On deals and dealmakers.

By Erin Griffith
November 16, 2016
November 16, 2016

ET CETERA

Just after 4 p.m. Eastern time yesterday, every single financial news outlet happened upon the exact same four pieces of information:

Snap Inc., the parent company of Snapchat, has confidentially filed the paperwork to go public. The IPO will likely happen in March. It will value the company at $20 billion to $25 billion. And Morgan Stanley and Goldman Sachs are the lead underwriters.

A couple of notes on the news:

Snap’s comparables are going to be Facebook, which has performed so well by every metric that Fortune named CEO Mark Zuckerberg business person of the year, and Twitter, which has done, well, the exact opposite.

It’s worth noting that when Facebook went public, it had nearly $4 billion in revenue and $1 billion in profits. It was eight years old. Most of its top executives had been in place for years. (COO Sheryl Sandberg, for example, was a five-year vet.)

Snap, on the other hand, is only five years old. (Note: An earlier version of this article had the incorrect age.) It’s not profitable. It has cycled through a number of top executives under CEO Evan Spiegel. It expects $250 million to $350 million in revenue, around the same size as Twitter was when it went public.

In big, splashy IPOs like this one, narrative often trumps fundamentals. Facebook, for example, had the fundamentals, but struggled with the narrative. Zuckerberg didn’t want to put in face time on the road show and he didn’t want to ring the opening bell in New York City. He wrote his shareholder letter from his phone. He declared that Facebook’s mission “not to become a public company.” That attitude made a lot of people want to see Facebook fail, which led to narratives like the GM fiasco (“Facebook’s ads don’t work”) and the mobile struggles. As a result, Facebook’s debut was a mess and it spent almost two years trying to reverse the narrative.

So far Snap’s narrative has been that there is no narrative. The company takes secrecy to the extreme. Spiegel avoids press and discourages collaboration among groups within Snap. Almost all information we have on Snap’s users, revenue, growth, and new hires, has been via leaks. Even employees learn about their company by reading about it in the press.

That the company is rushing to go public so quickly is almost confusing – why does the most secretive company in the world want to force itself to start sharing? To me, it is yet another way that Snap, based in L.A., is different from Facebook and its Silicon Valley peers: It doesn’t use kumbaya mission statements to tap dance around the fact that it is a business that wants to make a lot of money. That’s a narrative I think investors might actually appreciate.

SPAC Attack: Last week Term Sheet accidentally overlooked an IPO that foreshadows the kind of debut we’ll be seeing more of this year. A SPAC owned by Gores Group bought Hostess Brands, the makers of Twinkies.

In an uncertain market for IPOs, SPACs, which used to exist in an esoteric little niche corner of the market, are becoming more popular. A number of big name executives and firms have recently launched their own: Earlier this year Centerview Capital, Landcadia Holdings, and Chinh Chu, formerly of Blackstone Group, all created publicly traded black-check companies and are on the prowl for targets. The SPACs usually have two years to find an acquisition target, so prepare to see the action pick up there…

Doubling Down: On CNBC yesterday, Tim Draper of Draper Fisher Jurvetson pulled out the lady card, arguing that his portfolio company CEO Elizabeth Holmes has been attacked because of her gender.

”Elizabeth Holmes is a great example of maybe why the women are so frustrated,” he said. “She is a woman entrepreneur who built a fabulous company, did great things for consumers and she got attacked.” When asked if he thought she was a victim, he said, “Absolutely.”

It is indeed unfortunate that the biggest startup blow-up of the last couple of years happens to be run by a woman. And certainly, a big part of why Theranos became such a hype machine can be traced back to the media and tech world’s desperation to prove it isn’t a boys club by showing off its female CEOs. (Which, talk about pressure…)

But, no. This isn’t a lady thing. If we needed further proof, last night Ars Technica published the full text of Walgreens lawsuit with Theranos, and it paints a grim picture. Walgreens claims it was actively misled by Theranos. For example, the company only found out about 31,000 voided blood tests after reading about it in the press. Theranos released a statement saying it would “respond vigorously to Walgreens’ unfounded allegations.”


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VENTURE DEALS

Royole, a Chinese manufacturer of flexible displays, sensors, and smart devices, raised $80 million in pre-Series D funding from WARMSUN Holding Group. The investment values the company at around $3 billion.

LeShi, LeEco’s parent company, raised $600 million in funding from 10 Chinese companies, according to Reuters. An initial $300 million tranche will go to Beijing-based LeEco. The company, which invests in high-tech products including electric car technology, was dealing with a cash shortage. Read more.

