By Polina Marinova
November 8, 2017

5 Qs WITH A DEALMAKER

Snap revealed some worse-than-expected earnings in the third quarter and a $40 million Spectacles flop during its earnings call on Tuesday. CEO Evan Spiegel noted that the company will redesign the app “to make it easier to use.”

Last Friday, I spoke with Jeremy Liew, the man who wrote Snap’s first check. Liew, a partner at Lightspeed Venture Partners, invested $485,000 in Snap in April 2012 — an investment that returned more than $1 billion when the company went public. Below is an abbreviated conversation with Liew. Read the full Q&A here.

TERM SHEET: You’ve had quite a year — Snap went public. Walmart acquired Bonobos. Stitch Fix filed for an IPO. Tell me about your investment thesis. What do you look for in a company or founder before investing?

LIEW: We’re usually looking for some indication that companies can become part of popular culture in the future. We’re looking for some signal that the company is not niche, and it will expand beyond what everyone will be doing in the future.

One of the ways we do that is we look for services that attract a lot of young female users initially. It’s a service that could make sense for a whole lot of people, but for whatever reason, the initial user base is young and female. We think that young women are the early adopters of popular culture. They’re kind of hit-makers for the rest of society.

You wrote Snapchat’s first big check in 2012. What did you see in the company then that made you want to invest?

Snapchat was highly engaging with young women, which is predictive of something being used broadly in the future. It showed incredible growth, incredible engagement, and incredible retention. That really caught our attention because we look for something that has a scalable, repeatable way of growing, and this appeared to be doing so through word of mouth. Snapchat was definitely creating a habit because we could tell from the engagement and retention, people were using the app several times a day.

Finally, we look for a unique insight from the founders that explains why this is all happening. We needed to know that they didn’t just get lucky but that they will continue growing the business in the future. This is obvious now, but this was a unique insight back in 2012 when Evan Spiegel said that Facebook and Instagram are highlight reels for your life. You use them when you’re feeling happy, excited, and proud. They give people performance anxiety about what they’re willing to put on social media. If you’re only seeing the top 10% of somebody’s life, you don’t really know the whole person. Snapchat allowed its users the freedom to be able to put things up that weren’t “Instagram-ready.”

What do you think about Snap’s performance since it went public?

I actually don’t think about the company’s performance since it went public. I think about the performance since it was founded. That, to me, is the more relevant metric. In the spring of 2012 when we invested, it had tens of thousands of users. Today, it’s in the hundreds of millions. It employs tens of thousands of people, it generates hundreds of millions of dollars, and it’s touching the lives of a good portion of the Western world every single day. That’s pretty remarkable.

It’s been reported that there was a misunderstanding with the terms of the deal. (Spiegel reportedly paid less attention to the exact terms that gave Lightspeed veto power over investment at Snap & regretted it later.) What do you think about the evolution in recent years from founder-friendly investing to more of a climate of governance?

I think that everything is a pendulum, and market conditions can change from one side to another over time. I do think it’s important to understand that some people will try to portray Evan as a naive founder. But he’s an incredibly sophisticated entrepreneur, and I think people can see that from the smart decisions he has made through the course of the life of his company. So yes, things can somehow get confused, but he’s a very sophisticated business person. No one can confuse Evan into doing something.

So you’re saying those reports about the misunderstanding of the terms were exaggerated?

I think that everything that has ever been done with Snapchat is something Evan has understood. He was well-advised by really smart people.


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…AND ELSEWHERE

Thomas Barrack’s Colony Capital ends bid for Weinstein studio. Bill Ackman loses bitter ADP proxy battle. These are Uber’s new ‘cultural norms.’ Apple to ramp up work on augmented reality headset. Private equity firms give each other the backhand. Bitcoin proves hard to kill in China.


VENTURE DEALS

Intersection, a New York-based smart cities technology and media company, raised $150 million in funding. Graham Holdings Company led the round, and was joined by investors including ArrowMark Partners and NewSpring.

Compass, a New York-based real estate technology company, raised $100 million in Series E funding at a $1.8 billion valuation. Investors include Fidelity Investments, IVP, and Wellington Management.

Monzo, a U.K.-based digital challenger bank, raised 71 million pounds ($93 million) in funding, according to Reuters. Read more.

Yotpo, an Israel-based user-generated content marketing platform, raised $51 million in funding. Access Industries (ClalTech) led the round.

Leanplum, a San Francisco-based mobile marketing platform, raised $47 million in Series D in funding. Norwest Venture Partners led the round, and was joined by investors including Canaan Partners, Kleiner Perkins Caufield & Byers, and Shasta Ventures.

EOC Pharma Group, a China-based oncology-focused development and commercialization company, raised $32 million in Series B funding. Taikang Investment led the round, and was joined by investors including Sequoia China and H&Q Asia Pacific.

Putiandi, a China-based platform for renting a pop-up space, raised approximately $13.6 million in funding. Investors include Eastern Bell Venture Capital, PGA Fund, GoHigh Fund and Meridian Capital.

Quidd, a New York City-based digital goods startup, raised $13 million in Series A funding. Sequoia Capital led the round.

Interaxon Inc, a Canada-based brain health technology company, raised $11.6 million in funding. Trend Forward Capital, Export Development Canada and OMERS Ventures led the round.

MyMusicTaste, a South Korea-based fan-initiated concert making platform for music artists, raised $11 million in Series C funding, according to TechCrunch. KTB Network led the round, and was joined by investors including Stonebridge and Yellow Dog. Softbank Ventures Korea, Samsung Venture Investment Corporation, Formation 8, Bokwang Investment and Golden Gate Ventures also participated. Read more.

