Term Sheet — Thursday, August 27

Aug 27, 2015

Random Ramblings

The stock markets roared back yesterday and are up sharply again this morning. Given that everyone was saying on Monday that startups must immediately increase cash conservation, I'd presume this means they should now ramp up their growth rates. Burn baby burn (rate).

Two more serious notes about our recent roller coaster and the tycoons who vomit on them:

1: The stock swings did not cause VC tourists like hedge funds and mutual funds to pull out of late-stage financing talks, according to several VC sources who regularly work with such groups. As one VC summed up: "We are watching closely, and I am sure the first to pull back will be the active public investors – they were the first to disappear in March 2014 when SaaS software company stocks dived. But we haven’t heard or seen any direct evidence yet."

2. One group of VC folks paying very close attention to the market machinations are CFOs, since they're the ones who have to send out quarterly reports to limited partners (plus audited annual financials). Remember, VC firms no longer just mark portfolio company valuations to the most recent round. They are required to make a good faith effort at marking to fair value -- which could be the last round, but broader market dynamics cannot be ignored. And given that the public markets -- including tech indices -- are still red for the quarter, some unicorns may quietly lose their crowns if the two-day rally doesn't extend deep into September...

•  Black to the future: BlackRock yesterday announced an agreement to acquire FutureAdvisor, a San Francisco-based provider of digital wealth management solutions that had raised around $24 million in VC funding from Canvas Venture Fund, Devonshire Investors and Sequoia Capital.

So I spent a bit of time on the phone with Rebecca Lynn, a Canvas general partner who sat on the FutureAdvisor board of directors. She says that the original conversations with BlackRock were about a strategic partnership, with the idea of an acquisition arising quite recently. Lynn adds that the company was growing at least 15% month-over-month, and that she “really believes they had a lot longer runway in front of them… but [co-founder and CEO Bo Lu] just felt there was such an incredible synergy with Blackrock in terms of what FutureAdvisor could do within a larger institution that he felt it was too exciting of an opportunity to pass up.”

Lynn also says that while FutureAdvisor had spoken to prospective investors about another VC round, it still had plenty of cash left from the $15.5 million Series B round it raised in May 2014. “In financial services, the worst way to build is too fast. You want great year-over-year growth, but you can’t just grow crazy and hope parts don’t fall off the back end. Keeping burn rates reasonable is important in all sectors, but particularly in financial services.

•  Throwing barrels: Angry Birds maker Rovio, which raised over $40 million in VC funding, yesterday announced that it was cutting more than 30% of its workforce (i.e., 260 jobs). This is on top of 130 layoffs last fall.

It reminded me a bit about a conversation I had with someone very close to the company around the time of its VC funding in 2011, who told me that Rovio viewed Angry Birds as the equivalent of Super Mario Brothers. When I asked about his confidence in Rovio being able to create a largely-unrelated hit based on a similar character -- given that Super Mario was based on Donkey Kong -- he expressed ignorance of that basic gaming history. To me, it was a big enough red flag that it stuck in my mind for the past four years...

•  From the trail: Carly Fiorina's political action committee took out a full-page ad in the NY Times today, defending its candidate's record as CEO of Hewlett-Packard. Or, more specifically, it paid to publish a full-page letter from former HP employee and director Tom Perkins, who just last year compared the “demonization” of America’s wealthiest individuals to Nazi Germany’s war on Jews. Kind of amazed that the PAC is using Perkins as a spokesman.

Also worth noting that the letter's signature refers to Perkins as "the founder of California venture capital firm Kleiner Perkins Caufield & Byers." Got to wonder what Eugene Kleiner would have thought about that... let alone Frank Caufield and Brook Byers.

•  Because I just can't help myself: Following Tuesday's dust-up between Donald Trump and Univision anchor Jorge Ramos, I took a look at the progress of Trump's lawsuit vs. Univision (a PE-backed company that is in registration for an IPO).

For the uninitiated, this is legal tussle that stems from Trump’s “rapists” comments about undocumented immigrants from Mexico, following which Univision terminated its contractual relationship (including television broadcast obligations) with the Trump-backed Miss Universe Organization.

