On deals and dealmakers.
IN RECENT DAYS the story of Justin Caldbeck and Binary Capital has rocked the venture capital and startup world. Here’s what happened:
1. The Information published a story in which six women, including Niniane Wang, Susan Ho, and Leiti Hsu, accused Binary Capital Partner Justin Caldbeck of making unwanted sexual advances while they were pitching him for a potential investment.
2. Some context: Binary Capital is a San Francisco-based venture firm founded in 2014. The firm had raised $175 million for its second fund in 2016, and was about to close on a $75 million extension. The close was delayed as a result of the news.
3. Caldbeck and Binary Capital’s initial response was to strongly deny The Information’s “attacks on [his] character,” adding that he has “always enjoyed respectful relationships with female founders, business partners, and investors.”
5. It gets worse: Days before the story broke, Caldbeck reportedly emailed one of his accusers with an offer of funding, which she interpreted as an attempt to squash the story.
6. Venture capitalists began rejecting Caldbeck’s behavior on Twitter. Reid Hoffman dissected the lack of “a good HR function that covers what happens between venture capitalists and entrepreneurs,” proposing a “Decency Pledge,” which many investors signed on to.
7. At least one portfolio company has reacted: Havenly, a startup backed by Binary, reportedly asked Caldbeck to step down as a board observer.
8. On Sunday the firm announced Caldbeck would leave Binary permanently.
9. Matt Mazzeo, formerly of Lowercase Capital, had just joined Binary Capital. He will also leave the firm.
10. Caldbeck and Mazzeo’s leaving will likely trigger a key man clause, which could result in investors voting to terminate the new fund.
A few thoughts:
• Remember this upsetting account of groping and other unwanted advances in Forbes in 2014? Infuriating as it is, this kind of behavior isn’t new. What’s new is women are willing to name names, and, just as important, attach their own names to their accusations. Doing so is obviously a great professional and personal risk to them, but it makes their accusations easier for us journalists to cover and far more credible to readers. In the past, accusations without a lawsuit attached to them have not had real consequences for the offending men. But now they are making a difference. We can thank Susan J. Fowler, whose blog post kicked off Uber’s year of reckoning, and Ellen Pao, whose trial forced the Valley to stop brushing off conversations about its gender problem as unnecessary distractions.
• For that reason I anticipate more of this. (Term Sheet’s tipbox is already filling up with stories…) In some cases, it may not involve women exposing these people publicly via the press. Firms may begin to actually self-police, realizing that it’s not enough to just hope inappropriate behavior goes away. But when this happens, I hope there’s an honest announcement about it. When partners get quietly pushed out, it doesn’t help anyone. That person will get another job or raise their own fund. Which means we’re setting up more women to go through the same horrible experience that the women who exposed Caldbeck went through. It’s not enough for someone’s bad behavior to be an “open secret” among the women who had to experience it firsthand.
• Speaking of open secrets: Did the men involved really not know? In his statement, Binary Partner Jonathan Teo said “It is clear to me now that I was misled by a partner and friend.” Hm. Lightspeed, where Caldbeck worked before starting Binary, must have known, according to The Information’s report: The firm reportedly agreed to remove Caldbeck from the board of a portfolio company after its female CEO complained that he had made her uncomfortable.
• To give some perspective on how difficult it is to publicly hold people accountable in these situations, I want to share Niniane Wang’s response to Caldbeck’s apology on Medium:
I’ve been trying to expose Justin for 7 years. He kept threatening reporters, and it was incredibly difficult to get this article out. He fought tooth and nail. Then he writes this apology (that was surely drafted by a crisis PR firm), and suddenly I’m seeing people say “We’re all human and make mistakes” and “I’m glad he’s learning” and “What a heartfelt apology”.
My fear is that if people actually believe that, what if the leave of absence doesn’t become permanent? Are people going to let him come back in 6 months when he’s “reflected” and learned his lesson?
I do not believe that someone can harass women for 10 years, tell the people who exposed him to go f*** themselves, and then 24 hours later, thank them for bringing him self-awareness.
It’s a somewhat unusual pairing at first glance. The acquirer, Red Ventures, is a Fort Mill, S.C.-based online-to-offline advertising company. In 2015, private equity firms Silver Lake and General Atlantic invested $250 million into the business, valuing it at more than $1 billion. Last year the company raised an $800 million credit facility, presumably to finance acquisitions.
Meanwhile Plano, Texas-based Choose Energy operates a website offering cost-comparison service tools for energy usage. The company raised $25.7 million in venture funding from Kleiner Perkins Caufield & Byers, BlueScape Resources, NGEN Partners, and angel investors. The company was profitable with “double digit millions” of revenue, a source said. Choose Energy had received inbound buyout interest earlier this year due to its position in the connected home category, and as a result, initiated a sale process.
Sources argue that Choose Energy fits in with Red Ventures’ combination of online marketplaces and single brand websites, comparing Red Ventures’ portfolio approach to that of IAC.
