2016-12-07-1

Term Sheet — Tuesday, February 14

Feb 14, 2017

OPEN MIC

It’s feedback time.

Here’s what Term Sheet readers had to say on….

…Mike Moritz’s op-ed against carried interest, private equity and Stephen Schwarzman:

Anon writes: I have become slightly appalled with how some P.E. and buyout firms are trying to skirt paying taxes. It feels like the rich getting richer. Even if they are barely legal, it just doesn't seem right, does it?

Anon II writes: Worth noting that Sequoia Heritage -- essentially the multi-family office for some of Moritz’s Sequoia partners -- is an investor in private equity funds, including several that use debt to acquire companies and pay themselves dividends.

On The American Investment Council’s response:

David writes: [Their argument on] carried interest taxation is kind of like saying “Just like every other group that gets a tax break they don’t really deserve benefits from said tax break, we (the direct and indirect beneficiaries of lower taxation of carried interest) also benefit from getting a tax break we don’t really deserve.”

As if taxing the P.E. Fund managers’ long-term, results-based bonus compensation like the rest of the world gets taxed on its bonus compensation would actually impact the pensions, charities and endowments. Such B.S.

…On Dick Costolo’s mea culpa about bullying on Twitter:

Anon writes: I sincerely hope that journalists do not give ex-Twitter CEO Dick Costolo any sort of pass or latitude for his farcical reason to not tackle the bullying problem on Twitter. "Not having the moral authority of a founder," what is the world coming to!?

…On the immigration executive order, and business world responses to it:

Chris S. says: Very interesting that VC's and start ups are so concerned about weighing in on political news - it's frankly ridiculous that they should feel like they have to respond. Since the election, I've had four Uber drivers, all immigrants, who were outspoken supporters of Trump. One was after the so-called “ban.” They all want change and progressives should not be able to put words in their mouths.

Paul S writes: I would disagree with you that not responding is the same as support. Yes, this is true in some cases, but it’s not universal. The audience dynamic is the real driver. If your company/product caters to a highly political market, there may be a need to take sides. If it doesn’t, many times the “wait and see” approach is warranted. Rash decisions are rarely right. There seems to be impatience among CEO’s to be the first to espouse their personal beliefs - and it often trumps (no pun intended) the company.

…On L.A. tech and the Snap IPO:

Ross says: Regarding L.A. locals missing out on "homegrown" opportunities, with The Honest Company, the answer probably lies more in the company’s advisors sensing the desire for a connection to Silicon Valley hands than any L.A. team dropping the ball. Same story for tech types looking to influence D.C. Sherpas reliably guide them to a predictable cast of characters.

Mark writes: L.A. VC's are focused on leading lower risk deals.  They only have so much capital and there isn't much room to hide if they screw up.  They will happily follow higher risk deals that come from Silicon Valley that have essentially been de-risked by the earlier VCs. Silicon Valley VCs are much more willing to take on high risk deals.  They have more money, more ego and more company behind which to hide if one blows up.

On HPE’s “undercorn” acquisition of Simplivity:

Marc writes: It still was a good win for investors despite the fall from Unicorndom. Based on Pitchbook's info on the six rounds of funding and some assumptions about the employee option pool, I estimate that the overall deal was a 2.4x return on aggregate capital invested (~19% Annual Rate of Return) and the founders walked away with north of $40 Million. It's a good strategic step for HPE as the competition from the likes of Nutanix will be pretty stiff. (I assume the last money in, a $175 million round at a $1.16 pre-money valuation, asked for a 1x liquidation preference and that the prior five rounds were all participating preferred.)

Christopher writes: My favorite term for most of the unicorns is ..... donkeys. It epitomizes the ridiculous hype around these companies that, on average, do not produce good returns for investors.

***

Slick: It can be complicated and time-consuming to untangle private equity holdings. Wilbur Ross, President Trump’s nominee for Commerce Secretary, is simply going to keep some of his. Ross plans to hold stakes in 11 investments linked to W.L. Ross & Co., including oil-tanker company Diamond S. Shipping Group.  Diamond was a co-investment alongside the Chinese government’s sovereign wealth fund. As the Wall Street Journal notes: “Negotiating with and responding to China will be one of Mr. Ross’s responsibilities as commerce secretary.” Likewise, the commerce department has authority and responsibility to respond to oil spills. Ross said he would only recuse himself of working on oil spills if Diamond S Shipping was involved.

Celebs, they’re just like you: Once you’re famous, any subsequent success in business will always come with an “actually” attached. Stories on Ashton Kutcher’s tech investments marvel at his “surprising” success, for example. This week, a Bloomberg story on football star Steve Young’s career as a private equity investor declares, whaddayaknow, he’s actually good at investing.  

