Term Sheet — Friday, January 15

Jan 15, 2016

Random Ramblings

Foursquare yesterday announced $45 million in Series E funding from (mostly) existing investors, plus that founding CEO Dennis Crowley would be replaced by chief operating officer Jeff Glueck (Crowley will become the company's executive chairman).

The big headline here is that this is a major down-round for a company once valued at $760 million, as it came at a pre-money valuation of around $250 million. But there are some other interesting items in the company's Delaware stock certificate (courtesy of VC Experts):

1. The Series E stock's liquidation preference is tied to a "qualifying revenue event." In general, the preference is 1.5x. But, if Foursquare reaches $25 million in gross revenue during a calendar quarter (in accordance w/ GAAP), then the Series E liquidation preference drops to 1x. This suggests both that Foursquare is not yet generating $100 million in annual revenue, and also that management feels it's a reachable threshold.

2. Per terms of this deal, the Series E holders ($4 per share) get paid back first in a liquidity event. Next comes the Series D folks, who paid $12.89 per share. Then it appears that remaining proceeds would be distributed pro rata among the Series A ($1), Series B ($13.34), Series C ($59.24) and common stock holders. In other words, the preference has disappeared. It also is worth noting, however, that one person I spoke with today is reading it differently, thinking that the new doc actually gives the Series A-C holders more rights. I'm pretty confident in my lying eyes, but will have a post up later this morning at Fortune.com after running it by a few more people.

3. Not included in the Delaware docs is the $41 million in debt it raised two years ago from Silver Lake and existing shareholders like Union Square Ventures (which led the new round). That's not surprising, as debt isn't usually disclosed in such filings. My understanding, however, is that the notes remain on Foursquare's books (i.e., have not been repaid).

•  Deal data: Venture capitalists disbursed $58.8 billion into U.S.-based companies last year, which is the second-highest number ever recorded by the MoneyTree three of Thomson Reuters, PwC and the National Venture Capital Association. Yup, even higher than the $54.9 billion disbursed in 2009.

In a press release announcing the figures, NVCA president Bobby Franklin said: "With almost $60 billion deployed to startup companies in 2015, the venture capital ecosystem is strong and healthy."

Strong? Perhaps. Healthy? Not necessarily.

Remember, performance for 1999/2000 vintage VC funds was so lousy that it caused a massive industry shakeout, and led to a situation where many brand-name funds were forced to essentially return money they had already raised. Sure, there are a bunch of tech and macroeconomic differences between then and now, but this faith in the virtue of large numbers is unproven (at best).

•  Keep an eye out: I've got a long piece about a fascinating piece of private equity-related litigation, which should be up at Fortune.com within the hour. I'll be sure to tweet it out @danprimack.

•  Publishing note: We will be off on Monday, in observance of the Martin Luther King Jr. holiday. Back and boisterous on Tuesday.

•  Have a Gronktastic long weekend. Go Pats!

THE BIG DEAL

•   General Electric (NYSE: GE) has agreed to sell its home appliances business to China’s Qingdao Haier for $5.4 billion in cash. This comes after GE’s deal to sell the unit for $3.3 billion to Sweden’s Electrolux fell apart last year due to U.S. regulatory concerns. Read more.

VENTURE CAPITAL DEALS

•   Taulia Inc., a San Francisco-based financial supply chain company, has raised $46 million in Series E funding. Zouk Capital led the round, and was joined by return backers like DAG Ventures, Harbor Pacific Capital, Matrix Partners, QuestMark Partners and Trinity Ventures. Taulia also announced that it has hired John Varughese, previously a partner in the advisory business of Perella Weinberg Partners, as CFO. www.taulia.com

•   VeloCloud Networks Inc., a Mountain View, Calif.-based provider of cloud-based WAN solutions, has raised $27 million in Series C funding. March Capital Partners and Cisco Systems were joined by return backers like NEA and Venrock. www.velocloud.com

•   PlaceIQ, a Boulder, Colo.-based provider of hyper-local ad targeting solutions, has raised $25 million in Series D funding. Harmony Partners led the round, and was joined by fellow return backers Iris Capital, IA Venture Partners, U.S. Venture Partners and Valhalla Partners. www.placeiq.com

•   Euclid Analytics, a San Francisco-based provider of location analytics, has raised $20 million in Series C funding. Cox Enterprises led the round, and was joined by Groupe Arnault, Gold Sky Capital and return backers Benchmark Capital, NEA and Harrison Metal. www.euclidanalytics.com

•   Fugue (f.k.a. Luminal), a Frederick, Md.-based provider of an infrastructure-level operating system for cloud computing, has raised $20 million in Series C funding. NEA led the round, and was joined by return backer Core Capital. www.fugue.co

•   Appthority, a San Francisco-based provider of mobile application risk management solutions, has raised $10 million in Series B funding. Blue Coat Systems and Knollwood Investment Advisory were joined by return backers U.S. Venture Partners and Venrock. www.appthority.com

•   Inturn, a New York-based 2B SaaS platform that helps brands and retailers sell and purchase off-price inventory, has raised $9.7 million in Series A funding. Novel TMT Ventures led the round, and was joined by Benvolio Group, Shuco LLC,  Bam Ventures and return backers  Forerunner Ventures, Lerer Hippeau Ventures and T5 Capital. www.inturn.co

•   20/20 GeneSytems Inc., a Rockville, Md.-based cancer diagnostics startup “at the intersection of tumor biomarker diagnostics and big-data healthcare analytics,” has raised $4.5 million in new Series A funding from firms like Ping An Ventures. www.2020genesystems.com

•   CourseHorse, a New York-based online platform for finding and enrolling in classes, has raised $4 million in VC funding from Red Ventures. Read more.

