term sheet

By Dan Primack
August 9, 2016

Corporates + Startups = BFFs

This is Erin Griffith filling in for Dan while he’s on vacation. 

As some of you are aware, Fortune has a tech newsletter called Data Sheet that I’ve been writing for every Tuesday. The following column has been cross-published to both of the ‘Sheets. You can subscribe to Data Sheet here

For years corporations have tried to show off how innovative they are by adopting superficial markings of startup culture—open office floor plans, ping pong tables and cold-brew coffee on tap. It became trendy to launch corporate-run startup accelerator programs, which I used to mock as “innovation by osmosis.” There’s a whole new class of corporate venture arms from non-tech corporations ranging from the insurance industry to Campbell Soup. Fortune 500 companies have hired “startup scouts” and opened innovation hubs in Silicon Valley.

A lot of it is “corporate innovation theater,” which I wrote about in Fortune’s last issue. It’s a way for the corporate sponsors to give themselves a halo of innovation and good PR, while soaking up a bunch of good ideas from startups and delivering little in the way of mentorship or actual partnerships for the startups. Will MasterCard or Sprint or Lowe’s or Anheuser-Busch InBev really strike a meaningful partnership with a three-person, three-month-old company without a viable product?

But lately I’ve noticed a shift in the strange, sometimes awkward relationships between corporations and startups. Corporations take startups—even very young ones—far more seriously today. Look no further than the recent Fortune 500 acquisitions of startups as proof: General Motors spent $1 billion (or around that with earn-outs) on Cruise Automotive, a 30-person autonomous vehicle startup that hasn’t even launched a product. Unilever spent $1 billion on Dollar Shave Club, a razor startup that adds just $200 million in revenue to Unilever’s €53.3 billion bottom line. And of course, yesterday Wal-Mart spent $3 billion on Jet.com

A new study on the state of startup/corporate collaboration from MassChallenge and Imaginatik shows that not only are corporates more eager to work with startups, 23% of it see it as “mission critical, and 82% said it’s at least “somewhat important.”

Most importantly, 67% of those responded that they wanted to work with earlier stage startups.

You can thank inflated valuations for that. There’s the fear factor of a company like Uber being worth more than the majority of Fortune 500 companies. And there’s the affordability factor—the shareholders of most Fortune 500 companies would not appreciate spending $1 billion or $3 billion or on a hot startup. By the time most large corporations notice a startup like Airbnb is hurting their business, the startup is way too expensive to be acquired.

It’s better, then, to partner with an eager friend and potential target much earlier. When asked whether GM would acquire $5.5 billion Lyft, which is reportedly for sale, at Fortune’s Brainstorm Tech conference last month, GM President Dan Amman essentially said the $500 million investment GM made in January invested was a big enough deal for the automaker.

That’s not what venture investors are used to. The normal acquirers for tech startups are tech companies, and they’re willing to pay up. Facebook can drop $18 billion on WhatsApp and investors will hardly wince. Apple could buy the Big Three automakers with its cash on hand. But normal, non-tech corporates can’t do that. They’re interested in buying tech startups, but they’re a lot more conservative than their cash-rich tech peers. They can wait for valuations to come down. In the meantime, they’ll be seeking to partner earlier and earlier.

• To be clear: Yesterday a few readers (correctly) quibbled with the way I conflated Jet’s revenue and gross merchandize volume. I should have pointed out that Jet’s revenue is likely a small fraction of the $80 million to $90 million in GMV it brings in each month.

• Hold onto your hats: The IPO section of this newsletter has been pretty lonely lately, but according to Liz Myers, global head of equity capital markets at JPMorgan Chase, that’s about to change. The bank has 20 global IPOs lined up for September. That doesn’t mean all our precious unicorns will suddenly change their minds about staying private as long as they possibly can. Myers told Bloomberg that “high-value” tech deals (cough, Airbnb, cough, Uber) are likely to wait until next year or 2018 to go public.

While Dan is out, direct your deal news and tips here. If you’ve enjoyed my columns, follow me on Twitter here.


