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Term Sheet — Friday, June 12

Friday Feedback

The sun is shining, Jack is back (again) at Twitter and Rupert is turning over the reins. In other words, it’s time for some Friday feedback.

First up are some emails related to the surprising lack of big VC liquidity events.

Peter: “It’s possible that this all actually works to LPs’ advantage. The traditional PE/VC model is actually a bit broken. You’re incentivized to deploy the capital relatively quickly; then if you get a couple of doubles or triples, you flip them quickly to print a brilliant IRR to raise your next fund; and you let the dogs fester in the portfolio for years. That’s not what LPs really want. They care about MOIC not IRR. It’s actually good to hold your winners for longer and to add capital to a winning investment.”

LP: “Thank you for writing this. We have a lot of confidence in most of our current VC fund investments but the time to exit is becoming unreasonably long. We’re also not pleased by what seems to be a much more hands-off attitude by our GPs, as if they don’t want to risk offending the entrepreneurs we are funding.”

Josh: “Has something changed fundamentally, where (often) younger private company management teams would rather stay private and therefore more nimble by not succumbing to public market regulations/scrutiny and quarterly analyst oversight (which is effectively what Jack Ma came out and said publicly)? Hypothetically, if you’re an investor in AirBnB or Uber right now, would you rather the liquidity that comes with an IPO, or could you envision a scenario where once growth plateaus and the company is mature, you would prefer the possibility of dividends as a means of liquidity rather than public company stock? If LPs in these funds are longer-term time horizon investors, where do they see more value?”

• There also were a lot of emails related to an earlier piece that took issue with the notion that private market valuations are inferior to public market valuations. George: “Agree with your conclusion re the public market compare. And as for the ‘made up’ valuations, I feel it’s almost a defense mechanism for managers that can’t invest in private companies. Oh look at those made up valuations (that I wish I could apply to my P&L).”

Marc: “Valuation is subjective and difficult at best and its accuracy/inaccuracy is ONLY appreciated retrospectively.”

Brian: “While I would never describe the public market as perfect, I do think it is generally the best judge of value at a point in time, with the freely available information at that time. Venture-backed companies and fast-growing public are both subject to considerable risk, uncertainty, and hard-to-predict futures, so both markets will inevitably have large valuation swings (one way or another). That said, the public market is obviously much, much larger and generally has more information, transparency, and liquidity. Public valuations are also influenced by derivatives, such as short positions, which have no real comparable mechanism in the private markets. This leads to more accurate pricing (theoretically anyway). Of course there is always the chance, that the future brings new information that makes the old price look silly, whether public or private.”

• S talks Ifty Ahmed: “If I were an LP, I’d really be wondering if there should be a VC exemption from full registration. I suppose it’s possible that this could have happened at a full registrant, but I’d be surprised — I think that the requirements of registration and the threat of enforcement result in better internal controls than Oak evidently had. Why was a senior investment partner in the middle of what is normally a back-office process, handling document review and wire instructions?That said, even absent full SEC registration, why didn’t the auditors catch this? I noted from their filings that they have a regional audit firm vs a Big 4, but the regional firm should have unearthed these weak controls.”

• Have a great weekend…


• Wingstop Inc., a Dallas, Texas-based chicken-wing chain owned by Roark Capital Group, raised $110 million in its IPO. The company priced 5.8 million shares at $19 per share (above upwardly-revised $16-$18 range), for initial market cap of around $543 million. It will trade on the Nasdaq under ticker symbol WING, while Morgan Stanley, Jefferies and Baird served as lead underwriters.

Wingstop reports nearly $9 million of net income on $67.5 million in revenue for 2014.


• Unum Therapeutics, a Cambridge, Mass.-based developer of antibody-directed cellular immunotherapy, has raised $65 million in Series B funding. New Leaf Venture Partners led the round, and was joined by Brace Pharma Capital, Cowen Private Investments, Jennison Associates, Novo AS, Sabby Management, Sectoral Asset Management, Wellington Management and return backers Fidelity Biosciences, Atlas Venture and Sanofi-Genzyme BioVentures. The company also raised an additional $5 million in equity funding from Seattle Genetics Inc., as part of a recently-announced strategic collaboration.

• WalkMe, an Israel-based guidance engagement platform for the enterprise market, has raised $25 million in Series D funding. Greenspring Associates led the round, and was joined by return backers Scale Venture Partners, Giza Venture Capital and Gemini Israel Ventures.

• TripleLift, a New York-based native advertising platform, has raised $10.5 million in Series B funding. Edison Partners led the round with an $8 million investment, and was joined by return backers True Ventures, iNovia Capital, Laconia Capital and NextView Ventures.

