Term Sheet — Tuesday, April 28

Apr 28, 2015

Random Ramblings

Some items to kick off your Tuesday:

•  Saving unicorns from themselves? There was an interesting piece last week from Martin Peers in The Information (sub req), arguing that the private markets need some sort of shorting mechanism so that there is a check on unreasonable valuation inflation. It would make the market more efficient, Peers argues, even though implementation would require several structural changes (particularly to stock transfer rules). He writes:

"Private companies will probably resist the development of a short-selling market, given it would hurt valuations, which in turn can undermine the value of employee option programs, and give them less control over their shareholder group. But those risks are likely to be outweighed by the long term benefits of bringing more buyers into the market and ensuring the company’s valuation can be sustained outside of the constraints of the private market."

Leaving out the technical difficulties -- including the lack of ongoing price discovery -- one big counter could be that shorts didn't so much to stop the earlier dotcom bubble (which largely took place in the public markets).

Adam D'Augelli of True Ventures pointed me to a 2002 academic paper (Princeton/London Biz School) that found "hedge funds during the time of the technology bubble on the Nasdaq... were heavily tilted towards overpriced technology stocks." They add that "arbitrageurs are concerned about attacking the bubble too early without support from their peers," and that they're more likely to ride the bubble until just a few months before the end.

That would seem to be too late to impose price discipline in private markets, but I'm curious in your thoughts. Does some sort of private shorting system make sense? And, if so, how would it be structured?

•  Royal pump: Today's big deal is that Intarcia Therapeutics has closed a $225 million synthetic royalty financing with an equity conversion option at a $5.5 billion valuation. This is the Boston-based company that has developed a new medication for Type II diabetics that it can deliver via an implantable, osmotic mini-pump (the total outpatient procedure only takes around one minute). Last year it raised "crossover" funding at a valuation north of $1.5 billion.

CEO Kurt Graves says that the deal is tranched out, with one-third upfront, another third after the company publishes its superiority study vs. Merck's Januvia this September and one-third upon regulatory achievements next year (the company's lead candidate is in the midst of Phase 3 clinical trials). Noteholders are entitled to 1.5% quarterly royalties after commecialization, and also have a two-year window for that equity conversion.

I asked Graves if he was worried about having too complicated a cap table, to which he replied: "We've raised around $1 billion over the last five years and have paid off all of our prior debt, and have only around 55 million shares outstanding. I think that's pretty clean for being this far along."

It's also worth noting that Graves, who is not diabetic, recently had a placebo version of the matchstick-sized pump implanted in himself, to better understand the patient experience.

•  Quiz Time: Can you name the historically East Coast-based venture capital firm that just named one of its West Coast partners as its sole managing partner? Or, put another way, the East Coast firm that has formally acknowledged it now is a West Coast-based firm (walking the path previously blazed by CRV, Greylock, etc.)?

Drop a dime: Just a reminder that you always can send me an anonymous message by using our tip function. Just go here.

THE BIG DEAL

•  Intarcia Therapeutics Inc., a Boston-based developer of drug therapies and delivery devices for Type II diabetes, has closed a $225 million synthetic royalty financing with an equity conversion option at a $5.5 billion valuation. Both new and existing investors participated in the deal, which provides noteholders with receive quarterly payments equal to 1.5% of future global net sales of the company’s lead product.

The company last year raised VC funding at a valuation north of $1.5 billion, from firms like RA Capital, Farallon Capital Management, Foresite Capital, Franklin Templeton, Fred Alger Management, New Leaf Venture Partners, Venrock and Quilvest. www.intarcia.com

VENTURE CAPITAL DEALS

•  Beijing Weiying Technology, a Chinese movie ticket booking platform embedded in messaging app WeChat, has raised $105 million in Series B funding from firms like Tencent and Wanda Group. Read more.

•  Refinery29, a New York-based digital lifestyle media company, has raised $50 million in Series D funding co-led by Scripps Networks Interactive and WPP. Return backers include Stripes Group, Floodgate, Lead Edge Capital, First Round Capital, Lerer Ventures and Hearst Corporation. Fortune had first reported on the fundraising effort last month, suggesting that the deal would value Refinery29 at around $240 million pre-money. www.refinery29.com

• Reliance Capital Management, an Indonesian financial services provider, has raised $45 million in new VC funding led by LeapFrog Investments, according to Reuters. Read more.

• Scanadu Inc., a Mountain View, Calif.-based maker of a handheld device that measures five vital signs in about 30 seconds, has raised $35 million in Series B funding. Fosun International and Tencent Holdings co-led the round, and were joined by China Broadband Capital, Iglobe Partners and return backers Relay Ventures, Redmile Group, Ame Cloud Ventures and Three Leaf Ventures. Read more.

• Visual Supply Co. (a.k.a. VSCO), an Emeryville, Calif.-based a mobile photography platform, has raised $30 million in Series B funding. Glynn Capital Management was joined by return backers Accel Partners and Goldcrest Investment. Read more.

• Loop Commerce, a Menlo Park, Calif.-based gifting platform, has raised $16 million in new VC funding. Oren Zeev and Wicklow Capital co-led the round, and were joined by return backers like PayPal. Read more.

• DataTorrent, a Santa Clara, Calif.-based real-time stream processing platform on Hadoop, has raised $15 million in Series B funding. Singtel Innov8 led the round, and was joined by GE ventures and return backer August Capital. www.datatorrent.com

• Windward, an Israeli provider of maritime data and analytics, has raised $10.8 million in Series B funding. Horizons Ventures led the round, and was joined by return backer Aleph. www.windward.eu

•  DocDoc, a Singapore-based matching platform for medical specialists and patients, has raised $8.6 million in Series A funding. Raymond Choong Yee How (CEO of Hong Leong Financial Group) led the round, and was joined by Sparklabs Global Ventures. Read more.

