On deals and dealmakers.

By Polina Marinova
October 13, 2017

SECRETS & MONEY

Happy Friday, Term Sheet readers.

BAD OUTCOME: The Wall Street Journal published a jaw-dropping story about how a hot tech startup misled customers with manipulated information. Outcome Health, a Chicago-based in-office medical advertising startup, has raised $500 million in venture funding at a $5 billion pre-money valuation. Investors include Goldman Sachs and Alphabet’s investment arm CapitalG.

Outcome installs video screens in doctors’ offices and charges pharmaceutical companies to run ads on them aimed at patients. Bill Gurley praised Outcome’s CEO Rishi Shah as “the real deal” and “a class act.” It all sounds good until you find out that some employees charged pharmaceutical companies for ad placements on more video screens than Outcome had actually installed, according to the WSJ. The startup also reportedly provided inflated data to measure how well ads performed and manipulated third-party analyses showing the effectiveness of the ads. Here’s a snippet from the story:

“Some advertisers required Outcome to provide affidavits with screenshots showing their ads had run in doctors’ offices. Outcome employees sometimes grabbed a screenshot of an ad from their own computers, edited it to add a timestamp and doctor identification number to make them appear genuine, and affixed Mr. Desai’s electronic signature, say people who prepared the documents.”

Here’s an example of yet another unicorn startup whose optics veer too far from the reality of its operations. Like I’ve said previously, big ambitions, positive press, and slick marketing are not enough to build a sustainable business. Neither are doctored screenshots and inflated numbers. Friendly reminder: we have an anonymous tip box here.

STEALTH MODE: In other startup news, Magic Leap, a Florida-based wearable tech company, may be raising as much as $1 billion in Series D funding at a valuation between $6.5 and $7 billion, according to TechCrunch. Allow me to remind you that the secretive company hasn’t even released a product to the public yet. But this hasn’t stopped the money from pouring in. Existing investors include Alibaba, Qualcomm, and Google. The following is from a September story on Magic Leap:

“Magic Leap has wowed investors with a promise to perfect a futuristic field, augmented reality, that all the leading consumer technology companies are actively chasing. But it has never given a launch date for its device and offered few details on how it would work.”

Because this company has kept the details of its technology largely to itself, my questions continue to be: How can you do due diligence on a promise? When do investors start to look past audacious visions and the massive valuations?


THE LATEST FROM FORTUNE...

• Can ‘Experience Investing’ Help Female Entrepreneurs? Meet The Helm. (by Valentina Zarya)

• Elon Musk’s SpaceX may fuel a $1 trillion space business boom (by Aaron Pressman)

• Richard Branson made an investment  in Hyperloop One (by Aric Jenkins)

• Uniqlo’s four secrets for building a global brand (by Kieron Johnson)

• Why women are boycotting Twitter today (by Natasha Bach)

…AND ELSEWHERE

US paves the way for use of pioneering ‘gene therapies.’ Wall Street is the new fantasy island. Coinbase is launching instant purchases. Tech giants are being viewed as threats. The LaCroix bubble may be ready to burst. Alphabet’s Waymo demanded $1 billion in settlement talks with Uber.


VENTURE DEALS

Kobalt, a U.K.-based music royalty collecting startup, raised $14 million in funding from Bill Maris’ Section 32 in a second installment into Kobalt’s Series D. Hearst led the round. The company has raised a total of $75 million at a $789 million valuation, according to TechCrunch. Read more.

XL Hybrids Inc, a Boston-based provider of connected fleet electrification solutions for commercial and municipal fleets, raised $22 million in Series D funding. Investors include Constellation Technology Ventures and IKEA Group.

CoverWallet, a New York City-based business insurance startup, raised $18.5 million in Series B funding. Foundation Capital led the round, and was joined by investors including Union Square Ventures, Index Ventures, CV Starr and Two Sigma Ventures.

Honest Buildings, a New York City-based project management platform for real estate owners and operators, raised $13 million in funding. Investors include Brookfield Property Partners, Rudin Management, C-III Capital Partners, Navitas Capital, Greensoil Building Innovation Fund, Bienville Capital Management, Riverpark Fund, The Westly Group, Rockport Capital, Circle Ventures and Thrive Capital.

CastBox, a San Francisco-based spoken-audio platform, raised $16 million in funding. Qiming Venture Partners and IDG Capital co-led the round, and were joined by investors including SIG China, GSR Ventures and ZhenFund.

Omnyway, a San Francisco-based augmented digital commerce platform, raised $12.75 million in Series A funding. Nyca, CommerzVentures and CEFIF led the round, and were joined by investors including Commerce Ventures and Industry Ventures.

ICX Media, a Washington, D.C.-based video data intelligence platform, raised $6.6 million in Series A funding. Grotech Ventures led the round, and was joined by investors including NRV and Avonlea Capital.

