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Richard Branson and Chamath Palihapitiya Partner to Take Space Tourism Company Virgin Galactic Public: Term Sheet

Wow, OK, let’s start the day off with a bang. Two years ago, I wrote about Social Capital’s Chamath Palihapitiya’s lofty goal of helping billion-dollar startups get liquid sooner.

At the time, he had raised $600 million in an IPO for his blank check company, Social Capital Hedosophia Holdings. The idea was that Social Capital Hedosophia would acquire a big tech company and help it circumvent the initial public offering process. 

The process for a tech company valued at more than $1 billion to go public is long and distracting, Palihapitiya told me at the time. It involves conducting an investor roadshow and working with bankers, who often charge significant fees. Social Capital Hedosophia would offer faster liquidity for investors and employees, waive lock-ups, and trim the timeline of “going public” to roughly 60 to 90 days. 

Social Capital Hedosophia has been trading on the New York Stock Exchange since September 2017, and it just completed its first transaction. 

The special-purpose acquisition company (SPAC) is planning to invest roughly $800 million in Virgin Galactic for a 49% stake, according to The Wall Street Journal. The combined firm will have an enterprise value of $1.5 billion.

As part of the deal with Social Capital Hedosophia, Virgin Galactic would become the first publicly listed human-spaceflight company. Virgin Galactic expects that the deal will give it the capital necessary to fund the business until its spaceships can commercially operate and turn a profit. Virgin Galactic has already raised more than $1 billion since it was founded in 2004 —the funds coming mostly from Virgin Group founder Richard Branson. 

“By taking Virgin Galactic public, at this advanced point in its development, we can open space to more investors and in doing so, open space to thousands of new astronauts,” Branson said in a statement. 

So wait, how did Branson end up doing business with Palihapitiya? I’ve interviewed both, and they're very similar in that their unbridled ambitions are no secret. What’s interesting here is that Branson was in talks with Saudi Arabia’s Public Investment Fund for a $1 billion investment in his company, but Branson suspended the plans following the murder of journalist Jamal Khashoggi at a Saudi consulate. Branson then met with Palihapitiya and his team about a potential investment through the SPAC.

The duo and their teams have been fully focused on this for the last nine months, Palihapitiya told Term Sheet this morning. He added, “Not only is it going to be the first public space tourism company, but the things they are building are revolutionary. It is an incredibly compelling business.” 

Palihapitiya is also investing $100 million of his personal money, and he will serve as the chairman of the company. 

Virgin Galactic is in competition with rivals Jeff Bezos’ Blue Origin and Elon Musk’s SpaceX. I asked Branson about his competitors in 2016. While Elon Musk’s SpaceX focuses on launching satellites and transporting humans to Mars, Branson said he doesn’t necessarily see him as a direct competitor. “I suppose I see [Musk] as a younger version of myself,” he says. As for Bezos? “The public will have to decide which vehicle they’d rather go to space in,” Branson said of Virgin Galactic and its competitor, Blue Origin. “Both of us will be striving to be better than the other, and we’ll see who pulls that off.”

VENTURE DEALS

Menlo Security, a Menlo Park, Calif.-based cloud security startup, raised $75 million in Series D funding. JP Morgan Asset Management led the round.

15Five, a San Francisco-based provider of continuous performance management solutions, raised $30.7 million in Series B funding. Next47 led the round, and was joined by investors including Matrix Partners, PointNine Capital, LAUNCH Fund, Newground Ventures, Bling Capital, Chaifetz Group and Origin Ventures.

Jacobi Inc, a San Francisco-based investment technology platform, raised $11 million AUD ($7.6 million) in funding. Investors include Illuminate Venture Partners, 8VC and Credit Ease Venture Fund.

Connected Robotics, a Japan-based developer of specialized robot systems for cooking in restaurant kitchens, raised 850 million yen (~$7.8 million) in Series A funding. Global Brain Corporation led the round.

4th & Heart, a Los Angeles, Calif.-based artisanal food brand, raised $7.6 million in Series C funding. Harbinger Ventures led the round.

DriveNets, an Israel-based networking software company, raised $7 million in Series A funding. Investors include Steve Luczo, Mark McLaughlin, John Thompson, and C4 Ventures. This amount brings DriveNets’ total Series A funding round to $117 million.

PERQ, an Indianapolis-based marketing technology company, raised $6 million in funding. Poplar Ventures led the round.

Kaleidoscope Labs, a New York City-based functional wellness and CBD brand, raised $4 million in seed funding. RRE Ventures led the round, and was joined by investors including Barry Rosenstein.

Amp Human, a Park City, Utah-based maker of products for athletes, raised funding of an undisclosed amount. Next Ventures led the round.

Brandable, a Beverly Hills, Calif.-based technology-enabled consumer packaged goods platform, raised Series B funding of an undisclosed amount. Cota Capital led the round, and was joined by investors including Lightspeed Venture Partners, Advance Venture Partners, Pentland Ventures and Fields Texas.

