Oct 25, 2018

Axios Pro Rata

By Dan Primack
Dan Primack

Airport greetings from Las Vegas. Kia fills in for me tomorrow, so be sure to email her any interesting news or views (kia@axios.com). I'll be back from the home office on Monday. Have a great weekend. 2-0 and counting...

Top of the Morning
Source: Giphy

The private markets are said to follow the public markets and, if that holds, then tech startup valuations may soon begin a pullback that has nothing to do with SoftBank or Saudi.

  • The Nasdaq lost 4.4% yesterday, its worst one-day performance since 2011, officially putting the index in correction territory.
  • Futures indicate a higher open but, at best, this is a violent roller coaster. The hockey stick is cracked.
  • One bright spot continues to be IPOs, which seem oddly unaffected by the broader fluctuations. This trend goes back to the market slides earlier from this year, and was reflected again yesterday by Brazilian payment processor StoneCo raising $1.1 billion in an IPO that priced above its range (see BFD below).
  • And, yes, there is an argument to be made that unaffected IPO performance will lead to unaffected private startup valuations. But it's hard to imagine IPOs not eventually aligning more with the broader markets.
  • Both the Dow and S&P 500 are negative for the year, as of yesterday's market close.

Deal scoop: Assembled Brands, a financing platform for consumer brands, raised $100 million from Oaktree Capital Management, Axios has learned. Oaktree also will have seats on Assembled's board and investment committee.

Why it matters: Upstart consumer brands traditionally have relied on a de facto credit system led by department stores, but that's begun to disappear alongside department stores. Assembled, which is structured as a holding company, wants to fill that gap.

  • It's led by Adam Pritzker, who originally financed Assembled via proceeds from the sale of coding school General Assembly (which he co-founded) and family monies (the Pritzkers have a bit). But he wanted an experienced credit investor both for capital and validation.
  • Assembled both incubates new brands in-house and also finances outside brands, focused on the long tail of smaller startups that don't have the sort of tech angle that would attract venture capitalists.

Alt assets: Research firm Preqin predicts that private equity will become the world's largest alternative asset class within five years, surpassing hedge funds.

  • The prediction is based on interviews with 420 fund managers and investors.
  • It expects private equity to grow by 58% over five years, rising from current AYM of $3.1 trillion to $4.9 trillion, while hedge funds are expected to grow 31% from $3.6 trillion to $4.7 trillion.

🎧 Pro Rata Podcast: Our new episode focuses on political text messages, which have been bombarding voters ahead of the midterms. Listen here.

The BFD
Another public Stone

StoneCo, a Brazilian online payment processor, raised $1.1 billion in its IPO. The company priced 50 million shares at $24 (above $21-$23 range), for an initial market cap of nearly $6.6 billion, and will trade on the Nasdaq under ticker STNE.

  • Why it's the BFD: Because this is a major vote of confidence for Brazil, just ahead of a presidential election that could result in a new leader with authoritarian tendencies. Among the company's supporters are some big global billionaires, as expected IPO buyers included Warren Buffett's Berkshire Hathaway, Jack Ma's Ant Financial and the Walton family's Madrone Partners (which was already an investor).
  • Bottom line: "Stone said in a securities filing it intends to use the proceeds for mergers, acquisitions and working capital. It said it intends to grow by offering banking services and creating a loyalty program." — Carolina Mandl, Reuters
Venture Capital Deals

Terminus Technologies, a Chinese IoT solutions provider, raised $173 million in Series B funding from firms like China Everbright, IDG Capital and SenseTime. http://axios.link/jPsq

• Algorand, a Boston-based developer of blockchain and cryptocurrency products for business, raised $62 million from firms like Union Square Ventures, Slow Ventures, and Pillar Venture Capital. http://axios.link/hSjl

Yellowbrick Data, a Palo Alto-based data warehouse startup, raised $48 million in Series B funding. Next47 led, and was joined by DFJ and return backers GV, Menlo Ventures, Samsung Ventures and Third Point Ventures. http://axios.link/PWW2

Innovusion, a Los Altos, Calif.-based developer of LiDAR tech for autonomous vehicles, raised $30 million in Series A funding from NIO Capital, Eight Roads Ventures, F-Prime Capital and Gaorong Capital. www.innovusion.com

People.ai, a San Francisco-based AI platform for enterprise revenue, raised $30 million in Series B funding. Andreessen Horowitz led, and was joined by return backers Lightspeed Venture Partners, GGV Capital and Y Combinator. www.people.ai

Infoworks.io, a Palo Alto-based provider of agile data engineering solutions, raised $25 million in Series C funding. NEA led, and was joined by Nexus Venture Partners and Centerview Capital Technology. www.infoworks.io

🚑 HealthKart, an Indian omnichannel health products retailer, reportedly raised $10 million from IIFL Alternative Asset Advisors and return backer Sequoia Capital India. http://axios.link/Bvrb

WireWheel, an Arlington, Va.-based data privacy compliance SaaS company, raised $10 million. NEA and PSP Growth co-led, and were joined by Grotech Ventures, Sands Capital Ventures and Revolution. www.wirewheel.io