THE BIG DEAL

Randstad Holding (AMS: RAND), an Amsterdam-based human resources services provider, and Monster Worldwide (NYSE: MWW), a Weston, Mass.-based job listings site, have agreed to merge. Randstand acquire Monster for approximately $429 million. www.monster.com/


VENTURE CAPITAL DEALS

OfferUp, a Bellevue, Wash.-based startup that allows users to buy and sell items through its mobile app, is in talks to raise $120 million in a round led by Warburg Pincus, according to The Wall Street Journal. Read more.

CVRx, a Minneapolis-based medical device company, has raised $93 million in Series G equity financing and a $20 million debt facility. Johnson & Johnson Innovation was the lead investor, with participation from existing investors New Enterprise Associates and Ysios BioFund I F.C.R.  New investors included Gilde Healthcare Partners, Action Potential Venture Capital Limited and Windham Venture Partners. www.cvrx.com/

NextVR, a Laguna Beach, Calif.-based provider of live virtual reality broadcast technology, raised $80 million in a Series B round of funding from CITIC Guoan Information Industry, NetEase, CMC Holdings, SoftBank, VMS Investments Group, Founder H Fundin, China Assets Limited, and Spectrum 28. www.nextvr.com/

Finova Financial, a Palm Beach Gardens, Fla.-based online lender, has raised $52.5 million in funding, according to the Wall Street Journal. www.finovafinancial.com/

Kaltura, a video technology provider based in New York, has received $50 million in pre-IPO funding from Goldman Sachs Private Capital Investing. corp.kaltura.com

MapR Technologies, a San Jose, Calif.-based data startup, has raised $50 million in new funding led by Future Fund, with participation from existing investors including Google Capital, Lightspeed Venture Partners, Mayfield Fund, New Enterprise Associates, Qualcomm Ventures, and Redpoint Ventures. MapR has raised a total of $194 million to date. www.mapr.com/

Engagio, a San Mateo-based enterprise technology company, has raised $22 million in Series B funding led by Norwest Venture Partners, with participation from FirstMark Capital and Storm Ventures.  www.engagio.com

Farmers Business Network, a San Carlos-based provider of an independent farmer-to-farmer network, has raised $20 million from Acre Venture Partners, the venture capital arm of Campbell Soup. www.farmersbusinessnetwork.com/

Aligned TeleHealth, a healthcare company based in Agoura Hills, Calif. that provides telemedicine solutions, has raised $12 million in Series A financing from SV Life Sciences. www.alignedth.com

Emotech, the UK-based maker of the Olly robot, has raised $10 million from Chinese venture investors Alliance Capital and Lightning Capital. www.heyolly.com/

Innoviz Technologies, an Israel-based developer of sensors and systems for autonomous vehicles, has raised $9 million in Series A funding. The round included Vertex Venture Capital, Magma Venture Partners, Amiti Ventures, and Delek Investments. www.innoviz.tech

SmartCAT, a Milipitas, Calif-based provider of a cloud translation automation platform, raised a $2.8 million seed round from RedSeed. www.SmartCAT.ai

Kwippit, an image-amplified messaging app based in Denver, has raised $2.5 million in seed funding. Investors included Wildcat Capital Management and Dave Leyrer, venture partner at FirskMark Capital. kwippit.com

Koko, a New York-based cognitive therapy technology startup, has raised $2.5 million in Series A funding. The round was led by Omidyar Network and Union Square Ventures. itskoko.com

Swabbl, a Lyon, France-based provider of sales software, has raised $1.1 million in funding from undisclosed backers. www.swabbl.com/

Finexio, a smart B2B payment network based in San Mateo, Calif., has raised $1 million in seed funding from Loeb.nyc and angel investors. finexio.com

MailControl, a Chicago-based provider of anti-spymail products, raised $1 million in seed funding led by Guild Capitalwww.mailcontrol.net/

FinTecSystems, A Munich-based company that provides data and analysis to the financial services industry, has secured a Series A investment round of undisclosed size led by Littlerock and Ventech. Previous investors MenschDanke Capital and Heilemann Ventures have also participated. fintecsystems.com/


