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Term Sheet — Thursday, February 16

February 16, 2017, 3:22 PM UTC
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Snap goes low: Either Snap is setting itself up for a big pop, or the company’s underwriters are nervous about how the market reacted to Snap’s slowing growth and major losses.

Snap will sell as many as 230 million shares (including 30 million for the underwriters) at between $14 and $16 a share for a total offering of $3.6 billion at the top of the range. This gives the company a valuation of between $16.20 billion and $18.52 billion. Remember: Snap’s last private market valuation is $25 billion.

At every turn, CEO Evan Spiegel has done the exact opposite of what’s expected from traditional Silicon Valley companies. He based his company in L.A. He’s building wearable technology when that category has been deemed a dead fad. He’s fiercely private in an era where “transparency,” or at least the idea of transparency, is king. He makes product decisions on gut feel rather than data and extensive A/B testing. And he’s going public in an era where nobody wants to go public.

You could argue that this morning’s news is that again. Remember how, right before its IPO, Facebook’s underwriters got a little greedy, boosting the company’s already-expensive listing price and valuation at the last minute? And remember how, despite pitching the listing as “The People’s IPO,” a full 57% of Facebook shares sold came from insiders dumping their stock? By contrast, secondary shares only represent 27.5% of Snap’s float.

Pricing Snap below its last private valuation is a conservative move, even though the company knows demand for its IPO – or any hot tech IPO – is high. I’m told most of the shares Snap is selling are already spoken for: Two large “non-traditional” investors have claimed $500 million each, while the traditional funds (Fidelity/Wellington/T. Rowe Price etc.) are buying $1 billion, leaving the remaining $1.6 billion for “everyone else.”

But this also means Snap won’t look so greedy if it raises its proposed share price after the road show. At any rate, that’s what investors that bought in at $25 billion have to be hoping for.

For now, Snap is slightly less expensive. My colleague Jen Wieczner emails:

Snap's future shareholders won't be taking quite as much risk by buying into the maker of the disappearing message app, which lost $515 million at its bottom line last year. At a valuation of $18.5 billion, Snap stock would trade at 46 times sales, not quite as sky high as the price-to-sales ratio of 62 that we previously computed. (If Snap prices at the low end of its range at $14 per share, giving it a valuation of $16.2 billion, it would trade at 40 times sales.)

While Snap's IPO will by no means be cheap, that price-to-sales valuation puts it in line with Twitter (TWTR) at that social media company's IPO, with Twitter stock debuting at about 45 times the company's sales.

At any rate, those investing in Snap are not investing because of its business fundamentals today. They’re investing because they believe CEO Evan Spiegel is a product genius who understands how young people want to consume media better than anyone else, and that that vision and foresight will pay off (somehow!) down the road.

New fund alert: Three years ago Goodwater Capital made a big bet that the “software is eating the world” thesis did not mean the opportunity to make money on consumer internet startups was over. Rather, the expansion of software into every possible industry would expand investment opportunities for consumer internet startups. That led Goodwater, which invests in Series A and B rounds, to back 16 fast-growing consumer-facing companies including and Zumper. The firm has not announced any exits to date but expects some in the next few quarters.

Today the San Mateo firm announces it has raised its second fund with $250 million in commitments. That’s a big step up from its first fund, a $130 million vehicle closed in 2014. Managing directors Chi-Hua Chien and Eric Kim do not plan to add more partners. The larger fund allows them to follow-on, investing up to $40 million in their portfolio companies over time.

“The definition of consumer technology was largely e-commerce and consumer audience businesses,” Chien says. “We’ve seen an expansion of that thesis such that consumer tech now is a horizontal- not a niche -- that touches every industry out there, including transportation, financial services, health care, real estate, and cosmetics.”

Adds Kim: “Five to seven years ago, it would have been laughable to consider transportation to a consumer tech category.” Goodwater is looking closely at changing consumption habits in video and financial services.

In order to stay on top of what the kids are into, Kim says the firm has a rule: Never say “I would or would not use that product.” They know they’re not the target demographic for many of the products they invest in. Rather, the firm uses deep consumer research to guide its decisions. “The consumer is the ultimate judge,” Kim says.

Verihoo: Verizon will cut the price of its $4.8 billion acquisition of Yahoo by somewhere between $200 million and $300 million, according to varying reports. That’s good news for Yahoo – it means the deal might actually happen after months of uncertainty and public hints from certain Verizon executives. Verizon gets to say it extracted a punishment from the company for not disclosing its major hacking during diligence. As my colleague Aaron Pressman joked, Verizon makes around $250 million in revenue every 18 hours.


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Why is India so obsessed with crimes committed by software engineers? How employee referral programs kill diversity. Data nerds struggle to gain power at hedge funds. Uber gives restless employees a way to cash out. Apple struggles to make big deals. Why Apple hasn’t revolutionized television. Time Warner shareholders approve AT&T merger.


Lytro, a Mountain View, Calif.-based developer of consumer light field cameras, raised $60 million in Series D funding. Blue Pool Capital led the round, and was joined by EDBI, Huayi Media, Foxconn Technology Group, Andreessen Horowitz, NEA, GSV, North Bridge, and Qualcomm Ventures.

uShip, an Austin, Texas-based online shipping marketplace, raised $25 million in Series D funding. DB Schenker led the round.

Caavo, a Santa Clara, Calif.-based maker of a device that brings together multiple TV streaming services, raised $15 million in funding, according to TechCrunch. Investors include DCM, Greylock, Sky, and Hearst Ventures. Read more.

IntSights, an Israeli cybersecurity company, raised $15 million in Series B funding. Investors included Glilot Capital Partners, Blackstone, Blumberg Capital, Wipro, and Vintage Investment Partners.

