Term Sheet — Tuesday, November 8

Nov 08, 2016

Et cetera

I’m going to take a wild guess that many of you are reading Term Sheet from a long polling line. Here’s a few news items to help you pass the time:

Turning Tide? JPMorgan and Deutsche Bank passed on the opportunity to sell shares of Uber to their high net worth clients, based on the lack of financial data the company provided, Bloomberg reports. Morgan Stanley did not, and its 290-page prospectus included 21 pages of risks but no net income or annual revenue figures.

I thought this might be a story about Uber finally needing to grow up and start reporting its financials, no matter how ugly they may be. The company is done burning through billions to compete in China, after all. But it isn’t. Despite its nosebleed valuation, Uber stock is still in high demand from investors of all stripes, the report says.

Lonsdale’s Lawsuits: Note: The original version of this item did not include the fact that the 2015 lawsuit against Lonsdale was dropped. It has been updated to reflect that fact. 

Blink Health is a startup that aims to make generic drugs cheaper through price transparency and a slick smartphone app. It has been called the “Expedia for prescription drugs.” The company launched in February and has raised more than $75 million in venture funding. Now its co-founders, Geoffrey and Matthew Chaiken, are being sued in the Southern District of New York by Eugene Kakaulin, its ex-CFO, for breach of contract and violating the protective whistleblower provisions of the Dodd-Frank Act by firing him after he allegedly alerted them to securities violations.

The New York Post reported on the suit last week using a very New York Post headline: “Generic Viagra peddler accused of stiffing business partners.” (Update: The Wall Street Journal first reported on the news.)

Why might Term Sheet readers care about this situation? Well, it involves a familiar name: Joe Lonsdale’s new firm, 8VC, is an investor in Blink. Other Blink investors, according to the lawsuit, include Burch Creative Capital, the venture firm of J. Christopher Burch (co-founder of the fashion brand Tory Burch), MedImpact, and Bill Doyle, the man that introduced Bill Ackman to Valeant.

Doyle may have introduced the Blink founders to Valeant, too: The lawsuit alleges that they were eager to sell some of their shares in Blink to a third party because one of them “lost half [his] money on Valeant stock.” (Other reasons cited include the need for a Hamptons house.) The complaint includes many accusations against Blink and the Chaikens: Using stolen data from a competitor, inflating revenue with an unorthodox accounting method, not paying vendors, misrepresenting transaction data, maintaining an unethical consulting relationship with an employee of MedImpact (a vendor and strategic investor), forcing employees to buy back their stock options when they left.

One of the Chaikens loaned the company $4.8 million, requiring quarterly interest payments on it, to “take advantage of losses generated by the company and to offset their personal income in 2015, which was primarily from the sale of equity in Blink,” the complaint alleges. The complaint also accuses Matthew Chaiken of using Blink’s customer relationship management dashboard to analyze and openly discuss the drug purchase history of employees and people he knows socially.

There’s even a sad text exchange between CEO Geoffrey Chaiken and his father, Dr. Barry G. Chaiken, over stock options, which is included as evidence in the lawsuit: “As a parent it is concerning that if this is your approach to us, your treatment of other people in life and business suggests a future no loving parent wants for their child,” the alleged text reads.

Blink Health provided the following statement: “The complaint is false, malicious and unjustified as a matter of fact and law. The plaintiff is angry that he was terminated for cause and the complaint reflects his malicious and untrustworthy character.” 8VC did not provide a comment.

Lonsdale isn’t mentioned by name in this lawsuit. He has been involved in a few others in recent years, though. In 2015, he was sued for sexual assault by an ex-girlfriend. Lonsdale denied the allegations and the case was dropped, but the shocking details that emerged from that suit reverberated around the Valley. The investors in Formation 8, his venture fund at the time, reportedly did not know about the lawsuit when they invested. Formation 8 broke up in 2015. Last month that break-up was the subject of a detailed BuzzFeed investigation, which describes Lonsdale’s failed attempt to bring Silicon Valley startups like Wish into Asia.

