2016-12-07-1

Term Sheet — Tuesday, May 30

May 30, 2017

The $2.5 BILLION VC FIRM YOU’VE NEVER HEARD OF

Access Technology Ventures is not a household name in Silicon Valley. But in just two years, the New York-based firm has quietly managed to get a piece of numerous hot pre-IPO “unicorn” startups. Now the firm is taking steps to formalize its previously ad-hoc investing strategy – and speaking publicly about it for the first time to Fortune.

Access Technology Ventures is the venture capital investing arm of billionaire industrialist Leonard Blavatnik. The firm is lean, with 12 investment professionals managing $20 billion of Blavatnik’s money. Until 2015, any startup investing was done randomly, based on Blavatnik’s connections and investment ideas. He backed Facebook, Square, Snap, Yelp and Alibaba before their IPOs, as well as current IPO candidates like Spotify. The firm even managed to earn a return on its investment in Zynga.

Managing Director Pueo Keffer joined Access Technology Ventures in 2015 from Redpoint Ventures with a mandate to formalize Access’ startup investing activities. “Len has an amazing nose for investments,” Keffer says. “Historically that’s served us really well. My job has been to institutionalize that and add a layer that takes advantage of Len’s connections and also define a strategy.”

The first step was to spin out the venture arm into a discreet fund with $2.5 billion under management. Access Technology Ventures now makes $200 million to $500 million worth of investments each year, depending on the opportunities. The fund is structured more like a hedge fund with “permanent capital” than a traditional ten-year venture fund.  That allows it to take a long view of investing, and to write large checks from $30 million to $100 million, all the way up to $1 billion (though Keffer’s portfolio has not yet done any deals of that size). Unlike most traditional venture investors, Access holds its investments in companies for around five years after they go public. The firm exited its Facebook holdings in late 2015, but it remains an investor in Snap, Square, Yelp, 58.com, Alibaba and Rocket Internet.

Keffer says Access is looking for “foundational companies that scale.” Filtering opportunities by their size, combined with criteria of a strong team, large market opportunity, strong unit economics and strong early traction has been “uniquely liberating and challenging approach,” Keffer says. Notable deals include an $83 million Series B investment in DigitalOcean, a New York City-based cloud company, and $80 million for OpenDoor, a buzzy real estate startup that buys and sells houses. The firm prefers to make primary investments in companies with at least 100% year over year revenue growth.

Access has been taking a more active role in its deals, sitting on occasional board seats and calling with portfolio company executives every quarter to be “strategically helpful,” Keffer says.  “We view it as a partnership regardless of whether it’s private or public.” Access has passed on deals that were only about money, with no relationship, he says.

One recent example of the firm’s more active role: OpenDoor’s business of buying and selling houses means it needs access to capital. When Access invested, OpenDoor’s capital markets team was nascent, and the firm helped the company build it out, thanks to connections from the firm’s multi-billion real estate group. “If they’re having a hard time with a discussion with a Wells Fargo or a Goldman or a Deutsche Bank, we can call the right person and help facilitate that dialogue,” Keffer says. “We have billions of dollars of outstanding leverage with these institutions,” he says. “A normal venture firm wouldn’t have [that].”

So with no brand and little PR, how does Access get access to deals? It helps to be one of the few places writing checks of that size, especially as mutual funds like Fidelity and T. Rowe Price and hedge funds like Tiger Global slowed their pace of late stage startup investing. (Now the late-stage competition comes from sovereign wealth funds and SoftBank’s giant Vision Fund.) Access touts its hybrid approach: We can write big checks, and we are active investors, too.

The firm has also worked Blavatnik’s connections, particularly in the music industry. (An affiliate of his acquired Warner Music in 2011.) Access since backed Beats, Spotify and Deezer.

Blavatnik, who is 59, is not planning to retire anytime soon, Keffer says. But this move of hiring someone to formalize a strategy around a key person is a tricky challenge faced by all firms led by visionary investors. SoftBank’s attempt to institutionalize Masayoshi Son’s investment instincts didn’t go as planned, for example. Keffer says his role is “Less of trying to build something that recreates Len and moreso us trying to recreate a vision that aligns well with his fundamentals.”

