Term Sheet — Wednesday, December 24

December 24, 2014, 2:28 PM UTC

Random Ramblings

Some notes for the 17 of you actually at work this morning (and the 55,000+ or so stuck at airports or train stations)...

Reddit ripple effect: When social news site Reddit raised $50 million in VC funding this past September, it said that it wanted to allocate around 10% of its overall equity to active users. Last week, it announced that the equity would take the form of something called “Reddit notes.” From a blog post:

To celebrate all of you and your contributions, we plan to give away reddit notes in a random lottery. As of this point, it looks like we're going to have approximately 950,000 reddit notes to divide among active user accounts. There aren't as many reddit notes as there are accounts, so if you get one, lucky you! Eligible recipients of reddit notes will be determined based on activities before 9/30/14, and we plan to give them away in the fall of 2015.

No additional details yet, except that Reddit has repeatedly suggested that it is planning to leverage some sort of crypto-currency -- with notes being transferable between users. But, from my perspective, successful execution could have repercussions far beyond the Reddit community.

In an era where companies are staying private longer, and in which consumer loyalty to one tech platform over another can be paramount, the concept of sharing equity with users is likely to be replicated by other startups. Basically the privately-held version of Virgin America letting top frequent fliers participate in its IPO -- but even more exclusive since there is no generally-available security 24 hours later. If I were a VC-backed entrepreneur right now, I'd be paying very close attention to how Reddit structures its "notes" -- with an eye toward copying/improving on it.

Speaking of Reddit: It appears that the social news site is being pulled into the gender discrimination lawsuit that its interim CEO, Ellen Pao, filed against venture capital firm Kleiner Perkins back in 2012 (well before joining Reddit in her original capacity as head of strategic partnerships).

The case is scheduled to go to trial in February, and new court filings indicate that Kleiner Perkins has subpoenaed a treasure trove of information from Reddit. Some of it appears to be amenable to Pao, including compensation data that could be used to mitigate possible damages.

But, according to a filing from Pao's attorneys, Kleiner Perkins also wants any performance evaluations Reddit has given Pao, plus "all documents related to [Pao's] promotion to interim CEO, and all documents discussing whether [Pao] will become the permanent CEO." It also wants any documents from or to Reddit executives that mention Kleiner Perkins, even if documents were not authored by Pao or in reference to her lawsuit. Finally, it appears that Kleiner Perkins also has subpoenaed similar information from BEA Systems, where Pao worked prior to joining Kleiner Perkins.

A judge has not yet ruled on the subpoenas, to which Pao largely objects on the grounds of privacy and irrelevance (i.e., only her job performance at Kleiner Perkins would be at issue). Reddit itself -- which has raised funding from partners at San Hill Road venture firms like Andreessen Horowitz and Sequoia Capital -- does not appear to have filed any relevant documents with the court. My messages left with a Kleiner Perkins spokeswoman last night were not returned.

Even worse than I thought: Yesterday I noted the cognitive dissonance of LPs who believe that having more female partners at PE firms would improve "team quality" and "team dynamics," but do nothing to help better investment returns. In a follow-up post on private equity's gender gap, I noted one study that found only  11.8% of senior North American private equity executives are female. But after doing some (admittedly incomplete) research, I have to think it's even lower.

Just take a look at these female/male ratios among senior private equity execs (specific terminology can differ a bit) at some major firms: Apollo Global Management (0/23), TPG Capital (1/21), Leonard Green (0/9), Catterton Partners (1/12), Warburg Pincus (1/22), Carlyle Group (1/17), Blackstone Group (3/47), Gores Group (1/23) and Bain Capital (4/42). Kind of makes 11.8% look aspirational...

Happy holidays: This is the final Term Sheet of 2014, as I'm taking a holiday break before returning on Monday, January 5 (when I'll be in Las Vegas for CES). Sincere thanks for reading this year and best wishes for the New Year. Have a great weekend, week and weekend again. Go Pats!