Lonsdale is also a defendant in an ex-employee lawsuit against Hyperloop One, the well-funded transportation startup. Lonsdale invested in Hyperloop One via Formation 8 and sits on its board. That lawsuit accuses Lonsdale of breaching his fiduciary duty when he allegedly insisted the company hire his younger brother as the company’s exclusive investment bank and interrupted Hyperloop One engineers while working so they could give tours to his friends. Hyperloop One has countersued.

8VC’s website currently features an essay Lonsdale penned in August called “A Deficit of Leadership.” It includes lines like, “Great leaders must understand how to act in such a way that they exhibit all the virtues in unison,” and quotes Cyrus the Great, Confucius, and Jesus Christ.

Random question: Does anyone know of a tool that can track VC websites and alert me when a logo has been added or removed?

For many firms, when a portfolio company is hot, the logo goes right to the top. When it starts to fade in prominence, it gets pushed lower on the page. When it is clearly failing, it disappears. It must be awkward, as a founder, to pull up your investor’s website and realize the firm no longer wants to be associated with your company. But never fear, when the company sells, regardless of whether it’s a big win or a money-losing acqui-hire, it gets added back with a big “EXIT” badge.

(This works in the positive, too. It’s how I noticed that Union Square Ventures quietly invested in Stripe a few years ago, or that CapitalG backed Snap and Airbnb.)

Voting Day: My colleague Jen Wieczner writes that Blackstone CEO Steve Schwarzman supports his one-time colleague and occasional rival Larry Fink, CEO of Blackrock, for Treasury Secretary. (Fink has been floated as a pick in a Clinton administration.) She writes:

That’s even more striking when you consider that Schwarzman and Fink once had a famous falling-out that led to BlackRock splitting off from Blackstone, which had spawned it, and that the pair are on opposite sides of the political aisle.

“Larry is an extraordinary businessperson,” Schwarzman tells Fortune. “He’s become the go-to person for central banks to understand the practical nature of money and securities in which they invest.” Read more here.

Wieczner also writes that the stock market has voted for Clinton:

The market’s rally increased investors’ confidence that a President Clinton would be good for U.S. stocks—even though the candidate wouldn’t necessarily be good for some of the day’s biggest gainers. Read more.

Lastly, Geoff Colvin counts the ways we have truly hated everything about this election, and asks why we put ourselves through this torment:

The answer is that we haven’t always hated election campaigns; in fact, it appears we’ve never hated one like we did this time. We used to love it all. Politics was America’s favorite spectator sport, with an option to participate. But this year something changed, and America can’t wait for it all to end. Read more.

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...AND ELSEWHERE

Are CEOs overhyped and overpaid? Ackman vs. Herbalife, the movie. Twitter could sell Vine. State attorneys get in on DuPont and Dow. Larry Ellison’s hardball tactics. “Tronc might work as a name for a maker of heavy machinery or a real-estate company.” Balmer’s making government great again. Tech companies are hiring and hoarding talent. Serial killer writes Amazon reviews.

VENTURE DEALS

Beijing Byte Dance Telecommunications, the parent company of the news aggregator app Toutiao, is considering raising $1 billion in a new funding round that would value the company at $10 billion, according to a report in the Wall Street Journal. The company was last valued at $500 million in 2014. Read more.

Baidu, a Beijing-based search engine company, is looking to raise between $300 million and $500 in new funding for Waimai, its food delivery unit, according to a Bloomberg report. Read more.

NBE-Therapeutics, a Basel, Switzerland-based biotech company focused on developing antibody-based treatments for cancer patients, has raised CHF20M ($20.5 million) in Series B funding. PPF Group led the round, and was joined by investors including Boehringer Ingelheim Venture Fund.

•  Zafin, a Vancouver-based provider of relationship banking software, has raised $10 million in funding from Vistara Capital Partners and Beedie Capital Partners.

Fillr, a Melbourne-based machine learning service that automatically fills out online forms for consumers, has raised $5 million Series A funding. Investors include SoftBank China Capital, Southern Cross Venture Partners and Reinventure.

