When the California Public Employees’ Retirement System announced last fall that it was abandoning hedge funds, I wondered if private equity would be the next asset class to fall. After all, it featured many of the same complexities and high fees that CalPERS cited in its hedge fund critique. At the time, however, a system spokesman said my curiosity was unfounded, as the hedge fund decision was driven largely by an inability to scale – whereas CalPERS had no trouble finding enough private equity opportunities to meet its target allocation.
Today, however, the FT reports that CalPERS may cut its number of private equity relationships by up to two-thirds.
My kneejerk reaction was to think that CalPERS had changed its mind (or that it wasn’t entirely truthful in the first place). But the reality is that the FT story leaves many unanswered questions. For example, will there be a corresponding target allocation cut? CalPERS previously reduced its PE target from 14% to 10%, but that was largely to better reflect current exposure (particularly in light of rocketing public equity holdings). Or is this really more about consolidation than cutting investments? Not only because bigger checks often come with lower fees, but also because fewer relationships require less investment staff/consultants to oversee. And, if that is the case, what is the impact on return expectations, given historical data that shows smaller and mid-cap PE funds often outperform larger ones.
The FT also suggests that CalPERS plans to “team up with other institutional investors to negotiate better terms.” Nothing new about that, as CalPERS has been pushing hard on terms ever since Real Desrochers took over the PE program in 2011 (which has had its own culling effect on existing manager relationships).
CalPERS is always a bit of an odd bird, in that it is by far the largest public pension system and yet, at the same time, one that wants to serve as exemplar to all of its smaller peers (despite the fact that size differences can, and often should, result in different investment strategies). But, at the very least, CalPERS can give PR coverage to other public pensions that want to make difficult decisions, as we saw a bit in the hedge fund example.
As of last check, around one-quarter of all PE commitments come from U.S. public pension funds. Even a slight pullback could become very problematic for the industry — particularly as many firms already have acquiesced to LP demands on fee splits (i.e., they don’t have many more marketing levers to pull). CalPERS was a big part of the private equity industry’s growth in the 1990s and the aughts. Perhaps it soon will play a very different role…
• New fund alert: Michael Neril is raising $15 million for a new seed fund to invest in enterprise tech startups, Fortune has learned.
This means he has stepped down from leading investments for Webb Investment Network, the seed-stage investment group he co-founded in 2010 with Maynard Webb (Yahoo chairman, ex-COO of eBay). The pair first got to know each other at LiveOps, a cloud-based call center where Webb was CEO and Neril was a business development executive.
Sources say that Maynard Webb is expected to be a limited partner in Neril’s new fund, which is called Spider Capital. The plan would be to invest around $350,000 into between 20 and 25 companies, with plenty left over for follow-on rounds. You can read a bit more by going here.
• Preemptive apologies: I’m driving to NYC later this morning, and then back to Boston tonight. Or, put another way, I’ll be very tardy in responding to any emails (even ones worthy of prompt response).
THE BIG DEAL
• Coinbase has raised $75 million in Series C funding, in what is believed to be the largest-ever funding round for a Bitcoin-related company.
DFJ Growth led the round, and was joined by The New York Stock Exchange, USAA, BBVA (Spain), NTT Docomo (Japan), Valar Capital, Vikram Pandit, Tom Glocer and Carlos Rodriguez Pastor. Returning investors included Andreessen Horowitz, Reddit Capital and Union Square Ventures.
“Our original goal at the beginning of October was basically to raise around $50 million at a reasonable valuation,” says Coinbase co-founder Fred Ehrsam, who declined to elaborate on ‘reasonable.’ Read more.
VENTURE CAPITAL DEALS
• Meituan.com, a Chinese group-buying site backed by Alibaba, has raised $700 million in new private equity funding at around a $7 billion valuation. No investor information was disclosed. Existing backers include Alibaba Group and Sequoia Capital China. Read more.