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• A Q&A with Peloton’s CEO in the wake of $325 million in new funding.

• Robotics experts believe Tesla’s Autopilot is a danger to cyclists.

• Uber and Lyft return to Austin Monday.

• Uber CEO’s mother has died in a tragic boat wreck.

• Bolt-on Geek Squad.

…AND ELSEWHERE

Lessons from the dotcom boom for the coming crypto boom. New Ford CEO may go on talent shopping spree. Bill Simmons’ The Ringer moves to Vox Media. Giphy’s monetization plans. Has China hit peak sharing economy? Why the tech industry is hurting itself by not backing black female founders. Journalism in the age of the body slam. Rural America is the new inner city. NYSE makes plans to do direct listings. A curious situation at Payless: A firm that’s close to the company’s private equity backers is “investigating the private equity firms for doing a very private equity thing.” Mark Zuckerberg’s great American road trip.

VENTURE DEALS

Swiggy, an India-based food ordering and delivery company, raised $80 million from Naspers, according to TechCrunch. Read more.

Wave, a Canada-based financial management software platform, raised $24 million in funding. Investors include National Australia Bank, Royal Bank of Canada, Portag3, and Exhibition Capital. Existing investors CRV, Social Capital, BDC IT Venture Fund and BDC Capital, OMERS Ventures, Harbourvest and OurCrowd participated.

CounterTack, a Waltham, Mass.-based real-time endpoint threat detection provder, raised $20 million in Series D funding. Singtel Innov8 led the round, and was joined by investors including SAP National Security Services.

AB Tasty, a France-based user testing and experience platform, raised $17 million in Series B funding from Korelya Capital and Partech Ventures. Existing investors Xange Private Equity and Omnes Capital participated. [This item was updated to reflect the correct headquarters location.]

Exporo, a Germany-based real estate crowdfunding platform, raised €8 million ($9 million) in funding, according to Tech.eu. Investors include E.Ventures, Holtzbrinck, Sunstone and BPO Capital. Read more.

CrowdJustice,  a London-based crowdfunding platform, raised $2 million in seed funding. Investors include Venrock, First Round Capital, and Bessemer Venture Partners.

Data Inventions, a Cincinnati-based manufacturing operations tech company, raised funding of an undisclosed amount from CincyTech and NCT Ventures. [This item has been updated to reflect the correct headquarters city.]

HEALTH AND LIFE SCIENCES DEALS

Saluda Medical Pty Limited, an Australia-based neuromodulation technology developer, raised AU$53 million ($40 million) in Series D funding. Action Potential Venture Capital led the round. Existing investors including Medtronic PLC participated.

PRIVATE EQUITY DEALS

CVC, Bain Capital, Fosun International and Primavera Capital are expected to submit bids for Netafim, an Israel-based irrigation systems manufacturer, which could fetch around $1.5 billion, according to Reuters. Read more.

Vulcan Materials Company has agreed to acquire Aggregates USA, the Birmingham, Ala.-based construction aggregates business of SPO Partners, for $900 million in cash. [This item has been updated to reflect the correct buyer and seller in the transaction.]

Kohlberg & Company has agreed to acquire Newell Brands’ (NYSE:NWL) winter sports businesses for $240 million.

LDC has sold its stake in UK2, a U.K.-based cloud services provider, to The Hut Group. Financial terms weren’t disclosed.

Madison Parker Capital made an investment of an undisclosed amount in AQUIS, a San Francisco-based beauty tool manufacturer.

Investcorp is among bidders vying to acquire Abax, a vehicle tracking systems company, from Norvestor, according to Private Equity News. Read more (subscription required).

