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Term Sheet — Wednesday, August 20

Random Ramblings

Some quick notes to kick off your Wednesday…

• It’s a (debt) deal: Digital payments company Square yesterday announced that it had “secured an investment from Victory Park Capital to significantly expand Square Capital,” the company’s small business financing program. My understanding is that this is a loan that expands Square’s own lending capacity, rather than an equity investment that makes Illinois-based Victory Park a Square shareholder.

In general, the Square Capital program is controversial because merchants pay back loans via automatic deductions from credit card and debit card transactions. That means that the effective interest rate increases as sales increase, as opposed to a traditional small biz loan in which the merchant would pay back on their own schedule (although Square Capital does not charge timing penalties, because there is no repayment deadline).

• Bitcoin bucks: Back in February, I wrote a magazine column titled: Why Venture Capitalists Are Right To Be Crazy About Bitcoin. It argued that the protocol ultimately may become more important and ubiquitous than the currency, just the ‘Internet’ ultimately became more important and ubiquitous than email.

That’s also the thinking behind Chain, a new Bitcoin development platform that launched today with $9.5 million in VC funding (led by Khosla Ventures). I’m sure that initial usage will focus on financial transactions but, if Chain succeeds, it likely will be because developers come up with all sorts of other distributed applications. You can read a bit more here.

• Sequoia’s signal: Earlier this week we noted how Medallia, a Palo Alto-based provider of customer experience management tracking software, had raised $50 million in VC funding from Sequoia Capital. This brought Sequoia’s total investment in the company to $105 million – easily one of the firm’s five-largest outlays ever to a single company – with no other VC firms in the cap table. So I was curious if the firm had any concern about signaling risk for portfolio companies where it syndicates and/or helps bring in outside leads for follow-on rounds. The reply from partner Doug Leone:

“Honestly there is no signaling or messaging to be taken here. Like WhatsApp this was a unique situation and it’s very rare for us to be the sole investor in a company. In fact, in my 26 years of investing, I cannot think of another case where a company has done multiple rounds, where I represented Sequoia on the board, and we were the sole investor.”

• Feedback: I received a lot of email in response to yesterday’s column on startup stock options and seconday sales. Will do a big mailbag on Friday. 

• Recommended reading: Rich Cohen has a great profile up on Gary Fencik, the former All-Pro safety for the Chicago Bears who now is a partner with private equity firm Adams Street Partners. Check it out here.

• Sinking: I need to do a bit more research on the recent mess at Seaworld (shares down 44% YTD), but I do recall how folks at The Blackstone Group (the company’s largest outside shareholder) were relieved when Black Fish — the documentary critical of the theme park’s practices — didn’t receive an Academy Award nomination. What I don’t recall them expressing were any concerns about Black Fish virtually going viral on Netflix. Pretty sure this will be a cautionary tale going forward…

• Didn’t see that coming: Uber yesterday hired former Obama campaign manager David Plouffe as its senior vice president of policy and strategy. Yes, the same Uber whose co-founder and CEO used to use the Atlas Shrugged coer image as his Twitter avatar. I guess on-demand car services make strange bedfellows…


• Iliad (Paris: ILD) has held talks with Google (Nasdaq: GOOG) and Microsoft (Masdaq: MSFT) about partnering on a revised takeover proposal for T-Mobile US (NYSE: TMUS), which recently rejected Iliad’s solo $15 billion all-cash offer, according to the NY Post. Read more. 


FarmLink, a Kansas City-based provider of “services to help farmers maximize their productivity,” has raised $40 million in Series B funding. OpenAir Equity Partners led the round, and was joined by Early Investments and return backer Thorndale Farm.

•  PernixData, a San Jose, Calif.-based provider of server-side storage intelligence solutions, has raised $35 million in Series C funding. Menlo Ventures led the round, and was joined by Marc Benioff, Jim Davidson, Steve Luczo and return backers Kleiner Perkins Caulfield and Byers, Lightspeed Ventures, Lane Bess, Mark Leslie and John Thompson.

•  vArmour, a Mountain View, Calif.-based data center security startup, has raised $21 million in Series C funding. Backers include  Columbus Nova Technology Partners (CNTP), Citi Ventures and Work-Bench Ventures. The company also disclosed that it had raised $15 million in Series B funding late last year led by Menlo Ventures.

•  Enlighted, a Sunnyvale, Calif.-based provider of smart sensor networking and lighting control solutions for the workplace, has raised $20 million in Series D funding. Return backers include Draper Nexus Ventures, Kleiner Perkins Caufield & Byers, RockPort Capital Partners, Draper Fisher Jurvetson and Intel Capital.

•  OrderUp, a Baltimore-based online and mobile food ordering and delivery service, has raised $7 million in Series A funding. Revolution Ventures led the round, and was joined by Tim O’Shaughnessy (ex-CEO of LivingSocial).

•  Purplebricks, a British online real estate platform, has raised £7 million in VC funding from CF Woodford Investment Management.

•  Lavante Inc., a San Jose, Calif.–based provider of on-demand supplier information management and profit recovery solutions, has raised $3.5 million in VC funding. PointGuard Ventures led the round, and was joined by return backers SAP Ventures and ATA Ventures.