•   Unmute, a Los Angeles-based open platform where users can host and share interactive phone calls, has raised $2.2 million in seed funding. Greycroft Partners led the round, and was joined by Comcast Ventures, Crosscut Ventures, Betaworks, Greylock, former NBA commissioner David Stern and Walking Dead creator Robert Kirkman.

PRIVATE EQUITY DEALS

•  American Apparel has rejected a $300 million takeover bid from Hagan Capital Group, Silver Creek Capital and former CEO Dov Charney. It is unclear if the group will raise its offer for the bankrupt retailer. Read more.

•   Cross Country Pipeline Supply Co., an Aurora, Colo.-based portfolio company of Odyssey Investment Partners, has acquired three companies: N2, a Midland, Texas-based provider of nitrogen generation and other integrity testing services to U.S. pipeline contractors and operators; Stone Pump & Trench, a Knoxville, Tenn.-based provider of liquid handling, transfer pumps and trench safety equipment U.S. infrastructure contractors and operators; and Pipeliner’s Warehouse Inc., a Houston-based provider of consumable pipeline construction supplies to the U.S. midstream market. No financial terms were disclosed. www.ccpipeline.com

•   Cubico, a joint infrastructure venture of Canadian pension funds OTPP and PSP and Spanish bank Santander, has acquired a pair of Brazilian wind farms for nearly $500 million. Read more.

•   Duff & Phelps Corp., a portfolio company of The Carlyle Group, has acquired CounselWorks LLC, a New York-based provider of strategic advisory and regulatory and compliance services to financial institutions. No financial terms were disclosed. www.counselworksllc.com

•   EIG Global Energy Partners is taking another stab at buying Canadian-Colombian oil company Pacific Exploration & Production Corp. (TSX: PRE), this time as a distressed debt-for-control rather than a pure equity play.

•   IK Investment Partners has agreed to acquire TeleComputing, a Norway-based IT services business, from Ferd Capital. No financial terms were disclosed. www.telecomputing.no

•   Kronos Inc., a Chelmsford, Mass.-based HR software company, has acquired Empower Software Solutions, an Orlando, Fla.-based provider of workforce and HR management software, from Lake Capital and Atlanta Equity Investors. No financial terms were disclosed. Kronos shareholders include The Blackstone Group, GIC, JMI Equity and Hellman & Friedman. www.kronos.com

•   Marlin Equity Partners has acquired ListenLogic, a Conshohocken, Penn.–based provider of unstructured big data and predictive analytics, social intelligence and real-time risk sensing to large enterprises. No financial terms were disclosed. Marlin plans to merge ListenLogic with existing portfolio company Anexinet Corp. www.listenlogic.com

IPOs

•  There is no IPO news this morning.

EXITS

•   Centrica PLC (LSE: CAN) is prepping a takeover bid north of €1 billion for Viridian, Northern Ireland's largest power company which is currently owned by Arcapita, according to the FT. Read more.

•   Ness Technologies, a portfolio company of The Rohatyn Group, has agreed to sell its TSG subsidiary to Israel Aerospace Industries and Formula Systems for an undisclosed amount. TSG is an Israel-based provider of command and control, intelligence and homeland security solutions. No financial terms were disclosed. www.ness.com

OTHER DEALS

•  American Energy Partners LP, the Oklahoma-based company led by former Chesapeake Energy CEO Aubrey McClendon, has signed a preliminary agreement worth more than $500 million with state-run Argentinian energy firm YPF to explore shale in the Vaca Muerta formation. Read more.

•   Brown-Forman (NYSE: BF) has agreed to sell its Southern Comfort and Tuaca spirits brands to Metairie, La.-based Sazerac for $543.5 million. Read more.

•   WebMD (Nasdaq: WBMD) yesterday disputed an FT report is exploring a sale of all of part of the company. Read more.

FIRMS & FUNDS

•  Saudi Arabia is planning to create a new sovereign wealth fund, according to Reuters. Read more.

Moving In, On & Up

•  Aaron DeRose has joined Tempus Global Data, an Ogden, Utah-based atmospheric and environmental data company, as executive VP of corporate development. He previously spent eight years with private equity firm Mercato Partners. www.tempusglobaldata.com

•   David Fallace has agreed to join The Investment Fund for Foundations as a managing director overseeing the firm’s “diversifying strategies” unit. He previously was director of special opportunities investments at the Alaska Permanent Fund. www.tiff.org

•   Summit Partners has made seven promotions: David Averett, Adam Britt, Andrew Collins, Robert Hassell and Michael Medici were promoted to managing directors; Jesse Lane was promoted to principal and Gabriel Carreiro was promoted to vice president. www.summitpartners.com

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