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Term Sheet — Friday, February 19

February 19, 2016, 3:15 PM UTC

Random Ramblings

In late 2012, I wrote about how private equity giant TPG Capital was going to have troubles raising its seventh flagship fund (which wasn't yet in market), primarily due to poor performance. Two years later, I changed my tune for three basic reasons: (1) Performance had improved; (2) The firm had endeared itself to LPs by apologizing for its massive mistakes (i.e., WaMu/TXU), plus by covering most of the LP portion of its collusion case settlement; (3) By choosing to target less than half of the $19.8 billion it had raised for Fund VI in 2008 (the new fund targeted $8b with a $10b hard cap).

"TPG is going to get this thing done," I wrote. And indeed it's about to, per sources familiar with the situation.

TPG had originally planned to hold its final close at $10 billion on January 15, but received an extension through the end of April so as to accommodate the calendar needs of a few laggard LPs. Expect the actual final close to occur by the end of March. Also, the final number should be closer to $10.4 billion, given that TPG's partners had pledged to invest the lesser of $400 million or 5% of the fund total.

To date, TPG VII has committed approximately $2.1 billion to six deals (i.e., around 20% of the fund total).

It also is worth noting that TPG had offered a fee structure choice to LPs who committed early: (1) A traditional 1.5% management fee that would step down to 75 basis points after the initial commitment period; or (2) Basically the reverse, which TPG has referred to as a "J-curve mitigation structure." The LP response was largely split, with a few more early investors taking the latter option. From TPG's perspective, it's take will be roughly the same either way.

Finally, there is the issue of if and when TPG plans to go public. Despite some recent high-profile hires that seem to point in that direction ― namely Jon Winkelried as co-CEO and Steve Ellis as head of global operations and portfolio building ― my same sources say that TPG has not yet begun any actual IPO work.

Related: Just to get a sense of how TPG has turned around its recent fund performance, just check out these internal rates of return (IRR) from the University of Texas Investment Management Co. (UTIMCO):

2/29/12: -5.54%
11/30/15: 5.16%

2/29/12: -1.06%
11/30/15: 12.1%

In the black (car): Uber CEO Travis Kalanick made headlines earlier this week by telling a Canadian media outlet that his ride-hailing company is losing over $1 billion per year in China. But the bigger news, which was largely overlooked, came earlier in Kalanick's same breath: Uber is now profitable in the United States.

Moreover, my understanding is that the U.S. profitability claim includes expenses related to the company’s San Francisco headquarters (i.e., employee compensation, office leases, etc.), although it’s unclear if some of those charges get allocated to overseas operations. We also don't know the time period for which Uber is claiming U.S. profitability (a company spokeswoman declined to give one), which would be particularly interesting given the January ride-price cuts.

 New firm alert: Michael Lebourgeois is moving on from NGP Energy Technology Ventures, in order to form a New Orleans-based private equity firm called Black Bay Energy Management, which is expected to invest between $10 million and $30 million into energy companies.

Lebourgeois (who did not return a request for comment) is the second NGP Energy Technology Ventures partner to leave in the past year, following Chris Sorrells (who now serves as interim COO of publicly-traded NGP ETV portfolio company GSE Systems). Moreover, he is being joined at Black Bay by NGP ETV principal Tom Ambrose (who will be a Black Bay partner) and associate Matthew Schovee. Black Bay's third partner will be Guy Cook, who previously was an EVP with Superior Energy Services.

NGP ETV has fully invested the $348 million second fund it raised back in 2009, and continues to manage 16 active portfolio companies. The firm’s two Washington, D.C.-based partners still plan to raise a third fund at some point, although timing and size remain undetermined. Managing partner Phil Deutch declined comment.

 Recommended viewing: If you feel inundated with stories and articles about hipster "maker" culture, this video is your catharsis.

My mistake: In discussing Marc Andreessen's Twitter vacation, I wrote that he hasn't been favoriting any tweets. My error. He's already done so 28 times in the past 9 hours.

 Have a great weekend...


