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Term Sheet — Friday, July 7


THE LP FACTOR: The past week’s news reports on sexual harassment in the venture capital industry have created hope that much-needed cultural change is coming to Silicon Valley. But many of my conversations with investors have been tinged by cynicism that little will change. A few notes:

• As we’ve written before, limited partners are furious over the revelations. Many feel deceived that they were not informed of past bad behavior with the general partners they invested in.

• Meanwhile, there have been many calls for LPs to help fix this problem, by demanding transparency, holding GPs accountable, and doing more thorough reference checking. But GPs and LPs I talk to say that, aside from the moral and ethical concerns, it boils down to two factors for LPs: Headline risk by association (especially if they represent state pension funds), and returns (preserving value of existing funds, and fears that the scandal will prevent the firm from getting into the best companies).

• In the case of 500 Startups, which held an investor meeting yesterday, some unhappy investors moved to invoke a “key man clause,” over Dave McClure’s departure, which would prevent the firm’s partners from making new investments. But 500 Startups would be a very complicated firm to unwind: It has backed more than 1900 companies via dozens of funds.

The firm has raised four “global flagship” funds that support its accelerator program. I understand the first three are fully deployed. Fund four has been in the market for some time; an SEC filing shows it closed on $50 million in September 2016 after lowering its target from $200 million to $150 million. Further complicating things: Regional microfunds and vertical funds focused on Latin America, Korea, Southeast Asia, Turkey, Vietnam, Canada, Thailand, Vietnam, Japan, the Middle East, India, mobile, and fintech.

• One sticking point for situations like this is that most funds have one or two anchor LPs. Often those LPs are sovereign wealth funds. If they don’t want to force a firm to shut down, the vocal opposition of smaller LPs doesn’t count for a lot.

SLOW DEATH OF A STARTUP DARLING: Jawbone is liquidating itself and Founder and CEO Hosain Rahman is moving to a new company he started called Jawbone Health, according to The Information. Blackrock, which financed Jawbone’s down round, got a stake in the new company. Some employees will be joining as well.

The demise of a company as high-profile, well-funded, and beloved by the Silicon Valley cognoscenti as Jawbone will launch a thousand thinkpieces. Lucky for me, I wrote mine a year ago, when Jawbone’s struggles were already widely apparent. The premise holds up, given Rahman’s continued determination with Jawbone Health:

There are two reasons startups fail, according to Y Combinator founder Paul Graham. They run out of money, or the founders give up.

We know when the former happens because it’s usually sudden. But overnight failures are rare. Instead, startups often die painful, drawn-out deaths, because Paul Graham’s second reason for failure—giving up—goes against the nature of most entrepreneurs. It takes a lot of grit and determination to start a company. Even the basics—raising capital, building a team, launching a product, and signing customers—require overcoming monumental odds. The “hero’s journey” mythology of famous, successful founders always describes the way they ignored everyone who said their idea would never work.

That explains why so many startup founders hang on to their dreams long after everyone else knows they’re doomed.

Exhibit A is Jawbone. The company has achieved many impressive feats in its 17 years of existence. It has raised hundreds of millions of dollars in funding, something very few companies do, and it created and launched a number of successful consumer products, including the Jambox wireless speaker, its namesake wireless Bluetooth headsets, and the Up fitness band. But in recent years the “can’t-miss” company has struggled with product delays; executive reshufflings; increased competition from Apple and Fitbit, costly lawsuits with its supplier, and Fitbit; and a down round that cut the company’s valuation in half. From the outside, it all adds up to an ugly picture.

Plenty of people close to founder and CEO Hosain Rahman have probably advised him to give up and make a graceful exit. Instead, his company continues to fight for its life. It’s the sort of thing that shows Rahman’s determination: If Jawbone fails, it won’t be because he gave up.

BIG TOP: Cirque du Soleil, which TPG acquired in 2015 for $1.4 billion, acquired the Blue Man Group for an undisclosed price. Fortune’s Michal Lev-Ram reports that we should expect more add-on deals for the Cirque “platform”:

“People recognize Cirque’s brand and how unique of an art form it is,” says David Trujillo, a TPG partner and member of Cirque’s board. “But they tend to overlook the capabilities that they have in things like being able to tour globally and deal with visa issues and promoter relationships. There’s a real know-how there that not a lot of companies have.”

