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Term Sheet — Friday, May 26


Good morning. Term Sheet will be off Monday for Memorial Day. Which means it’s the Friday before a long weekend. Which means it’s time for some feedback. Strap in!

On Etsy’s activist investor woes:

DS writes: If the Etsy founders held on to a larger stake in the company, Etsy’s foray into B Corp. may have turned out different. The Etsy IPO had one of lowest insider ownerships vs. its tech peers.

(Term Sheet note: Indeed, Etsy CEO Chad Dickerson, who was not a founder, owned 2.1% of the company when it went public. Etsy’s prior CEO, founder Rob Kalin, wasn’t even mentioned on the company’s S-1 filing.)

On the increase in pay-to-play clauses at venture-backed companies:

Todd writes: The moral of the story is, don’t put the pay-to-play clause in the documents originally! Of course, it usually doesn’t make any difference when the company gets to that point. But in better times, it keeps lower tier investors from not reneging on their preemptive rights by more reputable investors who continue to support the company. Of course, if there’s no provision, investors could agree to do it to help out…but couldn’t be forced.

(Term Sheet note: There’s a lot more on pay-to-play from Brad Feld’s archives here.)

On Naveen Jain, founder of Moon Express, who said,  “If I could rephrase John F. Kennedy, it would sound like, ‘We chose to go to the moon, not because it’s easy, but because it’s a good business.”:

JS writes: Honestly, this is the worst quote I’ve heard in a long time.  It makes me sad for humanity.

On whether Snap is Facebook or Twitter (and my assertion that the question is a pointless one to debate): Many of you had more creative comparisons…

Gilbert writes: It’s neither — I think it’ll be closer to LiveJournal. Snap will never reach the audience Facebook does with its confusing UI and (now slightly less) ephemeral messaging construct. Twitter is, although perhaps a bad business, a social good/quasi-utility. LiveJournal was an early-mover in the blog category, built a small but indefensible moat based on users, and was eventually overtaken by better-funded, better-architected rivals like Blogger and WordPress. That’s my best guess for Snap (with Instagram currently leading the pack to play the role of spoiler).

Sara writes: Snap is more like WhatsApp and Instagram in one. To stay alive, Snap will slowly edge towards Instagram, enhancing user profiles, providing a few more ‘pervasive’ / permanent tools and content so that there’s a real social media presence vs. something which disappears in 24 hours.

Joseph writes: Snap will be a Twitter. Snapchat’s usage is just about sharing stories and pictures with your intimate friends and maybe reading some articles, and their monetization strategy has not been anything novel.

Arif writes: Q‎qqqqq ‎Qq Qq‎qqqqqqqqqqqqqqqqqqq

(Yes, I get lots of butt-emails and accidental cc’s.)

Luke writes: When we are mired in our next recession, the question will be asked, ‘When should we have known better?’ The day we should have known better was the day that anyone thought a company which will never make a cent [of profit] is worth $20+ billion.

Michael writes: Snap is like neither. They made it clear on page one of their S-1: They’re a camera company. Like GoPro. Or Cannon. Or Nikon. Or Minolta…

Mark writes: Twitter. There’s only so much innovation one can bring to the industry segment.

Brian writes: Snap feels more like MySpace+LaserDisks than Facebook or Twitter.

Jim writes: My guess is that the “Discover” tab is what’s going to drive that user growth. Each of us has only so many friends… and those friends only have so much skill in terms of content creation. Snap’s taken an interesting approach offering guaranteed licenses for content they want, but that is very limiting. Further, they’ve invested almost no effort in making it easier for the content creators to get that content in to Snapchat. Those types of workflow-and-measurement problems aren’t sexy, but have a big impact on what you end up seeing.

DN writes: Snap is Twitter as long as Evan [Spiegel] is CEO because he’s fundamentally more a ‘feeler’ than a ‘thinker’. Evan has far more in common with the ‘feelers’ Ev and Jack (and Jobs). Zuckerberg the ‘thinker’ is more like the second coming of Bill Gates.

Evan (no, not that one) writes: Snap is making mistakes on the same axis as Twitter but in the opposite direction. Twitter tried to copy Facebook too hard without recognizing what made its product special. Snapchat is abjectly refusing to copy Facebook even though it has a lot to learn.

One other thing they have in common with Twitter: Facebook figured out their killer pieces and copied them shamelessly. The one positive thing Snap and Twitter have in common: They really do have unique products that have attracted unique, non-replicable user-bases. What Snap has in its favor is that it seems to have a stronger sense of who it is.

On bitcoin and ICOs:

Stay tuned — we will be running a follow-up column soon.

On yesterday’s flubs:

Yes, Montana not Minnesota. And here’s the correct link to the story about Masayoshi Son driving up startup valuations around the world.

🇺🇸 Happy Memorial Day!🇺🇸


• Why China’s tech founders don’t have to worry about Wall Street.

• Cloudflare’s question to kill a patent troll gains steam.

• The economic cost of Texas’ ‘bathroom bill.’

• Jeff Immelt places big bets on GE’s software push.

• Paul Singer predicts Trump could cause a recession.

• The ACHA’s approval rating: 20%.

• Zuckerberg calls for universal basic income.

•  “Mr. Bubble” thinks tech stocks look cheap.


We will soon see the term sheet for Uber’s acquisition of Otto. The first-ever national gig economy bill. Teenagers don’t understand money. Renaud Laplanche faces shareholder litigation. OMERS ventures into ETFs. Walt Mossberg’s final column is very good. Anita Borg Institute cuts ties with Uber.


