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Term Sheet — Thursday, April 27


The following article is from Fortune’s latest issue.

After years of avoiding the public markets, Silicon Valley suddenly has IPO fever. Snap’s successful debut, paired with solid early performances from MuleSoft and Okta, has investors—both the Wall Street kind and the Sand Hill Road kind—making squee sounds of excitement.

They’re so exuberant, one VC even declared on CNBC that this year “could be one of the best for the IPO market since the dotcom boom.” It may be the first time anyone has referenced the 1999–2000 tech bubble as aspirational.

But pinch-yourself valuations aren’t the only thing today’s IPO candidates have in common with their dotbomb forebears: They’re also losing money. Snap, which lost $515 million last year but is currently valued at $24.5 billion, is a particularly egregious offender. But enterprise technology companies Cloudera, Okta, and MuleSoft also disclosed 2016 losses of $187 million, $83.5 million, and $50 million, respectively.

And as in 1999, more often than not, no profit is no problem. On its first day of trading, Okta stock surged 38%. Public-market investors are desperate for a growth story (any growth!), and these highly valued, venture-backed startups are giving them exactly that.

That any CEO at a hot startup is willing to consider going public is a stark turnaround from the past five years. On the stages of posh tech conferences, when asked “Will you IPO?” the CEOs of billion-dollar startups would answer, essentially, “Why?”

For the money? They didn’t need that. Investors like sovereign wealth funds, family offices, mutual funds, and hedge funds—relative newbies who didn’t dabble in startups before the current boom—were keeping startups flush and well stocked with free organic snacks.

For the attention? Startups’ billion-dollar valuations and resulting membership in the “unicorn club” got them plenty of that (see the aforementioned posh conference stages, as well as magazine covers and TV hits).

Meanwhile, there were plenty of reasons not to IPO: To startup founders, going public meant jumping through hoops to get a bunch of bean-counting Wall Streeters to see their world-changing vision, diluting their ownership, and paying massive banker fees for the privilege. And if it was successful, their reward would be earnings reports, every quarter, for the rest of time, while a bunch of high-­frequency trading bots threaten to tank the stock anytime the company ­misses its overly lofty revenue projections or an employee tweets something dumb.

Some startup execs have discussed perma-private scenarios like reverse IPOs or dividends for investors. What if they never had to go public, just like Peter Pan never had to grow up?

Yet today the IPO pipeline for venture-backed tech companies looks healthier than it has in years. Part of the reason is that there aren’t as many buyers willing to tolerate big losses from unicorns as there are unicorns losing money. Some founders have tried to sell their startups and found no buyers willing to pay their inflated valuations. And some venture investors are losing patience waiting for a return on their investments. Even the “new money” investors are becoming more selective—that’s forcing all but the top-tier companies to turn to the public market for cash.

For regular investors, this means they can now get a piece of these rarefied high-growth startups and all the risk and reward that entails. For startups, it means more disclosure, perhaps leading to greater accountability for the Valley’s disrupters. And it signals a sea change in the tech world. So far this year, six startups have left the billion-dollar unicorn list, while a paltry 10* have joined it, according to CB Insights. The Age of Unicorns appears to be coming to a close.

*11 as of yesterday


Worst Q1 since 2010: This morning Pitchbook released M&A data from the first quarter. Short version: We’re behind the pace of the last two years with 3,785 deals worth $385.0 billion. Deal volume is the lowest since Q3 of 2010. From the report:

These figures represent 37.8% and 34.6% year-over-year decreases, respectively. While not up to par with activity in 2015 and 2016, global M&A activity is still respectably on pace with 2014 levels in terms of dollars. With this slowdown came a corresponding decrease in valuation/EBITDA multiples to 8.4x in North American and Europe, down from 9.1x last quarter, and the lowest figure we’ve seen since 2Q 2014.

People moves: Qasar Younis left his role as COO of Y Combinator at the end of 2016. He had joined the firm in 2013 and became COO in 2015 to help the startup accelerator manage its growth. At the time, Younis was the company’s second-in-command to Sam Altman; he managed Y Combinator events, day-to-day operations, finance and legal functions, and advised startups.

