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Term Sheet — Friday, June 5

Random Ramblings

Some quick and early notes this morning before I head to the airport for a flight back east…

• Something is wrong here: I spent most of yesterday on Sand Hill Road. Per usual, most of what I heard about was unicorns and sunshine. But, from where I sit, VC and growth equity folks should be getting nervous. Not about rising valuations, per se, but about their inability to get liquidity (no, that wasn’t a California water drought pun).

Unlike a private equity market that continues to sell everything that isn’t bolted down, the VC market is in the midst of an inexplicable buy-and-hold period. Only seven VC-backed tech companies have gone public so far in 2015, even though we’re in June. Moreover, there has been only one strategic sale valued at over $1 billion (LinkedIn buying Lynda). What good is it to have a stable of unicorns if you don’t ever ride them?

To be sure, this may be just a blip and there will be an IPO gold-rush coming after Labor Day. Or maybe some massive trade sales (admittedly, there is some rumbling that a biggie is around the corner). But strong public market conditions+high-value VC-backed portfolio companies should equal exits. It isn’t (in large part thanks to crossover investors who are filling the cash void). If I’m a VC — or, moreover, an LP in VC funds — I’m not seeing more clouds than sun…

• Update #1: As we reported earlier this week, Ellen Pao recently filed a notice to appeal the March jury verdict finding that venture capital firm Kleiner Perkins Caufield & Byers was not guilty of gender discrimination or harassment against Pao while she was an employee. This move — which does not necessarily mean that she will actually appeal — came after Kleiner Perkins said it would ask for $1 million in legal fees unless Pao drops her appeal plans.

In response, Kleiner Perkins today is expected to disclose in court filings that Pao allegedly told Kleiner Perkins that she would waive her appeal if it paid her $2.7 million (i.e., a $3.7m swing). Re/Code was first to report on Pao’s ask, which I’ve been able to confirm with a source close to the situation.

• Update #2: Last month we reported on how several state pension funds were invested in a private equity fund (managed by JLL Partners) that owns the nation’s second-largest payday lender (ACE Cash Express). The potential moral conflict was that payday lending is illegal in those states.

Following this report, one of those public pensions — New Jersey’s State Investment Council — has said publicly that it will explore ways to divest. It is worth noting, however, that the neighboring New York State Teachers’ Retirement System — also an LP in the JLL fund with an identical $50 million commitment — has steadfastly refused to respond to our questions about its investment.

• Lucre and trust: Almost every VC I’ve spoken with this week is shocked by the Iftyy Ahmed situation, and a bit concerned about how easily he seemed to pull off his alleged fraud. One summed it up: “I trust my partners and don’t believe any of them would ever try to pull something like this. But if I was wrong, I obviously wouldn’t know until it’s too late.”

• Have a great weekend!


• Court Square Capital Partners has agreed to sell Harvard Drug Group, a Livonia, Mich.-based distributor of generic and OTC medications, to Cardinal Health (NYSE: CAH) for around $1.115 billion.


• Blue Bottle Coffee, an Oakland-based chain of artisanal coffee shops, has raised $70 million in new VC funding led by Fidelity, according to the FT. The company previously raised over $40 million from firms like True Ventures, Lowercase Capital, Index Ventures and Morgan Stanley. Read more.

• Joyus, a Palo Alto, Calif.-based direct response video network for women, has raised $24 million in new VC funding. Marker LLC and Steamboat Ventures co-led the round, and were joined by Accel Partners, InterWest and Time Warner Investments.

• TabbedOut, an Austin, Texas-based provider of mobile payment solutions for bars and restaurants, has raised $21.5 million in Series C funding. Wellington Management Co. led the round, and was joined by return backers NEA and Morgan Creek Capital Management.

• PicsArt, a San Francisco-based “mobile creative image community,” has raised $15 million in new VC funding from Insight Venture Partners and return backer Sequoia Capital.

• Qianhai Mobile, a provider of WiFi service to Chinese commuters, has raised $11.5 million from Baidu. Read more.

• Informed Data Systems Inc. (d.b.a. One Drop), a developer of a diabetes management software, hardware and services platform, has raised $8 million in Series A funding from RRE Ventures.

• Jungoo, an on-demand mobile app for hailing auto rickshaws in India, has raised $5 million in Series A funding. Snow Leopard led the round, and was joined by Paytm. Read more.

• Zentera Systems, a San Jose, Calif.–based provider of cloud overlay network hybrid infrastructure, has raised $4.9 million in Series A funding led by CDIB Venture Capital.

