2016-12-07-1

Term Sheet — Tuesday, January 17

Jan 17, 2017

ALL THE DEALS

Welcome back from the long weekend. Some quick deal notes...

Unicorn Watch: Enterprise video software company Zoom Video Communications raised $100 million from Sequoia. The round (more details below) values the company at exactly $1 billion, Term Sheet has learned. Sequoia’s Carl Eschenbach, who joined Sequoia in March from his role as President and COO of VMware, will join Zoom’s board.

IPO Watch: Planning to buy IPO shares of Snap? Don’t expect a vote.

Layoff Watch: Joyable, a small startup focused on helping people overcome social anxiety, has laid off 20 people, or half of its staff, Term Sheet has learned. The company made the change as shift in its business model from consumer-facing to enterprise. It will partner with employers, insurers, and providers to reduce the cost of its services. Co-founder and CEO Peter Shalek confirms the layoffs, noting the way for Joyable to reach the most people is to make its services as affordable as possible. The company has worked with 500,000 people with a clinical level of anxiety or depression, he says. “We believe that our evolved strategy will allow us to reach and help the most people,” he says. The company is backed by Thrive Capital and Harrison Metal.

AI Deal Watch: Microsoft bought another one.

The Other Kushner: Jared Kushner, son-in-law and senior advisor to the president-elect, is no stranger to the spotlight. His brother Josh, founder of Thrive Capital, co-founder of Oscar Health, and significant other to model Karlie Kloss, has largely avoided it. A recent New York Times profile of Josh calls the next four years a “new and unsettling chapter” for him, noting that he’s told Thrive investors he wants to stay out of politics.

As Term Sheet has noted before, the Kush-bro connection has some potentially awkward ramifications for Josh Kushner’s well-funded and sometimes-criticized startup Oscar Health. Remember, Oscar was founded on the back of the ACA, which congress just voted to dismantle. Not a good sign.

But that creates another, slightly more cynical potential outcome for Oscar: This could be very, very good. The company has direct family ties to one of the most influential people to the president, in a time when the future of the health insurance industry will be rewritten from scratch.

Jared Kushner has already shown that he’s willing to put his family’s interest ahead of politics. He orchestrated the dismissal of Chris Christie from Trump’s campaign, a move CNN and others tied to a Kushner family score from the early 2000s:

Kushner's criminal tax evasion and witness tampering case won Christie, then a US attorney, triumphant headlines in the country's largest media market.

That kind of influence might also be attractive to a large insurance company seeking to acquire a little goodwill in the White House. Oscar’s $2.7 billion valuation would be a small price to pay…

PE in DC: Even though Secretary of Commerce nominee Wilbur Ross no longer runs day-to-day operations at his firm, WL Ross, he is going to have to leave his board seats (including Nexeo Solutions, Bank of Cyprus, and Sun Bancorp) and sell off his holdings in a number of the funds, the Wall Street Journal reports, noting the investor’s “finances and reputation as the “King of Bankruptcy” are so intertwined with WL Ross & Co. … that it is difficult to tell where the firm’s financial interests end and his begin.” Selling those illiquid assets is likely to mean losses.

Ross’s hearing is scheduled this week. One point of focus will surely be the fact that companies controlled by his firm have offshored 2,700 jobs since 2004.

Deal Worth Noting: AppsFlyer, a Herzliya, Israel marketing technology platform for apps, has raised $56 million in Series C funding led by Qumra Capital, with Goldman Sachs Private Capital Investing, Deutsche Telekom Capital Partners, Pitango Growth and existing investors participating. The company did not disclose its valuation.

CEO Oren Kaniel co-founded the company in 2011 when he noticed that app makers and the burgeoning market for app install ads had little in the way of measurement tools. “I basically saw spray and pray,” he says. “Marketers spraying budgets and hoping for the best.” AppsFlyer measures the effectiveness of app-install ads, as well as any traffic coming to a specific app, be it via organic Facebook post, QR code, user invite, or email marketing. The company’s software development kit has been installed on more than 2.5 billion unique smartphone devices, which it estimates includes 98% of smartphones. Revenue is tripling each year.

Two macro trends that make this deal interesting to me:

  1. Mobile advertising has essentially become a Facebook-Google duopoly. That has hurt investor appetite for all manner of advertising technology.
  2. The narrative for the past few years has been that apps are dead. The average American downloads zero apps a month. Social apps like Facebook, Facebook Messenger, Slack, Snapchat and others are increasingly trying to suck the entire Internet into their little app worlds.

On the first point, Kaniel says Facebook and Google cannot provide advertisers with “unbiased” measurement data on their ad performance because they don’t have a full picture of the data. “The average marketer uses 50 different sources. [Facebook and Google] don’t know if [the customer] saw something on other platforms,” he says. But Kaniel agrees other ad-tech providers are facing a reckoning. “Some of these companies got used to getting paid for nothing,” he says. “For the first time, they are measured on value and not how many people they annoyed today.”