• Planet Labs, a San Francisco-based satellite company, has held a first close on the “majority” of a $70 million Series C funding around led by Data Collective. Planet Labs also secured a $25 million debt facility from Western Technology Investment. www.planet-labs.com
• Avalara, a Bainbridge Island, Wash.-based provider of cloud-based software for sales tax and other transactional tax compliance, has raised $42 million in Series D-1 funding. Approximately $36 million of the fundraise was used to buy shares from existing holders. Technology Crossover Ventures led the round, and was joined by return backers like Warburg Pincus. www.avalara.com
• EarlySense Ltd., an Israel-based provider of contact-free monitoring solutions, has raised $20 million in new VC funding. Samsung Ventures led the round with a $10 million investment, and was joined by return backers Pitango Venture Capital, Welch Allyn, JK&B, Proseed and Noaber. www.earlysense.com
• Dig Inn Seasonal Market, a farm-to-table restaurant chain, has raised $15 million in Series C funding. Wexford Capital led the round, and was joined by Monogram Capital Partners, Michael Marks and return backer Magnus Hoglund. Read more.
• Taykey, an Israel-based provider of digital marketing solutions, has raised $15 million in new VC funding. Innovation Endeavors was joined by return backers SoftBank Capital, Sequoia Capital, Marker LLC and Tenaya Capital. Read more.
• Sparkcentral, a San Francisco-based “enterprise customer engagement platform for real-time customer service,” has raised $12 million in Series B funding. Split Rock Partners led the round, and was joined by Sigma West. www.sparkcentral.com
• Rubikloud, a Toronto-based provider of big data solutions for the retail industry, has raised $7 million in Series A funding. Horizon Ventures led the round, and was joined by Access Industries, TOM Group and Ule. Read more.
• WorkAngel, a London-based employee reward and recognition platform, has raised $5 million in Series A funding. Terry Leahy (ex-Tesco CEO) led the round, and was joined by other individual investors. www.workangel.com
• Car Throttle, a UK-based online auto community, has raised $1.6 million in seed funding. Redalpine led the round, and was joined by Passion Capital and Blake Chandlee. www.carthrottle.com
• Visualead, an Israeli developer of QR code solutions, has raised an undisclosed amount of Series B funding from Alibaba Group. Read more.
PRIVATE EQUITY DEALS
• Apollo Global Management reportedly has increased its bid for Slovenian bank Nova KBM for approximately €200 million. Read more.
• Centerbridge Partners is in talks to acquire German wind turbine maker Senvion SE for approximately €1 billion from Suzlon Energy, according to an Indian news report.
• GTCR has partnered with Adams Outdoor Advertising to acquire Fairway Media Group LLC, a Duncan, S.C.-based outdoor advertising company, from ACON Investments and MidOcean Partners. No financial terms were disclosed. www.fairwayoutdoor.com
• H.I.G. Capital has acquired a majority equity stake in Aviapartner, a Belgium–based provider of airport ground handling services. No financial terms were disclosed, except that the company generated more than €350 million in 2014 revenue. www.aviapartner.aero
• Phoenix Equity Partners has agreed to acquire Bridge Leisure, a UK–based holiday park operator. As part of the deal, Bridge Leisure is simultaneously acquiring Silver Sands Holiday Park near Lossiemouth in Scotland. No financial terms were disclosed for either transaction. www.bridgeleisure.com
• Platinum Equity has hired RBC to explore strategic alternatives for portfolio company Exterion Media Group, a European outdoor advertising company, according to Reuters. One possibility could be a “major acquisition,” perhaps of the European assets of Clear Channel Outdoor Holdings Inc. Read more.