Univision has said it plans to file for a dismissal of the lawsuit, and was supposed to file its formal response by yesterday. But the particular court where this case is being heard requires a pre-motion conference to occur before a motion to dismiss is filed, but the court had no available time for such a meeting prior to yesterday’s deadline. Instead, the pre-motion conference has been scheduled for Sept. 14. After Univision files its motion to dismiss, Trump will have 45 days to respond.

Two related notes: (1) Univision did acknowledge the suit in its most recent IPO documents, but said it “does not believe that the ultimate outcome of such litigation will have a material adverse effect” on the business. (2) In his suit, Trump says that Univision is “principally owned by longtime Clinton Foundation donor and current Hillary Clinton fundraiser, Haim Saban.” Saban is indeed company chairman and his Saban Capital Group was part of the private equity consortium that acquired Univision for $13.6 billion in 2006. But while Univision has not yet broken out its ownership structure in IPO docs, a source close to the situation says that Saban is not Univision’s principal owner, having invested less than each of the private equity firms.

THE BIG DEAL

Monsanto (NYSE: MON) has dropped its $46 billion takeover offer for Swiss agribusiness Syngenta AG (Swiss: SYN), after repeated rejections. Syngenta had consistently said that Monsanto was undervaluing its business, although Syngenta's own shareholders responded to the M&A collapse by pushing the company's stock down by 18%. Read more.

VENTURE CAPITAL DEALS

•  ServiceMax, a Pleasanton, Calif.-based provider of cloud-based field service management solutions, has raised $82 million in Series F funding. Premji Invest led the round, and was joined by GE Ventures, PTC Inc., Cloud Apps Capital and return backers Emergence Capital Partners, Kleiner Perkins Caufield & Byers, Mayfield, Meritech Capital Partners, Adams Street Partners, Crosslink Capital, Questmark Partners, Sozo Ventures and Trinity Ventures. www.servicemax.com

•  Yuneec International, a Shanghai-based drone-maker, has raised more than $60 million from Intel Capital. Read more.

•  Providence Medical Technology Inc., a Lafayette, Calif.-based developer of “tissue-sparing cervical spine technology,” has raised $12 million in new equity and debt financing. The equity came from return backers like Stanmore Medical Investments and Aphelion Capital, while Silicon Valley Bank provided the debt facility. www.providencemt.com

•  AirVM, an Ottawa-based cloud management platform, has raised C$8 million in Series A funding. Rho Canada Ventures led the round, and was joined by Build Ventures and existing shareholder Wesley Clover. www.airvm.com

•  Augury, a New York-based predictive machine diagnostics startup, has raised $7 million in Series A funding. Formation 8 Hardware Fund led the round, and was joined by Pritzker Group Venture Capital and return backers First Round Capital and Lerer Hippeau Ventures. www.augury.com

•  Lifefactory Inc., a Sausalito, Calif.-based housewares company, has raised $5 million in Series C funding. Silas Capital led with a $4 million investment, and was joined by return backers Greenhouse Capital Partners, dCapital, FOFM and Big Sky Partners. www.lifefactory.com

•  Eko Communications, a Bangkok-based provider of mobile communications tools for large organizations, has raised $5.7 million in Series A funding led by Gobi Partners. Read more.

•  Lugg, an on-demand app for large purchase delivery, has raised $3.8 million in seed funding. A Capital led the round, and was joined by such groups as CrunchFund and SV Angel. Read more.

•  Docady, an Israel-based maker of a mobile app for critical document access and management, has raised $1.5 million in seed funding from backers like Pitango Venture Capital, Disrupt-ive and Eilon Tirosh. www.docady.com

•  Klaviyo, a Boston-based platform for ecommerce email campaigns, has raised $1.5 million in VC funding led by Accomplice. www.klaviyo.com

•  Pronto, a London-based on-demand app for healthy meal delivery, has raised £1 million in seed funding. Backers include Payfair Capital, Seedcamp, Ballpark Ventures, London Co-Investment Fund and individual angels. Read more.