HEALTH AND LIFE SCIENCES DEALS

BioNTech SE, a Germany-based clinical-stage biotechnology company focused on patient-specific immunotherapies, raised $325 million in Series B funding. Fidelity Management & Research Company led the round, and were joined by investors including Redmile Group, Invus, MiraeAsset Financial Group, Platinum Asset Management, Jebsen Capital, Steam Athena Capital, BVCF Management and the Struengmann Family Office.

GNS Healthcare, a Cambridge, Mass.-based precision medicine company, raised $23 million in Series D funding. Cigna Ventures led the round, and was joined by investors including Amgen Ventures, Celgene, Echo Health Ventures, Alexandria Venture Investments, and Gary Loveman.

Unmade, a London-based fashion software company, raised £4.75 million ($5.9 million) in funding. Octopus Ventures led the round, and was joined by investors including MMC Ventures, and Felix Capital.

MedaRed Inc, a San Francisco-based biotechnology company focused on discovering and developing new therapeutics targeting fibrin, raised $6.5 million in seed funding. Dementia Discovery Fund and Dolby Family Ventures co-led the round.

PRIVATE EQUITY DEALS

Avaap, a portfolio company of NMS Capital, acquired Navigator Management Partners, a Columbus, Ohio-based cross-platform management and technology consulting firm. Financial terms weren’t disclosed. 

Marlin Equity Partners acquired Clarus Commerce, a Rocky Hill, Conn.-based provider of premium loyalty programs for retailers. Financial terms weren’t disclosed. The investment was made alongside Norwest Venture Partners

Verdi Oncology, a portfolio company of Pharos Capital Group, acquired Nashville Oncology Associates PC, a Nashville, Tenn.-based cancer care provider. Financial terms weren’t disclosed. 

Cinven agreed to make a “significant” investment in Jaggaer, a Research Triangle Park, N.C.-based provider of procurement software for large and medium-sized businesses. Financial terms weren’t disclosed. 

Frontier Capital invested in GovQA, a Chicago-based provider of government enterprise workflow software. Financial terms weren’t disclosed. 

IPOs

DouYu International Holdings, a Wuhan, China-based  live game-streaming platform, plans to raise $859 million in an IPO of 67.4 million shares (33% insider sold) priced between $11.50 to $14.00. The firm posted $531.5 million in revenue  and loss of $127.4 million in 2018. Tencent backs the firm. Morgan Stanley, J.P. Morgan and BofA Merrill Lynch are underwriters. It plans to list on the NYSE as “DOYU.” Read more.

AssetMark Financial Holdings, a Concord-based wealth management platform for independent financial advisers, plans to raise $250 million in an IPO of 12.5 million shares (50% insider) priced between $19 to $21. It posted revenue of $363.6 million in 2018 and income of $37.4 million. Huatai International backs the firm. J.P. Morgan, Goldman Sachs, Credit Suisse, and Huatai Securities are underwriters. It plans to list on the NYSE as “AMK.” Read more.

Tyro Payments, an Australian payments firm, is weighing an IPO in the country. The firm is valued at about $2 billion. Read more.

EXITS

Long Ridge agreed to sell BlueTarp Financial, a Portland, Maine-based provider of customized B2B credit management programs, to Capital One. Financial terms weren’t disclosed. 

Trilantic North America sold Home Franchise Concepts, an Irvine, Calif.-based franchising system in the home improvement goods and services space, to JM Family Enterprises. Financial terms weren’t disclosed. 

Pamplona Capital Management acquired a majority stake in Infiana, a Germany-based provider of engineered polyolefin films. The sellers included Deutsche Beteiligungs AG. Financial terms weren’t disclosed. 

Great Hill Partners acquired EnterpriseDB, a Bedford, Mass.-based developer of Postgres software. The seller was PeakEquity Partners. Financial terms weren’t disclosed. 

Ardian sold Schleich, a Germany-based toy manufacturer, to Partners Group. Financial terms weren’t disclosed. 

ArchiMed acquired EUROLyser GmbH, an Austria-based point-of-care testing specialist. Financial terms weren’t disclosed. 

Genstar Capital acquired Advarra, a Columbia, Md.-based provider of compliance solutions that are critical to the drug development process, from Linden Capital Partners. Financial terms weren’t disclosed. 

FIRMS + FUNDS

Flexpoint Ford LLC, a Chicago-based private equity firm, raised $2 billion across two funds — $1.5 billion for Flexpoint Fund IV and $500 million for Overage Fund IV raised $500 million.

Prospect Hill Growth Partners, a Waltham, Mass.-based private equity firm, raised $380 million for its second fund, Prospect Hill Growth Fund II, L.P.

InnovaHealth Partners, a New York-based medical private equity firm, raised more than $53 million for its new fund, according to an SEC filing. The fund’s target was not listed.

Haystack, a San Francisco-based venture capital firm, raised $50 million for its fifth fund, according to a filing with the SEC.

PEOPLE

Genstar Capital promoted Sid Ramakrishnan to principal.

Pharos Capital Group promoted Ryan Shelton to principal.

Kari Sulenes joined Alpha Bridge Ventures as a partner. 

Accordion hired Junaid Samnani as managing director.

William (“Bill”) Cooling joined TSG Consumer Partners as a managing director.