On deals and dealmakers.
CORPORATE INNOVATION TOUR
The following is from the latest print edition of Fortune, where I write a regular column about technology and startups called “Boom with a View.”
It’s also the second installment of Term Sheet’s series on corporate innovation efforts. (See the first one here.)
When entering an unfamiliar society, it is wise to learn the local customs, the unspoken rules, and the names of its heroes, villains, and gods.
The same rule applies to Startup Land. To an outsider, the world of venture-backed startups might feel impenetrable. But don’t despair: The Internet is littered with free guides to The Startup Way. Look first to the luminaries known by their acronyms: PG, TK, @AVC, a16z. (That would be Y Combinator founder Paul Graham, Uber CEO Travis Kalanick, Union Square Ventures partner Fred Wilson, and venture capital firm Andreessen Horowitz.) Follow their blogs, listen to their podcasts, repeat their catchphrases, learn the Acronymed Ones’ acronyms. (FNAC stands for “feature, not a company.” HENRY means “high earner, not rich yet.”) You can even consume precious nuggets of startup wisdom through mobile push notifications thanks to products like Startup Funding Bot, Startup Patterns, Startup Quotes, and the website Great Fucking Startup Advice. (Sample counsel: “Don’t ask for permission, ask for fucking forgiveness.”)
Startup Land’s collective knowledge is one part mythology, one part advice, one part inspiration, and zero parts business school–sanctioned case study. (As universities add courses on entrepreneurship, Peter Thiel pays students to drop out.) Its catchphrases have been repeated so much that they are now clichéd punch lines, oversimplified to the point of meaninglessness.
But that doesn’t mean they’re not true. So what happens when a piece of startup gospel is flat-out wrong?
I recently found myself carelessly repeating a statistic that I’d heard dozens of times in private conversations and on public stages: “Nine out of 10 startups fail.” The problem? It’s not true. Cambridge Associates, a global investment firm based in Boston, tracked the performance of venture investments in 27,259 startups between 1990 and 2010. Its research reveals that the real percentage of venture-backed startups that fail—as defined by companies that provide a 1X return or less to investors—has not risen above 60% since 2001. Even amid the dotcom bust of 2000, the failure rate topped out at 79%.
Yet the denizens of Startup Land continue to cite the 90% figure because it serves a purpose. It comforts failed startup founders who burned through their investors’ money, laid off staff, and shut down their companies. It supports the startup world’s celebration of failure. “Sure, you failed, but that’s the norm,” the thinking goes. “The odds were against you.”
But startup failure isn’t a natural law like gravity. It’s not a given. Normalizing the failure narrative only conceals the truth, misleads founders, and in certain cases, explains away bad behavior.
So here’s some wisdom of my own: Take a skeptical view of the widely accepted knowledge in Startup Land. It’s especially necessary in an environment where entrepreneurship is fetishized on television shows like Shark Tank, old-economy corporations are desperately trying to imitate their disrupters, and Fortune 500 execs are jumping ship to “unicorn” startups.
Soak up the mantras inside the Silicon Valley bubble. But do so with a grain of salt.
Force for good: Fortune is beginning to work on its third annual Change the World list, which highlights companies that have made measurable progress addressing global social problems as part of their core business strategy. If you’d like to nominate a company for the list, please email Fortune senior writer Erika Fry with a brief description of why it should be considered. You can also submit nominations (and learn more about Fortune’s criteria) through the application portal.
THE LATEST FROM FORTUNE...
• Four tech giants team up to help fight the spread of terrorist content.
• Amazon and Whole Foods are headed for a culture clash.
• Apple and Cisco think customers should get discounted cybersecurity insurance.
• CBO says 22 million would lose health care coverage under the Senate’s new bill.
• Why executives don’t go to prison anymore.
• Google faces a $1.2 billion antitrust fine in Europe.
• View, a Milpitas, Calif.-based glass system manufacturer, raised more than $200 million, including a $70 million investment from funds and accounts managed by BlackRock.
• Sumo Logic, a Redwood City, Calif.-based cloud-native log analysis platform, raised $75 million in funding. Investors include Sapphire Ventures, Accel Partners, DFJ Growth, Greylock Partners, Institutional Venture Partners, Sequoia Capital and Sutter Hill Ventures.
• Drive.ai, a Mountain View, Calif.-based self-driving technology startup, raised $50 million in Series B funding, according to TechCrunch. NEA led the round, and was joined by GGV and Northern Light. Read more.
• CloudHealth Technologies, a Boston-based cloud service management company, raised $46 million in Series D funding. Kleiner Perkins led the round, and was joined by Meritech Capital Partners, .406 Ventures, Sapphire Ventures and Scale Venture Partners.
