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November 16, 2018
POWERING A COMEBACK

Good morning, Term Sheet readers.

After 26 hours of travel, I'm back in NYC! Thank you to all of you who wished me good luck on the marathon — I certainly needed it. I finished, I'm probably never running something like that ever again, and I'm excited to be back. Now, on to the news.

 
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BIG BUY: Another day, another large cybersecurity acquisition. Today, BlackBerry announced it will buy Cylance, an AI-based cybersecurity company, in an all-cash $1.4 billion deal. Cylance had raised approximately $297 million in venture funding from investors including Khosla Ventures, Insight Venture Partners, DFJ Growth, KKR, and Blackstone Tactical Opportunities.

Various media reports suggest that Cylance was preparing to go public before BlackBerry swooped in with an offer. So what on earth does BlackBerry want to do with a company that uses AI & machine learning to preempt security breaches before they occur?

The idea is that Cylance will operate as a separate business unit at the company, but it will eventually integrate its technology with BlackBerry's Spark Enterprise of Things platform. Spark is BlackBerry's communications platform that enables any manufactured IoT device to connect with another. Of course, a system like that requires heavy emphasis on privacy and security, and that's where the Cylance acquisition comes in.

This deal marks BlackBerry's largest purchase to date, and it is the latest in a series of strategic cybersecurity plays for the Canadian tech company. But this has been going on for a while. Ever since taking the helm as BlackBerry chief executive in 2013, John Chen has been steering the has-been smartphone maker away from consumer hardware and into enterprise services.

"I would not call us in a turnaround mode anymore," Chen told Bloomberg TV in January. "We make money, we generate growth in the right areas. We're very good in the cybersecurity [and] enterprise for regulated industries."

The cybersecurity sector has become white-hot in terms of M&A activity in 2018. In the last year, Thoma Bravo acquired network security company Barracuda for $1.6 billion, AT&T acquired threat intelligence company AlienVault for an undisclosed amount, a private equity group acquired cybersecurity startup PhishMe for $400 million, and Symantec bought cybersecurity companies Appthority and Javelin Networks.

Just last week, I wrote about Thoma Bravo's $950 million acquisition of software security firm Veracode. According to Pitchbook, private equity firms have already completed more cybersecurity deals in the U.S. and Europe in 2018 than in any other recent full year, and global cybersecurity is estimated to be a $232 billion industry by 2022, up from around $138 billion last year.

In other words, there's plenty of opportunity in the cybersecurity sector across the board. What remains to be seen is whether the former mobile phone giant can make a genuine comeback through its new enterprise pivot.

We have yet to see just how much Cylance's actual core technology will affect BlackBerry's bottom line, but here's one detail I'm sure made the all-cash deal worth it: Cylance has 3,500 active enterprise customers, including more than 20% of which are Fortune 500 companies.

Immediate access to that customer base would give BlackBerry a huge advantage in the cybersecurity world, and I'm sure those business relationships played a big role in negotiating the deal's hefty price tag.

WEEKEND READING: Fortune released its annual Business Person of the Year List yesterday. The list weighs financial metrics including 12-month and 36-month increases in profits and revenue, stock performance, and total shareholder returns over the same period. Then we toss in CEO intangibles like business influence, strategic vision, and the impact of leadership.

This year, the top honor goes to Tricia Griffith, who is the CEO of insurance company Progressive. Progressive's one-year and annualized three-year sales growth (at 20.2% and 11.4%, respectively) tops both Apple's and Microsoft's. The insurer's stock is up nearly 50% over the past 12 months, and profits have more than doubled. In 2017 Progressive vaulted past Allstate to become the nation's third-largest auto insurer, behind Geico and State Farm.

My colleague Aric Jenkins has an in-depth feature on Griffith's leadership tactics and her path from an entry-level claims representative to the CEO of a Fortune 500 company. Read the story here.

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VENTURE DEALS

Automation Anywhere, a San Jose, Calif.-based provider of robotic process automation, raised $300 million in funding from SoftBank Vision Fund.

