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Term Sheet — Friday, November 14

Random Ramblings

Reddit, the online comment and aggregation site that boasts 175 million users, yesterday announced that CEO Yishan Wong had resigned due to a disagreement over new office space. He will be succeeded on an interim basis by business development head (and former VC) Ellen Pao, while co-founder Alexis Ohanian will return as full-time executive chairman.

I spent some time on the phone with Pao and Ohanian, and learned the following:

Pao may not be interim CEO for long: Reddit is not currently looking for a permanent replacement for Yishan Wong, because the hope is that Pao can prove herself worthy of the role. “Speaking as a board member and the executive chairman, I’m hopeful this is not an interim position,” Ohanian said.

Yes, it was really about an office: No doubt, it’s extremely strange that the CEO of a half-billion dollar company resigned because of a disagreement over where to park his desk. Particularly given that Reddit is only looking to move from one building in San Francisco to… another building in San Francisco. Moreover, Wong is the CEO who told Reddit employees in cities like New York and Salt Lake City that they must relocate to San Francisco by year-end or find other work. But both Pao and Ohanian insist that office space was the straw that broke Wong’s employment. “To add one layer, he genuinely did want to spend more time with his family, but you’d probably consider that to be an even less satisfying answer,” Ohanian said.

Community chest: Upon raising $50 million in VC funding back in September, Reddit announced that it planned to allocate around 10% of its shares to members of the Reddit community. That’s still the goal — and actually something Ohanian first proposed to company lawyers when Reddit spun out of Condé Nast in 2011 — but the company is still working out specifics. Sounds like Bitcoin or some other cryptocurrency could be used (no doubt making members of r/bitcoin quite giddy).

Culture club: Pao says that, upon joining Reddit last year, the thing that surprised her most was the “depth of connections” people make on Reddit, particularly people who don’t share geography, ethnicity or other normally-bonding demographics. She says that her initial goal is to help blend the corporate culture as out-of-town Reddit employees move to San Francisco, and then continue to ship new products like RedditMade (custom products made by users) and RedditGifts (a giant online Secret Santa program).

Elephant in the room: I didn’t speak to Pao about her pending gender discrimination lawsuit against Kleiner Perkins, which is scheduled for a jury trial beginning on February 17. But her promotion to the CEO spot of a popular company backed by such Sand Hill firms as Andreessen Horowitz and Sequoia Capital certainly adds an interesting new wrinkle to the case.

Job responsibilities: Pao says that, in the wake of Wong’s resignation, bringing Ohanian back was a primary concern because he is the “voice of Reddit.” But he’s also the animator of Reddit, explaining that he originally drew the company’s iconic alien, and is the “final arbiter” of how it is drawn in future iterations.

• Data point: Thomson Reuters reports that global financial sector M&A now totals $287 billion for the year, up from 49% over year-to-date 2013.

• Update: More than a year ago, I wrote a column about how the U.S. Department of Energy’s “green” loan program was likely to produce an investment profit, despite highly-publicized losses on such companies as Solyndra. In other words, it wasn’t the boondoggle that certain politicians insisted it was.

Now I don’t like to say I told you so… Strike that. Actually, I love to (yes, it’s a character flaw). So, in that spirit, the DoE yesterday disclosed new data showing that the U.S. government ultimately expects to earn more than $5 billion of interest on the loans — and that current loan interest already outstrips baked-in losses. Moreover, 20 of the projects already are generating revenue, thus beginning to repay the loan principal.

• Have a great weekend… Go Pats!


• Halliburton (NYSE: HAL) is in talks to acquire rival oilfield services provider Baker Hughes (NYSE: BHI), which closed trading yesterday with a market cap of approximately $25 billion. Read more.


•, a Beijing-based art-trading website, has raised around $100 million in Series B funding from CITIC Securities and Shenzhen Capital Group.

• Craftsy, a Denver-based online community for crafting enthusiasts, has raised $50 million in Series D funding. Stripes Group led the round, and was joined by return backers Foundry Group, Tiger Global, Adams St. Partners, Access Venture Partners and Silicon Valley Bank.

• Blueprint Medicines, a Cambridge, Mass.-based developer of kinase inhibitors for genomically-defined cancers, has raised $50 million in Series C funding. Partner Fund Management led the round, and was joined by Wellington Management Company, RA Capital, Tavistock Life Sciences, Perceptive Advisors, Sabby Capital, Cowen Investments and Redmile Group. Return backers include Biotechnology Value Fund, Casdin Capital, Fidelity Biosciences, Nextech Invest and Third Rock Ventures.

