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Are Investors ‘Whistling Past the Graveyard’ When It Comes to the Economy?: Term Sheet

September 19, 2019, 1:43 PM UTC

Stephen Schwarzman says he has lived through seven major market declines or recessions in his 50 years working on Wall Street. The CEO of Blackstone Group lists them in his new book What It Takes: 1973, 1975, 1982, 1987, 1990-1992, 2001, 2008-2010. Through all those experiences, he writes that there are “simple rules” for identifying them. 

So what about now? Is the U.S. headed into a recession as so many economists and market pros are predicting? “It’s unlikely now,” he tells my colleague Susie Gharib, adding, “but that doesn’t mean we won’t have a lower growth rate.” 

What worries Schwarzman the most right now is the China trade conflict. He says if the U.S. and China cannot resolve their differences, he fears they will drag down growth for the world economy. 

But Deloitte’s quarterly CFO survey, which was released this morning, shows that financial officers’ optimism about their own firms’ prospects has turned negative for the first time in seven years. 

Deloitte’s Sanford Cockrell III, head of the CFO program, said financial officers “are concerned about how Brexit, our US trade policy, and how the 2020 elections will impact the economy.” 

And as Fortune’s Alan Murray noted in this morning’s CEO Daily: FedEx CEO Fred Smith told investors: “I watch the business press every day and I have to tell you, I think there’s a lot of whistling past the graveyard about the U.S. consumer and the U.S. economy versus what’s going on globally.”

A PERSONAL BET: SoftBank’s Masayoshi Son, who built a $15.2 billion fortune investing in tech startups like Alibaba, has always bet on himself. He has pledged 38% of his stake in the Japanese firm as collateral for personal loans from 19 banks. That’s up from 36% at the start of the year and triple the level in June 2013.

“It lets him monetize a large share of his wealth without foregoing influence over the firm,” said Michael Puleo, assistant professor of finance at Fairfield University’s Dolan School of Business in Connecticut. “But there’s an elevation of crash risk. If the share price falls low enough, he could get a margin call and that could be pretty costly.”

The risk-loving Son, who saw $70 billion wiped from his fortune in the dot-com crash, is unlikely to be fazed. He told shareholders at the company’s June meeting that SoftBank’s investment portfolio could grow 33-fold to 200 trillion yen ($1.8 trillion) in 20 years. Read more.

WOMEN ON WALL STREET: Before the recession, several women looked poised to make the jump. Over a decade later, big banking still hasn’t seen a woman chief executive. 

Even as diversity initiatives and the #MeToo movement work to recalibrate corporate power dynamics across a range of industries and workplaces, Wall Street has remained terra incognita for women trying to reach the highest rung.

My colleague Claire Zillman has a brilliant feature titled, ‘Wall Street Has Never Had a Woman CEO. Why Not?Here’s an excerpt from the story:

Fortune started tracking female CEOs on the Fortune 500, which ranks firms by gross revenue, in 1998. Since then it has identified only two female bank CEOs. The first was the late Marion Sandler of Golden West Financial, which she founded with her husband and was bought by Wachovia in 2006. The second is Beth Mooney, CEO of KeyCorp, a regional bank based in Cleveland, which ranked No. 413 on this year’s Fortune 500. 

It’s not all bad news. Outright sexual harassment, the type that turned mostly male trading floors into petri dishes of misogyny decades ago, is less commonplace. Leaders have avowed the need to be inclusive and have tweaked recruiting machinery to nearly achieve gender parity among starting classes. The obstacles that remain are the smaller, more subtle barriers that range from “microaggressions” to “over-mentoring” and “under-sponsoring.” 

Fortune interviewed more than a dozen women who are veterans of banking and finance for this story. Some didn’t want their names used because they wanted to speak candidly about former employers. But their stories shared common threads of the cultural factors that are keeping the boys’ club in place. 

What they told us? Women want to be CEOs but are deemed not quite ready. Boards and shareholders say they want diverse leadership, but just can’t quite seem to find the right candidates once the top job opens up. All told, Wall Street finds itself at a standoff.

As of now, those in the financial community believe that JPMorgan Chase is the likeliest of the megabanks to break the all-male CEO streak. There are three women—CEO Marianne Lake, CFO Jennifer Piepszak, and asset and Wealth Management CEO Mary Erdoes—who are in the mix when talking about Jamie Dimon’s successor.

Read her feature here.

VENTURE DEALS

- Automattic, the San Franicsco-based company behind WordPress.com, WooCommerce and soon Tumblr, raised $300 million funding round at a $3 billion post-money valuation, from Salesforce Ventures.

- Checkr, a San Francisco-based provider of background checks and related services, raised $160 million of funding at a valuation of $2.2 billion. T. Rowe Price Associates led the round, and was joined by investors including Bond, Coatue, Accel, Y Combinator, and IVP. 

- Wunder Mobility, a Germany-based mobility technology company, raised $60 million in Series B funding. Investors include Blumberg Capital and KCK.

- PlayVS, a Santa Monica, Calif.-based software startup building a platform for competitive experiences on top of esports, raised $50 million in Series C funding. NEA led the round, and was joined by investors including Battery Ventures, Dick Costolo and Adam Bain of 01 Advisors, Sapphire Sport, Michael Zeisser, Dennis Phelps of IVP and Michael Ovitz. 

- Dental Intelligence, a Utah-based analytics and workflow automation platform for dental practices, raised $34 million in Series A funding, from K1 Investment Management.