Airtable, a San Francisco-based tool that allows creators to build their own software, raised $100 million in Series C funding at a $1.1 billion valuation. Investors include Thrive Capital, Benchmark, Coatue Management, Delphine Arnault, Emily Weiss, Alexa Von Tobel, Sarah Smith, Dan Rose, CRV and Caffeinated Capital.

Habana Labs Ltd, an Israel and San Jose, Calif.-based fabless semiconductor company, raised $75 million in Series B funding. Intel Capital led the round, and was joined by investors including WRV Capital, Bessemer Venture Partners, and Battery Ventures.

Renalytix AI plc, a U.K.-based developer of artificial intelligence-enabled clinical diagnostics for kidney disease, raised $29 million in funding. The investors were not named.

Emerge, a provider of a platform that connects shippers and carriers, has raised $20 million in seed funding. Greycroft led the round.

Pirate Studios, a U.K.-based music technology company, raised $20 million in funding. Investors include Talis Capital.

Airspace Technologies, a provider of an ecosystem of software applications that lets users to quote, route, and track shipments in real time, raised $20 million in Series B funding. Scale Venture Partners led the round, and was joined by investors including Qualcomm Ventures, Defy.vc, Cross Culture Ventures and Schematic Ventures.

AdaSky, an Israel-based provider of far-infrared technology for self-driving vehicles, raised $20 million in funding from Sungwoo Hitech Co. Ltd.

Propel, a Santa Clara, California-based platform for future brands, raised $18 million in Series B funding. Norwest Venture Partners led the round.

Apex.ai, a Palo Alto, Calif.-based developer of an operating system for self-driving vehicles, raised $15.5 million in Series A funding. Canaan led the round, and was joined by investors including Lightspeed.

Pachyderm, a San Francisco-based big data company, raised $10 million in funding. Benchmark led the round.

Self Lender, an Austin, Texas-based fintech startup, raised $10 million in Series B funding. Altos Ventures led the round, and was joined by investors including Silverton Partners and Accion Venture Lab.

Kaloom, a Montreal and Silicon Valley-based software startup, raised $10 million in funding. Fonds de solidarite FTQ and Somel Investments led the round, and were joined by investors including MBUZZ Investments.

SmartRent, a Scottsdale, Ariz.-based smart home automation platform company for property managers and renters, raised $5 million in funding. Real Estate Technology Ventures led the round.

Ezra, a New York City-based cancer screening startup, raised $4 million in seed funding. Accomplice led the round, and was joined by investors including Founders Future, Credo Ventures, Seedcamp and Esther Dyson.

Well Data Labs, a Denver-based business that helps companies manage, analyze and report frac data, raised Series B funding of an undisclosed amount. Cottonwood Venture Partners led the round.

Axio Global, a New York-based provider of a cybersecurity optimization platform, raised funding of an undisclosed amount. The investor was NFP Ventures.

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HEALTH AND LIFE SCIENCES DEALS

Cadent Therapeutics, a Cambridge, Mass.-based developer of therapies focused on movement and cognitive disorders, raised $40 million in Series B funding. Cowen Healthcare Investments and Atlas Venture led the round, and was joined by investors including Qiming Venture Partners, Access Industries, Clal Biotechnology Industries and Novartis Institutes for Biomedical Research.

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PRIVATE EQUITY DEALS

Resource Label Group LLC, which is backed by First Atlantic Capital and TPG Growth, acquired Best Label, a California-based label manufacturer. Financial terms weren't disclosed.

Mercer Advisors Inc, a portfolio company of Genstar Capital, acquired Financial & Investment Management Group, Ltd, a Traverse City, Mich.-based wealth management firm. Financial terms weren't disclosed.

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IPOs

Canaan, a crypto mining equipment maker, let its $400 million IPO in Hong Kong lapse. Read more.

Post Holdings, the maker of cereals such as Pebbles and Honey Bunches of Oats, is planning for an IPO of its active nutrition business. Read more.

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FIRMS + FUNDS

Real Estate Technology Ventures, a Park City, Utah-based venture capital firm, raised $108 million for its inaugural fund, Real Estate Technology Ventures.

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PEOPLE

TCV promoted Nari Ansari to general partner.

Gautam Shah joined Evolution Media as a vice president on the investment team.

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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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