YC has gone through many changes since then, including making Michael Seibel CEO of the core Y Combinator accelerator program.

Younis plans to launch a startup. In a March 31 post to his Facebook page, he wrote: “While I absolutely love YC and the work, from the day Google acquired TalkBin (April 26th, 2011) I’ve been thinking of starting my own thing. After 3 years at Google and 3 at YC, I think it’s time.:) Like leaving Google wasn’t about Google, leaving YC isn’t about YC. I’m not ready to announce what i’m doing next but I’m sure it won’t be a surprise to any of you.” (This item has been updated with the correct year Younis joined Y Combinator.)

Retiring: “Super angel” investor Chris Sacca announced he will retire. That means his firm, Lowercase Capital, won’t raise another fund. More details on that in the blurbs below, but two quick notes: I asked Sacca about one specific aspect of his announcement — the fact that he and his wife Crystal have been “quietly backing the next generation of investors, but specifically women and people of color who have been starting venture funds.” He said:

“For years people gave us sh*t for being vocal about the need for diversity, but not being a more diverse firm. However, I don’t think many realized we didn’t have a big staff. In fact, our total headcount was never higher than five and our ambition, as is now well known, was to shrink Lowercase. So Crystal and I decided the best way to literally put our money where our mouth was on diversity in VC issues was to start backing women and people of color who were starting their own firms. Once we put in our money, we intro’d them around to meet our favorite LPs. I think we are at 12 or so now and still going.” He noted that he hasn’t done a good job of tracking those investments but hopes to highlight them on his blog soon.

I also asked if he expects to ever get lured back into investing. No chance: “I’m sure now and then we will cherry-pick a friend’s company or two. But no chance we do it for a living again.”

Earnings Before All The Bad Stuff: IPO candidate Dropbox announced it is profitable “on an EBITDA basis.” The company didn’t say over what period the profit occurred. Houston told Bloomberg: “We are certainly charting a path to being a thriving public company, but one of the things that’s nice about being cash-flow positive and having a strong balance sheet is we can do that when the timing is right for us.”


• How Boxed automated an entire fulfillment center and no one lost a job.


• How McAfee’s CEO is securing its future.

• Only 1% of female founders have used VC money to fund their business

• Facebook and Google were victims of a $100 million payment scam.

• The tech nightmare of “The Circle.”


Perhaps the most intense mic drop in the history of corporate conference calls. 21-page prom rulebooks. America’s rich get richer and the poor get replaced with robots. Could Gawker sue Peter Thiel? Jack Dorsey on Donald Trump. The hedge fund poised to create the most billionaires. The family office/side investing problem hits private equity, namely, Blackstone Group’s Tony James. Bribe cases, Kushner’s partner, and potential conflicts. Cool.


Didi Chuxing, a Beijing-based ride-hailing startup, is near an agreement to raise at least $5 billion in funding. The deal would value the company at over $50 billion. Read more at Fortune.

Zeta Global, a New York City-based marketing automation software provider, raised $140 million in Series F funding. Investors include Global Partnership Investing and Franklin Square Capital Partners. Read more at Fortune.

Tmon, a Seoul, South Korea-based mobile e-commerce company, raised $115 million in funding, according to VentureBeat. Investors include Simone Investment Managers. Read more.

UiPath, a Romania-based robotic process automation software provider, raised $30 million in a Series A funding, according to TechCrunch. Accel led the round. Read more.

OverOps, a San Francisco-based software analytics company, raised $30 million in Series C funding. Lightspeed Venture Partners led the round, and was joined by Menlo Ventures.

Domino, a San Francisco-based enterprise data science platform, raised $27 million in funding. Coatue Management led the round. Existing investors Sequoia Capital, Zetta Venture Partners and Bloomberg Beta participated.

WorkMarket, a New York-based freelancer management system provider, raised $25 million in funding from Accenture PLC and Foundry Group.

Riskmethods, a Munich-based supply chain risk management platform, raised €13.5 million ($14.7 million), according to Digital Growth Fund led the round, and was joined by Bayern Kapital. Existing investors Senevo Capital and EQT Ventures participated. Read more.

