• Egg on Face: There’s no confusion over what to make of the news coming out of mayonnaise startup Hampton Creek this week. It’s really, really bad. Bloomberg reports the company dispatched undercover teams of contractors to buy up its product in stores to create the impression of booming sales and strong demand.
Even in the era of Zenefits and Theranos, this is shocking behavior. If true (and Bloomberg presents ample evidence that it is), Hampton Creek deceived investors and its retail partners.
It’s an especially egregious example of a startup founder mistaking “growth hacking” and “hustling” for unethical, and possibly illegal, activity. How does this keep happening? Well, the startup world has a way of promoting creation myths and glory stories of its most successful founders doing similar things. We hear about he times that Successful Founder X that conned her way into conference or Founder Y bent rules he didn’t fully understand to get his product to market. For inexperienced leaders, the line between innocent “hustling” and fraudulent behavior can be hard to grasp.
The more frequently things like this happen, the more I imagine investors must to be questioning that whole “founder first” ethos they’ve been peddling for the last decade. Maybe not all founders can grow into impressive, responsible leaders like Mark Zuckerberg did. Maybe not all of them deserve to be put on a pedestal and protected with board control. I know this is blasphemy in the Valley, but maybe there’s something to be said for bringing in the adult supervision.
And while I’m out on this limb, maybe this is a sign that CPG companies shouldn’t be funded with the same growth expectations as tech startups…
• On the flip side: Part of what makes high growth entrepreneurship so exhilarating to watch is that founders often have irrational, impossible ambitions, and every so often, they actually pull them off. Marc Lore launched Jet.com with the goal of taking on Amazon – something literally no one else in the world, besides maybe Jack Ma, is delusional enough to try.
This week we learned he might be falling short of that goal, an invitation for cynics to cackle with “toldja so” glee. Jet is reportedly in talks to sell to Wal-Mart for $3 billion. The news kicked of a debate among those of us that like to debate these things: Is this deal happening because Wal-Mart is desperate to get a stronger digital foothold (following Unilever’s footsteps with Dollar Shave Club), or because Jet can’t survive on its own? Is this a failure, or an alliance that will make both players stronger in their fight again Amazon (thus, a continuation of Lore’s revenge fantasy)? I tend to agree with Jason Del Rey of Recode, who called the deal, “a marriage of necessity for both sides, and one that probably makes too much sense not to happen.”
• Reputation management: Interesting reader response from my Tuesday column about the public’s not-so-savory view of private equity: It’s not just the lack of transparency or cost-cutting that hurt’s private equity’s reputation. It’s the pressure to deliver returns to LPs.
Shaun writes: The government is used to buying and using products, but more and more they will be buying services because these are the types of companies that investors want to invest in. Why sell a bus when you can operate a transit service? Why sell drones when you could run a security service?
Public benefits are possible without giving up market returns (or above market). But for most of our prospective LPs, this is a very tough discussion. I'd say we've had north of 200 discussions now, and the folks who buy "the public benefits and financial returns" story are firmly in the minority. If LPs arent able to reconcile public benefits with financial returns, I'm not sure how best to tell the stories more broadly.
• Dan is still out next week, so I'll be here. Have a great weekend.
THE BIG DEAL
Deliveroo, a London-based on-demand food delivery service, has raised a $275 million Series E investment led by Bridgepoint, returning investor DST Global, and General Catalyst, with participation from returning investor Greenoaks Capital. The company has raised $474.59 million in funding to date. deliveroo.co.uk/
VENTURE CAPITAL DEALS
• GO-JEK, an Indonesian app for motorcycle ride-hailing, online food delivery, and other services, has confirmed an investment of more than $550 million from KKR, Warburg Pincus, Farallon Capital, and Capital Group Private Markets. www.go-jek.com
• Deliveroo, a London-based on-demand food delivery service, has raised a $275 million Series E investment led by Bridgepoint, returning investor DST Global, and General Catalyst, with participation from returning investor Greenoaks Capital. The company has raised $474.59 in funding to date. deliveroo.co.uk/
• Mosaic, a provider of affordable solar financing solutions for homeowners based in Oakland, Calif., has raised equity financing of up to $220 million, led by Warburg Pincus. Core Innovation Capital and Obvious Ventures also participated in the round. joinmosaic.com
• Formlabs, a designer and manufacturer of 3D printing systems based in Somerville, Mass., has raised $35 million in Series B funding from Foundry Group and Autodesk. formlabs.com
• Quixey, a Mountain View, Calif.-based startup that aims to help users find content within mobile apps, has raised $30 million in debt financing, according to CNBC. The company’s investors have included Alibaba and SoftBank. Read more.
