| | | | | | | | | | | Axios Pro Rata | | By Dan Primack · Jun 13, 2022 | | Greetings from D.C., where tomorrow we'll be hosting a live event on the path forward for crypto investing. Interviews with venture capitalist Katherine Wu, Rep. Darren Soto (D-Fla.) and CFTC commissioner Christy Goldsmith Romero. Go here to join us in person or virtually. - 🚀 It's launch day for Axios Boston (finally!) and Axios Macro, a lunchtime econ newsletter written by Neil Irwin and Courtenay Brown.
| | | | | | Top of the Morning |  | | | Illustration: Maura Losch/Axios | | | | If you're looking for sunshine, you've come to the wrong place. - Over the past month, my conversations with private market investors have become progressively bleak. This culminated last night when a veteran source put his finger on why this is really different from 1999: Scale.
By the numbers: Private markets AUM hit $9.8 trillion through July 2022, which is up from just $7.4 trillion one year earlier, with over $2 trillion held by venture capital firms. - In 1999, U.S. startups raised around $47 billion. Last year they topped that during several individual months, raising a total of $330 billion.
- Neither macro economic growth nor inflation can explain away those numbers.
Why it matters: The private markets are more critical to the broader economy than they were in 1999, or during the Great Financial Crisis a decade later. Which means the fallout could be more messy. - Pain so far has been mostly localized to valuations, but soon it could hit income statements. Consumer spending power is flagging due to inflation, and corporate layoffs mean that enterprise tech contracts will include fewer seat licenses.
- VC funds will need to pick winners and losers, and some younger partners may be tempted to throw good money after bad (to keep their career-making "wins" afloat). Including in crypto, which no longer seems immune to the downturn. Oh, and LPs are over their paper gains.
Many startup CEOs seem late to recognize that valuations based on slight discounts to "future growth" may be this generation's "eyeballs" metric, perhaps believing this is just a blip that they have enough cash to survive. - Incumbents are certainly looking for devalued acquisition targets, but they'll be highly selective. Or as my conversant last night said: "Big companies don't want to buy new problems."
- Yes, new VC rounds are still being signed and announced. But a lot of the larger ones are highly-structured, which rarely gets announced externally or internally.
It's also rough waters ahead for leveraged buyouts whose debt usually is tied to floating rates (new deals may be a different animal, relying more on private credit). Forward guidance: The Nasdaq opened this morning down around 2.7% and the Dow opened down around 1.7%. The S&P 500, as of this writing, is back in a bear market. The bottom line: 2022 isn't about a single shock. It's about rolling, successive shocks that could interact with one another in crushingly unpredictable ways. |     | | | | | | The BFD |  | | | Illustration: Aïda Amer/Axios | | | | Blue Nile, a Seattle-based online retail of diamonds and jewelry, agreed to go public at an implied $683 million enterprise valuation via Mudrick Capital Acquisition Corp. II (Nasdaq: MUDS). Why it's the BFD: The SPAC market was poised to suffer its first week without a new merger since early January, before this announcement arrived at 5:40pm ET on Friday. Details: The merger would include an $80m PIPE from the private equity firms that took Blue Nile private in 2017 for around $500m: Bain Capital, Bow Street and Adama Partners. It also includes $50 million of new preferred equity from the SPAC sponsor, Mudrick Capital. The bottom line: Blue Nile is a dotcom-era retailer, and one of the few still alive, founded in 1999 to change how consumers bought diamond engagement rings. It first went public in 2004. | | | | | | | | Venture Capital Deals | | • Pixellot, an Israeli provider of automated sports video and analytics solutions, raised $161m. PSG led, and was joined by insider Israeli Secondary Fund. www.pixellot.tv • Echodyne, a Seattle-based maker of commercial radars for defense and autonomous tech, raised $135m in Series C funding co-led by Bill Gates and Baillie Gifford. www.echodyne.com 🚑 ImCheck Therapeutics, a French immunotherapeutics startup, raised €96m in Series C funding. Earlybird and Andera Partners co-led, and were joined by Invus, The Leukemia & Lymphoma Society and insiders Kurma Partners, Eurazeo, Gimv, EQT Life Sciences and Boehringer Ingelheim. http://axios.link/Zbuh • Magic Spoon, a DTC breakfast cereal startup, raised $85m in Series B funding. HighPost Capital led, and was joined by Siddhi Capital, Coefficient Capital, Constellation Capital and Carter Comstock. www.magicspoon.com 🚑 Corvia Medical, a Tewksbury, Mass.-based maker of shunt implants for heart failure, raised $54m in Series C funding from undisclosed investors. Existing backers include Third Rock Ventures, General Catalyst Partners, AccelMed, Lumira Ventures and Edwards Lifesciences. http://axios.link/1ipg 🚑 Bttn, a Seattle-based medical supplies e-commerce startup, raised $20m in Series A funding led by Tiger Global. http://axios.link/t7ts | | | | | | | | A message from Axios | | What matters this year in VC, PE and M&A | | |  | | | | Learn what's moving markets and driving valuations across Health Tech, Fintech, Retail, Climate, and Media. Download the industry report. | | | | | | Private Equity Deals | | 🚑 Blackstone and CPP Investments agreed to buy a majority stake in Advarra, a Columbia, Md.