PitchBook News - Information security amid a pandemic

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The Daily Pitch: VC

June 9, 2020

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Today's Top Stories

Assessing the resilience of the information security industry to COVID-19

The information security industry is facing challenges from the rapidly shifting IT environment and financial pressures resulting from COVID-19, forcing security buyers to prioritize short-term needs. Our latest Emerging Tech Research report identifies the segments poised to benefit from demand shifts in a recessionary environment.

Key takeaways include:

Infosec companies raised $2 billion in VC in Q1 2020 across 87 deals, a near record in deal value but a decrease in deal count
Incumbents are actively adding to their Secure Access Service Edge (SASE) product suites through M&A, a response in part to increased remote work
Q1 was a strong quarter for VC exits, and acquirers and private equity firms should be well-positioned to remain active during a downturn

If you have any questions or feedback about the research, we'd love to hear from you: analystresearch@pitchbook.com

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More coronavirus news: Continuing coverage from PitchBook

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Sycamore eyes J.C. Penney in latest retail bid

A closed J.C. Penney store in San Bruno, Calif.
(Justin Sullivan/Getty Images)

Sycamore Partners is in negotiations with J.C. Penney about a deal to acquire the ailing retailer out of bankruptcy, Reuters reported late last week, signaling the potential next move for a firm that remains dedicated to investing in brick-and-mortar retail despite the sector's ongoing struggles.

Sycamore's current portfolio includes names such as Staples, Belk, Hot Topic and The Limited. In recent years, the firm has also owned multiple retailers that lapsed into bankruptcy, including Nine West and Aéropostale. Last month, Sycamore walked away from a deal to buy 55% of Victoria's Secret for $525 million, citing changes brought on by the coronavirus pandemic.

Texas-based J.C. Penney filed for Chapter 11 protection last month, weighed down by some $5 billion in debt. Two of the company's landlords, Brookfield Asset Management and Simon Property Group, could team with Sycamore on a joint bid for the business, according to Reuters.

To date, Sycamore's emphasis on retail has produced mixed results. Its first flagship fund, from 2012, ranks in the top quartile of its peer benchmark in terms of IRR, according to PitchBook data. Meanwhile, its second vehicle, from 2014, sits in the bottom quartile of its benchmark. The firm closed its third fund on $4.75 billion in 2018.

Related read: Private equity-backed bankruptcies surged in May, but future might not be so bleak

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A message from RSM

COVID-19: Rewriting private equity's playbook

The coronavirus outbreak has become a watershed moment for the private equity industry. As the US pauses its economy to take care of its population, the measures taken have upended sectors and businesses, including PE-backed ones.

RSM has released COVID-19: Rewriting Private Equity's Playbook, in partnership with PitchBook, to summarize the current environment and how PE is adapting. The report highlights the pandemic's impact on deal and exit flow and the fundraising market. It also highlights the impact on currently sponsored companies, including what steps are being taken to stabilize them and what steps investors are taking to care for portfolio company employees. And while this will be a financial opportunity for private equity, it's also an opportunity for the industry to prove its abilities to grow and sustain companies without the assistance of federal stimulus money.

To download the report, click here.

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Recommended Reads

There's a growing consensus that the tech pipeline needs to be reinvented for black and Latinx workers. Jehron Petty is one of the young people hoping to lead the charge. [Protocol]

After 10 years, multiple lawsuits and five unfortunate deaths, a treasure hunt in the Rocky Mountains launched by an octogenarian author has apparently come to an end. [Santa Fe New Mexican]

Private equity dealmakers tend to be proponents of a free market. In this current crisis, though, some are changing their tune. [Institutional Investor]

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Quick Takes


	The Daily Benchmark
	2012 Vintage Global Buyout Funds
	VC Deals
	HistoSonics picks up $40M
	Fintech Wahed raises $25M from Saudi Aramco
	Portfolio Companies
	Airbnb public offering still alive as US bookings bounce back
	SiO2 Materials inks vaccine contract with US government
	Exits
	Royalty Pharma looks to raise $1.96B in IPO
	Avidity Biosciences sets price range for Nasdaq listing
	Akouos files for IPO
	Insurance startup Lemonade eyes public debut
	Investors
	Dubai center invests in fintech startups

