On deals and dealmakers.
DOING THEIR OWN THING
It’s fairly normal for successful venture capital pros to spend their careers building up a track record at a larger firm, and then “spin off” with their own firms. Lately, as limited partner interest in venture continues to grow, it feels like just about every partner who isn’t listed on their firm’s Form ADV is launching their own fund.
Another fairly normal thing: Lots of people who hold the “partner” title at venture capital firms don’t actually have decision-making power. For years startup gurus like Paul Graham have told young founders not to waste time talking to venture associates. So now some firms give their associates the “external” title of partner.
But even many of the partners that do have decision-making power and influence over a firm’s investments aren’t on the Form ADV. These forms show which partners own the venture firm’s management company (as opposed to the individual funds). The key distinction is that partners not listed on the ADV don’t have influence over how the firm spends its fees.
In general venture firms make money via returns on the money they invest (carried interest), and via the fees they charge for managing the fund (usually 2%). Junior partners can get access to the returns, but they don’t usually get to control what’s done with the fees.
Those junior partners are increasingly realizing they have the track record and ability to raise their own funds, where they’ll control the entire fee stream. Naturally, no venture capitalist would ever want to be seen as enriching themselves with fees – this is not about the fees, okay? – and so none were eager to discuss this aspect of the story. And to be sure, there are lots of reasons for spinning off. But total autonomy over the direction of the firm seems like a pretty compelling one to me.
Recently, a venture investor who is trying to add a new partner told me he keeps striking out because all the junior partners he wants to hire are planning to do their own thing. In some cases, the limited partners of their employers are even pledging support and encouraging the spin-offs.
Here are a few recent examples of spin-offs:
• Elephant Partners founders Jeremiah Daly and Andrew Hunt were previously at of Highland Capital Partners. They raised $156 million for their first fund.
• Precursor Ventures founder Charles Hudson was formerly a partner at SoftTech VC. Precursor raised $15 million for its first fund.
• Radian Capital founders Weston Gaddy and Jordan Bettman, formerly of Bain Capital Ventures, raised $150 million.
• Goodwater Capital founders Chi-Hua Chien and Eric Kim come from Kleiner Perkins and Maverick Capital, respectively. They raised $130 million for their first fund.
• Imaginary Ventures co-founder Nick Brown, formerly of 14W, is raising a fund, which Term Sheet sources say has a target of around $100 million.
• Ilona Capital founders Michael Abdy and Noah Lowy, formerly of General Atlantic, have raised $75 million for their first fund. The firm will provide expansion capital for web and software companies, Term Sheet has learned. The Lowy Family of Westfield Corp. is the firm’s anchor limited partner.
• BlueYard Capital founders Ciarán O’Leary and Jason Whitmire, formerly of Earlybird Venture Capital, raised $120 million.
• Afore Capital founders Anamitra Banerji and Gaurav Jain, formerly of Foundation Capital and Founder Collective, respectively, raised $46 million for their first fund.
Venture firms, lock in your junior partners.
MEANWHILE, some aspiring titans of venture capital are skipping the big fund experience altogether. Here’s a story from the Mercury News on up-and-coming crews of 23-year-olds that are raising their own venture funds. If you’d like a soundtrack to read it to, might I suggest the song “I’m Losing My Edge.”
MEANWHILE, Alan Patricof this week urged buyout barons to step back from leading the day-to-day activities of their firms, because they’re overpowering the talent within their firm that they’re going to need to take over some day. Patricof stepped back from his buyout firm Apax Partners over a decade ago, though he has explained in the past that he did so to get back to his roots of dealing with small, scrappy startups. He still looms pretty large at Greycroft Partners, the venture firm he started with Dana Settle and Ian Sigalow in 2006. But his point, echoed in a blind quote from the Financial Times, is extremely relevant to today’s column: “Succession is the Achilles heel of asset management industry.” [Update: This item originally said Patricof urged buyout barons to retire; it has been corrected to reflect his intention, which is that they step back from day-to-day operations, not retire altogether.]
New book alert: Wild Ride: Inside Uber’s Quest for World Domination, by Fortune’s Adam Lashinsky, comes out this week. Fortune has an excerpt in its latest print edition. I’ll have more on it tomorrow, but for now, you can read the excerpt here, along with a side story placing odds on which of Uber’s many scandals could actually take the company down.
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Denying visas to gay Russians fleeing kidnapping and torture. “We recorded VC’s conversations and analyzed how differently they talked about female entrepreneurs.” American trees are moving west and no one knows why. Trump had at least 18 undisclosed contacts with Russians. Hacking into Mar-a-Lago.