Souche.com, a Beijing-based used vehicle retailer that operates an online platform for selling pre-owned cars, raised $100 million in Series C funding, according to China Money Network. Investors include Ant Financial Services Group and Ucar. Read more.

Magenta Therapeutics, a Cambridge, Mass.-based biotechnology company developing stem cell and bone marrow-based therapeutics, raised $48.5 million in Series A funding. Third Rock Ventures, LLC and Atlas Venture led the round.

MOD Pizza, a Seattle-based fast-casual pizza chain, raised $42 million in funding. Fidelity Management & Research Company, and PWP Growth Equity led the round.

Mavenlink, a Irvine, Calif.-based provider of project management and organization software, raised $39 million in Series D funding. Goldman Sachs Growth Equity led the round.

SUN Behavioral Health, a Red Banks, N.J.-based operator of psychiatric hospitals, raised $34 million in funding. Private equity firm LLR Partners led the round, and was joined by HealthInvest, NewSpring Capital, Petra Capital Partners and SV Life Sciences.

Womply, a San Francisco-based provider of front office software for SMBs, has raised $30 million in funding led by Sageview Capital, with participation from existing investors

&pizza, a Washington, D.C.-based pizza chain, raised $25 million in funding. AVALT led the round.

Aperia Technologies, a Burlingame, Calif. company that provides tire-inflation technology for the transportation industry, raised $16 million in funding. ELab Ventures led the round.

AnalyticsMD, a Palo Alto, Calif. software platform that streamlines workflow at hospitals using data analytics, raised $13 million in funding. Norwest Venture Partners and Mayfield led the round, with participation from Y Combinator and the Stanford-StartX Fund.

SeaLights, an Israeli cloud-based, continuous testing platform for quality assurance cycles, raised $11 million in funding. TLV Partners led the round, and was joined by Blumberg Capital, and Oren Zeev.

Invincea, a Fairfax, Va. cybersecurity firm, raised $10 million in funding. Investors include ORIX Growth Capital, Comerica Bank, Dell Ventures, New Atlantic Ventures, and Harbert Ventures.

Skedulo, a San Francisco provider of workforce management software, raised $9.2 million in Series A funding. Costanoa Venture Capital led the round, and was joined by Blackbird Ventures.

PageCloud, an Ottawa developer of cloud-based website building tools, raised $11.5 million CAD ($8.6 million) in Series A funding. Investors include Accomplice, Export Development Canada, and several angel investors.

Procurify, a Vancouver, B.C. cloud-based platform for making purchases and organizing receipts, raised $7 million in Series A funding, according to TechCrunch. Runa Capital led the round, and was joined by Point Nine Capital, Nexus Venture Partners, and the Business Development Bank of Canada. Read more.

P2Binvestor, a Denver lender that extends accredited investor-funded credit to businesses, raised $7.7 million in funding, according to the Denver Business Journal. Rockies Venture Club led the round, and was joined by Future Venture Capital Co. Read more.

Firefly Learning, a London-based edtech teaching and learning platform, raised £4.5 million ($5.6 million) in Series A funding. BGF Ventures led the round, and was joined by and Beringea.

Now Interact, a Stockholm, Sweden-based digital-marketing company, raised $5 million in Series A funding, according to ArcticStartup. Investors include SEB Venture Capital, Inventure, and Industrifonden. Read more.

Apptentive, a Seattle provider of software that enables app developers to connect with users to get their feedback, raised $3.6 million in funding, according to The Seattle Times. Origin Ventures led the round, and was joined by SurveyMonkey, Blossom Street Ventures and Vulcan Capital. Apptentive completed a $5.3 million Series A round in 2014. Read more.

Scroll, Chartbeat founder Tony Haile’s digital subscription service that allows users to read ad-free content from multiple publishers, raised $3 million in funding, according to Recode. Investors include SoftTech, OATV, Axel Springer, News Corp and the New York Times. Read more.

Mobalytics,  a Santa Monica-based eSports company, has raised $2.6 million in seed funding from Almaz Capital, Founders Fund, General Catalyst, and GGV Capital.

Echo, a London app for managing prescriptions, raised £1.8 million ($2.2 million) in seed funding. LocalGlobe led the round, and was joined by Global Founders Capital.

Orbital Shift, a Missoula, Mont. provider of employee scheduling and communication software, raised $1.25 million in Series A funding. Next Frontier led the round, and was joined by Frontier Angels and several angel investors.

Apvera, a Singapore security intelligence platform, raised S$1.7M ($1.2 million) in funding. ACP and Spring Seeds Capital led the round, with participation from Nest Ventures, Muru-D of Singapore, and Central Exchange.


