Apr 9, 2018

Axios Pro Rata

By Dan Primack
Dan Primack
Top of the Morning
Photo by Bryan R. Smith/Getty Images

Axios' Jonathan Swan reported last night that President Trump is winging his trade policy, and that "there wasn’t one single deliberative meeting in which senior officials sat down to debate the pros and cons of this historic threat."

Ryan Petersen, founder and CEO of shipping logistics company Flexport, tells me that he's preparing his clients for the tariffs to go into effect because "what else are we supposed to do?" More from Petersen, whose company was recently valued at more than $900 million by VCs:

  • Some importers already are pre-0rdering excess product from China, believing the warehousing costs will be lower than the tariff costs.
  • Some companies already are talking about moving some manufacturing outside the U.S.
  • There is a U.S. loophole whereby there's no duty on anything worth less than $800, so some importers may respond to tariffs by having items packaged individually instead of in bulk. It's also could be a boon to e-commerce companies like Wish, and create the opportunity for new direct fulfillment platforms.
  • Flexport has over 10,000 clients, but has not been asked for input on the tariffs from anyone in the White House. Petersen also hasn't yet discussed the matter yet with Trae Stephens, a Flexport director (via Founders Fund) who worked on the Trump transition.

#ThemToo: Two more venture capitalists have left their firms, following accusations of sexual harassment:

  • Rami Beracha, managing partner of Israel's Pitango Venture Capital. He denies the allegations, which were first made public via a television program. More here.
  • Stefan Glaezner, a partner with London-based Passion Capital. This relates not to newly-uncovered allegations, but rather to a 2012 arrest and conviction for sexually assaulting a woman on the subway. More here.

Today is the six-year anniversary of Facebook buying Instagram for $1 billion, a deal that was widely mocked at the time:

  • ComputerWorld: "What Facebook has really bought is some Web 2.0 software for tweaking pictures... Facebook won't see a noticeable increase in users. And Instagram fans who loathe the idea of Facebook getting its hands on their images will move to another platform."
  • Jon Stewart on The Daily Show: "The only Instagram worth a billion dollars would be an app that instantly gets you a gram.”
  • But, but, but: Many concerns weren't about price, but about privacy.
  • Speaking of privacy: The lawmakers who could give Zuckerberg hell.

New firm alert: Rafael Corrales has stepped down as a general partner with Charles River Ventures, in order to form Background Capital. It's basically a super-angel strategy, with a group of young LPs (median age=36) who Corrales says will serve as "super-connectors" for founders.

  • The debut fund is around $9 million.
  • "I tried to pick the stars of tomorrow," Corrales tells me. "If I had Bill Gates as an LP, would he even care? I could drop his name, but that would probably be the extent of his value."
  • "In the same way that GPs have had to add services, I think it's going to become table stakes for LPs to become value-add beyond checks."

Top of the Hill: Big congrats to the team from BYU Marriott for winning the International VCIC Finals this past weekend. The team members were: Matt Phillips, Corbin Coil, Jared Fowler, Taylor Murphy and Sarah Wasden.

The BFD
Source: Giphy

SenseTime, a Beijing-based developer of AI technologies like facial recognition, has raised $600 million in new funding at a valuation reported to be north of $4.5 billion. Existing backer Alibaba led, and was joined by Qualcomm, Temasek and Suning.

  • Why it's the BFD: Because that's the highest valuation ever for a privately-held AI company.
  • Bottom line: "SenseTime said as far as it knows, Chinese police have only used the company's tech to catch criminals. But critics have slammed the deployment of AI to track Chinese citizens, saying it violates privacy and targets political dissidents." — Sherisse Pham, CNN
Venture Capital Deals

🚑 Constellation Pharmaceuticals, a Cambridge, Mass.-based developer of tumor-targeted and immuno-oncology therapies, raised $100 million in new funding. Cormorant Asset Management, Deerfield Management, Fidelity, Hillhouse Capital, NS Investment, OrbiMed, Sirona Capital, and Venrock Healthcare Partners were joined by return backers The Column Group, Third Rock Ventures, Venrock, SROne, UC Investment Office, Topspin Partners and Casdin Capital. http://axios.link/BYqp