- Built Robotics, a San Francisco-based developer of automation technology solutions for the construction industry, raised $33 million in Series B funding. Next47 led the round, and was joined by investors including Founders Fund, NEA, Lemnos, and Presidio Ventures.

- 128 Technology, a Burlington, Mass.-based provider of networking solutions, raised $30 million in Series D funding, and was joined by investors including 128 Technology, G20 Ventures, and The Perkins Fund.

- Takeoff Technologies, a Waltham, Mass.-based operator of an online grocery-shopping marketplace, raised $25 million in Series C funding. Forrestal Capital led the round.

- Skout Cybersecurity, a New York-based cloud-native cybersecurity provider for small and mid-sized businesses, raised $25 million in Series B funding. ClearSky led the round.

- Vouch Insurance, a San Francisco and Chicago-based insurance company serving early stage startups, raised $24.5 million in Series A funding. Ribbit Capital and SVB Financial Group led the round, and were joined by investors including Y Combinator, Index Ventures and 500 Startups.

- AvantStay, a West Hollywood, Calif.-based hospitality brand, raised $20 million in Series A funding. 3L Capital led the round, and was joined by investors including Bullpen Capital, Convivialite Ventures, F-Prime Capital, Zeno Ventures and Olympian Shaun White.

- Robin Healthcare, a Berkeley, Calif.-based health technology company that provides a digital assistant service, raised $11.5 million in Series A funding. Norwest Venture Partners led the round. 

- Red Sift, a London-based cognitive data platform that provides cloud-based email security solutions, raised $8.8 Series A funding. MMC Ventures led the round, and was joined by investors including  In-Q-Tel, Inc.

- Luca + Danni, Inc, a Cranston, R.I.-based jewelry brand, raised $6.2 million in funding. Investors include Ross-Simons Inc.

- Plum, a Waterloo, Canada-based talent data platform, raised C$4.2 million ($3.10 million) in seed funding. Real Ventures led the round.

- Aliro, a Boston-based building a platform for developers to code more easily for quantum environments, raised $2.7 million in seed funding. Investors include Flybridge Capital Partners, Crosslink Capital, and Samsung NEXT.

- Jorsek, a Rochester, N.Y.-based provider of knowledge management software for the technical documentation market, raised $2.7 million in funding. Armory Square Ventures led the round, and was joined by investors including Greycroft and Drake Ventures. 

- Voro, a New York-based healthcare social network where people share doctor recommendations with their friends and neighbors, raised $2.5 million in seed funding. Floodgate led the round.

HEALTH & LIFE SCIENCES DEALS

- Ginkgo Bioworks, a Boston, Mass.-based organism company, raised $290 million in Series E funding.  Investors include T. Rowe Price Associates.

- Scintil Photonics, a France-based developer of silicon photonic fully integrated circuits, raised 4 million euros ($4.4 million) in funding. Investors include Supernova Invest, Innovacom, Bpifrance, Credit Agricole Alpes Développement and Fund Foreis.

PRIVATE EQUITY DEALS

- Self Esteem Brands LLC, a portfolio company of Roark Capital Group, acquired The Bar Method, a San Francisco-based barre fitness brand. Financial terms weren't disclosed. 

- U-C Coatings, a portfolio company of High Road Capital Partners acquired the assets of the stains and industrial coatings business of Eco Chemical, Inc, a Seattle-based wood stains and coatings company. Financial terms weren't disclosed. 

IPOs

- Datadog, a New York-based SaaS-based analytics and monitoring platform for technology stacks, raised $648 million in an offering of 24 million shares at $27, above the upwardly-revised range of $24 to $26. The firm posted $198.1 million in revenue and a loss of $10.8 million in 2018. Index Ventures (20.1% pre-offering), OpenView Venture Partners (16%), and ICONIQ Strategic Partners (11.3%) back the firm. It plans to list on the Nasdaq as “DDOG.” Read more.

- Newlat, the Italian food group, plans to raise up to 200 million euros ($220 million) in an IPO in Milan by the end of October, Reuters reports citing sources. Read more.

- Ping Identity, a Denver-based firm focused on digital authentication and security, raised $188 million in an IPO of 12.5 million shares priced between $14 to $16 apiece, though that is likely a placeholder. The firm posted revenue of $201.6 million in 2018 and loss of $12.4 million. Vista Equity Partners, which acquired the firm for $600 million in 2016, backs it. It plans to list on the NYSE as “PING.” Read more.

- Exagen, a Vista, Calif.-based diagnostic blood test maker focused on lupus and rheumatoid arthritis, raised $50 million in an offering of 3.6 million shares priced at $14, the low end of its $14 to $16 range. The firm raised $32.4 million in an IPO and loss of $18.5 million in 2018. The New Mexico State Investment Council (31.5%) and Tullis-Dickerson Capital (25.4%) back the firm. It plans to list on the Nasdaq as “XGN.” Read more.

EXITS

- Clearway Pain Solutions, a portfolio company of NexPhase Capital, acquired KureSmart Pain Management, an Annapolis, Md.-based provider of comprehensive support services to pain management physicians, from New Harbor Capital. Financial terms weren't disclosed. 

FIRMS + FUNDS

- Afore Capital, a San Francisco-based venture capital firm, raised $77 million for its second fund, Afore II.

PEOPLE

- Domenic Perri joined Vertex Ventures US as a partner. 

- Jesse Morris joined Human Ventures as a managing partner.