On the second point, Kaniel says AppsFlyer’s data shows that app installs and app usage is actually increasing. App growth may have slowed in the U.S. but that’s not the case in Asian countries where mobile device adoption leapfrogged that of the PC, he says. AppsFlyer plans to use the new capital to expand in Asia and to explore M&A opportunities.

THE LATEST FROM FORTUNE...

The Fortune Unfiltered podcast features Stacy Brown-Philpot, CEO of TaskRabbit.

The MPW OnStage podcast features Marne Levine, COO of Instagram.

• The real reason Wall Street should fear the new “fiduciary rule.”

• Baidu snags Microsoft exec in AI push.

•  “They make clothes and I make artificial brains for drones,” Versace said.

• Dispatch from Davos: Xi Jinping warns Trump about protectionism, China’s coming out party, Meg Whitman on Trump, CEOs are getting more confident, Trump, markets, and automation, Davos in crisis, TRILLIONAIRES.

• Sallie Krawcheck is over “Women’s ‘empowerment.’”

• Marc Benioff: How business leaders can narrow income inequality.

• There are no black women running Fortune 500 companies.

• The shower beer is for drinking.

…AND ELSEWHERE

PETA invests in luxury designer brands. Bernie Madoff is cornering the prison market on Swiss Miss hot chocolate. Pale, male and stale.

VENTURE DEALS

Letgo, a mobile marketplace that allows users to buy and sell locally, raised $175 million in funding. Investors include Naspers, Accel, Insight Venture Partners, New Enterprise Associates, and 14W.

Zoom Video Communications, a San Jose, Calif.-based provider of enterprise video and web conferencing, online meetings, and group messaging, raised $100 million in Series D funding. Sequoia led the round, and was joined by Emergence Capital, Jerry Yang’s AME Cloud Ventures, and Qualcomm Ventures.

Shiftgig, a Countryside, Ill.-based mobile platform that connects businesses with hourly workers, raised $20 million in Series C funding. Investors include DRW Venture Capital, FJ Labs, GGV Capital, and KDWC Ventures.

OrderGroove, a New York City-based subscription management platform for brands and retailers, raised $20 million in Series C funding. National Securities led the round.

Moon Express, a Cape Canaveral, Fla.-based commercial space company building robotic spacecrafts to explore the moon, raised $20 million in a Series B-1 funding, according to TechCrunch. Investors include Founders Fund, Collaborative Fund, and Autodesk. Read more.

Neurala, a Boston-based artificial intelligence startup, raised $14 million in funding. Pelion Ventures led the round. Read more at Fortune.

Zeotap, a Berlin-based platform that allows businesses and consumers to transmit data securely, raised €12 million ($12.8 million) in Series B funding. Investors include New Science Ventures, HERE, Capnamic Ventures, and Iris Capital.

USound, a Graz, Austria-based mobile audio system manufacturer, raised €12 million ($12.8 million) in funding. eQventure led the round.

D.light, a Cayman Islands-based manufacturer and distributor of solar-rechargeable LED lighting products for rural and semi-urban households in India, Africa, and South America, raised $10.5 million in funding. Norfund contributed $5 million, and Beyond the Grid and Shell Foundation provided $5.5 million in grant funding.

Spaces, a Los Angeles-based virtual- and mixed-reality firm, raised $6.5 million in seed funding. Songcheng Performance Development Co. led the round, and was joined by Comcast Ventures. Read more.

Fraugster, a Berlin  cybersecurity company using artificial intelligence and behavioral analytics to prevent payment fraud, raised $5 million in funding. Earlybird led the round, and was joined by Speedinvest, and Seedcamp. This item has been corrected to note that Fraugster is based in Berlin, not Leeds. 

SecureSet Academy, a Denver, Colo.-based provider of cybersecurity educational programs, raised $4 million in Series A funding. Colorado Impact Fund led the round.

APANA, a Kirkland, Wash.-based smart water management system for commercial and industrial buildings, raised $3.5 million in Series A funding. Kurita Water Industries led the round, with participation from the Urban Innovation Fund.

Ascent360, a Golden, Colo. customer data platform, raised $1.9 million in seed funding. Investors include Access Venture Partners, Nelnet, Bialla Venture Partners 2, Service Provider Capital, and the Rockies Venture Club.

Wochit, a Yehud, Israel-based producer of online videos for publishers and media companies, raised an undisclosed amount in funding from PA Group.

Bringhub, a Los Angeles-based ecommerce platform that allows digital-media companies to add shopping capabilities to their sites, raised an undisclosed amount in funding from Forbes Media.

PRIVATE EQUITY DEALS

Bain Capital and Advent have agreed to acquire Concardis, a German debit and credit card payment transaction services company, according to Reuters. The purchase price was not disclosed, but earlier reports valued the deal at about €700 million ($745 million). Read more.

Providence Equity Partners has bought a majority stake in Hungarian festival company Sziget, the companies said in a joint statement on Friday, aiming to expand the events internationally.

Cotton Creek Capital has recapitalized Dillon Transport, a Burr Ridge, Ill.-based provider of temperature-sensitive transportation services for oil, asphalt, and fuel products. Financial terms were not disclosed.