Tear Film Innovations Inc, a San Diego, Calif.-based developer of dry eye care products, raised $9 million in funding. Visionary Ventures Fund LP and Tigris Ventures LLC led the round.

Resonate, a Reston, Va.-based provider of SaaS-enabled real-time consumer intelligence and engagement solutions, raised $8 million in funding. Argentum led the round, and was joined by investors including Revolution Growth and Greycroft Partners.

LogDNA, a San Francisco-based log management platform, raised $7 million in Series A funding. Initialized Capital led the round.

Matic Insurance Services, a Sherman Oaks, Calif.-based digital insurance agency whose technology enables borrowers to purchase homeowner’s insurance during the mortgage transaction, raised $7 million in Series A funding. Investors include Anthemis and Manchester Story Group.

NeuVector, a Milpitas, Calif.-based container firewall company, raised $7 million in Series A funding. Hummer Winblad Venture Partners led the round.

Equalum, a Silicon Valley and Tel Aviv-based provider of an enterprise data beaming platform, raised $5 million in Series A funding. Investors include Innovation Endeavors and GE Ventures.

Coconut Software Corporation, a Canada-based enterprise appointment scheduling software company, raised CAN $4.2 million ($3.3 million) in Series A funding. Information Venture Partners led the round, and was joined by investors including ScaleUp Ventures and StandUp Ventures.

Rightway Healthcare, a New York-based patient navigation and analytics company, raised $2 million in seed funding. UHNW led the round.

VisitPay (fka iVinci Health), a Boise, Idaho patient financial health platform, raised funding of an undisclosed amount. Norwest Venture Partners led the round, and was joined by investors including Ascension Ventures.


PRIVATE EQUITY DEALS

Bioclinica, a portfolio company of Cinven, acquired MDDX Research & Informatics, a  San Francisco-based medical research image management platform.

Warburg Pincus acquired a stake in Cyren, a McLean, Va.-based internet security-as-a-service provider, for about $19.6 million.

Cairngorm Capital Partners acquired Thornbridge, a Scottish timber processing and distribution company. Financial terms weren’t disclosed.

Luminate Capital Partners made an investment of an undisclosed amount in AMTdirect, a Cornelius, N.C.-based provider of lease administration and lease accounting solutions.

Norwest Equity Partners made an investment of an undisclosed amount in Ramsey Industries, a Tulsa, Okla.-based maker of service cranes. Financial terms weren’t disclosed.


OTHER DEALS

Teall Investments acquired Riddle & Bloom, a Boston-based millennial-focused marketing agency. Financial terms weren’t disclosed.

Shiseido Americas Corporation, a subsidiary of Shiseido Company, Limited, acquired Giaran, Inc., a Boston-based data driven company with technology in artificial intelligence platforms. Financial terms weren’t disclosed.

Material Handling Systems, Inc acquired Atronix Engineering, Inc, a Peachtree Corners, Ga.-based controls systems integrator, and Advanced Production Systems, Inc, a Louisville, Ky.-based dedicated specialist in engineering, design, and assembly of control panels. Financial terms weren’t disclosed.


IPOs

Sterling Bancorp, a mortgage loan company based out of Southfield, Mich., plans to raise $130 million in an offering of 10 million shares(23% insider) between $12 to $14 a piece. In 2016 the company posted income of $33.2 million with loans of $2 billion. Real estate developer Scott Seligman and his family backs the company. Sandler O’Neill and Partners is underwriter in the deal. The company has filed to list on the Nasdaq.

Metropolitan Bank Holding, A New York City-based bank , said it raised $109 million in an IPO of 3.1 million shares at $35 a piece, above its $31 to $35 range. The company posted assets of $1.6 billion by mid-2017, with income of $5 million in 2016. J.P. Morgan, Keefe, Bruyette & Woods, and Piper Jaffray are underwriters in the deals. Metropolitan plans to list on the NYSE as “MCB.”

Bluegreen Vacations, a Boca Raton, Fla.-based timeshare resort company, plans to raise $110 million in an offering of 6.5 million shares(42% insider) at a range of $16 to $18 a piece. In 2016, the company posted revenue of $662.6 million and income of $75 million. BBX Capital backs the company. Stifel and Credit Suisse are bookrunners in the deal. The company plans to list on the NYSE as “BXG.”

Fireman B.V. or InflaRx, a Jena, Germany,-based pharmaceutical company developing treatments for inflammatory diseases, raised $100 million in an offering of 6.7 million shares(40% insider) at $15 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.”

CBTX, a commercial bank based out of Houston, Texas, raised $62 million in an offering of 2.4 millions shares at $26 a piece, the high end of its range. The company recorded 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.”


EXITS

James Hardie Industries plc agreed to acquire XI (DL) Holdings GmbH and its subsidiaries from Xella International S.A. in an all-cash transaction valued at €473 million ($549 million).

Beringer Capital acquired BrandShop, a Shelton, Conn.-based digital commerce provider for consumer brands. The seller was Veronis Suhler Stevenson Partners LLC. Financial terms weren’t disclosed.


FIRMS + FUNDS

Genesis Park, a Houston-based private equity firm, raised more than $148.5 million for its second fund, according to an SEC filing. The fund’s target is $250 million.


PEOPLE

Hayley Barna is joining First Round Capital as a general partner. Barna was the co-founder and co-CEO of Birchbox.

Solium Capital acqui-hired four senior executives, Steve Liu, Betty Ma, Russ Zanetti and Scott Winder, to form Solium Analytics. Previously, they were at Silicon Valley Bank Analytics.

Roger Liew joined Impact Engine as an operating partner.


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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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