2016-12-07-1

Term Sheet — Friday, December 9

Dec 09, 2016

Layoff Watch and Founder-Friendly Boards

It’s the kind of thing that stinks to be right about. Earlier this week I predicted that many startups would go through end-of-year layoffs. Some are trimming headcount after over-expanding relative to their projections. Some are shifting strategies. Others are in survival mode. So far, I’ve written about layoffs at well-funded startups including AdRoll and Github. There are more where that came from.

•  GuideSpark, a provider of software for human resources departments, laid off around 20% of its staff, or 60 people, in November, Term Sheet has learned. Guidespark Chief of Staff Pam Gonclaves confirmed the reduction “to expand and align its initiatives in the enterprise employee communications market,” and noted that employees were offered severance and outplacement assistance. The Menlo Park-based company has raised $42.5 million in venture funding from Meritech Capital Partners and Storm Ventures.

•  On Tuesday, The Honest Company announced it would lay off 80 employees and close its office in Austin, Texas. President and co-founder Sean Kane and CFO David Parker will also step down. The news, which ran in Women’s Wear Daily, wasn’t picked up by the wider business press.

The Honest Company is Jessica Alba’s consumer products startup. It has raised $228 million in funding, valuing it at $1.7 billion, from Wellington Lightspeed, IVP, Iconiq, Pritzker Group, General Catalyst, Fidelity, and AllianceBernstein.

Earlier this year, the company was reportedly in talks to sell to a large consumer products company for around $1 billion. That deal never happened and in a surprise move, Unilever acquired Seventh Generation in October.

• Beepi, an online marketplace for used cars, will lay off 180 workers and close operations in 16 unprofitable cities. The company will merge with a new venture called Fair that has not yet launched.

Mountain View-based Beepi has raised $149 million in funding from investors including DST Global, Foundation Capital and Flight Ventures.

•  Yik Yak, an Atlanta-based anonymous messaging app, laid off 30 employees, or 60% of its staff, The Verge reported. The company also lost its CTO earlier this year. The app’s growth has stalled, according to The Verge, ever since it began requiring users to use handles to post their anonymous messages.

YikYak raised $73.5 million from Sequoia Capital, Vaizra Investments, DCM Ventures, Azure Capital Partners, and Atlanta Ventures, valuing the company at $400 million. It’s not clear whether YikYak has developed a way to earn revenue.

•  Founder Friendly: How did Mark Zuckerberg convince his board to let him create a third, non-voting class of Facebook stock, ensuring he retains control even if he sells all his stock, or, say, goes into politics for two years? Bloomberg revealed yesterday that he had some advice from inside the room. Facebook board member (and special committee member) Marc Andreessen coached him through negotiations, according to a shareholder lawsuit.

The argument that companies like Facebook, Alphabet, and many startups including Theranos make for giving their founders complete control is that it allows them to think long-term and not obsess over quarterly results. Shareholders are happy to hand over their voting power when times are good, as they have been at Facebook for the past three years. But there’s something icky about seeing how that power is negotiated and maintained. Further, given the volume of shady startup situations we’ve seen over the last year, I predict the era of founder-friendly governance at startups is winding down.

Coincidentally, my colleague Geoff Colvin (who has a newsletter about leadership), wrote yesterday about problematic boards, noting that board members at all companies, not just tech, don’t challenge their CEOs enough. He argued that companies need activist directors that challenge their executives:

The culture on most boards is getting along. Companies specifically seek directors who won’t be the squeaky wheel and cause tension, when that’s exactly what most boards need – activist directors willing to say what’s uncomfortable.

• Thanks to those of you that sent in predictions yesterday. Have a great weekend!

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VENTURE DEALS

•  Procore, a Carpinteria, Calif.-based maker of cloud-based construction software, raised $50 million in new funding. Iconiq Capital led the round. Procore is now valued at more than $1 billion, according to the Wall Street Journal. Read more.

•  Molotov, a French maker of a digital DVR-like service, raised $23.3 million (€22 million) in new funding from Idinvest, Sky, TDF, and other investors, according to TechCrunch. Read more.

•  Nantero, a Woburn, Mass.-based nanotechnology company developing next-generation memory using carbon nanotubes, raised $21 million in new funding. Globespan Capital Partners led the round, with participation from new and existing investors.

•  Eutilex, a South Korea-based biopharmaceutical company focused on treating cancers and autoimmune diseases, raised $18.9 million in Series A funding from DS Asset Management, Kolon Investment, G.N. Tech Venture, and SNU Bio Angel.

•  Thanx, a San Francisco-based company that provides customer loyalty products to merchants, raised $17.1 million in Series B financing. Icon Ventures and Sequoia Capital led the round, with participation from Javelin Venture Partners.

•  Vesper, a Boston-based electronics startup, has raised $15 million in Series A round of funding led by Accomplice, with participation from Amazon’s Alexa Fund, Hyperplane, and Miraenano Tech.

•  Vapogenix, a Houston, Texas-based developer of non-opioid medicine for localized pain, raised $8.2 million in new funding from Pamoja Capital, among other investors.

•  eFounders, a Brussels-based “startup studio,” raised $5.3 million (€5 million) in new funding from Nicolas Steegmann, Jean-Daniel Guyot, Clément Benoit, and other investors, according to TechCrunch. Read more.

•  Nectar, a Palo Alto, Calif.-based stealth company building a device for alcohol inventory management, raised $4.55 million in seed funding from Joe Lonsdale, Lior Susan, and the founding family of Modelo Group, according to TechCrunch. Read more.

•  Emanate Wireless, a Cleveland, Ohio-based provider of healthcare IT services, raised $1.5 million in funding from unnamed investors.

