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Term Sheet — Wednesday, October 28

Random Ramblings

Barry Silbert last week sold SecondMarket, his popular trading exchange for private company stock, to the Nasdaq for an undisclosed amount. Now he’s lined up a group of big-name backers to support the launch of a conglomerate devoted entirely to bitcoin and other blockchain technologies.

It’s called Digital Currency Group (something that already existed in a much more modest form), and will include a pair of businesses that were originally formed at SecondMarket, but were not part of the sale. They include Genesis Global Trading, an over-the-counter bitcoin trading firm; and Grayscale Investments, a digital currency asset management firm that manages the Bitcoin Investment Trust, a publicly-listed vehicle that raised over $60 million.

It also will house a portfolio of 57 seed-stage investments that Silbert and his team have already made, including Chain, Circle, Coinbase, Ripple and Xapo. They also have backed several companies looking to exploit bitcoin’s blockchain technology for uses outside of finance, including Ascribe (managing digital IP) and ShoCard (digital identification). Using CoinDesk data and other public sources, Silbert estimates that the companies he’s made early investments in have gone on to raise nearly 70% of all venture capital that has been pumped into the bitcoin and blockchain markets.

“What we’re building is the largest early-stage investment portfolio in the digital currency and blockchain ecosystem,” Silbert explains. “We’re also going to start high-growth businesses of our own, and develop a global platform and network to support our companies.”

DGC is structured as a company rather than as an investment vehicle, in part because Silbert hopes to someday take it public. To that end, he has raised what he refers to as a “very large” new round of funding.

Among the new investors is MasterCard, which seems to be making its first formal foray into the bitcoin space. The others are: Bain Capital Ventures, CIBC, CME Ventures, FirstMark Capital, New York Life, Novel TMT, Oak HC/FT, RRE Ventures, Solon Mack Capital and Transamerica Ventures.

“We’re still far away from bitcoin being a functional currency, and I don’t think we’ve gotten closer lately,” Silbert says. “First it’s going to function as a speculative investment that will drive up the price and create a larger monetary base that will draw in Wall Street to trade it. Then more merchants will come on board. As it gets more liquid, as a [payment] rail it will become a real alternative to the existing money transfer systems in the world today. I really believe that’s what will happen, and I want DGC to be a big part of it.”

• Today in Theranos: The U.S. Food and Drug Administration has published two lab inspection reports on Theranos, the $9 billion blood-testing company that is fighting to salvage its reputation. And it’s not good. Per Fortune’s Robert Hackett, who reviewed all of the documents:

The investigators found that the company had been shipping its tiny blood-collecting vials—”uncleared medical device[s],” as the authors called them in one report—between states. They also found that Theranos kept poor records, mishandled complaints, failed to conduct quality audits, and was “unable to produce documented supplier qualifications,” among other observations.

Or, put another way, Fortune will have lots to talk about with Theranos CEO Elizabeth Holmes, when she’s on stage next week at Fortune Global Forum in San Francisco.

Plus, we have a bit of new information. First, research firm VCExperts tells me it has uncovered a Delaware filing that shows Theranos recently authorized the sale of $200 million in new shares (10m shares at $20 per share). This is technically a Series C-3 round, and the filing is dated just days before the original WSJ story critical of Theranos. There is not yet a record of the shares actually being issued. Moreover, the company reported back in April that it had issued more than 32 million Series C-2 shares at $17 per share (out of 58.8m authorized) — which suggests it already has raised far more than the reported $400 million.

Second, we’ve identified a couple more investors in Theranos: Partner Fund Management, a San Francisco-based hedge fund; and BlueCross BlueShield Venture Partners, the health insurance giant’s corporate VC arm that is managed by Chicago-based Sandbox Industries. No comment from either one (or from Theranos), natch. It also is worth noting that several secondary firms have been calling around, claiming to have access to Theranos shares at a discount to the $9 billion valuation.

THE BIG DEAL

• Walgreens Boots Alliance (Nasdaq: WBA) has agreed to acquire Rite Aid (NYSE: RAD) for $9.4 billion in cash. The $9 per share deal represents a 48% premium to Monday’s closing price for Rite Aid stock, and assigns the Pennsylvania-based pharmacy chain an enterprise value of $17.2 billion. The combined chain would have nearly 13,000 U.S. locations. Read more.

