Term SheetTerm Sheet — Tuesday, March 21Erin Griffith9:12 AM ET
It’s feedback time!
On “Who kills more jobs, private equity or venture capital?”
Gustav writes: Would it be possible to take a different view and instead focus at how many workers that directly and indirectly were employed by [Blackstone CEO Steve] Schwarzman? And how much tax income [his birthday party] generated?
I believe that one problem of the economy today is that we lack visionaries. Everyone is just trying to cut costs, buy back shares, keep a low profile and not make any mistake that puts your current position, often lucrative, in jeopardy.
We want companies that dare to think big, we want governments that dare to question the gigantic public sector they have built post-WW2, we want the media to dare embrace diversity in thinking, and we want the successful to dare build huge houses, throw big parties, buy big boats, etc., as that will feed through the economy and raise everybody's wealth. The poor will always be behind the rich on a relative basis, but what matters is the absolute basis compared to an alternative socialistic society. And that absolute level is not helped by the rich increasing their savings ratio.
Jonathan writes: The important issue with PE is not debt vs. equity, but the common practice of “equity looting.” They tend to load their companies with debt, in order to pay themselves handsomely and let the company (or its next purchaser) work off the debt. There is no value-add or gain to social welfare from equity looting. In true venture investments, there is little or no equity to loot, certainly not to borrow against. Many startups would love to have the choice of debt or equity (or a combination), particularly in our low interest rate environment. Debt versus equity or the ideal ratios between is a business school exercise. PE is up to something else.
Johnny writes: This is dead-on. Maybe you should go on vacation and write from the chaise lounge more often.
On the trend of pre-IPO companies getting bought:
John writes: The problem with buying unicorns pre-IPO is that they have CEO ego-driven inflated valuations and only the reality of a roadshow and the resulting pricing guidance (paired with the prospect of life-changing wealth for the team from the IPO) will get them to accept realistic valuations.
On investing in consumer products startups:
Gary writes: 98% of the investments will end badly because they value packaged goods companies like they are tech companies. At some point the tide will go out and valuation will matter. Plugging unrealistic numbers into spreadsheets and hyping valuation accordingly is a bad prescription for making money. If no companies have exited, ask yourself why?
On Uber’s hunt for a COO to fix its cultural problems:
David writes: Travis Kalanick trying to convince the world that he's no longer an "a****** CEO" because he's willing to hire a COO is like Donald Trump trying to convince the world that he's no longer an "a****** President" because he brought [fill in the blank] onto his team. Culture doesn't start with the #2 in command, it starts with #1.
Jonathan writes: It wasn't so long ago that Uber brought in David Plouffe to serve as chief adult. Plouffe, who ran the $1 billion Obama campaign, elected the leader of the free world, and is no stranger to managing excess egos, was presumably up to the task. So the key question is whether Uber needs more adults or fewer toddlers?
On the Uber/Waymo lawsuit:
AB writes: I believe we'll see consolidation on a huge, unheard-of scale within the on-demand transportation space. Perhaps this lawsuit (coupled with Uber's culture dysfunction) is Alphabet’s strategy to drive down their valuation for a pending acquisition.
My response: An interesting theory! I’m sure some creative M&A bankers have pitched it to both sides, but I’m doubtful it could happen. The sticking point is not valuation – Alphabet has plenty of cash. The sticking point is the fact that Uber management, including CEO Travis Kalanick, controls Uber’s board. An acquisition would likely require him to step aside and if he hasn’t done it amid this past month’s series of disasters, I don’t see it ever happening. If this ship goes down, he’s going with it. Also, even without the CEO, a buyer would inherit some seriously entrenched dysfunction.
On taking AI seriously:
Alexander writes: Interesting that the product-to-funding ratio is so low for AI startups. In my opinion, it's a technology that augments existing processes, not something that radically alters our way of living (yet).
Howard writes: I know a boom is over when Fortune puts out a major article.
THE LATEST FROM FORTUNE…
• The Fortune Unfiltered podcast features Jessica Herrin, founder and CEO of Stella and Dot.