Gauge Capital has made an undisclosed investment in Miami Beach Medical Group, a Miami Beach, Fla.-based operator of health and wellness centers in South Florida.

Palamon Capital Partners has acquired a majority stake in Happy Socks, a Stockholm sock manufacturer and online retailer. The deal values the company at SEK 725 million ($81.5 million). In addition, Palamon Capital Partners is investing SEK 40 million ($4.5 million) in the company, giving it a post-money valuation of SEK 765 million ($86.1 million).

L Catterton has agreed to buy Leslie’s Holdings Inc., a Phoenix-based operator of swimming pool supplies stores. GIC is also investing. Terms were not disclosed.

3P Equity Partners and Silver Sail Capital have invested in JPI Glass, a Kansas City, Mo.-based provider of  glass and glazing services.

The Carlyle Group (NASDAQ: CG) has agreed to acquire a significant stake in GCR, a South African largest credit rating agency, from its founders and German development financial institution DEG. Carlyle will be the largest shareholder with around half the equity in the company. Management and DEG will remain invested in the business.

OTHER DEALS

British American Tobacco (LSE:BATS) has agreed to buy the 58% of Reynolds American (NYSE:RAI) it already doesn’t own for $49.4 billion. At $29.44 in cash and 0.5260 in BAT shares for each Reynolds share, the offer represents a 26% premium over Reynolds’ stock price on Oct. 20, the day before BAT’s takeover bid was made public. Read more at Fortune.

Luxottica (BIT:LUX), a luxury spectacles maker, and Essilor (ENXTPA:EI), a manufacturer of ophthalmic lenses, have agreed to a €46 billion ($49 billion) merger. The combined company will make more than €15 billion in annual revenues, Luxottica and Essilor said in a statement. Read more at Fortune.

Auxilio (OTCQB: AUXOD), a provider of document workflow and security services for the healthcare industry, acquired CynergisTek, an Austin, Texas security consulting business for approximately $26.8 million in combined cash, stock, and seller debt, with earn-outs of up to $7.5 million

IPOS

REV Group, a Milwaukee, Wis.-based emergency and specialty vehicles manufacturer, has set its IPO terms. It plans to offer 12.5 million shares at between $19 to $21 per share, which would value the company at $1.3 billion if it priced in the middle of its range. The company is backed by American Industrial Partners. Goldman Sachs, Morgan Stanley, and Baird are the lead underwriters on the offering.

EXITS

Microsoft (Nasdaq:MSFT) has acquired Maluuba, a Montreal-based artificial intelligence startup, for an undisclosed price. The company raised $11 million from Nautilus Venture Partners and Emerillon Capital.

TriEnda Holdings LLC has acquired The PendaForm Company, a New Concord, Ohio-based manufacturer of heavy-gauge thermoforming plastic products backed by Resilience Capital. Financial terms were not disclosed.

Quad-C Management has agreed to sell Worldwide Express, a Dallas-based provider of logistics for small and medium-sized businesses, to Ridgemont Equity Partners. Financial terms weren’t disclosed.

FIRMS + FUNDS

ArcLight Capital Partners, a Boston-based private equity firm focused on energy investments, has sold a minority stake to Goldman Sachs with participation from Wafra Investment Advisory Group, according to the Wall Street Journal. Read more.

Waterous Energy, a Calgary-based private equity fund launched by Nova Scotia’s former global head of energy Adam Waterous, raised C$400 million ($305 million) to invest in the Canadian and U.S. oil and gas industry, according to Bloomberg. Read more.

Serena Capital, a Paris-based venture capital firm, raised close to €80 million ($85.7 million) for Serena Data Ventures, its latest fund dedicated to investing in big data and artificial intelligence companies in Europe.

Claritas Capital, a Nashville, Tenn.-based venture and private equity firm focused on investments in  health care and technology  companies, raised $40 million for its latest fund, according to an SEC filing. This item has been corrected to say Claritas invests in health care companies, not biotech or life sciences.  

Oracle Corp (NYSE:ORCL) is launching an accelerator program in Israel for cloud-based technology startups.

NEW JOBS

Michael Lynton is stepping down as the CEO of Sony Entertainment, and joining Snap Inc., the Venice, Calif.-based parent company of social media app Snapchat, as chairman of the board. Read more at Fortune.

Tom Loverro has been promoted to principal at IVP.

Prospect Partners has promoted Brett Holcomb and Brad O’Dell from vice presidents to principals.

Robert Vassel has joined Swander Pace Capital as a principal. The private equity firm also promoted Tyler Matlock to vice president, and Tara Hyland to associate.

William Chu has joined SparkLabs Global Ventures as a venture partner.

Marcia J. Hooper has joined Bowside Capital as a senior advisor.

Altamont Capital Partners has made a series of promotions: Kristin Johnson and Alex Rolfe are now managing directors, Melissa Francis, Sam Gaynor, and Kevin Mason are now principals, and Greg Corkran is now a vice president.

Michael Kober and Manny Cominsky have joined 3i (LSE:III) as a senior associate and associate, respectively.

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