VENTURE CAPITAL DEALS

• Alteryx Inc., an Irvine, Calif.-based provider of data blending and analytics solutions, has raised $85 million in new VC funding co-led by Iconiq Capital and Insight Venture Partners. Meritech Capital Partners also participated. www.alteryx.com

• Paddle8, a New York-based secondary marketplace for art and luxury collectibles, has raised $34 million in Series C funding. New investors include Rolf Sachs, Eric Fellner and Edgar Berger. Return backers include Mousse Partners, Damien Hirst; Jay Jopling and Stavros Niarchos. www.paddle8.com

• TruMid, a New York-based platform and marketplace for corporate bond and CDS trading, has raised $27 million in new VC funding. Peter Thiel led the round, and was joined by return backers Soros Fund Management and by Shumway Capital. www.trumid.com

• Marqeta, an Emeryville, Calif.-based “Open API issuer processor platform,” has raised $25 million in Series C funding. IA Capital, CommerzVentures and Max Levchin were joined by return backers 83North, Granite Ventures and Commerce Ventures. FT Partners served as placement agent. www.marqeta.com

• Talentsoft, a French provider of cloud-based talent management software, has raised €25 million in new funding led by Goldman Sachs. www.talent-soft.com

• Turnstone Biologics Inc., a Toronto-based developer of oncolytic viral immunotherapies for cancer, has raised C$11.3 million in Series A funding. Versant Ventures led the round, and committed more than C$20 million in follow-on funding. www.turnstonebio.com

• NGData, a New York-based provider of customer experience management solutions, has raised $10.2 million in Series B funding. Idinvest Partners led the round, and was joined by Pamica, Capricorn Venture Partners, Nausicaa Ventures and SmartFin Capital. www.ngdata.com

• Pendo, a Raleigh, N.C.-based SaaS data analytics platform for helping organizations build and improve enterprise software, has raised $11 million in Series A funding. Battery Ventures led the round, and was joined by Salesforce Ventures and return backers Contour Venture Partners, Core Capital Partners and IDEAFund Partners. www.pendo.io

• SourceClear, a San Francisco-based “security company for software developers,” has raised $10 million in Series A funding. Index Ventures led the round, and was joined by Storm Ventures. www.srcclr.com

• Two Bit Circus, a Los Angeles-based “experiential entertainment company,” has raised $6.5 million in Series A funding. Techstars Ventures and Foundry Group co-led the round, and were joined by Intel Capital. www.twobitcircus.com

• HyPR Brands, a New York-based automated marketplace for social media influencer marketing, has raised $5 million in seed funding. Edgewater Capital led the round, and was joined by Silvertech Ventures, Star Farm and Klingenstein Fields. www.hyprbrands.com

• Kickoff, a dating app for Latin America, has raised $1.6 million in funding from Brazil’s Monashees Capital. www.kickoffapp.co

• Zype, a New York-based provider of direct-to-consumer video delivery solutions for online publishers , has raised $1.6 million in seed funding from Revel Partners, Entrepreneurs Investment Fund and individual angels. www.zype.com

• Splittable, a London-based app for sharing and managing household expenses, has raised $1.2 million in seed funding from Seedcamp, Playfair Capital and the London Co-Investment Fund. Read more.

PRIVATE EQUITY DEALS

• Calvert Street Capital Partners has acquired Abrasive-Form Inc., a Bloomingdale, Ill.-based creep-feed grinding manufacturer serving the industrial gas turbine, aerospace, automotive and general industrial sectors. No financial terms were disclosed. Livingstone managed the process. www.abrasive-form.com

• CCMP Capital Advisors has completed its previously-announced acquisition of Shoes for Crews, a West Palm Beach, Fla.-based provider of footwear to food service industry workers, from AEA Partners. No financial terms were disclosed, but an earlier report suggested that AEA was seeking upwards of $700 million. www.shoesforcrews.com

• Citic Private Equity has offered to acquire the 80% stake it does not already hold in Biosensors International Group Ltd., a Singapore-listed medical device maker that has a current market cap of around S$1.1 billion. Read more.

• Paine & Partners has agreed to acquire Suba Seeds Co., an Italian producer of specialty vegetable and legume seeds. No financial terms were disclosed. www.subaseeds.com

• TravelClick, a New York–based provider of cloud-based revenue generation solutions for the hospitality industry, has acquired ZDirect, a Hallandale Beach, Fla.-based CRM platform in the hospitality sector. No financial terms were disclosed. TravelClick was acquired earlier this year by Thoma Bravo. www.travelclick.com

IPOs

• Adesto Technologies Corp., a Sunnyvale, Calif.-based provider of non-volatile memory products for Internet of Things apps, raised $25 million in its IPO. The company priced 5 million shares at $5 per share, compared to earlier plans to offer 4.1 million shares at between $10 and $12 per share. Its initial market cap is $81 million, and it will trade on the Nasdaq under ticker symbol IOTS. Needham & Co. and Oppenheimer & Co. served as lead underwriters. Adesto reports a $4 million net loss on around $20 million in revenue for the first half of 2015, and has raised over $50 million in VC funding from firms like ARCH Venture Partners (19.4% pre-IPO stake), Harris & Harris Group (16.2%), Applied Ventures (15.6%), ATA Ventures (11.2%), Adams Street Partners (10.1%) and Altera Corp. (8%). www.adestotech.com

• Deezer, a Paris-based music streaming service, has indefinitely postponed its Paris IPO, which had been designed to raise around €300 million. Its only explanation was “market conditions.” The company has raised more than $140 million in funding from such firms as Access Industries, CM-CIC Capital Prive and IDInvest Partners. Read more.

