On deals and dealmakers.
You'll Laugh! Cry! (Maybe Buy.)
Below is my column from the latest issue of Fortune. Apologies if this concept sounds a tiny bit familiar to dedicated Term Sheet readers…
It is a weekday afternoon in May, and a dozen young women are dabbing themselves with expensive creams, serums, and balms in the Glossier showroom, a tiny, light-filled beauty sanctuary on the sixth floor of an office building in downtown Manhattan. Even the cosmetics startup’s employees, whose dewy complexions match their millennial-pink jumpsuits, are participating.
Some of the women are here to shop for Boy Brow eyebrow gel and Balm Dotcom salve, but that’s not really the point of the space. As Glossier CEO Emily Weiss recently explained at the TechCrunch Disrupt conference, the women are present because they want to be a part of something. “While the sales are through the roof and defy all odds, what’s more interesting are the girls who come once a week because they want to feel the energy in the room,” Weiss declared. “I can’t say that about large beauty retailers.” The showroom is merely one of a dozen daily touch points, digital and physical, that Glossier has with its fans.
That’s the future of retail, according to a new breed of startups that have embraced physical stores as places for “brand experiences” rather than mere sales. Consider Outdoor Voices, an athletic apparel brand that has gained a cultlike following among young, primarily female fitness enthusiasts. The company’s four stores are home base for gatherings like “dog jogs,” community yoga, and brunch parties. As CEO Tyler Haney explained at the TechCrunch event, its stores “are not about revenue, but community.”
A statement like that might induce eye rolls from a traditional retail executive. But it’s worth considering in a year when store closings are on pace to break a 20-year record. Macy’s, Sears, J.C. Penney, Staples, and Kmart are all shuttering stores this year. Payless, the Limited Stores, Wet Seal, MC Sports, Gander Mountain, and Rue21 declared bankruptcy in 2017. The retail landscape is so ugly that CEOs are issuing mea culpas about missing the e-commerce wave, as J. Crew’s chief recently did. “If I could go back 10 years, I might have done some things earlier,” Mickey Drexler conceded to the Wall Street Journal.
On the flip side is Amazon, which marked its 20th anniversary as a publicly traded company amid the retail carnage. Famous for defying shareholder expectations to turn a quarterly profit, Amazon has watched its stock price soar since going public in 1997. The company is now worth about $473 billion; more than Walmart Stores, CVS Health, Walgreens, and Target combined. The behemoth has opened seven physical bookstores with plans for convenience, electronics, grocery, and home-goods shops.
In the middle of it all are the upstarts, among them Glossier, Outdoor Voices, Warby Parker, Harry’s, Bonobos, Rent the Runway, Everlane, and Cuyana. They are leveraging newly available real estate to experiment with boutiques, showrooms, and pop-up shops. Using physical spaces to build offline community has another advantage: It’s one place where Amazon doesn’t care to compete. The company’s sensor-packed Amazon Go convenience stores, set to open later this year, won’t even have cashiers.
All Uber all the time: To clarify from yesterday’s dispatch: Not all of Uber’s 215 HR claims were for sexual harassment. Some were for discrimination, some were for unprofessional behavior, and others were for retaliation and bullying.
The details of certain of those Uber HR claims are beginning to trickle out. For example: Recode reports that three years ago, Eric Alexander, the president of Uber’s business in Asia Pacific, obtained the medical records of a woman who was raped by her Uber driver. He showed the records to Emil Michael and Travis Kalanick, who were reportedly suspicious that the rape was real and thought it was part of a sabotage plot by its Indian competitor, Ola. The especially salacious part that renewed calls for Travis Kalanick to be fired: Uber hadn’t fired Alexander as part of the 20 it let go – he was cut only after Recode asked about this incident.
As predicted: The aforementioned WeWork acquisition spree begins. The company has acquired FieldLens, a New York City-based startup that provides project management tools for the construction industry. WeWork tells Term Sheet that FieldLens’ 25 employees will join the company and that it has no immediate plans to change FieldLens’ product.
Mark your calendars: I’m hearing Blue Apron plans to go public on June 29.
THE LATEST FROM FORTUNE...
• Fortune feature: Howard Schultz has something left to prove.
• Sidebar: Howard Schultz for President?
• The original hospitality disruptor.
• Fortune 500 CEOs on Trump, the economy, AI, and more.
How bots are inflating Instagram egos. The U.S. ranks 28th in the world in mobile Internet speeds. Execs don’t care about EpiPen prices. How Apple’s Siri lost its lead. BuzzFeed and TV. How Russian propaganda spread from a parody website to Fox News. Trump’s economic policy: There is no policy. This morning is all about the Comey testimony. Kalanick is meditating in Uber’s lactation room. Tiger Global’s bet on Apollo.