The Daily Benchmark

2012 Vintage Global Buyout Funds

Median IRR

14.74%

Top Quartile IRR Hurdle Rate

21.00%

1.59x

Median TVPI

Select top performers

Eureka III

Seaport Capital Partners IV

Camden Partners Strategic Fund V

*IRR: net of fees

93 Funds in Benchmark »

Check out the latest version of PitchBook Benchmarks

VC Deals

HistoSonics picks up $40M

HistoSonics has raised a $40 million Series C1 led by Yonjin Venture. The company is a developer of non-invasive robotic treatments for tumors and other diseases. Founded in 2009, HistoSonics has offices in Michigan and Minnesota.

Additional Investors:

Johnson & Johnson Innovation, Lumina Ventures, State of Wisconsin Investment Board, Varian Medical Systems

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Fintech Wahed raises $25M from Saudi Aramco

Saudi Aramco Entrepreneurship Ventures, also known as Wa'ed Ventures, has led a $25 million investment in fintech startup Wahed. The company operates an investing platform that focuses on assets that comply with Islamic principles, avoiding investments such as tobacco companies and interest-bearing debt. The funding will be used for the startup's Middle East expansion, according to Bloomberg.

Additional Investors:

BECO Capital, Cue Ball, Dubai Cultiv8

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Portfolio Companies

Airbnb public offering still alive as US bookings bounce back

Bookings for Airbnb rentals in the US were higher in recent weeks than in the same period last year, according to Bloomberg. The rebound comes as the travel industry continues to struggle with the effects of the pandemic, and it could help resurrect the vacation rental company's plans to go public. "We're not ruling out going public this year and we're not committing to it," CEO Brian Chesky told Bloomberg. Airbnb announced in May that it had laid off about 25% of its employees due to the coronavirus crisis.

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SiO2 Materials inks vaccine contract with US government

SiO2 Materials Science has signed a $143 million contract with the US government to ramp up its production of proprietary containers used for storing potential treatments and vaccines for COVID-19. Based in Auburn, Ala., SiO2 has received prior funding from JMC Investment, MPM Capital and Novartis.

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Exits

Royalty Pharma looks to raise $1.96B in IPO

Royalty Pharma, a New York-based company that buys pharmaceutical royalty interests and helps fund new treatments, is seeking to raise up to $1.96 billion in an initial public offering, according to an SEC filing. The company has revealed plans to offer 70 million shares at $25 to $28 apiece in a listing on the Nasdaq under the symbol RPRX. Royalty Pharma's backers include Adage Capital Management and Quilvest Private Equity.

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Avidity Biosciences sets price range for Nasdaq listing

Avidity Biosciences has filed with the SEC to list 10 million shares for between $14 and $16 apiece in its upcoming public debut on the Nasdaq. A midpoint pricing would raise $150 million. The California-based biotech startup is a developer of therapies for genetic diseases, with a particular focus on muscular disorders. Avidity has raised private funding from investors including RTW Investments (14.5% pre-IPO stake), Cormorant Asset Management (10.6%) and Eli Lilly (8.2%).

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Akouos files for IPO

Akouos, a developer of gene therapies for hearing disorders, has filed with the SEC to go public on the Nasdaq. Founded in 2016 and based in Boston, the company has raised funding from backers including 5AM Ventures (21.6% pre-IPO stake) and NEA (18.6%). It brought in a $105 million Series C in March at a $240 million valuation, according to PitchBook data.

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Insurance startup Lemonade eyes public debut

Lemonade, the operator of a platform for homeowners and renters insurance, has filed for an initial public offering on the NYSE. The company reported net losses of $108.5 million last year, but its annual revenue nearly tripled between 2018 and 2019 to $67.3 million. Based in New York, Lemonade has raised close to $480 million in private funding from investors including SoftBank, Sequoia, Aleph and XL Innovate.

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Investors

Dubai center invests in fintech startups

Dubai International Financial Centre has invested in four fintech startups, FlexxPay, Go Rise, Now Money and Sarwa. The investments come from the center's $100 million fund to help fintech companies in the Middle East, Africa and South Asia.

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