On deals and dealmakers.
WRITEDOWNS, CLAP BACKS, LEAPS OF FAITH, BEYONCE
Hello from snowy New York, where this morning’s layer of fresh white snow will soon turn into black, bottomless slush puddles of death.
Clapping back: Term Sheet readers had lots of thoughts on Michael Moritz’s op-ed on Stephen Schwarzman, carried interest, President Trump, and private equity ethics (here). I’ll share them in a feedback column later, but one repeated theme was that the companies backed by Moritz’s firm, Sequoia Capital, and other VC firms, contribute to just as much indirect job loss via displacement as buyouts do directly via layoffs.
The American Investment Council’s official response accuses Moritz of misunderstanding the private equity model (“long term investments,” “alignment of interests”), noting that pension funds benefit from private equity’s high returns, and that many startups raise debt as well.
On carried interest, the Council, alongside the National Taxpayers Union and Americans for Tax Reform, argues that “changing the tax treatment of carried interest would hurt the pension funds, charities, and college endowments that form partnerships with fund managers and depend on the superior returns these managers deliver.”
Impaired: Last Fall Term Sheet mentioned Simple, the innovative digital bank that BBVA acquired in 2014 for $117 million, as an example of a traditional bank using a startup within it to disrupt itself. It’s the same model being used at Almond Bank, the secretive “bank within a bank” that Andreessen Horowitz, Battery Ventures, and Ribbit Capital were incubating in Cross River Bank, a joint investment.
At the time, I noted that Simple had experienced outage issues over the years. I also mentioned that Almond would pick up where Simple left off. But Simple representatives were quick to let me know at the time that the company is still very much alive. Simple has even begun on-boarding Simple customers to the BBVA balance sheet, a source close to the company says.
But this month BBVA Compass, the North American subsidiary that owns Simple, took a $59.9 million impairment charge on the company, according to an SEC filing. Josh Reich, Simple’s Founder and CEO told Term Sheet that BBVA continues to invest in Simple. The team now has 350 employees and “added customers at the rate of a bank that has over 1,000 branches,” he says.
BBVA Compass representative Christina Anderson provided more detail via email:
Accounting rules for investments like these and valuations for fintech companies are very volatile and often result in impairments. We are also interested in the intangibles that our innovation investments bring, including their knowledge and culture, as those elements help BBVA Compass become more dynamic, customer-centric and could potentially change the way banking is done. As with most investments, return is delivered in the medium to long term, and BBVA Compass remains committed to Simple and its continued success and ongoing growth.
Further Impaired: Publicis Groupe, a major acquirer of digital advertising businesses and agencies, has taken a massive writedown on its onetime “crown jewel” Sapient. The company disclosed a $1.49 billion impairment charge on the company, which it acquired in 2014 for $3.7 billion. CEO Maurice Lévy told WSJ his plan for Sapient, part of a wider strategy to turn the ad holding company into more of a consulting business, was “probably too ambitious.”
Leap of Faith: I read this Business Insider article on Magic Leap with great interest. In recent months the highly funded ($1.4 billion), highly valuable ($4.5 billion), highly secretive company has been accused of overhyping its not-yet-launched technology. Now, according to the article, the company is “scrambling” to get a demo ready ahead of a big board meeting. To be clear: All startups scramble. But Magic Leap is under more pressure than most startups, thanks to its valuation and funding.
The story shows that Magic Leap is making progress (its demo is in “decent” shape), but it also shows the danger of too much hype before launching anything. (Its CEO has promised the product will be like “really cool dream. Of flying squirrels and sea monkeys and rainbow powered unicorns. Of most anything you can imagine.” That’s a lot to live up to!) Also: Beyoncé was apparently unimpressed by a personalized demo.
Broadly speaking, one side effect of the Theranos mess is that companies are terrified of being called “the next Theranos.” They’re simultaneously scared of the media, and want more than ever to participate in and shape coverage. This could lead to more transparency, but so far I think it’s only led to more paranoia.
