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Term Sheet — Thursday, April 28

Random Ramblings

Today’s big deal is that pharma giant AbbVie has agreed to acquire VC-backed cancer drug startup Stemcentrx at what could become an enterprise value of $10.2 billion. In other words, a unicorn just got its wings gilded.

Some quick notes on what could become one of the five largest VC-backed trade sales of all time:

1. The deal includes $5.8 billion in upfront payments, including $2 billion in stock. Then there is another $4 billion in cash-based earnouts, plus a return to shareholders of Stemcentrx cash on hand.

2. This represents a stunning return for initial VCs Artis Ventures and WTI, plus Series D entrant Founders Fund (at a $300m valuation). In fact, Stemcentrx was the single largest investment in Founders Fund’s history (even more than it invested in SpaceX), and it should return more than the $625 million raised for the fund out of which it first invested and around half of a successor $1 billion fund. Even late-stage backer Fidelity will see positive returns, despite coming in at a $5 billion post-money valuation. So will Sequoia Capital, which first invested at a $2.3 billion pre-money valuation.

3. Speaking of Fidelity: I am feeling much better this morning about my recent decision to stop reporting its monthly valuation marks. Fidelity had marked down the value of its Stemcentx shares by 37.75% from where it had bought last summer. Again, Fidelity will make money even if Stemcentrx never delivers a dime of the earn-out.

4. Finally, this is yet another massive VC exit from the life sciences sector, which seems to be having more massive wins than the IT sector (at least relative to its initial investment market share). A number of generalist VC firms backed away from life science investing several years back, a decision that is not looking terribly good right now…

• Reddit’s big biz plan: This morning I posted a piece on the business of controversial social media site Reddit (i.e., how it’s making money). Included were comments from co-founder and CEO Steve Huffman, about the company’s venture capital situation. He says there is still plenty of cash left in the bank from a $50 million round raised in late 2014, but that another fundraise is likely in early 2017.

• Growing into (early) growth: Menlo Ventures yesterday disclosed that it has raised $250 million for its first-ever “opportunities” fund, which will be focused on what it sees as a funding gap for Series B and Series C rounds. Around half of the money is expected to go toward existing Menlo portfolio companies but, for new deals, initial commitments will be matched by the firm’s flagship $400 million early-stage fund (so as not to distort LP economics).

• Brand equity: Lion Capital this morning said that it would acquire a minority equity stake in Authentic Brands Group, a brand development company whose “labels” include retail brands like Juicy Couture and Spyder, plus individual brands like Elvis Presley, Marilyn Monroe and Shaquille O’Neal (who also happens to be a small shareholder).

No financial terms were disclosed, but Lion’s Lyndon Lea says that it’s a pro rata purchase from all existing owners, including private equity firm Leonard Green and ABG founder Jamie Salter. He adds that Lion’s actual equity ownership isn’t yet fixed, but that it likely will end up at between 25% and 33%. More on this one later today on the website…

• John Snow is dead: Benchmark partner Bill Gurley recently published a comprehensive blog post on his favorite topic: How winter is coming for unicorns, how they did it to themselves (by taking “dirty” term sheets from crossover investors) and what it will mean for all stakeholders (startups, investors, employees).

It’s gotten a lot of attention, but I wanted to highlight one overlooked section:

Against this difficult backdrop, many firms are asking their LPs to make new accelerated commitments to their next fund, exactly when evaluation is most difficult and anxiety may be at a cyclical peak….

One response from the LP community might be to demand commitments from new funds that prohibit inside-led rounds and cross-fund investing. This can help to ensure that new capital is not put to use in an attempt to save previous investment decisions — an activity known as “throwing good money after bad.”

In other words, Gurley thinks LPs should consider shifting the power paradigm with their VC firms, just as they did with LBO relationships after the Great Recession.

