Term Sheet — Wednesday, March 30

Mar 30, 2016

Random Ramblings

Greetings from the home office. Sorry I'm a bit late, but there was lots to get to this morning:

• Caspersen caper: After Term Sheet was published yesterday, the charitable foundation allegedly ripped off by former PJT Partners exec Andrew Caspersen outed itself: It's The Moore Charitable Foundation, a $189 million group focused on environmental conservation efforts, and founded by hedge fund manager Louis Bacon. It is unclear if the unidentified "hedge fund manager" who sourced the deal and personally invested/lost $400,000 is an employee of Bacon's Moore Capital Management organization.

My initial thought upon hearing about this alleged con was that it might strengthen due diligence controls within a private equity world that relies more on trust than any other mature asset class. But that didn't seem to happen after the Canopy Financial fraud, or the legal spat between General Atlantic and Autonomy. Let alone the Ifty Ahmed situation. So I think this will ultimately go down as a cautionary tale that the industry misinterprets as an opportunity to gossip and rubberneck.

• Look ma, I'm on TV: Speaking of Caspersen, I was interviewed for a Good Morning America segment that aired earlier today. You can view it by going here. And in other "look ma, I'm on TV" news, last night I appeared on WGBH's Greater Boston program to discuss everything from DraftKings to Apple/FBI to GE's apparent rent-free move to Boston (alongside ex-Mass. AG Martha Coakley and one of the attorneys who prosecuted Whitey Bulger). Here's the video.

Screaming Streaming: Today's big deal is that Spotify has agreed to raise around $1 billion in a convertible debt deal with TPG, Dragoneer and Goldman Sachs clients. A couple quick thoughts:

(1) This clearly is a reflection of Spotify's inability to raise new equity at a premium (or at least a substantial premium) to its most recent valuation of $8.5 billion. If it had been able to do so, then the dilution would have been more palatable than a convertible deal that contains some pretty terms.

(2) That said, the lenders don't do this deal if they believe Spotify is ultimately going to lose value. Protecting downside is not the same as projecting downside.

(3) While I'm skeptical that Spotify will be able to raise an equity up-round -- particularly in this environment -- it is worth noting that this deal isn't too different from what Uber did in late 2014, and clearly that wasn't the company's valuation peak.

It's official: Last October we reported that KKR was raising its first-ever growth equity fund focused on the technology sector. Some related SEC filings popped up this morning indicating that it is called the KKR Next Generation Technology Growth Fund.

• Litigation update: CVC Capital Partners last night responded to a January lawsuit brought by former investor relations exec Lisa Lee (now with Providence Equity), which alleged such things as inappropriate "fondling" by a senior executive, violations of the Family Leave Act and retaliation for reporting such behaviors.

In short, CVC denies all the charges ― particularly the more lurid ones and anything about how Lee's maternity leave impacted her job responsibilities. What's interesting, however, is that CVC acknowledges that it denied her around $10 million in equity-based compensation because she took a job at a competing private equity firm within two years after leaving, even though she was terminated as part of what CVC claims was a broader restructuring. Never before heard of an enforceable non-compete that covers a person who was fired, as opposed to quit (HR folks and lawyers, help me out here).

It's also worth noting that CVC disputes Lee's claim that the firm has no female senior managing directors, although she seems to be backed up by a viewing of CVC's own website. Also notable that CVC claims that it had decided to terminate Lee more than a month before informing her of the decision.

More on this later today on the website, as I'm able to read the CVC response a bit more deeply.

• Another litigation update: A personal injury attorney has filed an attorney's lien against Amber Baptiste, in the case that she wins damages in her breach of contract lawsuit against former Sequoia Capital partner Michael Goguen.

• Sorry: Yes, I know that Term Sheet is beginning to look like a legal newsletter.

• Deal update: Last Thursday we reported that Snapchat had agreed to buy BitStrips, the Canadian maker of "bitmojis." A source familiar with the situation says that the deal is now closed.

• VC fundraise go boom: There has been a lot of talk in the past week about the recent burst in venture capital fundraising, highlighted by a front-page story in today's WSJ. Not terribly surprising given that many of the largest VC firms are now on similar fundraising cycles, in part due to increased deal activity in 2014-2015 (which is driving LPs nuts).

Two contradictory thoughts on this: (1) These numbers might be overstated, given the inclusion of many "opportunity" funds that are unlikely to be fully called. (2) These numbers might be understated, in that they don't include the increase in corporate VC or crossover fund participation.

THE BIG DEAL

•  Spotify has agreed to raise around $1 billion in new convertible debt financing from TPG CapitalDragoneer Investments and high-net-worth clients of Goldman Sachs The deal was first reported by the WSJ, and includes a 20% conversion discount the the company's IPO price (assuming the IPO is within a year -- getting 2.5% deeper with successive 6-month periods). Read more.

VENTURE CAPITAL DEALS

•  Zavante Therapeutics, a San Diego-based developer of antibiotics, has raised $45 million in Series A funding (including the conversion of $10m in outstanding notes). Frazier Healthcare Partners and Longitude Capital co-led the round, and were joined by Aisling Capital. Read more.

•  Wanliyun Medical Information Technology, a Chinese developer of cloud-based big data medical imaging platforms, has raised around $35 million in new funding led by the healthcare unit of Alibaba Group (NYSE: BABA). Read more.

