part of Blackstone's apparent goal to become much of the world's landlord.
  • The bottom line: "Property firms have turned to Britain’s budding build-to-rent sector, which caters to students and city dwellers seeking affordable accommodation, as traditional home building and selling falters." — Reuters
Venture Capital Deals

SambaNova Systems, a Palo Alto-based developer of software-defined AI hardware, raised $250 million in Series C funding. BlackRock led, and was joined by Intel Ventures, GV, Walden International, WRVI Capital, and Redline Capital. http://axios.link/ODwo

HeadSpin, a Palo Alto-based provider of mobile app performance software, raised $60 million in Series C funding at a $1.16 billion valuation. Dell Technologies Capital and Iconiq Capital co-led, and were joined by Tiger Global Management, Kearny Jackson, and Alpha Square Group. http://axios.link/UTnn

Plume, a Palo Alto-based consumer experience management platform for smart home services, raised $60 million in Series D funding from Charter Communications, Qualcomm, Belkin, Service Electric Cablevision, and return backers Liberty Global and Shaw Communications. It also raised $20 million in debt from SVB and WestRiver Group. www.plume.com

Molekule, a San Francisco-based developer of connected indoor air purifiers, raised $58 million in Series C funding. RPS Ventures led, and was joined by Founder’s Circle Capital, IAC, and return backers Foundry Group, Crosslink Capital, Uncork Capital and TransLink Capital. http://axios.link/MrZz

Flock Freight, a Solana Beach, Calif.-based freight logistics matching platform, raised $50 million in Series B funding co-led by SignalFire and GLP Capital Partners. http://axios.link/vmw1

Minute Media, a New York-based sports media company that recently acquired The Player’s Tribune, raised $40 million at a reported valuation north of $500 million. Dawn Capital led, and was joined by Battery Ventures, Goldman Sachs, ProSieben, Qumra Capital, Vintage Investments, Gemini Ventures, North Base Media, La Maison, Remagine Ventures, Hamilton Lane, and Maor Investments. http://axios.link/lyIb

Snapask, a Hong Kong-based tutoring app, raised $35 million in Series B funding co-led by Asia Partners and Intervest. http://axios.link/rOMO

Aria CV, a St. Paul, Minn.-based developer of medical devices for treating pulmonary arterial hyperextension, raised $31 million in Series B funding. Xeraya Capital led, and was joined by Longview Ventures, Catalyst Health Ventures, BioStar Ventures, Cedar Point Capital, and Frontcourt Group. http://axios.link/EQXu

FogHorn, a Sunnyvale-based provider of edge computing intelligence software, raised $25 million in Series C funding. LS Corp. led, and was joined by Forte Ventures and return backers Dell Technologies Capital, Intel Capital, Saudi Aramco Energy Ventures, Honeywell Ventures, GE Ventures, Robert Bosch Venture Capital, March Capital Partners, and Darling Ventures. http://axios.link/Hzt2

Cityscoot, a French e-scooter service, raised €23.6 million from Allianz France, Demeter, and return backers Groupe RATP and Banque des Territoires. http://axios.link/hzQw

SquadLocker, a Warwick, R.I.-based provider of custom apparel and equipment purchasing software for teams and organizations, raised $20 million in Series C funding. ABS Capital Partners led, and was joined by return backers Causeway Media Partners and Jim Lombardi. http://axios.link/lcJC

MycoWorks, developer of a leather alternative, raised $17 million in Series A funding. DCVC Bio led, and was joined by 8VC, Novo Holdings, Future Tech Labs, AgFunder, Susa Ventures, Cthulhu Ventures, and Wireframe Ventures. http://axios.link/Rx3P

Nature’s Toolbox, a Santa Fe-based biomanufacturing and bioinformatics startup, raised $13 million in Series A funding led by Anzu Partners. http://axios.link/zNkH

Hasura, an app development platform with offices in San Francisco and India, raised $9.9 million in Series A funding. Vertex Ventures US led, and was joined by SAP.iO Fund, Nexus Venture Partners, and Strive VC. www.hasura.io

Olea Edge Analytics, an Austin, Texas-based provider of water optimization software, raised $9 million in Series B funding. Renewal Funds led, and was joined by return backers Ananta Family Office and Mercury Fund. http://axios.link/yAc5

Alkymi, an enterprise email extraction automation startup, raised $5 million in seed funding. Canaan Partners led, and was joined by Work-Bench. http://axios.link/h6lD