• UpLift, a Sunnyvale, Calif.-based payment marketing platform, has raised $8.2 million in Series A funding. IDG Ventures led the round, and was joined by PAR Capital Ventures, Thayer Ventures and individual angels from the travel industry.

• Speakaboos, a New York-based mobile education platform for literacy and language learning, has raised $6.5 million in Series B funding. Rick Segal (managing partner of ReThink Education) and The Al Sayegh Group co-led the round, and were joined by Lead Edge Capital, Helena Wong (ex-int’l president of Rosetta Stone, Scott Booth and return backers Advancit Capital, the Kyowon Group and Ninestars.

• Apio Systems, a Crystal City, Va.-based maker of a mobile transportation safety platform for vehicles, has raised $5 million in Series A funding. Verizon Ventures led the round, and was joined by Lerer Hippeau, Transdev and East Rock Capital.

• Body Labs, a New York-based 3D body modeling platform, has raised $2.2 million in seed funding. FirstMark Capital led the round, and was joined by New York Angels.


• Apollo Global Management is planning to bid on the mature drug portfolio of GlaxoSmithKline (LSE: GSK), which could be valued at more than $3 billion, according to Reuters. Other possible bidders include KKR, which has partnered with Norgine (Netherlands) and Lundbeck (Denmark). Read more.

• Aquiline Capital Partners has acquired a majority equity stake in Beach & Associates, a Toronto–based global specialist reinsurance intermediary. No financial terms were disclosed.

• Express KCS, a Pittsburgh–based provider of outsourced creative pre-media and production solutions for marketers, has raised an undisclosed amount of new equity funding from existing shareholder Saturn Partners.

• KKR and Fajr Capital are among the bidders for a 25% stake in Azadea Group, operator of the Zara clothing and Virgin Megastore chains in the Middle East, according to Bloomberg. The deal could be valued at between $300 million and $400 million. Read more.

• Micross Components, a Los Angeles-based portfolio company of Insight Equity, has acquired Silicon Turnkey Solutions, a Milpitas, Calif.–based semiconductor contractor. No financial terms were disclosed.


• DermTech International, a La Jolla, Calif.-based developer of non-invasive gene expression tests to aid in the diagnosis of various skin conditions, has withdrawn its $25 million IPO registration, which it originally filed back in May. No explanation was provided. The company had planned to trade on the Nasdaq, with Maxim Group serving as lead underwriter. Shareholders in the pre-revenue company include Jacobs Investment

• Fibrogen Inc., a San Francisco-based developer of therapeutics in such areas as fibrosis and anemia, raised $146 million in its IPO. The company priced 8.1 million shares at $18 per share, compared to plans to offer 7.1 million shares at between $16 and $19 per share. Its initial market cap is approximately $1 billion, and it will trade on the Nasdaq under ticker symbol FGEN. Goldman Sachs, Citigroup and Leerink Partners served as lead underwriters. Fibrogen reports $30.5 million in net income on around $108 million in revenue for the first half of 2014. Shareholders include Astellas Pharma (10.5% pre-IPO stake).

• Gumi, a Japanese mobile game publisher, is prepping a Tokyo IPO that could value the company at nearly $900 million. It has raised nearly $50 million in VC funding from firms like DBJ Capital, Nissei Capital, JAFCO Asia, Shinsei Bank, B Dash Ventures and World Innovation Lab. Read more.

• Navios Maritime Midstream Partners LP, a crude tanker operator formed by Navios Maritime (NYSE: NM), raised $122 million in its IPO. The company priced 8.1 million units being at $15 per unit (below $19-$21 offering range). It will trade on the NYSE under ticker symbol NAP, while BofA Merrill Lynch was listed as left lead underwriter.

 • NeuroDerm Ltd., an Israel-based developer of treatments for CNS disorders, raised $45 million in its IPO. The company priced 4.5 million shares at $10 per share (below $13-$16 offering range), for an initial market cap of approximately $164 million. The pre-revenue company will trade on the Nasdaq under ticker symbol NDRM, while Jefferies and Cowen & Co. served as lead underwriters. Shareholders include Capital Point (17% pre-IPO stake).

