#DCTech Gossip May 2019
It’s time for DCTech Gossip… what’s going on? This May 2019 edition of DCTech Gossip is based on tips deemed reliable but unverified.
For your information, DCTech Gossip is not to be confused with DCInno which is like the gossip you get at a 6-year-old’s Tea Party or the “News” you get from the “journalists” at Technically DC which is Technically not a news site. At least if Technically DC did a printed copy you could wrap fish in it… as it is, the website “news” site isn’t good for anything except an occasional laugh.
- ZoomData – Or as they say at DCInnon, the Big One, although unlike DCInno this Big One doesn’t involve a company that never raised a dime and existed only as a press release. Today’s big one is ZoomData, a company that raised nearly $50 Million from some of the worlds “smartest” VCs including, NEA, Accell Partners, and Goldman Sachs has been acquired. According to my sources, the company’s last round was $8 million in debt. The rumor is that Zoom, a company that is a 4 time, “100 DCTech Companies I Don’t Hate,” was acquired for $8 million with every dollar going to the debt holders. So is that a 5X or a 10X return for Preferred or Common stockholders? I can’t tell you because my calculator keeps saying, “cannot divide by zero.” Just for that… I’m taking them off the list this year. Confidence Level – Fairly High
- Fortify Ventures – Again, I must begrudgingly give it to Jonathon Perrelli... after the Venga exit which paid out 5.6X, and a minor return on Hinge’s sale to Match.com, Fortify investors will get another return with the total return to Limited Partners, being in the neighborhood of $1.40 for every dollar they invested. That’s about 1/2 the return of the S&P for the same period of time at 806.3 times the risk. Kudos to JP, you’re a winner! Confidence Level – High
- Venga Acquisition – Wow! Returning 5.6X to investors is a big win for this town, especially when you think that the much more highly touted companies like ZoomData which returned Zilch and TrackMaven which reportedly returned 0.5X exchange in stock. Great job Venga! Confidence Level – High
- Ranking Some DC Exits – Ranking from best to worst based on educated estimations on a scale where 1 = weak and 10 = strong – Confidence Level – Medium
- Exit Based On Estimated Acquisition Value
- Social Tables (Exit Value north of $100 million) – 8
- Track Maven – 5
- Contactually – 4
- Venga (Exit Value estimated somewhere between $12 to 14 million)- 4
- ZoomData (Exit Value $8 Million) -2
- Exit Based on Investor Return
- Social Tables (Early Investors 5.6X) – 7
- Venga (5.6X) – 7
- Contactually (Estimated 0.5X) 2 – 3X) – 5
- Trackmaven (Estimated 2 – 3X)
- ZoomData – 0
- Exit Based On Estimated Acquisition Value
- ICX Media – Sources tell me that ICX Media just closed a funding round and the terms were not as optimistic as prior rounds. This round featured no new outside investors. I’m told that any prior investor that did not exercise their pro-rata rights in this round saw their preferred shares converted to common. Ouch. Confidence Level – Medium
- Grotech – Word is that Grotech was unable to make a follow-up investment in a round at ICX Media because they are out of cash. Is Grotech out raising another fund or are they going the way of the DC VC. Is Grotech going to be added into the long list of once active DC Venture Funds that are no more like, FBR, Novak Biddle (check this post from 2012 where Jack Biddle argued with me that Novak Biddle was healthy, right before they went into a coma), Bluewater and Valhalla? Are DC VCs going the way of the dodo? Confidence Level – Medium
- Akonni Biosystems – Is Maryland-based Akonni our regions answer to Theranos? According to Crunchbase, these Elizbeth Holmes-wannabes have raised $55 million since 2003. Their idea they call a product offers ” An array of molecular diagnostic information at your fingertips.” Kind of like the Theranos blood sampling thing… no? According to some investors, the execs have paid themselves well and gone on lavishly funded company boondoggles. They have done everything you do in a big successful company except for the success part. Their product has not come out of FDA trials and it’s a flip of the coin if they ever will. The execs have burned through their $50+ million in investment and grants and is now begging current investors to confirm their naivety and reinvest. The company staes they are likely to exit at a “narrow” (he said sarcastically) range of anywhere from $20 million to $60 million. WTF? Any existing investors who do not participate in this round will be washed-out. The company claims to have $2 million circled for this round with 1/2 coming from new investors. Well, at least the new investors won’t have to wait 8 years for a write-off (see company email below). – Confidence Level – Fairly High
