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Term Sheet — Wednesday, June 21

Jun 21, 2017

YES, MORE UBER

🚨 Travis Kalanick is permanently out as CEO of Uber.🚨

A few things to note:

Investors did this. Benchmark, First Round Capital, Lowercase Capital, Menlo Ventures, and Fidelity Investments consolidated their power -- voting rights worth a combined 40% -- and demanded Kalanick resign.

• Kalanick’s email to employees made it clear that he isn’t happy about the decision: “I have accepted a group of investors’ request to step aside.”

• Benchmark’s Bill Gurley’s consolation to Kalanick was a tweet stating that “very few entrepreneurs have had such a lasting impact on the world.”

• Kalanick is still on the board. He owns a majority of the voting shares. That sounds like a recipe for dysfunction, let alone a deterrent to any potential CEO. The only solace to any incoming exec might be that there are no remaining “surprises” after the Holder investigation.

• Some are already comparing this situation to Steve Jobs’ ouster from Apple. And indeed, Kalanick could someday return in a blaze of glory. But why limit ourselves to such a clichéd comparison? This situation could also mirror Mark Pincus and Zynga. Or Rob Kalin and Etsy. Or Jack Dorsey and Twitter!

• I’ve seen arguments that if Kalanick would still have his job if Uber were profitable. I disagree with for a bunch of reasons but would love to hear reader thoughts on that one… (Hit reply to this email.)

• The speculation begins for replacements. Outside names that have already come up include newly available Marissa Mayer, Mark Fields or Jeff Immelt, and the not-available Sheryl Sandberg. There’s also the ones that were rumored for the COO job – former Walt Disney COO Thomas Staggs, former Walmart CIO Karenann Terrell, CVS EVP Helena Foulkes, Turner head John Martin, AOL CEO Tim Armstrong, as well as Nikesh Arora (who was not approached about the COO role).

NOW, I know some of you are tired of reading about every wrinkle in Uber’s unraveling. But there is a reason the media is closely following this story, and it’s not just ~OMG DRAMA~. This news has real ramifications.

Uber is the largest, most valuable, most global, most disruptive, most quintessential Silicon Valley success story of this era. What happens to this company affects the entire tech industry – the companies, the investors, the culture, the regulations, the employees.

To elaborate on what I wrote last week:

Regulations: An excuse to be aggressive. The ability to connect Uber’s swashbuckling approach to the law and the ouster of its CEO bolsters the case of any regulator looking to crack down on disruptive Silicon Valley startups. And not just in the specific areas Uber ran afoul of the law – labor, transportation – but in any startup that operates in a legal gray area. As startups attempt to innovate in highly regulated sectors of the economy like healthcare, financial services, insurance, and real estate, they almost always start out in a legal gray area that must be defined. These companies need a bit of regulatory goodwill just to prove their idea is viable.

Employees: Scaring away the “adults.” Startups need experienced executives, increasingly from the old-economy industries they’re disrupting, to help them transition from fledgling disrupters into legit businesses. A few years ago, many of those executives saw joining a hot pre-IPO tech startup as an attractive career move (not to mention, a way to get very rich, very fast). Now they are probably looking at former Target CMO Jeff Jones’ six month stint as Uber President and viewing the jump to startup-land as career suicide.

Investors: The end of founder-friendly? This era of founder-friendly venture investing – driven by Web 2.0, Mark Zuckerberg, Sean Parker, and The Social Network -- means founders get board control and can’t be forced to step aside when the job outgrows them. (Instead they “hire a Sheryl Sandberg” to deal with all the management stuff.)

Now investors are likely rethinking that trend. Even without control, the board was able to oust Kalanick, but only after a month of very messy, very public fighting. (Notably, Kalanick did not secure his board control in Uber’s early rounds of funding – that came in later rounds. Early investors had no choice but to live with it.)

Businesses: Nobody is immune. In reporting my story on Silicon Valley ethics from January, a number of people quietly wondered whether Uber might be the next startup to have a major, company-ruining scandal. This was before we learned about Susan Fowler, Greyball, the Waymo lawsuit, the rape victim’s medical records, the escort party in Korea.

I noted the suggestion but, after a number of conversations about it, ultimately dismissed it. Yes, Uber had some issues, everyone said, but it was too big, too well-funded, too valuable, too dominant to face a comeuppance as bad as that of Theranos or Zenefits. How wrong that was, and it’s led me (and plenty of others) to rethink our assumptions that tech’s dominant power players are invulnerable.

Culture: Death to “growth at any costs.” This is what happens when you take Silicon Valley’s most aggressive business practices to their logical end. As my colleague Adam Lashinsky wrote this morning: For Uber, “flying in the face of convention was an asset, but ultimately a horrible liability.” Startups that followed Uber’s playbook are likely reevaluating the serious risks associated with it.

IN THE MEANTIME, dealmaking marches on. See today’s deals below.