Interesting idea (and one that is unlikely to actually affect Benchmark), but it’s hard to imagine LPs holding that sort of line. LBO firms arguably are more interchangeable than are VC firms in terms of performance, so the risk of losing a relationship is less impactful. Plus, the dollar allocation to VC is usually much smaller than the allocation to PE, so the losses are less but the prospect for massive IRR is higher. And then there is the whole matter of many LP managers getting bonuses for paper IRRs, which lowers their incentive to play hardball for longterm prudence. But I’m interested in your thoughts. Could LPs make a stand here?


• AbbVie (NYSE: ABBV) has agreed to acquire Stemcentrx, a San Francisco-based cancer drug developer, at what could become a $10.2 billion enterprise value (including earn-outs). Stemcentrx had raised around $550 million in VC funding, most recently at a post-money valuation of $5 billion, from firms like Founders Fund, Artis Ventures, WTI, Sequoia Capital and Fidelity. Read more.


• Drivy, a France-based peer-to-peer car rental platform, has raised €31 million in new VC funding co-led by Cathay Innovations and Nokia Growth Partners. Return backers include Bpifrance, Via-ID and Index Ventures.

•, a Dublin, Calif.-based provider of cloud infrastructure security and compliance automation solutions, has raised $15.7 million in Series B funding led by Venrock. Existing backers include Bain Capital Ventures and True Ventures.

• uAvionix, a Palo Alto, Calif.-based developer of aviation communication systems, has raised $5 million in Series A funding led by Playground Global.

• Xola, a San Francisco-based online booking and marketing platform for travel tour providers, has raised $5 million in Series A funding led by the travel agency unit of Japan’s Rakuten. Read more.

• Poncho, a New York-based personalized weather forecasting service, has raised $2 million in seed funding. Lerer Hippeau Ventures led the round, and was joined by such firms as betaworks, Greycroft Partners, Comcast Ventures, Venture51 Capital Partners and RRE Ventures.

• SpaceVR, a San Jose, Calif.-based platform for creating cinematic virtual space tourism, has raised $1.25 million in seed funding. Shanda Group led the round, and was joined by Skywood Capital.

• PrecisionHawk, a Raleigh, N.C.-based provider of aerial data and safety technology for drones, said that DuPont has joined its recently-announced $18 million in Series C round.


• A.H. Harris, a West Hartford, Conn.-based portfolio company of The Frontenac Co., has acquired Kenseal Construction Products, a Baltimore-based distributor of waterproofing, sealing and other construction products.

• AnaCap Financial Partners is in talks to acquire the French retail operations of Barclays. In other Barclays (LSE: BARC) news, the firm agreed to sell its credit card business in Spain and Portugal to Spanish online bank Bancopopular-e. No financial terms were disclosed. Read more.

• Bain Capital, Permira and Thoma Bravo each have made first-round offers to acquire Qlik Technologies Inc. (Nasdaq: QLIK), a Radnor, Penn.-based provider of business intelligence software, according to Bloomberg. Vista Equity Partners also is considering a bid for the company, which currently is valued at around $2.7 billion. Read more.

• CIVC Partners has acquired Sitewise Corp., a Denver-based utilities service provider. No financial terms were disclosed. Sitewise will be merged with existing CIVC portfolio company Track Utilities.

• Investindustrial has agreed to acquire Valtur Group, an operator of vacation resorts in Italy and Croatia, from Sofia Srl (which will retain a minority equity stake). No financial terms were disclosed.

• Polymer Solutions Group, a portfolio company of Arsenal Capital Partners, has acquired Sasco Chemical Group Inc., an Albany, Ga.-based maker of specialty chemicals for the rubber, wood, consumer and medical industries. No financial terms were disclosed.

• Silicon Ranch Corp., a Nashville, Tenn.-based solar plant operator, has raised $100 million in new equity funding led by Partners Group.

• Summit Casing Equipment, a Fort Worth, Texas-based provider of centralizers and float equipment to the oil and gas industry, has secured an undisclosed amount of private equity funding from Renovo Capital.