PRIVATE EQUITY DEALS

Koch Equity Development, the investment arm of Koch Industries, has invested $2.5 billion for a stake in Infor, which sells financial and manufacturing software to businesses. The deal values Infor at $10 billion. The company’s existing shareholders, including Golden Gate Capital, Summit Partners, and Management, will maintain control of the company. Read more at Fortune.

• Wireless communications provider NewNet Communication Technologies, a Skyview Capital portfolio company, has agreed to sell its RCS Business to Samsung. Financial terms were not disclosed.

Bernhard Capital Partners-backed Brown & Root Industrial Services, a Baton Rouge, La.-based operator of engineering, construction, and maintenance services, has acquired MEI Group, a Malvern, Pa. full-service turnaround specialist for industrial facilities globally. Financial terms were not disclosed.

Spectrum Equity has invested in Tenstreet, a Tulsa, Okla. provider of driver recruiting and workflow management software for the trucking and transportation industry. Financial terms were not disclosed.

• Teakwood Capital has invested in HomeSphere, a Denver provider of digital lead generation and customer retention tools for builders and contractors. Financial terms were not disclosed.

Peak Rock Capital has sold Koroseal Interior Products, a Fairlawn, Ohio-based company that distributes and manufactures commercial interior products, to Sangetsu Corp. Financial terms were not disclosed.

FineLineTechnologies, a Norcross, Ga.-based provider of data and RFID solutions, has undergone a recapitalization from Summit Partners. Terms of the recap were not disclosed.

Phononic, a Durham, N.C.-based provider of solid-state cooling and heating technology, closed a $71 million investment with an additional $40 million in funding from UBS’ wealth management businesses. The syndicate of investors includes GGV Capital, Lookout Capital, Eastwood Capital Corp, Venrock, Oak Investment Partners, Tsing Capital, Huaneng Invesco WLRoss, Wellcome Trust and Rex Healthcare Ventures.


OTHER DEALS

Viacom has purchased Television Federal SA (Telefe), an Argentine broadcaster, from telecom carrier Telefonica SA for $345 million in an all-cash deal. Read more at Fortune.


EXITS

GE has acquired Bit Stew Systems, a Vancouver, B.C.-based machine learning platform, and Wise.io, a Berkley, Calif.-based advanced machine learning technology. Financial terms were not disclosed. Bit Stews raised $24.3 million from investors including GE Ventures, Cisco Investments, and Yaletown Partners. Wise.io raised $3.6 million from investors including Voyage Capital. Read more at Fortune.

FFL Partners has agreed to acquire Crisis Prevention Institute, a St. Louis-based provider of crisis prevention, non-violent physical intervention, and dementia care training, from Brockway Moran & Partners. Financial terms were not disclosed.

Anchorage Capital Group and Littlejohn & Co. have sold Contech Engineered Solutions, a West Chester, Ohio-based provider of infrastructure services for engineers, contractors, and architects, to QUIKRETE Holdings. Financial terms were not disclosed.

Virtual Instruments, an infrastructure performance management company, has acquired Xangati, a San Jose, Calif.-based hybrid cloud and virtualization performance management company. Xangati had raised $21.7 million in funding from investors including Alloy Ventures, Citrix Systems, HighBar Partners and Walden International.


IPOS

Snap Inc., Snapchat’s parent company, has filed paperwork with the U.S. Securities and Exchange Commission for an IPO. The offering likely values the company between $20 and $25 billion, and could take place as early as March. Read more at Fortune.


FIRMS + FUNDS

• KKR has raised $688 million for KKR Next Generation Technology Growth Fund, a growth-equity fund focused on technology investments.

Mosaic Health Solutions, a Durham, N.C.-based venture capital and private equity firm, and Cambia Health Solutions, a Portland, Ore.-based venture firm, have merged their investment arms into a single unit: Echo Health Ventures. The new company will manage Mosaic Health and Cambia Health’s combined portfolio.


NEW JOBS

William J. Teuber Jr. has joined Bridge Growth Partners as a senior operating principal. Previously, he was vice chairman of EMC Corporation.

Ian Sandler has joined Insight Venture Partners as chief operating officer. Previously, Sandler was the COO of global equities at Citadel.

Z Capital Group, a New York City-based alternative asset management firm, has added Sean Maddock, Ashwini Sawhney, Michael Stanczak, and Tyler Hendry as operating partners, David DeMilt as managing director, and Ian Delehanty and Olivia Guo as associates.


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