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Term Sheet — Tuesday, June 21

Jun 21, 2016

Random Ramblings

This morning's big news is that Nikesh Arora has stepped down as president of SoftBank, the Japanese conglomerate where he was widely views to be the successor-in-waiting to founder and CEO Masayoshi Son.

Arora originally joined SoftBank from Google, in order to lead investments in entertainment and media companies, but was elevated to president after just nine months. But he still was involved in major investment decisions, including the whopping $1 billion "venture capital" deal for online lender SoFi.

Via Twitter, Arora has been suggesting that his departure is amicable, and largely based on the 59 year-old Son deciding to remain in charge longer than previously-expected. He claims to have no immediate plans, although clearly he now transitions from SoftBank's CEO-in-waiting to Silicon Valley's CEO-in-waiting. If a major job opens up (or is rumored to open up), expect Arora's name to be mentioned.

For more on Arora, please read Erin Griffith's fantastic feature from last fall. Erin also has chimed in this morning on the surprise announcement.

• New firm alert: Defy.vc has been quietly launched as a new VC firm by Trae Vassallo (ex-Kleiner Perkins) and Neil Sequeria (ex-General Catalyst). The focus will be on connected software, with plans to hold a one-and-done close in September on around $150 million for its debut fund. Vassallo declined comment, when reached yesterday by phone.

• Personnel scoop: Alex Crisses, a former managing director with Insight Venture Partners, where he focused on infrastructure software and Internet investments, has taken a job with General Atlantic. No further details. Yet.

• Customer service: Anyone else out there have a Lenovo laptop whose fan is beginning to sound like a spastic power drill? If so, what did you do to fix it?

IN MEMORIAM

On Friday evening, venture capital pioneer David Morgenthaler passed away at the age of 96 years-old. At the time, he was a patient of the Cleveland Clinic, an organization where he served on the board and finance committees for decades.

"It was not unexpected, but it was still a surprise," says Gary Morgenthaler, David's son who more than two decades ago opened a Silicon Valley office for David's firm, then known as Morghenthaler Partners. "His last night with us he was very intently focused on how the Cavs were doing, and on his grandson's new job."

For many in today's venture community, David Morgenthaler's name may not mean too much. But without him, many of those folks would likely be in another line of work.

Morgenthaler, who grew up in rural South Carolina before attending MIT and joining the U.S. Army one day after the Pearl Harbor Attacks, was one of the original venture capitalists (back before VCs even called themselves VCs). But, more importantly, he helped form the National Venture Capital Association and was asked in 1975 to be its president. He said yes, on one condition: The organization, which then represented fewer than two dozen firms, would need to move its headquarters from Chicago to Washington, D.C., so that it could help pursue policies that would spur entrepreneurship.

"He felt that there was no particular incentive at that time to create new companies, because the risk was not commensurate with the reward," David says.

The first lobbying effort was to create a lower tax rate for capital gains, which proved successful. Then, working with others, Morgenthaler helped change Erisa laws so that pension funds could invest in alternative assets like venture capital — a move that coincided with the personal computer revolution.

"Today it's almost unthinkable for a small, meagerly-funded group to walk the halls of Congress and get laws changes, but my father and those he worked with did it," Gary Morgenthaler says.

David Morgenthaler would go on to invest in such companies as Apple, before focusing more on biotech healthcare in his later years (in part due to one of his sons getting cancer). His firm also would split up based on different strategies, with the West Coast venture unit now known as Canvas Ventures.

"He took great pride in the firm and in mentoring younger partners," Gary Morgenthaler adds. "But he also stayed interested in the latest technology. You'd see him in the Cleveland Clinic playing with an Apple Watch, learning all the functionality. What other 96 year-old does that?"

Rest in peace David. The country is better for your contributions.

THE BIG DEAL

Tencent has agreed to acquire an 84.3% stake in  Supercell, the Finnish gaming company whose titles include Clash of Clans, from SoftBank at an enterprise value of around $10.2 billion. Read more.

VENTURE CAPITAL DEALS

•   Number26, a Berlin-based digital bank for consumers, has raised $40 million in Series B funding. Horizons Ventures led the round, and was joined by Battery Ventures, individual angels and return backers Valar Ventures, Earlybird Ventures and Redalpine Ventures. Read more.