• PNC Riverarch Capital has acquired a majority stake in North American Breaker Co., a Burbank, Calif.–based reseller of circuit breakers and related electrical components for wholesale electrical distributors. No financial terms were disclosed, except that NXT Capital and NABCO management co-invested alongside PNC. www.nabreaker.com
• Sycamore Partners and clothing retailer Express Inc. (NYSE: EXPR) said that they are ending acquisition talks, after having “worked together in good faith towards a transaction over the past several months.” The decision was based on “the unavailability of financing on commercially acceptable terms.” www.express.com
• TA Associates has agreed to acquire a majority stake in Access Technology Group, a UK–based provider of business management software, from Lyceum Capital. No financial terms were disclosed. www.ta.com
• Tech Air, a Danbury, Conn.-based portfolio company of CI Capital Partners, has acquired McGinnis Welding Supply, a Wichita Falls, Texas-based distributor of industrial, specialty and medical gases. No financial terms were disclosed. www.techair.com
• TrialCard Inc., a Cary, N.C.–based provider of patient access and adherence services to the pharma market, has raised an undisclosed amount of private equity funding from Excellere Partners. www.trialcard.com
• Tritium Partners has acquired a majority stake in Giact Systems LLC, an Allen, Texas–based provider of risk management solutions for electronic payments. www.giact.com
• VXI Global Solutions, a Los Angeles–based provider of business process outsourcing and IT outsourcing services, has acquired Symbio, a San Jose, Calif.–based provider of outsourced product development services. VXI is a portfolio company of Bain Capital. www.vxiusa.com
• This week’s IPO calender includes expected pricings from Box, Entellus Medical and Presbia. Read more.
• Ascendis Pharma AS, a Denmark-based developer of technology to create “prodrugs that provide for the predictable and sustained release of an unmodified parent drug,” has set its IPO terms to 5 million shares being offered at between $16 and $18 per share. It would have an initial market cap of approximately $373 million, were it to price in the middle of its range. The company plans to trade on the Nasdaq under ticker symbol ASND, with BofA Merrill Lynch and Leerink Partners serving as lead underwriters. It reports $1.8 million in net income on $14.8 million in revenue for the first nine months of 2014. Ascendis has raised more than $85 million in VC funding, from firms like Sofinnova Capital (31.9% pre-IPO stake), Gilde Healthcare (16.9%), Sofinnova Ventures (7.2%), OrbiMed (7.2%), Vivo Ventures (6%), Janus Capital Management, Venrock, RA Capital Management, Rock Springs Capital and Sectoral Asset Management. www.ascendispharma.com
• Euronav NV, a Belgium-based provider of shipping and offshore services for the transportation and storage of crude oil, set its IPO terms to 13.55 million shares being sold. It plans to trade on the NYSE under ticker symbol EURN, which is the same ticker it currently trades under on the NYSE Euronext Brussels (where it ended trading last Friday at €11.13 per share). Deutsche Bank Securities is serving as lead underwriter. www.euronav.com
• Flex Pharma Inc., a Boston-based developer of treatments for neuromuscular disorders, has set its IPO terms to 4.615 million shares being offered at between $12 and $14 per share. It would have an initial market cap of approximately $221 million, were it to price in the middle of its range. The company plans to trade on the NYSE under ticker symbol FLKS, with Jefferies and Piper Jaffray serving as co-lead underwriters. Shareholders in the pre-revenue company include Longwood Fund (19.23% pre-IPO stake), Bessemer Venture Partners (9.82%), EcoRq Capital, Jennison Associates, Lightstone Ventures, Alexandria Equities, CD-Venture, Bindley Capital Partners, City Hill Ventures, Kraft Group, Todd Dagres, Peter Lynch and Steve Pagliuca. www.flex-pharma.com
• Infraredx Inc., a Burlington, Mass.-based developer of medical devices for the diagnosis and management of coronary artery disease, has set its IPO terms to 4 million shares being offered at between $13 and $15 per share. It would have an initial market cap of approximately $199 million, were it to price in the middle of its range. The company plans to trade on the Nasdaq under ticker symbol REDX, with RBC Capita, Markets, Canaccord Genuity and BMO Capital Markets serving as lead underwriters. The company reports a $24.5 million net loss on $3.68 million in revenue for the first nine months of 2014. It has raised more than $175 million in equity funding from backers like Sanderling Ventures, Nipro Corp. and Eastwood Capital. www.infraredx.com
• Shake Shack Inc., a New York-based premium burger restaurant chain, has set its IPO terms to 5 million shares being offered at between $14 and $16 per share. It would have an initial market cap of approximately $532 million, were it to price in the middle of its range. The company plans to trade on the NYSE under ticker symbol SHAK, with J.P. Morgan and Morgan Stanley serving as lead underwriters. The company reports $3.5 million in net income on $83.7 million in revenue for the 39 weeks ending Sept. 24, 2014, compared to $4.4 million in net income on $59.5 million in revenue for the year-earlier period. Shareholders include Leonard Green (30.7% pre-IPO stake). Read more.