Octopus, a Chinese B2B travel platform, raised around $95 million in Series C funding from Tempus Group, CCB International and Ant Financial. http://axios.link/U3bb

Selina, a Central American co-working and traveling hospitality service, has raised $95 million from Abraaj Group and WeWork CEO Adam Neumann. http://axios.link/2SSM

🚑 Magenta Therapeutics, a Cambridge, Mass.-based developer of therapeutics for bone marrow transplant, raised $52 million in Series C funding. Casdin Capital led, and was joined by EcoR1 Capital, Eventide Asset Management, Watermill Asset Management and return backers Be the Match BioTherapies and Access Industries. www.magentatx.com

Armis, a Palo Alto, Calif.-based enterprise IoT security startup, raised $30 million in Series B funding. Red Dot Capital Partners led, and was joined by Bain Capital Ventures and return backers Sequoia Capital and Tenaya Capital. www.armis.com

Bitmovin, an online video infrastructure software startup, raised $30 million in Series B funding. Highland Europe led, and was joined by return backers Atomico, Constantia New Business, Dawn Capital and YCombinator. http://axios.link/8TCy

Nantero, a Waltham, Mass.-based provider of carbon nanotube electronics, has raised $29 million in sixth-round funding from backers like Dell Technologies Capital, Cisco Systems and Kingston Technology. Existing backers include CRV, DFJ, Globespan Capital Partners and Harris & Harris Group. http://axios.link/oKtU

IYUNO Media Group, a Singapore-based provider of localization solutions to studios and broadcasters, raised $23.5 million from SoftBank Ventures. http://axios.link/Hjn8

Edovo, an Evanston, Ill.-based education startup for prisoners, raised $9 million from Impact Engine, Lumina Foundation and Kapor Capital. http://axios.link/jWsx

City Pantry, a British office catering marketplace, raised £4 million in new funding from Octopus Investments and return backer Newable Private Investing. http://axios.link/1rjC

Spidr Tech, a Los Angeles-based provider of automated messaging systems for police departments, raised $2.5 million from Sidewalk Labs, Birchmere Ventures, Stage Ventures, Kairos Association, Heartland Ventures and No Name Ventures. http://axios.link/YPoS

Private Equity Deals

🚑 Clearview Capital acquired Community Medical Services, a Scottsdale, Ariz.-based provider of medication-assisted treatment programs for those suffering from substance use disorders.

Infrastructure Services Group, a portfolio company of Juniper Capital Management, has acquired a pair of municipal sewer system rehab companies: Green Mountain (Vermont) and Mr. Rehab (Pennsylvania).

InstarAGF has acquired Amports, a Jacksonville, Fla.-based auto port logistics and processing company, from Lincolnshire Management. www.amports.com

KKR has closed its previously-announced deal to sub-advise FS Investments, a business development company platform, replacing Blackstone’s GSO Capital Partners. http://axios.link/DSlj

North Haven Infrastructure Partners has agreed to acquire the Delaware Basin subsidiary companies of Brazos Midstream Holdings for $1.75 billion in cash. www.brazosmidstream.com

Public Offerings

Aston Martin plans to hire Deutsche Bank, Goldman Sachs and JPMorgan for a London IPO that could value the luxury automaker at upwards of $7 billion, per Reuters. http://axios.link/Fpzl

Construction Partners, a Dothan, Ala.-based road and infrastructure construction services company owned by SunTx Capital Partners, filed for a $207 million IPO. It plans to trade on the Nasdaq under ticker ROAD, with Baird as lead underwriter. www.constructionpartners.net

🚑 Inspire Medical Systems, a Maple Grove, Minn.-based maker of sleep apnea devices, filed for an $86 million IPO. It plans to trade on the NYSE under ticker INSP, with BofA Merrill Lynch as lead underwriter. The company reports $29 million in 2017 revenue, and has raised over $110 million from firms like USVP (16.2% pre-IPO stake), OrbiMed (15.9%), Synergy Life Science Partners (15.7%), Kleiner Perkins (14.5%), Amzak Health Investments (10.3%) and Medtronic (5.7%). www.inspiresleep.com

🚑 MorphoSys, a German antibodies developer, set its IPO terms to 8.3 million shares at $24.12 (the price where it currently trades in Frankfurt). It would be valued at around $3 billion at that price, and plans to also list on the Nasdaq under ticker MOR. Goldman Sachs is lead underwriter.

