On deals and dealmakers.
New Money, Old Deals, Lingering Questions
LA Tech: Upfront Ventures has closed its fourth core fund with $400 million in commitments. It’s the firm’s largest ever, and according to managing partner Mark Suster, the largest Los Angeles-based fund ever raised. Suster says he’s been on the road meeting limited partners for ten years, and finally, they’re understanding the value of L.A.’s tech scene. (Around 45% of Upfront’s investments are local.)
As for the lingering criticism that it’s too easy for Sand Hill Road investors to swoop in and take all the good deals from local investors, Suster says it’s not true.
He points to LA success stories (some that Upfront has backed, some other local firms have) including sneaker marketplace GOAT, Loot Crate (Inc.’s fastest growing company this year), home security company Ring, gaming company Scopely, and exits such as Maker Studios and Truecar, Dollar Shave Club and Riot Games.
Snap, which is the city’s biggest success but had no local investors, was an anomaly, Suster says. “Everybody knew about it, very few took the risk,” he says, referring to the speculative nature of backing another early stage photo-sharing app, alongside what he saw as headline risk for what was then a “teen sexting” app. “Nobody knew except Benchmark just how talented the [Snap] team is,” he notes.
But Snap’s success creates more opportunities. “You have literally hundreds of under-30 millionaires from Riot Games and Snap,” he says. “Some section of those are going to create their next company. If it spawns 50 startups and we fund 15 of them, that’s how you germinate the next generation of companies,” he says. Likewise for new venture funds: “L.A. probably has 15 new funds created in the last few years and I’m ecstatic to have that,” Suster says. He believes Los Angeles has the potential to top New York City in terms of investments and exits. (The data shows NYC has a healthy lead on exits and on funding.)
Regarding New York, Suster throws down the gauntlet: “In 2009, ’10, ‘11 and ‘12 the VCs all thought New York was the big next market, so they all started traveling out there and doing deals. I just don’t think they are making that trip anymore, I think the trip is to SoCal.” He says he welcomes the money from big Valley firms because it results in situations like that of Ring. Upfront was an early backer of the company, and Silicon Valley investors have since poured more than $200 million into it.
Lingering questions: Jonathan Teo has offered to resign from Binary Capital. Meanwhile Ann Lai, a former principal at the firm, has sued the firm for harassment and defamation, according to Bloomberg. (Former partner Justin Caldbeck allegedly threatened her after she left the firm last year. Lovely.)
Questions remain around who knew what and ignored it. Lightspeed knew that Justin Caldbeck had made Stitchfix founder Katrina Lake so uncomfortable she asked to remove him as a board observer. When he left and started Binary Capital, the firm was only able to say Caldbeck’s decision to leave was “mutual.” But in order to raise Binary Capital’s first fund, limited partners would have wanted to speak with his past employer as a reference. Did Lightspeed vouch for Caldbeck?
Unicorn Watch: Oracle held deal talks with Palantir last year. The data startup had also discussed going public at a valuation of $30 billion in 2015, which would have been double the company’s private valuation at the time. No word on why either of those exits fell apart, though Palantir CEO Alex Karp has made statements expressing his reluctance:
The minute companies go public, they are less competitive. … You need a lot of creative, wacky people that maybe Wall Street won’t understand. They might say the wrong thing all the way through an interview. You really want your people to be focused on solving the problem, not on cashing in.
The Oracle-Palantir deal talks were revealed as part of a lawsuit from Palantir investor Marc Abramowitz who is suing the company over the information. Abramowitz says he and Disney exec Michael Ovitz set up a meeting between Palantir co-founder Peter Thiel and Oracle’s Larry Ellison.
Some background on Abramowitz from my colleague Jeff Roberts:
Abramowitz is a 63-year-old investor and lawyer who lives in Palo Alto and maintains a low public profile. Palantir’s complaint describes him as a “Major Investor” because he owns at least five million shares in the company, and because as a long-time adviser who spent so much time at the firm, he even asked for an office in 2014.
In September Palantir sued Abramowitz for allegedly stealing trade secrets and filing Palantir patents in his name. Abramowitz has offered to drop his suit if Palantir drops theirs.
IPO: Blue Apron goes public today. The company priced at the bottom of its already-slashed range last night, bringing its valuation to $1.9 billion (wince). More details below, but I want to point to this analysis of the company’s churn rate. Finding how quickly customers stop out of using Blue Apron was the first stat I looked for when the company filed its S-1, and I was disappointed when I realized the company didn’t disclose it. Seems like an important stat to share with potential investors, but alas.
Daniel McCarthy, a professor and entrepreneur, has crunched some numbers using a retention curve technique he developed to arrive at this figure: 62% of Blue Apron customers churn within six months. Combine that with another stat that Blue Apron did disclose: It pays an average of $94 to acquire a customer. So: Blue Apron ended the first quarter with one million subscribers. That means, to merely stay flat, by my calculations, Blue Apron must pay $58 million every six months to just replace the customers that leave. To grow, it’s gotta spend even more.