•  Stitch Labs, a San Francisco–based provider of inventory management control solutions for retailers, has raised $3.5 million in new VC funding from return backers True Ventures and Costanoa Ventures.

•  HealthPrize Technologies, a Norwalk, Conn.-based provider of digital health solutions for medication adherence and patient engagement, has raised $3 million in VC funding from Mansa Capital (which has a one-year option to invest another $2 million). 

•  PlayFab Inc., a Seattle-based provider of cloud tools and services for building and managing online games, has raised $2.5 million in seed funding. Backers include Startup Capital Ventures and individual angels like John Spinale, Scott Banister and Larry Bowman.

•  HearHere Radio Inc., a Chicago-based provider of personalized radio services for smartphone uers, has raised $1.7 million in convertible note financing. Backers include The Associated Press, A.H. Belo Management Services, Whittier Ventures and Ringleader Ventures.

•  Health Gorilla, a Sunnyvale, Calif.-based online healthcare marketplace for connecting doctors and clinicians with diagnostic labs and radiology centers, has raised $1.2 million in VC funding led by True Ventures.

•  Flybits Inc., a Toronto-based provider of a “context-aware experience development platform for mobile environments,” has raised C$3.75 million in Series A funding. Robert Bosch Venture Capital and Trellis Capital Corp. co-led the round, and were joined by MaRS investment Accelerator Fund and Ryerson Futures.


• Dancing Deer Baking Co., a Boston-based maker of branded gourmet baked goods, has raised an undisclosed amount of private equity funding from River Hollow Partners.

• Datapipe, a Jersey City, N.J.–based managed services provider owned by ABRY Partners, has acquired Layered Tech, a managed hosting and cloud company. No financial terms were disclosed.

• Galls LLC, a Lexington, Ky.–based distributor of uniforms and equipment to the public safety market, has acquired Best Uniforms Inc., a Wilmington, N.C.-based based regional distributor of similar products to public safety and transit personnel. No financial terms were disclosed. Galls is a portfolio company of CI Capital Partners.

• Hony Capital has acquired a 20% stake in Chery Heavy Industry Co Ltd., a Chinese maker of farm machinery, for approximately $113 million.

• Longitude Venture Partners and NovaQuest Pharma Opportunities Fund have acquired Los Angeles-based sperm bank California Cryobank. No financial terms were disclosed, except that Golub Capital provided debt financing.

• The Riverside Co. has acquired Grace Hill, an Augusta, Ga.-based provider of training solutions for apartment industry workers. No financial terms were disclosed, except that Freeport Capital provided debt financing.

• Standard Chartered Private Equity has invested $75 million for a minority stake in Topaz Energy and Marine, a UAE-based operator of offshore support vessel that is majority owned by Renaissance Services SAOG.

• TVV Capital has acquired Design Molded Plastics, a Macedonia, Ohio-based provider of custom injection-molded products and manufacturing solutions. No financial terms were disclosed.


• Amoun Pharmaceutical Co., an Egyptian drugmaker, is considering an IPO if it fails to find a buyer for between $700 million and $800 million, according to Bloomberg. Prior reports suggested that Abraaj Group was a possible suitor, with Jefferies Group managing the process. Amoun Pharmaceutical is currently owned by an affiliate of Capital Group Inc., Concord International Investments and the Rohatyn Group. Read more

• Southeastern Grocers Inc. (f.k.a. Bi-Lo), a Jacksonville, Fla.-based grocery store chain owned by Lone Star Funds, has withdrawn registration for a $500 million IPO. No explanation was provided. Citigroup had been listed as left lead underwriter. Southeastern Grocers in 2012 paid $560 million to acquire Winn-Dixie Stores, and last year bought 165 stores from the parent of Food Lion for $265 million.


• Apax Partners has hired J.P. Morgan Chase to find a buyer for TriZetto Corp., an Englewood, Colo.-based healthcare IT company, according to Reuters. The deal could be valued at upwards of $3 billion, including debt. Read more

•  Kohlberg Kravis Roberts & Co. has hired Rothschild to find a buyer for the public sector unit of UK-based Northgate Information Solutions for upwards of $600 million, according to Reuters. Read more

•  LBO Italia Investimenti has agreed to sell Milan-based Corvette Pharmaceutical Services Group to Sweden’s Recipharm AB for an enterprise value of €120 million.


• Balfour Beatty (LSE: BBY), a London-based infrastructure construction and services company, has rejected the most recent takeover offer from rival Carillion (LSE: CLLN), which would have valued Balfour Beatty at approximately £2.1 billion.

• Condé Nast has agreed to sell Fairchild Fashion Media, a trade publisher whose titles include Women’s Wear Daily and Footwear News, to Penske Media. The deal is valued at around $100 million, according to the NY Times. Read more


• Citigroup is considering a sale of its Japanese consumer banking business, according to Bloomberg. Read more


• ff Venture Capital has named two new partners: Adam Plotkin, previously an EIR with the firm; and Michael Faber, a former partner with NextPoint VC. Read more

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