• GenSight Biologics, a Paris-based ophthalmic therapeutics using gene therapy, has set its IPO terms to 4.65 million shares being offered at between $13 and $15 per share. It would have an initial market cap of around $256 million, were it to price in the middle of its range. The company plans to trade on the Nasdaq under ticker symbol GNST, with Leerink Partners listed as left lead underwriter. Shareholders include Novartis Ventures (20.37% pre-IPO stake), Abingworth (17.06%), Versant Ventures (17.06%), Fidelity (9.44%), Vitavest (7.48%) and Index Ventures. www.gensight-biologics.com

EXITS

• Aetos Capital has agreed to sell Tokyo-based property firm Simplex Investment Advisors to Hulic Co. (Tokyo: 3003) for approximately $1.3 billion. Read more.

• Benchmark Electronics Inc. (NYSE: BHE) has agreed to acquire Secure Technology Co., a Santa Ana, Calif.-based provider of customized electronics, sub-systems and component solutions for defense, aerospace and industrial applications. The deal is valued at $230 million, and Vance Street Capital is the seller. Harris Williams & Co. managed the process. www.securetechnologycompany.com

• Cisco Systems Inc. (Nasdaq: CSCO) has agreed to acquire Lancope Inc., an Alpharetta, Ga.-based provider of network visibility and security intelligence solutions, for around $450 million in cash. Sellers include Canaan Partners, GMG Capital Partners, H.I.G. Capital and Council Capital. www.lancope.com

• Raycom Media has acquired PureCars, a Charleston, S.C.-based digital advertising platforms for the automotive industry. No financial terms were disclosed. PureCars had raised $10 million in VC funding from Gemini Investors and Stage 1 Ventures. www.purecars.com

OTHER DEALS

• Goldman Sachs (NYSE: GS) is spinning out a collection mobile phone software it had developed into a new vehicle that will be managed and majority-0wned by Synchronoss Technologies (Nasdaq: SNCR). Goldman Sachs will retain a minority stake. Read more.

• Snyder’s-Lance Inc. (Nasdaq: LNCE) has agreed to acquire San Francisco-based snack maker Diamond Foods Inc. (Nasdaq: DMND) for $1.27 billion in cash and stock. There had been earlier reports that Kellogg Co. (NYSE: K) was prepping a $1.5 billion bid. Read more.

• Toshiba Corp. (Tokyo: 6502) has agreed to sell its image sensor business to Sony Corp. (Tokyo: 6758). No financial terms were disclosed for the deal, which is expected to close by the end of Q1 2016. Read more.

• Trinity Mirror PLC (LSE: TNI) has agreed to acquire the 80% stake it does not already own in Local World, a British publisher of 52 daily and weekly newspapers, for around £220 million. Read more.

FIRMS & FUNDS

• Ares Management and Kayne Anderson have called off their planned merger. Read more.

MOVING IN, UP, ON & OUT

• Brian Regan has stepped down as CFO of Shutterfly Inc. (Nasdaq: SFLY), in order to join Spectrum Equity Investors as a managing director and CFO. Read more at Fortune.

• Rolf Classon has joined BBH Capital Partners as a senior advisor. He is the onetime chairman of the executive committee of Bayer HealthCare AG, and served as president of Bayer Diagnostics. He also served as interim CEO of Hillenbrand Industries. www.bbh.com

• Jake Foley has stepped down as a managing director of financial sponsors at Houlihan Lokey, according to Bloomberg. Read more.

• Michael Huff has joined Arsenal Capital Partners as an industry and operations partner focused on the firm’s specialty industries group. He previously was president and CEO of Citadel Plastic Holdings and, before that, was a senior executive with Johns Manville Corp. www.arsenalcapital.com

• Punit Mehta has stepped down as global head of life sciences banking at Barclays, in order to join Credit Suisse as co-head of Americas healthcare. Read more.

• New Enterprise Associates has promoted Sara Nayeem to partner. She originally joined the VC firm’s healthcare practice in 2009 from Merrill Lynch, and sits on the boards of portfolio companies Mersana, Cydan, Vtesse and Therachon. www.nea.com

• James Staley has been named CEO of Barclays (LSE: BARC). He is a former JPMorgan banker who most recently was a managing partner with hedge fund BlueMountain Capital Management. www.barclays.com

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