BIG FOOD: Campbell Soup paid $700 million to acquire a soup company called Pacific Foods in a move toward more natural and organic-focused products. Pacific is not some upstart brand, though. The company is 30 years old and has more than $200 million in sales. Fortune’s Beth Kowitt notes that Campbell CEO Denise Morrison has been one of the industry’s more aggressive food industry CEOs in reshaping her company’s portfolio toward more natural and organic products:

The Pacific Foods deal is Campbell’s fifth acquisition in five years; it’s also snapped up Bolthouse Farms, organic baby-food company Plum Organics, biscuit maker Kelsen, salsa and hummus producer Garden Fresh Gourmet all in the last five years. “We’ve been talking about seismic shifts now since 2011,” she says. “We think this is a marketplace change that we’ve expected and embraced.”

That’s likely helped her keep her job, since, as we noted yesterday, the top reason so many Fortune 500 CEO’s are being fired is not anticipating disruptive changes to their industry.

RECOVERY MODE: Yesterday’s commentary on Uber’s long road to fixing its issues sparked an idea from the Twitter peanut gallery: Which startups have successfully survived a complete management wipe-out?

Suggestions so far include Tesla (Elon Musk was an early investor, not the founder), Zenefits (after the David Sacks clean-up, Jay Fulcher has continued on the road stability), Lending Club (the company’s stock isn’t doing much, but it managed to survive its governance scandal), and Etsy (despite its current activist investor trouble, the company thrived and went public under replacement Chad Dickerson). Who else?


New section alert! Some readers have asked for weekly recaps in case they missed an edition of Term Sheet. While I’d like to keep our (very healthy!) open rate high, I’m going to start running this section on Fridays. It will include weekly deal data from Dealogic, a count of Term Sheet’s deals, and links to the web versions of past editions. And as a reminder, you can always find those yourself on under the Term Sheet tag here.


• 307 M&A deals worth $48.7 billion were announced globally this week, according to Dealogic. Buyout firms disclosed 12 deals worth $3.4 billion.

• In the US, 35 M&A deals worth $12.7 billion were announced and buyout firms disclosed six deals worth $2.3 billion.

• Term Sheet highlighted 33 venture deals, 60 M&A transactions, 14 IPOs, and 20 new funds.


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We discussed JP Morgan’s would-be deal, the challenges of Uber’s new board, CEO angst, the latest round of sexual harassment accusations in Silicon Valley and how the industry can respond, and a big new round of funding for meditation app Headspace.


• Why are there more potatoes in my Blue Apron box?

• Samsung is likely to beat Apple as the most profitable tech company this quarter.

• Job growth accelerated in June.

• Trump’s claim that the stock market has added $4 trillion in value since he was elected is not true.

Designing the Fortune 500.


Would Trump block the Time Warner AT&T deal just to punish CNN? Hackers are targeting nuclear facilities.  Will private equity eat itself? How Vista outduels corporate buyers.


Moglix, a Singapore-based online platform for industrial tools and construction supplies, raised $12 million in Series B funding, according to TechCrunch. Investors include International Finance Corporation and Existing investors Accel Partners, Jungle Ventures, Shailesh Rao and Venture Highway participated. Read more.

Recycle Track Systems, a New York-based waste and recycling management technology company, raised $11.7 million in Series A funding from Volition Capital.

Squirro, a context intelligence and insights solution provider with offices in Zurich and New York, raised $10 million in Series B funding. Orange Growth Capital led the round, and was joined by investors including Salesforce Ventures.

Jumbotail, an India-based online wholesale marketplace for groceries, raised $8.5 million in funding. Kalaari Capital led the round, and was joined by Nexus Venture Partners.

Side, a Paris-based freelancer marketplace, raised $5.7 million in funding, according to TechCrunch. Xavier Niel led the round. Read more.

Light Polymers, a San Francisco-based nanochemistry startup, raised $5 million in Series B funding. Tsingda International Venture Capital and TEL Venture Capital led the round.

Dandelion, a geothermal heating and cooling systems provider, has spun out of Alphabet’s moonshot accelerator X to become an independent company. Dandelion raised $2 million in seed funding. Collaborative Fund led the round.


Axonics Modulation Technologies, an Irvine, Calif.-based developer of implantable neuromodulator devices, raised $20.5 million in funding. Investors include Glide Healthcare and Cormorant Asset Management.



BBX Capital Corporation (OTCPK:BBXT) acquired IT’SUGAR, a Deerfield Beach, Fla.-based specialty candy retailer, for approximately $57 million.

Blackstone Strategic Capital Holdings will acquire a 15% stake in Leonard Green & Partners, a Los Angeles, Calif.-based private equity firm, according to Bloomberg. Read more.

OMERS Private Equity agreed to acquire a minority stake in National Veterinary Associates, an Agoura Hills, Calif.-based owner and operator of veterinary hospitals and boarding facilities. Financial terms weren’t disclosed.

