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Term Sheet — Monday, April 24

OPEN MIC

It’s feedback time.

On crowdfunding and pre-ordering hardware from startups:

Joe writes: Expecting evidence of transparency before investing, either crowdfunding, angel or venture, would improve outcomes for investors. Research has confirmed that entrepreneurs that embrace transparency actually perform better. For example, Skully [the AR helmet maker that took 3,000 pre-orders and suddenly shut down].

David writes: The reason more venture backed company’s (specifically those that crowdfunded) are willing to go through a bankruptcy process is largely due to VCs thinking it will protect them from lawsuits related to all the people who paid for products who never see anything for their money. It’s CYA.

On the uncomfortable reality of Uber’s culture:

Paul writes: The key part here is that it was indeed a poorly kept secret – employees, board members, investors, etc., all knew of the toxic culture. And I frankly don’t buy the, “(We) were powerless to make a difference” excuse. The simple truth is people let it go because profits and/or the prestige of being associated with such a successful company outweighed principles. Now that the lid is blown in public and Uber has lost its glitter, many are leaving, citing those same principles they buried previously. Kalanick is at fault, but there is plenty of blame to go around.

Mitchell writes: Uber will be worth $200 billion in five years. You heard it here first. Mark my word. Only truly global Internet company that is private that can be used by anyone in the world.

On that viral Juicero discovery:

Tony writes: I’m starting to think that the only requirement to getting a startup off the ground is situational morality. It’s hard to have sympathy on the Juicero investors though. Perhaps they should have an advisor on hand who can remind them of the laws of physics.

On that perpetual Apple buying Disney rumor:

John writes: The better option for Apple is Tesla.

On the lack of venture opportunities in consumer-facing apps:

Josh writes: I agree that a lot of VCs may be missing consumer right now, but given how pervasive apps are now, I believe there are plenty of very large companies still to be built that tap into that.

On Silicon Valley’s obsession with longevity:

Michael writes: All I can say is “sad”.  The idea that “living life is defined as longevity” is sad and is one more way Silicon Valley just misses the point.  Our hurts, wounds, sickness, disease, having relationships around these, that is life … not living longer.  Then again, Silicon Valley doesn’t believe in God, however continues to want to purvey that they are omnipotent and want to play God.  It’s kind of laughable that they don’t get the irony of the arrogance they display.

On shorting startups:

AG writes: Your own newsletter yesterday reminded me of another way to short startups, make money on all the stranded write offs. (Presumably you think there will be more duds than winners if you’re shorting). Maybe someone with the right connections can buy some of The Terminator’s management company.

On startups taking on debt:

Paul writes: Of all the press that has surrounded debt being a “ticking time bomb” or something for startups to avoid at all costs, there is a common theme amongst the examples given. They are mostly B2C consumer stories (Modcloth, Foursquare, I would add Nasty Gal to that list amongst others, etc), or transactional (ad-driven) business’ (Visible Measures). For these kinds of companies, debt is not a good answer. The models are too unpredictable and the revenue is really not contractually visible at all.

Generally speaking, it’s a different story for enterprise software companies with scale (more than $10 million recurring rev). When you have contractually recurring revenue and good churn/retention metrics… you have a LOT of visibility into your forecast, and thus can adjust operating expenses and spend accordingly. These kinds of businesses are much better suited for funding growth with debt than any B2C or transactional in nature companies. There are other factors at play of course (burn rate, gross margins, etc).

Regarding “lenders offering debt on the backs of their investors doing a round”, there are lots of venture lenders that do that and won’t lend to a company unless their VCs are the “who’s who.” That’s a very dangerous and terrible underwriting philosophy. VC’s don’t want to put money in just to cash-secure a piece of debt, and who could blame them? Underwrite the business, not the investors.

On Lyft’s fundraising:

A Lyft employee writes: Lyft’s investment thesis is not solely based on what is happening externally. Our internal growth since the last round has been insane, and yes, some of that can be attributed to #deleteuber.

On whether ad-tech is toxic to VC’s:

LB writes: The TradeDesk came public in September and has been a rock solid winner for those who bought in the IPO and afterwards. In addition to the IPO, they did a large secondary offering in February 2017 and the market absorbed it enthusiastically, taking the price up during the lead up to the transaction even though the supply-demand ratio was about to shift in favor of supply.  The chart does show a dip [in recent weeks] but that is because the lock-up just expired. While much adtech hasn’t scaled or been able to figure out how to turn a profit, here’s one example that has worked out well. It’s been a rough area, but investors still like a profitable P&L when they see one.

 

THE LATEST FROM FORTUNE…

•  Blocked traffic, immolated cars: Uber’s problems in Africa.

•  Fortune feature: Hulu and the fight for realtime TV.

•  TED goes corporate.

•  Jack Ma expects 30 years of “pain” because of AI.

 Doug Derwin vs. Elon Musk.

…AND ELSEWHERE

Lyft tried to sell itself to Uber for a 15% stake, but Travis Kalanick and Emil Michael laughed at the proposal. How Venmo grew up and got serious. China’s internet giants grow up and go global. Netflix gets $1 billion in debt for potential acquisitions. Scientists are skeptical of cancer-detecting startups like Freenome and Grail.

