Term Sheet — Monday, March 14


Random Ramblings

Greetings from New York City, where I'm in town for a variety of meetings. A lot to address (yeah, this is going to be a long one):

Stomach churning: Last Tuesday, Sequoia Capital kicked off its annual 2-day meeting of limited partners. Among those in attendance was Mike Goguen, a longtime Sequoia partner known for his focus on enterprise technology deals. No one was terribly surprised, even if Goguen hadn't been listed as a general partner on the firm's most recent U.S. fund. What neither the LPs nor Goguen's Sequoia partners realized, however, was that a lawsuit was being simultaneously filed in San Mateo Superior Court, alleging that Goguen had systematically raped and otherwise abused a woman named Amber Baptiste for over 13 years.

The complaint itself, which you can read here, is officially for breach of contract. Specifically, Goguen and Baptise agreed in 2014 to a settlement whereby Baptiste would keep quiet in exchange for $40 million, to be paid out in four installments. Baptiste alleges that Goguen made the initial $10 million payment, but then balked at future payments (thus precipitating the lawsuit). For his part, Goguen claims that he has been extorted by Baptiste, and is expected to file a counter-suit sometime this morning.

A Sequoia spokesman declined to comment much about the case, except to say that the firm was unaware of the settlement agreement until Thursday. Goguen was out at the firm by that evening ― the spokesman declined to say that he was terminated, but clearly there was an irreparable breach of trust. We do not yet know if Goguen remains a limited partner in Sequoia funds, or a partial owner of its management company (he held between 5%-10% at last check). His board responsibilities will be reassigned.

Some initial thoughts on all of this:

1. The complaint itself is horrifying. Its allegations touch on sex trafficking, rape and the callous spreading of STDs. If even half of it is true, then Goguen is lucky to not be in prison.

2. What's important to remember at this point, however, is that we don't yet know what is and what isn't true. The settlement agreement ― attached to the filing ― certainly lends credence to Baptiste's allegations. But I would expect that Goguen will dispute more than a few claims in his counter-suit.

3. Goguen is referred to in the lawsuit (and in subsequent media reports) as a "managing partner" at Sequoia. But I'm not so sure that's correct, particularly given that thing about not being a GP on Sequoia's last U.S. fund (most likely related to investment performance). When Mike Moritz gave up day-to-day control several years ago, fellow Sequoia partner Doug Leone took over those responsibilities. But I've never heard Goguen referred to as Leone's number two, or even the firm's number three or number four (in terms of job responsibilities, let alone investment performance).

4. The reason the job title may matter is that there already is a lot of chatter about how this lawsuit can be tied, even in some small way, to Sequoia's historical lack of any female general partners. If a guy like this is making decisions, then no wonder (or, in a similar vein ― if Sequoia kept a guy like this around). From my (admittedly male) perspective, this is a bridge too far (in the absence of more information). Yes, Sequoia is a boys club. But there is a big line of demarcation between male chauvinism and rape. Moreover, I do think it is possible that Goguen kept his private life private. You might recall a recent situation in which a senior private equity executive managed to keep his severe drug addiction secret from his partners for years. Again, I'm not saying no one else at Sequoia knew (and if they did, there will be deserved hell to pay). I'm saying that it is too early to draw conclusions.

Intel intelligence: On Friday, Bloomberg reported that Intel Capital has hired UBS to explore the sale of around $1 billion in direct investments via the secondary markets. A few notes on this:

1. Intel Capital currently has around 430 active portfolio companies, and my understanding is that around a quarter of them could be sold. The primary motivation is strategic rather than financial, and reflective of Intel Corp.'s own changing focus. For example, expect to see most consumer tech holdings on the block, while anything related to drones, wearables and IoT remains untouched. This means that there could be some objective "winners" included in the deal, which could help get the block sold in one piece (which is Intel Capital's preference).

2. This is not the first time that Intel Capital has launched a massive secondary sale. It also did so in 2002 or 2003, just as the dotcom bust had broken wide open. In that case, it was mostly about culling winners from losers.

3. Intel Capital isn't commenting on this, save for pointing reporters to a February blog post by new boss Wendell Brooks (longtime Intel Capital leader Arvind Sodhani left last summer). In the post, Brooks says that Intel Capital plans to continue investing between $300 million and $500 million per year, with more of a focus on sourcing deals (it currently leads around half of its deals, but wants that figure to hit 2/3). Seems like the blog post might have been laying the PR groundwork for the secondary news leaking out...

Numbers game: Venture capital firm Data Collective on Friday filed SEC docs for its fourth early-stage fund and its second "opportunities" fund. Each is sized the same as its predecessor ($155 million and $125 million, respectively), and word is that they both are fully subscribed.

Moving on: Dave Johnson has quietly stepped down as a senior managing director with The Blackstone Group, as we first reported on Friday.

You might recall that Johnson was the former Dell Inc. deal-maker who joined Blackstone in early 2013, and soon tried leading a buyout of his former company on Blackstone's behalf. But it didn't work, and Johnson never really got much over the finish line (which isn't uncommon for Blackstone tech leads). He'll remain a senior advisor to the firm. In other Blackstone news, longtime operating partner Sandy Ogg (former chief HR officer for Unilever) has left.

 March Madness Extravaganza: We will indeed by holding our annual March Madness contest, with full information tomorrow morning. Per usual, the winner will have the chance to write part of Term Sheet.


