On deals and dealmakers.
SWEATER VESTS AND PURSE WARS
New York startup SimpleReach has raised new funding and replaced its CEO, founder and former CEO Edward Kim tells Term Sheet. New funding for the “content data platform” startup totals $9 million, led by Spring Mountain Capital. Hal Muchnick, formerly of DoubleClick, Kontera, AddThis, and LowerMyBills, will become CEO.
This news is notable for two reasons:
- In the last year, investors have viewed any startups related to advertising and marketing as toxic, in part, because the category was over-capitalized and VC portfolios are over-exposed to struggling assets.
But last month’s sale of Moat, an ad verification startup, to Oracle for a reported $850 million has renewed interest in the category. Kim says after the Moat deal, “a ton of folks” that had passed on investing in SimpleReach “emailed [him] right away saying, ‘We want to catch up.’” It was too late — Kim says SimpleReach had raised “more than enough capital” and doesn’t want to take more dilution than needed.
- Kim’s move from the CEO role is notable because it goes against the prevailing narrative among startups that says founders should avoid handing their companies over to a more professional CEO. Those that didn’t willingly step aside risked being forced by their investors.
That was the old way of doing things. Web 2.0, Mark Zuckerberg, Sean Parker, The Social Network, and the rise of founder-friendly venture firms changed that. Recall Digg CEO Jay Adelson’s anti-VC catchphrase, “F*ck the sweater vests,” from Sarah Lacy’s book on Web 2.0. Now, instead of stepping aside when the job outgrows them, founders “hire a Sheryl Sandberg.” As Businessweek noted in 2011:
Today, young founders generally get to stay at the helm of their companies, and there’s a new shorthand for the kind of leader whose willing to serve as a second-in-command, complementing without overshadowing the wunderkind while doing the hard work of turning a promising idea into a real business: a Sheryl Sandberg.
But even with “a Sheryl,” successful founder-CEOs still need to learn how to become professional executives that can manage billion-dollar businesses with thousands of employees. Some of them get antsy and would prefer to get back to the scrappy days of experimenting, pivoting, and inventing.
“A lot of founders feel like it’s this big slight if they don’t hang onto the CEO title, but to me, this stuff is really hard and if you haven’t done it before, there is something to be said for bringing someone in who has scaled company after company,” Kim says. “When I think about how to maximize the value of my own equity, I think having [Muchnick] leading the day-to-day will end up with the company being most successful.” Kim will remain active as executive chairman at SimpleReach, “leading the charge on the product vision.”
Sidenote: It’s not clear why Oracle wouldn’t officially disclose the size of a deal as large as the one for Moat, but it’s worth noting that last time Oracle made a splashy ad-tech buy, a $300 million deal for social media management platform Vitrue in 2012, competitors Salesforce and Google followed up with even splashier deals. Two months later Google bought Wildfire for around the same price and Salesforce bought Buddy Media for more than twice as much.
The Handbag’s Tale: Coach has acquired Kate Spade for $2.4 billion, its largest ever deal. Term Sheet readers may not be so surprised – Kate Spade has been for sale since December and we noted last month that that Coach was on the prowl for a major deal.
On the merger, Fortune’s Phil Wabha writes:
The idea is also to shield Coach Inc from the ups and downs of its namesake brand, which only two years ago saw comparable sales fall more than 20% in North America. Long the U.S. handbag leader, Coach lost its top spot to Michael Kors (KORS, +1.57%) a few years ago.
Kate Spade, which soared during the recent handbag boom and last year had revenues of $1.38 billion, came under pressure from activist hedge fund Caerus Investors last autumn as its profit margins were well below those of its rivals, including Coach. Coach’s offer of $18.50 a share is about 27.5% above the Kate stock price before media speculation about a deal emerged and sent its stock upwards. Read more.
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• Sea, Ltd. (formerly known as Garena), a Singapore-based mobile entertainment company, raised $550 million in new funding, according to Bloomberg. Investors include GDP Venture, JG Summit Holdings, Farallon Capital Management, Hillhouse Capital, Cathay Financial Holding Co. Read more.