Dash Radio, a Los Angeles-based streaming radio startup focused on live programming, raised $8.8 million in seed funding from backers like Nimble Ventures, Lazerow Ventures, Arab Angel, Lindzon Capital Partners and Slow Ventures. http://axios.link/8NjE

Wahed Invest, a New York-based halal robo-advisor, raised $8 million at a $100 million valuation, from Cue Ball Capital and BECO Capital. http://axios.link/plEo

Urban Sports Club, a Berlin-based providers of flat rate fitness memberships, raised “8 digit financing” led by Partech. http://axios.link/9Wwh

Private Equity Deals

🚑 CEI Vision Partners, an ophthalmology management services company owned by Revelstoke Capital Partners, acquired two Ohio practices: Dayton Eye Associates and Retina Physicians and Surgeons. www.cvphealth.com

Gemspring Capital invested in Fiesta Insurance Franchise Corp., a Las Vegas-based provider of non-standard auto insurance and tax preparation services. www.fiestafranchise.com

Kar’s Nuts, a Madison Heights, Mich.-based snackmaker owned by Palladium Equity Partners, acquired Clinton Township, Mich.-based Morley Candy Makers from Peninsula Capital Partners. http://axios.link/7zlQ

🚑 KKR agreed to invest A$400 million for a 20% stake in Australian cancer and cardiac care company GenesisCare, with an option to invest another A$250 million, per AFR. KKR owned Genesis care from 2012-2016, before selling to China Resources Group and Macquarie Capital. http://axios.link/rLWk

Sverica Capital invested in Gorilla Logic, a Boulder, Colo.-based nearshoring and Agile software development solutions. www.gorillalogic.com

Public Offerings

Curaleaf, a Wakefield, Mass.-based cannabis retailer, is planning to raise around $400 million at nearly a $4 billion valuation, via a Toronto IPO, per Reuters. http://axios.link/qU7d

Pintec Technology, a Chinese online platform that connects businesses with financial services companies, raised $44 million in its IPO. The company priced 3.7 million shares at $11.88 (within range), for a fully-diluted market value of $520 million. It will trade on the Nasdaq (PT). Goldman Sachs (Asia) was lead underwriter, while shareholders include Ventech China and Xiaomi Ventures.

Liquidity Events

Aptive (NYSE: APTV) acquired Winchester, a Middlebury, Conn.-based provider of interconnect solutions for harsh environment applications, from Snow Phipps Group. www.winchesterelectronics.com

Berkshire Partners hired Baird and Jefferies to find a buyer for Implus, a Durham, N.C.-based maker of footwear and fitness accessories that could fetch around $1 billion, per the WSJ. http://axios.link/KgRZ

Comvest Partners agreed to sell Red Hawk Fire & Safety, a Boca Raton, Fla.-based provider of commercial fire, life safety and security services, to ADT (NYSE: ADT) for $317.5 million in cash. www.redhawkus.com

Golden Gate Capital sold a control stake in 2020, a Fort Worth, Texas-based outsourced sales and merchandising company, to chairman and CEO Christopher Munday. Golden Gate will retain a minority stake. www.2020companies.com

Refinitiv, which Blackstone recently carved out of Thomson Reuters for $17 billion, is exploring the sale of International Financing Review, with both Euromoney and Moody’s viewed as possible suitors, per Bloomberg. http://axios.link/rZKN

Vista Equity Partners hired Morgan Stanley and Macquarie to find a buyer for Mediaocean, a New York-based advertising software company that could fetch more than $1.5 billion, per the WSJ. http://axios.link/eyxo

More M&A

CommScope (Nasdaq: COMM) is in talks to buy Suwanee, Ga.-based set-top box maker Arris International (Nasdaq: ARRS). http://axios.link/86sR

Evolve Vacation Rental Network, a Denver-based vacation rental management company that has raised around $100 million, bought the assets of Everbooked, a pricing platform for the short-term rental market. http://axios.link/cGb8

Felix Energy, a Denver-based shale oil producer, hired Jefferies to find a buyer, per Reuters. A deal could fetch more than $3.5 billion. http://axios.link/Ttiv

Rothschild & Co. agreed to sell its trust services unit to Rothschild executive Richard Martin, who is being backed by an undisclosed investor. http://axios.link/TkoW

Pershing Square Capital Management acquired a 3.7% stake in Hilton Worldwide (NYSE: HLT). http://axios.link/xv0y

Wingtech Technology of China agreed to buy Dutch chipmaker Nexperia for $3.63 billion from backers like Beijing JianGuang Asset Management. http://axios.link/nXel

WPP (LSE: WPP) is seeking a buyer for a stake in its Kantar data analytics unit, per Reuters. http://axios.link/vudI

Fundraising

Roark Capital Partners raised $6.5 billion for its fifth flagship fund and its second sidecar fund. www.roarkcapital.com

Final Numbers
Expand chart
Data: Money.net; Chart: Axios Visuals
Dan Primack

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