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Snap gets ready for its close-up and VCs find their way into Trumpland

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By Dan Primack ·Jan 11, 2017

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Top of the Morning

Source: Giphy


It'll be a spectacle: Snap is expected to hold its analysts day next week, which means there's a very good chance that we'll see a publicly-filed S-1 before month's end (minimum is usually one week after such a meeting). Also worth noting that the company has quietly hired Solebury Group, an advisory firm generally known in IPO circles for helping to determine allocations. Solebury is co-led by a pair of former bankers at Credit Suisse, which is also the former home of Snap chief strategy officer Imran Khan.

Trumpland: Venture capitalists not named Peter Thiel haven't been very visible in Trumpland, but a pair of VC types appear to be finalists to lead the Food & Drug Administration. Sources say the front-runner is Dr. Scott Gottlieb, a former FDA official who has been a venture partner with NEA since 2007 (he's also a resident fellow at conservative think tank AEI). And given yesterday's kerfuffle about POTEUS entertaining vaccine conspiracy theories, it's worth noting that Gottlieb last year told CNBC that "the science around the purported link between autism and these vaccines was debunked years ago."

The other possibility is Jim O'Neill, a onetime HHS official who later hooked up with Thiel at Clarium Capital and, later, Mithril. O'Neill said in a 2014 speech that the FDA should allow commercialization of drugs that have been proven safe, even if they haven't yet been proven effective. Obviously a tricky suggestion, particularly given how dependent it would be on how long the FDA's "safety" tail would be. And it would seem to apply more to drugs for orphan diseases, since large-scale clinical tests usually determine efficacy long before safety. A bigger question would be how insurers respond, including the worrisome prospect that some would only reimburse for cheaper alternative treatments that have not yet been proven effective. Finally, it could seriously change the math for later-stage life sciences VCs.

Slow that roll: In other political news, it appears that Senate confirmation hearings for Steve Mnuchin (Treasury) and Wilbur Ross (Commerce) have been pushed back until next week.

Hot off the presses: KKR chief economist Henry McVey just released his 2017 global macro outlook: "We believe that there are four major potentially secular changes that all investment professionals must consider: fiscal stimulus over monetary, domestic agendas over global ones, deregulation over reregulation, and a broadening of outsized volatility from the currency markets to include global interest rate markets." Get the rest.

Coming attractions: Upfront Ventures has hit the market with its sixth fund, which is targeting around $325 million.

SaaS stuff: It's not news that public equity investors have soured on the "growth-at-all costs" model for SaaS companies, but Credit Suisse analyst Michael Nemeroff yesterday published a research note that put the flip into clearer focus. He writes that "the relationship between cash flow/burn (i.e., operating cash-flow margin) and valuation" nearly doubled year-over-year from 0.16 in 2015 to 0.30 in 2016. Moreover, "profitability (non-GAAP operating margin) vs. valuation" almost tripled from the prior year" (0.05 vs. 0.14). Not too long ago, these year-over-year comps were going in the opposite direction.

But this isn't to say that growth no longer matters. Nemeroff adds that SaaS companies with projected 12-month revenue growth of 20% or more were acquired last year at an average valuation/projected revenue multiple of 6.7%, compared to 4.3x for those below the 20% threshold.

Ouch: Anaplan, a provider of planning and performance management software, yesterday named Frank Calderini as its new president and CEO. Frank is the brother of Anaplan chairman Bob Calderoni (an advisor to Silver Lake). It would seem that former CEO Frederic Laluyaux found out a bit earlier than the rest of us, and was more than a bit miffed, tweeting out in late December: "Nepotism - the practice among those with power of favoring relatives or friends, especially by giving them jobs: the new norm?"

Deal data: Two big 2016 venture capital reports out this morning, one from PwC/CB Insights and the other from NVCA/PitchBook. Both agree that 2016 disbursements were down from 2015 (16% and 12%, respectively), largely driven by Q4 declines.