• Kobalt, a New York-based global music services company, today announced it has raised $75 million in Series D funding. Hearst Entertainment led the round, and was joined by Balderton Capital and MSD Capital.
• MariaDB, a Finland-based open source database platform, raised €25 million ($27 million) in funding from the European Investment Bank.
• Move24, a Berlin-based moving startup, raised €13 million ($14.3 million) in Series C funding, according to Tech.eu. Innogy Venture Capital led the round. Existing investors Holtzbrinck Ventures, DN Capital, Piton Capital, and Cherry Ventures participated. Read more.
• BlueCart, a Mountain View, Calif.-based wholesale procurement platform, raised $10 million in Series B funding. Investors including Michael Qu of Maxim restaurant corporation, Hua Kuok of Kerry Properties, Bill Helman of Greylock Partners, and Patrick Cheung of Focus Media participated.
• SiFive, a San Francisco-based open-source-enabled semiconductor company, raised $8.5 million in Series B funding. Spark Capital led the round, and was joined by Osage University Partners. Existing investor Sutter Hill Ventures participated.
• Falcon Computing Solutions, a Santa Clara, Calif.-based big-data application solutions platform, raised $8 million in Series B funding. Intel Capital led the round, and was joined by Baidu Ventures, Clear Ventures, SV Tech Ventures and Sierra Ventures.
• Flex Logix Technologies, a Mountain View, Calif.-based reconfigurable RTL IP cores developer, raised $5 million in Series B funding. Lux Capital and Eclipse Ventures co-led the round, and was joined by the Tate Family Trust.
• Growlabs, a San Francisco-based sales automation platform, raised a $2.2 million in seed funding from undisclosed investors.
• Fluence Analytics, a New Orleans, La.-based industrial and laboratory systems manufacturer, raised an undisclosed amount in Series A funding. Energy Innovation Capital led the round.
• SalesHood, a San Francisco-based sales productivity platform, raised an undisclosed amount in Series A funding. No financial terms were disclosed. Investors included TeleSoft Partners.
• Texas Crop Science (formerly known as CottonGen), an Austin, Texas-based agricultural technology company, raised an undisclosed amount in funding. Five T Investments led the round, and was joined by Korenvaes Horizon Partners.
HEALTH AND LIFE SCIENCES DEALS
• Outset Medical, a San Jose, Calif.-based medical technology company, raised $76.5 million in Series C funding. T. Rowe Price Associates led the round. Existing investors Fidelity Management & Research Company, Partner Fund Management, Warburg Pincus, Perceptive Advisors and The Vertical Group participated.
• Lamellar Biomedical, a UK-based biotechnology company, raised £5.75 million ($7.5 million) in Series C funding. Invesco Asset Management Limited led the round.
• Devicare, a Barcelona, Spain-based medical device company, raised €3 million ($3.3 million) in seed funding from investors including EMESA Corporación Empresarial.
PRIVATE EQUITY DEALS
• TPG Growth has agreed to acquire Medical Solutions, an Omaha, Neb.-based clinical staffing company, for approximately $500 million, according to Reuters. Medical Solutions’s majority-owner Beecken Petty O’Keefe & Company will maintain an equity stake in the company. Read more.
• Tan Capital Partners acquired Osurv, a Los Angeles-based mobile survey platform. Financial terms weren’t disclosed.
• Cimbria Capital has made an investment of an undisclosed amount in VRC Technologies, a Brownwood, Texas-based chemical formulations manufacturer and distributor.
• Sinclair Broadcast Group (Nasdaq:SBGI) is nearing a deal to acquire Tribune Media Co (NYSE:TRCO), the Chicago-based media and entertainment company, for approximately $4 billion. Read more at Fortune.
