On deals and dealmakers.
Transparency: Over the past four years, FundersClub, an online venture capital firm, has invested in 217 companies. It has had 19 exits. Today the company published a quarterly breakdown of its returns in an effort to bring more transparency to venture capital performance, a historically not-so-transparent area. “The whole industry is normalized to not publish returns,’” says co-founder and CEO Alex Mittal. The company has committed to updating its returns every quarter. You can find them here.
As of the third quarter last year, FundersClub’s 2012 fund held a 2.3x unrealized net multiple and its 2013 fund held a 3.2x multiple. These are unrealized returns, which don’t really mean much if all of the firm’s portfolio companies fail.
FundersClub’s multiple for realized exits is 1.1. Mittal notes that as a four-year-old fund, that return includes companies that “either dissolved or that took an early exit.” FundersClub will mark down investments when the firm’s investment committee believes they’ve been overvalued, but not in the other direction.
A reminder: FundersClub is structured like any other limited partnership. The company’s investors are vetted high net worth individuals. FundersClub’s six-person investment committee conducts diligence on its each of its investments; once it chooses to back a company, LPs can choose to join the round. Similar to other venture firms, FoundersClub does not invest in competing companies and participates in follow-on investments. Separately, the company operates FCVC, a fund for family offices, endowments and pensions.
In the past I’ve heard rumblings of complaints from FundersClub investors suggesting the firm isn’t getting the same terms as the rest of the investors on its deals. But Mittal says that’s not true: FundersClub only invests if the deal terms are identical to the other investors in the round.
FundersClub has had to do some work in educating its LPs, he says. “You’ll see a disconnect where someone reads something about some company getting an exit and then wonders, “‘Why am I losing half my money’ or ‘Why am I only getting a 3x?’” he says. The company’s site has an education center that helps LPs understand the difference between “a real profitable exit and an exit that’s just an exit in name.”
Make the world a better place: Startup culture is easy to criticize, for its focus on hype over substance, for excluding people that don’t fit the stereotypical startup bro mold, for its worship of disruption at all costs. I pegged the ugly parts of startup culture as a major factor in the industry’s recent string of scandals, fraud, and ethical lapses in my recent feature. What starts as a simple rule-bending to get to the next funding round, or press hit, or customer, can easily (and quickly) blossom into a culture of blatant rule-breaking.
Plenty of founders know the importance of making culture and values a priority from the beginning. (They also know “culture” is more than just ping pong tables and coldbrew on tap and “values” are more than just “make the world a better place.”)
Obvious Ventures, a firm focused on “combining profit and purpose,” today announced a modest proposal: Why not bake your company’s values directly into your term sheet? Today the firm unveiled something called “World Positive Term Sheet.” It’s a template that startup founders can use to get their investors and employees on board with the company’s values. In Obvious co-founder James Joaquin’s words:
At the highest level, all [term sheet] elements cluster around two themes: economics and control. At Obvious Ventures, we think it’s time to add a third category to the term sheet: values. Given that the task of building a huge company is a long and arduous journey, entrepreneurs and investors should make sure that they are well aligned on the values that define the ‘why’ of a business beyond the business plan describing the ‘what’ and the ‘how’.
I asked Joaquin if he thinks startups will actually adopt this, given how hard it is for most of them to merely survive, let alone get their investors to agree to sign a squishy, feel-good term sheet. “We see first-hand a mega trend of young entrepreneurs founding companies around a core mission and value set,” he said. “As this happens with greater frequency, it will become more important for founders to make sure they find investors aligned with their mission.” And of course, there’s the evidence that diverse and woman-friendly workplaces perform better.
Joaquin believes this could help with the startup world’s ethical issues I described, too. “My theory is that a cocktail of transparency and values-based leadership is the vaccine for rotten culture and fraudulent behavior,” he said.
Obvious also published a B-Corp cheat sheet so companies can determine if they should commit to their values in a more formal way. (Venture or private equity-backed B Corps include Etsy, Sungevity, and Laureate Education.)
Unicorn Watch: New money for Funding Circle. TechCrunch pegs the European peer-to-peer lender’s valuation above $1 billion.
Just gonna leave this here: Maureen Dowd’s interview with Peter Thiel takes the investor’s famous contrarianism to parody-able levels, with answers such as, “If there’s no conflict of interest, it’s often because you’re just not interested,” and, “There’s a point where no corruption can be a bad thing,” and my personal favorite, “Maybe pro wrestling is one of the most real things we have in our society.” He also confuses sex with sexual assault, and believes that people in Silicon Valley aren’t having that much sex and that much fun. Okay!
