The sun is shining, retailers are slumping and Fortune has a great new cover story on Pope Francis’s management strategy. In other words, it’s time for some Thursday Throwback.
Leading us off are some responses to yesterday’s column on the paucity of reliable VC performance data, and its possible implications for future entrepreneurship (for much more discussion of this issue – particularly from Marc Andreessen and Matt Ocko -- just search @danprimack on Twitter).
Mike: The issue with VC returns as reported by consultants and media is that ‘aggregate industry’ returns are not relevant. In VC more than PE or any other asset class, the difference between the elite and the good (much less the average are huge). The risk profile of VC depends on getting the "big win" to make a portfolio work, which creates massive disparities… -- Sophisticated LPs have realized this dynamic and therefore.. are concentrating their VC allocations in those [top] firms and cutting it elsewhere. They still appreciate VC, but they are investing in a ‘smarter’ way.
Tom: “Do you think it’s a coincidence that most of the best VC firms (Sequoia, A16Z, KPCB, etc.) don’t publicly disclose their data? Have you ever considered that there is a competitive advantage to keeping that information between the GPs and LPs? Typical media arrogance to think you DESERVE to know the details of transactions between two private parties.”
Mark: “You would be surprised how challenging it can be even for LPs to get the data they want from GPs (broad strokes here, not all GPs are created equally). The more sophisticated LPs will dig deep into portfolios to understand the health of the portfolio, the decision making process, and the potential upside, but that is easier said than done to get what they want/need. Some LPs even pitch themselves as being "easy to deal with" to make themselves seem enticing to GPs. That to me is just ridiculous. They should ask the tough questions and not just be bystanders. I believe that as stewards of capital for the LPs, the GPs should be willing to give time, data, effort into helping them understand what they are doing with their money. The more, the better here. It can be a pain/distraction for GPs but a super high quality IR person who is a real partner can help. Very few funds across all of private equity have someone of this caliber, but when they do it’s a real difference maker and speaks to how much they value their LP relationship.”
• Samuel on the private equity collusion case: “Was someone putting a gun to shareholder heads, forcing them to vote for private equity buyout bids? Or did they vote in favor because they were being offered a price premium after years of a bull market? Private equity firms don’t have an obligation to compete with other private equity firms and shareholders don’t have an obligation to sell. This is just plaintiff lawyers cashing in on an easy target.”
• A few emails on Felicis Ventures vowing to vote its shares alongside its portfolio company founders. SB: “Even if it's only limited to share votes (and not board votes), as you rightly point out, it's hard not to see how a blind commitment to vote with the founders is not a violation of fiduciary duties to the LPs. It seems like the drag-along would include an acquisition offer, in which founders and VCs can have very divergent interests. VCs tend to want their home runs, and are typically agnostic about which portfolio company it comes from, whereas a founder may like a decent--but not unicorn-level--exit along the way.”
Jason agrees: “They have their duties all mixed up… Under certain circumstances they may have duties to other shareholders and/or creditors in times where the company is failing. This might be good marketing, but clearly doesn't line up with technical fiduciary duties. If their fund doesn't go well, they are leaving a huge liability door for their LPs to drive through.”
Derek counters: “If this pledge/policy was clearly disclosed to LPs prior to them committing to the fund, then how is this a breach of fiduciary duty? As you point out, there are benefits to the fund from publicly committing to this approach so it's not like this is a straight betrayal of LP interests in favor of founder interests. Either way, LPs should be capable of evaluating the pros/cons of the approach and decide whether or not to invest in the fund, right?”
• Arlene: "Are you coming back out to San Francisco to do another Liquidity Event this fall?" Yes Arlene. In October. Full details sometime next month. In the interim, please drop me a note if you have interest in sponsoring.
THE BIG DEAL
• General Electric (NYSE: GE) has received takeover interest for its home appliances unit from Sweden’s Electrolux and VC-backed consumer products startup Quirky Inc., according to Bloomberg. The deal could be valued at around $2 billion. Read more.