Flont, a New York-based “Jewelry as a Service” platform, raised $5 million in funding. Investors include C Ventures.

Supersolid, a London-based mobile games developer, raised $4 million in funding. Index Ventures led the round.

Visual Vocal, a Seattle-based immersive productivity platform for team collaboration, raised $3.6 million in seed funding. Eniac Ventures led the round, and was joined by investors including Scout Ventures, Spider Capital, and the Alliance of Angels.

Groupize, a Boston-based platform provider for corporate meetings, raised $3.25 million in funding. Thayer Ventures led the round, and was joined by investors including Golden Seeds, Launchpad Ventures, Wayfare Ventures, NTX Venture Fund and the Ace Fund.

Beauty Bakerie, a San Diego, Calif.-based brand of cosmetics, raised $3 million in seed funding. Unilever Ventures led the round, and was joined by investors including 645 Ventures and Blue Consumer Capital.

CarHopper, a Miami, Fla.-based online booking platform for luxury and exotic car rentals, raised $1.5 million in seed funding. The investors were not named.

HomeToGo, a Berlin-based metasearch engine for vacation rentals, raised Series C funding of an undisclosed amount. Insight Venture Partners led the round, and was joined by investors including Acton Capital Partners, DN Capital and Global Founders Capital.

VY Esports, a Santa Monica, Calif.-based content and services platform “that bridges the gap between esports and brands,” raised seed funding of an undisclosed amount. Raine Ventures led the round, and was joined by investors including Courtside Ventures and Elysian Park Ventures.


HEALTH AND LIFE SCIENCES DEALS

VirionHealth Ltd, a U.K.-based developer of new treatments for respiratory viral infections, raised up to 13 million pounds ($17.3 million) in Series A funding from Abingworth.


OTHER DEALS

Lufthansa (DB:LHA) will acquire several business units from Air Berlin, including Niki Luftfahrt and Luftfahrtgesellschaft Walter, for 210 million euros, or about $249 million, according to the New York Times. Read more.

Nonni’s Foods LLC, a Tulsa, Okla.-based specialty cookie maker, is weighing a sale, according to The Wall Street Journal. Read more.

Sportradar US acquired MOCAP Analytics, a Silicon Valley-based player-tracking tech startup. Financial terms weren’t disclosed.

BASF agreed to buy seed and herbicide businesses from Bayer for 5.9 billion euros ($7 billion) in cash, according to Reuters. Read more.


IPOs

OptiNose, a Yardley, Penn.-based company for nasal inflammation treatments, said it raised $120 million by offering 7.5 million shares at $16 a piece. That’s an upsized offering within its $15 to $17 range. 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.”

• Loma Negra, a Buenos Aires-based cement maker, set the terms of its IPO. The company says it plans to raise a total of $853 million from an offering of 44.2 million ADSs between $15 to $19 in the NYSE, and an additional 30 million new ordinary shares between $3 to $3.80 a piece on the Bolsas y Mercados Argentinos. The company posted profit of $30.2 million on revenue of $595 million in 2016. Camargo Corrêa backs the company. Bank of America Merrill Lynch, Bradesco BBI, Citigroup, HSBC, Itau BBA, and Morgan Stanley are underwriters in the deal. The company plans to list as “LOMA” on the NYSE.


EXITS

Thompson Street Capital Partners acquired BCC Software LLC, a Rochester, N.Y.-based provider of postal software and data marketing solutions. from Versa Capital Management. Financial terms weren’t disclosed.

Innova Global Inc, which is backed by TriWest Capital Partners, acquired Braden, a Tulsa, Okla.-based provider of auxiliary equipment for gas turbines. The seller was Global Power Equipment Group. Financial terms weren’t disclosed.

Equistone acquired a majority stake in Inspired Thinking Group, a U.K.-based provider of outsourced marketing services. The seller was Bridgepoint Development Capital. Financial terms weren’t disclosed.

TPG sold its stake in Myanmar Distillery Company, a Myanmar-based spirits company, to Thai Beverage Public Company Limited. Financial terms weren’t disclosed.


FIRMS + FUNDS

American Securities Partners, a New York-based private equity firm, is seeking to raise $6 billion for its eighth private equity fund, according to an SEC filing.

M33 Growth, a venture and growth stage investment manager, raised $180 million for its debut fund, M33 Growth I L.P.


PEOPLE

Alantra named Jeremy Novak as a managing director. Previously, Novak was at Houlihan Lokey.

Steve Allpress joined BGF Ventures as an entrepreneur-in-residence. He is the co-founder of Five AI & Icera.


SHARE TODAY'S TERM SHEET

View this email in your browser.

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

SPONSORED FINANCIAL CONTENT

You May Like