By Polina Marinova
September 27, 2017

5 QS WITH A DEALMAKER

Good morning, Term Sheet readers.

We kick off our first installment of “5 Questions with a Dealmaker” series with Byron Deeter, a partner at Bessemer Venture Partners.

Deeter has led investments in companies including, Twilio, Box, ProCore, and Tile. He’s personally backed more cloud companies to IPO than any other individual investor, and heads Bessemer’s cloud portfolio, which contains more than 100 startups.

Oh, and he’s also known for passing on Tesla in 2006. Term Sheet spoke with him about Tesla, the cloud, and Bessemer’s infamous “anti-portfolio.”

TERM SHEET: What’s going on in the cloud space right now that you think Term Sheet readers should know about?

DEETER: The massive replatforming of software continues, and cloud is that next evolution. We are doubling down in every way on the space now and absolutely believe that the trend is ripping through the software ecosystem.

It’s created a number of related trends where cloud is the enabler for enterprise mobile, and this notion that mobile workers can get access to great software products is now taking hold. We went from clunky heavy software, to a browser interface with cloud, to your phone with mobile. The next iteration will actually have the interface disappear, and you will interact with software much more naturally. The pace of innovation is accelerating, and each of these cycles is compressing.

You often point to a section on your website entirely dedicated to your biggest misses called, The Anti-Portfolio. Why does Bessemer showcase winning investments the firm decided to pass on?

We’ve had people call and notify us that our website’s been hacked: “Oh my God, someone put up an anti-portfolio on your page. You guys should know so you can take it down.” It’s hilarious, and I tell them, “Guys, just step back. You can’t take yourselves this seriously. Can you not enjoy a little bit of humor?”

We need to be able to make fun of ourselves. As good as we can be in this business, we still wake up every day and read articles of great companies that we missed or didn’t quite understand, and they materialized. We hope every entrepreneur we meet with ends up on one of two pages on our website — either the portfolio or the anti-portfolio. And we’re sincerely happy for their success either way. It’s not a zero-sum game. The spirit of the anti-portfolio is to acknowledge that even the best investors screw up all the time.

Related: VCs Confess Their Biggest Regrets

In 2006, you put a deposit down on a Tesla but passed because you were turned off by the fact that it was a negative margin company. Describe how you feel about that pass today.

It drives me crazy every time I drive to work in my Model X. What I really regret about Tesla is how transformative it’s been for the industry.

In hindsight, automotive was not a sector I was an expert in. I just didn’t understand how great of an entrepreneur Elon [Musk] was and what a force of nature he was to overcome so many tremendous obstacles. He’s absolutely transformed multiple industries, and he’s the type of entrepreneur we love to work with — the type willing to take massive risks for massive change in the industry.

What are your thoughts on the future of cryptocurrency and the blockchain as it relates to venture capital?

I struggle with two diametrically opposed positions on this. On the one hand, I absolutely love the innovation that the blockchain is bringing and see a lot of need for financial industry innovation and removing friction from that ecosystem. On the other hand, I believe that Bitcoin and Ethereum are wildly overvalued relative to any notion of what is value. I do fear and suspect that a lot of the short-term price escalation is driven by speculation and/or improper uses for things like money laundering.

What’s the best business advice you’ve ever received?

Success = Results – Expectations. It was good practical short-term advice I received as an early founder. Obviously, long-term results in the absolutely sense are all that matters. For early companies just attracting investors and team members, you need to show that you’ve got control of your business, and you know what you’re building. At the end of the day, you need to overdeliver.

For more on Deeter’s investment thesis, read the full Q&A here.

CLOUD M&A: Speaking of the cloud, Google acquired Bitium yesterday, a cloud identity management company. The acquisition will help Google better manage enterprise cloud customer implementation across an organization (i.e: look for applications across Google Cloud and G Suite). According to a new 2017 M&A report from The Boston Consulting Group, high-tech deals represented almost 30% of the total $2.5 trillion of completed M&A transactions last year. The report identified nine trends driving market growth, including a surge in investments in cloud-based services, mobile tech, and software application providers. Cloud-based deals have increased by approximately 30% per year since 2013. Don’t be surprised to see more acquisition interest here in the days to come.


THE LATEST FROM FORTUNE...

• Why African-American women aren’t making it to the top in Corporate America (by Ellen McGirt)

• Equifax CEO is retiring with a $90 million payday (by Jen Wieczner)

• U.S. to collect social media data of immigrants (by Jeff John Roberts)

• Hilton wants to open a ‘hostel on steroids‘ to woo Millennials (by Lucinda Shen)

• Tax havens eye a new sideline: Initial Coin Offerings (by Jeff John Roberts)

…AND ELSEWHERE

Ford partners with Lyft on self-driving cars. U.S. seeks to undo Parker Hannifin’s Clarcor deal on on antitrust grounds. Kik raises nearly $100M in ICO. Uber is leaving Quebec. The FBI upends college basketball’s underground economy.


VENTURE DEALS

Indigo Ag, Inc., a Boston-based agriculture technology startup, raised $156 million in Series D funding at a $1.4 billion valuation. Investors include Baillie Gifford, Activant Capital, Flagship Pioneering, and Alaska Permanent Fund.

CallRail, an Atlanta-based call analytics platform, raised $75 million in funding. Investors include Sageview Capital and Leaders Fund.

JingChi Inc, a China-based self-driving startup, raised $52 million in funding. Investors include Qiming Venture and NVIDIA GPU Ventures.