 Aria Systems, a San Francisco-based cloud platform for billing and managing recurring revenues, has raised $50 million in new funding.

New investors Rembrandt Venture Partners, Madison Bay Capital Partners and Hercules Technology Growth Capital were joined by return backers Bain Capital Ventures, Hummer Winblad Venture Partners, InterWest Partners, Venrock and VMware.


 Riskified, an Israel-based provider of e-commerce fraud prevention solutions, has raised $25 million in new VC funding. Qumra Capital led the round, and was joined by The Phoenix Insurance Co., NTT DOCOMO Ventures and return backers Genesis Partners and Entrée Capital.

 Effector Therapeutics, a San Diego-based developer of translation regulators for the treatment of cancer, has raised $16 million in new Series B funding from Sectoral Asset Management. The round total is now $56 million, including a $40 million December 2015 close led by Altitude Life Science Ventures.

 Opternative Inc., a Chicago-based provider of online refractive eye exam services, has raised $6 million in Series A funding. Jump Capital led the round, and was joined by Tribeca Venture Partners, Pritzker Group Venture Capital, Chicago Ventures, Craig Duchossois, Corazon Capital and NextGen Venture Partners.

 Nomva, a Los Angeles-based maker of cold-pressed juices, has raised $3 million in Series A funding co-led by Evolution Media Partners and Taylor Farms.

 Anyline, an Austrian startup that helps developers add text recognition to apps, has raised €1.5 million in seed funding. Gernot Langes-Swarovski Group led the round, and was joined by iSeed Ventures and individual angels.

 Centric Digital, a New York-based provider of digital transformation solutions, has raised an undisclosed amount of equity funding from Bookend Capital. It is Centric Digital’s first round of institutional funding since being founded in 2009.

Clarification: Wednesday's VC funding blurb on PokiDok Inc. should have referred to the company -- which raised an undisclosed amount of funding from McKesson Ventures, as a healthcare API platform.


 Bain Capital, GIC and Advent International have invested a combined $350 million to purchase minority equity stakes in Quest, a Singapore-based provider of global engineering solutions, from Warburg Pincus.

 Parts Town, an Addison, Ill.-based provider of OEM parts to the foodservice industry, has acquired Whaley Foodservice Repairs Inc., a Lexington, S.C.-based commercial food service equipment repair company. No financial terms were disclosed. Parts Town is a portfolio company of Summit Partners.

 VC3 Inc., a Columbia, S.C.-based provider of managed IT hosting and support services to the municipal government sector, has raised an undisclosed amount of growth equity funding from WestView Capital Partners.

 Visual China Group, a Shenzhen-listed image licensing company, said that it will invest up to $100 million into Getty Images, a Seattle-based stock photography company owned by The Carlyle Group. Read more.


 Zhong An Online P&C Insurance, a Chinese online insurance brokerage, reportedly is planning a U.S. IPO that could raise upwards of $2 billion. Read more.


No exit news this morning.


 BTG Pactual is in talks to sell its Swiss business to EFG International (SWX: EFGN), less than two years after having purchased the business for around $1.7 billion in cash and stock. Read more.

 Sprinklr, a VC-backed provider of social media marketing solutions, has acquire the assets of social media visualization platform Postano from TigerLogic Corp. No financial terms were disclosed.


 Permira has begun raising its sixth flagship fund with a €6.5 billion target, according to Private Equity International. The firm currently is investing out of a €5.3 billion fund raised in 2014.

 The Virginia Retirement System committed $250 million to a separate account to be managed by General Atlantic, and another $200 million for a distressed company-focused separate account to be managed by Littlejohn & Co. Read more.


 Felix Olale has joined LeapFrog Investments as a partner leading African healthcare investments. He previously served as chairman of Excelsior Group, a U.S. and Kenya-based advisor and developer of healthcare systems. LeapFrog also announced that its Asian healthcare investment group will be led by partner Michael Fernandes (who previously managed Khazanah Nasional Berhad’s healthcare portfolio).

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