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2016-12-07-1

Term Sheet — Tuesday, April 4

Apr 04, 2017

OATH MY GOD

Hello from San Francisco, where it is very dark and quiet at 4 a.m.

Startup for sale: Anonymous messaging app Yik Yak is up for sale, according to sources familiar with the situation. Sequoia Capital, the company’s biggest investor, has in recent weeks held deal talks with potential buyers for the Atlanta-based startup.

Yik Yak has the option to sell to a few different acquirers, sources say, but none of the deals will provide a return for the company’s investors. More likely, the company will strike an acqui-hire-style deal for its technology team in exchange for stock in the acquiring company. Yik Yak has raised $73.5 million in venture funding, the biggest chunk of which came from Sequoia in 2014, valuing the company at $400 million.

At the time, Yik Yak felt like the hottest app on college campuses. But the app’s anonymity made it a conduit for cyberbullying, prompting complaints. The company built tools to keep harassment off its platform, but adoption began to drop before the company could even figure out a way to make money. As far as I am aware, the company has never earned any revenue.

In December 2016, the Yik Yak laid off 60% of its staff, leaving about 20 employees. At the time the company had “eight figures” worth of cash in the bank, a source said. With much of its marketing and “growth” team gone, the company planned to begin incubating new apps, including a secret group messaging app that The Verge discovered in February called Hive.

Yik Yak’s tale is a common one in Silicon Valley: Investors race to pour money into the hot app of the moment, only to watch adoption and usage drop shortly after the ink dries on the term sheet. Then the app becomes a punch line, and then it’s forgotten, then somebody snidely tweets “remember yikyak?” (or frontback, or secret, or yo, or ello, or meerkat, or wuwu)… Social media is a hits-driven business, but even harder than making a hit is staying one.

Yik Yak and Sequoia did not immediately respond to request for comment.

Brand equity: The Yahoo-Verizon deal hasn’t closed yet, but if you needed a clearer sign that its executives have full faith it will actually, really, truly happen, see Tim Armstrong’s announcement yesterday, via Twitter: Upon closing, Yahoo and Aol will merge into one company called Oath.

This morning Armstrong had to clarify: The Yahoo and Aol brands aren’t going away. But their decline in value (and the fact that people thought they might ditch them) is a lesson in the near-impossibility of winning back cool cache once fickle Internet users have decided a company’s product or brand has lost it.

There was a time when the Aol and Yahoo brands were both very cool. Now, Urban Outfitters sells fake vintage t-shirts sporting the original Aol logo, worn by models so young they’ve probably never even heard of dial-up.

According to a somewhat hilarious new Google-sponsored report on What The Kids Think Is Cool, Google and YouTube are very cool right now. But today’s kings of cool might want to take careful note of Oath: The minute your brand starts to seem lame, there’s little turning it around. It’s an especially important lesson for Snap, which pitched itself to public market investors on its ability to stay hip and relevant with young people.

Done deal: TPG’s carve-out of cybersecurity company McAfee, struck in September, is closed. As a reminder: Intel is spinning off the unit into an independent subsidiary and TPG is investing $1.1 billion for a controlling stake, valuing the company at $4.2 billion. One new tidbit of info in today’s announcement: Thoma Bravo has joined the deal as a minority investor.

TPG has been ramping up its cyber deals. The firm backed Tanium and Zscaler in 2015. The company called this deal a “platform,” meaning it plans to seek out add-on deals. My colleague Michal Lev-Ram spoke with Chris Young, an SVP with Intel who is now CEO of the independent company, who had this to say about deals:

"Being independent will give us a chance to do some M&A ad I expect that’ll be part of our going forward strategy. We have to separate first, and we’ll do the right things, whatever we do has to be consistent with our strategy."

New job: Kevin Rose, best-known as the co-founder of Digg, has joined True Ventures as a venture partner.

The news was a little surprising, given Rose was listed as an advisor to GV, the fund where he was a partner until 2015, as recent as last week. (I noticed when I covered the news of GV’s four new advisors, including former Navy Secretary Ray Mabus.)