VENTURE DEALS

Quora, a Mountain View, Calif.-based Q&A website, raised $85 million in new funding, co-led by Sam Altman on behalf of Y Combinator Continuity and Collaborative Fund, according to VentureBeat. Existing investors Tiger Global, Matrix Partners, and Dustin Moskovitz participated. Read more.

Wecash, a Beijing-based big data credit analytics company, raised $80 million in Series C funding. China Merchants Venture Capital, Forebright Capital and SIG Ventures led the round with participation from Joinhope Capital and Lingfeng Capital.

Farmdrop, a London-based online grocery platform, raised £7 million ($9 million) in Series A funding, according to TechCrunch. Atomico led the round. Read more.

360imprimir, a Lisbon, Portugal-based B2B online marketing startup, raised €4 million ($4.3 million) from Omnes Capital and Pathena. Read more.

• MJ Freewaya cannabis compliance software developer, raised $3 million in funding. The investors include Roger McNamee and Tao Capital Partners.

Invertex, an Israel-based 3D fashion e-commerce company, raised $2 million in a seed funding round. OurCrowd led the round.

Inzpire.me, an Oslo, Norway-based influencer and brand marketing platform raised $1 million in new funding. Investors include Snö Ventures. Read more.

ReloQuest, a Sunrise, Fla., temporary housing platform provider, raised an undisclosed amount in funding from Las Olas Venture Capital. Financial terms weren’t disclosed.

PRIVATE EQUITY DEALS

KKR (NYSE:KKR) is in advanced talks to acquire a stake in SRL, a New Dehli-based medical diagnostics firm being spun off from Fortis Healthcare, according to Bloomberg. The deal could be valued at 50 billion rupees ($774 million). Read more.

Bolder Healthcare Solutions, a portfolio company of Edgewater Growth Capital Partners, has acquired Business Dynamics, a health care management consulting firm. Financial terms weren’t disclosed.

Hallcon Corporation, which is backed by Novacap, acquired Certification Services Inc and Rail Temps Inc, two Overland Park, Kansas-based companies that provide training, certification, consulting, and regulatory compliance for the rail and transit industries. Financial terms weren’t disclosed.

Värde Partners acquired Gruppo Boscolo, an Italy-based luxury hotel group. Financial terms weren’t disclosed.

Sunstone Partners invested an undisclosed amount in NetSPI, a Minneapolis-based network security software provider. Financial terms weren’t disclosed.

AGIC Capital agreed to acquire Fotona Holdings, a Central European medical laser company, from The Gores Group. Financial terms weren’t disclosed.

Alliance Source Testing, a portfolio company of Align Capital Partners, acquired the stack testing operations of Golden Specialty, a Friendswood, Texas-based emission-testing service provider. Financial terms weren’t disclosed.

OTHER DEALS

Becton Dickinson (NYSE:BDX) agreed to acquire C R Bard (NYSE:BCR) in a $24 billion cash-and-stock deal. At $317 per share, the offer represents a 25% premium to Bard’s closing price on April 21. Read more at Fortune.

KKR (NYSE: KKR) and the Innovation Network Corp of Japan, a Japanese government-backed private equity fund, will submit a joint offer for Toshiba’s (TSE:6502) memory chip unit, according to Reuters. Read more.

Jimmy Choo (LSE:CHOO), a London-based luxury retailer, has put itself up for sale. Shares in Jimmy Choo closed Friday at 168.5 pence, valuing the business at 657 million pounds ($840 million). Read more at Fortune.

PPG Industries (NYSE:PPG) increased its proposed cash and share offer to 26.9 billion euros ($28.8 billion), from around 24.6 billion euros for Akzo Nobel, the Amsterdam-based paint and coatings company. Read more at Fortune.

American Securities acquired Air Methods (GS:AIRM), a provider medical emergency transportation, at $43 per share. Air Methods will no longer trade on the NASDAQ.

FNG Group acquired Suitcase, a Belgium-based online fashion company. Financial terms weren’t disclosed.

 

IPOS

Argenx, a Breda, Netherlands-based biopharmaceutical company, filed on April 21 to raise up to $75 million in an initial public offering, according to Renaissance Capital. The company plans to list on the Nasdaq under the symbol ARGX. Cowen & Company and Piper Jaffray are the joint bookrunners on the deal. Read more.

Veritone, a Newport Beach, Calif.-based cognitive software company, plans to raise $19 million by offering 1.3 million shares at a price range of $14 to $16, according to Renaissance Capital. It plans to list on the Nasdaq under the symbol VERI. Wunderlich Securities and Craig-Hallum Capital Group are the joint bookrunners on the deal. The company has raised as much as $65 million from investors including Acacia Research, Miramar Ventures, and Checketts partners Investment Fund. Read more.

FIRMS + FUNDS

Abraaj Group, a Dubai-based private investment firm, is planning to close a $4.5 billion fund by the end of June, according to Bloomberg. Read more.

PEOPLE

Andrew Aldrich joined American Family Ventures as a principal. Previously Aldrich was a director at AXA Equitable.

Amit Thaper joined Cairngorm Capital as an investment director. Previously Thaper was a vice president at H.I.G. Capital.

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Term Sheet is produced by Polina Marinova. Submit deal items here.