On deals and dealmakers.
5 QS WITH A DEALMAKER
Ryan Sweeney, a general partner at Accel, joined the firm in 2008 to focus on growth investments. He became the first outside investor and board member at enterprise software companies including Atlassian, Qualtrics, and Squarespace.
Below are some of Sweeney’s thoughts on investing, industry trends, and the future of cryptocurrency.
TERM SHEET: Your investments include Braintree/Venmo, Airwatch, and Atlassian. What are some of the key elements you always look for in a founder/company before investing?
SWEENEY: Conviction around the management team. At its core, venture investing is about investing in people. Business plans will evolve and markets will shift, so gaining comfort with those risks is often dependent on having confidence in the team running things. We’re looking for teams that can not only eloquently pitch their companies but that are also genuinely thinking about where they need help.
How is Accel thinking about blockchain tech, cryptocurrency, and the hype around ICOs?
Venture capital is not a spectator sport. We take the time to build relationships with entrepreneurs, often treating them like a partner years before investing. When we do invest in a company, we’re committing far more than capital — we’re also committing our firm’s time, energy, and network.
Claims that venture is overcrowded and outdated aren’t new. Crowdfunding platforms and a proliferation of new seed funds prompted a similar debate several years back. We’re conscious of these arguments and potential new competitors, but many of them seem to equate venture investing to random stock picking, which isn’t consistent with our approach. We’re navigating today’s venture environment the same way that we have for over 30 years — we are looking to back exceptional people tackling real problems in compelling and innovative ways.
Based on all the pitches you and Accel have received since the beginning of 2017, what are some trends you think Term Sheet readers should be paying attention to?
There are still great technology companies being formed across sectors and geographies. As you pointed out earlier, the prevailing narrative around private tech investing right now seems to be fairly negative. Looking under the headline figures citing record venture investment levels and round sizes, we’re seeing an increasing number of companies come to market with both a large strategic vision and a commercial focus from day one.
What’s an example of a company like that?
MessageBird, which was bootstrapped for six years and is competing very successfully around the world — and will hit a $100 million run rate by end of year. LightSpeed also exemplifies this scrappiness. Prior to taking on external funding, their team was also bootstrapped for five years and grew revenue 2,000% in that time. While we’re always conscious of valuation, we’re also enthusiastic about the operating profiles of many tech companies we’re seeing today.
What’s the best business advice you’ve ever received?
Don’t overthink things. It’s easy to lose sight of this in tech, but some of the best companies we’ve backed at Accel are built on fairly simple ideas with well-executed business models.
*Upcoming Q&As for ‘5 Qs with a Dealmaker’ include Andreessen Horowitz’s Jeff Jordan and Blockchain Capital’s Bart Stephens. Email me or send me a tweet with recommendations on who you’d like to see featured.*
POWER MOVES: Uber’s board of directors met yesterday to discuss how the embattled tech company will run going forward. Here are the three key things to know:
• Power structure: Travis Kalanick’s power at the company will be significantly reduced. That’s thanks to the new “one share, one vote” provision, which strips Kalanick and some of the company’s earliest backers (like Benchmark) of their outsize voting power. The 11-person board also moved to expand its size to 17 seats. As someone on Twitter said, they’re going to need an UberXL for that. The new policy would require a whopping two-thirds of the directors’ votes to approve a new chief executive, meaning Uber’s new CEO Dara Khosrowshahi can breathe a sigh of relief.
• SoftBank deal: SoftBank, alongside Dragoneer Investment Group, has agreed to invest between $1 billion and $1.25 billion in Uber at its ~$70 billion valuation. The group would also spend up to $10 billion to buy shares from existing investors at a lower valuation of about $50 billion. This is not a done deal, and it could fall apart if not enough shareholders choose to sell their shares.
• Path to IPO: The board also agreed to move Uber toward an IPO. The company would go public by late 2019 or let early and large shareholders sell their stock. “Today the Board came together collaboratively and took a major step forward in Uber’s journey to becoming a world class public company,” Kalanick said in a statement.
THE LATEST FROM FORTUNE...
• Inside Macy’s secret weapon (by Phil Wahba)
• Disney’s Bob Iger speaks out about gun violence (by Michal Lev-Ram)
• Goldman Sachs CEO Lloyd Blankfein weighs in on Bitcoin (by Lucinda Shen)
• Elon Musk’s ludicrous new idea (by Leon Vanstone)
• Canada PM Justin Trudeau is coming to Fortune’s Most Powerful Women Summit (by Valentina Zarya)
Yahoo says all 3 billion accounts hacked in 2013. Equifax & Wells Fargo apologize to Congress. Europe orders Amazon to pay $300 million in back taxes. Donald Trump gets final list of Fed candidates. The U.K. could lose a $79 billion market after Brexit.
• INFINIDAT, an Israel-based independent provider of petabyte-scale data storage solutions, raised $95 million in Series C funding at a $1.6 billion valuation. Goldman Sachs Private Capital Investing led the round, and was joined by investors including TPG Growth.
• Roofstock, an Oakland, Calif.-based online marketplace for single-family rental home investing, raised $35 million in Series C funding. Canvas Ventures led the round, and was joined by investors including Lightspeed Venture Partners, Bain Capital Ventures, Khosla Ventures, Nyca Partners, QED Investors, and FJ Labs.
• Frame.io, a New York-based collaboration platform for the video industry, raised $20 million in Series B funding, according to TechCrunch. FirstMark Capital led the round, and was joined by investors including Accel Partners, SignalFire and Shasta Ventures. Read more.