Plenty of athletes and celebrities wind up as window dressing at investment firms, but Young is actually showing up and doing the work, seeing himself as “a deal guy first.” And yet, the story notes, he is still window dressing in a way: He says he continues to appear on ESPN, in part, because his private equity partners “like him to keep a high profile.”

THE LATEST FROM FORTUNE...

• Elon Musk: Humans need to merge with machines.

• Credit Suisse cutting 5,500 more jobs.

• Janet Yellen heads to Congress with uncertainty about Trump’s policies.

Mattel and Alibaba partner up.

• Aetna and Humana’s breakup fee: One billion dollars.

• IBM CEO Ginny Rometti defends her role as a Trump advisor.

…AND ELSEWHERE

Snap shrinks its long employee lock-up period (subscription required). Hotels recruit tech workers. Name dropping will backfire. “Shareholder spring.” Google’s self-driving car executives are quitting because the company paid them too much. The rise and fall of a K-street renegade.

VENTURE DEALS

• Nova Sciences Holdings, a Wakefield, Mass.-based industrial instrumentation company, raised $100 million from  Pamplona Capital Management and Ascent Venture Partners.

8i, a Wellington, New Zealand-based company that develops holographic technology for virtual and augmented reality, raised $27 million in Series B funding. Time Warner Investments led the round, and was joined by Baidu Ventures, Hearst Ventures, Verizon Ventures, One Ventures, Carsten Maschmeyer’s Seed & Speed Ventures, and existing investors.

BirdEye, a Sunnyvale, Calif.-based business reputation and customer experience platform, raised $25 million in funding. World Innovation Lab led the round, and was joined by Trinity Ventures.

Samanage, a Cary, N.C.-based provider of enterprise service management software, raised $20 million in funding. Investors include Carmel Ventures, Gemini Israel Ventures, Marker LLC, Salesforce Ventures, and Vintage Investment Partners.

Dedrone, a San Francisco-based drone detection technology company, raised $15 million in Series B funding. Felicis Ventures and John Chambers, executive chairman of Cisco (Nasdaq:CSCO), led the round.

Dreamscape Immersive, a Santa Monica, Calif.-based virtual reality company, raised $11 million in funding, according to Variety. Bold Capital led the round, and was joined by  Warner Bros. 21st Century Fox, Metro-Goldwyn-Mayer, IMAX Corporation, Westfield Corporation, and Steven Spielberg. Read more.

Sense.ly, a San Francisco-based developer of a virtual assistant app for patients, raised $8 million in a Series B funding. Chengwei Capital led the round, and was joined by the Mayo Clinic, Chengwei Capital, Bioved Ventures, Fenox Venture Capital, and the Stanford StartX fund.

Flutura Business Solutions, a Benagluru, India-based IoT data analytics firm, raised Rs 50.13 crore ($7.5 million) in funding, according to The Economic Times. Vertex Ventures led the round, and was joined by Lumis Partners, and the The Hive. Read more.

Miyoko's, a Fairfax, Calif.-based line of non-dairy cheeses, raised $6 million in funding. JMK Consumer Growth Partners led the round, and was joined by the CircleUp Growth Fund, Stray Dog Capital, and Obvious Ventures.

ConsejoSano, a San Francisco-based health services navigation platform for Spanish speakers, raised $4.9 million in Series A funding, according to MobiHealthNews. 7wire Ventures led the round, and was joined by Tufts Health Ventures, TOTAL Impact Capital, Wanxiang Healthcare Investments, Acumen, Oxeon Partners, and Impact Engine. Read more.

Wiretap, a Columbus, Ohio-based security intelligence platform, raised $3 million in Series A funding. Draper Triangle Ventures and Ohio Innovation Fund led the round.

QD Solar, a Toronto-based solar technology company, raised C$2.5 million ($1.9 million) in Series A funding. DSM Venturing led the round, and was joined by MaRS innovation and KAUST Innovation Fund.

Galore, a San Francisco-based mobile app that allows parents to book activities for their children, raised $1.65 million in seed funding. Norwest Venture Partners and DCM Ventures led the round.

NanoSteel, a Providence, R.I.-based manufacturer of nano-structured steel alloys, raised an undisclosed amount in funding. GM Ventures led the round, and was joined by Lear Corporation (NYSE: LEA) and SPDG.

Conductor Technologies, a Berkeley, Calif.-based maker of cloud rendering platforms used to make Hollywood films, raised an undisclosed amount in Series A funding. Walden Venture Capital led the round, and was joined by Autodesk (Nasdaq:ADSK).