Kyriba, a San Diego, Calif.-based cloud treasury and financial management platform, raised $45 million in funding. Sumeru Equity Partners led the round, and was joined by investors including Bpifrance, Iris Capital, Daher Capital, and HSBC.

Playbuzz, an Israel-based storytelling platform for interactive content, raised $35 million in Series C funding. Viola Growth led the round, and was joined by investors including Disney, Saban Ventures, 83North, Carmel Ventures, firstime and Oded Vardi.

Dreamscape Immersive, a Los Angeles-based virtual reality startup, is raising $20 million in Series B funding. AMC Entertainment will lead the round.

Caresyntax Inc, a Boston-based surgical analytics and integration services company, raised $11.9 million in funding from Norgine Ventures.

Legion Technologies, a developer of an intelligent workforce engagement platform, raised $10.5 million in Series A funding. Norwest Venture Partners led the round, and was joined by investors including First Round Capital, XYZ Ventures and Webb Investment Network.

Cardinal Analytx Solutions, a San Francisco-based developer of advanced machine learning solutions, raised $6.1 million in Series A funding. Cardinal Partners led the round, and was joined by investors including Premera Blue Cross and the Stanford-StartX Fund.

Hoop, a London-based family app for millennial parents, raised  £2.4 million ($3.2 million) in funding. BGF Ventures led the round.

Boost Insurance, a New York City-based insurance platform, raised $3 million in funding. Norwest Venture Partners led the round, and was joined by investors including IA Capital Group, Greycroft Partners, State National Companies and Nephila.


HEALTH AND LIFE SCIENCES DEALS

Deep Genomics, a Toronto-based genetic medicine startup, raised $13 million in funding. Khosla Ventures led the round and was joined by True Ventures.


PRIVATE EQUITY DEALS

CVC Capital Partners and Leonard Green & Partners are looking to sell BJ’s Wholesale Club, a regional warehouse chain, for $4 billion to $4.5 billion, according to The New York Post. Read more.

United Derm Partners, which is backed by Frazier Healthcare Partners, acquired Vitalogy Skincare, a Georgetown, Texas-based provider of dermatology services. Financial terms weren’t disclosed.

Acorn Growth Companies acquired CIS Secure Computing Inc, a Dulles, Va.-based provider of communications and computing solutions for government and commercial customers. Financial terms weren’t disclosed.

White Oak Healthcare Finance made an investment of an undisclosed amount in Hopebridge LLC, an Indianapolis-based provider of pediatric, clinic-based, outpatient therapy services to children and adolescents with developmental and behavioral challenges.

Tally Energy Services, a Houston-based firm focused on North America shale, raised more than $130 million in funding. Investors include RedBird Capital Partners and Sallyport Investments.

Maven Capital Partners invested 1 million pounds ($1.34 million) in hedgehog lab Limited, a U.K.-based mobile app designer and technology consultancy.


OTHER DEALS

Nippon Life Insurance Co, is in talks to buy a minority stake in TCW Group, a Los Angeles, Calif.-based investment manager, according to Reuters. Read more.

Alibaba agreed to invest RMB 5.3 billion ($807 million) for a majority stake in Cainiao, a China-based logistics company. Cainiao had raised approximately RMB 10 billion ($1.54 billion) in funding from investors including Temasek Holdings, GIC, and Primavera Capital Group. Read more.


IPOs

RYB Education, a childhood educational services provider based out of China, said it raised $102 million in an offering of 5.5 million shares at $18.50, higher than its previously stated range of $16 to $18. In 2016, the company posted revenue of $108.5 million on earnings of $5.9 million. Credit Suisse and Morgan Stanley are joint bookrunners in the deal. The company has also added BNP Paribas as an underwriter. The company plans to list as “RYB” on the NYSE.

Microphase, a Shelton, Conn.-based defense contractor, withdrew plans for a $12 million IPO. In 2016, the company posted revenue of $9.1 million and loss of $1.1 million. Joseph Gunnar was underwriter in the deal.


EXITS

Vimeo acquired Livestream, a New York-based live video-streaming platform. Financial terms weren’t disclosed. Livestream raised approximately $14.7 million in venture funding from investors including Gannett Co. Read more at Fortune.

Blackstone and Fireside Investments acquired International Market Centers Inc, a Las Vegas-based owner and operator of showroom space for the furnishings, home decor and gift industries. The sellers were Bain Capital Private Equity and Oaktree Capital Management. Financial terms weren’t disclosed.

IHS Markit acquired automotiveMastermind Inc, a New York City and San Francisco-based provider of predictive analytics and marketing automation technology for the automotive industry, for about $392 million. AutomovieMastermind’s backers included JMI Equity.

trivago (Nasdaq: TRVG) acquired the assets of tripl, a Hamburg-based machine learning travel startup. Financial terms weren’t disclosed, but Tripl raised approximately $300,000 in venture funding from investors including Primary Venture Partners and Quotidian Ventures.


FIRMS + FUNDS

Lexington Partners, a New York-based investment firm, raised $2.66 billion for its fourth fund, Lexington Middle Market Investors IV, L.P.

Property Innovation Labs (Pi Labs), a London-based accelerator and venture capital firm, raised $10 million for its second fund.


PEOPLE

Alex Stirling joined Centerbridge Partners as a senior managing director. Previously, Stirling was at Carlyle Group.

McKesson Ventures named Carrie Hurwitz Williams as principal and Irem Mertol as director.

Financial Technology Partners named Paul VanderMarck as a managing director.


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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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