April 18, 2024

Top of the Morning

Illustration: Lindsey Bailey/Axios

Limited partners in Silicon Valley venture firm Shasta Ventures have until the end of Monday to decide whether to approve a continuation fund, Axios has learned.

Why it matters: More VCs may try to follow a similar path as the dearth of exits continues, and firms struggle to raise new funds (as Shasta hasn't since 2017).

What's happening: Shasta needs two-thirds approval to move nearly all holdings of its fifth (and last) fund into a continuation vehicle priced at about $562 million, or 65% of its 2023 Q3 valuation.

  • Investment firm StepStone is the lead investor for the new fund, and will purchase any sellers' equity plus contribute additional cash for follow-on investments.
  • The voting form only offers LPs the option to sell or roll into the continuation form, with the ability to commit additional capital.
  • The proposal requires that LPs consent to moving existing assets to the continuation fund in order to roll their equity into it. That is, they can't be investors in the new fund unless they vote to support it — something that was part of Shasta's bargain with StepStone. This has raised questions from LPs.

Flashback: Fundraising for Shasta's sixth fund fell apart following general partner departures and shifting investment strategies. Jason Pressman is the only remaining partner.

  • Shasta has since tried to raise new funds, but has been unsuccessful. LPs have also denied requests for additional fees from existing funds.

Zoom in: The proposed continuation fund's management fees would be 1% annually, with a maximum of about $5 million per year. The aggregate fees are about $15 million more than the original fund would pay if it continued on.

  • The new fund's carried interest is initially 10% and could increase to up to 25% based on performance (the original fund is set at 20%).

By the numbers: Pet food company Farmer's Dog makes up 40% of the fund's assets, with other potential wins like HR software maker Lattice and sales software startup Highspot also in the portfolio.

What they're saying: "We don't think this is in the best interest of the limited partners," a Shasta LP tells Axios.

  • The timing — only seven years into the fund's 10-year life — is also raising questions among investors.

The other side: According to a source familiar with the transaction, Shasta's pitch to investors is that the continuation fund is an opportunity for liquidity to LPs, with price certainty.

  • It also provides a longer horizon of active management to the portfolio companies, many of which are early-stage startups that are many years away from exiting.
  • And should the continuation fund not get approved, the original fund will have to get wound down, potentially fetching less value for the assets.

The bottom line: For LPs, it comes down to whether they really need liquidity now, and if the discount is worth it.

  • Or whether they want to sign up for another cycle of fees for the same portfolio, at a lower value.

Editor's note: This story was updated to clarify details of Shasta's sixth fund in paragraph 7.

The BFD

Illustration: Eniola Odetunde/Axios

Vista Equity Partners, the private equity founded by Robert Smith, is closing on more than $20 billion for its eighth flagship fund, according to a letter sent to investors and obtained by Axios.

Why it's the BFD: Vista extended its fundraising to rake it more capital than its initial $17 billion. This is the firm's largest fund to date.

Details: Vista is going big on AI with its new fund.

  • "You will also hear more about how we have adopted generative artificial intelligence not just as a tool but as a pivotal component of our value creation and underwriting processes," Smith writes to investors in reference to the firm's annual general meeting, which kicked off last night.
  • "This has enabled us to identify and capitalize on opportunities, including dramatically expanding TAM, product innovation, GTM strategies, with greater precision and speed, ensuring that we stay ahead of the curve in a rapidly evolving market landscape," he adds.

The bottom line: Like other investors, Vista is making the case that the sheer size of AI's opportunity needs capital firepower to match.

