Axios Pro Rata: Why Formation folded

Plus, Didi's IPO implosion. | Monday, April 18, 2022

Open in app View in browser   Presented By RBC Capital Markets   Axios Pro Rata By Dan Primack · Apr 18, 2022     Top of the Morning Illustration: Aïda Amer/Axios   "It was a long time coming." That was the reaction of a former employee of Formation Group, the Silicon Valley venture firm that last week took the highly unusual step of putting its fund into bankruptcy protection. And the sentiment was hardly unique, based on conversations with multiple other sources. Backstory: Formation Group was launched in 2015 by Brian Koo, a scion of the family that founded publicly traded South Korean conglomerate LS Group, following the tumultuous breakup of an earlier VC firm called Formation 8. It raised $354 million for its debut fund and began a disastrous string of investments: Formation plugged around $90 million into Eva Automation, a failed audio startup led by former Facebook and YouTube CFO Gideon Yu; who was part of Formation's founding team but who later had a falling out with Koo. It also put more than $50 million into Yello Mobile, a South Korean fintech that imploded in a rash of litigation. One bright spot was an early investment in Indonesian ride-hail giant GoJek, but Koo sold those shares at just a tiny profit so that he could plug more money into... HonestBee, a Singapore-based online delivery upstart that Koo believed would become the future of shopping in Southeast Asia. The company would eventually fold, but not before its co-founding CEO was accused of self-dealing and embezzlement, and Koo briefly took over as CEO. The big problem was that Koo didn't just put good good fund capital after bad into HonestBee. According to multiple sources, he also leveraged the fund without limited partner approval — via a $53 million loan from an affiliate of LS Group. It was collateralized by future cash flow from fund distributions. But there were no real fund distributions, so LS Group eventually initiated arbitration proceedings. And, in case you missed this part, that's members of Brian Koo's family essentially suing Brian Koo. The bankruptcy filings are designed to protect Formation Group both from LS Group, as a creditor, and also from the possibility that the arbitration could prompt litigation from LPs (although it's unclear what they'd stand to gain financially). Koo didn't respond to a request to speak with Axios, and an attorney for the LS Group affiliate declined comment. The bottom line: Formation Group is done. The legal wrangling over its remaining scraps is not.     The BFD Illustration: Sarah Grillo/Axios   DiDi Global (NYSE: DIDI), the Chinese ride-hail giant, said that it plans to delist its shares in the U.S. before applying to list on an alternate exchange. Why it's the BFD: This has become one of the IPO market's most colossal busts, with more than $57 billion of market cap destroyed in just nine months. And it could have been avoided, had DiDi executives not miscalculated the resolve of Chinese regulators. Details: DiDi said it will hold an extraordinary general meeting on May 23 to vote on the NYSE delisting, adding that its Q4 net loss grew by 95% year-over-year and that its revenue fell by 13%. The bottom line: This casts a further pall on Chinese equities in the U.S., which recently got some hopeful glimmers when Beijing agreed to loosen rules that effectively prevented Chinese companies from sharing audited financials with American securities regulators.     Venture Capital Deals 🚑 Be Biopharma, a Cambridge, Mass.-based developer of B cell medicines, raised $130m in Series B funding. Arch Venture Partners led, and was joined by Bristol Myers Squibb, Atlas Venture, RA Capital Management, Alta Partners, Longwood Fund and Takeda Ventures. http://axios.link/Eu7p • Fi, an Indian neobank, is in talks to raise around $100m at a $700m valuation led by Alpha Wave Global, per TechCrunch. http://axios.link/VG7d ⚡ Ohmium, an Incline Village, Nev.-based maker of PEM electrolyzers, raised $45m in Series B financing. Fenice Investment Group led, and was joined by Energy Transition Ventures. http://axios.link/wlu0 🚑 Clipboard Health, a Walnut, Calif.-based nurse shift-matching marketplace, raised $30m in Series C funding at a $1.3b valuation. Sequoia Capital led, and was joined by IVP, YC, Caffeinated Capital, Initialized Capital and SciFi VC. http://axios.link/PS2N • Cal.com, an S.F.-based scheduling platform, raised $25m in Series A funding. Seven Seven Six led, and was joined by OSS Capital, Obvious Ventures and Daily.co. http://axios.link/x90G • UrbanPiper, an Indian restaurant management platform, raised $24m in Series B funding. Insiders Sequoia Capital India and Tiger Global co-led, and were joined by Swiggy and Zomato. http://axios.link/qUKd • Fasset, a British digital asset gateway, raised $22m in Series A funding. Liberty City Ventures and Fatima Gobi Ventures co-led, and were joined by Soma Capital and MyAsiaVC. http://axios.link/D2l • Stem, an L.A.