Choose Energy’s investment from Kleiner Perkins came from the firm’s green investment arm, which has $1 billion under management. The firm is currently in the midst of spinning off that effort into a new firm called G2VP. The firm has held a first close on its first fund, which has a target of $275 million.
Kleiner Perkins and Silver Lake declined to comment on the deal. Representatives from General Atlantic, Choose Energy and Red Ventures did not immediately respond to a request for comment.
DONE DEAL: The Houzz funding round we scooped a few weeks back is officially closed: Houzz raised $400 million in Series E funding led by ICONIQ Capital with new money from Wellington Management Company, and participation from existing investors Sequoia, Zeev Ventures and GGV Capital. The round values Houzz at $4 billion.
HERE’S A COOL THING: Today Barclays and Time (Fortune’s parent company) announced they’re working together to create a new family of stock indices based on the Fortune 500. Why? Because the Fortune 500 is a good bet. As we noted earlier this month when we revealed this year’s list, an equal-weighted portfolio of Fortune 500 stocks held since 1980, rebalanced with each new year’s list, would have earned twice the return of an investment in broader market indices. Read more about the Fortune 500 index here.
THE LATEST FROM FORTUNE...
• Why peak TV is further away than we think.
• Can Bitcoin’s first felon make cryptocurrency a trillion-dollar market?
• Why tech investors love ICOs and lawyers don’t.
• Slack’s quest to make work easier.
• Tim Westergren to step down from Pandora.
• Dan Loeb’s Third Point takes a stake in Nestle.
Walmart took away Jet’s office booze. Walmart will not counter-offer for Whole Foods. Martin Shkreli can’t keep quiet ahead of his trial. Why overworked staffers still love their bosses. Leaderless Uber scrambles to prevent employee exodus. Stockpicking is dying because there are no more stocks to pick. The many ways cybersecurity matters in M&A deals. India’s biggest e-commerce deal is at risk over billionaire objections. A network of online stores used as a front for online gambling payments.
• Autotalks, an Israel-based fabless semiconductor company, raised $40 million in Series D funding. Investors include the Mirai Creation Investment Fund.
• SparkCognition, an Austin, Texas-based cognitive security analytics company, raised $32.5 million in Series B funding. Verizon Ventures led the round, and was joined by The Boeing Company, through its Boeing HorizonX unit.
• Satellogic, a Palo Alto, Calif.-based provider of earth observation solutions, raised $27 million in Series B funding. Tencent led the round, and was joined by investors including CrunchFund and Pitanga.
• Yoyo Wallet, a London-based mobile payment platform, raised £12 million ($15.3 million) in Series B funding, according to TechCrunch. Metro Group led the round, and was joined by Woodford Investment Management and Touchstone Innovations. Read more.
• Synthio, an Atlanta-based customer data platform, raised $10.5 million in funding. Fulcrum Equity Partners led the round, and was joined by investors including Vocap Investment Partners, Spinnaker VC Direct, Bahns Stanley, Stanley Partners, Ellis Capital, Buckhead Investments, the AIM Group and Silicon Valley Bank.
• TechSee, an Israel-based smart visual platform provider, raised $7.5 million in Series A funding. Planven Investments led the round, and was joined by investors including OurCrowd and Comdata Group.
• Tizeti, a Nigeria-based provider of Internet services in Africa, raised $2.1 million in new funding, according to TechCrunch. Investors include Western Technology Investment, Social Capital, Vy Capital, Picus Capital, Ace & Company, Lynett Capital Partners, Zeno Ventures, Michael Seibel, and Gabriel Hammond. Read more.
• OMG Digital, a Ghana-based media startup, raised $1.1 million in seed funding, according to TechCrunch. Investors include Kima Ventures, Soma Capital, Comcast Ventures Catalyst Fund, Social Capital, M&Y Growth Partners, and Macro Ventures. Read more.
HEALTH AND LIFE SCIENCES DEALS
• M2i Life Sciences, a France-based life sciences company, raised €12 million ($13.4 million) in funding from Idinvest Partners.
PRIVATE EQUITY DEALS
• TowerBrook Capital Partners and two Spanish investors agreed to invest €900 million ($1 billion) in Aernnova Aerospace SA, a Spain-based aerospace company, according to Private Equity News. Read more (subscription required).
• Gemspring Capital acquired the assets of Therma Corporation, a San Jose, Calif.-based mechanical contracting services provider. Financial terms weren’t disclosed.
• Summit Behavioral Healthcare, a Franklin, Tenn.-based behavioral health center operator and portfolio company of Flexpoint Ford, is exploring a possible sale, according to the Wall Street Journal. Read more.
• CORA Health Services, a portfolio company of Gryphon Investors, acquired Spine & Sport Physical Therapy, a Savannah, Ga.-based physical therapy company. Financial terms weren’t disclosed. [This item has been corrected.]
• Key Safety Systems agreed to purchase nearly all of Takata’s (TSE:7312) assets for about 175 billion yen ($1.57 billion), after the Japanese airbag maker filed for bankruptcy in the United States and Japan, according to Reuters. Read more.
