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For better and for worse, it was stock-trading startup Robinhood that got the brunt of the attention from the meme-stock frenzy of recent months, rather than its rivals.
Robinhood is making its debut at a time when it is simultaneously beloved and despised. Revenue grew 681% in 2020 amid a surge in equity trading, yet customers are suing while regulators are scrutinzing the business. The discontent has grown so loud that on corners of Reddit, the conversation board of choice for retail traders, that some users have warned their peers away from the company’s IPO. As one user emphatically put it a few days ago: “DO NOT GO NEAR IT!!!”
Now facing the potential of becoming a meme stock itself, Robinhood priced its IPO at $38 a share, at the low end of its expected range, valuing the company at about $32 billion. While it is a significant step up for Robinhood’s private market investors, the pricing still signals that some investors were nervous about the high valuations the company sought.
But there’s also more to this particular story: It also signals that the banks and company itself may be also worried about how unconventional the IPO is, and how so-called meme traders may impact the stock. Per the Wall Street Journal: “The price reflects both hesitation on the part of some investors, who bristled at what they saw as the high valuation Robinhood sought, as well as a conscious decision by the company and its underwriters to be conservative in order to help set up a successful first-day of trading, according to people familiar with the matter.”
And there is a lot new in this IPO. While most companies, in a bid to keep trading stable, try to lock down long-term investors, Robinhood is offering between 20% to 35% of the IPO shares to its meme-heavy retail traders. While those traders are discouraged from selling shares for 30 days (traders that do “may be prevented from participating in IPOs for 60 days,” per the company’s website), they are by no means barred from flipping the stock. Not to mention, Robinhood is also allowing employees to sell 15% of their shares immediately after the stock lists, rather than the typical six-month lockup period.
It’s good to see companies shaking up the traditional IPO process, but it’s also causing anxiety for bankers.
In short: There’s a lot of new ground here, and a lot to be uncertain about. And while most stories around such listings focus on the CEOs, founders, and early investors, the stars this time around may be the meme traders.
A CASE FOR CROWDFUNDING: Though its proponents predicted crowdfunding could give traditional venture capital a run for its money, those forecasts so far remain unfulfilled. The total amount raised through the method in 2020 grew only to $215 million—a smudge when compared to the broader venture market that raised $156 billion in the U.S.
There’s a lot of good reasons for the lack of interest: In the early stages of a business, founders can source important employees and operational know-how from venture capitalists, and at the former $1 million cap, it wasn’t always enough to get a company off the ground.
Newly minted unicorn Mercury Bank, however, is giving a case for the practice. Confirming a $115 million Series B round of funding led by Coatue (as first reported by the Information), the bank focused on startups and e-commerce companies is raising $5 million via a crowdfunding campaign on WeFunder. Mirroring the rash of startups giving their clientele shares in the IPO process (Acorns and Robinhood, to name a few), Mercury plans to give priority to its customers. While Mercury is the most valuable startup to do so yet, it is not the only one to take advantage of the higher crowdfunding limits, instated in March, to raise from so-called regular investors and notable venture capitalists at the same time. Creator economy-focused Gumroad in March raised $5 million of a $6 million round from, well, the crowds.
As SPACs and direct listings are to the traditional IPO process, crowdfunding may not be the second coming for traditional venture capital, but it is certainly becoming a compliment. Read the full story here.
Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com
Jessica Mathews compiled the IPO and SPAC sections of this newsletter.
VENTURE DEALS
- Exo, the maker of an ultrasound device, raised $220 million in Series C funding. RA Capital Management led the round and was joined by investors including BlackRock, Sands Capital, Avidity Partners, and Pura Vida Investments.
- Culture Amp, an Australian employee engagement platform, raised $100 million in Series F funding at a $1.5 billion valuation. TDM Growth Partners and Sequoia Capital China led the round.
- Strata Oncology, an Ann Arbor, Mich.-based oncology company, raised $90 million in Series C funding. Wellington Management led the round and was joined by investors including Cormorant Asset Management, Monashee Investment Management, and Highside Capital Management.
- Homebase, a San Francisco-based platform for managing hourly teams, raised $71 million in Series C funding. GGV Capital led the round and was joined by investors including Bain Capital Ventures, Baseline Ventures, Bedrock Capital, Cowboy Ventures, Khosla Ventures, and PLUS Capital.
- Lithic, a New York City-based issuing platform for developers, raised $60 million in Series C funding. Stripes led the round and was joined by investors including Bessemer Venture Partners, Index Ventures, Exor, Rainfall, Tusk Venture Partners, and Commerce Ventures.
- Coralogix, a San Francisco-based analytics platform, raised $55 million in Series C funding. Greenfield Partners led the round and was joined by investors including Red Dot Capital Partners, StageOne Ventures, Eyal Ofer's - O.G. Tech, Janvest Capital Partners, Maor ventures, and 2B Angels.
- Brain Technologies, a startup with an app seeking to replace phone apps, raised $50 million in funding. Investors include Laurene Powell Jobs’ Emerson Collective, Goodwater Capital, Scott Cook, and WTT Investment.
- inVia Robotics, a Westlake Village, Calif.-based warehouse automation company, raised $30 million in Series C funding. M12 and Qualcomm Ventures invested along with Hitachi Ventures.
