The unobvious IPO winner

July 8, 2021, 2:47 PM UTC

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Everyone wants a piece of pre-IPO companies.

That’s been made clear by the mass influx of later-stage investors (including Tiger Global) snapping up shares in companies just before they hit the public markets. The surging initial public offering market certainly has been a driver of that dynamic as the blockbuster businesses like Airbnb, Coinbase, and Snowflake go public and shower riches on venture capitalists that managed to get into the companies as private investors. 

Headlines (including my own!) have pointed to the massive gains experienced by the Sequoias, SoftBanks, and Peter Thiels of the world as a result of this post-pandemic dynamic. Meanwhile, most retail investors don’t have the net worth or network to directly invest in high-demand private businesses. So it was fun to take a dive into an under-the-radar stock that public market investors have used as a proxy for betting on the rise of the private markets and of the venture capital industry. 

As it turns out, it became one of the best performing stocks on the S&P 500 in the last year and the best bank stock not only of the past year, but the past decade.

As a part of Fortune’s Quarterly Investment Guide published Thursday, I wrote about Silicon Valley Bank. While the company is well known throughout the startup world as the bank of choice for the industry, it is less known outside of those walls. And because it is still considered a regional bank, it rarely makes it into the headlines.

In return for banking and lending to high-risk startups, SVB at times gets warrants to acquire shares in pre-IPO companies on top of any fees and interest payments. Analysts say that it knows the vast majority of these warrants will be worthless (SVB declined to confirm a percentage), but big winners in the portfolio can be a big sweetener for the bank. The bank’s warrants in companies going public like Coinbase, CrowdStrike, and Snowflake have helped push its gains on sales of investments and securities up 250% to $987.5 million in the 12 months ending March. The bank’s own shares have risen 166% in the last year.

What really has been its main growth driver however is not its proximity to these blockbuster IPOs—but in an even less well-known lending business known as the capital call line.

“While Silicon Valley Bank is known for banking tech startups, the secret to its most recent growth is actually even less mainstream. It’s a product known as a capital call line—or lending to private equity firms and venture capital investors. As dealmaking in the private markets hit all-time highs amid low interest rates, the so-called Global Fund Banking group, whose main product is the capital call line, has become SVB’s fastest-growing segment within lending,” says CEO Greg Becker.

The reasoning behind the growth of the segment is twofold: First, even if a venture capital firm has on paper a $1 billion fund, it takes time to draw the funding from its own investors—the limited partners—to actually put say $100 million to work in a company. In the fast-moving dealmaking world, that lost time can mean a lost deal. So private market investors may keep a capital call line to deploy investments faster. Second, firms can also use the line of credit to boost their internal rate of return (IRR) by effectively buying on margin or, more problematically, using the line to manipulate the IRR, the all-important benchmark upon which their performance is judged. IRR is calculated in large part based on the timing of the capital call. The later the capital call, the higher the return. By using the credit line, investors can delay the point at which they call for capital from their limited partners.

Read the story here.

PANDEMIC BOUNCE: Instawork, a company that got its start placing gig-economy workers in jobs within the hospitality space, took a downround amid the pandemic. Now, the company is raising $60 million and has grown its valuation by 650% as the economy reopens. The pandemic reopening play is in full swing. Read that story here.

Lucinda Shen

Jessica Mathews compiled the IPO section of the newsletter.


- Bunq, an Amsterdam-based challenger bank, raised $228 million (€193 million) in Series A funding. Pollen Street Capital led the round.

- Clearco, a San Francisco-based e-commerce company financing company, raised $215 million. SoftBank Vision Fund 2 led the round.

- Younited Credit, a French credit provider, raised $170 million. Goldman Sachs led the round and was joined by investors including Eurazeo, Bpifrance, and AG2R La Mondiale.

- Glossier, a New York City-based beauty products company, raised $80 million in Series E funding. Lone Pine Capital led the round and was joined by investors including Forerunner Ventures, Index Ventures, IVP, Sequoia Capital, and Thrive Capital. The deal values the company at $1.8 billion, per a source with knowledge of the matter.

