Mar 23, 2018

Axios Pro Rata

By Dan Primack
Dan Primack

Friday greetings from the home office. New Island Capital's Thomas Lee is still leading our March Madness contest, but he also still picked Virginia to win it all. Four readers tied for second-place, three of whom have Villanova at the end, including Andreessen Horowitz's Caroline Moon. Okay, here we go...

Top of the Morning
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Dropbox raised $756 million in its IPO, pricing shares at $21. That's above its already-increased offering range, but most of the attention so far is on a fully-diluted valuation ($9.23 billion) that falls a little short of Dropbox's last private-market valuation:

Both tweets have merit, but let me address Hunter's (since it's aimed at folks like me, and because Hunter is a friend of the program).

Yes, this will be a huge return for the Series A investors and a decent one for the Series B investors (using $21 as baseline). But beyond the numbers of Series C shares is that many LPs in Series A and B funds have been sitting on inflated paper valuations for more than four years (since general protocol is to mark to the most recent primary round). And those valuations have potentially impacted allocations, not to mention expectations. Moreover, many employees have had inflated expectations of their own (no matter what 409a valuation is tied to their shares).

Bottom line: The long-hold unicorn trend can have investment consequences beyond the calculator's +/- function.

  • Check back: I'll speak with Dropbox founder and CEO Drew Houston today, and will get it in the Axios business stream by early afternoon.

Hip hopportunity: Kia recently interviewed rapper/investor/entrepreneur Chamillionaire. Topics included his career transition, why he picked LA over Silicon Valley and the increasing number of celebrities investing in startups: "I was an entrepreneur who was known as a rapper... I had, like, five phones. People thought that I was a nerd as a rapper." Read the Q&A.

Trade wars: There's a lot of market consternation over yesterday's anti-China tariffs, which is understandable. But I'd pay attention to the 30-day public comment period. Remember that Trump's original steel and aluminum tariffs were to have no country exemptions, even for close allies like Canada, but they've since been watered way down. Just yesterday came new exemptions for the EU, Australia, South Korea, Brazil and Argentina.

Moving on: Josh Hannah has quietly stepped down as a general partner with Matrix Partners, which he joined in 2009 after having founded wagering site Flutter (which merged in 2002 to form Betfair). No word yet on future plans for Hannah, who will maintain his Matrix board seats but won't be making any new investments.

It gets worse: Charles Lazarus, who founded Toys "R" Us after returning from WWII, has passed away at the age of 94.

  • Toys "R" Us has told employees that they won't be getting any severance. Here's the letter.
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GlaxoSmithKline (LSE: GSK) has pulled out of the auction for Pfizer's (NYSE: PFE) consumer healthcare business, which includes such products as Advil, ChapStick, Nexium and Robitussin. When Pfizer put the unit up for sale last fall, it had been expecting offers of between $15 billion and $20 billion.

  • Why it's the BFD: Because this comes one day after Reckitt Benckiser walked away, while Johnson & Johnson (NYSE: JNJ) bailed in January.
  • Bottom line: "That’s now three large drug companies that have dropped out, even though Pfizer’s over-the-counter products are profitable. With all the tax reform cash these companies have, you have to wonder if they want to pursue something bigger." — Bob Herman, Axios
Venture Capital Deals

ServiceTitan, a Glendale, Calif.-based provider of workflow and field service management software for home-service businesses, raised $62 million in Series C funding. Battery Ventures was joined by return backers Bessemer Venture Partners and ICONIQ Capital.

🚑 Dracan Pharma, a Baltimore-based immuno-metabolism startup, has raised $40 million in Series A funding led by Deerfield Management.

🚑 ArcherDX, a Boulder, Colo.-based developer of gene fusion detection assays, raised $35 million in Series A funding. Boulder Ventures and PBM Capital Group co-led, and were joined by Longwood Fund and Peierls Foundation.

🚑 BioIQ, a Santa Barbara, Calif.-based population health measurement company, has raised $26.5 million. HealthQuest Capital led, and was joined by Arboretum Ventures.

Ansarada, an Australian virtual data room provider, raised uS$18 million in Series A funding. Ellerston Capital led, and was joined by Tempus Partners, Belay Capital and Australian Ethical Investments.

Everledger, a London-based blockchain tracking platform, raised $10.4 million in Series A funding from Fidelity, Vickers Ventures Partners Graphene Venture Capital, FPV, Fenbushi, Bloomberg Beta and Rakuten.

Skyline AI, an Israeli property discovery startup for real estate investors, raised $3 million in seed funding from Sequoia Capital.

🚑 SteadyMD, a St. Louis-based online concierge primary care startup, has raised $2.5 million. Pelion Venture Partners led, and was joined by CrossCut Ventures, M25 Group, Service Provider Capital, and Hyde Park Venture Partners.

Private Equity Deals

Eckhart, a Lansing, Mich.-based portfolio company of LFM Capital, has acquired Logic Plus, a Reed City, Mich.-based electrical controls and automation company.

Emerald Media, an India-based portfolio company of KKR, has acquired a minority stake in Global Sports Commerce, a Singapore-based sports technology and management company, for $80 million. FidelisWorld existed GSC via the transaction.

Harvey Building Products, a Waltham, Mass.-based portfolio company of Dunes Point Capital, has acquired Thermo-Tech Windows & Doors, a Sauk Rapids, Minn.-based maker of vinyl windows and doors, from Bounds Equity Partners and ORIX.

Public Offerings

🚑 MorphoSys, a German antibodies developer, filed for a $150 million IPO. It currently trades in Frankfurt with a €2.5 billion market cap, but plans to also list on the Nasdaq under ticker MOR. Goldman Sachs is lead underwriter.

Sunlands Online Education Group, a Beijing-based provider of online courses for professional qualifications, raised $150 million in its IPO. The company priced 13 million shares at $11.50 (low end of range), and will trade on the NYSE under ticker STG. It reports a $34 million net loss on $53 million in revenue for the second half of 2017.

Liquidity Events

Entertainment Studios, a company owned by comedian and talk show host Byron Allen, has purchased The Weather Channel for a reported $300 million from Bain Capital, Blackstone Group and NBC Universal. The sellers originally purchased Weather Channel in 2008 for $3.5 billion, and sold the digital assetsfor more than $2 billion to IBM in 2015.

U.S. Silica (NYSE: SLCA) has agreed to acquire EP Minerals, a Reno, Nev.-based industrial minerals company, from Golden Gate Capital at a $750 million enterprise value.

More M&A

⛽ Elia of Belgium has agreed to acquire a 20% stake in German energy network 50Hertz for around $1.2 billion, beating out China’s State Grid.

Greece has completed its sale of a 67% stake in the country’s second-largest port (Thessaloniki) to a group that includes Germany’s Deutsche Invest, France’s Terminal Link and Cyprus-based Belterra Investments.

Steve Wynn has sold his remaining stake in Wynn Resorts (Nasdaq: WYNN).


Las Olas Venture Capital, a Ft. Lauderdale, Fla.-based early-stage firm, has closed its debut fund with $28.5 million.

It's Personnel

Sudip Chakrabarti has joined Seattle-based Madrona Venture Group as a partner. He previously was with Lightspeed Venture Partners.

Roberto Nicastro, a former senior exec with Unicredit, has joined Cerberus Capital Management as a senior advisor focused on the European financial services sector.

Tripp Smith, co-founder of GSO Capital Partners, is leaving The Blackstone Group (which bought GSO in 2008) by the end of June, according to Bloomberg.

Final Numbers
Dan Primack