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Term Sheet –Friday, March 25

Friday Feedback

The sky is gray, the markets are closed and 2015 GDP has been revised to 2.4%. In other words, it’s time for some Friday Feedback…

First up are some emails on yesterday’s discussion of Instacart. Mark: “I don’t know whether Instacart is a good business or a bad one. But since when is ‘gross margin positive a sign of a good company? I’ve never invested in a company that’s not ‘seriously gross margin positive.’ How could anybody ever consider a company that is gross margin negative (or zero) because that means you’re losing money on every single customer (or in other words – you are paying customers to take your product).”

JT in a similar vein: “If all companies did their profitability calculations this way then everyone would be profitable.”

Liam: “Obviously it would be better for Instacart if its overall business was profitable but I’m surprised to see all of the Twitter criticism of your story. There had been reports that Instacart was losing lots of money on every order, which your story debunked. And most VC-backed businesses are unprofitable, sometimes even after going public. Considering what it is that Instacart actually does ― it’s a physical services company, not a software company ― achieving gross margin profitability is an important accomplishment.”

Drew: “Regarding Instacart and similar services – it’s about building and maintaining route density to create sustainable logistics and operational efficiency, the economy staying strong, an ability to deal with the potential of unionization of the delivery people and wages + benefits paid being and staying competitive to maintain and grow the workforce in a quality manner versus derelicts off the street. All must be properly screened and this does not always happen.”

• Chris on Staples vs. FTC: “Rather than writing that ‘it’s highly unusual to beat the FTC,’ wouldn’t it be more accurate to say it’s highly unusual to decide to fight the FTC in court? Beating them in court is not highly unusual, even if the odds are somewhat against you. The federal judiciary has lots of conservative jurists skeptical of FTC’s view on antitrust. Whole Foods fought (Wild Oats) and gained ground in a settlement (even if they didn’t win a verdict).”

• I also received a lot of email about the Mike Goguen situation. LS: “While I want to applaud Sequoia for firing Goguen on the spot, I don’t exactly understand their reasoning. If he really agreed to the original settlement because he was being extorted, then it seems unfair to fire him for not disclosing to his partners that he had agreed to a settlement under that sort of duress. That’s the point of extortion. If they actually fired him because they believe the other allegations, however, then come out and say so. Maybe their real problem is that they can’t quite admit to themselves that the accusations are legitimate, because that would reflect very poorly on their own ability to assess character, or on what they decided to ignore.”

Adam: “I think it is unfair to state Goguen ‘Clearly…has broader troubles with fidelity.’ It is entirely possible seeing, dating, and/or being sexually involved with other people was something he and his spouses discussed and agreed upon in some way, shape or form. While that probably isn’t the case in the majority of marriages, I am not sure there is incontrovertible evidence available to the public that this was the case here.”

JL: “Baptiste is to be blamed as much as Goguen. If she was sexually and physically abused by Goguen, why was she still with him for 13 years and hasn’t said a word until now? If she was afraid to do something about it why isn’t she afraid anymore?” [This one really bothered me, but similar sentiments were shared by others. So I present it as a reflection of some reader views, but with this brief editorial note.]

• Gametime: Half of the Elite 8 has been determined, and we have a new leader in our March Madness contest: Bryan Goettel, director of marketing and communications at Chicago-based fintech startup Supernova Cos. Unfortunately for Bryan, he picked Michigan State as his ultimate champion, so this is likely to be one of those fleeting victory sort of things…

• Have a great weekend…


• Snapchat has agreed to acquire Bitstrips, the Toronto-based maker of customized emojis called “bitmojis,” as first reported last night by Fortune. One source puts the deal “in the ballpark” of $100 million in cash and stock. Bitstrips had raised around $11 million in venture capital funding from firms like Horizons Ventures and Kleiner Perkins Caufield & Byers. Read more.