• Sky Solar, a Chinese owner and operator of solar energy parks, raised $44 million in its IPO. The company priced 5.5 million shares at $8 per share (high end of range), and will trade on the Nasdaq under ticker symbol SKYS. Roth Capital served as lead underwriter. Shareholders include IDG-Accel China, which held a 24.2% pre-IPO stake.

• Virgin America, a Burlingame, Calif.-based air carrier backed by Cyrus Capital Partners and Virgin Group, raised $307 million in its IPO. The company priced 13.34 million shares at $23 per share ($21-$24 offering range), for an initial market cap of approximately $994 million. It will trade on the Nasdaq under ticker symbol VA, while Barclays and Deutsche Bank Securities served as lead underwriters. Virgin America reports $56 million of net income on $1.12 billion in revenue for the first nine months of 2014, compared to a $4 million net loss on $1.06 billion in revenue for the year-earlier period. Read more.

• Virtu Financial, an electronic trading company backed by Silver Lake, is planning to revive its stalled IPO in the spring of 2015, according to Reuters. The New York-based firm filed for a $100 million IPO last March, but held off after the publication of Flash Boys, a book about high-speed electronic trading written by Michael Lewis. Read more.


• Apollo Global Management and C. Dean Metropoulos are considering an early 2015 sale process for Twinkie maker Hostess Brands, which they bought out of bankruptcy two years ago for $410 million, as first reported by the NY Post. The firms reportedly may seek upwards of $1.5 billion. Read more.

 Catalent Inc. (NYSE: CTLT) has acquired Micron Technologies, a Malvern, Penn.–based provider of particle-size engineering technologies, from Arlington Capital Partners. No financial terms were disclosed.

• CI Capital Partners has hired Morgan Stanley to find a buyer for KIK Custom Products Inc., a Canadian maker of household cleaning and personal care products, according to Reuters. The deal reportedly could be worth more than $1.5 billion (including debt). Read more.

• IK Investment Partners has hired Lincoln International to find a buyer for Sport Group, a German  maker of outdoor sport and recreational surface systems, according to Reuters. The deal could be valued at more than €300 million. Read more.

• Mandalay Digital Group Inc. (Nasdaq: MNDL) has agreed to acquire Appia, a Durham, N.C.–based mobile user acquisition network. The deal is valued at $100 million in stock, minus around $10 million in Appia’s net debt and transaction expenses. Appia had raised nearly $40 million in VC funding from firms like Trident Capital, Venrock, DCM, Noro-Moseley Partners, Wakefield Group, Relay Ventures and Eric Schmidt’s TomorrowVentures.

• MBK Partners has agreed to sell Yayoi Co., a Japanese maker of accounting software, to Orix Corp. (Tokyo: 8591) for approximately $691 million.

• Microsoft Corp. (Nasdaq: MSFT) has acquired Aorato Ltd., an Israeli cybersecurity startup that has developed a directory services application firewall, for approximately $200 million. Aorato has raised around $10 million in VC funding from Accel Partners, Innovation Endeavors, Glilot Capital Partners and Mickey Boodaei (co-founder of Imperva and Trusteer). Read more.

• Mobile Mini (Nasdaq: MINI) has agreed to acquire Evergreen Tank Solutions, a Houston, Texas-based provider of specialty containment solutions, from Odyssey Investment Partners. The deal is valued at $405 million in cash, and is expected to close by year-end.


• Nestle SA (Swiss: NESN) said that it is reviewing strategic options for its Davigel frozen foods business, including a possible joint venture. Back in February, Reuters reported that Nestle was seeking a buyer for Davigel, with around a €300 million asking price.


• Lonestar Capital Management, a hedge fund founded by Jerome Simon, has decided to shut down for the second time in eight years. Read more.

• Qihoo 360 (NYSE: QIHU) is forming a $60 million venture capital fund focused on the Internet-of-Things market, according to the WSJ. Read more.


• Colin Angle, co-founder and CEO of iRobot (Nasdaq: IRBT), has been named a special advisor to Boston-based VC firm Data Point Capital.

• Hemal Mirani has stepped down as an Hong Kong-based senior managing director with CVC Capital Partners, in order to rejoin HarbourVest Partners (where she worked between 1997 and 2009), according to Private Equity International.

• Kara Nortman has joined Upfront Ventures as a partner. She previously co-founded Upfront portfolio company P.S. XO (f.k.a. Moonfrye).

• Eunseok So has joined Auda International as a Hong Kong-based senior vice president. He previously was a VP with Squadron Capital.

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