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Term Sheet — Thursday, Aug. 3


After we wrote about mutual fund markdowns to Uber’s share price, a few readers wrote in asking how mutual funds determine their markdowns.

A couple things to note:

• This isn’t just a bunch of people sitting around a table saying “15% sounds right I guess…” Each firm has its own process. Many firms use an internal cross-disciplinary valuation committee that operates independently of portfolio management. Sometimes portfolio managers or analysts are involved. They base their valuations on factors like the offering price (in a subsequent investment round, the secondary market, or company-sponsored liquidity events), financial performance and valuation of peers, and other factors. (Fortune’s Jen Wieczner wrote about that here.)

• Remember late 2015, when mutual funds started slashing the holding values of many of their portfolio companies? The press started reporting on it and everyone freaked out. On the holiday party circuit, startups debated whether they should include mutual funds in their next rounds of funding, given the negative signal a markdown could create. After all, startups were staying private longer so they can maintain that sweet appearance of momentum, even when they have a bad quarter or two. Public markdowns defeated the purpose. (In a world where venture investors are supposedly not allowed to criticize startups, markdowns were practically a declaration of war.)

Then the markdown reports died down. Two reasons why: First, journalists realized mutual fund valuations weren’t necessarily a great reflection of the company’s performance (the process, as described above, isn’t always consistent or clear, and many startups don’t have good public comparables). And second, mutual funds realized the damage they were doing. Jen emails:

Fidelity seems to rarely change its private valuations on its high profile portfolio companies anymore. Several of the others hadn’t touched Uber’s valuation in at least a year, or in some cases, not since its last fundraising round. And [with the current markdowns at Uber], it was weirdly consistent among three funds, which makes me think that they were actually basing it off some specific data point, whether a secondary market sale or something else. Otherwise I don’t know how they would all have independently arrived at the exact same share price, down to the cent.

Which is why this week’s news was significant enough for us to report on.

• A 15% drop is not a problem for the mutual funds. Any paper losses are tiny compared to the overall size of the funds that T Rowe Price or Fidelity are investing out of. Plus, they plan to hold for long after the IPO. (Is this a good time for me to break out my favorite gif again?)

In other words, the narrative that the mutual funds are “dumb money” is wrong. They’re not dumb, they just have a totally different strategy than venture capitalists. And now, two years after they poured giant sums of money into many late state startups, we’re starting to see the negative effects of those conflicting strategies.

One example: Blue Apron’s last round of funding. In 2015, the company went out to raise its Series D, and a number of late stage venture capital firms put in bids that were a premium to the company’s prior valuation of $500 million, but still under $1 billion. They were all outbid by Fidelity, which submitted an outlier bid at $2 billion.

Fast forward two years. After dramatically reducing its planned IPO price, Blue Apron is trading at a valuation of $1.16 billion. That’s not a problem for Fidelity – the firm can wait for a long time for the stock to rise or for Blue Apron to sell for a premium. But it’s bad news for employees that joined after the Fidelity round and were granted shares that are now underwater, as well as any investor that bought shares at the $2 billion valuation on the secondary market.

Here’s a study (via Bloomberg) that explains that problem in more detail. Moral is: Inflated valuations hurt startup employees the most.

COOL: The Nin Ventures call lasted for 20 minutes, covering some crowdfunding statistics and a step-by-step guide for wiring her money. The presentation included a slide for Q&A but Desai chirpily concluded that, “unfortunately we do not have time for questions today.”

MORE OF THIS STUFF: Greylock Partners COO Tom Frangione has left the firm three days after it was revealed internally that he had an inappropriate relationship with an employee, The Information reports.

There are no further details on what the relationship entailed or how it was revealed to the firm. I understand the desire for privacy in situations like these. But I’m going to say this every time a new person is publicly dismissed for some vague “inappropriate” thing: The degree of the misdeed matters. Every incidence of sexist or harassing behavior should not be lumped into the same category. The specific act that occurred matters for questions like: Should this person be allowed to get a new job in a position of power? Should everyone associated with that person should suddenly become radioactive? And many others. (Let’s all reread The Black Box of Inappropriateness….)

MY BAD: Yesterday’s newsletter mistakenly called McCain Foods a subsidiary of Mondelez International. It is not. Apologies!


• How to avoid getting crushed by Amazon.

• Tesla 3 order cancellations.

• Avon’s CEO steps down under activist pressure.

• Microsoft trades “mobile first” for AI.

• Bitcoin cash vs. bitcoin rages on.


An oral history of the failed LBO of Bell Canada. Millennial trolling in this article aside, 29% of Americans don’t know they can get free TV with an antenna. Mooch’s communications plan. Steve Cohen’s Point72 faces regulatory rebuff in UK.


