Term Sheet — Friday, November 20

November 20, 2015, 3:17 PM UTC

Random Ramblings

Some items to kick off your Friday:

On the other hand: Earlier this week I wrote about how private equity firms were getting a leg up on prospective limited partners during the fundraising process, by utilizing outside counsel that knew what sorts of terms those limited partners had agreed to with other firms. This was based on comments made by senior counsel to the California Public Employees' Retirement System, during a Monday workshop on private equity. It sounded quite inappropriate, which is why I titled a related blog post: Private Equity Behaving Badly.

As you might imagine, I received some pretty strong push-back from certain fund formation attorneys. As you might not imagine, I think they made some pretty decent points (buttressed by some subsequent conversation I had with folks from the LP world -- albeit not with the CalPERS counsel, who did not return requests for follow-up comment).

Three primary counterpoints: First, from a legal perspective, general partners are not typically bound by the same confidentiality terms as are limited partners. Yes, that's unfair. But it's the reality -- in part because GPs often have to share their limited partnership agreements with third parties like prospective lenders. So a GP can give its outside counsel tacit approval to use the information gleaned in the LPA, particularly if they will get reciprocal advantage in their own fundraising processes (or at least turn a blind eye to it). Also, it's important to remember that outside counsel to a GP does not technically owe client privilege to prospective LPs in that GP's fund.

Second, and arguably more important, limited partners also use outside counsel that often represent other LPs who are negotiating for entry on the exact same fund. This is something CalPERS counsel mentioned briefly in his remarks, but then quickly moved on from. It is true that certain public pension staffs have been warned to be careful about using such information -- for fear of collusion lawsuits -- but it is highly unlikely that any  private equity firm is going to risk the reputational damage of suing prospective LPs for surreptitiously sharing information when they themselves are doing virtually the same thing. And that doesn't take into account sovereign wealth funds and others that aren't likely to care too much about a U.S. civil lawsuit.

Finally, CalPERS counsel suggested that LPs are "on an island" when it comes to information. Really? What does he think his private equity staffers do when having dinners on the annual meeting circuits with other LPs, or in the hotel lobby at SuperReturn in Berlin? Let alone if there have been any replays of the so-called Denver Group meeting in 2012 (here's a refresher).

In short: I was swayed by one side on Monday, and I was whipsawed back yesterday into thinking the LP/GP information flow is reasonably balanced (so long as the LP is savvy enough to use experienced outside counsel). So now I'm interested in your thoughts. As always, any published replies will only include your first name or initial (assuming, of course, I get around to doing a mailbag again).

Unplugged: Battery Ventures is going to look a bit different next year when it finishes raising its eleventh fund. Not listed as a general partner is Dave Tabors, a 20-year veteran of the firm's Boston office who has backed such software and services companies as BladeLogic, SingleHop, HighJump Software, Made2Manage Systems and Quovadx.

Tabors declined to discuss anything related to Battery fundraising, natch, but did confirm via phone that he will step away from an investing role sometime next year. "It's been a great 20 years but I'm a little on the burned-out side," he said. "Sometime next year I'll stop looking at new investment opportunities so that I can have some extra time for something completely different... I haven't really done anything else professionally, so I'll either find something new that I love doing or maybe a break from venture will bring me back to it."

Tabors adds that he will continue to serve as a GP in existing Battery funds, and continue to work with his existing portfolio companies.

Asking the questions: We've got a pair of Q&As up that should be of interest to Term Sheet readers. The first is with Sarah Friar, chief financial officer of Square, which was conducted shortly after the company's shares began trading yesterday on the NYSE. Read it here. The second is a Q&A with Maura Healy, the Massachusetts Attorney General who yesterday unveiled proposed regulations for daily fantasy sports sites like DraftKings and FanDuel. Read it here.

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Have a great weekend...


 Cabela’s (NYSE: CAB), a Nebraska-based outdoor retailer with a market cap north of $2.8 billion, is fielding takeover offers, according to Bloomberg. Read more.


 Avenida, an Argentinian e-commerce company, has raised $30 million in Series C funding. Naspers led the round, and was joined by fellow return backer Tiger Global. Read more.

 Fractyl Laboratories Inc., a Waltham, Mass.-based developer of a device-based endoscopic procedure to treat Type 2 diabetes, has raised $17 million in new Series C funding (bringing the round total to $57m). Deerfield Management Company was joined by return backers Mithril, General Catalyst, Bessemer Venture Partners and Domain Associates. www.fractyl.com

 Dollar Shave Club, a subscription razor delivery service, has raised $15 million in new Series D funding, according to a regulatory filing. That puts the round total at $90 million, including a $75 million first close from June at a reported valuation of $615 million. Shareholders include Technology Crossover Ventures, Dragoneer Investments, Comcast Ventures, Forerunner Ventures, TCV, Pritzker Group Venture Capital, Venrock, Kleiner Perkins Caufield & Byers, Andreessen Horowitz and Shasta Ventures. www.dollarshaveclub.com

 Le Tote, a San Francisco-based on-demand fashion rental service, has raised $15 million in Series B funding. AITV led the round, and was joined by Lerer Hippeau Ventures, Azure Capital, Simon Venture Group, Epic Ventures and Funders Club. Read more at Fortune.