Venture Capital Deals

• Ramp, a N.Y.-based corporate finance management startup, raised $150m in additional Series D funding at a $7.65b post-money valuation led by Khosla Ventures and Founders Fund, with Sequoia Capital, Greylock, 8VC, Thrive Capital, General Catalyst, Sands Capital, D1 Capital, Lux Capital, Iconiq Capital, Definition Capital, and Contrary Capital also participating. axios.link/3Ul26Nn

• Flink, a German ultra-fast delivery company, raised €100m ($106m) from existing investors including Rewe Group, Bond, Northzone and Cherry Ventures, and is in potential acquisition discussions, per Bloomberg. axios.link/3UbMvyy

• Cape, an Arlington, Va.-based mobile carrier, raised $61m in funding led by A* Capital and Andreessen Horowitz, with XYZ Ventures, ex/ante, Costanoa Ventures, Point72 Ventures, Forward Deployed VC, and Karman Ventures also participating. cape.co

• Anvilogic, a Palo Alto, Calif.-based enterprise data management startup, raised $45m in Series C funding led by Evolution Equity Partners, with Foundation Capital, Cervin, Myriad, Point72, Outpost and G Squared also participating. anvilogic.com

• NeuBird, an S.F.-based software and infrastructure reliability management startup, raised $22m in seed funding led by Mayfield. axios.link/3Uk6egC

• Pliant, a German corporate credit card startup, raised over $19m in additional Series A funding led by PayPal Ventures, with SBI Investment, Motive Ventures, and Alstin Capital also participating. axios.link/3JpePbC

• Red Rover Interactive, a U.K.-based video game studio, raised $15m in Series A funding led by Krafton, with Tirta Ventures, Overwolf, The Games Fund, Behold Ventures, GEM Capital, Lifelike Capital, and Acequia Capital also participating. axios.link/3Q8z7cW

• Centrifuge, an UAE-based blockchain finance startup, raised $15m in Series A funding led by ParaFi Capital and Greenfield, with Arrington Capital, Bloccelerate, Borderless Capital, Circle Ventures, Edessa Capital, Gnosis, IOSG Ventures, Modular Capital, ProtoCap, Re7 Capital, Scytale Digital, Skynet Trading, Stake Capital, The Spartan Group, TRGC and Wintermute Ventures also participating. centrifuge.io

• Allen Control Systems, an Austin-based counter-drone robotic gun maker, raised $12m in seed funding led by Craft Ventures, with Forum Ventures and Rally Ventures also participating. allencontrolsystems.com

• AI Squared, a Washington, D.C.-based business application analytics startups, raised $13.8m in funding led by Ansa Capital, with NEA and Ridgeline also participating. axios.link/4cZHku1

ğŸŒŽ Found Energy, a Boston-based maker of modular fuel packs, raised $12m in seed funding from Kompas VC, Munich Re Ventures, Good Growth Capital, the Autodesk Foundation, J-Impact, GiTV, Massachusetts Clean Energy Center, and Glenfield Partners. axios.link/49Bq4IA

• Breaking, a Boston and Dallas-based plastic degradation and synthetic biology company, raised $10.5m in seed funding led by Builders VC. breaking.com

• Clazar, an S.F.-based software sales tools startup, raised $10m in Series A funding led by Ridge Ventures, Saurabh Gupta, and Ensemble VC, with The General Partnership and Twin Ventures also participating. clazar.io

• GovDash, a N.Y.-based government contract bidding management startup, raised $10m in Series A funding led by Northzone, with Y Combinator also participating. axios.link/3W37GVK

• Toku, a Chilean business payments management startup, raised $9.3m in Series A funding led by Gradient Ventures, with F-Prime, Clocktower, Y Combinator, Funders Club, and Wollef also participating. axios.link/4aFpKdh

• Miggo, an Israeli cybersecurity startup, raised $7.5m in seed funding led by YL Ventures, with Cyber Club London also participating. axios.link/3xJusbh

• Rivet, a Detroit-based electrical construction workforce management startup, raised $6m in funding led by Brick & Mortar Ventures, with defy.vc, Augment Ventures, Detroit Venture Partners, Michigan Rise and angel investors also participating. rivet.work

• Condoit, a Birmingham, Ala.-based electrical industry software maker, raised $4.25m in seed funding led by The Westly Group, with Fontinalis Partners, Navitas Capital, C2 Ventures, Studio Management, Overline, and Southwire also participating. condoit.io

Editor's note: The bullet on Clazar's fundraising has been corrected to note that Saurabh Gupta, not DST Global, led the funding.