Rose has been removed from GV’s site, and that’s no accident: Now that he’s is part of another fund, he will no longer be an official GV advisor. A person familiar with the firm says GV still has “a great relationship” with Rose and will call on him “informally.”

Act now! Here’s one way to get a first-day pop on your IPO. As Term Sheet noted yesterday, Ronco, the company behind Veg-o-Matic and other infomercial products, filed to go public. My colleague Lucinda Shen writes that the company is offering an unusual, if appropriate, deal to investors: If you buy more than $5,000 worth of Ronco stock, the company will send you a free rotisserie. But wait, there’s more…

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Private equity is raising its bets to save its distressed debt positions. Steve Feinberg wants to keep his holdings in Cerberus funds while overseeing defense contracts. President Trump can pull money from his business whenever he wants without having to tell us. That digital nomad life.

VENTURE DEALS

Amino, a San Francisco price and service comparison tool for health care providers, raised $25 million in Series C funding. Highland Capital Management led the round, and was joined by and Accel, Aspect Ventures, CRV, Northwestern Mutual Future Ventures, and Pilot Wall Group.

HealthEngine, an Australian online directory of health care providers, raised A$26.7 million ($20.2 million) in Series C funding, according to Business Insider. Sequoia’s Indian arm led the round. Read more.

ActionIQ, a New York City marketing analytics company, raised $13 million in funding. Sequoia Capital led the round.

Shield AI, a San Diego developer of artificially intelligent systems, raised $10.5 million in Series A funding. Andreessen Horowitz led the round.

LogPoint, a Copenhagen security information and event management platform, raised $10 million in Series B funding from Evolution Equity Partners.

• NTex Transportation Services, an Indian startup that operates the logistics and distribution platform ElasticRun, raised $7 million in funding, according to the Economic Times. Norwest Venture Partners and Kalaari Capital led the round. Read more.

Bizzabo, an Israeli startup that designs apps for event planning, raised $6.5 million in Series A funding, according to TechCrunch. Zvi Limon led the round, and was joined by fellow angel investors including Avigdor Willenz and Danny Tocatly. Read more.

LeafLink, a New York City B2B cannabis e-commerce platform, raised $3 million in seed funding. Lerer Hippeau Ventures led the round, and was joined by Casa Verde Capital, Phyto Partners, Wisdom VC, and angel investors.

Purely Elizabeth, a Boulder, Colo. company that sells natural foods, including granola, oatmeal, muesli and cereal, raised $3 million in funding from 301 INC, General Mills’ (NYSE:GIS) VC arm. Read more at Fortune.

Iyzico, a Turkish fintech startup, raised an additional $2 million in Series C funding from Amadeus Capital Partners, closing the round at $15 million, according to TechCrunch. Read more.

HEALTH + LIFE SCIENCES DEALS

Synchron, a San Francisco-based company developing a medical device that records neuron signals as a way to control advanced prosthetics, raised $10 million in Series A funding. Neurotechnology Investors led the round, and was joined by the U.S. Department of Defense.

PRIVATE EQUITY DEALS

Glouston Capital Partners’ management now owns the entirety of the Boston-based private equity and venture firm, after acquiring Legg Mason’s remaining stake in the company.

• HGGC acquired Cynergie UK, a U.K. specialist regulatory services business, which it will integrate into its portfolio company Davies Group, a third party administrator and specialist outsourcer.

• KKR (NYSE:KKR) agreed to acquire the assets of Angelica Corporation, an Alpharetta, Ga. provider of healthcare linen and medical laundry services that recently filed for bankruptcy, for approximately $125 million.

• Berkley Capital, W. R. Berkley Corporation’s (NYSE: WRB) private equity arm, acquired a majority stake in The Crypton Companies, a Bloomfield Hills, Mich. provider of performance fabrics in the contract, home furnishings and apparel markets. Financial terms weren’t disclosed.

L Catterton invested in I and love and you, a Boulder, Colo. pet care product company. Terms weren’t disclosed.