• TPG Growth has acquired Frank Recruitment Group, a UK-based staffing and recruiting firm focused on the enterprise software market, from the company founders and private equity firm Livingbridge. No financial terms were disclosed.


• Intellia Therapeutics, a Cambridge, Mass.-based gene-editing company focused on the development of medicines using CRISPR/Cas9 technology, has set its IPO terms to 5 million shares being offered at between $16 and $18 per share. The pre-revenue company would have an initial market cap of around $583 million, were it to price in the middle of its range. Intellia plans to trade on the Nasdaq under ticker symbol NTLA, with Credit Suisse, Jefferies and Leerink Partners serving as lead underwriters. It has raised in VC funding, from firms like Novartis (20.3% pre-IPO stake), Atlas Venture (17%), OrbiMed Advisors (9.3%), Fidelity (7.1%), Janus Capital Management, Foresite Capital, Sectoral Asset Management and EcoR1 Capital.

• Samsung Biologics, a South Korean contract manufacturer for the biotech market, said it is planning to go public later this year in a Seoul IPO that could value the company at upwards of $2.6 billion. Read more.


• Cinven is seeking a buyer for Host Europe Group (HEG), a Germany-based provider of web hosting services to small and mid-sized businesses, according to Reuters. The deal could be worth around $1.9 billion. Read more.


• Abbott Laboratories (NYSE: ABT) has agreed to acquire medical device maker St. Jude Medical (NYSE: WTJ) for approximately $25 billion in cash and stock. The $85 per share value represents around a 37% premium to yesterday’s closing price for St. Jude stock. Read more.

• Hanesbrands (NYSE: HBI) has agreed to acquire Australian underwear company Pacific Brands (ASX: PBG) for A$1.1 billion. Read more.

• HNA Group of China has agreed to acquire Carlson Hotels, a Minnetonka, Minn.-based hotelier whose brands include Radisson and Country Inns and Suites. No financial terms were disclosed. Read more.

• Oracle (Nasdaq: ORCL) has agreed to acquire Textura (NYSE: TXTR), a Deerfield, Ill.-based provider of cloud contract and payment management solutions for the construction market. The deal is valued at $663 million in cash.

• Sanofi (Paris: SAN) has publicly offered to acquire Medivation (Nasdaq: MDVN), a San Francisco-based prostate cancer drug-maker, for $9.3 billion in cash. It originally made the offer privately, but says it did not receive a reply. The Times of London previously reported that Medication had rejected to overture, and that AstraZeneca (LSE: AZN) was preparing a bid of its own. Read more.


 Astorg Partners, a Luxembourg-based private equity firm, has raised nearly $1.96 billion for its sixth fund, according to a regulatory filing. Park Hill Group is serving as placement agent.

• Cinven is planning to target €7 billion for its sixth flagship private equity fund, according to Reuters. Read more.

• Binary Capital, a San Francisco-based early-stage consumer tech VC firm, is raising its second fund, according to a regulatory filing. No target is listed. The firm’s first fund was sized at $125 million.

• Menlo Ventures has raised $250 million for its first “opportunities fund,” which will focus on Series B and Series C rounds for tech startups.

• Sunstone Partners has closed its debut fund with $300 million in capital commitments. The firm was recently formed as a spin-out of the growth equity team from Trident Capital.


• Balderton Capital, a European VC firm, has named Bernard Liautaud as its first managing partner. He had joined Balderton in 2008, and has led such deals as Citymapper, Talend, Vestiaire Collective, Recorded Future, Sunrise and Qubit.

• André Esteves, the former CEO of Brazilian investment bank BTG Pactual, has returned to the firm after being released from jail and house arrest. Late last year, Esteves was arrested as part of a large financial corruption case, which remains ongoing. He will not have an executive role with BTG Pactual, but rather will focus on partnership and strategy issues. Read more.

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