-based distribution and payments platform for musicians and labels, raised $20m. QED Investors led, and was joined by Block, Slow Ventures and Quality Control. www.stem.is • Union54, a Zambian card issuing startup, raised $12m in new seed funding. Tiger Global led, and was joined by Vibe VC, Earl Grey Capital and Not Boring Capital. http://axios.link/0ZnT • EPNS, a decentralized communication layer for crypto, raised $10.1m in Series A funding. Jump Crypto led, and was joined by Tiger Global, ParaFi, Polygon Studios, Wintermute, Sino Global Capital, Harmony Foundation and Zebpay. http://axios.link/441F • Mytaverse, a Miami-based enterprise metaverse infrastructure startup, raised $7.6m in seed funding. Blumberg Capital led, and was joined by Correlation Ventures and Accelerator Ventures. www.mytaverse.com 🚑 Sika, a New York-based startup focused on FSA/HSA payments, raised $6.2m in seed funding led by Forerunner Ventures. www.sikahealth.com     A message from RBC Capital Markets 2021 PE M&A activity was 50% higher than the previous record     Private equity (PE) firms executed 8,500 transactions worth over $1.2 trillion in value last year. Even better: Funds are experiencing significant growth and the outlook for private equity M&A dealmaking remains strong in 2022. Learn what's next for private equity and M&A.     Private Equity Deals • Alpine Air Express, a Provo, Utah-based portfolio company of AE Industrial Partners, bought Suburban Air Freight, an Omaha, Neb.-based regional air cargo carrier. www.alpine-air.com 🚑 ArchiMed agreed to buy Natus Medical (Nasdaq: BTUS), an Orlando-based neurological medical device maker, for around $1.2b. http://axios.link/HQtM • Bain Capital agreed to buy a majority stake in French IT services provider Inetum from Qatar's Mannai at a €1.85b enterprise value. http://axios.link/A5nu ⚡ EQT and KKR are among the suitors for British gas station operator Motor Fuel Group, which is being sold by Clayton Dubilier & Rice for around £4.6b, per The Telegraph. http://axios.link/bXMR     Public Offerings 🚑 PepGen, a Cambridge, Mass.-based developer of therapeutics for Duchenne muscular dystrophy, filed for a $115m IPO. It plans to list on the Nasdaq (PEPG) and raised $176m from firms like RA Capital Management, University of Oxford, CureDuchenne Ventures and Oxford Sciences Innovation. http://axios.link/kUdi     SPAC Stuff • Iconiq, a Chinese electric vehicle maker, agreed to go public at an implied $2.5b valuation via East Stone Acquisition Corp. (Nasdaq: ESSC). Iconiq raised over $180m from firms like GSR Ventures and AutoX Technologies. http://axios.link/DaQw • Abri SPAC 2, a tech SPAC led by Jeffrey Tirman, filed for a $100m IPO. http://axios.link/Nh5v 🚑 Biotech Group Acquisition, a North America biotech SPAC led by Melody Shi (YCM CPA), filed for a $100m IPO. 🚑 Foresite Life Sciences, a biotech SPAC formed by Foresite Capital, withdrew registration for a $250m IPO. http://axios.link/SaF5     Liquidity Events 🚑 Coronis Health, a Sykesville, Md.-based physician billing and revenue cycle management startup, hired Guggenheim Securities to find a buyer, per Axios Pro. Backers include 424 Capital, Plexus Capital and Eagle Private Capital. http://axios.link/qY7a     More M&A 🚑 Groupe Bruxelles Lambert (Brussels: GBLB) is in talks to buy Dutch healthcare services firm Affidea for around €1.6b from Swiss tycoon Ernesto Bertarelli, per Bloomberg. http://axios.link/tQz4 • InfoWars and other companies owned by supplement-hawking conspiracy theorist Alex Jones, have filed for Chapter 11 bankruptcy protection. This comes amidst a flurry of civil litigation, including from parents of children murdered in the Sandy Hook shooting. http://axios.link/EJjn     Fundraising ⚡ Energy Capital Partners is raising up to $4b for its fifth fund, per an SEC filing. www.ecpgp.com • Trivest Partners, a Coral Gables, Fla.-based PE firm, is raising $900m for its seventh fund, per SEC filings. www.trivest.com 🚑 Transformation Capital, a Boston-based growth equity firm focused on digital health, raised $800m for its third fund. www.transformcap.com 🚑 Water Street Healthcare Partners is raising up to $1.4b for its fifth fund, per an SEC filing. www.waterstreet.com     It's Personnel • Gina Bauman joined Cota Capital as head of capital formation. She previously led IR and marketing for IVP. http://axios.link/J1ou • Shu Nyatta and Paulo Passoni, two of three managing partners on SoftBank's Latin America fund, have left to launch their own firm. http://axios.link/r3eR     Final Numbers Data: Moody's; Chart: Axios Visuals Go deeper: Corporate credit remains very loose     A message from RBC Capital Markets Healthcare remains a top sector for M&A activity     The healthcare sector saw a record $600B worth of M&A activity in 2021. About 50% of deal volume came from biopharma, but medtech and services also played important roles. Looking ahead: A slowdown in activity is anticipated, but M&A prospects remain strong. Learn what's next for healthcare M&A.   ✅ Thanks for reading Axios Pro Rata! Please ask your friends, colleagues and marathoners to sign up. Go deeper with Axios Pro: Deals, featuring hyper-relevant news and analysis across PE, VC and M&A.   Axios thanks our partners for supporting our newsletters. 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