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Six big things: Peter Thiel, Palantir and the power of information

Peter Thiel is a proud nerd. So it only makes sense he named his data-mining startup after a creation of JRR Tolkien.

In “The Lord of the Rings,” a palantir is a powerful crystal ball, a sort of telepathic device that shows the viewer glimpses of both present and past; in Tolkien’s invented High Elvish language, “palantir” means “far-seeing.” It’s a way to gain knowledge, offering information that would otherwise be impossible to obtain. This, surely, was what Thiel had in mind when he co-founded Palantir Technologies nearly 15 years ago.

Yet in the possession of the powerful, the palantir can have a dark side. In Tolkien’s trilogy, a palantir falls into the hands of Saruman, a wizard who’s believed to be leading the battle against the dark lord Sauron. But Sauron has a palantir, too. And he uses it to manipulate Saruman, sending him images and messages—in other words, data—that convince Saruman the fight is hopeless, that the only option is to embrace evil. The palantir brings Saruman new and powerful information, yes. But it’s up to him to make sense of it. Humans (or wizards, as it were) still have to process the information a palantir provides.

Which brings us back to Palantir, with an uppercase P. Thiel’s startup has created what is by all accounts one of the most powerful tools for data collection and analysis in human history, one that could be used to discover life-saving new drugs and fight financial fraud. But it’s also one that can (and has) been used for much more nefarious means. Its original purpose was as a tool of war in Afghanistan and Iraq. Across the US, it’s being deployed by police departments for the rather “Minority Report” purpose of “predictive policing.” By tracking in detail the everyday lives of American citizens, Palantir’s software could in certain hands be a serious threat to safety and privacy. All that data still must be processed.

The company’s name may be more accurate than Thiel ever intended.

Minor controversies have erupted, but for the past decade-and-a-half, Palantir has largely managed to stay out of the public eye. Will that change if it becomes a publicly traded company? The fact that we may be about to find is one of the six big things to know from the past week in VC:

1. A Palantir IPO looms

Reports emerged this week that the Thiel-founded startup is working with Morgan Stanley on an IPO for either 2019 or 2020. The financials around such an offering will be highly interesting: While Palantir’s valuation topped $20 billion in 2015, a Bloomberg report from earlier this year indicated Morgan Stanley had marked its valuation of the company down by some $6 billion. Palantir expects to turn a profit this year for the first time.

2. Farewell, sweet Theranos

The most spectacular collapse in venture capital history is almost complete. As soon as September 10, Theranos will officially begin winding down its operations after spending the past five months seeking a miracle round of funding, according to a letter sent to investors this week by CEO David Taylor. A one-time $9 billion valuation is long, long gone. May the blood-testing startup live forever as the ultimate example of why investors should conduct at least a titch of due diligence.

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Billionaire VC Doug Leone reveals Sequoia’s spending power

SAN FRANCISCO—Sequoia global managing partner Doug Leone has accumulated a net worth of $3.8 billion over his three decades at the firm, according to the latest Forbes estimate. In the process, Leone has helped the VC juggernaut expand its investment scope well beyond its Menlo Park headquarters, with the firm opening additional offices in China, India, Israel and Singapore.

“We looked for places that we thought were going to grow rapidly and be very large,” Leone said Thursday at TechCrunch Disrupt. “We didn’t go to Europe because it was large but not growing. We didn’t go to Vietnam because it was growing but not large.”

Many VCs have shied away from investing in China because of its opaque financial regulations and strict government oversight that, among other things, requires companies to get licenses for IPOs, Leone explained, but Sequoia has done just the opposite. The firm now spends half its money in the region, and that trend isn’t likely to slow down anytime soon.

“It all depends on if you want to go where the puck is or where the puck is going to be,” Leone said. “It’s our belief that four or five years from now China is going to be a little different. There’s a lot of pressure now that China will become more open over time.”

The country has already received increased attention in the VC industry over the past year, following the launch of SoftBank’s $100 billion Vision Fund. Sequoia has responded by targeting $8 billion for its latest investment vehicle, in what marks the largest US-based VC fund ever. The firm had reportedly raised $6 billion toward its massive target as of May, and Leone confirmed Thursday the fund has reached its $8 billion goal.

Why invest in China-based businesses, given the drawbacks? Leone argued that there are some advantages.

“Chinese founders in some ways are a little more desperate,” Leone said. “And you see it in the crazy work ethic that I’m not endorsing, nor condoning, nor disapproving. But I’ve had dinner in China at 10 pm. And people go to work after 10 pm. And we don’t see that in the US.”