 Electra Partners has acquired the UK franchise business of casual dining chain TGI Fridays, with Electra investing around $155 million of equity alongside company management. The sellers are Sentinel Capital Partners and TriArtisan Capital Partners, which had bought TGI Fridays earlier this year. www.tgifridays.co.uk


 Assurex Health, a Mason, Ohio-based personalized medicinecompany, has raised $30 million in new equity funding. American Financial Group and Cross Creek Advisors were joined by return backers Cincinnati Children’s Hospital Medical Center, Sequoia Capital, Claremont Creek Ventures, Mayo Clinic, CincyTech, Allos Ventures and Danmar Capital. www.assurerxhealth.com

 Ginger.io, a San Francisco-based provider of behavioral health analytics, has raised $20 million in new VC funding, according to a regulatory filing. Kaiser Permanente Ventures appears to be a new investor, while the company previously raised more than $8 million from Romulus Capital, Khosla Ventures and True Ventures. Read more.

 Qualtré Inc., a Marlborough, Mass.-based provider of silicon MEMS inertial sensors, has raised $9 million in new VC funding. Alps Electric and an undisclosed strategic investor were joined by return backers Matrix Partners and Pilot House Ventures. www.qualtre.com

 Appcues, a Boston-based provider of a SaaS platform for user onboarding, has raised $1.2 million in seed funding from Atlas Venture and individual angels. www.appcues.com


 AssuredPartners, a Lake Mary, Fla.-based insurance brokerage platform owned by GTCR, has acquired Sheehan Insurance Service Inc., a Haymarket, Va.–based business and personal insurance agency with annual revenue of around $4 million. No financial terms were disclosed. www.assuredptr.com

 Bain Capital has agreed to buy German elevator parts maker Wittur Holding GmbH from Triton Private Equity and Capvis. No financial terms were disclosed, but Reuters puts the deal value at nearly €600 million. Read more.

 Bolder Healthcare Solutions LLC, a portfolio company of Edgewater Funds, has acquired PPM Information Services Inc., a Mission, Kansas–based provider of medical billing software and services. No financial terms were disclosed. www.bolderhealthcare.com

 First Reserve has acquired Navigator Energy Services LLC, with an equity commitment of up to $250 million. Navigator will continue to build the Big Spring Gateway System, which is expected to begin operations next quarter as a supplier of crude oil gathering and transportation services to the core of the Midland Basin in Texas. www.firstreserve.com

 Lone Star Funds has agreed to acquire Hanson Building Products, a UK-based provider of concrete and clay building products, from German cement maker HeidelbergCement for around $1.4 billion. Read more. Read more.

 Wendel Investissement has agreed to acquire Austrian packaging company Constantia Flexibles from One Equity Partners at an enterprise value of €2.3 billion (which is 9x estimated 2014 EBITDA). Read more.


 CardioDx, a Palo Alto, Calif.-based provider of cardiovascular genomic diagnostics, has withdrawn registration for an $86.25 million IPO that it originally filed in for in October 2013. The company said that “the terms currently obtainable in the public marketplace are not sufficiently attractive… to warrant proceeding with the public offering.” CardioDx has raised over $220 million in VC funding from V-Sciences Investments, Longitude Venture Partners, Artiman Ventures, Kleiner Perkins Caufield & Byers, JPMorgan Direct Venture Capital and MDV-Revelation. www.cardiodx.com


 Generation Growth Capital has sold Quality Assembly & Logistics LLC to company president and CEO Guy Meyerhofer for an undisclosed amount. QAL is a Marinette, Wis.-based provider of contract manufacturing and repair/refurnishing services of electromechanical parts for large OEMs in the medical equipment and fire suppression industries. www.quality-assembly-logistics.com


 Barnes & Noble (NYSE: BKS) has bought back a 5% stake in its Nook digital book and device business from Pearson PLC for nearly $28 million. The deal follows Barnes & Noble’s recent buyback of a 17.6% stake in Nook from Microsoft. Read more


 No firm or fund news this morning...


North Bridge Growth Equity has promoted Roshen Menon to general partner. He had joined the firm in 2007 as a principal, and focused on healthcare technology investments. www.northbridge.com

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