- QuotaPath, a Philadelphia-based commission-tracking software maker, raised $21.3 million in Series A funding. Insight Partners led the round and was joined by investors including ATX Ventures, Integr8d Capital, Stage 2 Capital, and HubSpot Ventures.
- Niron Magnetics, a Minneapolis-based maker of magnets free of rare earths, raised $21.3 million. Investors include The Volvo Cars Tech Fund and Volta Energy Technologies.
- OneDay, a Dallas-based video storytelling tech maker, raised $19 million in Series B funding. Volition Capital led the round.
- Spot, an Austin-based injury insurance provider, raised $17.5 million in funding. GreatPoint Ventures led the round and was joined by investors including Montage Ventures, Silverton Partners, Mutual of Omaha, and MS&AD.
- Realm, a New York City-based database for homeowners, raised $12 million in Series A funding. GGV Capital led the round and was joined by investors including Primary Venture Partners, Lerer Hippeau, and Liberty Mutual Strategic Ventures.
- Global66, a Santiago, Chile-based B2B and B2C cross-border payments platform, has raised $12 million in Series A funding. Quona Capital led the round, and was joined by Magma Partners, Clocktower Technology Ventures (US), and Venrex Investment Management (UK).
- Daisy, a New York City-based property management company, raised $4.5 million. Aleph led the round.
- Amplify Life Insurance, a San Francisco-based life insurance platform, raised $2.5 million in seed funding. Anthemis led the round and was joined by investors including Transverse Ventures Fund.
- Mentor Spaces, a mentorship platform for companies to scale diversity, raised $2.5 million. The American Family Insurance Institute for Corporate and Social Impact led the round.
PRIVATE EQUITY
- CorEvitas, a portfolio company of Audax Private Equity, acquired Vestrum Health, a data analytics company for retinal diseases. Financial terms weren't disclosed.
- NewQuest Capital Partners acquired a minority stake in Cloudnine, an India-based birthing center for maternal, childcare and fertility care. Financial terms weren't disclosed.
EXIT
- Summit Partners invested €180 million in Odoo, a Belgium-based business software company. Sofinnova Partners and XAnge exited.
OTHER
- Hill-Rom Holdings, a medical equipment maker, rejected a $9.6 billion takeover offer from Baxter International, per Bloomberg.
- Adecco Group agreed to acaquire Akka Technologies, a Paris-based provider of consulting services for tech-focused engineering projects, for €1.5 billion ($1.8 billion).
- SoftBank Group is selling $2.1 billion of its stake in Uber Technologies, the U.S.-based ride-hailing company, per CNBC. The deal comes as SoftBank’s stake in Chinese ride-hailing company Didi falls in value.
- Fosun will make a minority investment in Evil Geniuses, a Seattle-based esports organizations, valuing it at $255 million post-investment.
IPO
- Healthcare Royalty, a Stamford, Conn.-based royalty acquisition company, plans to raise $797 million in an offering of 46.9 million shares priced between $15 and $17 per share. The company posted income of $228.8 million in 2020.
- Traeger, a Salt Lake City, Utah-based grill company, raised $423.5 million in an offering of 23.5 million shares priced at $18 per share. The company posted $545.8 million in revenue in 2020 and net income of $31.6 million. AEA Investors, the Ontario Teachers' Pension Plan and Trilantic Capital Partners back the firm.
- Riskified, an Israeli fraud prevention software company, raised $367.5 million in an offering of 17.5 million shares priced at $21 per share—it had previously planned to raise $350 million. The company posted $169.7 million in revenue in 2020 and a net loss of $11.3 million. General Atlantic and Fidelity Management & Research Company back the firm.
- European Wax Center, a Plano, Texas-based hair removal salon chain, plans to raise up to $190.8 million in an offering of 10.6 million shares (up to 15% sold by insiders) priced between $15 and $18 per share. The company generated $103.4 million in 2020 revenue and ran at a net loss of $21.5 million. General Atlantic backs the firm.
- Icosavax, a Seattle-based biotech developing coronavirus vaccines, raised $182 million in an offering of 12.1 million shares priced at $15 per share. It has previously planned to offer 10 million shares. 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.
- Nuvalent, a Cambridge, Mass.-based cancer therapy company, raised $166 million in an offering of 9.8 million shares priced at $17 per share. Deerfield Management, Bain Capital Life Sciences, and Fidelity Management & Research Company, back the firm.
- Rallybio Corporation, a New Haven, Conn.-based rare disorder biotechnology company, raised $80.6 million in an offering of 6.2 million shares priced at $13 per share. 5AM Ventures and Viking Global Investors back the firm.
- Clarios International, a Milwaukee, Wis.-based battery technology company, postponed its IPO indefinitely due to market conditions, per Bloomberg. Brookfield and Caisse de dépôt et placement du Québec acquired the firm in 2019.
SPAC
- Vacasa, a Portland, Or.-based vacation management platform, will go public via merger with TPG Pace Solutions, a SPAC. It values Vacasa at about $4.5 billion.
- Nanosys Inc., a Milpitas, Calif.-based quantum-dot technology company, is in talks to go public via a merger with the SPAC GigInternational1 Inc., per Bloomberg.
PEOPLE
- M12, Microsoft’s venture capital arm, named Michelle Gonzalez as the new corporate vice president and global head of M12.
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