PRIVATE EQUITY DEALS

•  Alta Growth Capital has acquired Fruehauf de Mexico, a Mexico-based manufacturer of semi-trailers for industrial and commercial use. No financial terms were disclosed. www.agcmexico.com

•  Centerbridge Partners has completed its previously-announced acquisition of KIK Custom Products, a Canadian maker of pool and spa treatment products, from CI Capital Partners. No financial terms were disclosed. www.kikcorp.com

•  Deposition Solutions, a Houston, Texas-based provider of litigation support services, has acquired Stratos Legal Records, the medical records retrieval services division of Houston-based Stratos Legal. No financial terms were disclosed. Deposition Solutions is a portfolio company of Trinity Hunt Partners. www.depotexas.com

•  Kainos Capital has agreed to buy a majority stake in Product Quest Manufacturing LLC, a Daytona Beach, Fla.-based contract maker of OTC health and beauty care products, from Stephens Capital Partners, according to LBO Wire. www.productquestmfg.com

•  Pacific Equity Partners is in “exclusive talks” to acquire Academic Colleges Group, a New Zealand-based provider of academic education services to international students, according to Reuters. The deal could be worth around US$340 million. Read more.

•  Temasek has joined MBK Partners on its bid for the South Korean business of Tesco PLC (LSE: TSCO), according to Reuters. Rival bidders for the business, which could be worth $6 billion, include Affinity Partners working with KKR and Carlyle Group working with GIC. Read more.

•  Total SA (Paris: FP) has agreed to sell a gas pipeline and gas terminal in the North Sea to North Sea Midstream Partners, a portfolio company of ArcLight Capital Partners, for approximately $905 million. Read more.

IPOs

•  Albertsons, the Cerberus Capital Management-owned supermarket giant that completed its acquisition of Safeway earlier this year, filed amended IPO documents that show plans to list on the NYSE under ticker symbol ABS. www.albertsons.com

EXITS

•  Providence Equity Partners has agreed to sell sports events brand IronMan to China’s Dalian Wanda Group Co. for $650 million. www.provequity.com

OTHER DEALS

 CRH (Ireland: CRG) has agreed to acquire C.R. Laurence, a Los Angeles-based maker of architectural hardware like industrial window glazes, for around $1.3 billion. Dublin-based CRH said that, following this deal, it will take a break from large-scale acquisitions. Read more.

Hortonworks (Nasdaq: HDP) has agreed to acquire Onyara Inc., an Eldersburg, Md.-based credtor of open source project Apache NiFi. No financial terms were disclosed. Read more at Fortune.

•  Overstock.com Inc. (Nasdaq: OSTK) has agreed to acquire SpeedRoute, a New York-based provider of online security brokerage services, for an undisclosed amount of cash and stock. www.overstock.com

FIRMS & FUNDS

• CIT Group (NYSE: CIT) and TPG Capital have launched a $500 million joint venture called Strategic Credit Partners, which will provide senior secured financing to U.S. companies. www.cit.com

• Commerce Ventures, a San Francisco-based VC firm focused on commerce-related companies, is raising its second fund, according to a regulatory filing. www.commercevc.com

• Summit Partners is raising its ninth flagship private equity fund with a $3 billion target, according to a regulatory filing. The Boston-based firm also is raising upwards of $600 million for its next venture capital fund. Summit previously raised $2.7 billion for its eighth flagship fund and $520 million for its third venture capital fund (investments of up to $45m) in early 2012. www.summitpartners.com

MOVING IN, UP, ON & OUT

•  Paul Nardone has joined BFY Holdings, a snack-maker owned by Permira, as president and CEO. He most recently was an operating partner with Sherbrooke Capital, and is the former CEO of Annie’s Homegrown. www.medorasnacks.com

•  Adinah Shackleton has joined private equity firm Permira as director of environmental, social and governance (ESG). She previously was a principal consultant with Environmental Resources Management. www.permira.com

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