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Term Sheet — Monday, March 11


Good morning, Term Sheet readers. Today’s guest column is by Fortune writer Robert Hackett, who also writes the “Cyber Saturday” edition of Data Sheet, our newsletter about technology. (Subscribe to it here.)

The sharing-isn’t-caring economy. As part of my reporting for my recent story in Time magazine on Uber’s terrible, horrible, no good, very bad year, a couple of academics gave me a sneak peek at a research paper they jointly plan to publish on the sharing economy—or as they called it, the “taking economy.”

The authors—Alex Rosenblat, an ethnographer at the Data & Society Research Institute in New York City, and Ryan Calo, an assistant professor at the University of Washington’s school of law—argued that peer-to-peer middlemen like Uber, Airbnb, and Lyft exercise too much unrestrained control over their marketplaces. These companies can (and do) manipulate and mislead market participants by surreptitiously exploiting “asymmetries of information and power,” in their view. They argue that regulators need get more involved rooting out abuses in the name of consumer protection law.

One part of the argument that stuck with me took Uber’s recently canceled cop-dodging Greyball program as its starting point. Rosenblat actually discovered “phantom cars” in the Uber app, à la Greyball, over the course of her investigations as early as two years ago. (Uber vehemently denied it then.) No one is quite sure how prevalent Uber’s ghost fleet is, but there’s reason to believe it’s more common than the company has let on. When Joe Sullivan, Uber’s security chief, banned the Greyballing of law enforcement officers last week, he noted: “Given the way our systems are configured, it will take some time to ensure this prohibition is fully enforced.”

Here’s the rub: How can anyone ensure the company isn’t discriminating against a particular segment of the population when no one can be sure of the data on display? Several researchers I spoke to compared Uber’s Greyball program to Volkswagen’s emissions-cheating software. The only reason regulators discovered that fraud was because a team of researchers at the University of West Virginia had taken it upon themselves to poke around and find discrepancies between what the cars reported and the reality. If Uber can simply Greyball anyone who breaks its terms of service—researchers, regulators, etc.—how can they hold the company accountable for its practices? This seems problematic.

Convertible debt debate. Yesterday, Union Square Ventures managing partner Fred Wilson touched off a debate by weighing in on the use of convertible debt and other loan-like notes in early stage venture capital financing rounds. He’s opposed to this practice, arguing that it obscures valuation and dilution for founders and makes things generally harder to understand for everyone later on. Better simply to do priced equity rounds, he said.

Ryan Lackey, a Y Combinator alum who sold his security startup CryptoSeal to CloudFlare in 2014, disagreed on the matter of SAFE notes, short for “simple agreement for future equity.” “SAFEs are founder friendly,” he posted in a tweet. “This is an investor (@avc) projecting his own economics/desires as the founder’s.”

What do you think? Let me know on Twitter.

Top of the charts. An amusing diversion to kick off your Monday. The third track off the Flaming Lips’ recently released album Oczy Mlody wormed its way into my mind last week. In the title refrain, frontman Wayne Coyne croons, “There should be unicorns / The ones with the purple eyes / Not the green eyes.”

Transcribing the words does not do this sonic acid trip of a song justice. The piece sounds like a fairytale that’s been blasted into the cold depths of outer space; merely reading, you miss out on all its rainbow-subwoofered-extraterrestrial glory. Do give it a listen.

But if you’re anything like me, you may have detected within the psychedelic lyrics a veiled bit of social commentary aimed at the startup and venture capital economy. “Unicorns,” of course, sure sounds like a play on the nickname for $1 billion-plus private firms that have become de rigueur in techland. If that’s the case, the vocals seem to be wishing for a world in which fantastical (a.k.a. purple-eyed) unicorns hold sway, rather than their money-grubbing (aka green-eyed) business counterparts. Quite a dream.

Perhaps my interpretation is nothing more than a harebrained fan theory, or maybe there is something deeper to the stanza. I wouldn’t put it past Coyne’s troupe, which, as the Guardian noted earlier this year, made its name “smuggling existential truths into euphoric pop songs.” Alas, the Flaming Lips did not respond to a request for comment this weekend. —Robert Hackett


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• Project Loon’s CEO is out after just six months.

• J.C. Penney wants to remodel your house.

• Alphabet’s Moonshots continue to crater.

• What the SEC Bitcoin ETF decision means for the future of cryptocurrency.


Golf and the presidency. How one turtle’s sex drive saved an entire species. Leonardo DiCaprio wants to sell you frozen seafood. When Preet Bharara went after Steven A. Cohen. Plus a look at how he targeted Wall Street crime.


Mintigo, a San Mateo, Calif. marketing analytics provider, raises $15 million in Series D funding, according to the Wall Street Journal. Sequoia led the round.

RiskSense, an Albuquerque cybersecurity company, has increased its Series A round to $14 million. The company’s investors included Jump Capital, Paladin Capital Group, Sun Mountain Capital, EPIC Ventures, and CenturyLink.

Borqs, a Beijing-based developer of “Internet of things” devices, raised $10 million in funding. Qualcomm Ventures and Accel Partners led the round. Read more.

Foodsby, a Minneapolis food-delivery startup for offices, raised $5.9 million in Series A funding, according to the Minneapolis Business Journal. Investors include Greycroft Partners, Rally Ventures, and Corazon Capital. Read more.

StatX, a Santa Clara, Calif. mobile dashboard company, raised $2.5 million in seed funding. Signia Venture Partners and Inventus Capital Partners led the round, with participation from XSeed Capital.

PokitDok, a San Mateo, Calif.-based provider of a platform to integrate healthcare transactions, raised an undisclosed amount in funding from GIS Strategic Ventures.


• Vista Equity Partners agreed to acquire DH Corp (TSX:DH) for C$4.8 billion ($3.6 billion), according to Reuters. At C$25.50 per share in cash, Vista’s offer represents an 11% premium on DH Corp’s Friday close. Read more.

• MTS Health Investors recapitalized Trumpet Behavioral Health, a Lakewood, Colo.-based provider of behavioral health services to children and adults with autism spectrum disorder and developmental disabilities. Financial terms weren’t disclosed.

• Littlejohn & Co. acquired a majority stake in Total Safety, a Houston-based of provider of integrated safety and compliance services. Financial terms weren’t disclosed.

• Seven Point Equity Partners acquired Medin, a Totowa, N.J. maker of sterilization cases and trays for the orthopedic implant and instrument industry. Financial terms weren’t disclosed.


• Intel (Nasdaq:INTC) agreed to buy Mobileye (NYSE:MBLY) for $15.3 billion. Read more at Fortune.

• MGM Holdings (OTCPK:MGMB)in discussions to purchase the 81% of New York City cable channel Epix that it does not already own from Viacom (Nasdaq:VIAB) and Lionsgate (NYSE:LGF.A), according to Reuters. Read more.


• Blackstone (NYSE:BX) hired additional banks as it prepares to take European warehouse Logicor public in an offering that could value the company at €13 billion ($13.8 billion), according to Reuters. Read more.


• Birch Hill Equity Partners acquired a majority stake in Cozzini Bros, a Des Plaines, Ill. knife-sharpening rental and exchange company, from investors including Audax Private Equity. Financial terms were disclosed.


• Timothy J. Cremieux joined Waud Capital Partners as a vice president. Previously, he was a vice president for GenNx360 Capital Partners

• James McIntire joined Star Mountain Capital as a strategic investor and senior adviser. McIntire is the former Washington State Treasurer.


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