VENTURE CAPITAL DEALS
• Desire2Learn Inc., a Canadian cloud-based learning platform, has raised $85 million in second-round funding. An undisclosed “institutional asset manager” led the round, and was joined by Columbus Nova Technology Partners, Graham Holdings, Four Rivers Group and Aurion Capital Management Inc. www.desire2learn.com
• Luminal, a Frederick, Md.-based developer of solutions for generation solutions for cloud operations and management, has raised $10 million in Series B funding. New Enterprise Associates led the round, and was joined by return backers Core Capital and the Maryland Venture Fund. www.luminal.com
• B-Stock Solutions Inc., a Redwood City, Caif.-based provider of inventory liquidation sales management solutions for retailers and manufacturers, has raised $7 million in Series B funding. Susquehanna Growth Equity led the round, and was joined by return backer True Ventures. www.bstocksolutions.com
• DripDrop Inc., a San Francisco–based rehydration drink-maker, has raised $5.6 million in new VC funding. Backers include Aurum Partners and musicians Sammy Hagar, Joe Satriani and Bob Weir. Read more. http://blogs.wsj.com/venturecapital/2014/08/14/dripdrop-gets-rock-star-backing-for-its-rehydration-product/
• NBD Nanotechnologies Inc., a Boston-based provider of “biomimetic-inspired” surface wetting modifications, has raised $5.2 million in Series A funding. Phoenix Venture Partners led the round, and was joined by Supply Chain Ventures. www.nbdnano.com
• StrataCloud (f.k.a. Reflex Systems), an Atlanta-based provider of infrastructure management solutions for virtual, converged and cloud environments, has raised $2 million in new VC funding from Hallett Capital and BLH Venture Partners. The company also has named rian Cohen (ex-CEO of SPI Dynamics) as CEO. www.stratacloud.com
• AuditFile, a Walnut Creek, Calif.-based provider of cloud-based auditing software for accountants, has raised $3 million in new VC funding. Banneker Ventures led the round, and was joined by individual angels like Nas and Time Draper. www.auditfile.com
• Bizzabo, a New York-based networking platform and event app, has raised $2.5 million in new VC funding. OurCrowd and Massa Group were joined by return backers like Kaedan Capital, AfterDox and Gigi Levy. www.bizzabo.com
PRIVATE EQUITY DEALS
• Ardian and Fosun International have withdrawn their €557 million takeover offer for Club Med, which had been topped by a €790 million offer from Investindustrial. Read more.
• Rhone Capital has agreed to acquire Ranpak Holdings Inc., a Concord Township, Ohio–based provider of paper-based systems for the “in-the-box” protective packaging market, from Odyssey Investment Partners. No financial terms were disclosed. www.ranpak.com
• TPG Capital has agreed to pay $113 million for a 70% stake in Sri Lanka's Union Bank of Colombo PLC. Read more.
• Venari Resources LLC, a Dallas-based deepwater oil exploration and production company focused on the Gulf of Mexico, has raised $1.3 billion in new equity commitments. GIC and BlackRock Private Equity Partners were joined by existing investors Warburg Pincus, Kelso & Co., Temasek and The Jordan Company. www.venari.com
• The Carlyle Group reportedly has hired Citigroup and Goldman Sachs to manage an IPO for Axalta Coating Systems, which it had acquired in 2012 for $4.9 billion from Dupont, according to Reuters. The float could raise upwards of $1 billion. Read more.
• oamix Ltd., an Israeli developer of a minocycline foam for the treatment of acne and other skin conditions, has filed for a $74.75 million IPO. It plans to trade on the Nasdaq under ticker symbol FOMX, with Barclays and Cowen & Co. serving as lead underwriters. Shareholders include Tamarkin Medical Innovation (21.1% pre-IPO stake). www.foamix.co.il
• Summit Partners has hired Harris Williams & Co. to find a buyer for HelpSystems LLC, an Eden Prairie, Minn.–based provider of IT management software, according to Reuters. The deal could be valyed at more than $700 million (including debt). Read more.
• Barclays is in talks to sell off its indexing unit for approximately $1 billion, according to the NY Post. Bidders include Bloomberg, Standard & Poor’s, MSCI and Markit. Read more.
• Delivery Hero, a Germany-based food delivery service, has acquired local rival Pizza.de for an undisclosed amount. According to TechCrunch, the merger puts the combined company’s valuation at nearly $1 billion. Delivery Hero has raised more than $300 million in funding from such firms as Insight Venture Partners, Luxor Capital, Point Nine Capital, Kreos Capital, Kite Ventures and Phenomen Ventures. Read more.
• IgnitionOne, a New York-based provider of a cloud-based marketing platform, has acquired Human Demand, a Norwalk, Conn.–based provider of mobile audience solutions to advertisers. No financial terms were disclosed. IgnitionOne has raised around $30 million in VC funding from ABS Capital Partners, Softbank Capital and Brown Savano. www.ignitionone.com
FIRMS & FUNDS
• Veritas Capital has closed its fifth fund with $1.875 billion in capital commitments. The New York-based private equity firm focuses on middle-market companies that provide services and solutions to government customers. www.veritascapital.com
MOVING IN, UP, ON & OUT
No personnel news this morning...
Share today's Term Sheet: