THE BOLD AND THE DISCIPLINED
Soft-Tress: The big news in Term Sheet’s world this morning is SoftBank Group’s after-hours acquisition of Fortress Investment Group for $3.3 billion. Takes are rolling in hot and fast! (“Neither cheap nor wise!” “A smart acqui-hire!” “A curious strategy!”) Here’s mine:
1. Nope, this isn’t part of SoftBank’s $100 billion Vision Fund. And no, the $100 billion Vision Fund isn’t closed yet. Rajeev Misra, the Vision Fund’s manager, is ex-Fortress. Meanwhile Fortress’s three principals, Pete Briger, Wes Edens and Randy Nardone will stay on.
2. Fortress will operate as an independent subsidiary owned by SoftBank. The firm has $70 billion in assets under management, $14 billion of which are private equity. It makes me wonder whether SoftBank’s Vision Fund, which includes outside LPs and is expected to do private equity-style investments, would compete. I’m told there isn’t expected to be much overlap since Fortress primarily focuses on distressed assets and SoftBank on tech.
3. Given the tech focus, this deal feels a bit random in that context. SoftBank is known for acquiring and investing in technology and telecom companies like Alibaba, Sprint, and ARM Holdings. But it’s worth noting that SoftBank owns all kinds of random things: Pepper the robot, several Asian ride-sharing startups, a big stake in Yahoo Japan, and a pro baseball team (Go Hawks!). CEO Masayoshi Son has described his vision for SoftBank as the “Berkshire Hathaway of tech.” This deal reminds us that SoftBank is actually the Berkshire Hathaway of whatever interests Son. The company stresses that his deals are simultaneously “bold” and “disciplined.”
AAPL M&A: Apple’s head of content Eddy Cue tamped down rumors that Apple would acquire a large media company at Recode’s Code Media conference yesterday. Speculation of such a deal has been flying since the fall, with perennial takeover targets like Netflix, Time Warner, Lionsgate and Sony Pictures in the mix.
One target that’s especially hot with traders is Disney. Perhaps because Disney CEO Bob Iger is on Apple’s board or because Laurene Powell Jobs owns more shares in Disney than she does in Apple. But the fact that Iger has no successor makes things trickier for any acquirer.
Either way, it appears that for now, Apple is content to make its own content. Said Cue:
“We think we have a real opportunity in the TV space to do that with Apple Music and shows, and the things we're trying to do aren't being done by anybody else. ... So yes, to the extent if we wanted to do what everybody else is doing, then you’re right, we might be better off buying somebody or doing that.
But that’s not what we're trying to do. We are trying to do something that’s unique, takes advantage of our platforms and that really brings culture to it.”
That includes an original show called “Planet of the Apps,” a “Shark Tank”-for-app-developers game show starring Jessica Alba, Gwyneth Paltrow, Gary Vaynerchuk, and Will.i.am. The show’s trailer was released yesterday to somewhat harsh mockery.
The Airbnb Profits: This morning my colleague Leigh Gallagher shared some newsy details from her brand new book, The Airbnb Story: How Three Ordinary Guys Disrupted an Industry, Made Billions . . . and Created Plenty of Controversy.
Last year Airbnb reported $100 million in EDBITDA on $1.7 billion in revenue. This year, the company projects $450 million in EBITDA on $2.78 billion in revenue. And by 2020, Airbnb expects to hit $8.5 billion in revenue with a whopping $3.5 billion in EBITDA.
Those last two are just projections, but they make one thing very clear: The model works. While certain “sharing economy” business models (food delivery, on-demand anything, even ride-hailing) face a questionable path to profits, home-sharing is not one of them. To whit:
The net effect is that, according to sources familiar with the company, Airbnb's losses over the years have totaled less then $300 million in aggregate. By comparison, Uber was reportedly on track to lose $3 billion in 2016.
New Firm Alert: Fika Ventures, a Los Angeles-based seed firm, has raised $40 million for its debut fund. The firm’s general partners are Eva Ho, who previously co-founded Susa Ventures, and TX Zhou, who co-founded Karlin Ventures. Both have worked as operators – Ho co-founded startups Factual and Navigating Cancer and worked at Google and YouTube for five years after Google acquired Applied Semantics. Zhou was previously the CFO of Lit Motors. The firm’s limited partners include Cross Creek Advisors and Knollwood Investment Advisory, as well as 15 founders Ho and Zhou backed in prior funds.
They started Fika to invest in seed-stage enterprise companies, noting that L.A.’s tech scene has thus far skewed e-commerce, digital media, and adtech. Fika is particularly keen to fund data-focused startups. “It used to be that data was only in the hands of the C-suite,” says Zhou. “But now it’s available to everyone in the organization, from the sales force to the people handling customer success.” That’s an opportunity for software companies.