The US full-year funding total of $58.6 billion represented a 20% drop from 2015, while cumulative deals of 4520 fell 16%.

She's back: After Ellen Pao filed her landmark gender discrimination lawsuit again Kleiner Perkins in 2012, conventional wisdom in Silicon Valley was that ― win or lose ― she was unlikely to ever again work in the VC industry. But, less than one year after a jury found for Kleiner Perkins, she's now joined Kapor Capital as a venture partner and the Kapor Center for Social Impact as chief diversity and inclusion officer. "It's not primarily an investing role, although there might be an opportunity for that," Pao says. "But certainly I'll use my experience in VC and angel investing to help make decisions with the firm."


Sera Prognostics, a Salt Lake City-based developer of prenatal testing solutions, has raised $40 million in Series A funding. LabCorp led the round, as part of a broader strategic agreement whereby it will distribute a blood test for preterm births. Return backers include InterWest Partners and Domain Associates.

Why it's the BFD: The March of Dimes estimates that 1 in 10 babies are born preterm in the U.S., but current tests only catch around 12% of instances.

Bottom line: "If we're able to predict earlier in pregnancy who is at risk, then we can intervene earlier with the goal of improving the chances of the baby staying in utero and developing more normally." -- Sera CEO Greg Critchfield.

Venture Capital Deals

Sera Prognostics, a Salt Lake City-based developer of prenatal testing solutions, has raised $40 million in Series A funding. LabCorp led the round (as part of a broader strategic partnership), and was joined by return backers like InterWest Partners and Domain Associates.

iZettle, a Swedish provider of mobile point-of-sale solutions, has raised €60 million in new capital. Around €45 million is venture debt from Victory Park Capital, while the remainder comes from its group of 16 existing backers. The equity tranche is an extension of a 2015 Series D round, which means the valuation remains at around $500 million, per TechCrunch.

MobileCause, a Calabasas, Calif.-based cloud fundraising platform, has raised $15 million in Series B funding led by Level Equity.

Scandit, a Zurich-based barcode scanning startup, has raised $7.5 million in new VC funding led by Atomico.

HOOQ, a Singapore-based Netflix clone, has raised $25 million in new VC funding from founding investors Singtel, Sony Pictures and Warner Brothers.

Revl, a UK-based online events discovery and booking platform, has raised £2.4 million in seed funding from undisclosed investors.

Mac & Mia, a Chicago-based personalized online shopping platform for kids clothing, has raised $3 million in seed funding from Corazon Capital, Chicago Ventures and KGC Capital.


A Message From Cooley

Expect private equity to invest more in tech in 2017

Private equity investors historically cautious about tech invested more than $135 billion in the sector in 2016. What changed? Will the allure of big returns outweigh potential risk? Cooley’s take.

Private Equity Deals

Arrowhead Electrical Products, a Blaine, Minn.-based portfolio company of The Riverside Company, has acquired J&N, a Cincinnati-based distributor of aftermarket replacement rotating electrical parts for use in off-highway markets. No financial terms were disclosed.

Artegic AG, a German provider of SaaS marketing automation solutions, has secured an undisclosed amount of private equity funding from Main Capital.

Dermatology Associates, a Houston-based dermatology practice network backed by ABRY Partners, has acquired three new acquisitions: Advanced Dermatologic Surgery in Houston, Dr. Bryan Townsend in Austin, and Dermatology and Laser Center of Fort Worth. No financial terms were disclosed.

GTM Holdings, a chemicals distributor owned by Advent International, has agreed to acquire Brazilian rival quantiQ Distribuidora for $172 million.

Industrial Opportunity Partners has acquired Union Corrugating Co., a Fayetteville, N.C.-based maker of metal roofing systems and roofing components. No financial terms were disclosed, except that PNC Business Credit and Patriot Capital provided leveraged financing.

