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Term Sheet — Wednesday, March 15

THE VC BEHIND THE COSMETICS COUNTER

Good morning, Term Sheet readers. Today’s column is from Fortune editor Matt Heimer. Enjoy.

In my life to date, I’ve watched umpteen thousand hours of prime-time television and leafed my way through a metric ton of magazines. So I’ve always been at least dimly aware of L’Oréal—the world’s biggest cosmetics company, and one of its top three spenders on advertising. Not that I’m a customer: On the fashion and skin care front, I’m one of those guys for whom the pejorative “basic” was coined. But L’Oréal is part of my mental and cultural wallpaper, along with similarly huge consumer brands that I encounter every day but don’t patronize, like Nike or McDonald’s.

Until very recently, if you had asked me how L’Oréal got so big, I would have said something appropriately dense and male like, “I dunno, I guess they invented a bunch of different makeup and sold it?” If you feel the same way, your eyes will be opened as mine were when you read my colleague Erin Griffith’s interview with Jean-Paul Agon, L’Oréal’s CEO since 2006, from this month’s issue of Fortune magazine. (Erin, whom you know as your regular Term Sheet columnist, interviewed Agon just before she left for vacation.)

It turns out that L’Oréal didn’t grow its beauty empire organically—or at least, it hasn’t done so since the Mad Men era. As Agon told Erin, the company has been expanding mostly via M&A: “Our model is, and has been for 50 years, to buy a brand at an early stage that we think can become a global successful player.” If spotting incipient success stories before they take off sounds a lot like the work of a venture capitalist…well, you’re on to something.

Of course, that analogy goes only so far. Being bought by L’Oréal is less like getting seed money from a VC and more like being acquired by the General Motors of makeup. This is a 108-year-old company that operates in 140 countries, runs an enormous research arm and owns an extra-large filing cabinet full of patents. If it had to grow only organically, it would probably do just fine.

But Agon describes L’Oréal’s management culture as one that may have more in common with startups than with other Global 500 corporations. That culture involves flexibility and openness to new ideas and new technologies, a combination that Agon dubs “organized chaos.” And in a beauty market where tastes change rapidly, it makes more sense for L’Oréal to acquire promising trend-setters than to play catch-up to those trends with internal R&D.

L’Oréal’s own name brand is relatively traditional and even conservative by beauty industry standards; this is a company, after all, that used to be called Société Française de Teintures Inoffensives pour Cheveux (“Safe Hair Dye Company of France”). So its in-house marketing geniuses may not have been likely to come up on their own with, say, a brand concept called Urban Decay. But a roving eye for good ideas outside its own walls helped the company spot that very hot brand and target it as a worthy acquisition, in 2012. (L’Oréal’s robust free cash flow, well north of $3.5 billion in each of the past four years, makes pulling the trigger on such acquisitions much easier.)

Perhaps most encouraging of all for the leaders of beauty startups, L’Oréal presents itself as a company that won’t mess with your brainchild after adopting it. “We offer [acquisition targets] the total respect of the identity, culture, spirit and soul of the brand,” Agon told Fortune. Music to a founder’s ears.

What’s Agon’s textbook example of success on the brand-integrity front? Kiehl’s, the New York boutique skin care brand, which L’Oréal has owned since 2000. It turns out there’s a bottle of their lotion in my travel bag. (Trust me, the scent is masculine.) So I guess I’m a L’Oréal customer after all. Who’s basic now? – Matt Heimer

File this in the “whoops” folder: Yesterday’s Term Sheet incorrectly stated that the VC firm Rokk3r Fuel has closed its inaugural fund. It is seeking to raise $150 million; it has not yet raised that amount. Additionally, in the item on Spectrum Equity and Cressey & Co.’s growth investment in Verisys, the hyperlink was incorrect. (Here’s the correct one). Apologies!

THE LATEST FROM FORTUNE…

• For advertisers, Instagram > Snapchat.

• Ex-Zenefits CEO Parker Conrad just launched a new HR startup.

• Donald Trump’s tax return showed he paid more than people thought. But it also suggests he understated his salary by millions.

• Big Food reconsiders its relationship with sugar, fat, and salt.

• The health startup trying to take on the multibillion-dollar diet industry.

• Commentary: Airbnb is way more competitive than Uber.

• Clifton Leaf has been named editor-in-chief of Fortune.

…AND ELSEWHERE

Domino’s high-tech $9 billion pizza empire. The toxic trouble brewing at ThinxLucky Peach’s days are numbered. What if the future of fashion is spider silk. New questions arise on the safety of Monsanto’s weed killer.

VENTURE DEALS

ServiceTitan, a Glendale, Calif. provider of business management software for plumbing and electrical service companies, raised $80 million in a Series B funding. ICONIQ Capital led the round.

Visier, a San Jose, Calif.-based provider of workforce intelligence software, raised $45 million in Series D funding. Sorenson Capital led the round, and was joined by Foundation Capital, Summit Partners, and Adams Street Partners.

Innovium, a San Jose, Calif. provider of networking silicon solutions for data centers, raised $38.3 million in Series C funding. Redline Capital led the round, and was joined by Greylock Partners, Walden Riverwood Ventures, Capricorn Investment Group, Qualcomm Ventures, and S-Cubed Capital.

Evrythng, a New York-based IoT platform, raised $24.8 million in Series B funding. Sway Ventures led the round, and was joined by Generation Ventures and BLOC Ventures.