• Tracon Pharmaceuticals, a San Diego-based developer of therapeutics for cancer and age-related macular degeneration, has set its IPO terms to 3.6 million shares being offered at between $12 and $14 per share. It would have an initial market cap of approximately $156 million, were it to price in the middle of its range. The company plans to trade on the Nasdaq under ticker symbol TCON, with Wells Fargo and Stifel serving as co-lead underwriters. Shareholders include New Enterprise Associates, BioMed Ventures, JAFCO Co, Nextech Inves, Brookline Investments, Arcus Ventures and BHP. MTS Health Partners and Wells Fargo Securities served as placement agents. www.traconpharma.com
• KPS Capital Partners has hired Goldman Sachs to find a buyer for the parent company of Anglo-Irish china and crystal maker Waterford Wedgwood, according to the FT. Read more.
• Malakoff Corp. and Keppel Infrastructure Trust have expressed interest in acquiring Alinta Energy, an Australian gas and electricity retailer being sold by TPG Capital, according to Bloomberg. Lazard is managing the process, which could result in around a A$4 billion deal. Read more.
• Roche (Swiss: RO) has agreed to acquire Trophos, a France-based developer of treatments for a genetic neuromuscular disease called SMA. The deal is valued at up to €470 million, including a €120 million upfront payment and upwards of €350 million in earnouts. Trophos has raised VC funding from firms like OTC Asset Management, CM-CIC Capital Prive, SGAM, Viveris Management, Turenne Capital Partners, Blue Medical and the Association Francaise contre les Myopathies. It had a prior option to be acquired by Actelion for up to €195 million. www.trophos.com
• BATS Global Markets is in talks to acquire foreign exchange trading platform Hotspot from KCG Holdings (NYSE: KCG) for upwards of $400 million, according to Reuters. Read more.
• Google has offered to purchase mobile payments company Softcard for less than $100 million, as first reported by TechCrunch. Read more.
• Google reportedly is in talks to invest approximately $1 billion in private spacecraft and rocket company SpaceX. Read more.
• Itochu (Japan) and Charoen Pokphand Group (Thailand) have agreed to acquire a 20% stake in Chinese conglomerate Citic for more than $10 billion. Read more.
• Saint-Gobain (Paris: SGO) has launched a sale of glass bottle-making subsidiary Verallia, according to Reuters. The deal could be worth upwards of €3 billion. Read more.
• Twitter Inc. (NYSE: TWTR) has agreed to acquire Indian digital marketing company ZipDeal. No financial terms were disclosed, but Bloomberg reports a purchase price of approximately $30 million. Read more.
• Uğurlu Cam, a Turkey-based specialized glass products manufacturer, has secured a €13.5 million mezzanine loan from Syntaxis Capital. www.syntaxis-capital.com
FIRMS & FUNDS
• Holtzbrinck Ventures, a Germany-based VC firm, has closed its sixth fund with €285 million in capital commitments. www.holtzbrinck-ventures.com
• KKR is nearing a first close on its fourth European buyout fund, which began marketing last April with a €3.5 billion target, according to Dow Jones. www.kkr.com
• TPG Capital has abandoned plans to raise a $1.25 billion fund focused on the energy sector, according to Bloomberg. Read more.
MOVING IN, UP, ON & OUT
• Stephen Fraidin has joined Pershing Square Capital Management as vice chairman. He previously was a partner with law firm Kirkland & Ellis. Read more.
• Brian Nobis has joined Liberty Mutual to focus on private equity fund and co-investment opportunities. He previously was a private equity investment analyst with the Teachers’ Retirement System of the State of Illinois. www.libertymutual.com
Eric Warner has joined Sail Capital Partners, a U.S.-based private equity firm focused on “sustainable innovation,” as a managing director in the firm’s new London office. He previously was co-CEO and head of investor relations at Altius Associates. www.sailcapital.com
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