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Term Sheet — Monday, November 7

Nov 07, 2016

Et cetera

A G Thing: When Google reorganized itself as Alphabet last year, it immediately struck the “Google” brand from a number of its divisions. Google X, its “moonshot” division, became simply “X,” and Google Ventures, its VC arm, became GV. But its lesser-known growth-stage investment arm, Google Capital, took its time rebranding. On Friday afternoon, Google Capital finally revealed its new name. Sadly for my ego, they did not choose G-Cap, Fortune’s suggestion from my 2015 profile of the firm. Instead they went with the title of a Nine Inch Nails songCapitalG.

More important than the new name are the two new investments CapitalG revealed Friday: The firm has backed both Snap Inc., the parent of Snapchat, and Airbnb. A company representative confirmed the deals but would not elaborate on the size of its investment or when they happened. We can probably assume CapitalG participated in Airbnb’s massive September funding round, which values it at $30 billion, and Snap’s $1.8 billion funding round from this Spring, which values the company at $20 billion.

With its $300 million fund, CapitalG’s selling point to startups is all about “value-add.” In other words, we’re not just writing checks, we’re contributing to your company’s success. The firm uses its access to 40,000 Alphabet employees, who are experts on topics as varied as security IT and search-based marketing, to help growth-stage startups solve their thorniest problems.

This kind of thing is more common at early-stage venture firms, which offer increasingly elaborate suites of services for startups, from PR and recruiting to “design sprints” and human resources. It’s their way of competing against the flood of new money coming from basically every direction to invest in startups. But it’s less common in the late stage, where passive investors like hedge funds and mutual funds tend to write checks and then wait for the IPO.

With that in mind, it’s very interesting to imagine the kinds of services and advice a startup like Snap, which makes money selling digital advertising, might glean from Google, the largest digital advertising company in the world. Snap and Google share a common competitor in Facebook.

Beyond that, Snap recently announced its first hardware product, Spectacles. They’re sunglasses with a camera that automatically uploads the videos it takes to your Snapchat account. The world reacted to the news with intrigue and excitement. Less excited, I assume, were the people who worked on Spectacles’ widely ridiculed predecessor, Google Glass. Somehow Google couldn’t make face-cameras cool. Snap may actually pull it off. Together, they make an interesting alliance.

Of course, any knowledge sharing requires Evan Spiegel, Snap’s notoriously secretive CEO who reportedly discourages collaboration among the company’s highly federated organization, to actually open up to Alphabet. But even if CapitalG winds up as passive money in this deal, it stands to earn a solid return in just a few months, based on reports of Snap’s upcoming IPO.

Speaking of IPOs: A report from Blossom Street Ventures analyzes the ownership stakes of founders in 79 publicly traded tech companies, showing the median ownership stake at 11%. I haven’t had time to check all the data, but at first glance, I see it claims former Twitter CEO Dick Costolo as the founder of Twitter, with just a 2% stake at the time of its IPO. The company’s actual co-founders, Jack Dorsey and Evan Williams, owned a respective 4.7% and 12% stake in the company when it went public. Still, the report’s takeaway message is a sign of the times: Raising giant sums of venture money, once seen by many as a sign of success back in the halcyon Age of Unicorns, is dilutive. Preserve your equity!

Layoffs: Windrose Advisors, a Waltham-Mass.-based wealth management firm serving family offices, endowments and foundations, has laid off a portion of its staff, including two key players from its alternatives investment team. Andy Gribbel, a director of the firm’s private equity practice, and Kathleen Kisler, director of the firm’s hedge fund practice, were among those let go. No word from Windrose on the reason for the cutbacks.

Cash Crunch: You may have heard of LeEco, the Chinese conglomerate, thanks to its bold ambitions to take on Apple, Google, Tesla, Amazon, and Samsung all at once.

Now, the company’s chairman and co-founder is telling employees those bold ambitions have created a serious cash crunch, according to Bloomberg. That doesn’t bode well for LeEco’s $2 billion acquisition of Vizio, the TV maker.

That deal was announced in July, and it hasn’t closed yet. Before LeEco came along, Vizio was on track to go public. The company had filed an S-1 just two days before LeEco made its offer. Vizio was planning to raise capital at a valuation below $1 billion, according to sources. It has around $3 billion in annual sales.

If that valuation sounds low relative to its revenue, it’s because the TV business is highly commoditized. And it shows just how much of a premium LeEco is willing to pay for the company. When I asked LeEco about the status of the deal last month, a representative said the deal is still in process and it doesn’t comment on rumors.

Hello, Portugal: I’ll be watching the election results from the airport tomorrow night, on my way to Lisbon for Web Summit.

