Term Sheet — Friday, November 4

Nov 04, 2016

Et cetera

Wishing Well: Wish, the e-commerce startup valued at $3.5 billion, is raising $500 million in new funding, according to sources familiar with the situation.
Recode first reported the news last night, noting that Temasek, the investment arm of the Singapore government, is one of the investors. But according to sources I've spoken with, Temasek may be getting cold feet about the deal.
Last week CB Insights unveiled a Delaware filing that showed Wish authorized the sale of 7.75 million new Series F preferred shares. (Wish's formal company name is ContextLogic.) The filing revealed no pricing or investor information, except some investor-friendly liquidation preferences.
A Temasek representative declined to comment. Wish did not respond to requests for a comment.
Launched three years ago, Wish acts as an online marketplace for extremely cheap stuff, mostly made in China. The company has claimed it will hit $2 billion in gross merchandize volume this year. Wish has raised nearly $600 million in funding from investors including 8VC and Founders Fund. Its most recent fundraise was a $500 million Series D from DST Global in mid-2015.
Wish’s growth has come in part via aggressive advertising. Wish spends $100 million a year on Facebook ads, according to Recode. The marketplace’s goods are heavily discounted, and the company has not revealed how many repeat purchases it takes to break even on a new customer, or how many of its first-time customers return.
Founder Peter Szulczewski has predicted his company will be a trillion-dollar-a-year marketplace, and has publicly stated he won’t sell his company for less than $10 billion.
Driverless Hype: Last week George Hotz, founder of Andreessen Horowitz-backed self-driving car startup Comma.ai, announced that because of a threatening letter from the NHTSA, he would cancel his company’s plans to build kits that retrofit cars to drive themselves.
“Would much rather spend my life building amazing tech than dealing with regulators and lawyers. It isn't worth it,” he tweeted. The NHTSA was asking for proof that the Comma One device was safe, with a threat to block its sale if the proof wasn’t provided.
It’s been on my mind all week, alongside Andreessen Horowitz’s investment thesis that “software is eating the world.” The idea has become so common it is now an Onion headline: New Company Aims To Explore Intersection Of Technology, Other Thing.
One side effect of software creeping (barging) into every sector of the economy is that technologists are now butting up against rules and regulations they didn’t face when they were just selling ads and data storage.
Despite the lessons learned from Uber and Airbnb’s regulatory stumbles, some startups still prefer pure, unadulterated, “leave us alone” disruption. As I wrote earlier this year, it’s the attitude of, “Why don’t people just trust that we are doing the right thing? Just let us work without picking apart every detail, and we’ll all be better off in the end.” Expressing concern and asking hard questions about new technologies, even in situations where the public is confused and wants to know more, makes you a “hater.”
Nevermind that Hotz was practically baiting regulators with his over-the-top proclamations and blustery conference speeches. (Comma’s t-shirts even say “Comma.ai / I am gonna be so rich.”) Or that self-driving kits like the Comma One operate in a legal gray area with little more than a loose set of guidelines in place. Or that building amazing technology and dealing with regulators and lawyers are not mutually exclusive. Hotz decided to take his ball and go home, an approach that, unsurprisingly, met a fairly negative response online.
It’s possible Comma, which has less than a dozen employees, was already re-evaluating its plan to sell aftermarket kits. The company’s self-imposed year-end deadline for launching that product is fast approaching. (The founders of Cruise Automation made a similar pivot after they realized how many makes and models they’d have to integrate their kits with.) If Comma was already planning a pivot, the NHTSA provided a convenient excuse and an on-brand rallying cry (disruption!) to go with it.
Some players in the self-driving industry are nervous about wild card startups like Comma.ai. It reminds me of the time Oculus VR CEO Brendan Iribe warned virtual reality headset competitors not to “poison the well” by introducing a product that wasn’t ready. In other words, a bad first impression could hurt the entire category. With self-driving cars, the stakes are so much higher than sub-par VR kits: It’s a matter of saving lives.
This summer, after the Tesla Autopilot fatality, I interviewed David Strickland, former NHTSA regulator and current counsel to the Self-Driving Coalition for Safer Streets, a lobbying group that includes Uber, Lyft, Ford, Volvo and Google. He expressed a similar sentiment: “We need to make sure to protect the ecosystem, so that we don’t have some player taking on unnecessary risk that may impact the opportunity to fully deploy because people think self-driving may not be ready or dangerous.”
In case it’s not clear from my coverage, I am very excited for all the benefits of self-driving technology. As I’ve covered the topic in recent months, I’ve talked to experts ranging from academics to executives in Detroit that caution against the hype. (“The public is being fed a publicity story that is not based on reality,” one told me earlier this week.) Given the stakes, I’m willing to wait until the technology is ready.
Corrections: Daniel Green joined Meketa Investment Group, not David. And yesterday’s link to the Facebook story was broke, you can read it here.