PRIVATE EQUITY DEALS

EQT will acquire Press Ganey (NYSE: PGND), a Wakefield, Mass.-based healthcare performance improvement company, for $40.50 in cash per share of Press Ganey common stock, for an enterprise value of approximately $2.35 billion. www.pressganey.com/ 

RoundTable Healthcare Partners has made a majority investment in two Dallas-based beauty companies, Revision Skincare and Goodier Cosmetics. www.revisionskincare.com www.goodiercosmetics.com

Sverica Capital Management is acquiring RMS Healthcare Management, a provider of management services to Med First Immediate Care and Family Practice, a provider of primary care based in Jacksonville, North Carolina. Cadiz Capital also participated in the transaction. Terms were not disclosed. thinkmedfirst.com

Ontario Teachers’ Pension Plan, RedBird Capital Partners, and Aethon Energy Management have acquired J-W Energy’s oil and gas upstream and midstream assets in northeast Texas and north Louisiana. These assets are being consolidated with Haynesville and Rockies assets acquired by Aethon and Redbird to form a joint partnership known as Aethon Unitedwww.jwenergy.com

Certica Solutions, a Wakefield, Mass.-based provider of educational technology, has acquired Educuity, a provider of Ed-Fi services based in Austin, Texas. Certica is backed by New Harbor Capital. No terms were disclosed. www.educuity.com 

One North, a digital marketing agency based in Chicago, has taken a strategic investment of undisclosed size from Svoboda Capital Partners, a Chicago-based private equity firm. http://www.onenorth.com/

PlanetRisk, a Washington, D.C.-based provider of risk assessment services has agreed to acquire Analytic Strategies, a McLean, Va.-based provider of analytics services, for an undisclosed amount. PlanetRisk is backed by Frontier Capital and Petra Capital Partnerswww.analyticstrategies.com/


IPOs

No IPO news today. 


EXITS

Honeywell International (NYSE: HON) is in talks to acquire JDA Software Group, a Scottsdale-Ariz.-based supply chain management company, from New Mountain Capital, according to Reuters. The deal could be worth as much as $3 billion. jda.com/

Riverstone Holdings will sell Rock Oil Holdings, a Houson and Denver-based oil and gas exploration company, to SM Energy for $980 million in cash. www.rockoilcompany.com/


OTHER DEALS

Google has acquired Orbitera, a commerce platform that allows users to buy and sell cloud-based software. The deal was valued slightly above $100 million according to TechCrunch. Read more.

TIAA will acquire consumer and commercial bank EverBank (NYSE:EVER). EverBank stockholders will receive $19.50 per share in cash for an approximate total of $2.5 billion. www.everbank.com

Rackspace (NYSE:RAX) has agreed to sell its Cloud Sites web hosting unit to Liquid Web, a Lansing, Mich.-based provider of cloud hosting services. Terms were not disclosed. www.rackspace.com/en-us


FIRMS & FUNDS

BioVentures Investors, a Wellesley, Mass.-based firm, has raised $29.3 million in funding towards a goal of $100 million for its fourth fund, according to an SEC filing. www.bioventuresinvestors.com/


MOVING IN, ON & UP

Joshua N. Beer and Jason W. Pike have been appointed managing directors at Charlesbank Capital Partners. www.charlesbank.com

Joanna Arras and Momei Qu have been promoted from senior associates to vice presidents at Baird Capital. www.bairdcapital.com

Thomas Zanios has been appointed managing director at Westport, Conn.-based Gemspring Capital. Previously he was a principal at Odyssey Investment Partners. www.gemspring.com

William (Bill) Salisbury has joined Mainsail Partners, a San Francisco-based growth equity firm, as CFO and operating partner. Salisbury was previously CFO of Hearsay Social. www.mainsailpartners.com

Matt Baldassano has joined Cowen Group as Managing Director, Head of Global Securities Finance in New York.  He previously worked as Co-Head of Global Prime Services and Head of Global Securities Finance at Jefferies. www.cowen.com/

Gabriel Becher has joined DW Healthcare Partners as a Principal. Previously he was a Portfolio Manager with Alberta Investment Management Corp. www.dwhp.com

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