Icertis, a provider of enterprise contract lifecycle management software in the Microsoft cloud, has raised $6 million in Series A funding co-led by Greycroft Partners and Fidelity Growth Partners India. www.icertis.com

•  InCarda Therapeutics Inc., a San Francisco-based developer of of therapies for acute cardiovascular conditions via the inhalation route, has raised over $5 million in Series A funding led by Morningside Ventures. www.incardatherapeutics.com

• Dedrone GmbH, a German developer of a “professional civilian  drone early-warning and detection system,” has raised €2.7 million in new VC funding led by Target Partners. www.dendrone.com  

• Empathetics Inc., a Boston-based empathy and communications training firm, has raised $1.5 million in VC funding co-led by GDN Holdings and Key Venture Partners. www.empathetics.com

• DriveWealth, a Chatham, N.J.-based online retail equity platform, has raised an undisclosed amount of VC funding from Route 66 Ventures. www.drivewealth.com

• SensorSuite Inc., a Toronto-based IoT startup that provides wireless monitoring and energy saving solutions, has raised an undisclosed amount of VC funding from Extreme Venture Partners, BDC Capital and individual angels. www.sensorsuite.com

PRIVATE EQUITY DEALS

•  Bridgepoint has agreed to acquire a 58% stake in Nordic Cinema Group from Ratos AB in a deal that values the movie theater chain at around $546 million. Read more.

• Mosaic Capital Partners has sponsored a leveraged ESOP buyout of Linxx Global Solutions Inc., a Virginia Beach, Va.-based provider of work experience training solutions for agencies like the U.S. Department of Defense and the National Aeronautics and Space Administration. No financial terms were disclosed. www.linxxglobal.com

• NCSG Crane & Heavy Haul Corp. has agreed to acquire Jefferson, La.-based B&G Crane Holdings Inc. from The Sterling Group for an undisclosed amount. NCSG Crane shareholders include TriWest Capital Partners, Alberta Teachers’ Retirement Fund and NCA Partners. www.bgcrane.com

• One.com, a Denmark-based provider of web hosting services and domain names, has secured an undisclosed amount of growth equity funding from Accel-KKR and ATP Private Equity. The company was founded in 2002. www.one.com

• Rede D’Or São Luiz, Brazil’s largest private hospital operator, has secured an undisclosed amount of private equity funding from The Carlyle Group. The company will remain majority-owned by the founding Moll family, while existing shareholder BTG Pactual will retain a minority equity position. Reuters reports that Carlyle has invested around $600 million. Read more.

• Salt Creek Capital has acquired CourseTrends, an Austin, Texas–based provider of online marketing solutions to the golf industry. No financial terms were disclosed. www.coursetrends.com

IPOs

•  Bojangles, a Charlotte, N.C.-based chain of around 600 quick-serve chicken restaurants, has set its IPO terms to 6.25 million shares being offered at between $15 and $17 per share. It would have an initial market cap of around $574 million, were it to price in the middle of its range. The company plans to trade on the Nasdaq under ticker symbol BOJA, with BofA Merrill Lynch, Wells Fargo and Jefferies serving as lead underwriters. Bojangles reports $26 million of net income on $430 million in revenue for 2014, compared to $24 million of net income on $375 million in revenue for 2013. It is currently owned by Advent Internationalwww.bojangles.com

EXITS

 ABRY Partners and Berkshire Partners are preparing to launch an auction process for Telx Group Inc., a New York–based provider of data centers and network solutions, according to Reuters. The company could be valued at around $2 billion (including debt). Read more.

• MasterCard (NYSE: MA) has agreed to acquire Applied Predictive Technologies, a Washington, D.C.-based provider of cloud-based predictive analytics software, for $600 million. Sellers will include Accel-KKR, Adams Street Partners and Goldman Sachs. www.predictivetechnologies.com

• Silver Lake Partners and Warburg Pincus are pursuing a dual exit process for Interactive Data Corp., a Bedford, Mass.-based provider of financial markets information, according to multiple media reports. The company could be valued at more than $5 billion (including debt) via either a sale or IPO. Read more.

OTHER DEALS

•  Hoban Construction Co. was the sole bidder in an auction for a majority stake in the parent company of Asiana Airlines Inc. Read more.

• Iron Mountain (NYSE: IRM), a Boston-based information storage company, has agreed to acquire Australian rival Recall Holdings (ASX: REC) for approximately $2 billion in cash and stock. Read more.

• Mylan NV (NYSE: MYL) has rejected an unsolicited $40 billion takeover offer from Israel’s Teva Pharmaceuticals (NYSE: TEVA), although Teva is expected to continue pursuing the deal. Read more.

• Rostelecom, a Russian state-controlled telecom company, reportedly is considering a takeover offer for CTC Media (Nasdaq: CTCM), a Russian commercial broadcaster whose current market cap is around $660 million. Read more.

FIRMS & FUNDS

•  Solace Capital Partners, a Los Angeles–based special situations firm led by former Oaktree Capital executives, has held a $126 million first close on its $500 million-targeted debut fund. Eaton Partners is serving as placement agent. www.solacecap.com

MOVING IN, UP, ON & OUT

•  Barbara Anderson has joined Azalea Capital as controller and chief compliance officer. She previously was VP and controller for Island Global Yachting. www.azaleacapital.com

• Yaser Moustafa has joined NBK Capital as a Dubai-based senior managing director, and head of day-to-day operations. He previously was a managing director with Alvarez & Marsal’s private equity advisory practice for the Middle East. www.nbkcapital.com

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