THE LATEST FROM FORTUNE...

• Etsy reorganizes under new CEO, lays off 15% of workforce.

• Walmart ramps up anti-Amazon strategy in wake of Whole Foods deal.

• Intel joins Team8, the Israeli cybersecurity incubator.

• China invites Ivanka Trump and Jared Kushner to visit.

• Confrontational activist shareholder tactics are finding a new home in Australia.

• A timeline of Uber’s controversies.

…AND ELSEWHERE

New York City pensions are still in crisis. Envisioning shopping’s future in the malls of Texas.  A 1985 Goldman Sachs recruiting video. Obscure assets are the last refuge for human money managers. China’s HNA takes a page from private equity. Warren Buffett’s German scout. Chicago Fed concerned big mergers put downward pressure on inflation.

VENTURE DEALS

Cybereason, a Boston, Mass.-based cybersecurity startup, raised $100 million in funding from SoftBank.

Tantan, a Beijing-based mobile dating platform, raised $70 million in Series D funding. YY Inc. and Genesis Capital led the round, and were joined by SAIF Partners China and Zhong Wei General Partners.

Samsara, a San Francisco-based Internet-connected sensor system provider, raised $40 million in Series C funding. General Catalyst led the round, and was joined by Andreessen Horowitz. The round valued Samsara at more than $530 million.

FloQast, Inc, a Sherman Oaks, Calif.-based provider of management software for accountants, raised $25 million in Series B funding. Insight Venture Partners led the investment, and was joined by investors including Toba Capital and Polaris Partners.

Textio, a Seattle, Wash.-based developer of an augmented writing platform, raised $20 million in Series B funding. Scale Venture Partners led the round.

Movius, an Atlanta-based provider of cloud-based enterprise mobility solutions, raised $15 million in Series C funding. PointGuard Ventures led the round, and was joined by investors including New Enterprise Associates and Anschutz Investment Company.

Rinse, a San Francisco-based dry cleaning and laundry delivery startup, raised $14 million in Series B funding. Partech Ventures led the round.

Keypr, a Los Angeles-based guest experience and management platform for hotels, casinos and residences, raised $12.8 million in funding. Karlani Capital led the round and was joined by investors including Simon Turner and Richard Haddrill.

Sense, a San Francisco-based talent engagement platform, raised $10 million in seed and Series A funding. Accel and GV led the round, and were joined by Signia Venture Partners, IDG Ventures and Khosla Ventures.

Tripleseat, a Concord, Mass.-based sales and event management platform, raised $7 million in funding from Level Equity.

Mic Network, a New York-based online news platform operator, raised $6.5 million in Series C funding from WPP.

GreatHorn, a Belmont, Mass.-based cybersecurity solution for cloud communications platform provider, raised $6.3 million in Series A funding. Investors include Techstars Venture Capital Fund, .406 Ventures, ff Venture Capital, SoftTech Ventures and RRE Ventures.

BlockFraud, a Los Angeles-based technology company, raised $5 million in Series A funding. Palisades Venture Capital led the round.

Lingokids, a San Francisco-based ed-tech startup, raised $4 million in funding. Holtzbrinck Ventures and JME Venture Capital led the round, and were joined by Bessemer Ventures Partners.

TrueLayer, a London-based financial application developer platform, raised $3 million in Series A funding, according to TechCrunch. Anthemis Group led the round, and was joined by Connect Ventures. Read more.

Hubdoc, a Canada-based cloud accounting application platform, raised $4.85 million in seed funding. BDC, IT Venture Fund and Round13 Capital led the round, and were joined by investors including Hyde Park Venture Partners.

Teespring Inc. is raising funding of an undisclosed amount at an $11 million valuation, according to the Wall Street Journal. Teespring was previously valued at $650 million. Read more.

HEALTH AND LIFE SCIENCES DEALS

Rubius Therapeutics, a Cambridge, Mass.-based biotechnology company, raised $120 million in funding. Investors include Flagship Pioneering.

Syntimmune, a New York-based clinical-stage biotechnology company, raised $50 million in Series B funding. Apple Tree Partners led the round.

TwelveStone Health Partners, a provider of post-acute chronic care services, raised $3.35 million in funding from Claritas Capital.

Intelligent Retinal Imaging Systems, a Pensacola, Fla.-based provider of early detection systems for diabetic eye disease, raised Series B funding of an undisclosed amount. Ballast Point Ventures led the round, and was joined by Providence Ventures and CoxHealth.

PRIVATE EQUITY DEALS

Sverica Capital Management acquired iWave Information Systems Inc, a Canada-based data and proprietary analytics access provider. Financial terms weren’t disclosed.

MPE Partners recapitalized California Medical Innovations, a Pomona, Calif.-based custom formulator and compounder of natural rubber latex. Financial terms weren’t disclosed. MPE also merged CMI with portfolio company Polytek Development to form a specialty chemicals provider.