Pivotal Software, a cloud-native app development platform majority-owned by Dell Technologies, set its IPO terms to 37 million shares at $14-$16. It would have a fully-diluted market cap of around $4.3 billion, if it prices in the middle. The company plans to trade on the NYSE under ticker PVTL, with Morgan Stanley as lead underwriter. http://axios.link/UNgH

🚑 Surface Oncology, a Cambridge, Mass.-based immuno-oncology company, set its IPO terms to 6 million shares at $13-$15. It would have a fully-diluted market cap of around $404 million, if it prices in the middle. The company plans to trade on the Nasdaq under ticker SURF, with Goldman Sachs as lead underwriter. Shareholders include Atlas Venture (23% pre-IPO stake), Novartis (16%), Eli Lilly (16%), NEA (16%) and F-Prime Capital Partners (10%).

Liquidity Events

🚲 Uber has agreed to acquire Jump Bikes, an electric dockless bike-sharing company that recently raised $10 million in Series A funding from backers like Menlo Ventures, SOSV and Esther Dyson.

More M&A

French Connection Group (LSE FCCN) has agreed to sell its 75% stake in women’s clothing brand Toast to Denmark’s Bestseller United for nearly $33 million. http://axios.link/dhD5

Novartis (Swiss: NOVN) has agreed to buy Illinois-based gene therapy company AveXis (Nasdaq: AVXS) for $8.7 billion in cash, or $218 per share (88% premium on Friday’s closing price). http://axios.link/U8Pl

O’Melveny & Myers is in merger talks with British law firm Allen & Overy, according to Legal Week. http://axios.link/KaEA

SoftBank is seeking to sell Brightstar, a Miami-based mobile phone distributor that could fetch more than $1 billion, per Reuters. http://axios.link/MoiI

Supervalu (NYSE: SVU) is exploring a sale due to activist investor pressure, according to Bloomberg. The Eden Prairie, Minn.-based supermarket chain has a market cap south of $650 million. http://axios.link/QeAM

Viacom (Nasdaq: VIAB) asked CBS (NYSE: CBS) to sweeten its below-market merger offer by $2.8 billion, according to Reuters. http://axios.link/ee8K

Woodward (Nasdaq: WWD) has agreed to buy L’Orange, a German power systems maker, from Rolls-Royce (LSE: RR) for around $859 million. http://axios.link/beho

Fundraising

Saama Capital, an India-focused VC firm, raised $100 million for its fourth fund, per an SEC filing. http://axios.link/EmMX

It's Personnel

Shweta Bhatia has joined Eight Road Ventures as a partner. She previously was head of Asia for the VC and growth equity team at Goldman Sachs Investment Partners. www.eightroads.com

John Cryan is out as Deutsche Bank CEO, replaced by co-president Christian Sewing. The other co-president, Marcus Schenck, is also leaving. http://axios.link/VNJl

Robert Durden last month was named CIO and CEO of the University of Virginia Investment Management Co. He previously was CIO for Texas Children’s Hospital. http://axios.link/E4G3

Matthew Smith (ex-Barclays) and Alex Wilmot-Sitwell (ex-BoA Merrill Lynch) have joined Perella Weinberg Partners as partners. http://axios.link/8hn1

Todd Speece has joined Goldman Sachs as a managing director and head of the TMT and financing coverage groups, per his LinkedIn profile. He previously led West Coast equity capital markets for William Blair.

Final Numbers
Source: Thomson Reuters, data through 4/5/18
  • Global follow-on equity offerings are at $126.7 billion, down 9% from 2017. U.S. follow-ons are off 15%.
  • Global convertibles are up 3%, but U.S. convertibles are down 20%.
Dan Primack