OTHER DEALS

Ensco Plc (NYSE:ESV) will buy Atwood Oceanics Inc (NYSE:ATW), a Houston, Texas-based offshore drilling contractor, in an all-stock deal valued at about $839 million. The $10.72 per share offer represents a premium of 32.6% to Atwood Oceanic’s closing price on May 26. Read more.

First Data (NYSE:FDC) agreed to buy CardConnect (Nasdaq:CCN), a payment processing platform, for approximately $750 million in cash.

London Stock Exchange (LSE:LSE) has agreed to buy The Yield Book, Citigroup's fixed-income analytics service and its related indexing business, for $685 million in cash, according to Reuters. Read more.

Shanghai Yiguo E-Commerce Co will sell an 18% stake in Lianhua Supermarket Holdings Co Ltd (SEHK:980), a Chinese supermarket chain operator, to a unit of Alibaba Group Holding (NYSE:BABA). The deal could be worth HK$782 million ($100.33 million), according to Reuters. Read more.

Western Digital Corp (Nasdaq:WDC) may join a consortium of Japanese government money and KKR & Co LP (NYSE:KKR) to bid for Toshiba Corp's (TSE:6502) chip unit, backing away from an earlier demand for a majority stake, according to Reuters. The unit has been valued for at least 2 trillion yen ($18 billion). Read more.

Sainsbury's (LSE:SBRY) is in the early stages of exploring a takeover bid for Palmer & Harvey, a U.K.-based tobacco distributor,  according to Reuters. Read more.

IPOs

VNG Corp., a Vietnamese game developer, is seeking an IPO in the U.S., according to CEO Le Hong Minh in a Bloomberg interview. The Goldman Sachs-backed company has already signed a preliminary agreement with the Nasdaq to explore an IPO. If successful, VGN will be the first Vietnamese company to go public overseas. But first, the company must acquire regulatory approval from the Vietnamese government, which may take 18 to 24 months, the CEO said. VNG forecasts revenue of $180 million in 2017, up 70% from a year earlier.

•  Alfa Financial, a software maker for the finance industry, popped over 30% during its first day of trading on the London Stock Exchange Friday—making it the largest U.K. IPO so far this year, according to the Financial Times. Shares were priced at 325 pence per share, but pushed as high as 425 pence per share.That gave the company a market capitalization of 1.25 billion pounds, or $1.61 billion.

EXITS

Sprig, a San Francisco-based food delivery service, shut down its operations. The startup had raised more than $56 million in venture funding from investors including Accel Partners,  Greylock Partners, Battery Ventures, CAA Ventures, FJ Labs, Founders Guild, and Great Oaks Venture Capital. Read more at Fortune.

FIRMS + FUNDS

Samsung Electronics (KOSE:A005930) will set up a 500 billion won ($445 million) fund that will help its suppliers borrow cash interest-free for a year, according to Reuters. Read more.

Yao Capital, a China-based private equity firm co-founded by Yao Ming, aims to raise $250 million for a fund that will invest in overseas sports assets, according to Reuters. Read more.

Vertex Holdings, the Singapore-based venture capital arm of Temasek Holdings, will raise two separate funds for investments in Israel and the United States in 2018, according to Reuters. Each fund’s target will be approximately $150 million. Read more.

Vx Capital Partners, a San Francisco-based private investment firm focused on the aviation industry, raised $107 million for its inaugural private equity fund.

BlueCross BlueShield Venture Partners, a Chicago-based corporate healthcare-industry venture fund, raised $10 million for its third fund, BlueCross BlueShield Venture Partners III.

Google (Nasdaq:GOOGL) launched a new venture capital program focused on artificial intelligence, according to Axios. Anna Patterson, a Google vice president of engineering, is leading the program. Read more.

PEOPLE

Chris Peetz joined Frazier Healthcare Partners as an entrepreneur-in-residence on the life sciences team. Previously, Peetz was the chief financial officer at Tobira Therapeutics.

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Polina Marinova produces Term Sheet, and Lucinda Shen compiles the IPO news. Send deal announcements to Polina here and IPO news to Lucinda here.

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