One thing Ho learned from her time at Susa Ventures is that acqui-hires aren’t always a great backup plan for investments “We made very fast bets into technical teams from schools like Stanford, thinking there would always be an acqui-hire outcome,” she said. But the amount of money and nurturing that goes into a company that ultimately takes an acqui-hire deal never pays off for the fund. “We’re screening for founders that have the mentality to do the long game and the opportunity to build something substantial,” she says. The firm has made three investments to date.
The end: Staffjoy, a Y Combinator company that announced a round of seed funding just a month ago, has shut down. The company’s scheduling app for on-demand workforces was unable to compete for large enterprise contracts, it said. Staffjoy returned its cash to investors.
AT&TW: Time Warner shareholders will vote on the company’s merger with AT&T today at 3 Eastern.
THE LATEST FROM FORTUNE...
• Machines eye Lebron James.
• Janet Yellen says the Fed will soon say goodbye to QE.
• The Nokia 3310 is coming back.
• Meet Acorns, the latest robo-advisor app.
• Watch Drive.ai’s self-driving car in action.
• The six biggest corporate breakups of the past year.
• Michael Simon, co-founder of LogMeIn, joins SessionM board.
The limits of divestiture as an antitrust remedy. Banker bonus DENIED. So much for the great unbundling, welcome to the great rebundling. Smart desks know when you’re working. The horror of in-flight phone calls.
• AirTrunk, a Singapore-based data center company, raised $400 million in funding from Goldman Sachs (NYSE:GS) and TPG, according to The Australian Financial Review.
• Top Hat, a Toronto-based teaching platform provider, raised $22.5 million in Series C funding. Investors include Union Square Ventures, Emergence Capital, Georgian Partners, iNovia Capital, Golden Venture Partners, Version One Ventures, and SoftTech VC.
• MealPal, a New York City-based subscription meal service, raised $15 million in Series A funding. Comcast Ventures led the round, and was joined by Bessemer Venture Partners, Haystack Partners, and NextView Ventures.
• Rokt, an Australian digital marketing company, raised $15 million in Series B funding. Moelis Australia Asset Management led the round, and was joined by Time Inc. (NYSE: TIME), Square Peg Capital, and angel investors.
• Komprise, a Campbell, Calif.-based developer of data-management software, raised $12 million in Series B funding. Walden International led the round, and was joined by Canaan Partners and angel investors.
• Simba Sleep, a London-based “high-tech” mattress company, raised £9 million ($10.6 million) in funding from Henderson Global Investors, Numis Securities, and angel investors.
• ZestMoney, a Bengaluru, India-based fintech company, raised $6.5 million in a Series A funding. PayU led the round, and was joined by Ribbit Capital and Omidyar Network.
• NewsWhip, a Dublin-based startup that tracks news shared via social media, raised $6.4 million in Series A funding. Tribal led the round, and was joined by the Associated Press.
• mClinica, a Manila-based developer of a mobile app for pharmaceutical companies, raised $6.3 million in Series A funding, according to TechCrunch. Unitus Impact led the round, and was joined by Global Innovation Fund, MDI Ventures, Endeavor, 500 Startups, IMJ Investment Partners, and Kickstart Ventures. Read more.
• Voonik Technologies, a Bengaluru, India-based fashion marketplace, raised $6 million in funding from RB Investments and Sequoia Capital.
• SmartUp.io, a U.K.-based online learning platform that incorporates gamification, raised $5.5 million in funding, according to TechCrunch. Notion Capital and Hong Leong Group led the round, with participation from angel investors. Read more.
• Get Spiffy, a Research Triangle Park, N.C.-based maker of an app for on- demand car washes and detailing services, raised $5 million in Series A funding. Bull City Venture Partners led the round, and was joined by Development 72, IDEA Fund Partners, and Industry Ventures.
• Gamalon, a Boston-based provider of statistical machine learning software, raised $4.45 million in seed funding from a group of angel investors, including Steve Blank.
• Pleo, a London-based fintech startup, raised $3.25 million in funding. Creandum led the round.
• Perfect Channel, a London-based developer of auction and trading technology, raised £2 million ($2.4 million) in funding from Beringea and UIL Limited.
• Orreco, a Sligo, Ireland-based sports and data science company, raised $2 million in Series A funding from True Ventures.
• Exceed.ai, an Israeli developer of chatbots for marketing, raised $1.5 million in funding from Glilot Capital Partners.
• Kado, an Israeli startup developing charging technology for smartphones, tablets, and laptops, raised $1.2 million in seed funding from AltaIR Capital.
• IOVOX, a London-based call analytics company, raised $10 million in equity and debt funding from Octopus Ventures, SF Capital, and Silicon Valley Bank.
• Intuition Robotics, an Israeli developer of social-companion robots, raised an undisclosed amount in funding from iRobot (NASDAQ: IRBT) and OurCrowd, which brings its total funding to $6 million.
HEALTH + LIFE SCIENCES DEALS
• Surrozen, a San Francisco-based biopharmaceutical company focused on developing drugs that repair human tissues, raised $33 million in Series A funding. The Column Group led the round.