Elsewhere in VR/AR news, Oculus VR is reportedly closing 200 of its 500 demo stations at Best Buys due to poor performance.
THE LATEST FROM FORTUNE...
• Cruise Automation testing an app for hailing self-driving cars.
• The 50 best workplaces for giving back.
• Intel’s delicate dance.
• Snapchat’s other mega-cloud purchase (It’s not from Google).
• Twitter’s earnings miss.
• Under Armour wants to have it both ways.
• A counter-argument to H1-B visa supporters.
• German automakers come to Silicon Valley.
America’s ‘jobs for the boys’ only tells half the story. (Subscription required.) A book about how the Thiel Fellows have fared. Retail investors beware the Vision Fund. Silicon Valley, white collar crime, and a wig. The tail of Fling’s demise. Why Silicon Valley wouldn’t work without immigrants.
• SpringCM, a San Mateo, Calif developer of cloud-based document management software, raised $25 million in funding. Investors include Crestline Investors and Foundation Capital.
• Demisto, a Cupertino, Calif.-based provider of collaboration and automation tools for security operations teams, raised $20 million in Series B funding. Investors include ClearSky, Accel, and the Slack Fund.
• WelbeHealth, a Menlo Park, Calif.-based healthcare services company delivering coordinated care to seniors, raised $15 million in Series A funding. F-Prime Capital and .406 Ventures led the round.
• Xeneta, a Norwegian ocean freight benchmarking and market intelligence software platform, raised $12 million in a Series B funding. Smedvig Capital led the round, and was joined by Creandum and Alliance Venture.
• HealthReveal, a New York City-based healthcare technology company that anticipates medical events for individuals with chronic disease, raised $10.8 million in Series A funding. GE Ventures led the round, and was joined by Greycroft Partners, Flare Capital Partners, and Manatt Ventures.
• Exactuals, a Los Angeles-based provider of an SaaS platform for royalties payments in the media and entertainment industries, raised $10 million in Series A funding. City National and TTV Capital led the round, with participation from Stanford-StartX Fund, S-Cubed Capital, Palo Alto Venture Partners, Skyview Fund, The Strand Partners, Temerity Capital, and angel investors.
• Empow, an Israeli cybersecurity startup, raised $9 million funding from unnamed investors.
• Intensix, an Israeli developer of a predictive analytics platform for the early detection of patient deterioration in the ICU, raised $8.3 million in Series A funding. Pitango Venture Capital led the round.
• Wooplr, a Bengaluru, India social commerce platform, raised $8 million in Series B funding, according to The Economic Times. Sistema Asia Fund led the round, and was joined by the Amereus Group and Helion. Read more.
• LifeDojo, a San Francisco-based provider of online behavior change and wellness programs for employees, raised $5.1 million in Series A funding. Sodexo Ventures led the round, and was joined by Launchpad Digital Health, GP Ventures, JD Investments, and the Telluride Venture Fund.
• Wiiv Wearables, a Vancouver, Canada-based company that 3D prints custom footwear, raised $4 million in Series A funding. The round was led by a Seattle-based tech investor syndicate, with participation from Eclipse VC, Evonik Venture Capital, Real Ventures, and Asimov Ventures.
• Cuebiq, a New York City-based location and data intelligence company, raised $3.5 million in Series A funding. Tribeca Angels and ARC Angel Fund NYC led the round.
• Botworx.ai, a Los Altos, Calif. messaging-based commerce platform, raised $3 million in seed funding. Costanoa Ventures led the round, and was joined by SV Angel.
• Agent.ai, a Sunnyvale, Calif. provider of messaging-based customer support tools, raised a $2.7 million in seed funding from angel investors.
• Capsule8, a Brooklyn, N.Y.-based cybersecurity company, raised $2.5 million in seed funding of $2.5 million from Bessemer Venture Partners and angel investors.
• Blend Media, a Palo Alto, Calif. 360˚ Video/VR platform raised $1.5 million in seed funding from angel investors.