Thanks: As usual, for the feedback. No surprise, those of you preferring “short & sweet” kept your feedback exactly that. (And today I completely defied that preference! ¯\_(ツ)_/¯)
Lots of you suggested we categorize the venture companies by industry. Currently they’re lumped together in descending order by size. We haven’t done that yet because startup categories can be a bit fluid, and because some companies are in denial about what they are. But there is one group that’s easy to carve out: Health and life sciences. Starting today, we’ll separate those deals into their own category. Shout-out to Bart B. for the suggestion.
Survey says: So far, you all expect higher income and lower taxes in 2017, according to early results from the Semaphore survey. It’s still open, and you can take it here.
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• Funding Circle, a London-based lending platform for small business finance, raised $100 million in funding. Accel led the round, and was joined by Baillie Gifford, DST Global, Index Ventures, Ribbit Capital, Rocket Internet, Sands Capital Ventures, Temasek, and Union Square Ventures.
• EasyStack, a Beijing-based provider of open cloud services for enterprises, raised $50 million in Series C funding. Cash Capital led the round, and was joined by several RMB funds.
• ezCater, a Boston-based provider of online ordering services for business catering, raised $35 million in funding. ICONIQ Capital led the round, and was joined by Insight Venture Partners.
• ICIX, a San Bruno, Calif.-based provider of supply chain risk management and compliance services for retail and manufacturing businesses, raised $15.5 million in funding from Arrowroot Capital.
• Corephotonics, a Tel Aviv-based startup developing dual camera technologies for smartphones, raised $15 million in funding. Investors include Samsung Ventures, Foxconn, and MediaTek.
• Kayrros, a Paris-based predictive analytics company for the energy markets, raised €9 million equity ($9.6 million) in a Series A financing round led by Index Ventures.
• Kasisto, an AI fintech startup based in New York City, raised $9.2 million in Series A funding led by Propel Venture Partners with participation from Mastercard and Commerce Ventures.
• Iguama, a Guatemala City-based e-commerce service that lets shoppers in Latin America buy products from U.S. stores, raised $5 million in Series A funding. Kibo Ventures and PeopleFund led the round.
• Stadium Goods, a New York City-based sneaker marketplace, raised $4.6 million in funding. Forerunner Ventures led the round, and was joined by The Chernin Group and others.
• Inspectorio, a Hong Kong-based inspection and supplier compliance verification platform, raised $3.7 million in funding. Target (NYSE:TGT) led the round, and was joined by Techstars Ventures and Matchstick Ventures.
• Roambee, a Santa Clara, Calif.-based real-time asset monitoring service for enterprises, raised $4.1 million in Series B funding. Deutsche Telekom Strategic Investments led the round. (This item has been updated with the correct funding amount.)
• Staffjoy, a San Francisco-based scheduling tool for workers and managers, raised $1.2 million in seed funding. Caffeinated Capital led the round, and was joined by Brainchild Holdings, Haystack Fund, and more.
• Pure Growth Organic, a New York City-based maker of organic snacks, raised an undisclosed amount of funding from Sunrise Strategic Partners.
HEALTH AND LIFE SCIENCES DEALS
• Luxendo, a Munich-based microscope manufacturer, raised €8 million ($8.5 million) in Series A funding. Investors include Life Science Partners, Amsterdam, EMBL Ventures, Heidelberg, and EMBL Enterprise Management Technology Transfer GmbH.
• DarioHealth, a digital health startup based in Boston, has raised $3.1 million in a round with commitments of $5.1 million from OurCrowd Qure and existing shareholders.
• Clearwater Clinical Limited, an Ottawa, Canada-based provider of medical-grade mobile devices and cloud-based data management services for the hearing health industry, raised $6 million in Series A funding. Whitecap Venture Partners led the round, and was joined by BDC Capital Healthcare Venture Fund.
• CVC Capital Partners is in advanced talks to buy MSC Software, a Newport Beach, Calif.-based software company developing simulation computer programs, for more than $800 million, including debt, according to a report by Reuters. Read more.
• Mercer Advisors, a Santa Barbara, Calif.-based provider of wealth management services backed by Genstar Capital, has acquired Novos Planning Associates, a New York City-based investment advisory firm. Financial terms were not disclosed.
• Onex (TSX:ONEX) is considering selling USI Insurance Services, according to report by Reuters. The private equity firm is hoping the deal will value the Valhalla, N.Y.-based brokerage at as much as $4 billion. Read more.
• McDonald’s (NYSE:MCD) is taking bids for up to 33% of its Japan unit, according to a the Wall Street Journal, which reports a number of private-equity are considering offers. McDonald’s owns around 50% of the Japan unit, which has a market cap of around $3.5 billion. Read more.
