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Term Sheet — Thursday, July 29

July 30, 2015, 2:38 PM UTC

Random Ramblings

Cyrus Sanati here filling in for Dan. I have great news! Dan is feeling much better and will be resuming control of Term Sheet as early as next Monday. Much thanks to the staff here at the Fortune Reeducation Center in New York - it wouldn't have been possible to reprogram, err, I mean, "help", Dan, without all your hard work.

Since I will be flying down to my hometown of New Orleans this afternoon, the lovely and talented Erin Griffith will be in control of the Term Sheet tomorrow as I will most likely be passed out following a totally age-inappropriate night in the Quarter with old friends. You can reach Erin at Anyway, after Nola I will be heading off to Cairo for the opening ceremonies of the New Suez Canal, which I will be reporting on for Fortune next week (if I am still alive), so look out for that! 

 A great thanks to both Dan and Mark Gongloff for the opportunity and God Bless Erin for being on call to help me through all the technical issues with the new (for me) system. (I think I got it down now Dan, really!). 

Lastly, thanks to all y'all Term Sheeterz (Erin, take note, I am trying to make this happen). But for serious - I have thoroughly enjoyed engaging with y'all via email and twitter. This is really a special group of people: intelligent, knowledgeable, and kind(ish). You made getting up at 3am worth it. Let's stay in contact -  email me at or hit me up via twitter @BeyondBlunt  whenevers. 

BREAKING - From Dan... Sad news

Longtime Summit Partners investor Joe Trustey has passed away.

Joe Trustey, a managing director and chief operating officer of Summit Partners, was killed last night when his single-engine plane crashed at Milwaukee’s Timmerman Airport. Also killed was one of Trustey’s daughters, Anna, who is believed to be the plane’s only other occupant. READ MORE from Dan on

No bailout for private capital

Ok - I guess I should be careful what I ask for...when you ask Term Sheeterz their opinion, they give it - in spades. I received, umm, I don't know, like 347 emails yesterday...seriously. Anyway, I was able to read most of them but wasn't able to reply yet (I needed three hours to sleep, because, you know, I'm human) - but I'll be in the air this afternoon and I'll bang it out - not because I have to, but because I want to - the responses were pretty damn good (and extensive). I am going to post a few that caused me to sit up and think...I will keep all the responses I post anonymous (unless specified that it would be ok to use your name). Better safe than sorry (or fired), right?

Here's a refresher on the question...from yesterday's rant....

With most of the money fueling the startup boom coming from venture capital and other private sources, what is going to happen when things inevitably go south and a lot of these companies start to fail? Will the government step in to save VC firm X and shareholder Y the way it did the banks during the Financial Crisis? And if not, how will the economy be able to absorb all of these losses?

So, overwhelming y'all thought that the government won't intervene to save Sand Hill Road...

Some thought that VCs would be fine - it is their investors we should be concerned with...after all, VCs  get their money from somewhere...

Nope. Venture Capital, except for very late stage or growth equity, is pretty well insulated from the banking system. It will be pensions foundations and university endowments that take this one in the chin. -DB

Yes! But many of those pensions and endowments are backed (explicitly and implicitly) by some government agency...What will happen if one of these big state employee pension funds takes a hit? Will Washington just stand back?

The biggest risk for VC investments versus leveraged loans is all of the pension funds, which are implicitly backed by states, municipalities, and -perhaps - when push comes to shove they are also backed by the federal government. Might be worth your time to add up how much of the $300bn of VC unicorns is owned indirectly by government funded pensions and how meaningful that could be in terms of state balance sheets. (GREAT IDEA) Maybe Meredith Whitney was right but was a few years too early. - DH

Meredith hasn't been right about anything since her call on Citi back in 07 - but DH is right, she could be right and it might just be a private capital meltdown that proves does it. But will things get that bad?  Some questioned the need for government intervention at all in such a meltdown ... Private Equity would come to the rescue!

The VC and private funding driving the startup boom is definitely creating some value in places, even if it's not nearly as much as the valuations would suggest. I wonder if the next step when all of this eventually shakes out is that the PE shops come in and do their thing? Imagine: markets dry up, all of these companies lose a ton of their value and can't get any more funding to extend their runways. PE shops could start swooping them up at huge "discounts," consolidate their operations, and eventually make the types of returns that would make their investors very happy. - NK

Other believed that all this is overblown...It's leverage that's the real killer and it isn't really an issue this time around...