Private Equity Deals

• Concord, backed by Apollo, agreed to buy Hipgnosis Songs Fund, a U.K.-based music rights investment fund, for $1.16 per share in cash, a premium of 32% from the last closing price and valuing the company at $1.4b. axios.link/49FxdI0

• EQT is considering options for Azelis Group, a Belgian chemical distributor, after receiving interest from potential buyers, per Bloomberg. axios.link/3Jtqsy0

• Forward Consumer Partners acquired Firehook Bakery, a Chantilly, Va.-based artisan baking business. mediterraneancrackers.com

ğŸŒŽ General Atlantic's BeyondNetZero fund acquired a majority stake in GRESB, a Dutch provider of sustainability standards and benchmarks for real assets, from Summit Partners. gresb.com

• Godspeed Capital Management acquired Special Aerospace Services, a Boulder, Colo.-based spaceflight engineering and facilities company. specialaerospaceservices.com

• Titian Software, backed by Battery Ventures, acquired Labguru, a Cambridge, Mass.-based laboratory data software provider, from Holtzbrinck Digital. labguru.com

Public Offerings

⛽️ Centuri Holdings, a Phoenix-based carve-out of Southwest Gas, raised $260m by offering 12.4m shares at $21, and raised an additional $54m from a private investment from Icahn Partners and affiliates. It plans to list on the NYSE as CTRI. UBS Investment Bank, BofA Securities, J.P. Morgan, and Wells Fargo Securities acted as joint bookrunners on the deal. axios.link/3Q94bJF

• Ibotta, a Denver-based digital rewards company, raised $577m by offering 6.6 million shares (62% secondary) at $88, above the range of $76 to $84. It plans to list on the NYSE as IBTA. Goldman Sachs, Citi, BofA Securities, Evercore ISI, UBS Investment Bank, and Wells Fargo Securities acted as joint bookrunners on the deal. axios.link/4aL8Ee8

Liquidity Events

• Thoughtworks (Nasdaq: TWKS) acquired employees and tech assets from Watchful, an S.F.-based business AI model deployment company. thoughtworks.com

More M&A

🚑 23andMe CEO Anne Wojcicki seeks to take the Sunnyvale, Calif.-based DNA-testing company private, per an SEC filing. axios.link/3JoCQiR

• Zuora (NYSE: ZUO), a Redwood City, Calif.-based software company, is exploring options including a sale, per Reuters. axios.link/3JoQxhL

Fundraising

🚑 SpringTide Ventures, a Boston-based health tech venture firm, raised $65m for a second a second fund. axios.link/3Q8NZIp

It's Personnel

🚑 Arsenal Capital Partners hired Raymond H. Hill as operating partner in its health care team. He was previously CEO of CorEvitas. arsenalcapital.com

• Performance Equity Management hired Anita Sonawane as principal and Sarah Condon as senior associate. peqm.com

Final Numbers

Tesla stock price
Data: Yahoo Finance; Chart: Axios Visuals

In order for Elon Musk to to win shareholders' votes to move Tesla to Texas and give him a big pay package, Musk is going to have to persuade institutional investors to swing his way, notes my colleague Felix Salmon.

Why it matters: While Tesla's army of retail investors largely supports him, small investors vote in such limited numbers that they're very unlikely to sway the outcome.

  • Institutional investors who benchmark the S&P 500 were largely forced to buy Tesla stock when the company joined the index on Dec. 21, 2020.
  • On that day, Tesla stock opened at $216 per share — 39% higher than its current level.
  • In other words, a very large part of Tesla's institutional investor base, far from being grateful for Musk's wealth creation, is sitting on substantial capital losses. The stock trades some 63% below its all-time high.

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