• Essential, a Palo Alto, Calif.-based mobile and home devices company, raised $300 million in funding at a $900 million to $1 billion valuation, according to Bloomberg. The investors were not named. Read more.
• Addepar, a Mountain View, Calif.-based portfolio analysis tech company, raised $140 million in Series D funding. Investors include Valor Equity Partners, 8VC, and Harald McPike.
• Algolia, a San Francisco-based SaaS company enabling developers to build search engines, raised $53 million in funding, according to VentureBeat. Accel led the round, and was joined by Alven Capital, Point Nine Capital, Storm Ventures, and SaaStr fund. Read more.
• Discord, a San Francisco-based Gamer chat platform, raised approximately $50 million, according to TechCrunch. Index Ventures is said to have led round at a pre-money valuation of $725 million. Institutional Venture Partners, Greylock Partners and Benchmark participated. Read more.
• IL MAKIAGE New York, a professional makeup brand with offices in New York, raised $29 million in funding from the Growth Fund of L Catterton.
• Beyond Limits, a Glendale, Calif.-based artificial intelligence and cognitive computing company, raised $20 million in Series B funding from BP Ventures.
• Obsidian Security, a Newport Beach, Calif.-based cybersecurity company, raised $9.5 million in Series A funding. Greylock Partners led the round.
• Automat, a Canada-based AI-driven conversational marketing company, raised $8.3 million in Series A funding. You & Mr Jones led the round, and was joined by Comcast Ventures and Omidyar Technology Ventures. Existing investors Relay Ventures, Real Ventures, and USAA participated.
• Viridis Learning, a New York-based education technology company, raised nearly $7.5 million in funding. Investors include Salesforce Ventures and Thayer Ventures.
• Digital Pharmacist, an Austin, Texas-based digital health company, raised $6.5 million in Series B funding. Activate Venture Partners and LiveOak Venture Partners led the round.
• Jodel, a Berlin-based social app, raised €6 million ($6.8 million), according to Tech.eu. Investors include Adam di Angelo, the Floodgate Fund, Global Founders Network and Atlantic Internet. Read more.
• NeoSurgical, a Dublin-based medical device developer, raised $5.5 million in funding. Investors include the Targeted Technology Fund 2.
• CybelAngel, a France-based big data-focused cybersecurity solutions provider, raised 3 million euros ($3.4 million) in funding from Serena Data Ventures.
• Trint, a London-based automated transcription company, raised $3.1 million in pre-Series A funding. Horizons Labs led the round.
• SalesRabbit, a Lehi, Utah-based mobile field sales software platform, raised $2.4 million in funding. Peak Ventures led the round.
• Upbeat, a San Francisco-based PR agency startup, raised $1.5 million in funding. Investors include Draper Associates, Maverick Capital, Kleiner Perkins Caufield Byers, FirstRock Capital, UpHonest Capital, Quest Venture Partners, SV Angel, 500 Startups, Stanford-StartX Fund and Y Combinator.
• Arx Defence, a Scotland-based maritime security firm, raised Series A funding of an undisclosed amount from Dreamlab Finance.
PRIVATE EQUITY DEALS
• A group of investors led by GL Capital agreed to buy SciClone Pharmaceuticals (Nasdaq:SCLN) in a deal valued at about $605 million. The buyer consortium includes Bank of China Group Investment, CDH Investments, Ascendent Capital Partners and Boying.
• Thoma Bravo agreed to acquire Riskonnect, a Kennesaw, Ga.-based risk management software company. Financial terms weren’t disclosed.
• Marlin Equity Partners acquired True Office Learning, a provider of interactive e-learning software with locations in Atlanta and Jersey City, from Intercontinental Exchange. Financial terms weren’t disclosed.
• InterVision Systems, a portfolio company of Huron Capital, has merged with Netelligent Corporation, a Chesterfield, Mo.-based provider of hybrid information technology solutions. No financial terms were disclosed.
• Togetherwork, which is backed by Aquiline Capital Partners, acquired Pennington & Company, a Lawrence, Kansas-based provider of fundraising services for fraternities and sororities. Financial terms weren’t disclosed.
• GTCR agreed to acquire GreatCall, a San Diego, Calif.-based provider of connected health and personal emergency response services. Financial terms weren’t disclosed.
• Morgenthaler Private Equity recapitalized Voeller, a Port Washington, Wisc.-based maker of batch plants and mixing equipment for the concrete, glass and related sectors. Financial terms weren’t disclosed.