•  Invoca, a Santa Barbara, Calif.-based provider of call intelligence solutions, has raised $30 million in Series D funding. Morgan Stanley Alternative Investment Partners led the round, and was joined by return backers Accel, Upfront Ventures, Rincon Venture Partners, Salesforce Ventures and Stepstone Group. Read more.

•  Beamr, an Israel-based provider of image and video optimization products, has raised $15 million in new VC funding. Disruptive Growth led the round, and was joined by return backers Marker LLC and Innovation Endeavors. In related news, the company agreed to acquire Palo Alto, Calif.-based encoding company Vanguard Video for an undisclosed amount. Read more.

•  Frichti, a French prepared meal and recipe box delivery service, has raised €12 million in new VC funding. Idinvest was joined by return backer Alven Capital and individual angels. Read more.

•  MapD, a San Francisco-based startup that helps companies process large data streams in real-time, has raised $10 million in Series A funding. Backers include Verizon Ventures, Google Ventures, Vanedge Capital and Nvidia. Read more.

•  ClearInk, a Santa Clara, Calif.-based developer of reflective display technology for electronic shelf labels, wearables and mobile devices, has raised around $7 million in second-round funding (with plans to add another $6m within the next four months). Backers include Jinfu, LangSheng Capital, NEY, Altus Ventures and CrossPacific Capital. www.clearinkdisplays.com

•  6 River Systems Inc., a Boston-based startup focused on fulfillment automation for e-commerce and retail operations, has raised $6 million in seed funding. Eclipse Ventures led the round, and was joined by iRobot. www.6river.com

•  Bluefin Payment Systems, an Atlanta-based provider of point-to-point encryption solutions for payments, has raised $6 million in growth equity funding co-led by Napier Park and Camden Partners. www.bluefin.com

•  Data Artisans, a German developer of software to analyze and process high-volume data streams, has raised €5.5 million in new VC funding. Intel Capital led the round, and was joined by Tengelmann Ventures and return backer B-to-V Partners. www.data-artisans.com

•  Lesson.ly, an Indianapolis-based developer of learning automation software, has raised $5 million in Series A funding. OpenView Venture Partners led the round, and was joined by High Alpha Capital and Allos Ventures. www.lesson.ly

•  Slice Labs Inc., a New York-based on-demand insurance platform for the on-demand market, has raised $3.9 million in seed funding co-led by Horizons Ventures and XL Innovate. www.slice.is

PRIVATE EQUITY DEALS

•  PanTheryx Inc., a Boulder, Colo.-based maker of medical nutrition products, has raised $53 million in new financing from Pegasus Capital Advisors. www.pantheryx.com

•  Trive Capital has sponsored a recapitalization of Iowa Northern Railway Co., a Cedar Rapids, Iowa-based short-line railroad operating around 250 miles of track. No financial terms were disclosed. www.iowanorthern.com

IPOs

•  No IPO news this morning.

EXITS

•  Brocade Communications (Nasdaq: BRCD) has acquired StackStorm, a Palo Alto, Calif.-based provider of operations automation solutions, for an undisclosed amount. StackStorm had raised a small amount of VC funding from firms like Engineering Capital, Finaves, Sand Hill East Ventures and X/Seed Capital. Read more.

•  Guidewire Software Inc. (NYSE: GWRE) has agreed to acquire EagleEye Analytics, a Columbia, S.C.-based provider of SaaS-based predictive analytics for property and casualty insurers, for $42 million in cash. Sellers include FirstMark Capital. www.guidewire.com

•  KKR has agreed to sell French fashion group SMCP to China’s Shandong Ruyi for approximately €1.3 billion. Read more.

•  KKR has agreed to sell its stake in Scout24 Schweiz, a Swiss online real estate marketplace, to Swiss Mobiliar. No financial terms were disclosed. www.kkr.com

OTHER DEALS

• eBay (Nasdaq: EBAY) has acquired Cargigi, a provider of online advertising services for car dealerships. No financial terms were disclosed. Read more.

•  Foxconn has finalized its deal to acquire a majority stake in Japanese electronics maker Sharp Corp. (Tokyo: 6753), but for around $900 million less than its original offer. Read more.

•  Metro Group (DB: MEO), a German retailer that last year sold department store chain Galeria Kaufhof to Hudson’s Bay Co. (TSX: HBC), said that it will split into a pair of listed companies, one focused on consumer electronics and another focused on food products and wholesaling. Read more.

•  McCormick & Co. Inc. (NYSE: MKC) is raising its takeover for Premier Foods PLC (LSE: PFD) to around $2.2 billion. Read more.

•  State Street Corp. (NYSE: STT) has agreed to acquire GE Asset Management, a group with around $100 billion in assets under management, from General Electric (NYSE: GE). The deal is valued at upwards of $485 million. www.ge.com

FIRMS & FUNDS

•  No firm or fund news this morning.

MOVING IN, ON & UP

•  Cyan Banister, an angel investor and former IronPort executive, has joined venture capital firm Founders Fund as an investing partner. Read more.

•  Jay Nadler, former COO of Interactive Data Corp., has joined Warburg Pincus as an executive-in-residence in the firm’s TMT, industrials and business services groups. www.warburgpincus.com

•  Bart Schachter, former co-founder of Blueprint Ventures who most recently led corporate develoment for Docker, has joined Iron.io as chief operating officer. www.iron.io

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