•  Spaceflight Industries, a Tukwila, Wash.-based small satellite company focused on imaging Earth, has raised $25 million in Series B funding. Mithril Capital Management led the round, and was joined by return backers RRE Venture Capital, Vulcan Capital and Razor’s Edge Ventures. Read more.

•  Smule, a Palo Alto, Calif.-based mobile developer of music applications and games, has raised around $22 million in new VC funding, according to a regulatory filing. Existing backers include Adams Street Partners, Roth Capital Partners, Bessemer Venture Partners, Granite Ventures and Shasta Ventures. www.smule.com

•  Zerto, a Boston and Israel-based provider of disaster recovery and data management software, has raised $20 million in Series E-1 funding led by CRV. This is a follow-on to a $50 million round announced earlier this year, led by Institutional Venture Partners. www.zerto.com

•  NSS Labs Inc., an Austin, Texas-based information security research and advisory company, has raised $16 million in new equity and debt financing. Delta-v Capital led the equity tranche, and was joined by return backer LiveOak Venture Partners. www.nsslabs.com

•  Iggbo, a Richmond, Va.-based provider of on-demand blood draws and medical testing, has raised $13 million in Series A funding led by Heritage Group. www.iggbo.com

•  Blueprint Bio, a Newport Beach, Calif.-based biomarker discovery and licensing company, has raised $7.5 million in new VC funding from Forentis Partners. www.blueprintbio.com

•  Rocketrip, a New York-based platform for reducing corporate travel costs, has raised $9 million in Series B funding. Bessemer Venture Partners led the round, and was joined by return backers Canaan Partners and Genacast Ventures. www.rocketrip.com

•  Dataloop.io, a San Francisco-based provider of cloud IT monitoring solutions, has raised $5 million in Series A funding from Battery Ventures and Open Ocean. www.dataloop.io

•  Techspace, a UK-based co-working space operator, has raised GBP 5 million in new VC funding led by real estate investor Leo Noé. www.techspace.co

•  Bonfyre, a St. Louis-based private social communication platform for companies, has raised $4 million in new VC funding led by existing backer Arsenal Capital Management. www.bonfyreapp.com

•  800 Degrees Pizza, a Los Angeles-based pizza chain, has raised an undisclosed amount of equity funding from Murfey Ventures. www.800degreespizza.com

PRIVATE EQUITY DEALS

•   CI Capital Partners has acquired a majority stake in Epiphany Dermatology, an operator of dermatology and skin cancer clinics in Central Texas. No financial terms were disclosed. www.epiphanydermatology.com

•  Liberty Hall Capital Partners has acquired J&M Machine LLC, a Norton Shores, Mich.-based provider of precision-machined metallic parts and assemblies for the global aerospace industry. No financial terms were disclosed. J&M will be integrated into existing Liberty Hall portfolio company Accurus Aerospace. www.jmmachine.com

•  Investcorp has acquired a 55% equity stake in Corneliani SpA, a luxury Italian menswear maker, at an enterprise value of approximately $100 million. The company’s founding family retains the other 45% ownership position. Read more.

•  McKesson Corp. (NYSE: MCK) has held talks about merging its IT unit with Change Healthcare, in a transaction that could be worth north of $10 billion, according to Reuters. Change Healthcare previously was known as Emdeon, before being acquired in 2011 for $2.2 billion by The Blackstone Group. Read more.

•  Silverfleet Capital has agreed to acquire Lifetime Training, a UK-based provider of corporate training solutions, in partnership with company management. The seller is Sovereign Capital Partners. No financial terms were disclosed. www.lifetimetraining.co.uk

•  The Sterling Group has simultaneously acquired, and will merger, two business in the industrial cleaning and related specialty cleaning services space: North American Industrial Services (Ballston Spa, N.Y.) and Evergreen Industrial Services (La Porte, Texas). No financial terms were disclosed for either transaction. Evergreen was previously owned by Platform Partners. Mark Neas, the former CEO of Brand Energy Solutions, will lead the combined company. www.sterling-group.com

•  Teasdale Foods, a provider of private label and branded Hispanic foods, has acquired Mesa Foods, a Louisville, Ky.-based producer of private label tortillas, flatbreads, taco shells, taco kits and chips. No financial terms were disclosed. Teasdale Foods is owned by Snow Phipps Group. www.teasdalefoods.com

•  TPH Partners has formed EnWater Solutions LLC via the combination of its existing water business in the Permain Basin and assets acquired from Pelagic Water Systems. No financial terms were disclosed. The water management company will be led by Micky Thacker, a former executive with Flint Energy Services. www.enwatersolutions.com