Best and brightest: Fortune’s annual 40 under 40 list is coming up and I’m interested in hearing your suggestions, Term Sheet readers. Who are the rising stars in your industry that deserve more recognition? (If you are a PR person nominating your clients: Here is a form for you to fill out.)
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• Trax, a Singapore-based provider of computer vision solutions for retail, raised $64 million in funding from Warburg Pincus.
• Kinetica, a San Francisco-based provider of a GPU-accelerated relational database, raised $50 million in Series A funding. Canvas Ventures and Meritech Capital Partners co-led the round, and were joined by Citi Ventures and GreatPoint Ventures. Read more at Fortune.
• ChargePoint, a Campbell, Calif.-based electric vehicle charging network, raised $43 million in Series G funding. Siemens led the round.
• Swift Navigation, San Francisco-based GPS hardware and software developer, raised $34 million in Series B funding. New Enterprise Associates led the round, and was joined by Eclipse and First Round Capital.
• Spruce Finance, a San Francisco-based provider of consumer financing for residential energy efficiency, raised $25 million in funding from HPS Investment Partners.
• Super League Gaming, a Santa Monica, Calif.-based platform that offers accessible esports competitions for amateur gamers, raised $15 million in Series C funding. Investors include Nickelodeon, DMG Entertainment, Jeff Vinik, and aXiomatic.
• Abl, a San Francisco-based education technology startup, raised $7.5 million in Series A funding. Rethink Education led the round, and was joined by Sinovation Ventures, Owl Ventures, Reach Capital, and First Round Capital.
• Trine, a Sweden-based crowdfunding platform for solar energy projects, raised 6 million euros ($6.8 million) in Series A funding. Gullspång Invest led the round.
• UrbanStems, a Washington, D.C.-based on-demand flower delivery service, raised $6 million in a Series A extension. Investors include GSW Investments, SWaN & Legend, NextGen Venture Partners, and GroTech.
• Astronomer, a Cincinnati, Ohio-based data engineering platform, raised $3.5 million in funding. Investors Wireframe Ventures, CincyTech, Frontline Ventures, Grand Ventures, Drummond Road, Core Network, M25 Group, and Silicon Valley Bank.
• Cabin, a San Francisco-based provider of hospitality transportation, raised $3 million in seed funding. FF Angel led the round, and was joined by SV Angel, Floodgate, Box Group, Brainchild Holdings, Justin Rosenstein, StartX, FJ Labs and 1517 Fund.
• Pray.com, a Santa Monica, Calif.-based interfaith mobile app, raised $2 million in seed funding, according to TechCrunch. Science Inc led the round, and was joined by Greylock Partners and Spark Capital. Read more.
• VendorHawk, a Seattle, Wash.-based enterprise software vendor management platform, raised $1.2 million in seed funding. iNovia Capital led the round, and was joined by investors including Techstars Ventures, Social Starts, Telos Ventures, Curious Capital, and Alliance of Angels.
HEALTH AND LIFE SCIENCES DEALS
• KRY, a Sweden-based provider of video-based doctors appointments, raised 20 million euros ($22.67 million). Accel led the round, and was joined by Index Ventures, Creandum, and Project A. Read more.
• Indi Molecular, a Culver City, Calif.-based life sciences company, raised $11.5 million in Series A funding. M Ventures led the round.
PRIVATE EQUITY DEALS
• ProSiebenSat.1, a Germany-based media company, sold its media-for-equity investment portfolio to Lexington Partners for approximately 50 million euros ($57 million), according to Reuters. Read more.
• Alleghany Capital agreed to buy a 45% equity stake in Wilbert Funeral Services, an Overland Park, Kansas-based provider of products and services for the funeral and cemetery industries. Financial terms weren’t disclosed.
• New Capital Partners made an investment of an undisclosed amount in LoyaltyExpress, a Woburn, Mass.-based provider of marketing automation and cloud-based CRM solutions for mortgage companies and banks.
• Montagu Private Equity and Astorg Partners are considering a sale of Sebia SA, a France-based medical diagnostic equipment maker, which could be valued at more than 2 billion euros ($2.3 billion), according to Bloomberg. Read more.
• TCV made a minority investment into The Pracuj Group, a provider of human resource solutions. Financial terms weren’t disclosed.
• Walgreens Boots Alliance Inc (Nasdaq:WBA) terminated its deal to buy Rite Aid Corp (NYSE:RAD) after struggling to win antitrust approval, and said it would instead buy nearly half of the smaller rival’s U.S. stores for $5.18 billion in cash. Read more at Fortune.
• Dialog Semiconductor plc (XETRA:DLG), a provider of highly integrated power management, invested $15 million in Energous Corporation (NASDAQ: WATT), a San Jose, Calif.-based developer a wire-free charging system.
