Nov 8, 2017

Axios Pro Rata

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Top of the Morning

• Sand Hill stuff: Sequoia Capital is quietly raising up to $180 million for a new fund that will focus exclusively on seed-stage opportunities.

That sounds huge, but it's actually more about changes to book-keeping than changes to strategy. Namely: Sequoia already has raised a pair of "scout" funds, and the new vehicle is viewed as the third in that series. The only difference is that Sequoia Scout III also will include seed deals (generally <$2m) that historically have been done out of Sequoia's flagship fund (although completed seed deals will not be transferred over).

  • Why it matters: Sequoia has a particularly strong track record in the seed space, having cut small, early checks for such companies as Airbnb, LinkedIn, Stripe, Palo Alto Networks and YouTube. No comment from the firm, natch.

• Tax talk: Senate Republicans plan to unveil their tax bill tomorrow. The Washington Post reports that it could look quite different than the House version, including a possible delay in enacting the corporate tax cut from 2018 to 2019.

• What comes around: Yes, there is some irony in Silver Lake participating in Broadcom's hostile bid for Qualcomm, after playing the white hat when when Blackstone made noise years ago about a hostile offer for Dell.

• Recommended: Long-time readers will recall the saga of Xfund, a venture capital effort whose co-founders last year engaged in a battle than included employee firings, name-calling, bank account freezes, and even a restraining order request. The feuding partners later reached a legal settlement that allowed one of them to continue running the fund (he also secured new capital and hired a new partner). Now BackChannel's Jessi Hempel has learned more, including that the mess not only cost Xfund co-founder Hugo Van Vuuren his job, but also his legal right to remain in the United States. Read it here.

• Kudos: TJX, the parent company of retailers like T.J. Maxx, Marshalls and HomeGoods, is continuing to pay its workers in Puerto Rico -- even those who work in stores that have not yet reopened.

  • Reminder: Over 57% of Puerto Rico electric customers remain without power, 50 days after Hurricane Maria made landfall.
  • Private equity executive Orlando Bravo has now raised a total of $25 million for Puerto Rico relief, including from peers like Silver Lake's David Roux, Luminate Capital's Hollie Moore Haynes, Blackstone' Joe Baratta and Bain Capital's Ian Loring. We previously discussed Bravo's efforts, which included airlifts and a $10 million personal donation.

Compass, a New York-based online platform for real estate purchases and rentals, has raised $100 million in Series E funding at a $1.8 billion post-money valuation. Fidelity led the round, and was joined by return backers like IVP and Wellington Management. The company previously raised $225 million from firms like IVP, Wellington, Thrive Capital, Founders Fund and .406 Ventures.

  • Why it's the BFD: Because the valuation looks rich for what appears to be a real estate version of Casper or Blue Apron, companies that use software to augment, rather than disrupt, traditional (and profitability-challenged) business models. Particularly given that quasi-rival RedFin, which appears to have similar revenue, has a public market cap of $1.74 billion (albeit with a decade's head start, which likely is a key differentiator for Fidelity).
  • Bottom line: "It employs more than 2,000 agents, who take a percentage of the selling price and gives 15% to 30% to Compass. It lures the industry's top talent with lavish signing bonuses and specializes in high-margin, luxury homes in upscale, coastal markets. The much-touted technology is, according to several agents, not that different from what other brokers provide." – Lizette Chapman, Bloomberg
Venture Capital Deals

• WeLab, a Chinese mobile lending company, has raised $220 million in new Series B funding from backers like Alibaba Hong Kong Entrepreneurs Fund, International Finance Corp. and Credit Suisse.

•, a Los Angeles-based consumer tech company founded by pop star, has raised $117 million in new VC funding from backers like Salesforce Ventures. Reuters reports that it now is developing a voice assistant for customer service.

• Yotpo, an Israeli user-generated content marketing platform, has raised $51 million in Series B funding. Access Industries led the round, and was joined by Vertex Ventures and return backers Bessemer Venture Partners, Marker LLC, Vintage Partners, Blumberg Capital, Rhodium and 2B Angels.

• Leanplum, a San Francisco-based mobile marketing platform, has raised $47 million in Series D funding. Norwest Venture Partners led the round, and were joined by Canaan Partners, Kleiner Perkins Caufield & Byers and Shasta Ventures.

🚑 EOC Pharma, a Chinese company that in-licenses externally-developed cancer drugs and develops them for the local market, has raised $32 million in second-round funding. Taikang Industry Development Fund led the round, and was joined by Sequoia Capital China and H&Q Asia Pacific.

• Excelero, a Tel Aviv-based developer of software-defined block storage solutions, has raised $25 million in new VC funding. Battery Ventures led the round, and was joined by Qualcomm Ventures, Square Peg Capital and individual angels.

🚑 Oyster Point Pharmaceuticals, a San Francisco-based developer of dry eye therapies, has raised $22 million in Series A funding co-led by NEA and Versant Ventures.

• CargoX, a Brazilian platform for connecting businesses with truckers who have excess capacity, has raised $20 million in Series C funding from Soros Private Equity, Qualcomm Ventures, Agility Logistics, Valor Capital Group and Oscar Salazar.