•  Turnbridge Capital Partners has sponsored a recapitalization of DeBusk Services Group LLC, a Pasadena, Texas-based mechanical and industrial cleaning services provider for the domestic refining and petrochemical facilities. No financial terms were disclosed. www.debusksg.com

IPOs

•   Acushnet Holding, a Fairhaven, Mass.-based maker of golf products under such brands as Titleist and Footjoy, has filed for a $100 million IPO (likely a placeholder figure). The company plans to trade on the NYSE under ticker symbol GOLF, with J.P. Morgan and Morgan Stanley serving as lead underwriters. It reports $26 million of net income on $443 million in revenue for Q1 2016. Shareholders include Mirae Asset Securities and the Blackstone Group. www.titleist.com

•  Conyers Park Acquisition, a blank-check acquisition company led by Centerview Partners, has filed for a $402.5 million IPO. Deutsche Bank and Goldman Sachs are serving as lead underwriters.

EXITS

•  No exit news this morning.

OTHER DEALS

•  Cambridge Consultants, a Boston-based product development firm owned by Altran (Paris: ALT), has acquired Synapse, a Seattle-based product development firm focused on consumer technology. No financial terms were disclosed. www.cambridgeconsultants.com

•  Icahn Enterprises has increased its takeover bid for the 18% it doesn't already own in auto parts maker Federal-Mogul (NYSE: FDL) to $8 per share. Read more.

•  Oi, Brazil’s fourth-largest mobile telecom company, has filed for bankruptcy protection. It represents the largest bankruptcy in Brazil’s history. Read more.

•  Sports Direct (LSE: SPD) and Modell's Sporting Goods are in talks to acquire upwards of 200 stores from bankrupt retailer Sports Authority, according to the WSJ. Bids for the store leases are due today. Read more.

•  Walmart (NYSE: WMT) has agreed to sell Yihaodian, its e-commerce site and app in China, to JD.com (Nasdaq: JD). The all-stock deal will give Walmart around a 5% stake in JD.com, which would value the transaction at approximately $1.5 billion. Read more.

FIRMS & FUNDS

•  Deutsche Börse is launching a corporate VC group called DB1 Ventures, which will back fin-tech startups and also manage some of the exchange’s existing minority investments. Read more.

•  Industry Ventures has closed its eighth venture capital secondaries fund with $500 million in capital commitments, plus $200 million for a new co-investment fund for direct venture deals. www.industryventures.com

•  KKR has closed its first European real estate private equity fund with $739 million in capital commitments. www.kkr.com

•  Monomoy Capital Partners, a New York-based turnaround firm focused on the middle markets, has raised just over $740 million for its third fund, according to an SEC filing. www.mcpfunds.com

•  Shasta Ventures is nearing a $300 million final close on its fifth fund (same size as Fund IV), according to Dow Jones. www.shastaventures.com

•  Welsh, Carson, Anderson & Stowe has closed its twelfth fund with $3.33 billion in capital commitments, compared to its $3 billion target and $3.5 billion hard cap, according to Private Equity International. www.wcas.com

MOVING IN, ON & UP

•   .406 Ventures has promoted Payal Agrawal Divakaran to principal, and also hired Rob McCall as a senior analyst. www.406ventures.com

•   Justine Gordon has joined executive search firm Egon Zehnder as a member of its private equity practice. She previously was a managing director with AlpInvest Partners. www.egonzehnder.com

•   Rich Hall has been named co-chair of the investment committee of Harvard Management Co., where he oversees private equity investing. His fellow co-chair is Rene Canezin, head of fixed income, credit and commodities. The moves come in the wake of HMC CEO Stephen Blyth taking medical leave. Read more.

•   Kevin Hurth has joined Insight Venture Partners as VP of capital markets. He previously was a VP in BMO Harris Bank's financial sponsors group. www.insightpartners.com

•   J.P. Morgan Chase & Co. has promoted Lori Beer to chief information officer of the company’s corporate and investment bank, according to Fortune. Read more.

•   Jesse Middleton, a co-founder of WeWork Labs, has joined VC firm Flybridge Capital Partners as a New York-based general partner. www.flybridge.com

•   Jesse Wu, former head of Johnson & Johnson’s operation in China, has joined The Carlyle Group as a senior advisor to its Asia private equity team. Read more.

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