• TA Associates invested in Babilou, a French private network of daycare facilities. Financial terms weren’t disclosed.

• Ridgemont Equity Partners invested in Dickinson Fleet Services, a service provider in the vehicle fleet maintenance industry. Financial terms weren’t disclosed.

• Beringer Capital acquired Blue Acorn, a Charleston, S.C. digital commerce agency. Financial terms weren’t disclosed.

Seafolly, an Australian swimwear designer owned by L Catterton Asia, acquired Maaji, a Colombian beachwear brand.

• One Equity Partners invested in USCO SpA, a Modena, Italy-based manufacturer of spare parts for earthmoving machinery. Financial terms weren’t disclosed.

• Highlander Partners acquired Gimbal Brothers, a jelly beans and gummy vitamins manufacturer, which it will combine with existing portfolio company Hillside Candy, a Hillside, N.J. candy maker, to form the San Francisco-based holding company Bettera Brands.

• CCMP Capital Advisors agreed to acquire a majority stake in Truck Hero, an Ann Arbor, Mich. maker of consumer accessories for pickup trucks. Former owner TA Associates will remain a significant investor. Terms weren’t disclosed.

• KKR (NYSE:KKR) invested $250 million in Masan Group, a Vietnamese food producer. According to Bloomberg, the private equity firm is purchasing 7.5% of Masan Nutri-Science, the company’s meat-producing business, for $150 million, which values the unit at $2 billion. In addition, KKR is acquiring $100 million in Masan Group shares from PENM Partners. Read more.

OTHER DEALS

• Yelp (NYSE: YELP) acquired Turnstyle Analytics, a Toronto-based Wi-Fi marketing company, for $20 million in cash.

Panera Bread (Nasdaq:PNRA) is exploring putting itself up for sale. Read more at Fortune.

Reckitt Benckiser (LSE:RB.) is considering selling off its food business, whose products include Worcestershire sauce and other condiments, according to the New York Times. Read more.

IPOS

• Apax Partners is planning to take Israeli investment firm Psagot public next year at a valuation of 3.7 billion shekels ($1 billion), according to Reuters. Read more.

EXITS

• BNP Paribas (ENXTPA:BNP) acquired a majority stake in Compte-Nickel, a French fintech startup. Financial terms weren’t disclosed, but media reports are valuing the deal at €200 million ($213 million). Compte-Nickel raised $10.2 million in venture funding from Partech Ventures. Read more.

• Altus Capital Partners sold PRISM Plastics, a Chesterfield, Mich.-based plastic component manufacturer, to Marmon Engineered Components Company. Financial terms weren’t disclosed.

• Clayton, Dubilier & Rice sold Mauser Group NV, a Dutch packing solutions manufacturer, to Stone Canyon Industries in a deal valued at $2.3 billion.

• WalkMe, a San Francisco user adoption platform, acquired Jaco, a San Francisco user analytics company. Jaco raised $1.15 million in venture funding from Hillsven Capital and UpWest Labs.

FIRMS + FUNDS

Israel Secondary Fund, an Israeli private equity firm, raised $100 million for its secondary fund, ISF II.

Edge Natural Resources, a Dallas private equity firm, raised $650 million for its second fund, ENR Partners II.

New Energy Capital Partners, a Hanover, N.H.-based asset management firm raised $325 million for its latest fund.

Shore Capital Partners, a Chicago private equity firm focused on the healthcare industry, raised $190 million for its second fund.

Resolute Ventures, a San Francisco-based early-stage venture capital firm, raised $65 million for Resolute III, a seed fund.

PEOPLE MOVES

Cotton Creek Capital promoted Christopher Weems and Alan Goldstein to senior associate.

• Andrew Woolford joined Cerberus Capital Management’s direct lending affiliate as a managing director.

Shore Capital Partners promoted Chris Mioton to principal.

• Hamilton Lane promoted 15 employees to principal.

• Doug Lancey joined TD (TSX:TD) as a senior relationship manager. Previously, he was a vice president at Harvest Capital Credit.

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