HEALTH + LIFE SCIENCES DEALS

Oncoinvent, an Oslo, Norway-based developer of antibody therapeutics for cancer patients, raised $25 million in funding. Investors include Geveran Trading, Canica, CGS Holding, Helene Sundt, and Must Invest.

PRIVATE EQUITY DEALS

• Apax Partners is in talks to acquire Syneron Medical (Nasdaq:ELOS) for $350 million to $400 million, according to Reuters. Read more.

• WILsquare Capital acquired Error! Hyperlink reference not valid., a Minneapolis-based service provider for estate asset recoveries. Terms weren’t disclosed.

• KKR (NYSE:KKR) agreed to acquire Travelopia, a Crawley, U.K.-based tour operator.

• Bregal Sagemount acquired a majority stake in Single Digits, a Bedford, N.H.-based internet provider. Financial terms weren’t disclosed.

• Blackstone Group and Carlyle Group are considering selling Service King Paint & Body, a Richardson, Texas-based auto repair-center operator, in a deal that could value the company at more than $2 billion, according to Bloomberg. Read more.

• TPG and Leonard Green & Partners are considering selling CCC Information Services, a Chicago-based provider of software for auto-insurance claims, in a deal that could value the company at $3 billion, according to Bloomberg. Read more.

• High Road Capital Partners completed its acquisition of Midwest Wholesale Hardware, a Kansas City, Mo.-based wholesale distributor of commercial hardware products.

• Riverside Partners acquired Medical Reimbursements of America, a Franklin, Tenn.-based provider of specialty reimbursement services for hospitals.

CityMd Urgent Care, a New York City-based urgent care center chain, has retained JPMorgan Chase to advise it on a sale, according to peHUB. Warburg Pincus, KKR (NYSE:KKR) and UnitedHealth Group have discussed bids. Read more (subscription required).

OTHER DEALS

• Restaurant Brands International (NYSE:QSR), which owns the fast-food franchises Burger King and Tim Hortons, has approached Popeyes Louisiana Kitchen (Nasdaq:PLKI) to discuss making a possible takeover bid. Read more at Fortune.

• PSA Group (ENXTPA:UG), the Paris-based auto-manufacturer that makes Peugeot and Citroen cars, is considering a bid for General Motors’ (NYSE:GM) struggling Opel and Vauxhall car brands. Read more at Fortune.

• Recon Group, a Beijing-based umbrella organization owned by Tony Xia, is in talks to acquire the Los Angeles-based Millennium Films, according to Bloomberg, which has produced titles such as Olympus Has Fallen and The Expendables franchise. Read more.

• Quotient Clinical, a Nottingham, U.K.-based early-phase drug development services provider, acquired QS Pharma, a Boothwyn, Pa.-based contract development and manufacturing company, from Charles River Laboratories International (NYSE: CRL).

EXITS

• Grab, a Singapore-based ride-sharing company, is expected to announce that it has acquired Kudo, an Indonesian online payment startup, for over $100 million, according to Reuters. Kudo raised an undisclosed amount in funding from investors including 500 Startups and East Ventures. Read more.

• Salt Creek Capital completed its sale of Distinct Software Solutions, an Austin, Texas-based provider of marketing services for golf companies, to EZLinks Golf,  a Chicago-based online network for golf reservations and a subsidiary of PGA TOUR.

• Turnspire Capital Partners sold its ownership stake in Banker Steel, a Lynchburg, Va.-based provider of steel fabrication services, to Atlas Holdings. Terms weren’t disclosed.

PEOPLE

TSG Consumer Partners has promoted Mary Miller from vice president to principal.

• Travis Brown has joined APFC as a member of the firm’s private equity and special opportunities team. Previously, Brown was at Goldman Sachs (NYSE:GS).

• Fabiana Cid de Andrade has joined First Avenue as a principal. Previously, Andrade was a vice president at Credit Suisse.

Christopher Weidler resigned from his position as chief accounting officer and controller of the Apollo Global Management (NYSE:APO), according to an SEC filing. The filing states that Weidler's resignation is not a result of a disagreement on accounting principles or practices, financial statement disclosure or internal controls. Elliott Russell, Apollo’s head of accounting policy, has been appointed interim chief accounting officer and controller.

Fred Wang will join Adams Street Partners as a partner based in Menlo Park, California. Wang was previously managing partner at Trinity Ventures.

• Tricia M. Mackechnie has joined HarbourVest Partners as chief technology officer and a managing director. Previously Mackechnie was a senior vice president and CIO for The Hartford.

Sorenson Capital has promoted Peter Sturgeon to managing director.

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