If a large number of the Unicorns go Public in 24-36 months at the equivalent of a “down round” to their recent V C raises, or if we have a repeat of 2001-02, and a complete collapse of tech prices (see Twitter today and Tesla probably) the impact on the overall economy would be fairly minor, because this is primarily Equity money, with no leverage. What caused 1929, 1981, 2008 is excessive leverage in the system primarily through the Banks. Lehman was levered 34-1, Bear Stearns 43-1 and GS and MS 25+-1. ( UBS alone lost $83 Billion in its supposed AAA Mortgage Portfolio) The 2001-2003 minor slowdown following the last Tech Bump had very little impact on the real economy except that it caused Mr Greenspan and the Fed to put the “pedal to the metal” for the next 4-5 years further fueling an unsustainable rise in housing prices on top of a government mandated lowering of underwriting standards. No V C firm has any debt at all and the majority of their young Companies employ very small amounts of leverage. - FD

Leverage is a killer - but is it the only killer? Greenspan did soften the blow of the Dot Bomb by lowering rates big time. Bernanke did the same in 2008 - taking it rates down to nearly zero. Will Yellen just do the same?

Trouble is, she can' least not now. When things went south those last two times the Fed had some slack in the interest rate to play with - today, they don't. Yesterday, the Fed left rates at near zero - for the 2,417th straight day, I might add. While Janet and the gang hinted that a rate hike was on the table for September, they still kept rates where they were on fear that they might mess up the "economic recovery."

It seems like nothing is good enough for these doves. I mean what do they need to see? The number of people seeking unemployment aid is at its lowest level in almost 42 years! Things are fine - we don't need to be at zero. Not JUST because inflation is flat (although, that is weird) but because there is just too much money in the economy being thrown around. With rates higher it would encourage people to save and not spend every cent they had in a futile search for yield (i.e. investing in ridiculous startups).

So that may not be an option...what then? More quantitative easing? Great. I think that could be the liquidity trap to end all liquidity traps...

Question here - (and I'll read and fwd off the responses to Erin) If the Fed is out of the game here and monetary policy is ineffective in helping to prop up the economy, what then?

The rise of "Private IPOs" - when the public markets just won't do (and there is too much wealth on the sidelines)

So-called "Private IPOs,"  which are funding rounds of at least $40 million are on the rise, largely replacing normal IPOs in the private capital markets. According to PitchBook's latest Venture Industry Reportthe number of $40M+ rounds jumped 71%, rising from 172 in 2013 to 294 last year. In the first half of 2015, there's been another $18.5 billion invested through 187 growth rounds versus only $3.5 billion raised through public offerings.


Delphi Automotive, the UK-based auto parts manufacturer, said on Thursday it was buying HellermannTyton Group, a UK-based manufacturer of cable fasteners and equipment, for $1.84 billion in bid to boost the firm's auto technology offerings.



 GitHub, the popular San Francisco based online repository for software code, raised $250 million in a second round of funding led by Sequoia Capital, with Institutional Venture Partners, Thrive Capital, and Andreessen Horowitz also participating. The investment values the seven-year-old company at around $2 billion. Fortune's  Kia Kokalitcheva has more here

 Catchpoint Systems, the New York based provider of web performance and application monitoring solutions, raised $16 million in a Series C funding round led by Battery Ventures, which contributed $6 million. The rest of the cash came from Silicon Valley Bank, which extended a $10 million line of credit.

 Jun Group, the New York based mobile video and branded content platform, raised $28 million from Halyard Capital and Bridge Bank..

 Radius, the San Francisco-based software company led by Darian Sharazi, Facebook’s first intern, raised $50 million in a funding round led by Founders Fund with participation from Formation 8, Glynn Capital Management, Jerry Yang’s AME Cloud Ventures, Salesforce Ventures, BlueRun Ventures, and Yuan Capital. The investment now values the software company at around $1 billion. Fortune's Heather Clancy has more here.