WayRay, a Swiss augmented reality car navigation startup, raised $18 million in a funding round led by Alibaba (NYSE:BABA), according to VentureBeat. Read more.

Evolv Technology, a Waltham, Mass. security platform, raised $18 million in Series B funding. Investors include Lux Capital, Bill Gates, General Catalyst, and DCVC.

Infoworks, a San Jose, Calif. platform for end-to-end data warehousing, raised $15 million in Series B funding. Centerview Capital Technology led the round, and was joined by Nexus Venture Partners.

Flow, a Hoboken, N.J. cross-border commerce platform, raised $13 million in Series A funding from Bain Capital Ventures.

Dyadic Security, an Israeli security software provider, raised $12 million in Series B funding. Goldman Sachs Principal Strategic Investments, Citi Ventures, and Innovation Endeavors led the round.

LimeBike, a San Francisco bike-sharing network, raised $12 million in Series A funding. Andreessen Horowitz led the round, and was joined by Stanford University, IDG, and DCM.

Bringg, an Israeli logistics platform for enterprises, raised $10 million in funding. Aleph VC led the round, and was joined by Coca-Cola (NYSE:KO) and Pereg Ventures.

Goodlord, a London software provider for real estate agents and renters, raised £7.2 million ($8.9 million) from Ribbit Capital, LocalGlobe, and Global Founders Capital.

Liven, an Australian hospitality-tech startup, raised A$10 million ($7.6 million) in funding from an unnamed Melbourne-based venture capital firm.

HEALTH + LIFE SCIENCES DEALS

CellAegis Devices, a Toronto medical device company, raised $ 9.5 million in Series C funding.

NeuroOne, a Minnetonka, Minn. developer of neuromonitoring and neuromodulating products, raised $1.2 in seed funding from investors including FundRx.

PRIVATE EQUITY DEALS

Bain Capital is close to acquiring Diversey Care, Sealed Air’s (NYSE:SEE) cleaning and chemicals systems unit, for between $3 billion and $4 billion, according to Reuters. Read more.

Stada (DB:SAZ), the German pharma corporation that makes Viagra, has initiated a bidding war. According to Reuters, Advent International and Permira have joined forces to make a €4.7 billion ($5 billion) takeover bid for the company, as have Bain Capital and Cinven. Read more.

Atlantic Street Capital acquired a stake in Planet Fit Indy 10, which operates Planet Fitness (NYSE:PLNT) health clubs in the greater Indianapolis area.

Excelligence Learning Corporation, which is backed by Brentwood Associates, acquired ChildCare Education Institute, a Duluth, Ga. provider of online training and certificates for the early child care and education market. Financial terms weren’t disclosed.

Cedar Springs Capital and Crestline Investors acquired a majority stake in CarePayment, a Nashville, Tenn.-based company that helps patients manage their health-care expenses.

Shore Capital Partners formed and invested in EyeSouth Partners, a provider of support services to affiliated eye care practices.

OTHER DEALS

Euronet Worldwide (Nasdaq:EEFT) offered $1 billion to acquire rival MoneyGram International (NasdaqGS:MGI), according to Reuters. Read more.

Citrix Systems (Nasdaq:CTXS), which has a market cap of $13.2 billion, is considering strategic alternatives including a sale. Read more at Fortune.

Volkswagen (XTRA:VOW3), still struggling from the fall out of its emission scandal, indicated it could be open to a merger with Fiat Chrysler (BIT:FCA). Read more at Fortune.

Neiman Marcus, a Dallas-based luxury fashion retailer, is putting itself up for sale. Read more at Fortune.

American Securities agreed to acquire Air Methods Corporation (Nasdaq:AIRM) for an enterprise value of about $2.5 billion. At a price of $43 per Air Methods share, American Securities’ offer represents a 20.4% premium on the company’s stock price on January 31, 2017.

TechStyle Fashion Group, which owns the Kate Hudson-fronted Fabletics sportswear line, is exploring a sale that could value the company at more than $1.5 billion, according to Reuters. Read more.

Harmony Merger (Nasdaq:HRMN), an acquisition company, agreed to merge with NextDecade, a Woodlands, Texas-based liquefied natural gas developer, in all-stock deal valued at about $1 billion, according to Reuters. Read more.

IPOS

Ardagh Group, an Irish packaging company, priced its IPO at $19 per share. The company is seeking to raise $307.8 million by selling 16.2 million of class A common shares. Read more.

EXITS

Active Interest Media, an El Segundo, Calif. media company backed by Wind Point Partners, sold Yachting Promotions, a Fort Lauderdale, Fla. operator of yachting and boat shows in the U.S., to Informa (LSE: INF.L).

FIRMS + FUNDS

Bill Maris, the founder and ex-CEO of Google Ventures, is starting a venture fund after all, Bloomberg reports. After walking away from a $230 million health-focused fund late last year, Maris has decided to launch a new $100 million fund that will also focus on biotech and health-related companies. Read more.

PEOPLE

Mike Mogul joined Healthpoint Capital as a member of the firm’s leadership team. Mogul is the former CEO of DJO Global.

Peter Coroneos joined Z Capital Group as a managing director and the global head of corporate development.

B Capital Group announced a series of new hires: Kabir Narang joined the firm as an investment partner, Virginia Schmitt as chief financial officer and chief administrative officer, Chip Welsh and Dave Gallon as vice presidents, and Hailey Hu as a senior associate. In addition, the firm promoted Adam Seabrook from senior associate to principal.

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