• Coach (NYSE:COH) has agreed to acquire Kate Spade & Co (NYSE:KAT E), a New York-based handbag and apparel maker, for $2.4 billion in cash. The $18.50 per share offer represents a 9% premium to Kate Spade’s closing price on May 5. Read more at Fortune.
• AkzoNobel, an Amsterdam-based paint and coatings company, has rejected a third takeover proposal from PPG Industries (NYSE:PPG). The offer valued Akzo at 26.3 billion euros ($28.8 billion). Read more at Fortune.
• Straight Path Communications (AMEX:STRP) said an unnamed telecommunications company had raised its offer to buy the company. The all-stock offer of $184 per share represents an enterprise value of about $3.1 billion. The unnamed company is reportedly Verizon Communications (NYSE:VZ). Read more at Fortune.
• DHT Holdings (NYSE:DHT), a Bermuda-based tanker company, rejected a fifth takeover proposal from Frontline (NYSE:FRO), saying the $500 million all-share bid “woefully inadequate,” according to Reuters. Read more.
• Bright Scholar Education, a China-based company operating international and bilingual schools in the country plans to raise $135 million in its IPO announced Friday. The company will offer some 15 million american depository shares priced between $8 to $10. In the year ending August 2016, the company booked earnings of $425,000 on revenue of $151.5 million. The holdings company plans to debut on the NYSE under ticker symbol “BEDU.” Excellence Education Investment Limited currently owns 72% of the company, while Morgan Stanley and Deutsche bank are acting as lead underwriters.
• Ironshore, an insurance company acquired by Liberty Mutual for $3 billion late 2016, officially withdrew its IPO for what it said was $100 million at the time. Prior to the transfer over to Liberty Mutual, Ironshore was owned by China-based conglomerate, Fosun International.
• Venator Materials, a Woodlands, Texas-based chemical pigment maker filed for an IPO with the SEC Friday, saying it plans to raise up to $100 million. In 2016, the company booked revenue of $2.3 billion and net loss of $77 million. Venator is being spun off of Huntsman International. Bank of America’s Merrill Lynch, Pierce, Fenner and Smith is named as the lead underwriter.
• GenNx360 Capital Partners has agreed to sell its portfolio company, Truck Bodies and Equipment International, a Lake Crystal, Minn.-based manufacturer of dump truck bodies and trailers, to Federal Signal Corporation (NYSE: FSS) for $270 million.
• iContracts, a portfolio company of Susquehanna Growth Equity, acquired PolicyStat, a Carmel, Ind.-based policy management software platform. Financial terms weren’t disclosed. PolicyStat raised more than $2 million in venture funding from investors including HALO Capital Group.
• Caterpillar (NYSE:CAT) acquired Yard Club, a San Francisco-based construction tech platform, according to TechCrunch. Financial terms weren’t disclosed. Yard Club raised more than $1 million in venture funding from investors including Caterpillar Ventures and Andreessen Horowitz. Read more.
FIRMS + FUNDS
• Hesong Tang, a former venture partner at IDG Capital and former vice president at Baidu, raised $261 million for a maiden fund, Xiang He Fund I. The fund’s target is $300 million.
• Tecum Capital, a Wexford, Penn.-based private equity firm, raised $225 million for its second fund, Tecum Capital Partners II. It will focus on making mezzanine loans and minority equity investments.
• Ryan Howard joined SeventySix Capital as a partner. Howard is a professional baseball player for the Atlanta Braves.
• David Buttress joined 83North as a general partner. Previously, Buttress was the chief executive officer of Just Eat.
• Dörte Höppner joined The Riverside Company as the chief operating officer of Riverside’s Europe Fund. Previously, Höppner was a managing director at Pöllath + Partners.
• 500 Startups promoted Chris Neumann to venture partner from entrepreneur-in-residence. Neumann is the co-founder of DataHero.
• Harry Stebbings, host of the “Twenty Minute VC” podcast, has left his role as an entrepreneur in residence at Atomico. He’s reportedly in the early stages of raising his own VC fund, according to Business Insider.