• Glooko, a Mountain View, Calif.-based diabetes data management platform, raised $35 million in new funding. Georgian Partners led the round, and was joined by investors including Insulet Corporation, Mayo Clinic, Canaan Partners, Social Capital, Medtronic and Samsung Next.
• Auth0, a Bellevue, Wash.-based cloud Identity as a Service platform, raised $30 million in Series C funding. Investors include Meritech Capital Partners, Bessemer Venture Partners, Trinity Ventures, and K9 Ventures.
• Diffblue, a U.K.-based artificial intelligence startup that checks and corrects code, raised $22 million in Series A funding. Goldman Sachs Principal Strategic Investments led the round, and was joined by Oxford Sciences Innovations and the Oxford Technology and Innovations Fund.
• Clique Media Group, a Los Angeles-based media, marketing, and consumer brands company, raised $15 million in Series C funding. Greycroft and e.ventures led the round. Investors Amazon, Bertelsmann Digital Media Investments, WndrCo and LionTree participated.
• JASK, a San Francisco-based AI-powered cybersecurity company, raised $12 million in Series A funding. Investors include Dell Technologies Capital, TenEleven Ventures, Battery Ventures, and Vertical Venture Partners also contributed.
• Aphea.Bio, a Belgium-based developer of sustainable agricultural products, raised 9 million euros ($10 million) in Series A funding. V-Bio Ventures led the round, and was joined by investors including PMV, Agri Investment Fund, Vives Louvain Technology Fund, Qbic II, Gemma Frisius Fund KU Leuven, and Group De Ceuster.
• Your.MD, a London-based personalized health assistant application developer, raised $10 million in new funding, according to TechCrunch. Orkla Ventures led the round, and was joined by investors including Smedvig Capital. Read more.
• Shapr, a New York-based professional networking app, raised $9.5 million in funding. Investors include Dannon Chairman Franck Riboud, the Bouygues family, and the Afflelou family.
• Homer Logistics, a New York-based startup specializing in optimizing local delivery using logistics technology, raised $8.5 million in Series A funding. Two Sigma Ventures led the round, and was joined by Lerer Hippeau Ventures, RSE Ventures, and Laconia Capital Group.
• BlockFraud, a Los Angeles-based provider of digital anti-fraud solutions to mobile carriers, raised $5 million in Series A funding. Palisades Venture Capital led the round.
• Clobotics, a China-based drone data and computer vision startup, raised $5 million in seed funding. GGV Capital led the round.
• MUSO, a London-based content protection and data insights company, raised £2.5 million ($3.2 million) in Series A funding from Harwell Capital.
• Nuance Energy, a San Ramon, Calif.-based developer of distributed ground-mount solar projects, raised $3 million in funding from Tabuchi Electric Co.
• Flip, a New York-based peer-to-peer leasing marketplace, raised $2.2 million in new funding, according to TechCrunch. Investors include Union Square Ventures, Techstars New York City, and Collaborative Fund. Read more.
• Upstream Security, an Israel-based cybersecurity platform for connected and autonomous vehicles, raised $2 million in funding. Glilot Capital Partners led the round, and was joined by Maniv Mobility.
• Stayawhile, a New York-based mid-term rental housing startup, raised $1.5 million in seed funding. New Enterprise Associates led the round, and was joined by Founders Fund and Global Founders Capital.
• Oars + Alps, a Chicago-based men’s skincare brand, raised $1.3 million in seed funding. Investors include Levy Family Partners and Breakout Capital.
• PromoRepublic, a Ukraine-based social marketing and digital promotion startup, raised $1.2 million in seed funding, according to TechCrunch. Investors include Finnish Funding Agency for Innovation Tekes, Howzat Partners, Digital Future and Spring Capital. Read more.
• Logiwa, a Chicago-based provider of a cloud warehouse and inventory management software, raised $1 million in funding from Revo Capital.
HEALTH AND LIFE SCIENCES DEALS
• Provention Bio, a Lebanon, N.J.-based biopharmaceutical company, raised $28.4 million in Series A funding. Investors include Johnson & Johnson Innovation.
• Eloxx Pharmaceuticals, an Israel and Waltham, Mass.-based developer of treatments focused on genetic diseases, raised $6 million in funding. Investors include Korea Investment Partners, DSC Investments, Dr. Phil Frost, OPKO Health Inc and Pontifax.
• VarmX, a Netherlands-based biotechnology company, raised seed funding of an undisclosed amount. Investors include BioGeneration Ventures and InnovationQuarter.