• The MPW OnStage podcast features Melanie Whelan, CEO of SoulCycle.
• CEO pay raises are back in fashion.
• Walmart to launch a Silicon Valley tech incubator.
• Snap gets its first buy rating.
• How digital health could help end the opioid crisis.
• Will Trump keep his promise to reinstate Glass-Steagall?
• David Rockefeller died on Monday. Here’s a profile of him from • Fortune’s archives: David Rockefeller’s fight to save Chase bank.
• Bitcoin finally starts to settle down.
The $3 trillion in forgotten debt. Marissa Mayer’s reprieve from Yahoo’s hack. Why Silicon Valley is so awful to women. How Palantir blocked investors from selling their shares.
• SoftBank (TSE:9984) invested $300 million in WeWork, the first tranche of a funding round expected to reach $3 billion. Read more at Fortune.
• Rocket Lab, a Huntington, Calif.-based rocket and space systems manufacturer, raised $75 million in Series D funding at a valuation of more than $1 billion. Data Collective led the round, and was joined by Promus Ventures, Bessemer Venture Partners, Khosla Ventures, and K1W1.
• CloudCheckr, a Rochester, N.Y. cloud management platform, raised $50 million in Series A funding from Level Equity.
• Before Brands, a Menlo Park, Calif. maker of nutritional products, raised $35 million in Series B funding. Gurnet Point Capital led the round.
• Reduxio Systems, a Tel Aviv, Israel-based developer of storage services for cloud data sets, raised $22.5 million in Series C funding. C5 Capital led the round.
• Jellyvision, a Chicago HR SaaS company, raised $20 million in funding from Updata.
• Beekeeper, a San Francisco employee communications platform, raised $8 million in Series A funding. Keen Venture Partners led the round.
• Bayshore Networks, a Bethesda, Md. provider of cyber protection for industrial infrastructure, raised an additional $4.5 million in Series A funding, closing the round at $11 million. Benhamou Global Ventures is a new investor.
• Dirac Research, a Swedish audio optimization technology, raised $4.8 million in funding from angel investors.
• MultiX, a French manufacturer of X-ray imaging detectors for airport security, raised €3.5 million ($3.8 million). Investors include Omnes Capital and H3C.
• TextRecruit, a San Jose, Calif. messaging provider for employers, raised $3 million in Series A funding. SignalFire led the round.
• Purple Squirrel, a San Francisco online marketplace for networking and recruiting, raised $2.7 million in seed funding. CrossCut Ventures led the round, and was joined by Greycroft, Arena Ventures, and 500 Startups.
• Prospectify.io, a Phoenix provider of intelligence to B2B sales organizations, raised $1 million in seed funding. Geekdom Fund led the round, and was joined by Arizona Tech Investors and angel investors.
• Pluto AI, a Palo Alto, Calif. analytics platform for smart water management, raised $2.1 million in funding.
HEALTH + LIFE SCIENCES DEALS
• SetPoint Medical, a Santa Clarita, Calif. biomedical technology company, raised an undisclosed amount in funding from New Enterprise Associates.
PRIVATE EQUITY DEALS
• Atlas Merchant Capital, the private equity firm owned by former Barclays chief executive Bob Diamond, and QInvest have teamed up to take London-based stockbroker Panmure Gordon private, according to the Telegraph. QInvest already owned a 43% stake in the company. Read more.
• Onex (TSX:ONEX) sold USI Insurance Services to KKR (NYSE:KKR) and CDPQ for $4.3 billion. Onex purchased the Valhall, N.Y.-based brokerage firm in 2012 for $2.3 billion.
• EQT Mid Market US agreed to acquire Innovyze from Stantec (NYSE: STN) for $270 million.
• Bain Capital, BC Partners, CVC, and Advent are among the investors preparing bids to acquire The Body Shop, a London-based organic beauty company, from L'Oreal (ENXTPA:OR), according to Reuters. Read more.
• Battery Ventures agreed to acquire Analytical Industries, a Pomona, Calif. manufacturer of electrochemical oxygen sensors and gas-analysis products. Terms weren’t disclosed.
