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Term Sheet — Friday, February 6

February 9, 2015, 2:48 PM UTC

Random Ramblings

“But what happens if Amazon or Google decides to do the same thing?”

This is a popular venture capitalist question for tech entrepreneurs, with Amazon and Google serving as stand-ins for a much larger group of powerful corporate incumbents. In fact, it’s a primary plot-line on HBO’s Silicon Valley. The basic notion is that huge companies with huge resources are able to crush the little guy if they just put their mind to it.

Or even the not-so-little guys. Just think about all of the consternation over Google challenging Uber. Or Apple challenging Spotify. Or, yes, Amazon challenging Instacart.

But here’s the thing: It rarely happens.

To be clear, this is not to say that most startups succeed, or that big companies don’t often use their wealth to acquire ancillary businesses. Instead, it’s simply to point out that existing tech companies rarely see someone else gain traction with a new idea, and then successfully copy it at scale.

For example, did Google+ take down Facebook or Google Buzz destroy Twitter? Did Facebook Poke beat Snapchat or Facebook Places cause Foursquare to disappear? I also recall a young WordPress seemed to handle the Yahoo 360 challenge pretty well.

Maybe you could argue that Microsoft copied and defeated Netscape back in the day, but: (1) Netscape still got acquired by $4.2 billion by AOL, and (2) Microsoft’s actions vs. Netscape became part of the federal government’s massive antitrust case. And then there was what Amazon did to Quidsi, which was more about anti-competitive bullying (and ultimate acquisition under duress) than well-capitalized innovation.

But, again, those are extraordinary exceptions to the rule.

I don’t exactly know why big tech does such a lousy job out-maneuvering smaller tech. Maybe it’s because large tech companies are burdened by all sorts of past experiences that cause them to either be too conservative or to follow a well-worn product path that doesn’t necessarily translate well to the new effort. Perhaps it’s more about first-mover advantage, with early adopters sticking with their original love. Or, most likely, startups are consumed with their new ideas whereas, for the incumbents, it’s just a new project that won’t have any imminent impact on the core business.

All I do know is that startups and their investors have plenty to worry about besides how Amazon or Google is going to swoop in and steal their lunch money. It hasn’t happened much in the past, so there is little reason to believe it will happen in the future.

New firm alert: Nautilus Venture Partners has quietly launched as a new Silicon Valley venture shop, with a focus on helping startups partner with large tech corporations (without the long wait-times for decisions or possible conflicts of interest often inherent in corporate VC).

Not surprisingly, it is being led by a pair of ex-corporate investors: Connie Shen (who is stepping down as a Bay Area-based director of global investment with Foxconn Technology Group) and Brian Kang (former managing director with Samsung Ventures America, who stepped down in late 2013). A third partner may also be added at some point.

The firm is seeking upwards of $150 million for its debut fund, with several tech companies already said to have signed on as LPs. Unclear if that includes Foxconn and Samsung, although at least the former will in some way be affiliated with Nautilus. It also is important to note that this firm has no relation to Nautilus Ventures, a seed-stage venture firm that has been run for years by Chris Michel.

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 Motorola Solutions Inc. (NYSE: MSI) is seeking a buyer, according to Bloomberg. The Schaumburg, Ill.-based communications equipment maker has a current market cap north of $15 billion, and is expecting interest from both private equity and government contractors. Read more.


 Alibaba Group has agreed to invest $590 million for an undisclosed stake in Chinese smartphone maker Meizu Technology Co. Read more.

 Imagine Health, a Cottonwood Heights, Utah-based provider of teams of hospitals and physicians for large, self-funded employers, has raised $21 million in Series A funding from Trident Capital and HLM Venture Partners.

 Fetch Robotics Inc., a San Jose, Calif.-based industrial robots startup, has raised $3 million in new VC funding from Shasta Ventures and OATV. Read more.


 Centerbridge Partners has completed its previously-announced $1.2 billion purchase of IPC Systems, a Jersey City, N.J.-based provider of communications and IT solutions to global trading floors, from Silver Lake.

 Exponent Private Equity is the frontrunner to acquire Big Bus Tours, a British sightseeing company, according to Reuters. J.P. Morgan is managing the process, which could garner upwards of £500 million. Read more.

 Kinderhook Industries has acquired CSDVRS LLC, a Clearwater, Fla.-based provider of video services that enable deaf people to have telephone conversations with hearing people, from M/C Partners, Providence Equity Partners and Communication Service for the Deaf. No financial terms were disclosed.

 Nautic Partners has acquired IPS Corp., a Compton, Calif.-based provider of solvent cements, specialty plumbing products and specialty adhesives. No financial terms were disclosed.