• Inbox Health, a Madison, Conn.-based developer of patient billing and payments software for the healthcare industry, raised $1.5 million seed funding. Connecticut Innovations led the round, and was joined by Launch Capital, Enhanced Capital, I2BF Global Ventures, Mohawk Ventures, and angel investors.
• Resilient Network Systems, a San Francisco-based contextual access control company, raised $1.2 million in Series A extension funding. HRK Investments led the round.
• Mojo Networks, a Mountain View, Calif.-based developer of a cloud-managed WiFi platform, raised $30 million in debt and Series E funding. Investors include Presidio Partners, Trident Capital, Granite Ventures, North Haven Expansion Credit, Walden Riverwood Ventures, and Alpha Technologies.
PRIVATE EQUITY DEALS
• Lovell Minnick Partners agreed to acquire a majority stake in Foreside Financial Group, a Portland, Maine-based provider of regulatory compliance and distribution services to the investment management industry. Financial terms weren’t disclosed.
• Unigestion and Akina have agreed to combine their private equity business. The new firm, which will have manage $6 billion in assets, will operate under the Unigestion name.
• ABRY Partners agreed to acquire MobileHelp, a Boca Raton, Fla.-based provider of mobile medical alert systems. Financial terms weren’t disclosed.
• Soaring Pine Capital acquired ETI Tech, a Dayton, Ohio manufacturer of flight hardware and ground support equipment for the aerospace and military industries. Financial terms weren’t disclosed.
• Market Track, a Chicago-based subscription advertising company backed by Aurora Capital and Cambria Group, acquired Brandtale, a New York City-based platform for digital branded content and native advertising intelligence. Financial terms weren’t disclosed.
• Gatekeeper Systems, an Irvine, Calif.-based manufacturer of shopping carts and trolley containers for retail stores, acquired Carttronics, a San Diego-based company that helps retailers decrease their operating and capital expenses. Financial terms weren’t disclosed. Gatekeeper systems is backed by Hammond, Kennedy, Whitney & Company.
• Quad-C Management invested in Pharm-Olam International, a Houston, Texas-based clinical research organization serving the biopharmaceutical and medical device industries. Terms weren’t disclosed.
• Anthem‘s (NYSE:ANTM) $54 billion takeover of Cigna (NYSE:CI) has been blocked by a federal judge, who ruled the merger would likely raise health insurance prices for Americans. Read more at Fortune.
• RPC Group (RPC.L) agreed to acquire Letica, a Rochester, Mich.-based plastic packaging products manufacturer, for £391 million ($491 million), with an additional £120 ($150.7 million) in performance-related incentives. Read more.
• Nokia (HLSE:NOKIA) agreed to acquire Comptel (HLSE:CTL1V), a Finnish provider of telecom software and service, for €347 million ($370.8 million) in cash.
• Jose Cuervo, a San Antonio, Texas-based tequila producer, priced its IPO at 34 pesos ($1.67) per share, at the top of its expected range. By pricing 476.6 million shares, the company raised at least 16.2 billion pesos ($791 million). Read more at Fortune.
• Sophos (LSE:SOPH) agreed to acquire Invincea, a Fairfax, Va.-based developer of endpoint security software, for $100 million in cash, with an additional $20 million in performance-related incentives. Invincea raised more than $40 million in VC funding from investors including ORIX Ventures, Aeris Capital, and Dell Ventures.
FIRMS + FUNDS
• Firsttime, an Israeli venture capital firm, raised $40 million for its second fund, Firstime II.
• G Square, a London-based private equity firm that invests in the the healthcare industry, raised €350 million ($373.8 million) for its second fund.
• Annette Wilson has joined Orange Growth Capital as a partner and head of investor relations. Previously, Wilson worked in investor relations at Silverfleet Capital Partners. In addition, Aman Ghei has joined the firm as a principal
• Brian C. Schmidt and Jon A. Fox have joined Värde as partners.
• Seth Harward and Scott Hoch have been promoted from principals to partners at Frontier Capital.
• Daniel Officer has been promoted to managing director at Sperry, Mitchell & Company.