• Casper, a New York City-based mattress startup, has raised $75 million from Target, according to TechCrunch. The news follows reports last week that Target had tried to acquire the company for $1 billion. Read more.

• CIMCON Lighting, a Billerica, Mass.-based provider of lighting management technologies, raised $15 million in Series B funding. Energy Impact Partners led the round.

• Spin, a San Francisco-based provider of bikeshare services, raised $8 million in Series A funding led by Grishin Robotics with participation from Exponent and CRCM.

• CloudFactory, a Durham, N.C. provider of cloud-based workforce services, raised $7.3 million in Series B funding. Investors include Dolma Impact Fund and The Social Entrepreneurs’ Fund.

Soft Space, a Kuala Lumpur, Malaysia-based payment provider, raised $5 million in Series A funding from Transcosmos, according to TechCrunch. Read more.

• Gixo, a personalized fitness app that features live audio and video classes, raised $3.7 million in funding from Greylock Partners, Cowboy Ventures, and xSeed Capital. Read more at Fortune.

• Inflowz, a Tel Aviv, Israel-based artificial intelligence company, raised $3.5 million in funding from Glilot Capital Partners.

• Rentalutions, a Chicago-based online platform for renters, raised $2 million in financing led by Cultivation Capital with participation from M25 Group and Sandalphon Capital.

• LeSports, a unit of LeEco, has raised new money of an undisclosed amount from undisclosed investors, valuing the company at $3.5 billion, according to Reuters. Read more.


• Harpoon Therapeutics, a San Francisco-based biotech company, raised $45 million in Series B funding. Arix Bioscience and New Leaf Venture Partners led the round, with participation from Taiho Ventures and MPM Capital.

• Wise, a Milan and Berlin-based biomedical startup, raised $6.5 million in funding from existing investors, according to Read more.


• Citic Capital and China’s Humanwell Healthcare acquired Ansell’s (ASX:ANN) condom unit for $600 million, according to Reuters. Read more.

• Good Sportsman Marketing, a Dallas-based manufacturer of outdoor sports products owned by Huron Capital, acquired Scent Web and Bullseye Camera Systems.

• (NASDAQ:WEB) is in talked with private equity firms about a potential buyout, according to Reuters. The company’s market cap is $1.1 billion. Read more.

• Staples (NASDAQ: SPLS) has rejected a buyout offer from Cerberus Capital Management, according to Bloomberg. Sycamore Partners remains in the running to acquire the retailer, which has a market cap of $5.8 billion. Read more.

• GSR Capital of China is in talks to control the rechargeable battery unit of Nissan Motor Co. (TYO: 7201) for $1 billion, according to Bloomberg. Read more.

• Mustbin, a Boston-based mobile app maker which had raised $6 million from General Catalyst, DAG Ventures, Mohr Davidow Ventures, and Northgate Capital, sold to LifeSite, a digital vault company based in Mountain View, Calif., for an undisclosed price.


• Rayonier Advanced Materials (NYSE:RYAM) agreed to acquire Tembec Inc (TSX:TMB) for $807 million, including debt. Read more.


• State Bank of India, the biggest lender of the emerging market, has reportedly retained Deutsche Bank and Bank of America to oversee its $2 billion offering in India, according to people familiar with the matter to Bloomberg. Exact terms of the deal have not yet been revealed. Read more.

• WideOpenWest, an Englewood, Colo.-based cable operator, closed its first day of trading at $16.50, down nearly 3% from its IPO price.

• Appian (NYSE:APPN), an app-developing software maker based out of Reston, Va., closed its first day of trading up 25% from its IPO price at $15.01 a share. Appian is backed by NEA and Novak Biddle Venture Partners.


• BV Investment Partners agreed to sell TriCore Solutions, a Norwell, Mass.-based provider of application and infrastructure managed services, to Rackspace, a San Antonio, Texas-based provider of cloud services. Financial terms weren’t disclosed.

• NewSpring Capital completed a debt recapitalization of portfolio company Cellucap Manufacturing Company, a Philadelphia-based manufacturer of apparel and accessories.

• Spirax-Sarco Engineering (LSE:SPX) agreed to buy Chromalox, a Pittsburgh-based provider of thermal technology and industrial heating applications, from Irving Place Capital for $415 million, according to Reuters. Read more.


• Saudi Telecom, Saudi Arabia’s largest telecommunications provider, said it is launching a new $500 million venture capital fund, according to Reuters. It expects to complete its first investment by the fourth quarter of this year. Read more.

• Blackstone Group has secured $20 billion in commitments from Saudi Arabia’s sovereign wealth fund for a new infrastructure fund.

• Dundee Venture Capital, an Omaha, Neb.-based early-stage venture capital firm, raised $30 million for its third fund.

• Engage Ventures, an Atlanta-based venture fund and accelerator program managed by Tech Square Ventures, has launched with $15 million in capital commitments.

• Horsley Bridge Partners has launched fundraising on its 12th VC fund of funds, with a target for $1.3 billion, according to an SEC filing.

• B Capital closed its first fund with $180 million in commitments, according to an SEC filing.

• Apax Partners is raising a technology-focused fund, according to Private Equity International. Apax Global Alpha has committed $50 million to the vehice, which has an undisclosed target. Read more (subscription required).


• The Sterling Group promoted Brad Staller to partner.

• Matt Veal joined Croft & Bender as a Vice President. He was previously a Vice President at Lincoln International.


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Polina Marinova produces Term Sheet, and Lucinda Shen compiles the IPO news. Send deal announcements to Polina here and IPO news to Lucinda here.