- LifeFuels – Speaking about companies that have been around for years with no product… Perrelli’s company still has no product after 5 years and going through over $5 million in funding? Let’s face, it buffoonery and ineptitude is hardly news when reporting on Jonathon Perrelli – Confidence – High. I do have a feeling about LifeFuels that they are getting closer to releasing a product. The company has added 8 people to the staff this year (according to my research on LinkedIn) and only lost one employee for a net add of… wait, let me get to my calculator that can’t divide by zero again…. okay, that’s a net add of 7. Based on the folks they added, and just a hunch, I think the product will be made in China, which means one of the nutrients it will likely deliver to customers is lead. If the product is imminent, and it is coming from China.. look out for the Trade War Tariff implications. For comparison sake, before the trade war, I was able to buy can’s of WhoopAss for $57 cents… now because of the steel tariffs, they cost $1.17. But, hey this is all conjecture and anyway, tomorrow’s blog is all about LifeFuels so I’ll move on. Confidence Level – Low
That’s it, folks… that’s all the DCTech Gossip that’s fit to print.
Akonni Email to Investors
From: Lawrence Firestone
Sent: May 21, 2019
Cc: Lawrence Firestone; Charles Daitch
Subject: Akonni 2019 Senior Secured Bridge Financing – All Shareholders
Greetings Akonni Shareholder,
FDA Review Progress:
Following the information that was sent to the FDA on April 30th, we met with our FDA compliance consultant and the FDA, and we believe we have cleared all of the issues and our road from here should be administrative on the FDA’s part. Based on that, we are highly confident that our major value building event, the FDA approval is in its final stages and based on the standard FDA process we believe there is a high likelihood we will receive approval between now and the end of June (earlier than our previous estimate of Aug-Sept).
2019 bridge Financing Progress:
As a follow-up to our prior email on the 2019 Bridge Note, we are finalizing our bridge financing and are still attempting to raise $4 million in this round, targeting half from existing shareholders ($2.0 million already subscribed) and half raised by new investors post FDA clearance through Chardan, our investment bank. We have put together a senior secured debt facility with enhancements above the principal and interest. In all events the repayment of the principal and interest is secured and will be paid before any other obligations of the Company. In addition from a transaction or liquidation after this debt facility plus interest has been paid, additional distributions will be made to noteholders in parallel to the preferred shareholders that are in first position. As a result, if the company is sold for approximately $20.0 million or more, the note holders who invested a collective $4 million will receive a 2.5x return on their investment, and if the company is sold for approximately $55 million or more the Noteholder will receive an additional .5x. See the schedule below:
|Example of a $100,000 Investment|
|Amount to Noteholders|
|Transaction value||Bridge Debt Principal||Interest (Based on 14% for 9 months)||50% of remaining proceeds available to shareholders up to 1.5x||100% of proceeds available to shareholders after payment of all preferred stock preferences up to .5x||Total for Bridge Debt Noteholder|
We encourage you to review the attached term sheet and the above schedule. We view this financing as critical to the company sale process which will enable the strategic process to take place at a higher value.
We are required to communicate with our shareholders every time the term sheet is adjusted during a financing. We realize many of our shareholders have already responded with their intent to invest or not. There is no need to reply if you do not have the intent to participate. However, if you have an interest in investing, please complete and sign the term sheet and email, fax or mail it to my attention at Akonni’s offices. The signed term sheet will not be binding, but it will allow us to prepare your closing documents. Because of the substantial documentation required and the short time frame, the minimum investment is $25,000, and is only available to accredited investors.
We would like to have all indications of interest by sending in a signed term sheet received by May 24th, and we would like to close on May 29th.
Please call or email with any questions.
Executive Vice President and
Chief Financial Officer
Akonni Biosystems, Inc.
400 Sagner Ave.
Frederick, MD 21701