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Term Sheet — Friday, September 30

Sep 30, 2016

Random Ramblings

It's been around a decade since I began writing about carried interest taxation, I've regularly noted that no prominent venture capital or private equity investor has said he or she would walk away were the tax treatment to change from capital gains to ordinary income. Just as none walked away when capital gains rates were increased a few years ago. But now, it seems, that note needs revision.

Keith Rabois, a longtime Silicon Valley tech exec (PayPal, LinkedIn, Square) who joined Khosla Ventures in 2013, says that he's out of the venture capital game if such a reclassification occurs. Or, more specifically, he's done being a general partner at a venture capital firm where he's helping to invest other people's money.

Rabois, who first expressed this sentiment in a tweet, tells me that he would have no financial incentive to remain a general partner in a VC fund, when he instead could invest as an angel and/or serve as an advisor to startups in exchange for equity (i.e., maintaining the long-term capital gains tax treatment). He acknowledges that not all VCs would have the same flexibility nor opportunities, but insists that this would be his path.

That said, Rabois does not believe such a tax change actually will occur (at least for venture capital), despite such promises from both major party presidential candidates (Trump even name-checked carried interest during Monday night's debate).

So that's one. Anyone else want to add their names to the list?

•  Update: Earlier this week we reported that Xiaodong Jiang, a longtime managing director in China for venture firm NEA, was launching a new firm called Long Hill Capital Partners. NEA subsequently emailed to say that it plans to "maintain or even increase" its level of China investing, but that it believes "the best way to expand and scale our presence is through a combination of direct investments and co-investments in partnership with local independent teams."

Long Hill will be one of those teams, with NEA already having subscribed to invest in its debut fund, which is targeting $125 million.

• From the filings: Gemspring Capital is targeting $300 million for its debut fund, according to a regulatory filing. This is the private equity firm founded late last year by former H.I.G. Capital managing director Bret Wiener, to focus on lower middle-market buyouts.

• And now for something a little different: A bank heist comedy called Masterminds opens in theaters today, starring such folks as Zach Galifianakas and Kristen Wiig. It's based on a screwy real-life story, but the background tale of the movie's oft-delayed release is just as strange. It involves corporate bankruptcy, allegations of financial self-dealing and Donald Trump's likely choice for Treasury Secretary (plus a longtime Clinton pal to boot). Here you go.

• Feedback: I got a lot of emails about the up-round vs. down-round debate, based on the Skyhigh Networks funding. Sufficed to say we don't have broad consensus. Hopefully we'll get to a mailbag early next week.

• Have a great weekend. Go Pats!

THE BIG DEAL

• Qualcomm (Nasdaq: QCOM) reportedly is in talks to acquire NXP Semiconductor (Nasdaq: NXPI) in a deal that could be valued at around $30 billion. Read more.

VENTURE CAPITAL DEALS

•  Home Chef, a Chicago-based meal kit delivery service, has raised $40 million in Series B funding led by L Catterton. www.homechef.com

•  Remitly, a Seattle-based mobile remittance company, has raised $38 million in new equity and debt financing from IFC and Silicon Valley Bank. Read more.

•  SQZ Biotech, a Boston-based developer of immunotherapies for cancer and other diseases, has raised $16 million in Series B funding co-led by NanoDimension and Polaris Partners. www.sqzbiotech.com

•  Depop, a UK-based social shopping platform, has raised $8.25 million in new VC funding from Balderton Capital, Holtzbrinck Ventures, Creandum, Red Circle Investments and Lumar. www.depop.com

•  Aura Biosciences, a Cambridge, Mass.-based developer of therapies to target and selectively destroy cancer cells using viral nanoparticle conjugate, has raised $8 million in new VC funding. Backers include Henri Termeer, Advent Partners, Chiesi Ventures, Ysios Capital Alexandria Venture Investments. www.aurabiosciences.com

•  Codefresh, a lifecycle management platform for Docker and other containers, has raised $7 million in new VC funding. Carmel Ventures led the round, and was joined by Hillsven Capital, Streamlined Ventures and UpWest Labs. The company has offices in Israel and Silicon Valley. www.codefresh.io

•  Simpplr, a San Francisco-based provider of employee community and help desk products, has raised $6 million in Series A funding. Norwest Venture Partners led the round, and was joined by Salesforce Ventures. www.simpplr.com

PRIVATE EQUITY DEALS

•  Avast Software, a Prague-based security software company backed by CVC Capital Partners and Summit Partners, has completed its previously-announced acquisition of AVG Technologies NV, a Dutch provider of device security software. The deal was valued at approximately $1.3 billion in cash, or $25 per share. Read more.

