I SCAM YOUS
Good morning, Term Sheet readers.
MORNING READ: What better way to start the morning off than with a nice, hefty read about scams? As you might’ve noticed celebrity endorsements are helping startups raise big bucks for their initial coin offerings. There was Paris Hilton and LydianCoin. Jamie Foxx and Cobinhood. And now, The New York Times published a piece about how Floyd Mayweather repeatedly told his 13.5 million Facebook followers that they should buy a new virtual currency known as the Centra token. And then this happened (from the NYT):
“Thanks in part to the endorsements, in just a few weeks Centra’s founders raised over $30 million from investors around the world. They finished their fund-raising this month, just before a grand jury indicted two of the three co-founders on perjury charges stemming from a drunken-driving case.”
Centra is one of approximately 270 ICOs that have raised more than $3.2 billion this year, which is a 3,000% increase from last year’s total. This didn’t sit well with USV’s Fred Wilson. On Twitter, he responded to the reporter of the article with, “that piece made me want to puke.” So Wilson wrote his own take on ICOs titled, “I Scam Yous.” While he thinks emerging blockchain/crypto technologies represent the next wave of innovation, Wilson says ICOs are very risky investments that require a lot of diligence and patience. He writes:
“Most ICOs, like the ones mentioned in Nathaniel’s piece, are scams. And the celebrities and others who promote them on their social media channels in an effort to enrich themselves are behaving badly and possibly violating securities laws.”
It’s an insightful piece that lays out the characteristics of legitimate projects (ie: it must have clear use case, a reasonable valuation, a credible team). Curious to hear what you think (let me know on Twitter).
ON THE REBOUND: 2016 was a dark year for startup funding in India. Last year, Indian tech companies raised approximately $4.4 billion, which was a pretty significant decrease from the $7.9 billion raised the previous year. Now, Indian tech startups are back for round two. In a record-setting 2017, startups have absorbed almost $10 billion — with two months left to go.
Why? Largely because of SoftBank. (You’ll quickly learn that SoftBank is the fuel behind a lot of new trends.) According to The Financial Times, SoftBank’s return to aggressive investment in the country has been the largest factor for the rebound. Just look at some of these mega-deals: SoftBank poured $2.5 billion in Flipkart, $1.4 billion in Paytm, and $250 million in Ola in a matter of months. (Most recently, Ola announced it scored $1.1 billion in new funding from investors including SoftBank & Tencent Holdings.) Though this boost from foreign investors is promising, it remains to be seen whether India could replicate some of the explosive tech growth investors have experienced in China in recent years.
THE LATEST FROM FORTUNE...
• Teforia, the $1,000 Juicero of Tea, shuts down (by David. Z Morris)
• Bitcoin just reached another all-time high (by David Meyer)
• Why closing on Black Friday is good for REI’s brand (by Phil Wahba)
• New images of the tunnel that could save L.A. from traffic hell (by David Z. Morris)
The tech millionaire who became tech’s critic. Roger Stone Jr. got suspended from Twitter. BlackRock and Blackstone will open offices in Saudi Arabia. The government is giving money to dying malls. Mark Zuckerberg pays another visit to China. Why the Kardashians may never go away.
• Farmobile, an Overland Park, Kansas-based farm data company, raised $18.1 million in Series B funding. Investors include Anterra Capital and AmTrust Agricultural Insurance Services.
• Beam Dental, a Columbus, Ohio-based provider of dental benefits for small and medium-sized businesses, raised $5.5 million in Series B funding. Lewis & Clark Ventures led the round, and were joined by investors including Drive Capital.
PRIVATE EQUITY DEALS
• General Atlantic made an investment of an undisclosed amount in Authentic Brands Group, a New York-based owner of a portfolio of brands in fashion, sports, and entertainment.
• Cinven agreed to acquire a majority stake in Planasa, a Spain-based plant variety and nursery operators, for approximately €450 million ($523 million).
• Hildred Capital Partners, LLC agreed to acquire a major stake in Crown Laboratories, a Johnson City, Tenn.-based specialty pharmaceutical company. Financial terms weren’t disclosed.
• Joseph Tsai, the executive vice chairman and co-founder of Alibaba, agreed to acquire a 49% minority stake in the Brooklyn Nets, a Brooklyn-based basketball team. The terms include the option to acquire controlling interest of the NBA franchise in 2021, according to ESPN. The purchase price will be based on the $2.3 billion valuation of the team. Read more.
• Pineapple Payments acquired Payline Data Services, a Chicago-based full-service payment solutions provider. Financial terms weren’t disclosed.
• Sogou, a Beijing, China-based search engine, said it plans to raise $540 million in an offering of 45 million shares between $11 to $13 a piece. In 2016, Sogou posted revenue of $660.4 million and earnings of $56 million. Sohu(37.8% pre-offering) and Tencent(43.7%) back the company. The underwriters include J.P. Morgan, Credit Suisse, Goldman Sachs, and CICC. The company plans to list as “SOGO” on the NYSE.
• Four Seasons Education, a Shanghai, China-based math education company, said it plans to raise $101 million in an offering of 10.1 millions shares(9% insider) between $9 to $11 a piece. In 2016, the company posted revenue of $14.2 million and loss of $4.9 million. Morgan Stanley, Citigroup, and China Renaissance are underwriters in the deal. The company plans to list on the NYSE.
• Fireman B.V. or InflaRx, a Jena, Germany,-based pharmaceutical company developing treatments for inflammatory diseases, said it plans to raise $100 million in an offering of 67 million shares(40% insider) between $14 to $16 a piece. In 2016, InflaRx posted loss of 8.9 million euro, or $10.5 million. Bm-t betetiligungsmanagement thüringen, Staidson Biopharmaceuticals, and Kreditanstalt für Wiederaufbau A.d.ö.R. back the company. J.P. Morgan, Leerink Partners, and BMO Capital Markets are underwriters in the deal. The company plans to list on the Nasdaq as “IFRX.”
• Bandwidth, a Raleigh, N.C.-based API software company, said it plans to raise $84 million in an offering of 4 million shares between $20 to $22 a piece. In 2016, the company posted revenue of $152 million and income of $22.4 million. The company is backed by Carmichael Investment. Morgan Stanley, KeyBanc Capital Markets, Baird, Canaccord Genuity, and JMP Securities are underwriters in the deal. The company plans to list on the Nasdaq as “BAND.”
• CBTX, a commercial bank based out of Houston, Texas, said it plans to raise $60 million by offering 2.4 millions shares between $24 and $26 a piece. The company record loans of $2.2 billion for 2016 and income of $27.2 million. Stephens, Keefe, Bruyette & Woods, and Sandler O’Neill + Partners are underwriting the deal. The company plans to list on the Nasdaq as “CBTX.”
• DH Private Equity Partners agreed to sell its stake in TMF Group, a Netherlands-based provider of compliance and administrative services, to CVC Capital Partners for 1.75 billion euros ($2 billion).
• Genstar Capital acquired Institutional Shareholder Services Inc, a Germany-based proxy advisory firm, from Vestar Capital Partners, for $720 million.
• Triton acquired Rocore Inc, an Indianapolis-based maker of heat exchangers and provider of heat exchanger repair services. The seller was Keystone Capital. Financial terms weren’t disclosed.
• Alex Marsh joined Maven Capital Partners as an investment manager. Previously, Marsh was at Northstar Ventures.