Meanwhile, in Vegas: Goldman Sachs is hosting its private internet company conference this week. Recode got its hands on the schedule, which paints an interesting picture of which startups Goldman thinks are poised to break out next. Among them: Craigslist competitor OfferUp, used car marketplace Auto1 Group, Indian fintech startup Paytm, public transit app Moovit, and peer-to-peer lending marketplace Funding Circle.

Reminder: Term Sheet is now a two-person operation. Submit your deal news, etc., to Laura Entis.

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VENTURE DEALS

Zoox, a Menlo Park, Calif.-based self-driving car company, has raised a new round of funding at a $1.55 billion valuation, according to a report in the Wall Street Journal. This summer, it raised $200 million at a valuation of $1 billion. Read more.

Privateer Holdings, a Seattle-based cannabis company whose portfolio includes Marley Natural and Leafly, has raised $40 million in convertible debt. Read more at Fortune.

Treasure Data, a Mountain View, Calif.-based provider of cloud services for processing large amounts of data, has raised $25 million in Series C funding round. SBI and INCJ led the round, and was joined by Scale Venture Partners, Sierra Ventures, AME Cloud Ventures, Dentsu, and IT Farm.

TrendKite, an Austin-based PR analytics company, has raised $16.3 million in Series D funding. Adams Street Partners led the round, and was joined by Battery, Noro-Moseley and Mercury Fund.

Freespee, a London-based conversation analytics company for marketers, has raised €9.25 million ($10.2 million) in a debt and equity in a Series B funding round, according to TechCrunch. Ventech led the round, and was joined by Sunstone Capital, Inventure, and Silicon Valley Bank. Read more.

GoOpti, a Slovenian a long-distance ride-sharing service, has raised €4.4 million ($4.8 million) in new financing. The company received €1.5 million from a European Grant, and the rest comes via a Series A round from investors including EBRD, Point Nine, and RTA.  This item has been updated to include the correct funding amount.

Pi-Top, a London-based computing and learn-to-code startup, has raised £3.5 million ($4.3M) in Series A funding, according to TechCrunch. Hambro Perks led the round, with participation from Committed Capital. Read more.

Bayzat, a Dubai-based health insurance and HR solutions provider, has raised $3.5 million in Series A funding. Investors include BECO Capital and Precinct Partners.

Bizongo, a Mumbai-based online business-to-business marketplace, has raised $3 million in Series A funding from Accel Partners and IDG Ventures, according to The Economic Times. Read more.

MobiChord, a Salt Lake City-based telecom service management software provider, has raised seed funding from ServiceNow Ventures. Financial terms were not disclosed.

PRIVATE EQUITY DEALS

Bain Capital Private Equity and Bow Street have agreed to acquire Blue Nile (Nasdaq: NILE), a Seattle-based online jeweler, in an all-cash deal valued at about $500 million. Blue Nile stockholders will receive $40.75 per share, about a 34% premium over the company’s closing price on Friday. Read more at Fortune.

• Apollo Global Management has completed its previously announced $4.3 billion acquisition of San Antonio-based cloud computing company Rackspace, for $32 per share in cash. That represents a 38% premium over where Rackspace was trading on August 3, when the first reports of a possible acquisition emerged. The deal also includes a strategic equity investment in Rackspace by Searchlight Capital Partners.

OTHER DEALS

• Telecommunications company Windstream will acquire Earthlink. Per the all-stock deal, which is valued at about $1.1 billion including debt, Windstream shareholders will own about 51% of the combined company, and EarthLink shareholders will own the remaining 49%. Read more at Fortune.

Broadridge Financial Solutions (NYSE: BR) has acquired M&O Systems, a New York City-based compensation management solutions provider for broker-dealers and wealth management firms. Terms of the deal were not disclosed.

IPOS

Three microcap IPOs plan to list themselves this week, raising a combined $80 million: SenesTech (SNES), Motif Bio (MTFB) , and PetroShare (PRHR).

EXITS

AlixPartners founder Jay Alix, along with CDPQ, PSP Investments, and Investcorp, has agreed to acquire the consulting firm from CVC Capital Partners in a deal that values AlixPartners at more than $2.5 billion. CVC acquired a majority stake in AlixPartners in 2012.

NEW JOBS

• Matthew Stadtmauer has joined Joyal Capital Management as a managing director. He was previously president of Pine Grove Asset Management.

• Ben Spiers will join Simpson Thacher & Bartlett as a partner in the firm’s London office. He is currently a partner at Freshfields Bruckhaus Deringer.

• Carmen Alfonso Rico has joined Felix Capital as an associate. She previously worked at Morgan Stanley.

• Edward J. Tirello has joined The Williams Capital Group as the head of the investment bank’s corporate finance strategic advisory team. He was previously a senior adviser in the investment banking group at Tudor, Pickering & Holt.

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