Bizarro private equity — Killer tomato deal — VC funding bonanza

Top of the Morning | Tuesday, September 29, 2020

View in browser   Presented By The Carlos Watson Show   Pro Rata By Dan Primack ·Sep 29, 2020 🎧 Axios Re:Cap digs into the Trump tax story with Francine McKenna, an independent financial journalist and CPA. Listen via Apple, Spotify, or Axios. ⚖ Primary sources: The federal judge who on Sunday night granted TikTok a temporary injunction has unsealed his reasoning. Read it here.     Top of the Morning Illustration: Sarah Grillo/Axios   In Superman (and Seinfeld) lore, "bizarro" world is one in which the people and places are the same but different. Almost as if they've been inverted. The big picture: SPACs have become bizarro private equity. What's happening: Private equity firms have spent decades convincing public companies to go private, or private companies to swap financial sponsors. They tell CEOs that being private means no longer worrying so much about quarterly numbers, creating flexibility to make decisions in the company's best long-term interests. They won't pace public backlash over executive pay or the other disclosure downsides of public company life. Now, many of these same private equity firms are creating SPACs whose primary purpose is to take private companies public. Names like TPG and Gores and ArcLight and (just announced) H.I.G. Capital. The acquisition part is the same, but everything else is different. Even the transaction financing is inverted, often about equity instead of debt. It is, in a word, bizarro. The bottom line: Private equity has always been as much about business opportunity as it's been about business ideology. Its enthusiastic participation in SPACs reflects that reality, even if it defies the rhetoric.     The BFD Source: Giphy AppHarvest, a Morehead, Ky.-based developer of large-scale tomato greenhouses, is going public via a reverse merger with a SPAC called Novus Capital (Nasdaq: NOVSU). The company would have an initial market value of around $1 billion. Why it's the BFD: This is about to be a "unicorn" based in one of America's poorest congressional districts. AppHarvest CEO Jonathan Webb tells Axios that the company will employ around 350 people in Morehead by year-end, and that its location allows its product to reach 75% of the continental U.S. within a one-day drive. Details: The merger would include $375 million in new equity commitments from Fidelity, Inclusive Capital, and Novus Capital. AppHarvest previously raised around $160 million in VC funding firms firms like ValueAct Capital, Revolution Rise of the Rest, and Equilibrium Capital. AppHarvest directors include Martha Stewart, J.D. Vance, Jeff Ubben, and Impossible Foods CFO David Lee. The bottom line: "We looked at lots of ag startups, but a lot of time we found a desire to build tech for its own sake without a really good business model or understanding of how to bring the produce to market. But here they already had distribution agreements and were growing produce at scale with defensible margins." — J.D. Vance, AppHarvest director and early investor, tells Axios     Venture Capital Deals ⚡ Northvolt, a Swedish maker of lithium-ion batteries, raised $600 million. Baillie Gifford, Goldman Sachs and Volkswagen co-led, and were joined by Baron Capital Group, Bridfield Investments, Norrsken VC, PCS Holding, Cristina Stenbeck and Daniel Ek. http://axios.link/Vax4 🚑 XtalPi, a Cambridge, Mass.-based AI-based drug molecule designer, raised $319 million in Series C funding from SoftBank, PICC Capital, Morningside VC and return backers Tencent, Sequoia Capital China, China Life, and SIG. http://axios.link/a7ay 🚑 InventisBio, a Shanghai-based biotech startup focused on gout and breast cancer, raised $147 million in Series D funding. GL Ventures led, and was joined by Qiming Venture Partners, Janchor, AIHC Capital, Matrix Partner China, Dyee Capital, E Fund Capital and return backers Lilly Asia Venture, OrbiMed, Pudong Innotek, AdvanTech Capital, and CMB International. http://axios.link/JVcG • Seismic, a San Diego-based sales process automation company, raised $92 million in Series F funding. Permira led, and was joined by Ameriprise Financial, EDBI and return backers Jackson Square Ventures, Lightspeed Venture Partners, and T. Rowe Price. http://axios.link/NyaM • Exotec, a French maker of e-commerce warehouse robots, raised $90 million in Series C funding. 83North led, and was joined by return backers Iris Capital and Breega. http://axios.link/w2Tk 🚑 Dewpoint Therapeutics, a Cambridge, Mass.