Huddly, an Oslo, Norway-based video collaboration platform, raised $10 million in Series B funding from undisclosed investors, according to TechCrunch.

Lemoncat, a Berlin-based online business catering marketplace, raised €6 million ($6.5 million). Investors include Northzone.

Mech Mocha, an India-based mobile gaming startup, raised $5 million in series A funding, according to the Economic Times. Accel Partners and Shunwei Capital co-led the round. Existing investor Blume Ventures participated. Read more.

Cubigo, a Belgium-based personal care management software startup, raised €4 million ($4.4 million) in funding, according to Urbain Vandeurzen led the round, and was joined by Transvision. Read more.

Propel, a New York-based financial management software, raised $4 million in funding from Andreessen Horowitz, Omidyar Network, The Durant Company, and SciFi VC. Existing investors Jay Borenstein, WinWin, and the Financial Solutions Lab at CFSI participated.

CollegeVine, an online academic tutoring and guidance platform, raised $3.6 million in Series A funding. Morningside Technology Ventures led the round, and was joined by University Ventures and Silicon Valley Bank., a New York-based personal gifting platform, raised $2.5 million in funding. Upfront Ventures led the round, and was joined by Slow Ventures and Human Ventures.

WiBotic, a Seattle-based wireless power solutions provider, raised $2.5 million in seed funding. Tsing Capital led the round, and was joined by Comet Labs, Digi Labs, W Fund, WRF Capital and Wisemont Capital.

Civilized Worldwide, a cannabis-focused digital lifestyle brand, raised $1 million in Series A funding from undisclosed investors.

Patch Homes, a San Francisco-based home equity financing platform, raised $1 million in seed funding. Investors include Techstars Ventures, KIMA Ventures, Eric Di Benedetto and Airbnb co-founder Nathan Blecharczyk.

KTB has agreed to make an undisclosed investment in the newly-formed M17 Entertainment, a Taiwan-based social entertainment company.

Epidemic Sound, a Stockholm-based company producing music for online creators, raised an undisclosed amount in funding from Kichi Invest. The deal values the company at $45 million.


Arsanis, Waltham, Mass.-based biotechnology company, raised $45.5 million in Series D funding. The Bill & Melinda Gates Foundation led the round, and was joined by GV, and Alexandria Venture Investments. Existing investors OrbiMed, Polaris Venture Partners, SV Health Investors, NeoMed, EMBL Ventures and the Anna Maria and Stephen Kellen Foundation participated.

Avedro, a Waltham, Mass.-based medical device company, raised $42 million in funding. HealthQuest Capital led the round. Existing investors OrbiMed Advisors and InterWest Partners participated.

ChromaCode, a Carlsbad, Calif.-based molecular diagnostics company, raised $12 million in Series B funding. New Enterprise Associates led the round. Existing investors Domain Associates and Okapi Ventures participated.

Evidation Health, a Menlo Park, Calif.-based healthcare digital tool provider, raised $10 million in funding. Sanofi-Genzyme BioVentures led the round. Existing investors GE Ventures and B Capital Group participated.

HealthVerity, a Philadelphia-based cloud healthcare data platform, raised $10 million in Series B funding. Flare Capital Partners and Greycroft Partners co-led the round, and was joined by Foresite Capital.


Cerberus Capital Management launched a selldown of up to $446 million in Seibu Holdings (TSE:9024), a Japan-based rail transportation company, according to Reuters. Read more.

NewSpring Capital invested $11 million in Eastern Wholesale Fence Co, a Medford, N.Y.-based fence product developer.

Togetherwork, which is backed by Aquiline Capital Partners, has acquired Bunk1, a New York-based camp management software provider. No financial terms were disclosed.

Council Capital invested an undisclosed amount in Triad Learning Systems, a Post Falls, Idaho-based behavioral health test preparation provider.

Evergreen Coast Capital, an affiliate of Elliott Management Corporation, has made an investment of an undisclosed amount in ASG Technologies, a Naples, Fla.-based enterprise IT software company.