• Carrefour Brasil, the Brazilian unit of the French retailer, has filed for an IPO of up to $1.7 billion, according to Reuters. The company plans to raise between 4.5 to 5.6 billion reals, with shares priced at about 15 reals to 19 reals a piece.
• Delivery Hero, a Berlin-based food delivery service, has priced in the upper half of its price range of between 22-25.50 euros a piece, Reuters reports. The company has said that it plans to raise about 996 million euros, or $1.13 billion in an offering of up to 39 million shares on the Frankfurt Stock Exchange. The company, backed by German company Rocket Internet, posed revenue of EUR 349 million($393 million) in 2016. Citigroup, Goldman Sachs, Morgan Stanley have been named joint global coordinators. UniCredit Bank, Berenberg, Jefferies, and UBS have been named as additional joint bookrunners. Read more at Fortune.
• Blue Apron, the New York City-based meal kit company, said it expects to sell 30 million shares at $10 a piece, at the lower end of its range. Blue Apron raised $300 million. Goldman Sachs, Morgan Stanley, Citigroup, and Barclays are lead underwriters in the deal. The company brought in $795.4 million in revenue in 2016, on losses of $54.9 million. Pre-IPO, Blue Apron is backed 23.8% by Bessemer Venture Partners, 10.5% by First Round Capital, and 6.5% by Stripes Group. The company plans to list on the NYSE under “APRN.” Read more at Fortune.
• Osprey Energy Acquisition, a SPAC formed by Jonathan Cohen, plans to offer 25 million shares for $10 each, raising $250 million total. The company plans to trade on the Nasdaq as “OSPR.U.” Cohen helped found Atlas Energy, which went public in 2004.
• RBB Bancorp, a bank based out of Los Angeles, filed for an IPO to raise up to $83 million. The company plans to offer 3 million shares. In 2016, the bank recorded loans of $1.1 billion. Sandler O’Neill, Keefe Bruyette and Woods, and Stephens are book-running managers.
• Dova Pharmaceuticals, a Durham, N.C.-based company focused on a low blood platelet count disorder, raised $75 million in an offering of $4.4 million shares at $17. The company plans to list on the Nasdaq under “Dova,” with J.P. Morgan, Jefferies, and Leerink Partners as book-running managers. PBM Capital(pre-IPO 84.8%) and Perceptive Advisors(5.4%) are the company’s backers. The company has yet to generate revenue, and posted a loss of $27.2 million between April and December 2016.
• Aileron Therapeutics, a cancer treatment biotech based out of Cambridge, Mass., raised $56 million in an IPO of 3.8 million shares priced at $15 a piece. That’s on the lower side of the $15 to $17 range it previously stated. Bank of America and Jefferies are joint bookrunners in the deal, which is expected to trade on the Nasdaq under symbol “ALRN.” Pre-IPO, the company is backed by Apple Tree Partners (22.4%), Novartis BioVentures (20.8%), Glaxo Smith Kline’s S.R. One (10.6%), as well as Excel Medical Fund(8.7%), Lilly Ventures Fund(7.7%), and Roche Finance(5.3%). The company has yet to post revenue, and reported a loss of $18.1 million in 2016.
• Cinven sold 40% of its equity stake in Visma, a Norway-based software company, to a group of investors led by HgCapital. HgCapital, GIC, Montagu and ICG, are acquiring 100% of KKR’s stake. The total transaction is valued at 4.7 billion euros ($5.4 billion).
• Värde Partners and York Capital Management agreed to sell Redcape Hotel Group, an Austalia-based hotel operator, to Moelis Australia for A$677 million ($519 million).
FIRMS + FUNDS
• Platte River Equity, a Denver, Colo.-based private equity firm, raised $625 million for its fourth private equity investment fund, Platte River Equity IV, L.P.
• Atlas Venture, a Cambridge, Mass.-based early stage venture capital firm, raised $350 million for its eleventh fund, Fund XI, Atlas Venture.
• Cathay Capital, a Paris-based private equity and venture capital firm, raised $320 million for its debut fund.
• Zeev Ventures, a Palo Alto, Calif.-based venture capital firm, raised $52 million for its third fund, according to an SEC filing.
• James Antonopoulos joined ROTH Capital Partners as managing director and co-head of healthcare investment banking. Previously, Antonopoulos was at Canaccord Genuity.
• Julie Sandler joined Pioneer Square Labs as a managing director. Previously, Sandler was at Madrona Venture Group.
• Mark Chiang joined Signal Hill as a managing director. Previously, Mark was at Jefferies.
• Sean Hill and Stephanie Berdik joined Kirkland & Ellis LLP as partners of the investment funds group. Previously, Hill and Berdik were at Proskauer Rose.
• Jonathan Kaskow joined Blue Sage Capital as a senior associate. Previously, Kaskow was at Construction Partners.
• Saih Bang Wong joined TruTag Technologies as managing director of Asia sales.
• Jeff Vergamini joined Deutsche Bank as a managing director. Previously, Vergamini was at JP Morgan.