GuavaPass, a Singapore-based service for finding gyms and fitness classes in Asia and the Middle East, has raised $5 million in new funding, according to TechCrunch. Vickers Venture Partners led the round. Read more.

Tailor Brands, an Israeli automated branding startup, has raised $4 million in Series A funding, according to Globes. Mangrove Capital Partners and Disruptive Technologies led the round. Read more.

Tend.ai, company that provides robotic technology to manage 3D printers, has raised $2 million in funding from True Ventures, according to TechCrunch. Read more.

Simple Contacts, an on-demand contact lens prescription app, has raised $2 million in seed funding, according to TechCrunch. Autonomous Ventures led the round, and was joined by angel investors including Twitch founder Justin Kan and CityMD founder Richard Park. Read more.

Feelter, a Tel Aviv-based retail review company, has raised $2 million in Series A funding.  Will Graylin, founder of LoopPay, led the round.

Quantified Care, a Baltimore-based mobile platform enabling health care providers to remotely monitor patients, has raised new funding from KiwiVenture Partners II. The amount raised was not disclosed.

PRIVATE EQUITY DEALS

GTCR has acquired RevSpring, a Wixom, Mich.-based provider of multi-channel billing and communications software to the healthcare and financial services industries. GTCR said it has committed up to $400 million to purchase additional companies in the multi-vertical billing and payments industries.

ATL Partners has acquired Pilot Freight Services, a Media, Pa.-based transportation and logistics services provider. Financial terms were not disclosed.

Francisco Partners has acquired Prometheus Group, a Raleigh, N.C.- based provider of enterprise asset management and plant maintenance software. Financial terms of the transaction were not disclosed.

Cloud Equity Group has acquired NodeServ, a Jacksonville, Fla.-based private server hosting provider. Financial terms were not disclosed.

Excellere Partners has invested in Premier Imaging Ventures, the management services provider to Riverside Radiology and Interventional Associates.

OTHER DEALS

Tesla Motors said it would acquire German firm Grohmann Engineering to both improve the quality and speed up the production of its automated manufacturing systems. No financial terms were disclosed. Read more at Fortune.

UPS has agreed to acquire Marken, a Durham, N.C.-based clinical logistics company. Marken employs more than 650 people and manages 50,000 drug and biological shipments every month. Financial terms were not disclosed.

IPOS

HarbourVest Partners, a Boston-based firm, has raised $4.77 billion in commitments its ninth fund. Dover Street IX will focus on secondary investments.

Essex Woodlands, a Palo Alto, Calif-based private equity firm that focuses on healthcare, has raised $543 million in commitments for its ninth fund, according to an SEC filing. A prior filing from July 2016 shows the firm was originally targeting a $750 million raise for the fund.

Juniper Capital Advisors, a Houston-based private equity firm, has raised $500 million for Juniper Capital II. The fund will focus on investments between $25 million and $75 million in U.S. oil and gas companies.

The European Commission has raised 400 million ($442 million) for a new venture fund that will invest in regional startups. The EU said it hopes private investors will contribute an additional €1.2 billion ($1.3 billion), which would bring the fund’s total to €1.6 billion ($1.8 billion).

Plexus Capital, a Charlotte-based private equity firm, has raised $400 million for Plexus Fund IV, its fourth fund, which will focus on investing in profitable businesses with $10 million to $100 million in revenue.

Scottish Equity Partners has raised £260 million ($322 million) for its fifth venture fund. SEP V will focus on high-growth tech companies located mostly in the U.K. and Ireland.

NEW JOBS

Mark Bourgeois has joined The Abraaj Group as a partner and the global head of investor engagement. He was previously chief executive officer of Atlantic-Pacific Capital.

Tom Gonser has joined Seven Peaks Ventures, an early-stage Bend, Ore.-based venture capital fund. Previously Gonser was the chief strategy officer at the digital document management service DocuSign, which he co-founded.

Cyrus Deboo has joined Mooreland Partners as a managing director. He was previously a managing director at Sonenshine Partners.

Aneek Mamik has joined Värde Partners as head of specialty finance for North America. Mamik was previously at General Electric.

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