OpenFin, a New York City-based provider of technology services for financial desktop applications, raised $15 million in Series B funding. Investors include Bain Capital Ventures, DRW Venture Capital, J.P. Morgan, Euclid Opportunities, Nyca Partners, Pivot Investment Partners, and angel investors.

Exactuals, a Los Altos, Calif.-based SaaS payment platform, raised $10.6 million in Series B funding from Entertainment Partners, City National, and TTV Capital.

Immuta, a College Park, Md.-based unified data platform, raised $8 million in Series A funding. Drive Capital led the round, and was joined by Greycroft Partners and Conversion Capital.

ReplyYes, a Seattle-based ecommerce mobile messaging platform, raised $6.5 million in Series A funding. Madrona Venture Group led the round, and was joined by Cross Culture Ventures, Lowercase Capital, Muse Capital, and Arnold Venture Group.

StockX, a Detroit-based online marketplace for buying sneakers, raised $6 million in funding. Investors include Mark Wahlberg, Eminem, Steve Case, Tim Armstrong, Scooter Braun, Courtside Ventures, and Detroit Venture Partners. Read more at Fortune.

Truebil, an Indian marketplace for selling used cars, raised $3 million in post-Series A funding from Shunwei Capital, according to TechCrunch. Read more.

Evollve, a Redondo Beach, Calif-based maker of robot toolkits, raised $3 million in a Series A funding. Tribeca Venture Partners led the round.

MiDrive, a U.K. marketplace for driving instructors, raised £2 million ($2.5 million) in funding, according to TechCrunch. Initial Capital led the round. Read more.

Mylestone, a Boston-based company that makes memories accessible via Amazon's Alexa and other virtual assistants, raised $2.5 million in funding. True Ventures led the round, and was joined by Founder Collective, Boston Seed Capital, Converge Ventures, and Mergelane.

GluSense, an Israeli medical device company focused on treating diabetes, raised an undisclosed amount in funding from the JDRF T1D Fund.


Xcell Biosciences, a San Francisco-based biotech company developing technology to study cancer cells, raised $12 million in Series A funding. HBM Genomics led the round.

Paradigm Diagnostics, a Phoenix-based provider of molecular information, raised an additional $3 million in Series B funding from New Science Ventures. This item has been corrected to identify the correct website and description of Paradigm Diagnostics. The company is not based in St. Paul, Minn. 


Blackstone (NYSE:BX) acquired a majority stake in Cloudreach, a London-based cloud computing company. Financial terms weren’t disclosed. Read more at Fortune.

Veronis Suhler Stevenson has invested in VKidz Holdings, a Ft. Lauderdale, Fla.-based provider of curriculum and supplementary programs to homeschool families and elementary schools.

H.I.G. Growth Partners has invested in AdTheorent, a New York City-based ad network for digital advertisers and publishers.

Cimbria Capital has invested in AMI Global, a Las Vegas-based IoT company.

Covey Park Energy, a Dallas-based oil and gas exploration and production company backed by Denham Capital Management, acquired assets from Chesapeake Exploration, a subsidiary of Chesapeake Energy Corporation (NYSE:CHK), for $465 million.


NBCUniversal, the U.S. media conglomerate owned by Comcast (Nasdaq:CMCS.A) is advanced talks to acquire a 25% stake in Euronews, a France-based broadcaster, for approximately $30 million in reserved shares. Read more at Fortune.

Universal, NBCUniversal’s studio film division, agreed to acquire a minority stake in Amblin Partners, a Universal City, Calif.-based film production company cofounded by Steven Spielberg. Read more at Fortune.

Goldman Sachs (NYSE:GS) purchased a 15% stake in MDC Partners (Nasdaq:MDCA) for $95 million. In November, MDC Partners hired Liontree Advisors to evaluate its financial and capital structure strategy.


Snap Inc, a Venice, Calif.-based maker of the popular messaging app Snapchat, set its IPO terms. The company is seeking to sell around 200 million Class A share priced within the range of $14-$16 per share, which values the company at between $16.20 billion and $18.52 (significantly below its expected valuation of $20 billion to $25 billion.) Read more at Fortune.

Canada Goose, a Toronto-based winter apparel maker backed by Bain Capital, has filed for an IPO. The company, which used a $100 million placeholder, plans to trade on the NYSE and Toronto Stock Exchange under the ticker symbol GOOS. CIBC Capital Markets, Credit Suisse, Goldman, Sachs & Co., and RBC Capital Markets are the joint bookrunners on the deal.


Ascendum Solutions, a Cincinnati-based IT provider, agreed to acquire Sourcebits, a San Francisco-based software company. Financial terms weren’t disclosed. Sourcebits raised $10 million in venture funding from backers including Sequoia Capital and IDG Ventures India.

Capgemini (ENXTPA:CAP), a consulting, technology and outsourcing company, acquired Idean, a Palo Alto, Calif.-based digital strategy and experience design consultancy. Sellers include Norvestia (HLSE:NORVE).

AXIO Group, an Epiris-portfolio company, sold OAG, a U.K.-based provider of aviation information and intelligence, to Vitruvian Partners for approximately $215 million.


Atomico, a London-based venture capital firm, raised $765 million for its fourth fund, Atomico IV. Read more at Fortune.

True Wind Capital Management, a San Francisco-based investment firm, raised around $560 million for its debut fund.

PeakEquity Partners, a Radnor, Pa.-based private equity firm, raised $137 million for its first fund, PeakEquity Partners Fund I.


Dave Prendergast has joined Waud Capital Partners as a vice president. Previously, he was a vice president at Great Point Partners.


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