Mar 26, 2020

Axios Pro Rata

By Dan Primack
Dan Primack

🎧 Pro Rata Podcast focuses on how America is trying to manufacture itself out of a medical supplies shortage. Listen here.

Top of the Morning

Illustration: Sarah Grillo/Axios

The Senate late last night passed a $2.2 trillion safety net for the American people and American businesses. But not all businesses were included.

  • Left out: Thousands of small companies owned by private equity firms.

Details: The legislation includes $350 billion in small business loans for companies with fewer than 500 employees. That's a liberalization of typical SBA rules, which are more industry-specific in terms of employee number and revenue.

Yes, but: One rule that still applies is that private equity-owned companies are considered "affiliated" with all of the private equity firm's other portfolio companies.

  • That means if you have 300 employees but are owned by a private equity firm whose portfolio companies employ a total of 1,000 people, you don't qualify.

Same goes for if a VC firm controls over 50% of a startup's voting stock, or if two or more VC firms combined "are large compared to other stock holdings."

  • Also left out are all cannabis-related companies, as they've historically been blocked from participating in SBA programs.

The new bill does have exemptions for small businesses in the restaurant, restaurant supply chain, and hospitality sectors — plus some carve-outs for SBIC-backed companies.

How it works: The bill asks Treasury to establish also includes a middle-market lending program for companies with between 500 and 10,000 employees, that potentially could help larger PE-backed companies. This is part of the broader $454 billion direct lending pool.

  • All direct loans would include several conditions while the loan is outstanding, including employment retention requirements, no dividends or stock buybacks, and no forgiveness.
  • The bill language says Treasury will "endeavor" to create the middle-market program, which seems a bit wishy-washy.
  • We still do not know how companies would apply for such loans, or any specific qualifying requirements besides employee number (kind of like the Fed's still-amorphous Main Street lending program, announced earlier in the week).

The bottom line: Most American businesses, small and big, were helped last night. But a wide swath of smaller, private equity-backed companies —everything from manufacturers to services companies to software providers — were forgotten.


Illustration: Aïda Amer/Axios

OfferUp, a Bellevue, Wash.-based peer-to-peer marketplace for local goods, agreed to buy New York-based rival Letgo in an all-stock deal. It also raised $120 million of new funding led by Letgo majority investor OLX Group (the classifieds unit of Naspers), which will hold a 40% stake in the combined company. Existing OfferUp investors Andreessen Horowitz and Warburg Pincus also participated.

  • Why it's the BFD: This is one of the few deals that was helped, not hurt, by the coronavirus pandemic. Sources say that the two companies had been discussing a tie-up for more than a year, but talks intensified as America's economy began shutting down — a crisis leading to compromise.
  • Up & down: OfferUp CEO Nick Huzar tells Axios the transaction volume hasn't been too negatively affected over the past few weeks, but that the types of items sold have changed. For example, there have been massive spikes in the home/garden and video game categories, while things like jewelry have sagged.
  • The bottom line: "The acquisition will see two of the largest third-party buying and selling marketplaces — outside of Craigslist, eBay and Facebook Marketplace, of course — become a more significant threat to the incumbents. Together, the new entity will have more than 20 million monthly active users across the U.S. For consumers, they’ll no longer have to list in as many apps when looking to unload some household items, electronics, furniture or whatever else they want to sell." — Sarah Perez, TechCrunch
Pro Rata for Kids

Today's Project: Ask your kid(s) to draw a picture of what you do for a living and, depending on their age, also write a one-line explanation (just because we're gonna see a lot of people on phones and laptops).

  • Per usual, send them to me by hitting reply ( Hopefully we can get a gallery up for tomorrow.
Venture Capital Deals

Plastiq, a San Francisco-based solution for paying bills via credit card, raised $75 million in Series D funding. B Capital Group led, and was joined by Kleiner Perkins, Khosla Ventures, Accomplice, and Top Tier Capital Partners.

Dremio, a Santa Clara, Calif.-based “data lake engine” startup, raised $70 million in Series C funding. Insight Partners led, and was joined by return backers Cisco Investments, Lightspeed Venture Partners, Norwest Venture Partners, and Redpoint Ventures.

🚑 Castle Creek Biosciences, an Exton, Penn.-based gene therapy company focused on rare skin conditions, raised $55 million in new equity funding from Fidelity and Valor Equity Partners. It also secured a $20 million venture loan from Horizon Technology Finance.

🚑 Reganacy Pharma, a Waltham, Mass.-based developer of diabetes treatments, raised $30 million in Series A funding. Cobro Ventures and Taiwania Capital co-led, and were joined by 3E Bioventures Capital, Yonjin Capital, and VIVA Biotech Holdings.