• QASymphony, an Atlanta-based software testing provider, raised $40 million in Series C funding. Insight Venture Partners led the round.
• Wandera, a San Francisco-based enterprise mobile security provider, raised $27.5 million in Series C funding. Sapphire Ventures led the round. Existing investors Bessemer Venture Partners and 83North participated. Read more at Fortune.
• YOPA, a London-based real estate agency service provider, raised £15 million ($19.5 million) in Series B funding. The Daily Mail and General Trust led the round, and was joined by Grosvenor Hill Ventures.
• Cheddar, a New York City-based web video content distributor, raised $19 million in Series C funding. Raine Ventures led the round, and was joined by AT&T, Amazon, Altice USA, the New York Stock Exchange, and Broadway Video. Existing investors Comcast Ventures, Lightspeed Venture Partners, and Ribbit Capital participated. Read more.
• KeepTruckin, a San Francisco-based fleet management system provider, raised $18 million in Series B funding. Scale Venture Partners led the round, and was joined by Google Ventures and Index Ventures.
• Readly, a Sweden-based digital magazine newsstand, raised 13 million euros ($14.5 million) in funding. Investors included Zouk Capital, Hermes GPE, Channel 4’s Commercial Growth Fund and Aggregate Media Fund.
• Aporeto, a San Jose, Calif.-based cloud-native security platform, raised $11.2 million in Series A funding. Norwest Venture Partners led the round.
• TriLumina Corp, an Albuquerque, N.M.-based semiconductor laser technology company, raised $9 million in funding. Investors included Kickstart Seed Fund, Stage 1 Ventures, Cottonwood Technology Fund, DENSO Ventures and Sun Mountain Capital.
• Atavium, a Minneapolis, Minn.-based data management solutions developer, raised $8.65 million in Series A funding. Rally Ventures and Grotech Ventures led the round, and were joined by Origin Ventures, Correlation Ventures, Brightstone Venture Capital and G-Bar Ventures.
• Social Native, a Los Angeles-based branded content company, raised $8 million in seed funding from SoftBank Capital.
• Guesty, a San Francisco-based professional property manager platform, raised $3 million in Series A funding. Buran Venture Capital led the round, and was joined by Magma Venture Partners and AltaIR Capital.
• Qupital, a Hong Kong-based online invoice trading platform, raised $2 million in seed funding, according to TechCrunch. MindWorks Ventures and Alibaba Entrepreneurs Fund led the round, and were joined by DRL Capital and Aria Group. Read more.
• Houwzer, a Philadelphia-based real estate brokerage service provider, raised $2 million in seed funding. Jay Minkoff led the round, and was joined by Ben Franklin Technology Partners and the StartupPHL Angel Fund.
• Blissfully, a Long Island City, N.Y.-based SaaS tracking automation platform, raised $1.5 million in seed funding. Founder Collective led the round
• eDynamic Learning, a Canada-based online course provider, raised funding of an undisclosed amount from Gauge Capital.
• Information Builders, a New York City-based provider of business intelligence and analytics, raised funding of an undisclosed amount. Goldman Sachs led the round, and was joined by Bregal Sagemount.
• Bluon Energy, a McClellan, Calif.-based energy-focused HVAC refrigerant manufacturer, raised funding of an undisclosed amount from investors including Bionatus, Greg Ellis, and Leonardo DiCaprio.
• Cuebiq, a New York-based precise location data provider, raised funding of an undisclosed amount from Balyasny Asset Management and Elevate Innovation Partners.
• Tamr, a Cambridge, Mass.-based data unification company, raised funding of an undisclosed amount from GE Ventures.
HEALTH AND LIFE SCIENCES DEALS
• IQuity, a Nashville, Tenn.-based life science tech company, raised $2.35 million in funding from unnamed investors.
• LogicStream Health, a Minneapolis, Minn.-based clinical process improvement solutions provider, raised funding of an undisclosed amount. Noro-Moseley Partners led the Series B round.
PRIVATE EQUITY DEALS
• Fairfax Media (ASX:FXJ), an Australia-based media company, received a takeover bid worth as much as A$2.87 billion ($2.13 billion) from Hellman & Friedman, according to Reuters. The deal values Fairfax Media at A$1.225 ($0.91) to A$1.25 ($0.93) a share. Read more.
• Noble Energy Inc will sell its 50% stake in Cone Gathering, a Canonsburg, Penn.-based natural gas pipeline operator, to Quantum Energy Partners for $765 million in cash, according to Reuters. Read more.