 The Blackstone Group has agreed to sell luxury hotel operator Strategic Hotels & Resorts Inc. to China’s Anbang Insurance Group Co. for around $6.5 billion. This is around $450 million more than Blackstone purchased Strategic for just four months ago.

Also this morning, Starwood Hotels & Resorts (NYSE:HOT) said that it has received a $76 per share takeover offer by an investor consortium that includes Anbang Insurance Group. Other members include J.C. Flowers and Primavera Capital. Starwood had agreed last November to be acquired by Marriott International (Nasdaq: MAR). Read more.


 Cainiao, a Chinese logistics startup backed by Alibaba Group, reportedly has raised upwards of $1.54 billion at around a $7.7 billion valuation. Backers include GIC, Temasek Holdings, Khazanah Nasional and Primavera Capital. Read more.

 Future Finance, a European student lender, has raised £119 million in new capital from backers like QED Investors and Blackstone Strategic Opportunity Fund. Read more.

 Cambridge Epigenetix, a UK-based developer of epigenetic tools, has raised $21 million in Series B funding. Google Ventures led the round, and was joined by Wellcome Trust, Sequoia Capital, New Science Ventures and Cambridge Enterprise. Read more.

 EZBob Ltd., a UK-based online business lender, has raised £20 million in new equity funding from Leumi Partners and Oaktree Capital Management. www.ezbob.com

 Marley Spoon, a Germany-based cook-at-home meal delivery service, has raised $17 million in Series B funding. QD Ventures and Kreos Capital were joined by return backers like Lakestar. Read more.

 Inmoji, a Boston-based mobile marketing startup that leverages branded interactive emojis, has raised $5 million in Series A funding led by John Wigneswaran. Others backers include Accomplice, PayPal Start and David Chang. www.inmoji.com

 BlueLine Grid, a New York-based security collaboration platform, has raised an undisclosed amount of funding from Bold Capital Partners. www.bluelinegrid.com


 AllOver Media, a Minneapolis-based portfolio company of Audax Private Equity, has acquired Astra Pacific Outdoor, a Los Angeles-based outdoor advertising company. No financial terms were disclosed. www.astrapacific.com

 Apollo Global Management has agreed to acquire Fresh Market Inc. (Nasdaq: TFM), a New York-based specialty grocery retailer, for $1.36 billion, or $28.50 per share. Read more.

 The Carlyle Group has agreed to acquire WingArc1st, a Japan-based provider of enterprise output management and business intelligence software, from ORIX Corp. and company CEO Hiroyuki Uchino. No financial terms were disclosed. www.carlyle.com

 CVC Capital Partners has agreed to acquire Italian generic drugmaker Doc Generici from Charterhouse. No financial terms were disclosed, but an earlier Reuters report put the asking price at between €650 million and €700 million. Read more.

 Serent Capital has acquired a 30% equity stake in Next Gear Solutions, an Oxford, Miss.-based provider of management software for the restoration market. No financial terms were disclosed. www.nextgearsolutions.com


No IPO news this morning.


 Blue Wolf Capital has agreed to sell H.C. Materials, a Bolingbrook, Ill.-based maker of single crystal piezoelectric materials, to CTS Corp. (NYSE: CTS) for $73 million in cash. www.hcmat.com


App Annie, a San Francisco-based provider of data on mobile apps, has acquired app marketing data startup AppScotch for an undisclosed amount. App Annie recently raised $63 million in new venture capital and debt financing led by Greenspring Associates. Read more.

Energy Transfer Equity LP (NYSE: ETE) has held talks to sell gas station and convenience store operator Sunoco, according to Reuters. The discussions come as ETE’s planned purchase of The Williams Co. (NYSE: WMB) has been made more difficult due to falling oil prices. Read more.

InVision, a New York-based design collaboration platform, has acquired Silver Flows, a stealthy startup that lets developers prototype within Sketch. No financial terms were disclosed. InVision last year raised $45 million in Series C funding led by Accel Partners. Read more.

 Magellan Health (Nasdaq: MGLN) has acquired The Management Group Inc., a Madison Wis.-based provider of Medicaid home and community-based waiver quality assurance and improvement services. No financial terms were disclosed. www.tmgwisconsin.com

 SS&C Technologies Holdings Inc. (Nasdaq: SSNC) has completed its previously-announced acquisition of Citigroup’s alternative investor services business for approximately $321 million. www.sstech.com


 Aberdeen Asset Management plans to raise between $350 million and $500 million for a global fund-of-funds focused on lower and middle-market private equity funds. Read more.

 Aqua Capital, a Brazilian private equity firm, has held a $188 million first close on is second fund, according to the NY Times. Limited partners include UTIMCO and Germany’s DEG. Read more.

 Lee Equity Partners has closed on over $315 million for its second fund, according to a regulatory filing. Park Hill Group is serving as placement agent. www.leeequity.com

 Wise SGR, an Italian private equity firm focused on the lower middle-markets, has closed its fourth fund with €215 million in capital commitments. www.wisesgr.it


 David Arcauz has stepped down as a London-based partner with Adams Street Partners, which he joined six years ago to focus on European large-cap funds, according to eFinancial News. Read more.

 Steven Webber has left Terra Firma Capital Partners, where he had served as a managing director for 20 years (including with the firm’s predecessor, PFG), according to eFinancial News. No word yet on his future plans. Read more.

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