PRIVATE EQUITY DEALS

•  Georgia Oak Partners has made an undisclosed investment in Farm Burger, an Atlanta-based burger chain with locations in Georgia, North Carolina, Alabama, Tennessee and California.

•  Harren Equity Partners has recapitalized MedPro Healthcare Staffing, a Sunrise, Fla.-based medical staffing firm. Financial terms were not disclosed.

•  Admiral Capital Group and Security Properties have sold Waters Edge Apartments, a Kent, Wash.-based 304-unit multifamily property, to an unnamed buyer. Financial terms were not disclosed.

OTHER DEALS

•  Jeyes Group, a U.K.-based provider of home cleaning products and services backed by Strategic Value Partners, has agreed to sell several home care brands in the U.K. and Ireland, to Henkel, a German company that sells products in the adhesive, beauty, and home care industries. Financial terms were not disclosed.

•  Spotify, a Stockholm-based music streaming service, has reportedly backed out of talks to acquire SoundCloud, a Berlin-based online music-hosting service, according to TechCrunch. In September, the Financial Times reported that the companies were in advanced acquisition discussions. Read more.

•  3M, the Minnesota-based maker of Scotch tape and Post-it notes, has entered into agreements to sell its identity management business to Gemalto (GTO:EN) an Amsterdam-based digital security company, for $850 million, according to Reuters. Read more.

•  Time Inc. (NYSE:TIME), a New York City-based media company and Fortune’s publisher, has reportedly hired Morgan Stanley and Bank of America to evaluate takeover offers, according to the Wall Street Journal. The company reportedly rejected a bid last month from a group of investors including billionaire Edgar Bronfman Jr., the former CEO of Warner Music, and Ukrainian-born billionaire Len Blavatnik, who bought Warner Music in 2011. Read more.

IPOS

•  Ichor Holdings, a Fremont, Calif.-based company that provides fluid delivery subsystems for semiconductor capital equipment OEMs, raised $53 million by offering 5.9 million shares at $9, below the initial range of $12 to $14. Ichor Holdings plans to list on the Nasdaq under the symbol ICHR. Deutsche Bank and Stifel acted as lead managers on the deal, while RBC Capital Markets, Cowen and Company, and Needham & Company, are serving as bookrunners

•  InnoLight Technology, a Chinese company that manufactures high-speed optical transceivers for data networks, withdrew its plans for an IPO. It originally filed in June 2015 and planned to raise $100 million. InnoLight Technology is backed by Google Capital, Suzhou Oriza Holdings, Lightspeed China Partners, ITC Vision, Hsing Hsien Kung, and Sheng Liu.

•  SenesTech, a Flagstaff, Ariz.-based company that commercializes a non-lethal rodent control chemical that lowers rat fertility, raised $15 million by offering 1.9 million shares at $8, below the already lowered $9 to $11 range. It has a market value of $91 million. It originally filed to raise $20 million by offering 2 million shares at the $12 to $14 range, targeting a market cap of $152 million. Roth Capital was the sole bookrunner on the deal.

•  Athene Holding, a provider of fixed annuities backed by Apollo Global Management, raised $1.1 billion in an upsized deal by offering 27 million shares at $40, the midpoint of the $38 to $42 range. Athene Holding plans to list on the NYSE under the symbol ATH. Goldman Sachs, Barclays, Citi, Wells Fargo Securities, BofA Merrill Lynch, BMO Capital Markets, Credit Suisse, Deutsche Bank, J.P. Morgan, Morgan Stanley, RBC Capital Markets, BNP Paribas, BTIG, Evercore ISI, SunTrust Robinson Humphrey, and UBS Investment Bank acted as lead managers on the deal. Athene Holding is backed by Apollo.

Meitu Inc, a Chinese app and phone company, will raise $630 millionin its Hong Kong IPO, according to Reuters. The pricing represents the bottom of Meitu’s expected range for the offering, valuing the company at HK$4.88 billion ($629 million). Read more.

EXITS

BWAY Corp., an industrial-packaging company owned by Stone Canyon Industries, is discussing the acquisition of Mauser, a maker of containers for consumer goods, for more than $2 billion, according to the Wall Street Journal. Mauser is owned by Clayton Dubilier & Rice. Read more.

FIRMS + FUNDS

•  RCP Advisors, a Chicago-based lower mid-market fund-of-funds manager, raised $257 million for its 11th fund, according to an SEC filing. The fund could grow to $400 million at the manager’s discretion.

•  Palm Beach Capital raised $49.35 million for its fourth fund, according to an SEC filing. The fund’s target is $150 million.

•  Scotiabank and QED Investors will launch a venture capital fund that will invest in Latin American fintech startups. QED Investors will manage the fund while Scotiabank will help with assessing potential investments and provide financing and resources to specific Latin American markets.

•  Domain Associates, a San Diego, Calif.-based venture capital firm focused on life sciences companies, raised $163 million for its ninth fund, according to an SEC filing.

•  Tinder, a dating app owned by Match Group, is launching Swipe Ventures, an investment vehicle that will focus on acquisitions, investments, and other business development within the dating and social networking industry. Tinder co-founder and CEO Sean Rad will lead the fund, trading his current job with Tinder chairman Gregg Blatt. Read more at Fortune.

•  Gene Munster, a longtime research analyst at Piper Jaffray, will leave the firm to form Loup Ventures, a venture capital firm focused on virtual reality and artificial intelligence, according to Bloomberg. Read more.

NEW JOBS

•  Gary Parr has joined Apollo Global Management as a senior managing director and co-chair of the firms’ management operating committee. Previously Parr was vice chairman at Lazard.

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