• Sansan, a Tokyo-based business card management startup, has raised $17.56 million in fifth-round funding from Goldman Sachs. Existing backers include DCM Ventures and Mirai Creation Investment.

• Quidd, a digital goods marketplace, has raised $13 million in Series A funding led by Sequoia Capital.

🚑 InteraXon, a Toronto-based developer of brainwave-controlled products, has raised US$11.6 million in new VC funding from Trend Forward Capital, Export Development Canada and OMERS Ventures.

🚑 Tear Film Innovations, a San Diego-based maker of a medical device to treat dry eyes, has raised $9 million in Series A funding co-led by Visionary Ventures and Tigris Ventures.

• ThirdChannel, a Cambridge, Mass.-based retail intelligence platform, has raised $7 million in Series A funding led by Fung Capital.

• Vidrovr, a New York-based provider of video search solutions for publishers, has raised $1.25 million in seed funding. Samsung NEXT led the round, and was joined by Verizon Ventures, R/GA Ventures and Social Starts.

• Thursday Boot, a New York-based premium footwear brand, has raised an undisclosed amount of Series A funding led by Blue Scorpion Investments.

Private Equity Deals

• Beringer Capital has acquired BrandShop, a Shelton, Conn.-based commerce provider for consumer brands, from Veronis Suhler Stevenson.

• Colony Capital has walked away from talks to invest in The Weinstein Co., due largely to a disagreement over price, according to the NY Times.

• Digital Map Products, an Irvine, Calif.-based geospatial mapping company owned by Silversmith Capital Partners, has acquired Mexico Business Directory, provider of a geocoded information database for business locations in Mexico.

• Luminate Capital Partners has made a growth equity investment in AMTdirect, a Cornelius, N.C.-based provider of lease administration and lease accounting solutions.

• Norwest Equity Partners has invested in Ramsey Industries, a Tulsa, Okla.-based manufacturer of service cranes, industrial and commercial winches, planetary gear and digger drives.

Public Offerings

BlueGreen Vacations, a Boca Raton, Fla.-based timeshare management company, set its IPO terms to 6.5 million shares being offered at $16-$18. It would have a fully-diluted market value of around $1.3 billion, were it to price in the middle. It plans to trade on the NYSE under ticker symbol BXG, with Stifel and Credit Suisse serving as lead underwriters.

• CBTX, a Houston-based commercial bank with 34 locations in Southeast Texas, raised $62 million in its IPO. The company priced 2.4 million shares at $26 (high end of range), and will trade on the Nasdaq under ticker CBTX. Stephens Inc. and Keefe Bruyette Woods served as lead underwriters.

🚑 InflaRx, a German drug developer focused on chronic inflammatory and autoimmune conditions, raised $100 million in its IPO. The pre-revenue company priced 6.67 million shares at $15 per share (middle of range), for a fully-diluted market value of around $362 million. It will trade on the Nasdaq under ticker IFRX, while J.P. Morgan served as lead underwriter. Shareholders include KFW, RA Capital Management, Bain Capital Life Sciences and Cormorant Asset Management.

• Metropolitan Bank Holding, a commercial bank with five branches in the New York metro area, raised $109 million in its IPO. The company priced 3.1 million shares at $35 (above $31-$34 range), and will trade on the NYSE under ticker MCB. J.P. Morgan and Keefe Bruyette Woods served as lead underwriters.

🚑 scPharmaceuticals, a Burlington, Mass.-based developer of products for subcutaneous delivery, set its IPO terms to 6.4 million shares being offered at $14-$16. It would have a fully-diluted market value of around $276 million, were it to price in the middle. The pre-revenue company plans trade on the Nasdaq under ticker symbol SCPH, with Jefferies serving as lead underwriter. Shareholders include 5AM Ventures (23.2% pre-IPO stake), OrbiMed (23%) and Lundbeckfond (22.6%).

Liquidity Events

🚑 The Blackstone Group has hired Morgan Stanley to find a buyer for Chinese orthopedic implant maker Xinrong Best Medical Instrument Co., according to the WSJ.

• James Hardie Industries (ASX: JHX) has agreed to acquire the parent company of German fiber gypsum board manufacturer Fermacell from Xella International, a portfolio company of Lone Star Funds, for €473 million in cash.

• Providence Equity Partners has retained Bank of America to launch a dual exit process for German home shopping TV network HSE24, which could be valued north of €1.5 billion, according to Reuters.

• Zynga (Nasdaq: ZNGA) has agreed to acquire the mobile card game studio of Turkey-based Peak Games for $100 million in cash. Peak Games backers include Earlybird Venture Capital, Endeavor Global and Hummingbird Ventures.

More M&A

🚑 Takeda Pharmaceutical (Tokyo: 4502) has signed a commercialization deal with Portal Instruments, to developer and commercialize Portal's needle-free drug delivery device for potential use with Takeda drugs. The partnership could be worth upwards of $100 million. Cambridge, Mass.-based Portal has raised VC funding from firms like 5AM Ventures.


• Blue Bear Ventures, an early-stage VC group focused on "radical innovation emerging" from the UC system, is raising $20 million for its debut fund, per an SEC filing.

• Seidler Equity Partners has closed its sixth private equity fund with $554 million in capital commitments, per an SEC filing.

Final Numbers