-based drug discovery startup focused on biomolecular condensates, raised $77 million in Series B funding. Arch Venture Partners led, and was joined by Maverick Ventures, Bellco Capital, and return backers Bayer, EcoR1 Capital, Polaris Partners, Samsara BioCapital, and Innovation Endeavors. http://axios.link/hVYp • KKday, a Taipei-based travel activities platform, raised $75 million in Series C funding. Cool Japan Fund and the National Development Fund of Taiwan co-led, and were joined by Monk's Hill Ventures and MindWorks Capital. http://axios.link/pGmY • ButterflyMX, a New York-based smart intercom developer for building tenants, raised $35 million. Volition Capital led, and was joined by Egis Capital, RiverPark Ventures and Stifel Venture Bank. www.butterflymx.com • PayCargo, a Coral Gables, Fla.-based payments network for global supply chains, raised $35 million from Insight Partners. www.paycargo.com • Axis Security, a San Mateo, Calif.-based zero-trust access startup, raised $32 million in Series B funding. Canaan Partners led, and was joined by return backers Ten Eleven Ventures and Cyberstarts. www.axissecurity.com • Thinkific, a Vancouver-based educational course creation platform, raised C$22 million led by Rhino Ventures. http://axios.link/FJYX 🚑 Ilias Biologics, a South Korean biotech focused on inflammatory diseases, raised $20.6 million in Series B funding. Backers include Asset One, Devsisters Ventures, Meritz Securities, Kiwoom Securities, Daishin Securities, Hanyang Securities/Yeolim Partners, and Genie Asset Management, and insiders Timefolio Asset Management and Daedeok Venture Partners. http://axios.link/WmjA 🚑 Koneksa, a New York-based developer of digital biomarkers for drug development, raised $16 million in Series B funding. Spring Mountain Capital led, and was joined by McKesson Ventures, Novartis, MBX Capital and return backers Merck and Waterline Ventures. http://axios.link/nERP • Huboo, a British e-commerce fulfillment startup, raised £14 million in Series A funding. Stride.vc led, and was joined by Hearst Ventures, Episode 1, Maersk Growth, Ada Ventures, and True Capital. http://axios.link/FO0U • UPShow, a Chicago-based provider of interactive digital signage for physical retailers, raised $14 million in Series A funding from 4490 Ventures, Jump Capital, TDF Ventures, and Signature Venture Banking Group. http://axios.link/5x2E 🚑 KeepMed, an Israeli developer of devices for treating obstructive sleep apnea, raised €13 million in Series C funding from Celeste Management, Financière Arbevel, 4See Ventures, and return backers Merieux Equity Partners, Pitango, Xenia Venture Capital, C4 Ventures and Lavorel Medicare. www.keepap.com • Ntech Lab, a Moscow-based provider of surveillance camera footage analytics, raised $13 million from the Russian Direct Investment Fund. http://axios.link/JQSN • Lyre's Non-Alcoholic Spirit Co., an Australian maker of non-alcoholic spirits, raised A$11.5 million in seed funding from VRD Investment, Doehler Ventures, DLF Venture, and Maropost Ventures. http://axios.link/ZYUa • Snappr, a San Francisco-based visual content marketplace, raised $10 million in Series A funding. Basis Set Ventures led, and was joined by YC and YesVC. http://axios.link/xjdV ⚡ Greenbird, a Norwegian digital integration hub for the utilities market, raised €5 million in Series B funding from EnBW New Ventures, Nysno, and ETF Partners. www.greenbird.com • DeepSurface Security, a Portland, Ore.-based provider of predictive vulnerability management software, raised $1 million in seed funding. Cascade Seed Fund led, and was joined by SeaChange Fund and Voyager Capital. www.deepsurface.com • HAGS, a high school social network, raised $1 million in seed funding led by GV. http://axios.link/Q9JZ     A message from The Carlos Watson Show Burst your bubble this election season with Carlos Watson     The time to talk is now. Hear from diverse voices and join a meaningful conversation with trendsetters and tastemakers, from Andrew Ross Sorkin to John Legend. Every weekday on The Carlos Watson Show. Watch now.     Private Equity Deals • EMS LINQ, a Wilmington, N.C.-based portfolio company of Banneker Partners, acquired Colyar, a Phoenix-based provider of management software for U.S. Agriculture Department nutrition and food distribution programs, from Castle Harlan. www.colyar.com • Investindustrial and Black Diamond Capital paid $425 million to buy Hexion PSR, a maker of specialty phenolic resins, engineered thermoset molding compounds and formaldehyde, from Hexion. http://axios.link/TmCi • Partners Group acquired Cote Restaurants, a British chain of French-style restaurants. http://axios.link/9OsQ • The Riverside Company acquired a minority stake in G&A Partners, a PEO and HRO provider. www.gnapartners.com     Public Offerings • McAfee, a San Jose, Calif.-based provider of provider of antivirus and endpoint security software, filed for an IPO that Renaissance Capital estimates could raise upwards of $2 billion. It plans to list on the Nasdaq (MCFE) with Morgan Stanley as lead underwriter, and reports $31 million of net income on $1.4 billion in revenue for the first half of 2020. Backers include TPG, Thoma Bravo, and Intel. http://axios.link/xNwe 🚑 C4 Therapeutics, a Watertown, Mass.