• Cloverdell Investment, an affiliate company of Warburg Pincus, sold a 25% stake in Capital First (BSE:532938), an India-based financial service provider, for 17.67 billion rupees ($275.4 million) in stock market transactions. Read more.
• Aspen Midstream, a Dallas, Texas-based energy company, raised $200 million in funding. Investors included EnCap Flatrock Midstream and Aspen Midstream’s management team.
• TAS Environmental Services, a portfolio company of TEAM Partners, acquired Water Kleen Services, an Ennis, Texas-based regional provider of environmental and industrial services. Financial terms weren’t disclosed.
• Lighthouse eDiscovery, which is backed by Spire Capital, has merged with Discovia, a San Francisco-based electronic discovery services company. Financial terms weren’t disclosed.
• Temasek has agreed to make a “significant” investment in Global Healthcare Exchange, a Louisville, Colo.-based healthcare supply chain solutions provider. Financial terms weren’t disclosed.
• Prostar Capital acquired more than 95% of the shares of Kyungnam Energy, a South Korea-based natural gas supplier. Financial terms weren’t disclosed.
• The Innovation Network Corp of Japan will sell nearly a fifth of shares in chip maker Renesas Electronics Corp (TSE:6723), according to Reuters. The deal would be worth $2.7 billion at current prices. Read more.
• SiriusXM is reportedly in active discussions about making a bid for Pandora, an Oakland, Calif.-based Internet music platform (NYSE:P). The bid could range as high as $12 to $13 a share, according to the New York Post. Read more.
• Addepar acquired AltX, a San Francisco-based intelligence platform for the alternative investments market. Financial terms weren’t disclosed.
• Bright Scholar Education Holdings a China-based company operating international and bilingual schools in the country raised $158 million in its IPO of 15 million shares. The company offered American Depository Shares priced at $10.50, above its previously set range of $8 to $10. The company will trade under the symbol “BEDU” on the NYSE. Excellence Education Investment Limited currently owns 72% of the company, while Morgan Stanley and Deutsche bank are acting as lead underwriters.
• argenx, a Netherlands-based biotech developing autoimmune disease treatments raised $100 million in an offering of 5.86 million American Depository Shares priced at $17 a piece. argenx will list on the Nasdaq as “ARGX.” Cowen and Piper Jaffray are lead underwriters in the deal.
• G1 Therapeutics, a clinical-stage biotech treating cancers, closed its first day of trading Wednesday slightly below its IPO price. The stock slid 0.07%, ending at $14.99 on a day the Russell 2000 Index was down nearly 3%. The company is backed by Hatteras Venture Partners (15.15% after offering), MedImmune Ventures/AstraZeneca (12.79%). Eshelman Ventures (11.77%), and the RA Capital Healthcare Fund (8.17%), and Lumira Capital (5.36%).
• Nautic Partners agreed to buy Endries International, a Brillion, Wisc.-based production component manufacturer, from Ferguson Enterprises. Financial terms weren’t disclosed.
• Distil Networks acquired Are You A Human, a Detroit, Mich.-based game-based verification company. Financial terms weren’t disclosed. Are You a Human had raised more than $7 million in venture funding from investors including BDS Capital, Detroit Venture Partners, FG Angels, Foundry Group, Mac Bell Ventures, and NCT Ventures.
• Apax Partners MidMarket acquired CIPRÉS Assurances, a Paris-based insurance focused-wholesale broker, from TA Associates. Financial terms weren’t disclosed.
FIRMS + FUNDS
• Morgan Stanley Investment Management, a New York-based investment manager, raised more than $125 million for its inaugural global impact fund, PMF Integro Fund I.
• Vesalius Biocapital, a Luxembourg-based venture capital and private equity firm, raised more than 65 million euros ($72.3 million) for its third fund, Vesalius Biocapital III. The fund’s target is 150 million euro ($167 million).
• Ben Laufer was promoted to senior associate at Arbor Advisors.
• Christopher Cheang was promoted to director and business development head at Post Capital Partners. Previously, Cheang was at Cabot China Limited.
• Erin Roeder was promoted to principal at KAP Group. Previously, Roeder was a vice president at Metropolitan Real Estate Equity Management.
• Philipp Patschkowski joined Neuberger Berman Private Equity as a principal. Previously, Patschkowski was at Coller Capital.
• Silverfleet Capital has hired Johan Boork, Jan Kux, Guntram Kieferle and Constance d’Avout to its investment team.
• Hancock Capital Management has added six new investment professionals to its Chicago team. They include Eric Barton, Jeff Bottcher, Ryan Reko, Patrick Kilrea, Brian Cihlar and Conner Moriarty.