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VENTURE DEALS

Xiaozhu.com, a Chinese booking website for room rentals, has raised $65 million in Series D funding. Capital Today, Joy Capital, and Bertelsmann Asia Investment Fund led the round, with participation from Heyu Capital and Morningside Venture Capital.
Apartment List, a San Francisco-based app for apartment rentals, has raised $30 million in Series B funding. Canaan Partners led the round, and was joined by existing investors Matrix Partners and Glynn Capital.
Planetary Resources, a Luxembourg-based company that wants to mine asteroids, has raised €25 million ($27.8 million) from the country’s government and the investment bank SNCI, according to TechCrunch. Read more.
Anuvia Plant Nutrients, a Zellwood, Fl.-based plant nutrition company, has raised $23 million in funding. TPG ART led the round, and was joined by Osceola Capital and Pontifax AgTech.
Big Viking Games, a Toronto-based social and mobile games company, has raised $22 million in funding. Royal Bank of Canada led the round, and was joined by BDC Venture Capital.
Gfresh, a Shanghai-based mobile marketplace for seafood, has raised $20 million in Series A funding, TechCrunch reports.  Investors include the Alibaba affiliated Riverhill Fund and Legend Capital. Read more.
The Future Group, a Norwegian augmented reality gaming company, has raised $20 million in Series C funding. Ferd ASA led the round.
Cohero Health, a New York City-based digital health company, has raised $9 million in funding, according to MobiHealthNews. Three Leaf Ventures led the round, and was joined by Zaffre Investments, GIS Strategic Ventures, Heitkamp & Thumann Group, and P5 Health Ventures. Read more.
Nurx, a San Francisco-based on-demand birth control app, has raised $5.3 million in Series A funding, according to TechCrunch. Union Square Ventures led the round. Read more.
Arex, a London-based marketplace for invoices, has raised €3 million ($3.3 million) in funding. The round was led by Lifeline Ventures, with participation from LocalGlobe and angel investors.
PetCoach, a Wayne, Penn.-based telemedicine startup for pets, has raised $2 million in seed funding in a round led by Comcast Ventures.

PRIVATE EQUITY DEALS

CenturyLink said it will sell its data centers and colocation business to a consortium, made up of funds advised by BC Partners, Medina Capital Advisors and Longview Asset Management, for $2.3 billion. In part, the money will be used to fund CenturyLink’s planned acquisition of Level 3 Communications. In addition, the consortium has  acquired four security and analytics companies from Medina Capital: Cryptzone, Easy Solutions, Brainspace and Catbird. Read more at Fortune.
Serent Capital has invested in Digarc, a provider of catalog and curriculum management software to higher education institutions. No financial terms were disclosed.
Graycliff Partners has invested in Installs, a Buffalo, N.Y.-based logistic services provider for retailers.
BC Partners and Medina Capital have agreed to buy Catbird, a Scotts Valley, Calif.-based cybersecurity company, and Easy Solutions, a Fort Lauderdale, Fl.-based provider of fraud-protection software.

OTHER DEALS

Chinese real estate and media giant Dalian Wanda has agreed to buy Dick Clark Productions, which runs the Golden Globe awards and Miss America pageants, from Eldridge Industries for $1 billion. Read more at Fortune.
Foodpanda, a food delivery company owned by Rocket Internet, has sold its Russian business, Russian Delivery Club, to Mail.Ru Group for $100 million, according to Bloomberg. Read more.
Tronc’s non-executive chairman said there is the possibility the company will strike “a different type of deal” with Gannett, according to Reuters, just days after merger plans between the two companies fell apart.  Read more.

IPOS

Smart Sand (Nasdaq: SND) a Texas-based, Clearlake Capital-backed producer of sand used for hydraulic fracturing, makes its trading debut today with plans to raise $129 million by offering 11.7 million shares at $11, below its range of $15 to $18 a share.

EXITS

New Mountain Capital has agreed to sell Camber, a Huntsville, Ala.-based government services company, to Huntington Ingalls Industries for $380 million.
Sophos has acquired Barricade, an Irish cybersecurity company. Barricade investors include Vectr Ventures and Flight Ventures. No financial terms were disclosed.
Intel has acquired Voke, a Santa Clara, Calif.-based company that makes technology for virtual reality, according to TechCrunch. Voke raised $12.5 million from investors including Intel Capital, Nautilus Venture Partners, A+E Networks, and the Sacramento Kings. Read more.

FIRMS + FUNDS

Gemspring Capital, a Westport, Conn.-based private equity firm specializing in lower middle market companies, has closed its first fund with $350 million of capital commitments.

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