- Thrive Global, a wellness startup founded by Arianna Huffington, raised $80 million in Series C funding. Kleiner Perkins and Owl Ventures led the round.

- Xilis, a Durham, N.C.-based cancer therapy company, raised $70 million in Series A funding. Mubadala Capital led the round and was joined by investors including GV, LSP, Catalio Capital Management, and Duke Angel Network. 

- Silk, a Needham, Mass-based database company, raised $55 million in Series B funding. S Capital led the round and was joined by investors including Sequoia Capital, Pitango, Globespan, Ibex, and Vintage as well as Clal Insurance, Bank Hapoalim, Meitav Dash and Menora Mivtachim.

- Unit21, a San Francisco-based fraud monitoring platform, raised $34 million in Series B funding. Tiger Global Management led the round. The deal values it at $300 million.

- r2c, a San Francisco-based startup with a security platform, raised $27 million in Series B funding. Felicis led the round.

- Osso VR, a San Francisco-based surgery-training focused virtual reality startup, raised $27 million in Series B funding. GSR Ventures led the round and was joined by investors including SignalFire, Kaiser Permanente Ventures, and Anorak Ventures.

- Popshop Live, a streaming retail startup, raised $20 million in Series A funding valuing it at $100 million, per TechCrunch. Benchmark led the round.

- Unibuddy, a New York City-based peer-to-peer university recruitment platform, raised $20 million in Series B funding. Highland Europe led the round and was joined by investors including Stride.VC.

- Ephemeral, a Brooklyn, New York-based maker of tattoos that fade within 9-15 months, raised $20 million in Series A funding. Investors included Anthos Capital, Primary Venture Partners, Canaan Partners, Techstars Ventures, Gaingels, Lauren Maillian, and The Syndicate Angels. 

- Spotlight Oral Care, a Dublin-based oral care brand, raised €12 million ($14 million) from Development Capital.

- Localyze, a Hamburg-based employee relocation company, raised $12 million from Blossom Capital. 

- WellSaid Labs, a Seattle-based maker of synthetic speech, raised $10 million in Series A funding. FUSE led the round and was joined by investors including Voyager, Qualcomm Ventures, and GoodFriends.

- LitLingo, an Austin-based A.I. risk monitoring platform focused on communication channels in companies, raised $7.5 million in Series A funding. Breyer Capital led the round and was joined by investors including former IBM CEO Sam Palmisano, LiveOak Venture Partners, Clarke Nobiletti, and James Marsico.

- Repeat, a Los Angeles-based startup looking to be an alternative to subscriptions, raised $6 million in funding. Battery Ventures led the round.

- Maude, a New York City-based sexual wellness brand, raised $5.8 million in Series A funding. True Beauty Ventures led the round and was joined by investors including Fable Investments, and WME.


- FTV Capital invested $100 million in LoanPro, a Farmington, Mass.-based loan management company. 

- JMI Equity invested $100 million in OnBoard, an Indianapolis-based board management software maker. 

- Koch Strategic Platforms invested $100 million in Eos Energy (Nasdaq: EOSE), an Edison, N.J.-based battery storage company.

- 48forty Solutions, backed by Audax Private Equity, acquired Oregon Pallet, a Salem, Ore.-based provider of recycled wood pallets and pallet services. Financial terms weren't disclosed.

- Abry Partners and Hoplon Capital acquired Fremont, Calif.-based Concentrix Corporation’s (NASDAQ: CNXC) insurance third-party administration and software platform. Financial terms weren't disclosed.

- Behrman Capital acquired Shur-Co, a Yankton, S.D.-based manufacturer of cargo covering. Financial terms weren't disclosed.

- Encora, backed by Warburg Pincus, acquired Daitan, a Brazilian company with software for digital engineering. Financial terms weren't disclosed.

- Gemspring Capital Management acquired a majority interest in Zavation Medical Products, a Flowood, Miss.-based maker of spinal health products. Financial terms weren't disclosed.

- Genstar Capital agreed to acquire a majority stake in Foreside Financial Group, a Portland, Me.-based risk compliance software maker, from Lovell Minnick Partners. Financial terms weren't disclosed.