-based developer of protein degraders for cancer treatment, set IPO terms to 8.8 million shares at $16-$18. The pre-revenue company would have a fully diluted market value of $725 million, were it to price in the middle, and plans to list on the Nasdaq (CCCC) with Jefferies as lead underwriter. It raised over $240 million from firms like Cobro Ventures (11.7% pre-IPO stake), Perceptive Advisors (8.1%), Cormorant Funds (7.8%), and RTW Funds (5.3%). http://axios.link/it97 🚑 Oncorus, a Cambridge, Mass.-based developer of viral immunotherapies for solid tumors, set IPO terms to 5.8 million shares at $14-$16. The pre-revenue company would have a fully diluted market value of $352 million, were it to price in the middle, and plans to list on the Nasdaq with Jefferies as lead underwriter. It raised $150 million in VC funding from firms like MPM Capital (17% pre-IPO stake), UBS Oncology (14.1%), Deerfield Management (11.6%), Cowen Healthcare Investments (7.5%), Arkin BioVentures (5.6%), and Perceptive Advisors. http://axios.link/ebPM     SPAC Stuff • EdtechX Holdings Acquisition II, an education-focused SPAC formed by IBIS Capital, filed for a $150 million IPO. http://axios.link/0gsm • H.I.G. Acquisition, a SPAC formed by H.I.G. Capital, filed for a $450 million IPO. http://axios.link/I8qi • Spartacus Acquisition, a TMT-focused SPAC led by Peter Aquino (ex-CEO of RCN), filed for a $250 million IPO. http://axios.link/hiFU 🚑 Turmeric Acquisition, a biotech-focused SPAC formed by MPM Capital, filed for a $100 million IPO. http://axios.link/FbRK     Liquidity Events • Endurance International Group, a Burlington, Mass.-based web-hosting company backed by Goldman Sachs and Warburg Pincus, restarted a review of strategic options that could include a sale, per Bloomberg. http://axios.link/OE3Z 🚑 One Equity Partners agreed to sell Simplura, a Valley Stream, N.Y.-based provider of home care services for the elderly and disabled, to Providence Service Corp. (Nasdaq: PRSC). www.simplura.com     More M&A • Hitachi (Tokyo: 6501) is prepping a sale process for its 53% stake in materials business Hitachi Metals (T: 5486), which could fetch more than $6.6 billion, per Reuters. http://axios.link/krVA • NTT (Tokyo: 9432) is launching a $40 billion take-private process for its Docomo wireless carrier unit. http://axios.link/cMgO • Uber (NYSE: UBER) is weighing a purchase of Free Now, a Europe and Latin America ride-hailing joint venture of Daimler and BMW, per Bloomberg. http://axios.link/Rb7D     Fundraising • Advent International raised $2 billion for its seventh Latin America-focused fund. www.adventinternational.com • GHK Capital has secured around $150 million of its $350 million target for its debut fund, per Buyouts. The firm was formed by Gilbert Klemann (ex-Goldman Sachs Merchant), and focused on lower mid-market industrials companies. http://axios.link/twd6 • H.I.G. Capital raised $1.3 billion for its sixth flagship fund focused on lower mid-market buyouts. www.higcapital.com • Silversmith Capital Partners, a Boston-based growth equity firm, raised $880 million for its third fund. www.silversmithcapital.com     It's Personnel • Bloomberg Beta promoted Minn Kim to principal. www.bloombergbeta.com • Manoj Sahoo joined Ara Partners, a PE firm focused on industrial decarbonization investments, as an operating partner. He's former COO of Calyxt. www.arapartners.com • TPG promoted Joseph Konzelmann to global head of the firm's client and capital formation group. www.tpg.com • Sujay Tyle joined Balderton Capital as a venture partner. He previously was co-founder and CEO of Frontier Car Group (acquired by FCG was acquired by OLX/Naspers). www.balderton.com     Final Numbers: LP survey says... Source: Eaton Partners LP Pulse Survey, September 2020 Eaton Partners, a fund placement agent, also found: Only 11% of LPs expect to resume physical meetings before year-end. 48% of LPs believe the biggest impacts of COVID-19 on the private markets are in the future. 60% of LPs expect Joe Biden to win the presidency, with 36% saying the election doesn't factor in their decision-making (13% call it a "significant factor"). 70% of LPs say they are not facing liquidity issues.     A message from The Carlos Watson Show The Carlos Watson Show: The talk show that meets the moment     Discover trendsetters and tastemakers who are ahead of their time and worthy of yours, from Andrew Ross Sorkin to Gabrielle Union. Tune into the Carlos Watson Show — every day on YouTube. Watch now.   ✔️ Thanks for reading Axios Pro Rata! Please ask your friends, colleagues, and Feldman to sign up.   Axios thanks our partners for supporting our newsletters. Sponsorship has no influence on editorial content. 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