•  GIC, a Singapore sovereign wealth fund, has acquired a portfolio of UK student accommodations from Oaktree Capital Management, at a reported purchase price of around £700 million. Read more.

•  MBK Partners is in talks to acquire Japanese sushi chain Sushiro Global Holdings from Permira, according to the WSJ. The deal could be valued at around $1.5 billion. Read more.

•  RGI, an Italian portfolio company of Ardian, has acquired Kapia Solutions SAS, a French provider of software solutions to the life insurance market. No financial terms were disclosed. www.rgigroup.com

IPOs

•  Nutanix, a San Jose, Calif.-based provider of datacenter infrastructure solutions, raised $238 million in its IPO. The company priced 14.9 million shares at $16 per share, compared to plans to sell 14 million shares at an upwardly-revised price range of $13-$15 per share. It has an initial market cap of approximately $2.18 billion. Nutanix will  trade on the Nasdaq under ticker symbol NTNX, while Goldman Sachs was listed as left lead underwriter. The company has raised over $300 million in VC funding and most recently was valued at around $2 billion. Shareholders include Lightspeed Venture Partners (23% pre-IPO stake), Khosla Ventures (10.9%), Fidelity (6.1%), Blumberg Capital (5.7%), Riverwood Capital Partners (5.1%), Morgan Stanley Expansion Capital, Greenspring Associates, SAP Ventures and Battery Ventures.www. nutanix .com

•  Quantenna Communications Inc., a Fremont, Calif.-based provider of Wi-Fi video networking for whole-home entertainment, has filed for a $100 million IPO. It plans to trade ticker symbol QTNA, with Morgan Stanley, Barclays and Deutsche Bank serving as lead underwriters. The company reports a $1.95 million net loss on around $57.5 million in revenue for the first half of 2016, compared to a $7.4 million net loss on $36.6 million in revenue for the year earlier period. The company has raised around $166 million in VC funding from firms like Sequoia Capital (24.73% pre-IPO stake), Rusano (10.39%), Venrock (10.22%), Sigma Partners (9.41%), Southern Cross Venture Partners (8.88%), DAG Ventures (8.32%), Centerview Capital Technology, Vivint and NTT Group. www.quantennacom

EXITS

 No exit news this morning.

OTHER DEALS

•  CafeMedia, a New York-based digital media platform for women, has acquired AdThrive, a digital publishing and ad monetization network. No financial terms were disclosed. CafeMedia shareholders include Abry Partners, Highland Capital Partners and Draper Fisher Jurvetson. www.cafemedia.com

•  CMS, Olswang and Nabarro – all London law firms – reportedly are considering a merger that just generate nearly $1.3 billion in annual revenue. Read more.

•  IBM (NYSE: IBM) has agreed to acquire Promontory Financial Group, a Washington, D.C.-based risk management and regulatory compliance consulting firm. No financial terms were disclosed. Read more.

•  Veresen Inc. (TSX: VSN) has hired TD Bank to find a buyer for its power business, which could be worth around C$1 billion, according to Reuters. .

FIRMS & FUNDS

•  Cadwalader Wickersham & Taft plans to close its Hong Kong and Beijing offices, which will result in the layoff of 25 attorneys. Read more.

•  LDV Capital, a New York-based seed investment firm, is raising $15 million for its second fund, according to a regulatory filing. www.ldv.co

•  Mesh Ventures, a Taiwan-based early-stage VC firm, is raising upwards of $30 million for its second fund, according to a regulatory filing. www.mesh.vc

•  Varsity Healthcare Partners is raising upwards of $250 million for its second fund, according to a regulatory filing. www.varsityhealthcarepartners.com

MOVING IN, ON & UP

•  Emergence Capital, a venture firm focused on the enterprise cloud space, has promoted Joe Floyd to partner and Jake Saper to principal. It also has hired Kara Egan (ex-Stitch Labs) as a senior associate. www.emcapcom

•  Alan Greenspan, former chairman of the Federal Reserve, has joined Advisors Capital Management as an economic advisor. Read more.

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