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ANON TIP
June 19, 2018
MORE DATA, FEWER HUMANS

What's going on at venture firm Social Capital is less of a shake-up and more of an upheaval.

We first learned that Arjun Sethi, a partner at the firm, would depart. And then Axios reported growth equity chief Tony Bates and vice chairman Marc Mezvinsky were also leaving.

 
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It's unclear what Bates and Mezvinsky will do next, but sources tell me that Sethi will raise a new early-stage fund with a likely focus on cryptocurrency and blockchain investments. This wouldn't be all that surprising given Sethi's track record of investing in crypto-focused companies such as SafeChain, {Set} Protocol, and SFOX.

The moves mark a time of high-profile turnover at the firm.

Social Capital co-founder Mamoon Hamid abruptly departed last August to join Kleiner Perkins Caufield & Byers. The company's third co-founder Ted Maidenberg won't be making new investments or participating in any future funds, although he's currently still supporting the portfolio.

Following the departures, the firm has three venture funds (one of which is active), a $150 million Opportunity Fund, a hedge fund, and it's held a first close on its $1 billion growth equity fund it's still raising.

Sources close to the situation tell me that the firm will set out to raise another venture fund later this year. But the plans for the large growth fund have changed. Social Capital will course correct and use the funds to make follow-on investments in existing portfolio companies. The capital will be deployed by its venture team.

For years, Social Capital CEO Chamath Palihapitiya has been hyper-focused on a data-driven investment approach and has continued to reiterate his vision — operational experience coupled with a heavy focus on data. (I have written extensively on the subject.) But as Social Capital veers toward an even more data-driven approach, sources tell Term Sheet that some people aren't on board with the direction the firm is taking.

In a June 11 Medium post titled, "Only the Paranoid Survive," Palihapitiya outlines that it needs to invest "more than ever" in engineering, product, data science and portfolio operations. He adds, "Over the next few months, you will see us accelerate some of these new efforts and push them to the forefront. This change may be hard but necessary."

He was likely alluding to the avalanche of departures that were to come. In yet another Medium post published yesterday, he said the firm will be returning to its "core" — a renewed focus on its venture capital funds.

"Friends and mentors told me blindly scaling our asset base would distract me. Focus on technology, they said, and stick to what makes you unique vs what makes you the same. I initially thought they were wrong.

And so we embarked on trying to do both: build great products and scale assets across multiple new funds, all at the same time. It's this last factor that is hard. Ironically, we tell our entrepreneurs all the time to do one thing really well, but found ourselves not following our own advice."

He mentioned the change in strategy for the growth fund and added that the firm will not be raising a credit fund either.

Half-joking, one source told me that they wouldn't be surprised if the operation turns into Palihapitiya's family office. It's not a wild idea given that 1) he has the money, 2) he'd be empowered to relentlessly pursue his data-driven approach without LPs, and 3) well, everyone keeps leaving.

As Palihapitiya told Term Sheet in November, his investment philosophy for early-stage is "Don't miss," while his strategy for later-stage investments changes to, "Don't be wrong."

"We can't rely on a PowerPoint presentation or Excel spreadsheet when writing a $50 million to $100 million check," he said at the time. "It's just not enough. You need to use data science and machine learning to get the ground truth of what's happening inside of a company."

This "ground truth" principle is the foundation of Social Capital — rely on the data. Because unlike humans, data has no bias, no emotion, no gut feelings. Yet this approach begs the question: What happens when all the humans leave?

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VENTURE DEALS

CrowdStrike Inc., an Irvine, Calif.-based provider of cybersecurity solutions and services, raised over $200 million at a valuation of more than $3 billion. General Atlantic led the round, and was joined by investors including Accel, IVP, March Capital and CapitalG.

Brex, a San Francisco-based fintech startup, raised $50 million in funding. Investors include Y Combinator Continuity fund, Peter Thiel, Max Levchin, Yuri Milner, financial services VC Ribbit Capital and former Visa CEO Carl Pascarella. Read more at Fortune.

SigFig, a San Francisco-based financial technology company for banks, advisors, and consumers, raised $50 million in Series E funding. General Atlantic led the round, and was joined by investors including Bain Capital Ventures, DCM Ventures, Eaton Vance, New York Life, Nyca Partners, UBS, and Union Square Ventures.

Peek, a company offering a selection of instantly bookable activities, raised $23 million in Series B funding. Cathay Innovation led the round.

Vi, an AI personal trainer for fitness wellness, raised $20 million in funding. Investors include Joy Ventures, Squarepeg Capital, New Era, Cerca Capital, Triventures, Wellborne and FGI Capital.

Crate.io, a San Francisco-based developer of an open source SQL database, raised an $11 million in Series A funding. Investors include Zetta Venture Partners, Deutsche Invest Equity, Chalfen Ventures, Momenta Partners and Charlie Songhurst. Existing investors Draper Esprit, Vito Ventures and Docker founder Solomon Hykes also participated.

Panaseer, a U.K.-based cyber security software company, raised $10 million in Series A funding. Evolution Equity Partners led the round, and was joined by investors including Notion Capital, Albion Capital, Winton Ventures, Paladin Capital Group and Cisco Investments.

Fabric, a New York-based financial services form for parents, raised $10 million in Series A in funding. Bessemer Venture Partners led the round, and was joined by investors including RGAx and Silicon Valley Bank.

Veriff, an Estonia-based web and mobile identity solutions, raised $7.7 million in Series A funding. Mosaic Ventures led the round, and was joined by investors including Taavet Hinrikus, Ashton Kutcher, Paul Buchheit, Elad Gil, SV Angel, ACE Ventures, and Superangel.