LLR Partners acquired 3SI Security Systems, a Malvern, Penn.-based provider of asset protection solutions, according to Reuters. Financial terms were disclosed. Read more.

Eating Recovery Center, a Denver, Colo.-based provider of eating disorder treatment centers that is backed by Lee Equity Partners, is exploring a possible sale, according to The Wall Street Journal. Read more.

Confie, which is backed by ABRY Partners, acquired five insurance companies: Rodney D. Young Insurance group’s Missouri retail operations, Tremont Spirit Insurance, the Louis P. Ferrari Agency, Valletta Insurance, and EZ Insurance. Financial terms weren’t disclosed.

MidOcean Partners acquired "a significant" controlling interest in Affinity Dental Management Holdings, a dental services organization for dental practices across Western Massachusetts, Connecticut and Vermont. Financial terms weren’t disclosed.

OTHER DEALS

Toshiba Corp (TSE:6502) has chosen a consortium of Japanese government investors and Bain Capital as the preferred bidder for its chip business in a deal valued at $18 billion, according to Reuters. Read more.

BMC Software, a Houston, Texas-based enterprise service management solutions provider, is exploring a possible merger with CA Inc (Nasdaq:CA), a New York-based software provider, according to Reuters. The deal would combine two of the largest U.S. providers of IT management software. Read more.

Ericsson AB, a Sweden-based mobile telecommunications gear maker, hired banks to explore a sale of its media solutions business, according to Bloomberg. Read more.

IPOs

BAWAG PSK, an Austrian bank, has reportedly picked a Morgan Stanley as lead organizer for an IPO that could value to firm at $5.6 billion, or 5 billion euros, Reuters reports while citing people with knowledge of the matter. The bank is largely backed by Cerberus.

Constellation Alpha Capital, a “blank check” company based out of West Palm Beach, Fla., said Tuesday that it raised $125 million in an offering of 12.5 million shares at $10 a piece. The SPAC, formed to acquire an Indian healthcare company, is led by Pipavav Defense & Offshore Engineering Company’s former CEO, Rajiv Shukla. The firm is 100% backed by Centripetal, a firm where Shukla is a managing member. The company plans to list on the Nasdaq under “CNACU.” Cowen and Company is lead underwriter in the deal.

Bison Capital Acquisition, a Beijing-based blank check company formed by a private equity firm of the same name, said it raised $52.5 million in an offering of 5.25 million shares at $10 a piece Wednesday. EarlyBirdCapital was named lead underwriter. The company plans to list on the Nasdaq under symbol “BCACU.” The funds raised will be used to enter into a potential deal with a business that primarily operates in Asia and North America.

EXITS

Hellman & Friedman LLC has agreed to acquire SnapAV, a Charlotte, N.C-based manufacturer of installation-friendly audio, video, networking, power and surveillance products, from General Atlantic. Financial terms weren’t disclosed.

FIRMS + FUNDS

TPG, a Fort Worth, Texas-based private equity and venture capital firm, is seeking $3 billion for its fourth growth-equity fund, according to Bloomberg. Read more.

Adams Street Partners, a Chicago-based investment firm, raised $475 million across their venture and growth equity fund programs.

Hamilton Lane, a Bala Cynwyd, Penn.-based investment firm, raised $292.9 million for its fourth fund of funds, Hamilton-Lane Carpenters Partnership Fund IV LP, according to The Wall Street Journal.

Seven Peaks Ventures, a Bend, Ore.-based venture capital firm, is looking to raise $30 million for its second venture fund, Seven Peaks Ventures Fund II, according to an SEC filing.

Sorenson Capital, a Lehi, Utah-based private equity and venture capital firm, announced the formation of Sorenson Ventures, a new investment group focused on early-stage enterprise software and security investments.

PEOPLE

Bessemer Venture Partners promoted Charles Birnbaum, Amit Karp, and Kristina Shen to partner.

Jorge Conde joined Andreessen Horowitz as a general partner.

Tim McInerney will join Castle Hill Capital Partners as a managing director.

Liz Sisson joined Urban Us as an associate focused on the pre-seed accelerator, URBAN-X. Previously, Sisson was at the Roosevelt Institute.

Tee Pruitt and Ruth Foxe Blader joined Anthemis’ investment team. Previously, Pruitt was at Santander InnoVentures, and Foxe Blader was at Allianz Group.

Greg Lawton joined Antares Capital as managing director for its asset management team. Previously, Lawton was at Crescent Capital.

Astasia Myers joined Redpoint Ventures as an investor on the early stage enterprise team. Previously, Myers was at Cisco Investments

Colin Fan and Jeffrey Housenbold joined SoftBank Investment Advisers as senior investing members. Previously, Fan was at Deutsche Bank, and Housenbold was at Shutterfly.

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Polina Marinova produces Term Sheet, and Lucinda Shen compiles the IPO news. Send deal announcements to Polina here and IPO news to Lucinda here.

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