- New Mountain Capital acquired Ascensus Specialties, a Bellevue, Wash.-based provider of specialty materials. Financial terms weren't disclosed.

- Obsidian Insurance Holdings, backed by Genstar, acquired Western Home Insurance Company, a home insurance company, from Western National Mutual Insurance. Financial terms weren't disclosed.

- Rhône agreed to invest in Wahoo Fitness, an Atlanta- based indoor cycling and endurance training company. Norwest Equity Partners will continue to own a minority investment in the company.

- Sun Capital Partners acquired LoanLogics, a Jacksonville, Fla.-based digital mortgage company. Financial terms weren't disclosed.


- Summit Companies acquired Republic Fire Protection, a provider of fire safety and protection services, from Lincoln Road Global Management and Peninsula Capital Partners. Financial terms weren't disclosed.

- Vestar Capital Partners acquired Stratus, a Mentor, Oh.-based provider of lighting services and signage, from Arcapita Group. Financial terms weren't disclosed.

- Hopin announced that it acquired Attendify, a San Jose-based event management platform. Financial terms weren't disclosed.


- Icosavax, a Seattle, Wash.-based biotechnology company that is developing coronavirus vaccines, filed for an initial public offering. The Bill & Melinda Gates Foundation gave the company a $10 million grant in October 2020. Adams Street Partners, Sanofi and RA Capital Management back the firm.

- F45 Training, an Austin-based fitness franchise, now plans to raise up to $345.3 million in an offering of 20.3 million shares priced between $15 to $17 per share. Mark Wahlberg, the actor, and ​​Kennedy Lewis Investment Management back the firm.

- Nuvalent, a Cambridge, Mass.-based cancer therapy company, filed for an initial public offering. Deerfield Management, Bain Capital Life Sciences and Fidelity Investment’s mutual fund investment advisor, Fidelity Management & Research Company, back the firm.

- Bianlifeng, a Beijing-based cashier-free convenience store operator, filed confidentially for an initial public offering in the U.S., according to Bloomberg.

- LinkDoc, a Beijing-based oncology big data company, has suspended its plans for a U.S. IPO, according to Reuters. The company had planned to raise up to $210.6 million in an offering of 10.8 million ADSs priced between $17.50 and $19.50 per ADS. Digital Medical Technology and New Enterprise Associates back the firm.

- HCW Biologics, a Miramar, Florida-based immunotherapy company, now plans to raise up to $56 million in an offering of 5.6 million shares priced between $8 and $10 per share. DeepWork Capital backs the firm. 

- Bridge Investment Group, a Salt Lake City, Utah-based real estate investment firm, now plans to raise up to $318.8 million in an offering of 18.8 million shares priced between $15 and $17 per share.

- Stevanato Group, an Italy-based delivery company focused on pharmaceuticals, now plans to raise up to $960 million in an offering of 40 million shares priced between $21 and $24 per share.

- Sight Sciences, a Menlo Park, Calif.-based eye disease medical device company, now plans to raise up to $160.5 million in an offering of 7 million shares priced between $20 and $23 per share.


- Circle, a cryptocurrency company, agreed to go public via merger with Concord Acquisition, a SPAC. The deal will value it at $4.5 billion.

- Planet Lab, a San Francisco-based satellite imaging company, will go public via merger with dMY Technology Group. The deal values the business at around $2.8 billion.

- Heliogen, a Pasadena, Calif.-based solar power company, will go public via merger with Athena Technology Acquisition, a SPAC valuing it at about $2 billion.


- Eurazeo, the Paris-based investor, raised €1 billion for its fourth secondaries fund.

- Lewis & Clark AgriFood, a St. Louis-based food company investor, raised $169 million for Lewis & Clark AgriFood Fund II and $88 million for Lewis & Clark RBIC Fund II.

- Acrylic, a Brooklyn, N.Y.-based early stage firm focused on crypto, raised $55 million.


- Relay Ventures, a Toronto-based investor, promoted Alex Baker and Irfhan Rawji to managing partner and Norman Winarsky to partner.

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