Micrima, a U.K.-based breast imaging company, raised £4.4 million ($5.8 million) in funding. Investors include Technology Venture Partners, The Angel CoFund, and Venture Founders.

Falkonry, Inc. a Sunnyvale, Calif.-based provider of operational machine learning, raised $4.6 million in Series A funding. Presidio Ventures led the round, and was joined by investors including Fortive Corporation, Basis Set Ventures, Polaris Partners, Start Smart Labs and Zetta Venture Partners.

Bainbridge Health, a Philadelphia-based maker of a medication safety platform, raised $1.6 million in seed funding. BioAdvance, Chestnut Street Ventures and Children's Hospital of Philadelphia led the round.

HealthMatch, a Australia-based company that matches patients with clinical trials, raised $1.3 million in seed funding. Tempus Partners led the round.

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PRIVATE EQUITY DEALS

American Vision Partners, which is backed by H.I.G. Capital, acquired Miles Eye Center, an Arizona-based eye care provider. Financial terms weren't disclosed. Miles Eye Center will operate under the name of Barnet Dulaney Perkins Eye Center.

Genstar Capital agreed to acquire Drilling Info Holdings, Inc. an Austin-based provider of business-critical insights over mobile platforms to oil and gas industries. Genstar will become the majority shareholder of the business, with Insight Venture Partners retaining a significant minority stake.

Fosun International Ltd agreed to buy FFT GmbH & Co KGaA, a Germany-based provider of automated and flexible turn-key production systems. Financial terms weren't disclosed.

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OTHER DEALS

Leanplum acquired Connecto, a provider of AI-powered conversational marketing. Financial terms weren't disclosed.

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IPOs

BrightView Holdings, a Plymouth Meeting, Penn.-based landscaping service, said it plans to raise $501 million in an IPO of 21.3 million shares priced between $22 to $25. The firm posted revenue of $2.2 billion in 2016. KKR (75% pre-offering) backs the firm. Goldman Sachs, J.P. Morgan, KKR, and UBS are among bookrunners in the deal. The firm plans to list on the NYSE as "BV." Read more.

GoodBulk, a Monaco-based dry bulk vessel operator, said it plans to raise $140 million in an IPO of 8.5 million shares priced between $15.50 to $17.50. The firm posted revenue of $57.1 million in 2017. CarVal Investors (49.6% pre-offering), Lantern Asset Management (12.9%), and Brentwood Shipping (11.6%) back the firm. Morgan Stanley and Credit Suisse are underwriters in the deal. The firm plans to list on the Nasdaq as "GBLK." Read more.

Forty Seven, a Menlo Park, Calif.-based immuno-oncology firm, said it plans to raise $101 million in an IPO of 6.7 million shares priced between $14 to $16. It has yet to post a revenue. Lightspeed Ventures Partners (16.8% pre-IPO), Sutter Hill Ventures (16.8%), Clarus Lifesciences (15.8%), Wellington Management Company (8.8%), and Alphabet (6.7%) back the firm. Morgan Stanley and Credit Suisse are underwriters. It plans to list on the Nasdaq as "FTSV." Read more.

Translate Bio, a Lexington, Mass.-based mRNA therapeutics firm, said it plans to raise $100 million in an IPO of 7.7 million shares priced between $12 to $14. The firm has yet to post a revenue. Shire Human Genetic Therapies (19.6%), Fidelity (14.5%), Baupost (13%), and Atlas Venture Fund (11.1%) back the firm. Citigroup, Leerink Partners, and Evercore ISI are underwriters. The firm plans to list on the Nasdaq as "TBIO." Read more.

Domo, an American Fork, Utah-based platform that offers employees real-time data insights, said it plans to raise $189 million in an IPO of 9.2 million shares priced between $19 to $22. The firm posted revenue of $87.5 million in the year ending Jan. 31, 2018. Institutional Venture Partners, Benchmark Capital, BlackRock, and GGV back the firm. Morgan Stanley, Allen & Company, Credit Suisse, UBS Investment Bank, William Blair, JMP Securities, and Cowen & Company are underwriters in the deal. Read more.

SurveyMonkey, the U.S.-based survey platform, filed confidentially for an IPO through its parent, SVMK. Previously, it was reported that it had tapped J.P. Morgan to lead its IPO potentially slated for later this year. Read more.

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EXITS

Cisco will acquire July Systems, Inc, a San Francisco-based provider of an enterprise-grade platform for location services. Financial terms weren't disclosed. July Systems had raised approximately $59.2 million in venture funding from investors including Sequoia Capital India, Intel Capital, CRV, SVB Capital, and Updata Partners.

TPG Growth and The Rise Fund agreed to acquire CLEAResult, a Austin, Texas-based provider of energy efficiency solutions for utility companies. The seller is General Atlantic. Financial terms weren't disclosed.

Apax Partners will sell Azelis, a Belgium-based distributor of specialty chemicals and food ingredients, to EQT Partners and PSP Investments. Financial terms weren't disclosed.

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FIRMS + FUNDS

Revelstoke Capital Partners, a Denver-based private equity firm, raised more than $302 million for its second fund, according to an SEC filing.

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PEOPLE

Ramzi Ramsey joined SoftBank Investment Advisers on the Vision Fund as a director. Previously, he was at TCV.

Andrew Harris joined North Sky Capital as a principal. Previously, Harris was at Threadmark.

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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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