• LaunchDarkly, a San Francisco–based platform that lets software developers launch and test features, has raised $2.6 million in new VC funding from SoftTechVC, Bloomberg Beta, 500 Startups and Cervin Ventures.

• Diffbot, a Palo Alto, Calif.–based developer of visual robot technology, has raised an undisclosed amount of funding from Bloomberg Beta.


• AE Industrial Partners has agreed to acquire Belcan Corp., a Cincinnati–based provider of engineering services and technical staffing to the aerospace, power generation and industrial markets.

• Ecom Express, a provider of logistics to the Indian e-commerce market, has raised more than $130 million in private equity funding from Warburg Pincus.

• General Atlantic has agreed to acquire a majority stake in Too Faced Cosmetics, an Irvine, Calif.-based beauty brand, from Weston Presidio. No financial terms were disclosed.


• EndoChoice, an Alpharetta, Ga.-based provider of GI endoscopy products and services, raised $95 million in its IPO. The company priced 6.4 million shares at $15 per share (low end of $15-$17 range), for an initial market cap of approximately $366 million. It will trade on the NYSE under ticker symbol GI, while JPMOrgan and BofA Merrill Lynch served as lead underwriters. Shareholders include Sequoia Capital (21.79% pre-IPO stake), River Cities Funds (14.54%), Envest (9.69%) and Council Capital (8.31%).\

• Evolent Health, an Arlington, Va.-based provider of a population health managed services solution, raised $195.5 million in its IPO. The company priced 11.5 million shares at $17 per share, compared to plans to offer 10 million shares at between $14 and $16 per share. The company will trade on the NYSE under ticker symbol EVH, while J.P. Morgan and Goldman Sachs served as co-lead underwriters. It reports a $52 million net loss on $101 million in revenue for 2014. Last year, Evolent Health raised $100 million in Series B funding from TPG Growth, The Advisory Board Co. and UPMC Health Plan.

• DavidsTea Inc., a Canadian retailer of tea and tea-related products, raised $97 million in its IPO. The company priced 5.1 million shares at $19 per share (above upwardly-revised $17-$18 offering range), for an initial market cap of approximately $440 million. It will trade on the Nasdaq under ticker symbol DTEA, while Goldman Sachs and J.P. Morgan served as lead underwriters. The company reports $11.4 million of net income on $142 million in revenue for 2014, compared to a slight net loss on $108 million in revenue for 2013. Shareholders include Highland Consumer Partners (20.8% pre-IPO stake).


• Hitachi Data Systems, a unit of Hitachi Ltd. (Tokyo: 6501), has acquired Pentaho, an Orlando, Fla.-based data integration, visualization and analytics company. No financial terms were disclosed, although media reports put the price tag at between $500 million and $600 million. Pentaho had raised over $70 million from VC firms like Benchmark, DAG Ventures, Index Ventures and NEA.

• Cisco Systems (Nasdaq: CSCO) has agreed to acquire Piston Cloud Computing, a San Francisco-based developer of commercialized OpenStack software for businesses. No financial terms were disclosed. Piston had raised over $20 million in VC funding from Cisco, Data Collective, Swisscom Ventures, Divergent Ventures, Hummer Winblad and True Ventures.


• BroadSoft Inc. (Nasdaq: BSFT) has acquired mPortal, a McLean, Va.-based provider of mobile experience apps and services. No financial terms were disclosed.

• Hewlett-Packard (NYSE: HPQ) has ended talks to acquire Computer Sciences (NYSE: CSC), according to Bloomberg, which says the two sides were close to an agreement last month. Read more.

• Mojix, a Los Angeles-based provider of wide area sensor networks, has acquired TierConnect, a Plymouth, Mich.–based platform for the Internet-of-things. No financial terms were disclosed. Moljix has raised over $60 million in VC funding from firms like OMERS Ventures and Mercury Ventures.


 Madrona Venture Group has closed its sixth fund with $300 million in capital commitments.


• Jon Crawford has joined Gap Inc. (NYSE: GPS) as senior director of corporate strategy. He previously was with A.T. Kearney and, before that, spent nine years as a principal with Booz & Co.

• Ryan Lawler has agreed to joined seed-stage investment firm 500 Startups as a venture partner. He has spent the past five years as a writer at TechCrunch.

• Christopher Williams has joined Perella Weinberg Partners as a London-based partner in the firm’s advisory practice. He previously was executive vice chairman of financial institutions at Credit Suisse.

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