• Kentik Technologies, a network analytics provider based in San Francisco, has raised $23 million in a Series B round led by Third Point Ventures. August Capital, Data Collective, First Round Capital, Engineering Capital, Glynn Capital, and David Ulevitch also participated. www.kentik.com
• GrubMarket, a San Francisco-based marketplace that aims to connect farmers and food producers with consumers, has raised $20 million in Series B funding. Sound Ventures, Global Founders Capital, Riverhead Capital, GGV Capital, Fosun Group, Danhua Capital, Fabrice Grinda, and Gang Wang participated in the round, according to TechCrunch. Read more.
• Elation Health, a cloud-based care platform for physicians based in San Francisco, has raised $15 million in Series B funding led by DFJ and including angel investors Martha Marsh and Charlie Cheever. www.elationhealth.com
• Insert, an automated in-app marketing platform based in Tel Aviv, Israel, has raised $10 million in Series A financing. Battery Ventures led the round, which also included angel investor Shlomo Kramer. www.insert.io
• Huuuge Inc., a developer of social casino games, has raised $4.6 million in a Series B round led by Asia Pacific-based investors Woori Technology Investment, along with Seoul Investment Partners and Kiwoom Investment. www.huuugegames.com/
• BrandYourself, a New York-based startup that aims to help users manage and improve their online reputations, has raised $2 million in funding from FF Angels, New Atlantic Ventures, and Barney Pell, according to TechCrunch. Read more.
• Baker, a Denver-based provider of software that helps marijuana dispensaries, has raised $1.6 million in seed funding led by Michael Lazerow led the round joined by Base Ventures, XG Ventures, 500 Startups, Poseidon Asset Management. www.trybaker.com/
• Vault RMS, A San Diego-based tech company advancing research into firefighter cancer rates, announced $1.3 million in a seed funding round led by Bill Miller of Legg Mason and San Diego-based Keshif Ventures, with participation from San Francisco-based Right Side Capital. www.vaultexposuretracker.com/
PRIVATE EQUITY DEALS
• Partners Group has agreed to acquire Systems Maintenance Services, a Charlotte, N.C.-based IT support services provider. SMS is being sold by funds affiliated with Thomas H. Lee Partners and Summit Partners. Terms were not disclosed. www.sysmaint.com/
• Rackspace (NYSE:RAX) is nearing a deal to sell itself to a private equity firm, according to the Wall Street Journal. The company has had an activist shareholder, Blue Harbour Group, since 2014. Read more.
• Carlyle Group will acquire 70% of China-focused outsourcing business VXI Global Solutions, according to the Wall Street Journal. The deal values the company around $1 billion. Read more.
At Home (NYSE: HOME), a Plano, Texas-based home goods retailer, priced its IPO at $15 per share. Shares began trading at $16.25 per share at its debut Thursday. At Home is backed by private equity firm AEA Investors. Read more.
• ECI Partners and Livingbridge have sold their investment in Reed & Mackay, a corporate travel management company, to Inflexion. The sale generated a return of 3.4x to investors. www.reedmac.com/
• Ripple, a San Francisco and Oakland-based news startup that draws on community contributors for coverage, has acquired Hoodline, another news platform also based in San Francisco that focuses on neighborhood coverage. Hoodline had raised funding from Sherpa Ventures and angel investors. Terms were not disclosed. hoodline.com/
FIRMS & FUNDS
• Arlington Capital Partners has raised $700 million for its fourth fund, which had a target of $575 million. arlingtoncap.com
• Powerplant Ventures has raised $42 million for a new fund that aims to invest in emerging plant-centric companies. www.powerplantvc.com
MOVING IN, ON & UP
• Kelly Rodriques has resigned as executive vice president of wealth services of Opus Bank and as CEO of PENSCO Trust, a subsidiary of Opus. Rodriques, who has led PENSCO since March 2010, will serve as a consultant to Opus. Curtis Glovier joins PENSCO as the new CEO from Fortress Investment Group. www.pensco.com
• James M. Neissa has joined Rothschild & Co Group as Head of Rothschild & Co North America. Previously he worked as Joint Global Head of Investment Banking and a member of the Global Executive Committee at UBS. Lee LeBrun will also join Rothschild Global Advisory as Head of M&A in North America. LeBrun previously worked as Co-Head of M&A – Americas at UBS. www.rothschild.com/
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