Marlin Equity Partners has acquired Medvind, a Swedish provider of workforce management solutions., and merged it into existing Danish portfolio company Bluegarden. No financial terms were disclosed.

Thompson Street Capital Partners has sponsored a recapitalization of Revenue Management Solutions, an Oklahoma City-based provider of healthcare payment posting and reconciliation processes. No financial terms were disclosed.

Warburg Pincus is putting together a consortium to bid for Global Logistic Properties, a Singapore-based warehouse operator with a current market cap of around $8.2 billion, per Bloomberg.

Liquidity Events

Arxan Technologies, a Bethesda, Md.-based security software company owned by TA Associates, has agreed to acquire Apperian, a Boston-based provider of enterprise mobile application management solutions. No financial terms were disclosed. Apperian had raised around $40 million in VC funding from Bessemer Venture Partners, Converge Venture Partners, Kleiner Perkins, Intel Capital and North Bridge Venture Partners.

China Communication Technology is among those in the last round of bidding for Asia Broadcast Satellite, a Hong Kong-based communications satellite operator being sold by Permira for approximately $1 billion, per Bloomberg.

More M&A

ANZ of Australia has agreed to sell its New Zealand finance arm, UDC Finance, to Chinese conglomerate HNA Group for $461 million.

Coty Inc. (NYSE: COTY) as agreed to acquire a 60% stake in Younique, a Lehi, Utah-based online cosmetics retailer, for approximately $600 million.

GuradeAqui, a Brazilian self-storage company owned by Sam Zell, and rival Kipit, backed by Pátria Investimentos, have agreed to merge.

Roche Holdings has acquired ForSight Vision4, a Menlo Park-based developer of drug delivery solutions for the treatment of retinal diseases. No financial terms were disclosed, except that the sale included both upfront and milestone-based payments. ForSight Vision4 had raised around $20 million in VC funding from Morgenthaler Ventures and Versant Ventures.

TruMid, a New York-based electronic trading platform whose backers include Peter Thiel and Soros Fund Management, is in talks to acquire bond-trading platform Electronifie, according to Business Insider. While Electronifie has raised over $10 million from undisclosed backers.


Bison Capital has closed its fifth fund with $377 million in capital commitments.

Calibrate Ventures, an "early revenue" venture firm formed by Jason Schottler and Kevin Dunlap (both ex-Shea Ventures), is raising upwards of $100 million for its debut fund, per an SEC filing.

Constitution Capital Partners of Boston has closed its fourth small-to-mid cap buyout fund with $755 million in capital commitments.

Gen Cap America of Nashville has closed its seventh lower middle-market buyout fund with $250 million in capital commitments.

It's Personnel

Daniel Gross is leaving Apple (which had bought his company, Cue) in order to join Y Combinator as a partner.

Elise Hebb has agreed to join Seattle-based VC firm Maveron as a partner and COO. She previously was with Madrona Venture Group.

Jocelyn Goldfein, a former Facebook and VMware exec, has joined Zetta Venture Partners as a partner.

Ken Mehlman, head of global public affairs at KKR, has been named chairman of the Chan Zuckerberg Initiative. He says it will not affect his role at KKR. In related news, former Obama campaign manager and current Uber board member David Plouffe is joining Chan Zuck as president of policy and advocacy.

Altus Capital Partners has promoted Thomas Groh to partner, Nick DeMarco to VP and Joshua Tesoriero to senior associate.

Spectrum Equity has promoted Mike Farrell to managing director and Julia Kuo to vice president.

Final Numbers

Source: Pitchbook/NVCA Venture Monitor


A Message From Cooley

Cybersecurity diligence in M&A only expected to increase

According to a 2016 NYSE Governance Services/Veracode Survey Report

  • Eighty-five percent of those involved in an M&A transaction say they would likely or very likely be affected by “major security vulnerabilities.”
  • Fifty-two percent would still go through with the transaction but only at a significantly reduced value.

Best practices for acquirers and targets when navigating this uncharted territory.

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