Meituan Dianping, a China-based group-buying and restaurant review service, is in talks to raise $3 billion to $5 billion, according to Bloomberg. The funding round is likely to value the company at $25 billion to $30 billion. Existing investor Tencent Holdings plans to participate in the round. Read more.

Kabbage Inc, an Atlanta-based online lender for small businesses, raised $250 million in funding from SoftBank Group Corp.

Interface Security Systems, an Earth City, Mo.-based provider of cloud IP managed security services, raised $125 million in funding. Investors include SunTx and Prudential Capital Partners.

Sugarfina, a Los Angeles-based luxury confectionary company, raised $35 million in funding from Great Hill Partners.  Read more at Fortune.

Primary Data, a Los Altos, Calif.-based data storage service provider, raised $20 million in funding. Investors include Pelion Venture Partners, Accel, and Battery Ventures. [This item has been updated.]

Personio, a Germany-based HR management and recruiting software developer, raised $12 million in Series A funding, according to TechCrunch. Northzone led the round, and was joined by investors including Global Founders Capital and Picus Capital. Read more., a San Francisco-based e-sports tournament platform, raised $11 million in Series A funding. Spark Capital led the round, and was joined by investors including Accel and Horizon Ventures. Existing investors including Caffeinated Capital and Lowercase Capital participated.

Gobee Bike, a Hong Kong-based station-less bicycle-sharing startup, raised $9 million in Series A funding, according to TechCrunch. Grishin Robotics led the round, and was joined by investors including, Alibaba’s Hong Kong entrepreneurship fund. Read more., a Seattle-based company applying AI to customer support, raised $5 million in Series A funding from Madrona Venture Group.

Keemotion, a Belgium-based developer of automated video technology for teams, leagues and broadcasters, raised $3.6 million in Series A funding. Investors include Elysian Park Ventures in association with Guggenheim Baseball Management and the LA Dodgers, R/GA Ventures in association with Interpublic Group, GO4IT Investments, Pincus Capital Management, and former NBA Commissioner David Stern.

Bitrise, a Budapest-based mobile continuous integration and delivery platform, raised $3.2 million in Series A funding. OpenOcean led the round, and was joined by investors including Y Combinator and Fiedler Capital.

EazyScripts, a Chicago-based provider of e-prescribing software for telemedicine, raised $2 million in Series A funding from Bluff Point Associates.

MojiLaLa, a San Francisco-based developer of emoji and sticker database, raised $1.5 million in seed funding. Investors include Great Oaks VC, betaworks ventures, and Dennis Phelps.

Universal Standard, a New York City-based direct-to-consumer size-inclusive brand for women sizes 10 to 28, raised $1.5 million in seed funding. Red Sea Ventures led the round.


Amplyx Pharmaceuticals, a San Diego-based developer of anti-fungal agents that treat life-threatening fungal infections, raised $67 million in Series C funding. Sofinnova Venture Partners led the round, and was joined by investors including Lundbeckfonden Ventures, Arix Bioscience, Pappas Capital, New Enterprise Associates, RiverVest Venture Partners, 3×5 RiverVest II and BioMed Ventures.

Quanterix, a Lexington, Mass.-based developer of an ultra-sensitive diagnostic platform, raised $8.5 million in funding. T. Rowe Price Associates led the round.


Canada Pension Plan Investment Board and GIC will invest $1 billion in WME-IMG, a U.S. talent management agency, at a $6.3 billion valuation, according to Variety. Read more.

Genesis Energy said it will buy Tronox Ltd’s alkali business, a Stamford, Conn.-based natural soda ash producer, for about $1.33 billion in cash, according to Reuters. Read more.

Blackstone is in talks to sell its 45% stake in Leica, a Germany-based high-end camera and sport optics maker, according to Reuters. Read more.

AltaLink Capital recapitalized Efficient Forms, a Littleton, Colo.-based hiring and onboarding software and services company. Financial terms weren’t disclosed.

Atria Wealth Solutions, which is backed by Lee Equity Partners, acquired CUSO Financial Services, a San Diego, Calif.-based provider of brokerage and investment services, and its sister company Sorrento Pacific Financial.

DigiCert, a Thoma Bravo portfolio company, will buy Symantec Corp’s (Nasdaq:SYMC) website security business and related PKI solutions for about $950 million cash. Symantec will also receive a 30% stake in DigiCert’s business. Read more at Fortune.

EyeSouth Partners, a portfolio company of Shore Capital Partners, made an investment of an undisclosed amount in Georgia Retina, an Atlanta-based retina-only medical practice.