• Peaceable Street Capital, a Philadelphia-based specialty finance company, raised a strategic investment from SunBridge Capital Management. Terms of the transaction were not disclosed.
• Compass Datacenters, a wholesale datacenter developer based in Dallas, Texas, has taken an investment from RedBird Capital Partners and Ontario Teachers’ Pension Plan alongside management.
• Think project! GmbH, a Munich-based provider of project management software to the construction and engineering industries, raised an undisclosed amount in funding from TA Associates.
• Callaway Golf Company (NYSE:ELY) has acquired OGIO International, a Bluffdale, Utah-based manufacturer of bags, backpacks, and travel luggage, for $75.5 million in cash. OGIO International raised $5 million in equity funding from an undisclosed investor, according to an SEC filing.
• AppDynamics, a San Francisco-based provider of software that helps companies monitor the performance of their networked applications, has set its IPO terms to offer 12 million shares offered at in the range of $10 to $12 per share, valuing the company at $1.9 billion in the middle of its range. Existing shareholders General Atlantic, Adage Capital Partners, LP and Altimeter Partners Fund, L.P., will purchase up to of $32.5 million in common stock at $11.00 per share.
• Arxan Technologies, a Bethesda, Md.-based security software company backed by TA Associates, has agreed to acquire Apperian, a Boston-based platform for managing apps. Financial terms were not disclosed. Apperian raised $39.4 million in funding from investors including Bessemer Venture Partners, Kleiner Perkins Caufield & Byers, and Intel Capital.
• Upland Software, Inc. (Nasdaq: UPLD) has acquired Omtool, an Andover, Mass.-based provider of enterprise document capture, fax, and workflow services backed by Summit Partners, for $22.2 million.
• The Canada Pension Plan Investment Board has agreed to purchase a 48% stake in GlobalLogic, a San Jose, Calif.-based product engineering company, from Apax Partners. Financial terms were not disclosed.
• The Riverside Company has sold iAutomation, a North Attleboro, Mass.-based provider of automation solutions for original equipment manufacturers, to an unidentified buyer.
• Dun & Bradstreet (NYSE:DNB) has acquired Avention, a Concord, Mass.-based company that monitors and analyzes business information for companies, for $150 million. Avention’s investors included GTCR and Cannondale Investments.
• Thompson Street Capital Partners has recapitalized Software Technology Inc., a Lincoln, Neb.-based provider of financial and practice management software for small and medium-sized law firms. Financial terms were not disclosed.
• Sarah Cannon Research Institute has agreed to acquire Genospace, a Cambridge, Mass.-based provider of reporting tools for clinical labs and health care providers. Genospace raised $5 million in funding from Clarivate Analytics.
FIRMS + FUNDS
• Correlation Ventures, a San Diego, Calif.-based venture firm, raised $200 million for its second fund.
• Precursor Ventures, a San Francisco-based venture firm focused on seed and early-stage investments between $100,000 and $250,000, raised $15.3 million for its first fund, according to TechCrunch. Read more.
• S. Somasegar and Hope Cochran have joined Madrona Venture Group as a managing director and a venture partner, respectively. The Seattle-based venture firm also promoted Julie Sandler to partner and Daniel Li to senior associate.
• Paul Zolfaghari will join Carrick Capital Partners, as an operating officer. Previously Zolfaghari was the president of MicroStrategy (Nasdaq:MSTR).
• Cinven has promoted Chris Good, Thomas Railhac, and Ivan Kwok to partners, and Brett Lewis to director.
• Jason Bergsman has been promoted to executive vice president at The Chernin Group.
• Ken Pontarelli is retiring from Goldman Sachs (NYSE:GS), according to Reuters. Pontarelli, who helped spearhead the firm’s private equity investments in the energy sector, worked at the firm for 22 years. Read more.
• Altus Capital Partners has promoted Thomas Groh to partner, Nick DeMarco to vice president, and Joshua Tesoriero to senior associate.
• Phil Kwun has joined Mooreland Partners as a managing director. Previously, Kwun was a managing director at Sonenshine Partners.
• BelHealth Investment Partners has promoted Joseph Wynne to chief administrative officer, Paul Barrett to vice president, and Jonathan Spero to senior associate.
• Thomas Klimmeck and Tricia Marks are retiring from Madison Capital, according to PE Hub. Klimmeck is the a senior managing director at the firm, and Marks is a managing director and head of capital markets. Read more.
• Brian Kelley has joined Lindsay Goldberg as a partner. Previously, Kelley was chief executive officer of Keurig Green Mountain.