• Ardian will acquire Dynamic Technologies S.p.A., an Attimis, Italy-based maker of automotive fluid-handling systems and precision aluminum parts. When the deal closes, Ardian will merge Dynamic Technologies with portfolio company Huron. Financial terms weren’t disclosed.
• Toshiba Corp (TSE:6502) will name a winner for its semiconductor business next week, according to Reuters. The choice has narrowed to bids from Broadcom, Silver Lake and Western Digital Corp. Toshiba’s chip unit is valued at $18 billion or more. Read more.
• A consortium of private equity firms TPG Capital Management, MBK Partners, and HKBN Ltd, are preparing separate bids for Hutchison Global Communications, the Hong Kong-based fixed-line telecoms unit of Hutchison Telecommunications Hong Kong Holdings Ltd. The unit is expected to be valued at about $1.5 billion. Read more.
• Valeant Pharmaceuticals International (NYSE:VRX) said it would sell its iNova Pharmaceuticals business, an Australia-based over-the-counter medicine provider, for $930 million in cash. The unit will be bought by a company jointly owned by Pacific Equity Partners and The Carlyle Group LP. Read more.
• Microsoft (Nasdaq:MSFT) agreed to acquire Hexadite, a Boston-based cuber incident security solutions company. Financial terms weren’t disclosed.
• Key Surgical, a Minneapolis, Minn.-based operating instrument manufacturer, and Interlock Medizintechnik GmbH, a Germany-based sterile services departments product supplier, merged to create a provider of sterile processing and operating room supplies. Water Street Healthcare Partners led the merger and invested in the newly combined company. Financial terms weren’t disclosed.
• St. Croix Hospice, an Oakdale, Minn.-based hospice service provider backed by Clearview Capital, is in the early stages of exploring a sale, according to Dow Jones.
• Shotspotter, Newark, Calif.-based company making gunshot detection software, offered 2.8 million shares at $11 a piece, within its previously stated range of $10 to $12 a piece. The company, which raised about $31 million, plans to list as “SSTI” on the Nasdaq. The company announced revenue of $15.5 million for 2016 on net loss of $6.9 million. ShotSpotter is backed by Lauder Partners(37.4% pre-offering), Motorola Solutions(15.6%), Claremont Creek Ventures(11.3), and RT Groos(10%). Roth Capital Markets is lead underwriter in the deal.
• TPG Pace Holdings, a blank check company formed by TPG, filed for an IPO to raise up to $400 million on Wednesday. The SPAC is lead by Karl Peterson, a senior partner at TPG and Co-founder of Hotwire.com. The company plans to list on the NYSE as “TPGH.U.” Goldman Sachs, Deutsche Bank Securities, and J.P. Morgan Securities are lead underwriters in the deal. Exact pricing terms have yet to be disclosed.
• BCG Partners CEO Howard Lutnick said Wednesday that its planned spinoff of real estate services unit, Newmark Grubb Knight Frank, should come before the end of the year, Reuters reported. The company confidentially filed a draft registration statement on a proposed IPO earlier this year.
• Cressey & Company acquired a majority stake in StatLab Medical Products, a McKinney, Texas-based diagnostic supplies manufacturer, from Prairie Capital.
FIRMS + FUNDS
• Hamilton Lane (NASDAQ:HLNE), a Bala Cynwyd, Penn.-based investment firm, raised $1.9 billion for its largest-ever fund, Hamilton Lane Secondary Fund IV, L.P.
• World Innovation Lab, a Tokyo-based venture capital firm, raised $236 million for its second venture fund, WiL Fund II. The fund’s target is $400 million.
• Ponoi Capital, a San Francisco-based venture capital firm, will raise $150 million for its inaugural fund.
• National Geographic Society, a non-profit scientific and educational institution operator, commits $50 million of endowment to create a new impact investment program, managed by CA Capital Management. Read more.
• Lerer Hippeau Ventures, a New York City-based seed investor, has raised $28 million for LHV Select, a follow-on vehicle to support portfolio companies with later stage investments. The firm’s last fund, Fund V, raised $113 million in 2015.
• Lattice Ventures, a New York-based investment firm, raised $2 million for its maiden fund.
• Wind Point Partners promoted Konrad Salaber and David Stott to managing director and Joe Lawler to principal.
• Cimbria Capital named Jens Ulrick Hansen as a managing director.
• Matthew Q. Reber joined 1315 Capital as a partner. Previously, Reber was at HealthCare Royalty Partners.