Bridge Growth Partners agreed to make a majority equity investment in BackOffice Associates, a South Harwich, Mass.-based information governance and data migration solutions provider. Financial terms weren’t disclosed.

Cloudreach, a company majority owned by Blackstone Tactical Opportunities, acquired a majority stake in Cloudamize, a Philadelphia-based cloud computing analytics and migration automation company. Financial terms weren’t disclosed.

Crownpeak, which is backed by K1, acquired Evidon, a New York City-based provider of digital governance, risk and compliance solutions. Financial terms weren’t disclosed.

MidOcean Partners and Cannon Safe Inc acquired Stack-On Products, a Wauconda, Ill.-based distributor of home safes, gun security products, garage storage and organizational products. Financial terms weren’t disclosed. MidOcean is making an investment in Cannon Safe to facilitate the deal.

Aclara, which is backed by Sun Capital Partners, acquired General Electric’s majority stake in General Electric Philippines Meter & Instrument Co Inc, a provider of electric meters in the Philippines. Financial terms weren’t disclosed.

The Riverside Company agreed to acquire Impeo, a Germany-based front-end software systems developer, as an add-on for its portfolio company Fadata. Financial terms weren’t disclosed.


Hasbro Inc (Nasdaq:HAS) ended talks to acquire Lions Gate Entertainment Corp, a Santa Monica, Calif.-based movie studio and entertainment company, according to Reuters. Read more.

Qatar Airways will not proceed with its proposed investment in American Airlines Group Inc (Nasdaq:AAL), reversing an earlier decision to build a stake of up to 4.75% in the U.S. carrier. Read more at Fortune.


Siemens (DB:SIE) will wait until next year to list Healthineers, its Erlangen, Germany-based health care unit valued at around $47 billion, according to Reuters.  Read more.

Cerberus Capital Management and GoldenTree Asset Management could list BAWAG PSK, a Vienna-based lender, as early as this fall. According to Reuters, the private equity firms have hired Rothschild to advise them on an initial public offering, which could value the bank at up to €5 billion ($5.9 billion) Read more.

Zealand Pharma, a Copenhagen-based biotech company developing peptide-based medicines to treat type 2 diabetes, plans to raise $75 million by offering 3.9 million shares priced at $19.30 a share. The company, which is publicly traded on the Nasdaq Copenhagen under the ticker symbol ZEAL, plans to list on the Nasdaq, also under the ticker symbol ZEAL. Morgan Stanley, Guggenheim Securities, Goldman Sachs, and Needham & Co. serve as bookrunners on the deal.

Clementia Pharmaceuticals, a Montreal-based clinical-stage biotech focused on developing treatments for rare bone diseases, raised $120 million by offering 8 million shares at $15, the high end of the range of $13 to $15. The company plans to list on the Nasdaq under the symbol CMTA. Morgan Stanley and Leerink Partners served as lead managers on the deal. Shareholders include OrbiMed Private Investments (42.4% pre-IPO stake), BDC Capital (22.7%), and New Enterprise Associates (8%).


Centerbridge Partners agreed to acquire TriMark USA, a South Attleboro, Mass.-based food services equipment distributor, from Warburg Pincus, according to Bloomberg. The deal is valued at around $1.35 billion. Read more.

One Equity Partners sold its interest in Netaş (IBSE:NETAS) to ZTE Corp, for $101 million.

• An affiliate of CoBe Capital acquired Völker, a Germany-based healthcare furnishings developer, from Hill-Rom Holdings, Inc. (NYSE: HRC). Financial terms weren’t disclosed.

Woodlawn Partners acquired BW Manufacturing, a Comstock Park, Mich.-based maker of flooring equipment and industrial vacuums, from Generational Equity. Financial terms weren’t disclosed.

Ardian acquired a majority stake in imes-icore GmbH, a Germany-based specialist manufacturer of computer numerical control and computer aided design systems. Financial terms weren’t disclosed.


Bow River Capital Partners, a Denver-based private equity firm, raised $262 million for its fourth buyout fund.

NextView Ventures, a Boston-based venture capital firm, raised $50 million for its third seed fund.

Fitz Gate Ventures, a Princeton, N.J.-based venture capital firm, raised $10 million for its new fund.


Yinglan Tan left Sequoia Capital to start his own venture capital firm, Insignia Venture Partners. Read more.

Jason Fiedler was promoted to principal at Red Sea Ventures. Previously, Fiedler was at Uber and Insight Venture Partners.

Hunter Hartwell joined Forté Ventures as an associate. Previously, Hartwell was at Deloitte.

Bennett Siegel joined Coatue Management as a vice president. Previously, Siegel was an associate at Altamont Capital Partners.


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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.