-based drug research services firm, from Genstar Capital. Earlier reports suggested around a $5b price tag. www.advarra.com • Cornerstone OnDemand, a portfolio company of Clearlake Capital, agreed to but SumTotal, a Gainesville, Fla.-based provider of learning and human capital management SaaS, from Skillsoft (NYSE: SKIL) for $200m in cash. www.cornerstoneondemand.com • Dyal Capital agreed to buy a massive minority stake in tech growth equity firm Lead Edge Capital, per Bloomberg. http://axios.link/EPgy • Genstar Capital agreed to buy Cerity Partners, a New York-based wealth management firm, from Lightyear Capital (which will retain a minority stake). www.ceritypartners.com • Vista Equity bought a majority stake in BetterCloud, a New York-based operations management SaaS whose existing backers include Accel, Bain Capital Ventures and Warburg Pincus. http://axios.link/wc2K | | | | | | | | Public Offerings | | • No companies expect to go public this week, as paint continues to dry on the IPO market window. http://axios.link/JObM • Nano Labs, a fabless Chinese chip designer, filed for a $50m IPO. It plans to list on the Nasdaq (NA) and reports $6m of 2021 revenue. http://axios.link/Laim | | | | | | | | SPAC Stuff | | • Federal regulators have expanded their investigation into the planned merger between Digital World Acquisition Corp. (Nasdaq: DWAC) and former President Trump's social media business, known as Truth Social, according to a Monday morning disclosure. Go deeper. | | | | | | | | Liquidity Events | | • Clayton Dubilier & Rice plans to sell off the warehouses and food production factories of Morrisons, the British supermarket chain for which it just received regulatory approval on its £9.8b buyout, per The Telegraph. http://axios.link/sQEV • CVC Capital Partners is seeking a buyer for VelocityEHS, a Chicago-based provider of enterprise compliance software that could fetch up to $2b, per Reuters. http://axios.link/PhmB • EQT is seeking a buyer for GPA Global, a New York-based packaging firm that could be valued at between $700m and $800m, per Bloomberg. http://axios.link/PXyB ⚡ Kayne Anderson is seeking a buyer for Sabinal Energy, a Texas oil producer in the Permian Basin that could fetch more than $1b, per Bloomberg. http://axios.link/Em2q • Spotify (NYSE: SPOT) agreed to buy Sonantic, a London-based AI for creating human-sounding voices from text. Sonantic had raised around $6m in VC funding from firms like EQT Ventures. http://axios.link/TwD7 | | | | | | | | More M&A | | • Ajinomoto (Tokyo: 2802), a Japanese seasonings maker, is seeking a buyer for South African food and beverages group Promasidor, which could fetch around $1.5b, per Bloomberg. http://axios.link/oyz7 ⚡ Cenovus Energy (TSX: CVE) of Canada agreed to buy the remaining 50% stake in the Sunrise oil sands project in northern Alberta from BP (LSE: BP) for up to C$1.2b (including C$600m upfront). http://axios.link/cAzc • Countryside Partnerships (LSE: CSPC), a British homebuilder under activist pressure, put itself up for sale after rejecting a $1.9b takeover offer from Inclusive Capital. http://axios.link/LMGZ • Go-Ahead (LSE: GOG), a British bus and rail transportation company with a £522m market cap, said it's received takeover offers from Australia's Kelsian Group (ASX: KLS) and a paring of Australia's Kinetic Holding Co. with Spain's Globalvia Inversiones. http://axios.link/JQpy • Prologis (NYSE: PLD) agreed to buy Duke Realty (NYSE: DRE) for $26b in stock. Duke Realty had previously rejected a $24b offer. • Revlon, the New York-based cosmetics firm owned by Ron Perelman, reportedly is preparing to file for Chapter 11 bankruptcy protection as early as this week. http://axios.link/rkyy • Viacom18 will pay $2.6b for five years of streaming media rights to Indian Premier League cricket, while TV rights remain up for auction. Viacom18 is a JV between Paramount, Reliance Industries and James Murdoch's Bodhi Tree. http://axios.link/vuzk | | | | | | | | Fundraising | | 🚑 Third Rock Ventures, a Boston-based life sciences VC firm, raised $1.1b for its sixth fund, per an SEC filing. www.thirdrockventures.com | | | | | | | | It's Personnel | | • Tony Hu joined Z Capital Group as a director of corporate development. He previously was with Onex Corp. www.zcg.com • Andrew Shackett, former president and CEO of ACV Enviro, joined One Rock Capital Partners as an operating partner. www.onerockcapital.com • Ya Tung is stepping down as a managing director with GCM Grosvenor, in order to join a family office, per Buyouts. http://axios.link/kFAP | | | | | | | | Final Numbers |  Data: CME; Chart: Axios Visuals | | | | | | | | A message from Axios | | What matters this year in VC, PE and M&A | | | | | | | | Learn what's moving markets and driving valuations across Health Tech, Fintech, Retail, Climate, and Media. Download the industry report. | | | | ✅ Thanks for reading Axios Pro Rata! Please ask your friends, colleagues and diamond district denizens to sign up. | | | | | | Axios thanks our partners for supporting our newsletters. If you're interested in advertising, learn more here.
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