Philly PE/VC highlights; NewSpring, First Round, IPO Watch

Tom Paine

Radnor-based NewSpring Capital opened a new market segment- NewSpring Franchise – with its initial.investment in Blo Blow Dry Bar.

Blo Blow Dry Bar, which appears to be based in Toronto, currently has 130 stores and aspires with the new investment to grow to 300 stores.

The franchise market is a niche within the PE world, requiring in-depth knowledge that makes it difficult for outsiders to compete.

“The investment in Blo Blow Dry Bar is a landmark for NewSpring as it represents the first deal in our newly formed franchise portfolio,” said Patrick Sugrue, NewSpring General Partner, in a press release. “Our extensive diligence on the business revealed the strong combination of a unique concept in a high-growth sector with increasing demand, healthy income potential for its franchise partners, and a strong management team. We’re thrilled to launch the Franchise strategy with such an exciting investment and look forward to leveraging the Firm’s wealth of knowledge, experience, and resources to support many more multi-unit businesses.”

Atlanta-based Roark Capital is probably the best known PE participant in the franchise space, with a long list of companies such as Arby’s, Buffalo Wild Wings, and MAACO in its portfolio. But there are thousands of franchised brands, and franchise owner groups within that, many of which you’ve probably never heard of, out there. And once established, franchise businesses can provide steady cashflows that PE firms crave.

General Partners Satya Ponnuru and Sugrue head up the NewSpring Franchise team.

Looking at GoPuff’s latest billion dollar plus round, one thing that stands out is that there is no Philly investor involved. Nor has there ever has been, as far as I can determine.

Cofounders Rafael Ilishayev and Yakir Gola like to say their $60,000 seed round was obtained by selling a family friend’s used office furniture. First Round’s Josh Kopelman reportedly looked at goPuff at some point, was impressed, but didn’t invest. I don’t know if goPuff ever did the rounds with Philly investors, but Ben Franklin Technology Partners, which usually picks up a slice of Philly’s most promising ventures, didn’t invest. In its later rounds, there is hardly a Philly VC who could have made a significant contribution given their size..

Of course, the business plan probably seemed like a stretch for two undergrads pursuing a new, untested model.

There are several Philly-area companies that could IPO this year, if market conditions remain right, and not necessarily companies you’ve heard of. But the two companies most will watch are Fanatics and goPuff.

Fanatics, actually based in Jacksonille but majority -owned by Michael Rubin’s Conshohocken-based Kynetic LLC, just achieved a $12.8 billion valuation with its latest round of $320 million. A Fanatics spokesperson said in a statement, “While an IPO is clearly an available option to us, there is no update on any timeline. Our focus remains on building a great global company and strengthening our vertical commerce business model.” Most observers think an IPO is highly likely, if not this year then in 2022.

goPuff’s latest $1.15 billion round gave it a valuation of $8.9 billion.Unlike Fanatics, its hard to tell what goPuff’s numbers might be, though I assume they’re heading in the right direction or it wouldn’t continue to be so heavily funded. But my guess is given SoftBank’s success with the recent DoorDash IPO, it won’ be hesitant to bring goPuff public as long as it can paint a credible pro forma picture of future profitability.

Dresher, Montco-based Ascensus, which has rolled up several retirement plan managers, has made its intentions clear that its looking towards a mid-year IPO. Owned since 2015 by PE firms Genstar Capital and Aquiline Capital Partners and continuing to be acquisitive, Ascensus says it is the largest retirement plan manager in the US in terms of Assets Under Management..

Former Wharton undergrad and First Round Capital intern Nat Turner, who went on to cofound Invite Media (acquired by Google) and Flatiron Health (sold to Roche), both with backing from First Round, led a prestigious investor group to complete the acquisition of Collectors Universe for $853 million. and take it private..Turner had long been an avid collector and trader of baseball cards and other sports collectibles..

Around the same time, Alt, which allows people to buy, sell and store sports cards, officially launched after raising $31 million combined in a seed and Series A financing. First Round joined the Series A.

You’d think First Round would seek to work with Turner, who has demonstrated an uncanny understanding of how markets work and how to make money in them. But of course, buyouts of public company is not within First Round’s DNA. Turner is not listed as an investor in Alt.

Its amazing – and a shame – that given the amount of biotech investment running through Philly, as well as the wealth of intellectual property, that there isn’t a significant venture fund based here that prioritizes the local biotech industry.

Haverford College grad Dan Primack, Axios business editor and author of its Pro Rata newsletter, may have to watch what he says about SPACS. He’s written extensively about SPACS, both positively and negatively, But now, rumors (at this point) emerge that Axios may consider merging with The Athletic and going public via a SPAC. I can somehow imagine a scenario in which Primack is called as an expert witness to testify against his own company.