General Atlantic made an investment of an undisclosed amount in Mi9 Retail, a Miami, Fla.-based retail software provider. Financial terms weren’t disclosed.

Fishawack Group of Companies, which is backed by LDC, acquired Carling Group of Companies, a London and San Diego-based healthcare marketing and medical education services provider. The deal includes San Diego-based companies: Carling Communications and MCME Global. Financial terms weren’t disclosed.

NSC Technologies, which is backed by White Wolf Capital, acquired Superior Resource Group, a Green Bay, Wisc.-based provider of contract engineering services. Financial terms weren’t disclosed.


Berkshire Hathaway’s energy unit is nearing a roughly $18 billion deal to acquire Oncor Electric Delivery Company, a Dallas, Texas-based regulated electricity transmission and distribution company. Read more at Fortune.

Paramount Resources (TSX:POU) will buy the Canadian subsidiary of U.S. oil and gas firm Apache Corp (NYSE:APA) for C$459.5 million ($353.7 million USD), according to Reuters. Read more.

Ultra Electronics will buy Sparton Corp (NYSE:SPA) for $23.50 per share, giving the company an enterprise value of about $234.8 million, according to Reuters. Read more.

AB Volvo (OM:VOLV B) sold its 25% stake in Deutz AG (DB:DEZ) for about 1.9 billion Swedish crowns ($225 million), according to Reuters. Read more.

Ensono acquired Inframon, a U.K.-based cloud transformation company. Financial terms weren’t disclosed.


Netlink, a subsidiary of Singapore Telecommunications focused on broadband, is set to price its IPO on the low-end of its range, Reuters reports citing people with knowledge of the matter. The company will raise about $1.7 billion in the listing at a price of likely S$0.81 or $0.59. According to a preliminary prospectus filed with the Monetary Authority of Singapore, the company plans to offer 2.9 billion units, previously at a range of about 58 cents to 67 cents a share. The IPO is expected to trade on the Singapore stock exchange July 19.

Engineering for the Petroleum & Process Industries, Egypt’s state-owned oil company, has picked a consortium led by CI Capital as lead managers and bookrunners for an IPO that could raise about $150 million, Bloomberg reports. Jefferies and NBD Capital have also been hired. The government expects to sell between 22% to 24% of the company.

Zealand Pharma, a Denmark-based biotech focused on peptide-based medicines for type 2 diabetes, has filed for an IPO of American Depository Shares. The company booked loss of $22.1 million on revenue of $33.7 million, and has hired Morgan Stanley and Goldman Sachs as joint bookrunners for the deal. The company is backed by Legg Mason(6.7% pre-IPO) and Sunstone Capital (8%). Zealand plans to list on the Nasdaq as “ZLND.” Most recently, Zealand traded on the Copenhagen Stock Exchange at 136.50 Danish krone, or abut $20.92.

Bento Inc., a Canadian sushi maker, has reportedly decided to end its bid for an IPO, Bloomberg said citing those with knowledge of the matter. The company was seeking to raise about C$80 million ($62 million), but failed to attract enough institutional investors. The deal was led by Nova Scotia and Canadian Imperial Bank of Commerce.


Blackstone agreed to acquire International Market Centers, a Las Vegas-based owner and operator of showroom space. The sellers were Bain Capital Private Equity and Oaktree Capital Management. Financial terms weren’t disclosed.


EnCap Investments, a Houston, Texas-based venture capital and private equity firm, raised approximately $6.2 billion for its energy fund, EnCap Energy Capital Fund XI LP. The fund’s target is $6.5 billion, according to The Wall Street Journal. Read more.

Terra Firma Capital Partners, a London-based private equity firm, is seeking to raise €3 billion ($3.4 billion) for its first buyout fund, according to Financial News London. Read more.

AGIC Capital, a China-based private equity firm, is planning to form its new fund this year with a target of $2 to $3 billion, according to The Wall Street Journal. Read more.

Stellex Capital Management, a New York and London-based private equity firm, raised $870 million for its maiden fund.

AT&T (NYSE:T) and Coral Group, a Minneapolis-based venture capital firm, have teamed up to launch a venture fund that will invest in startups focused on connected services and platform technologies. AT&T will invest up to $200 million for the fund.

Altitude Partners, a U.K.-based private equity firm, is seeking to raise 10 million pounds ($13 million) for its second regional fund.


Pablo de la Infiesta joined Moelis & Company as managing director and head of the private fund advisory group in Europe, Middle East and Africa. Previously, de la Infiesta was at Lazard.


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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.