AllSeated, a San Francisco-based event-planning platform, raised $4.4 million from Liquidity Capital. http://axios.link/E0YZ

Stonly, a DIY customer support startup, raised $3.5 million led by Accel. http://axios.link/WQQO

Microverse, a coding school for students in developing countries, raised $3.2 million in seed funding from General Catalyst and YC. http://axios.link/Yoek

App Samurai, a San Francisco-based mobile app marketing platform, raised $2.4 million in Series A funding. 212 Ventures led, and was joined by Collective Spark, 500 Startups, and Degerhan Usluel. http://axios.link/J47c

Private Equity Deals

ACS, a Springfield, Mo.-based portfolio company of Angeles Equity Partners and Clearlake Capital Group, acquired Homewood, an Altadena, Calif-based lumber and building materials dealer. www.acs-lbm.com

Digital River, a Minneapolis-based e-commerce enabler for brands, raised $50 million led by Siris Capital. http://axios.link/Kdnc

The Stephens Group acquired Kele, a Memphis-based distributor of building automation peripherals and controls solutions, from Snow Phipps. www.kele.com

Wynnchurch Capital acquired Penn Machine, an Aston, Penn.-based maker of high-pressure forged fittings and branch connections. www.pennusa.com

Liquidity Events

Mondelez International (Nasdaq: MDLZ) agreed to buy Give & Go Prepared Foods, a Toronto-based maker of brownie snacks, from Thomas H. Lee Partners for a reported US$1.2 billion. http://axios.link/LEkd

Salesforce (Nasdaq: CRM) agreed to buy Vlocity, a San Francisco-based provider of industry-specific CRM solutions, for $1.33 billion in cash. Vlocity had raised $162 million in VC funding, most recently at a $1 billion valuation, from Salesforce Ventures, Sutter Hill Ventures, Bessemer Venture Partners, Accenture and New York Life. http://axios.link/FUT2

More M&A

Checkout.com, a London-based payments platform that last year raised a $230 million Series A round, acquired ProcessOut, a New York-based smart router tech startup. http://axios.link/z0LZ

Comcast (Nasdaq: CMCS) acquired Xumo, an Irvine, Calif.-based OTT streaming service, from Meredith Corp. (NYSE: MDP). http://axios.link/VWzQ

DP World will buy Fraser Surrey Docks, a cargo terminal near the Port of Vancouver, from Macquarie Infrastructure Partners for US$290 million. http://axios.link/CiX1

Facebook (Nasdaq: FB) acquired Sanzuro Games, a Foster City, Calif.-based VR games studio. http://axios.link/lUx4

🚑 Iovance Biotherapeutics (Nasdaq: IOVA) is exploring a sale, per Bloomberg. Shares of the San Carlos, Calif.-based immune-oncology company spiked on the news, giving it a market cap of $3.97 billion. http://axios.link/HAK6

Fundraising

Fifth Wall Ventures, a real estate-focused VC firm, raised $100 million for a fund that will focus on e-commerce companies seeking to break into physical retail. Limited partners include Acadia Realty Trust, Cushman & Wakefield, Macerich, and Nuveen Real Estate. http://axios.link/IAkt

🚑 MPM Capital formed a $100 million fund as part of a broader venture philanthropy partnership with the Dana-Farber Cancer Institute, whereby MPM will get right of first refusal on investing in Dana-Farber technologies. http://axios.link/1R7y

Ubiquity Ventures, a Palo Alto-based deep-tech seed firm, is raising $40 million for its second fund, per an SEC filing. www.ubiquity.vc

Variant Fund is raising upwards of $50 million for its debut fund, per an SEC filing. The Brooklyn-based firm is led by Jesse Walden, a former crypto investor at Andreessen Horowitz who remains active with its “crypto startup school.” http://axios.link/KBoP

It's Personnel

David Abrams, a former partner with Apollo Global Management, joined Harris Blitzer Sports & Entertainment as head of investments. Harris Blitzer is the parent company of the Philadelphia 76ers and New Jersey Devils, and is co-owned by Apollo’s Josh Harris. http://axios.link/zLuc

John Boncher, former president and CEO of Cupertino Electric, joined Blue Wolf Capital Partners as a strategic advisor. www.bluewolfcapital.com

Final Numbers
Expand chart
Data: Challenger, Gray & Christmas; Chart: Axios Visuals
  • The CEO carousel was in full swing yesterday, with top job changes at Disney, Mastercard, Salesforce, and Thomson Reuters. Go deeper.
Dan Primack

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