• June, a maker of “intelligent countertop ovens,” has raised $22.5 million in Series A funding. Eclipse Ventures led the round, and was joined by Sound Ventures, Vaizra Investments, Promus Ventures, Lumia Capital and return backers Foundry Group, First Round Capital and Lerer Hippeau Ventures. The company plans to begin shipping product by the 2016 holiday season.

• EndoStim Inc., a St. Louis-based maker of a neurostimulation device for treating gastroesophageal reflux disease, has raised $11 million of a new VC funding round that could total $20 million, according to a regulatory filing. Last December the company withdrew registration for a $35 million IPO that it filed for in September 2014 due to “market conditions.” Shareholders include Sante Ventures (35.4% stake per IPO filings) and Prolog Capital (5.7%).

• Kreditech, a German provider of credit and digital banking products to underbanked consumers, has raised €10 million from the International Finance Corp. It previously raised over $150 million from firms like J.C. Flowers, Amadeus Capital Partners, Varde Partners, HPE Growth Capital and Blumberg Ventures.

• Zeel Networks Inc., a New York-based provider of on-demand massages, has raised $10 million in Series A funding. Emil Capital Partners led the round, and was joined by New Atlantic Ventures, Slow Ventures, Partech Ventures and Spafinder. Read more.

• TravelerCar, a French P2P car-sharing company, has raised €5 million in new VC funding from MAIR Avenir. Read more.

• OneRent, a San Jose, Calif.-based residential rental and property management service, has raised $4 million in Series A funding from RenRen Inc. (NYSE: RENN).

• CiValue, an Israel-based provider of a customer analytics and personalization cloud platform for grocery, health and beauty retailers, has raised $2.4 million in seed funding from Nielsen Innovate, Mac Fund and Deutsche Telekom.

• FLYR, a San Francisco-based travel and data science company, has raised an undisclosed amount of funding from JetBlue Technology Ventures (making this the corporate VC group’s first investment).


• Invo HealthCare Holdings, a Jamison, Penn.-based portfolio company of Post Capital Partners, has acquired Progressus Therapy LLC, a Tampa, Fla.-based provider of school-based therapy and early intervention services. No financial terms were disclosed. Sellers include Sterling Partners.


• Klox Technologies Inc., a Quebec-based drug company focused on developing treatments for skin and soft tissue disorders, has withdrawn registration for an IPO designed to have raised upwards of $72 million at an initial market cap of more than $350 million. UBS was serving as lead underwriter.


• Ebates, a San Francisco-based subsidiary of Rakuten (Tokyo: 4755), has acquired Shopular, a Redwood City, Calif.-based mobile product discovery app. No financial terms were disclosed. Shopular had raised around $7.2 million in VC funding from groups like Foundation Capital, Sequoia Capital and Y Combinator.

• Olapic, a New York-based startup that helps brands leverage user-generated images, has acquired Piqora, a San Mateo, Calif.-based visual marketing and visual commerce platform for marketers and publishers. No financial terms were disclosed. Olapic has raised around $22 million in VC funding from firms like Felix Capital, Unilever Ventures, Fung Capital and Longworth Venture Partners. Piqora had raised around $11 million from firms like DFJ, Altos Ventures, Baseline Ventures and Freestyle Capital.

• Playboy Enterprises has hired Moelis & Co. to explore a possible sale, according to the WSJ. The publisher has been controlled by private equity firm Rizvi Traverse Management since 2011, with Hugh Hefner owning a minority stake. Read more.

• Yokohama Rubber Co. (Tokyo: 5101) has agreed to acquire Alliance Tire Group BV, a Dutch tire maker, for around $1.2 billion from an investor group led by KKR. Read more.


• Rovi Corp. (Nasdaq: ROVI) is in talks to acquire Tivo (Nasdaq: TIVO), according to the NY Times. Read more.


• Forté Ventures, an Atlanta-based VC firm, is raising upwards of $75 million for its second fund, according to a regulatory filing.


• Karin Klein, a partner with VC firm Bloomberg Beta, has been named to the board of real estate firm Paramount Group (NYSE: PGRE).

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