CData, a Chapel Hill, N.C.-based provider of data access and connectivity software, raised $20 million from Updata Partners.

Fast, a developer of platform-agnostic login and checkout services, raised $20 million. Stripe led, and was joined by Index Ventures and Susa Ventures.

Humio, a London-based log management platform, raised $20 million in Series B funding. Dell Technologies Capital led, and was joined by return backer Accel.

SecondNature, a North Carolina-based DTC air purifier and water filter startup, raised $16.4 million in Series C funding from Mann & Hummel, IDEA Fund Partners, Multiplier Capital, Lead Edge Capital, Arsenal Growth, One Better Ventures, and Bonaventure Capital.

🚑 Redpin Therapeutics, a New York-based chemo-genetics focused on nervous system diseases, raised $15.5 million in Series A funding. 4BIO Capital and Arkin Bio Ventures co-led, and was joined by Takeda Ventures, New York Ventures, and Alexandria Venture Investments., a Menlo Park-based developer of platform-agnostic autonomous driving AI, raised $13 million in seed funding from A.Capital Ventures, Amplo, Binnacle Partners, Sound Ventures, Fontinalis Partners, and SV Angel.

Forager, a Chicago-based cross-border shipping startup, raised $10 million in Series A funding. USVP led, and was joined by Soma Capital and seed backer Chicago Ventures.

3CLogic, a Rockville, Md.-based provider of cloud contact center solutions for CRMs, raised $9 million in Series B funding. Capitan Investment Partners and True Blue Partners co-led, and were joined by Blu Ventures and Force 3 Partners.

Pathlight, a San Francisco-based team performance platform, raised $7 million in Series A funding led by Kleiner Perkins.

Revuze, an Israeli provider of customer analytics software, raised $5.1 million in Series A funding. Maverick Ventures Israel led, and was joined by seed backer Prytek.

Private Equity Deals

Gainline Capital Partners acquired SourceHOV, a Ft. Worth, Texas-based provider of tax incentive solutions to accounting firms and mid-market companies, from Exela Technologies (Nasdaq: XELA).

GRO Capital invested in Queue-it, a Denmark-based provider of virtual waiting room SaaS.

• Levine Leichtman Capital Partners invested in Blue Ridge ESOP Associates, a Charlottesville, Va.-based provider of ESOP administration and recordkeeping solutions.

Marlin Equity Partners acquired SmartLinx, an Iselin, N.J.-based provider of workforce management software for skilled nursing, senior living and post-acute care providers.

🚑 Northlane Capital Partners invested in VMG Health, a Dallas-based valuation and transaction advisory firm exclusively focused on the healthcare industry.

TA Associates invested in Accion Labs, a Pittsburgh-based software engineering company.

Public Offerings

GAN, a U.K.-based online gambling software company that's currently listed on London's AIM, filed in the U.S. for a $35 million float whereby it also would trade on the Nasdaq.

🚑 GVS, an Italian maker of biohazard masks, hired Goldman Sachs and Mediobanca for a Milan IPO that could come by next month, per the WSJ.

Liquidity Events

🚑 ARX Equity Partners sold DCB, a Slovenian healthcare services company, to Slovenian insurers Sava Re and Triglav.

TA Associates sold its minority equity stake in hedge fund manager Evanston Capital to firm management.

More M&A

Advance Publications, the owner of Conde Nast, is in advanced talks to buy the Ironman triathlon business from China’s Wanda Sports for more than $700 million, per Bloomberg.

🚑 EU antitrust regulators opened an investigation into Johnson & Johnson’s (NYSE: JNJ) $400 million agreement to buy surgical patch product TachoSil from Takeda (Tokyo: 4502).

🚑 Pfizer (NYSE: PFE) is delaying the merger of its off-patent drugs unit with Mylan (Nasdaq: MYL) until the second half of 2020.


DBL Partners, a San Francisco-based VC firm, is raising up to $450 million for its fourth fund, per an SEC filing.

Fort Ross Ventures of Menlo Park raised $235 million for its second fund.

Mayfield, a Menlo Park-based VC firm, raised $475 million for its sixteenth early-stage fund and $275 million for its second opportunities fund.

Origami Capital Partners, a Chicago-based special situations firm, raised $520 million for its fourth fund.

Final Numbers
Expand chart
Source: FRED; Chart: Axios Visuals

A record 3.3 million people filed unemployment claims last week, up from around 150,000 the prior week, representing the largest-ever spike in U.S. history.

It’s even worse than it looks: Gig economy workers and other independent contractors are not included in these numbers. Neither are many workers who have been furloughed (i.e., no more pay, but get to keep health care benefits). Plus, there have been reports that some state unemployment offices were so deluged with calls that they couldn’t process all the claims before the weekly cutoff.

Dan Primack

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