 Sweaty Betty, a London-based women’s activewear brand, has raised an undisclosed amount of private equity funding from Catterton Partners.

 TA Associates has agreed to acquire a majority stake in NorthStar Financial Services Group, an Omaha, Neb.-based wealth management firm, for an undisclosed amount.


 SteadyMed, an Israeli developer of disposable, subcutaneous delivery systems for medications, has filed for a $55 million IPO. It plans to trade on the Nasdaq under ticker symbol STDY, with Wells Fargo and RBC Capital Markets serving as lead underwriters. Shareholders in the pre-revenue company include Samson Venture Partners (12.8% pre-IPO stake), Deerfield Management (6.7%) and Federated Investors (6.7%).


 Charterhouse has agreed to sell Deb Group, a UK-based skincare line, to Wisconsin-based SC Johnson & Son. No financial terms were disclosed, but earlier press reports suggested that Goldman Sachs was managing the process with an asking price of up to £650 million.

 Inflexion Private Equity has agreed to sell Soil Machine Dynamics Ltd., a UK–based maker of remoter interventional equipment, to Hong Kong-listed Zhuzhou CST Times Electric Co. No financial terms were disclosed.

 Thoma Bravo has revived its sale process for Blue Coat Systems, a Sunnyvale, Calif.–based provider of online security and WAN optimization solutions, according to the WSJ. Thoma Bravo acquired the company in early 2012 for $1.3 billion. Read more.


 Harris Corp. (NYSE: HRS) has agreed to acquire Exelis Inc. (NYSE: XLS),, for approximately $4.75 billion in cash and stock. The $23.75 per share price represents a 36.25% premium over Friday’s closing price for Exelis stock. Read more.

 FactSet Research Systems Inc. (NYSE: FDS) has acquired Code Red Inc., a Boston–based provider of research management technologies to the investment community. No financial terms were disclosed.

 Jamie Oliver Holdings Ltd., the media and publishing business of celebrity chef Jamie Oliver, has hired Raine Group to find a minority equity partner that would invest between £50 million and £75 million, according to Sky News. Read more.


 Independent Bankers Capital Funds, a Dallas-based private equity and mezzanine capital firm focused on the lower middle-markets, has raised around $100 million in capital commitments. This includes $33 million from traditional LPs, and up to $67 million in matching funds from the U.S. Small Business Administration.

 LGT Capital Partners of Switzerland has closed its first private equity co-investment fund with $432 million in capital commitments.

 MCG Capital Corp. (Nasdaq: MCGC), an Arlington, Va.-based private equity and debt investment firm, said that it has hired Morgan Stanley to explore strategic alternatives for the company, including a possible sale. MCG has a current market cap of around $165 million.

 Morgan Stanley is seeking to sell its 19% stake in Lansdowne Partners, a $17.5 billion hedge fund based in London, according to the WSJ. Read more.


 Dan Allen and John Beyer have joined private equity firm Grey Mountain Partners as a vice president and associate, respectively. Beyer (based in Pittsburgh) previously was CFO of Grey Mountain portfolio company Bolttech Mannings. Beyer (based in Boulder, Colo.) previously was an analyst in the industrials group of Robert W. Baird & Co.

 David Andrews has joined Evercore as a Houston-based senior managing director in its energy group. He previously led oilfield services coverage for Deutsche Bank.

 Nico Helling has joined Italian private equity firm Ambienta SGR as a Germany-based partner. He previously was a partner with Vorndran Mannheims Capital Advisors.

 Francesco Loredan recently stepped down as co-chairman and managing partner of BC Partners, according to Dow Jones. He has been replaced as co-chairman by Stefan Zuschke. In other BC Partners news, Mark Twinning has retired as finance director. Read more.

 Morgan Stanley has promoted Ellen Zentner to chief U.S. economist. She had joined Morgan Stanley in 2013 as a senior U.S. economist, and succeeds Vincent Reinhart. Read more.

 Stefan Thiele has resigned as a managing director of Terra Firma’s renewable energy business, which is in the midst of trying to raise a new fund. He joined back in 2013 from Energie Baden-Württemberg, and will officially leave Terra Firma sometime this summer. Read more.

 Jerry Truzzolino has joined SK Capital Partners as chief financial officer, after having served in a similar position at CI Capital Partners. In other SK Capital personnel news, the firm has promoted Philip Marxen to principal.

 Jeff Veen has joined True Ventures as a design partner. He previously co-founded TypeKit, and remained with Adobe after it acquired TypeKit in 2011.

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