PRIVATE EQUITY DEALS
• P. Schoenfeld Asset Management acquired a minority stake in CdR Capital, a U.K. and Switzerland-based private investment office. Financial terms weren’t disclosed.
• Platte River Equity acquired MFG Chemical, a Dalton, Ga.-based specialty manufacturer of polymers, surfactants and esters. Financial terms weren’t disclosed.
• Kellstrom Aerospace Group Inc, a portfolio company of AE Industrial Partners, acquired Vortex Aviation, a Ft. Lauderdale, Fla.-based provider of support and turnkey solutions for aircraft lessors and airlines. Financial terms weren’t disclosed. [This item was updated with the correct headquarters city.]
• Intervale Capital recapitalized Pro Oil & Gas Services, a Houston, Texas-based oilfield services company. Financial terms weren’t disclosed.
• Visa (NYSE:V) made an investment of an undisclosed amount in Klarna, a Sweden-based online payments company.
• Singular, a marketing analytics company with offices in San Francisco, Berlin, and Tel Aviv, completed its merger of Apsalar, a San Francisco-based mobile application analytics provider into the Singular platform. Financial terms weren’t disclosed.
• Bain Capital and Cinven are speaking with investors about the terms of a potential new offer for German generic drugmaker Stada (DB: SAZ) after its first tender offer fell through, according to Reuters. Read more.
• Netlink, a subsidiary of Singapore Telecommunications focused on broadband, filed for an IPO worth up to $1.95 billion Tuesday, Reuters reports. According to a preliminary prospectus filed with the Monetary Authority of Singapore, the company plans to offer 2.9 billion units at about 58 cents to 67 cents a share. The IPO is expected to price July 7 on the Singapore stock exchange.
• Avenue Therapeutics, a New York-based firm developing an intravenous version of opioid tramadol, raised $33 million in an IPO of 5.5 million shares priced at $6. Avenue plans to go public on the Nasdaq under symbol “ATXI.” The company, formed February 2015, has yet to generate any revenue. It posted net loss of $3.2 billion for 2016. Avenue named Oppenheimer as lead manager in the deal.
• Esquire Financial, a Jericho, New York-based bank, is seeking an IPO of $33 million in an offering of 2.4 million shares at $14 a share—at the lower end of its previously quoted range. That’s down from the $40.5 million it previously planned to sell, with insiders offering roughly 24% of the deal. Sandler O’Neill is the lead underwriter. The company held a loan portfolio worth $289.5 million by the end of 2017’s first quarter, and has no branches. Gapstow Capital Partners holds 9.8% of the company pre-offering, and Wolfson Equities holds about 6.3%. The company plans to list on the Nasdaq as “ESQ.”
• Fiverr acquired Veed.me, a San Francisco-based video creation marketplace, according to TechCrunch. Financial terms weren’t disclosed. Veed.me had raised about $1 million in venture funding from investors including Marker and UpWest Labs. Read more.
FIRMS + FUNDS
• Basis Set Ventures, a Menlo Park, Calif.-based venture capital firm, filed to raise a $136 million venture fund, Basis Set Ventures I, according to an SEC filing.
• Capnamic Ventures, a Germany-based venture capital firm, raised a new €115 million ($130 million) tech fund. It will invest in tech companies predominantly in the German-speaking region of Europe, according to TechCrunch. Read more.
• Cloudflare, a San Francisco-based Internet performance and security company, raised $100 million for its Cloudflare Developer Fund, which will back startups building applications on the Cloudflare Apps Platform. Read more at Fortune.
• Trend Micro (TSE:4704), a Japan-based security solutions provider, raised $100 million for a venture fund to invest in Internet of Things and other emerging technologies.
• Applied Ventures, the Santa Clara, Calif.-based venture capital arm of Applied Materials, said it would partner with the Korea Venture Investment Corporation to invest in Korean startups. The new fund, Innovation Fund I, will set out to raise $40 million, according to an SEC filing.
• Ryan Daws joined Baird as a managing director on its global healthcare team. Previously, Daws was at Concert Pharmaceuticals.
• Timm Schipporeit joined Financial Technology Partners as a managing director. Previously, Schipporeit was at Morgan Stanley.
• Peter Higgins joined Ares Management as a partner and portfolio manager in the Ares Credit Group. Previously, Higgins was at BlueBay Asset Management.
• David Eisenberg joined Meketa Investment Group as a principal and consultant. Previously, Eisenberg was at Mercer.
• Pharos Capital Group promoted Anna Kovalkova to partner. It also promoted Lauren Gurley and Kevin Ryan, and Jim Kerrigan to associates.