Industrial Growth Partners acquired Royal Die & Stamping, a Carol Stream, Ill.-based electrical connectivity components provider. Financial terms weren’t disclosed.

Windjammer Capital Investors acquired Vital Records Control, a Memphis, Tenn.-based provider of information governance services. Financial terms weren’t disclosed.

ArchiMed acquired a $3 million-minority stake in Moberg ICU Solutions, an Ambler, Penn.-based a medical device manufacturing company.


Hellman & Friedman and The Carlyle Group have agreed to recapitalize Pharmaceutical Product Development, a Wilmington, N.C.-based contract research organization, and expand the company’s ownership to include the Abu Dhabi Investment Authority and GIC, which would acquire minority ownership stakes in PPD. The transaction values PPD at more than $9 billion.

HSBC Holdings (LSE:HSBA) and Royal Bank of Scotland Group’s (LSE:RBS) Saudi Arabia ventures are exploring a potential merger to form a lender with $78 billion in assets, according to Bloomberg. Read more.

Deckers Outdoor Corp (NYSE:DECK), the Goleta, Calif.-based owner of the UGG brand of boots and apparel, is exploring a potential sale of the company, according to Reuters. Read more.

Volkswagen (XTRA:VOW3) is considering a sale of Ducati, the Italy-based motorcycle maker, according to Reuters. Read more.

Invesco (NYSE:IVZ), has agreed to acquire Source, a Europe-based ETF provider. Financial terms weren’t disclosed. Source is majority owned by Warburg Pincus.


Floor & Decor Holdings, a Smyrna, Ga.-based specialty retailer of hard surface floorings, raised $185 million by offering 8.8 million shares at $21, according to Renaissance Capital. The company plans to list on the NYSE under the symbol FND. BofA Merrill Lynch, Barclays, Credit Suisse, UBS Investment Bank, Goldman Sachs, Jefferies, Piper Jaffray and Wells Fargo Securities acted as lead managers on the deal. Read more.

Real Matters, a Canada-based cloud real estate technology platform, plans to price shares at C$12 to C$13 apiece in its May IPO and raise about C$125 million ($92 million), according to Bloomberg. The company is seeking a valuation of as much as C$1.1 billion ($810 million). Read more.

KBL Merger Corp. IV, a Newark, Denmark-based company formed to acquire a healthcare company, filed on Wednesday with the SEC to raise up to $100 million in an initial public offering, according to Renaissance Capital. It plans to list on the Nasdaq under the symbol KBLMU. Ladenburg Thalmann & Co., B. Riley & Co. and FBR Capital Markets are the joint bookrunners on the deal. Read more.

Verona Pharma (AIM:VRP), a London-based clinical stage biopharmaceutical company, raised $78 million by offering 5.8 million shares at $13.50, according to Renaissance Capital. The company plans to list on the Nasdaq under the symbol VRNA. Jefferies and Stifel acted as lead managers on the deal. Read more.


Spotify acquired Mediachain Labs, a Brooklyn, New York-based blockchain startup. Financial terms weren’t disclosed. Mediachain Labs raised about $1.5 million in venture funding from investors including Andreessen Horowitz and Union Square Ventures. Read more at Fortune.


Accolade Partners, a Washington D.C.-based venture capital and growth equity investment firm, raised $235 million for its sixth fund.

Origin Ventures, a Chicago-based venture capital firm specializing in early stage investments, raised $80 million for its fourth fund.


Chris Sacca, a Silicon Valley “super angel” and founder of Lowercase Capital, is retiring from the venture capital world. Lowercase Capital will continue to look after its current portfolio companies, but it will not raise additional funds from investors. Read more at Fortune.

Paul Landsman joined Livingbridge as an investment director. Previously, Landsman was an investment director at LDC.

Michael Troiano joined G20 Ventures as a partner. Previously, he was the chief marketing officer at Actifio.

LaunchCapital has hired Cliff Sirlin as a managing director, Woody Benson as a venture partner, Stefan Pepe as a venture partner, Jason Gray as a vice president of portfolio operations, and Alice Linnehan-Smith as a controller.

Chris Leavy joins MedMen as a partner and co-chairman.


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