Leone said Sequoia doesn’t directly compete with SoftBank and hasn’t lost out on any deals to the telecom giant. He disclosed that his firm has already made a pair of $400 million investments from its new $8 billion fund—totals that are more reminiscent of money spent by a private equity firm than a VC that specializes in growth investments.

“The reason we raised it is the large companies want to stay private longer,” Leone said. “They want to fight the global fight as private companies, not as public companies, and they require a lot more money in the private markets.

“Let me be clear, we have never lost a single company in this large fund to anybody because we have a preexisting relationship,” he added. “Having said that, we’re not going to get a discount price. We have to pay the market price.”

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Uber’s CEO on his first year

SAN FRANCISCO—Before Dara Khosrowshahi became CEO of Uber a year ago, the ridehailing company was in the process of cleaning up its image after a rough year—and bringing on the former Expedia chief as its leader was a big part of its strategy.

Now, almost exactly a year has passed since Khosrowshahi was installed in the CEO seat—enough time that he’s no longer referred to as Uber’s “new CEO” or “Travis Kalanick’s replacement.” Khosrowshahi took the stage at TechCrunch Disrupt 2018 to discuss how Uber has evolved since he took on the big job last September, from major personnel changes to a move into scooters to a renewed focus on diversity.

“I had no frickin’ clue what I was getting into,” Khosrowshahi said of his decision to take on the top job, adding that overall he feels positive about the progress the company has made. “It’s been a year. So far, so good.”

 

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CVC Lining Up Major Exits From Fund VI

In 2013, CVC Capital Partners raised €10.9 billion (about $12.7 billion at today’s conversion rate) for its sixth flagship vehicle. Now, five years later, the firm is in the process of arranging a pair of significant sales from the mega-fund.

PDC Brands, a provider of beauty and personal care products that CVC bought for $1.43 billion last year, is working with advisors on a public offering in the US for some time next year, according to Bloomberg.

The company behind the Dr. Teal’s, Cantu and Bod brands had been owned by Yellow Wood Partners until CVC used cash from its sixth fund to conduct a takeover. CVC reportedly took out a loan against PDC in December in order to pay itself a dividend.

Separately, CVC and company founder Joop van den Ende have agreed to sell Stage Entertainment, an owner and operator of theaters in the US and Europe, to Advance Publications, a longtime media investor.

CVC used cash from its sixth flagship fund to acquire a 60% stake in the business in 2015, a deal reportedly valued around €400 million. The firm had reportedly considered an IPO for Stage Entertainment earlier this year before striking a sale pact.

We’ve got more coverage of PE exits.

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Medallia Brings On New CEO To Take It Public

Medallia has hired Leslie Stretch as its new chief executive in the run-up to a public offering that could come early next year, per Forbes. The company, which offers a SaaS app that captures customer feedback for companies, has been led by co-founder Borge Hald since its launch 17 years ago. Hald will move into an executive chairman and chief strategy officer role. Stretch, meanwhile, was most recently CEO of Callidus Software, a CRM software provider that was acquired by SAP for $2.4 billion earlier this year.

Medallia, founded in 2001, is ripe for an exit. Over the years, Sequoia has been a major backer of the San Mateo, CA-based company. Here’s a quick look at its funding and valuation history:

2010: $13M round | $31M valuation
2012: $35M | $103M
2014: $50M | $475M
2015: $150M | $1.3B

Learn more about Medallia in its free profile.

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Is Genstar Capital The Next Private Equity Powerhouse?

Predicting the future is a difficult thing, as private equity investors know all too well. But if the recent past is any indication, Genstar Capital could be on the verge of assuming a starring role on the industry’s stage.

First, there’s the fundraising. Genstar closed its latest flagship buyout fund on $3.95 billion last year, which represented a nearly 100% increase from its previous effort, a $2.1 billion pool from 2015. That vehicle was in turn more than 100% larger than its predecessor. If Genstar keeps doubling the size of its funds—which is admittedly a tall proposition—it won’t be long before those vehicles are among the largest in private equity.

And then there are the deals. Genstar completed 24 investments during 1Q, according to PitchBook data, more than any other PE firm in the US. That continues a recent flurry of activity: Genstar has executed nearly 150 transactions since the start of 2016, more than in the previous nine years combined:

What kinds of deals are driving this rapid rise? Who are the firm’s key decision-makers? And where did Genstar come from?

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Saudi wealth fund weighing $1B investment in Tesla rival

After an especially tumultuous couple of weeks for Tesla, Elon Musk’s potential buyout partner is apparently looking to obtain a majority stake in another electric car company.

The Public Investment Fund of Saudi Arabia is considering an investment in Lucid Motors, a Newark, CA-based electric car maker, that could total more than $1 billion and give the fund ownership of the company, according to Reuters.