• FreshTracks Capital invested in THINKMD, a Burlington, Vt.-based maker of a point-of-care clinical assessment tool for gathering patient information.
PRIVATE EQUITY DEALS
• Zenith American Solutions, a Mokena, Ill.-based third-party employee benefits administrator, acquired Pacific Federal, a Glendale, Calif.-based employee benefits company. Financial terms weren’t disclosed. Zenith American Solutions is backed by Water Street Healthcare Partners.
• Carnelian Energy Capital Management invested an undisclosed amount in Grit Oil & Gas Partners, a Houston-based oil and natural gas company.
• Platinum Equity agreed to acquire Interior Logic Group, an Atlanta-based provider of turn-key design, from MSouth Equity Partners, according to the Moody's report.
• LFM Capital acquired Heartland Steel Products, a manufacturer of steel storage, tubing, and security products.
• H.I.G. Capital acquired the assets of Xtera Communications (OTCPK:XCOM.Q), an Allen, Texas-based optical networking company that filed for bankruptcy in November.
• IBS Investment Bank, a Fort Lauderdale-based private equity firm, will acquire and manage the assets of MACC Venture Partners, a Gastonia, North Carolina based multifamily owner-operator and launch a new $100 million fund called MACCVP Capital Equity Fund.
• Cliqz, German maker of a privacy browser, has agreed to acquire certain consumer-facing assets New York City startup Ghostery. Terms were not disclosed. Ghostery Inc, is changing its name to Evidon, and focusing on enterprise technology. Evidon is backed by Warburg Pincus.
• Vita Coco, a New York City-based coconut water company, expects to bring in around $1 billion in sales this year, according to Bloomberg. The company, whose shareholders include Reignwood Group and Verlinvest, is readying itself for a sale, although an IPO is also a possibility. Read more.
• SoftBank Group (TSE:9984) agreed to buy Fortress Investment Group (NYSE:FIG) for $3.3 billion. At $8.08 per share, SoftBank’s offer values the company at a 39% premium to its Feb. 13 closing price. Read more at Fortune.
• Walmart (NYST: WMT) has agreed to acquire Moosejaw, a Madison Heights, Mich.-based online retailer of outdoor goods, for $51 million.
• Apollo Global Management (NYSE:APO) hired Deutsche Bank AG and Credit Suisse Group AG to solicit acquisition offers for Chuck E. Cheese, an Irving, Texas-based family restaurant franchise. The firm also hired Jefferies and Morgan Stanley to ready the company for an IPO, if it’s unable to receive an acquisition offer of less than $2 billion. Read more at Fortune.
• Leonard Green & Partners and CVC Capital Partners are hiring investment bankers to help it sell BJ Wholesale Club, a Westborough, Mass.-based operator of wholesale warehouse clubs, or take the company public, according to the Wall Street Journal. Read more.
• E2open, a Foster City, Calif.-based provider of on-demand software for supply chain management, acquired Steelwedge, a Pleasanton, Calif.-based provider of cloud services for supply chain management. Financial terms weren’t disclosed. E2open is backed by Insight Venture Partners. Steelwedge raised $50.5 million in venture funding from investors including Sigma Partners and Camden Partners.
• Accion Venture Lab sold its stake in Clip, a Mexico City-based provider of digital payment services to small and medium-sized businesses in Mexico, to an undisclosed buyer. Financial terms weren’t disclosed.
• Marwit Capital sold Arc Machines, a Los Angeles-based manufacturer of orbital welding equipment, to ESAB Welding & Cutting Products.
• Allergan (NYSE: AGN) agreed to acquire Zeltiq Aesthetics (Nasdaq: ZLTQ), a Pleasanton, Calif.-based medical technology company, for $2.48 billion in cash, according to Reuters. At $56.50 per share, the deal represents a 14.4% premium over the company’s closing price Friday. Read more.
• PayPal Holdings (Nasdaq: PYPL) agreed to acquire TIO Networks (TSXV: TNC) for C$304 million ($233 million).
FIRMS + FUNDS
• Dyal Capital Partners, Neuberger Berman Group’s private equity division, raised $5.3 billion for its third fund, Dyal Capital Partners III.
• Veritas Capital, a New York City-based private equity firm, raised $3.55 billion for its sixth fund, Veritas Capital Fund VI.
• Direct Capital Private Equity, an Auckland-based private equity and venture capital firm, raised NZ$375 million ($270 million) for Direct Capital V, its fifth mid-market fund.
• Greenspring Associates has promoted Hunter Somerville from principal to partner.
• Ryan Lucero has joined Frazier Healthcare Partners as a vice president. In addition, the firm has promoted Philip Zaorski to vice president.
• Jon Ma has joined SignalFire as an investor. Previously, Ma was an investor at Insight Venture Partners.
• Michael Leonardo has joined Sixpoint Partners as a vice president. In addition, the firm has promoted Sean Joffe and Ryan Carey to directors, and Ben Newman to vice president.