• Catalyst Capital Group is exploring options for Therapure Biopharma, a Canada-based biopharmaceutical company, including a potential sale of its contract development and manufacturing unit, according to Bloomberg. The Therapure unit could fetch C$400 million ($302 million). Read more.
• TeamSnap, a Boulder, Colo.-based sports management application provider, acquired FanAppEvents, a Jefferson City, Mo.-based tournament and league management company. The new tournament management platform will be known as TeamSnap Tournaments. Financial terms weren’t disclosed.
• Best Inc., an Alibaba-owned Chinese supply chain network, filed for an IPO of up to $750 million worth of American Depository Shares. The company lost $815 million on revenue of $1.3 billion in 2016. Alibaba backs 23.4% of the company. Citigroup, Credit Suisse, Goldman Sachs, J.P. Morgan, and Deutsche Bank are underwriters in the deal. Exact terms of the deal have yet to be disclosed.
• Libstar, a South African consumer products maker, is reportedly at the center of a potential IPO, Bloomberg reports. Abraaj Group, which backs Libstar, is considering a $300 million IPO, which would value to company at about $1 billion, people familiar with the matter told Bloomberg. The company is working with Standard Bank Group and J.P. Morgan Chase for an IPO potentially in London or a local stock exchange.
• Vapiano, the German-owned restaurant chain, is planning an IPO valued at 23 euros, or $25.8 a share, Reuters reports citing people with knowledge of the matter. Vapiano will raise as much as $206.3 million in a Frankfurt-based IPO. Barclays, Berenberg, and Jefferies are acting joint global coordinators.
• Kala Pharmaceuticals, a Waltham, Mass.-based biotech focused on treating eye diseases with nanoparticles, filed for an $86 million IPO Friday. J.P. Morgan, Wells Fargo, Bank of America Merrill Lynch, and Wedbush have been named underwriters for the company, which plans to go public on the Nasdaq as “KALA.” In 2016, the company booked losses of $33 million, and has yet to show revenues. The company is backed by Longitude Capital (11.9% pre-IPO), OrbiMed (11.9%), Polaris Partners (10.9%), Wellington Management (10%), Third Rock Ventures (9.6%), and RA Capital Management (9.1%).
• PetIQ, an Eagle, Id.-based pet medication maker, filed for a $85 million IPO Friday. The company, which booked losses of $3.4 million on revenue of $200.2 million on 2016, is backed by Eos Funds, Labore et Honore, Porchlight Entities, True Science Founders, and NBTS Holdings. The company plans to list on the Nasdaq as “PETQ.” Exact terms of the IPO, being led by Jefferies and William Blair, have yet to be disclosed.
• YogaWorks, the Culver City, Calif-based yoga studio chain, filed for a $75 million IPO Friday. In 2016, the company booked losses of $9.5 million on revenue of $55.1 million. The company, which filed confidentially mid-April, has 50 studios, and about 3 million student visits in 2016. Cowen, Stephens, and Guggenheim are lead underwriters in the deal. Great Hill Partners backs the company, which plans to list as “YOGA” on the Nasdaq. Exact terms of the deal have yet to be disclosed.
• Calyxt, the New Brighton, Minn.-based company based on gene-editing foods, filed for a $50 million IPO Friday. The company is being underwritten by Citi, Credit Suisse, and Jefferies. The company lost $12.1 million on revenue of $339 million in 2016. Calyxt is backed by French biotech, Cellectis. The has not disclosed the terms of its offering, nor its proposed ticker.
• Blue Apron, the meal kit delivery service, is expected to also IPO this week.
• Mikhail Fridman’s L1 Retail agreed to buy Holland & Barrett, a U.K.-based health food and supplements chain, for 1.77 billion pounds ($2.26 billion) from The Nature’s Bounty Co. and The Carlyle Group. Read more at Fortune.
• Martin Marietta Materials, Inc. (NYSE:MLM) agreed to acquire Bluegrass Materials Company, a Jacksonville, Fla.-based construction materials company, for $1.625 billion in cash. The seller was Panadero Aggregates Holdings, which is majority-owned by Lindsay Goldberg.
• An AGIC Capital-led consortium agreed to acquire The Ritedose Corporation, a Columbia, S.C.-based pharmaceutical company, from Olympus Partners. The deal is valued at between $600 million and $800 million, including debt, according to The Wall Street Journal.
• ShawKwei & Partners sold YongLe Tape Ltd, a China-based tape equipment manufacturer, to Avery Dennison for $190 million. [This item has been updated with the correct purchase price.]
• Pearl Automation, a Scotts Valley, Calif.-based automotive startup, will shut down, according to Axios. Pearl Automation had raised approximately $50 million in venture funding from Accel, Shasta Ventures, Venrock, and Wellcome Trust. Read more.
FIRMS + FUNDS
• TLcom Capital, a London and Nairobi-based venture capital firm, raised $40 million for its new Africa fund, TIDE Africa Fund. The fund’s target is $100 million.
• Alex Popov will join The Carlyle Group as a managing director. Previously, Popov was at HPS Investment Partners.