 Fuisz Media, the Los Angeles-based tech company, raised $10 million in a Series A funding round led by Evolution Media Partners,which is a joint venture between Evolution Media Capital, TPG Growth and Participant Media. Ross Levinsohn, former interim CEO of Yahoo! and President of Fox Interactive Media, and Ian Doody, principal at Evolution Media Capital (TPG Growth + CAA), have joined the company’s board of directors. Fuisz's proprietary technology can turn any online video into an interactive experience, allowing users to touch or click on products to learn more about them.

 ZVerse, a Columbia, South Carolina-based 3D printing technology company, raised $3.5 million in a Series A funding round from Mosley Ventures, Capital A Partners, as well as other strategic investors.

Tictail, the New York based tech firm, raised $22M in a Series B funding round, led by existing investors; Creandum (Stockholm, Sweden,), Thrive Capital (New York, NY,) Balderton Capital (London, UK,) as well as Acton Capital Partners (Munich, Germany.),  bringing the company's total amount raised to $32 million. Tictail is a free-to-use DIY e-commerce platform that enables independent brands to set up an online store in a virtual mall (Tictail Marketplace) with other small companies.

Behalf, an online payments platform targeting small and mid-sized businesses and their vendors, received a $119 million credit facility from new investors MissionOG, Maverick Ventures, Victory Park Capital as well as from existing investors, Sequoia Capital and Spark Capital. Behalf will use the new funds to grow its team and increase the number and size of working capital lines it offers to small businesses. Behalf funds businesses’ purchases with flexible terms, up to 150 days. After answering just four questions online, businesses can instantly qualify for $50,000 in working capital, at affordable rates.

Light, a Palo-Alto based digital photography startup, raised $25 million in a series B funding round led by Formation 8 Hardware Fund. Additional participants in the round include StepStone Group, Bessemer Venture Partners , CRV, Foxconn's FIH Mobile, GlobalFoundries CEO Sanjay Jha, and CrunchFund. Light uses advanced optics to make beautiful images more accessible. (that's right,it's .co)


The Carlyle Group announced that its RMB (Chinese Renembi) fund Carlyle Beijing Partners Fund, and affiliates invested RMB530 million (approximately US$85 million) in Beijing Ubox Technology & Trade, a vending machine operator in China. Ubox is one of the largest and fastest-growing vending machine operators in China.The RMB fund was established by Carlyle with the support of the Beijing Municipal Government.

Marlin Equity Partners, the Los Angeles-based investment firm with $3 billion under managementcompleted an investment in My Fit Foods, an Austin, TX-based producer of health-oriented grab-and-go prepared meals. No financial terms were disclosed.


Petco reportedly may be going public - for the third time! The company was last taken private in 2006 in a $1.8 billion leveraged buyout by TPG Capital and Leonard Green & Partners. Read more HERE


 Summit Partners, the Boston-based growth equity firm, sold 360T, a German financial technology firm, to Deutsche Börse, the German exchange operator, for €725 million in cash. 360T is a global FX trading platform with operations in all the major financial centers, including Frankfurt, London and New York.

 Dallas-based Brazos Private Equity Partners, today announced that it has entered an agreement to sell one of its portfolio companies, Vision Source, to Essilor of America, a subsidiary of Paris-based Essilor International and the leading manufacturer and wholesale distributor of optical lenses in the United States. Terms of the deal were not disclosed.

 Sun Capital Partners, the Boca Raton based private equity firm, sold  Vari-Form, a Troy, Michigan-based auto parts manufacturer to Crowne Group. Terms of the deal were not disclosed


Odyssey Behavioral Healthcare announced that it has completed its first two acquisitions - Pasadena Villa Psychiatric Residential Treatment Centers, and Lifeskills South Florida. The new Brentwood, Tennessee-based psychiatric and addiction care platform is backed by Rhode Island private equity firm, Nautic Partners. Odyssey and Nautic plan to invest up to $50 million of equity capital.



Butler Burgher Group (BBG), a Dallas-based commercial real estate valuation, advisory and assessment firm, announced new senior-level staff members have joined its New York office to enhance the firm's advisory, financial reporting and appraisal review services. Louis Yorey will lead the firm's new advisory services and financial reporting practice. Andrew Babienco has joined BBG at the director level. He has over 36 years of experience in real estate valuation, most recently with Deutsche Bank. Lastly, Helen Peng, cane on board as a director in New York City. She also joins from Deutsche Bank.

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