Under the terms of the agreement, the Saudi Arabian sovereign wealth fund, which manages some $250 billion, would reportedly provide an initial investment of $500 million, then make two subsequent investments if Lucid hits certain production targets.

Founded in 2007 by former Oracle executive Sam Weng and former Tesla vice president Bernard Tse, Lucid is backed by VCs including Venrock and Tsing Capital. Unlike Tesla, the company has yet to release any cars on the open markets. But last year, Lucid unveiled a prototype sedan, Lucid Air, which has 400 horsepower and a starting price of $60,000. The car is expected to ship sometime in 2019.

The potential Saudi Arabia PIF-Lucid partnership could be problematic for Musk, who already appears stressed. Last week, the billionaire entrepreneur gave an interview with The New York Times in which he alternated between laughing and crying while detailing the pressures of running Tesla.

The latest controversy came when Musk himself tweeted earlier this month that he planned to take the business private for $420 per share, or about $72 billion, noting that funding was secured.

Musk later clarified in a blog post that the Saudi Arabia wealth fund, which owns a 5% stake in Tesla, was the potential backer, though no formal agreement had been made. The company is now reportedly facing a subpoena from the SEC and lawsuits from investors that allege Musk’s tweet aimed to inflate the company’s stock price. Tesla stock initially dipped Monday before closing the afternoon up just about 1% at $308.44 per share.

 

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BP To Buy BHP’s US Shale Oil And Gas Assets For $10.5bn

BP has agreed to buy US shale oil and gasfields from the Anglo-Australian miner BHP for $10.5bn (£8bn), in the UK firm’s biggest acquisition in nearly two decades.

Bob Dudley, BP’s chief executive, lauded the deal as transformational and industry watchers said the move significantly beefed up the company’s US shale presence, which was small compared to peers.

The acquisition will boost BP’s US oil and gas production by nearly a fifth and marks a new period of growth for the company, which is emerging after years under the $65bn burden of the Deepwater Horizon disaster.

In total, 470,000 acres of assets are covered in the deal, including fields in the Permian in west Texas, the Eagle Ford in south Texas and Haynesville in east Texas and Louisiana.

Analysts said Eagle Ford was the most valuable of the three because of its scale and economics, while the Permian offered the greatest long-term promise.

Read Full Article – www.theguardian.com

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UK Ramps Up Powers To Block Foreign Takeover Deals

Government intervention in foreign takeovers of UK firms will massively increase under proposed new powers.

The government expects to review 50 foreign takeovers a year over national security. In the last two years it has reviewed just one takeover a year.

Previously the government could only review deals where the target company had annual revenues of over £70m.

The proposed new legislation would abolish that threshold – entirely and permanently.

It marks a new era in government oversight of corporate activity deemed likely to the threaten national interests.

The government expects that the new thresholds will result in 200 notifications of potential national security concerns being raised when either whole companies or sensitive assets are being acquired.

Of that 200, ministers and civil servants expect half – or 100 – will need more careful analysis, and of that 100, it expects to “call in” fifty for detailed scrutiny.

That would be a fifty-fold increase on current levels.

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House Of Fraser Cancels All Online Orders!

Beleaguered British department store House of Fraser is cancelling all online orders and will be refunding thousands of customers potentially millions of pounds after a dispute with its warehouse operator held up deliveries.

The decision comes “after the chain’s website was taken offline amid complaints from customers about delayed deliveries since the company was bought by Sports Direct for £90m last week”, says Sky News.

XPO logistics, which operates a House of Fraser distribution centre in Wellingborough, “has told employees to stop accepting orders from the department store”, reports The Times.

 

House of Fraser has told over 1,000 suppliers it will not pay money owed before 10 August, when Sports Direct bought the chain out of administration.

But XPO has halted work as it tries to convince Sports Direct to honour existing contract terms.

“We have taken the decision to cancel and refund all orders that have not already been sent to customers,” the department store said on Facebook.

“We didn’t take this decision lightly, but since we cannot give our customers clear assurances of when their orders will be delivered, we believe cancellation is the best option.”

A source close to Sports Direct told The Guardian it had been forced to cancel orders as XPO was being “totally unreasonable in terms of their demands” and was “refusing to engage in any process” which would “move the situation forward”.

“XPO is trying to hold us to ransom,” the source said.

Sports Direct “has no legal obligation to pay suppliers money owed before its buyout as their debts were part of the administration”, adds the paper, but new owners “often agree to settle at least some of the debts in the interest of good relations”.

The announcement that online orders have been cancelled “has caused anger among customers”, says the BBC.

https://twitter.com/houseoffraser/status/1030125197473599488

Read Full Article – www.theweek.co.uk