• Madison Dearborn Partners invested in U.S. Lumber Group, an Atlanta-based distributor of specialty building products in the Eastern U.S. Financial terms weren’t disclosed.
• Sussex Wire, an Easton, Pa. metal parts manufacturer backed by Argosy Capital, acquired Marox Corporation, a Holyoke, Mass. precision machine components manufacturer. Financial terms weren’t disclosed.
• Daxko, a Birmingham, Ala. software provider for nonprofits backed by GI Partners, acquired Zen Planner, a Denver provider of member management software for gyms and fitness studios.
• Softbank (TSE:9984) has withdrawn its planned $100 million investment in Essential Products, a Palo Alto, Calif. iPhone rival, in part because of its close relationship with Apple (Nasdaq:AAPL), according to the Journal. The investment would have valued Essential Products at around $1 billion. Read more.
• The GEO Group (NYSE:GEO) agreed to acquire Community Education Centers, a West Caldwell, N.J.-based provider of rehabilitative services for offenders in reentry and in-prison treatment facilities backed by LLR Partners.
• Medica Group raised £121 million ($150 million) in its public offering. Read more.
• Avantium, a Dutch plastic manufacturer, is seeking to raise around €90 million ($97.3 million) in an IPO by selling 8.2 million shares at €11per share, according to Reuters. Backers include Navitas Capital, ING Group, and Aster Capital. Read more.
• Dino, a Polish supermarket operator, priced its public offering at 33.5 zlotys ($8.42) a share in what could be Poland’s largest IPO this year. Read more.
• Altice N.V. (ENXTAM:ATC) agreed to acquire Teads, a platform for social video advertising, in a deal that values the company at €285 million ($307.8 million).
• Alibaba (NYSE:BABA) acquired Damai.cn, a Chinese online ticketing platform. Damai.cn raised more than $14 million in venture funding. Read more at Fortune.
• Synchrony Financial (NYSE:SYF) acquired GPShopper, a New York mobile commerce platform for retailers. GPShopper raised $3 million in venture funding from Allen & Company and Rudyard Partners.
• H.I.G. Capital sold Arctic Glacier Group, a distributor and manufacturer of ice products, to The Carlyle Group (Nasdaq:CG). Terms weren’t disclosed.
• Clayton, Dubilier & Rice agreed to acquire Safway Group, a Waukesha, Wisc. manufacturer of scaffolding equipment, from Odyssey Investment Partners. CD&R will combine Safway Group with its existing portfolio company, Brand Energy & Infrastructure Services. Terms of the transaction were not disclosed.
• FactSet (NYSE:FDS) acquired BI-SAM Technologies, a French provider of software for asset managers, for $205.2 million. BI-SAM Technologies raised about $7 million in venture funding from backers including Aquiline Capital Partners, Alven Capital, and Galileo Partners.
FIRMS + FUNDS
• The Blackstone Group (NYSE:BX) is folding its $3 billion distressed-debt hedge fund, according to Bloomberg. Read more.
• Jake Fingert has joined Camber Creek as a partner. Previously, Fingert was the senior policy adviser for infrastructure at the White House. Read more at Fortune.
• Chris Golio has joined Crestline Investors as a managing director.
• Rob Collins has joined 3i (LSE:III) as managing partner of North America infrastructure. Previously, Collins was the head of global investments in North America and Europe at Hastings Funds Management.
• Justin Catalano has joined Fengate Real Asset Investments as managing director and head of private equity. Previously, Catalano was director of infrastructure at Fengate.
• Harsh Agarwal has joined EQT Partners as a director. Previously he was a vice president at TPG Capital.
• Annie Kadavy has left her position as a general partner at Charles River Ventures.
• Dave Ulrich has joined Luminate Capital Partners as a vice president. Previously he was at Mainsail Partners.
• Karun Dhir and Thomas Pinks have joined Aurelius’ (XTRA:AR4) investment team.
• CapX Partners promoted Peter Washington to director, and Justin Wirt and Jim Fox to associates.
• Steve Mills, a long-time IBM executive, has joined Bridge Growth Partners as a senior advisor. Read more at Fortune.
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