• BloomThat Inc., an on-demand flower delivery platform, has raised $5.5 million in Series A funding, according to the WSJ. Forerunner Ventures led the round, and was joined by Sherpa Ventures, Rothenberg Ventures and return backers First Round Capital and Vaizra Investments. Read more.

• Homesuite, a Palo Alto, Calif.-based monthly furnished rental brokerage, has raised $2.3 million in seed funding. Backers include Battery Ventures, Bessemer Venture Partners and Foundation Capital, Mike Evans (co-founder of GrubHub) and Pierre Lamond.


• ABRY Partners has completed its previously-announced acquisition of Gilbert, Ariz.-based FastMed Urgent Care, which calls itself the second-largest independent urgent care organization in the U.S. No financial terms were disclosed. Sellers included Comvest Partners. In related news, ABRY said that FastMed president Kyle Bohannon has been promoted to CEO.

• Aptean, an Atlanta-based portfolio company of Vista Equity Partners, has acquired Vision, a provider of supply chain inventory management and business intelligence software, from Chinram Group, a Canadian portfolio company of Najafi Companies. No financial terms were disclosed.

• Ethos Private Equity has agreed to sell Plumblink, a South African plumbing and bathroom merchant, to The Bidvest Group (JSE: BVT) for an undisclosed amount.

• Global Leveraged Capital has acquired Video King, an Omaha, Neb.-based maker of electronic gaming devices and entertainment systems, from Nogales Investors and Contrarian Capital. No financial terms were disclosed. G.C. Andersen Partners managed the process.

• Hess Corp. (NYSE: HES) has agreed to sell a 50% stake in its processing and pipeline unit in North Dakota’s Bakken to Global Infrastructure Partners for $2.675 billion. Read more.

• Perceva Capital has offered to buy the European underwear brands of Fruit of the Loom from Berkshire Hathaway, according to the FT. Read more.


• Biotie Therapies, a Finland-based developer of therapeutics for central nervous system disorders, raised $56 million in its IPO. The company priced 3.8 million shares at $14.89 per share, and will trade on Nasdaq under ticker symbol BITI. RBC Capital Markets served as lead underwriter. The company reports $5.8 million of net income on nearly $28 million in revenue for 2014, and will continue to trade in Helsinki under ticker symbol BTH1V.

• Catabasis Pharmaceuticals Inc., a Cambridge, Mass.-based developer of medicines to treat inflammatory and metabolic diseases, has set its IPO terms to 4.3 million shares being offered at between $13 and $15 per share. It would have an initial market cap of around $194 million, were it to price in the middle of its range. The pre-revenue company plans to trade on the Nasdaq under ticker symbol CATB, with Citigroup and Cowen & Co. serving as lead underwriters. Catabasis has raised over $100 million in VC funding from firms like SV Life Sciences (25.8% pre-IPO stake), Clarus Ventures (24.9%), MedImmune Ventures (14.8%), Advanced Technology Ventures (10.3%) and Lightstone Ventures (6.8%).

• Rapid7, a Boston-based provider of security analytics software and services, has filed for an $80 million IPO. It plans to trade on the Nasdaq under ticker symbol , with Morgan Stanley and Barclays serving as lead underwriters. The company reports a net loss of nearly $33 million on $47 million in revenue for 2014, and has raised nearly $90 million in VC funding from firms like Bain Capital Ventures and Technology Crossover Ventures. Read more at Fortune.


No exit news this morning.


• Dennis Wilson, founder of Lululemon (Nasdaq: LULU), has filed to sell his 14% stake in the business, which could be valued north of $1.2 billion. Read more.


• Learn Capital, an Austin, Texas-based VC firm focused on education, is raising upwards of $79 million for its third fund, according to a regulatory filing. It already has closed on $52 million.

• Leerink Capital Partners and Revelation Partners have launched a $192 million investment platform that will provide “capital and liquidity to healthcare investors, companies, founders and funds.”


• Tom Bradley has joined Oxford Capital as a managing director of the firm’s growth capital unit. He previously was a partner with DN Capital, and a founding partner with DFJ Esprit.

• J.P. Morgan has named Kurt Simon as global chairman of M&A. He previously led the bank’s tech, media and telecom team – a role that now will be filled by several of his deputies. In related news, Noah Weintroub will become vice chairman of investment banking, while Mark Fitney will take Weintroub’s role as head of Internet and digital banking. Read more.

• Mary Schapiro, former SEC chair, has agreed to become a nonexecutive director of the London Stock Exchange. Read more.

• Sarah Tavel has agreed to join venture capital firm Greylock as an investment partner, effective August 31. She has spent the past three years as a product manager at Pinterest and, before that, spent six years with Bessemer Venture Partners. Read more.

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