• TripActions, a Mountain View, Calif.-based travel management software, raised $12.5 million in funding to complete its Series A round with a total of $27.1 million. Lightspeed Ventures led the round, and was joined by investors including Zeev Ventures.
• Numetric, an Salt Lake City, Utah-based business intelligence tool provider, raised nearly $13 million in funding. Investors include Insight Venture Partners, EPIC Ventures, Tim Draper, and Aaron Skonnard of Pluralsight.
• Urgent.ly, a Virginia and California-based digital roadside assistance platform, raised $10 million in Series B funding. Investors include American Tire Distributors, Verizon Ventures and Forté Ventures.
• Pensa Networks, a Mountain View, Calif.-based cloud platform that enables the adoption of virtual data centers has rebranded itself to Pensa, Inc, and raised $4 million in Series A funding. March Capital Partners led the round.
• Clearsurance, a Newburyport, Mass.-based crowdsourced review, rating and educational platform for the insurance industry, raised $4 million in a Series A funding. Michael Crowe led the round, and was joined by investors including Davis Capital Partners.
• Fuel50, a New Zealand-based career pathing software, raised $2.5 million in Series A funding. Investors include Rincon Venture Partners and Bonfire Ventures.
• GROW, a smart gardening company, raised $2.4 million in seed funding. Resolute Ventures led the round.
• Radar, a New York City-based location platform for mobile apps, raised $2 million in seed funding. Accel led the round, and was joined by investors including Expa and Fuel Capital.
• Forensic Logic, a Walnut Creek, California-based provider of network search technology and cloud-based information services to law enforcement, raised funding of undisclosed amount. Investors include Mainsail Partners.
• PatientWisdom, a New Haven, Connecticut-based digital application that collects and curates patient stories, raised funding of undisclosed amount. Investors include OSF Ventures.
PRIVATE EQUITY DEALS
• Pfingsten Partners acquired Lumenier, a Sarasota, Fla.-based provider of motors, propellers, antennas, airframes, batteries, electronics and other drone-related components. Financial terms weren’t disclosed.
• Growth Street Partners made a minority growth equity investment in CRM Web Solutions, a provider of customer relationship management and marketing SaaS for the early childhood learning industry. Financial terms weren’t disclosed.
• Office Depot agreed to buy CompuCom Systems Inc, a Plano, Texas-based provider of IT services, for about $1 billion.
• Lawson Products, Inc. (NASDAQ:LAWS) acquired The Bolt Supply House Ltd, a Canada-based operator of fasteners and industrial related products, for approximately CAD$40.0 million ($32 million).
• Gannett Co Inc invested less than $10 million in Grateful Ventures, an online media company that focuses on lifestyle content including videos about food and cooking, according to Reuters. Read more.
• Realtime Electronic Payments acquired PaidSuite, a Scottsdale, Ariz.-based electronic payments provider. Financial terms weren’t disclosed.
• Qudian, Beijing, China-based company that provides small loans for e-commerce purchases, said it plans to raise $769 million in an offering of 37.5 million shares(5% insider) priced between $19 to $22. In 2016, the company posted revenue of $212.8 million on income of $85.1 million. Morgan Stanley, Credit Suisse, Citi, CICC, and UBS Investment Bank are joint bookrunners in the deal. The company plans to list as “QD” on the NYSE.
• OptiNose, a Yardley, Penn.-based company for nasal inflammation treatments, said it would raise $100 million in an offering of 6.3 million shares between $15 to $17 a piece. The company posted revenue of $47.5 million and earnings of $9.5 million. The company is backed by Avista Capital Partners (58.85% pre-offering), TKWD Ventures (14.7%), Entrepreneurs Fund (10%), Ikos Invest AS (8.8%), and Fidelity Management and Research Company (7.5%). Jefferies, Piper Jaffray, BMO Capital markets, and RBC Capital Markets are joint bookrunners in the deal. OptiNose plans to list on the Nasdaq as “OPTN.”
• Evoqua or EWT Holdings, a Pittsburgh, Penn.-based water treatment company, filed for an $100 million IPO. The company had revenue of about $1.2 billion in the 12 months ending September 2016, with loss of $86.1 million. Credit Suisse and J.P. Morgan are underwriters in the deal. The company plans to list as “AQUA.”
• Amazon acquired Body Labs, a New York-based data and information provider related to human body shape, pose, and motion, for an amount between $50 million and $70 million, according to TechCrunch. Read more.
• Lincolnshire Management sold Fabbri Group, an Italy-based provider of wrapping machines, films and related parts for the fresh food packaging sector, to Argos Soditic. Financial terms weren’t disclosed.
• Boston Scientific Corp agreed to acquire Apama Medical Inc, a Campbell, Calif.-based medical device firm, for $300 million, which includes $175 million in cash upfront. Apama had raised more than $34 million in venture funding from investors including Ascension Ventures, Medvance Incubator Partners, ONSET Ventures and Incept.
FIRMS + FUNDS
• TPG, a San Francisco-based private equity firm, raised $2 billion for The Rise Fund.
• Trive Capital Management, a Dallas, Texas-based investment firm, raised $1 billion for its third fund, Trive Capital Fund III.
• NovaQuest Capital Management, a Raleigh, N.C.-based private equity and venture capital firm, raised $59.8 million for its private equity fund, according to an SEC filing. The fund’s target is $400 million.
• John McAvoy joined Blueprint Capital Advisors as a partner.
• FBR Capital Markets & Co. named David Buck, George Zavoico, and Madhu Kumar equity research analysts along with investment banker Derrick Li.
• The Carlyle Group named Idris Mohammed as managing director on the firm’s Sub-Saharan African fund team.