 SalaryFinance, a London-based financial employee benefit service, has raised $6.1 million from Brightbridge Ventures. www.salaryfinance.com

 Tubi TV, a San Francisco-based provider of a free, ad-supported movie streaming platform, has raised $6 million in Series B funding. Cota Capital led the round, and was joined by MGM, Lionsgate and return backer Foundation Capital. Read more.

 PHHHOTO, a New York-based app for sharing moving pictures, has raised $1.5 million in seed funding. Eniac Ventures led the round, and was joined by WME and Maveron. www.PHHHOTO.com

 Freebird Inc., a Cambridge, Mass.-based maker of an app that lets air travelers skip lines and book new tickets without extra costs in the case of long delays or missed connections, has raised $3.5 million in VC funding. Backers include General Catalyst, Accomplice and Slow Ventures. Read more.

 SaltDNA, a Belfast, Ireland-based encrypted mobile messaging app, has raised $3 million in VC funding from Accomplice. Read more.

 WaHome, a South Korean on-demand home cleaning service, has raised $1 million in seed funding from Sparklabs Global Ventures, Mashup Angels, Fast Track Asia and individual angels. Read more.


 Advent International, Bain Capital and Silver Lake each are preparing to submit final bids for a 20% stake in Singapore-based engineering outsourcing firm QuEST Global Services, which is being sold by Warburg Pincus for around $200 million, according to Reuters. Read more.

 Bridgepoint has moved four private equity firms to the second round of bidding for British forensic science firm LGC, according to Reuters. The deal could be valued at around $1 billion, with KKR, EQT Partners, CVC Capital Partners and The Carlyle Group remaining in the auction. Read more.

 Caisse de depot et placement du Quebec has agreed to acquire a 30% stake in Bombardier Inc.'s (TSX: BBD) rail business for $1.5 billion. Read more.


 Axsome Therapeutics Inc., a New York-based developer of drugs to treat pain and CNS disorders, raised $51 million in its IPO. The company priced 5.67 million shares at $9 per share (below plans to offer 4.25 million shares at $11-$13), for an initial market cap of around $180 million. The pre-revenue company began trading on the Nasdaq under ticker symbol AXSM, with shares finishing their first day down at $8.74 each. www.axsome.com

 Duluth Holdings, a Belleville, Wis.-based maker of branded work and outdoor apparel, raised $80 million in its IPO. The company priced 6.7 million shares at $12 per share (below $14-$16 offering range), for an initial market cap of around million. It will trade on the Nadsdaq under ticker symbol DLTH, with William Blair listed as left lead underwriter. The company reports $24.1 million of net income on $232 million in revenue for the fiscal year ending Feb. 1, 2015. www.duluthtrading.com

 Mimecast Ltd., a London-based provider of cloud security and risk management services for corporate information and email, raised $78 million in its IPO. The company on Wednesday night priced 7.75 million shares at $10 per share (low end of $10-$12 range), for an initial market cap of around $540 million. Shares closed up at $10.10 on their first day of trading on the Nasdaq under ticker symbol MIME. Mimecast reports $285k in net income on $116 million in revenue, for the fiscal year ending March 31, 2015. Shareholders include Insight Venture Partners (19.8% pre-IPO stake), Index Ventures (17%) and Dawn Capital (14.5%). Read more at Fortune.

 Noble Midstream Partners LP, a Houston, Texas-based spinout of Noble Energy Inc. (NYSE: NBL) that will focus on domestic midstream energy infrastructure assets, has postponed an IPO that could have raised upwards of $302 million, citing poor market conditions. It had planned to trade on the NYSE, with Barclays, Baird and J.P. Morgan serving as lead underwriters. www.nobleenergyinc.com

 Truck Hero Inc., an Ann Arbor, Mich.-based maker of branded consumer accessories for pickup trucks, has postponed its IPO due to “unfavorable market conditions.” The company, whose shareholders include TA Associates, were seeking to sell 11.11 million shares at between $17 and $19 per share. It would have had an initial market cap of around $710 million, were it to have priced in the middle of its range. J.P. Morgan, Baird and BofA Merrill Lynch were serving as lead underwriters. The company reports $7.4 million of net income on $189 million in revenue for the first six months of 2015. www.truck-hero.com


 Charterhouse is expecting bids today for Armacell, a German provider of insulation materials that could be worth upwards of €1 billion, according to Reuters. Read more.

 CVC Capital Partners is planning to sell a 6.3% stake in Spanish toll road operator Abertis (CATS: ABE), via a private placement. The deal would be worth around 870 million based on yesterday’s closing price for Abertis shares. Read more.

 TA Associates has agreed to sell CMOSIS, a Belgian provider of area and line scan CMOS image sensors, to AMS (Swiss: AMS) for an undisclosed amount of cash. www.ta.com


 Infineon Technologies, a listed German semiconductor company, has “expressed an interest in investing” in Japanese chipmaker Renesas Electronics (Tokyo: 6723), according to the WSJ. Read more.


 Scale Venture Partners is seeking to raise upwards of $335 million for its fifth fund, according to a regulatory filing. It currently is investing out of a $300 million fourth fund. www.scalevp.com

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