VCs + ICOs
Good morning, Term Sheet readers.
CRYPTO DEALS: We’ve previously discussed the role that traditional venture capital firms will play in the brave new world of initial coin offerings (the hot new crowdsourced way for crypto projects to raise money). My hypothesis was that despite talk of ICOs being scams and/or pump and dump schemes, VCs are warming up to the idea. Why? Profits and liquidity. Crypto investors have made some pretty significant returns with the option to cash out faster than playing the long-game of waiting for an IPO or acquisition.
Today, my colleague Robert Hackett got his hands on some hard data that backs up some of these claims. Here are the highlights:
— VC firms are investing in crypto hedge funds, ICOs, and tokens directly. VC firms are on track to ink 77 traditional deals with blockchain startups by the end of 2017 — more than any year prior. So far, 59 deals have been struck this year, already exceeding the 57 signed last year.
— Some active dealmakers include Sequoia Capital, Union Square Ventures, and Andreessen Horowitz. According to CB Insights, Andreessen likes to invest alongside Union Square Ventures, as seen in join fundings in Coinbase (a crypto broker) and Polychain Capital (a crypto hedge fund). Meanwhile, Sequoia places bets more sparingly, backing only Bitmain Technologies, a Bitcoin miner, a since-shuttered crowdfunding platform.
— ICOs show no signs of slowing. ICOs have raised more than $2 billion in funding to date, with many ICOs still ongoing and hundreds more scheduled. In other words, companies have raised more money through ICOs than through traditional equity financing. Over-capitalization becomes a concern here with startups receiving too much money too quickly. When compared to traditional equity financing in the sector, ICOs raise well above the historical average of $3 million for early-stage blockchain deals.
Just today, news broke that Bain Capital Ventures and Andreessen Horowitz have participated in the pre-sale of a new cryptocurrency called basecoin. Many VCs I’ve spoken with tell me they haven’t thought much about ICOs, but I think this is a disruptive trend that's not just going to go away. Read Hackett’s full story here.
If you’re interested in learning more, Hackett and CB Insights analyst Arieh Levi will hold a webinar on Thursday, Oct. 26. Register here. Bring all crypto-related questions/concerns/compliments.
SOUND-OFF: Yesterday, Term Sheet featured two articles: One from The New York Times that said online monopolies need to be broken up before they “smash the foundations of our society.” And another that argued much of the press and regulators are on an “anti-tech campaign” that’s using Big Tech as a scapegoat for the election of Donald Trump.
Here are some thoughtful responses from Term Sheet on the issue:
Erik writes: Before Facebook was the problem, television was the problem, and it was a bigger problem because there were three networks that controlled content instead of users enjoying a free-for-all. Prior to television, radio was the problem and prior to radio, it was newpapers. Social media reflects society — all of it, including not just the powerful but also the powerless. Predecessors reflected the will and tastes of a small number of executives. The establishment preferred their old lock on power, and it still does.
Jared writes: The 'monopoly' argument is a bit hard to make when it comes to Apple, Facebook, Amazon, Google. The classic economics argument for the destruction of monopolies is that it provides more choice and lower prices to consumers. But that's not the case in this day and age as companies become platforms vs. physical products on store shelves. Most consumers don't care so much that the Russians spread fake news on Facebook. They also don't care that Amazon is literally taking over every sector of e-commerce. Why? Because Facebook still provides a valuable service as a place to connect with friends and family and Amazon has the lowest prices for literally everything. Now, this argument changes if you analyze from a business/media/advertising perspective. One can easily argue FB and Google are way too big — 65% of all digital ad spend goes through one of these two. But that's not a classic monopoly. Sure, tech companies need to realize their influence and power and take sufficient steps to stop the spread of fake news, hatred, etc. But that's a different conversation than simply calling them monopolies and calling for their dismantling.
Look forward to hearing your thoughts each day. Now, on to the deals:
THE LATEST FROM FORTUNE...
• Bernanke thinks Bitcoin will fail. But he likes blockchain (by Jeff John Roberts)
• Facebook acquires 'tbh,' an anonymous app for teens (by Jonathan Vanian)
•Teaching GE to think like a startup (by Eric Ries)
•Why the ‘Me Too’ sexual harassment awareness campaign went viral (by Claire Zillman)
• Tesla Model 3 production problems are tied to suppliers (by Kirsten Korosec)
SoftBank is in talks to raise a second giant tech fund. Netflix crushes its own expectations for subscription growth. Uber-SoftBank deal likely to be finalized in the next week. Kushners’ control of family’s NYC crown jewel is in jeopardy. PayPal rolls out Venmo payments to U.S. retailers. The ‘Uber for Dog-Walking’ keeps losing dogs.
• Vacasa, a Portland, Ore.-based vacation rental management company, raised $103.5 million in Series B funding. Riverwood Capital led the round, and was joined by Level Equity, Assurant Growth Investing, and NewSpring.
• Digital Asset, a New York-based blockchain startup, raised $40 million in funding. Jefferson River Capital led the round. Read more at Fortune.
• Spotahome, a Spain-based startup that lets users view and book mid to long-term accommodation online, raised €13.6 million ($16 million) in Series A funding, according to TechCrunch. Investors include Passion Capital, Seaya Ventures, Howzat Partners, Samaipata Ventures, Arthur Kosten, Nordic Makers, Gate 93, Mexico Ventures, Apostolos Apostolakis, Javier Etxebeste, Charlotte Street Capital, Samos Investments, and Modara Technologies. Read more.
• Connexin, a U.K.-based Wi-Fi firm, raised up to 10 million pounds ($13.2 million) in funding. Digital Alpha Advisors led the round, and was joined by investors including Cisco Systems.
• Chope, a Singapore-based dining discovery and reservation app, raised $13 million in funding. Square Peg Capital led the round, and was joined by investors including C31 Ventures, Moelis Australia, NSI Ventures, Susquehanna International Group, DSG Consumer Partners and SPH Ventures.
• LevelTen Energy, a Seattle-based renewable energy transaction platform developer, which raised $6.8 million in Series A funding. Investors include Prelude Ventures, Techstars Venture Capital Fund, Founders’ Coop, Wireframe Ventures, Element 8 Fund and Avista Development.
• Blue Hexagon, a Silicon Valley machine learning-based threat-detection software developer, raised $6 million in Series A funding. Benchmark led the round.
• BridgeU, a London-based university preparation and career guidance software developer, raised £4 million ($5.3 million) in Series A funding, according to TechCrunch. Octopus Ventures led the round, and was joined by investors including Fresco Capital and Downing Ventures. Read more.
• Backplane, a San Francisco-based startup that helps companies manage software deployments, raised $5 million in seed funding. Baseline Ventures led the round. Read more at Fortune.
• Butterfly, a New York City-based employee intelligence and management coaching software, raised $2.4 million in seed funding. Daphni led the round, and were joined by investors including Tectonic Capital and Precursor Ventures.
• Pick-Up, a Hong Kong-based delivery platform, raised funding of an undisclosed amount. Investors include Axis Capital Partners, Metroworks Equity, Sage 42 Apps and Shanghai Bestway Enterprise Development Company.
• Militus Inc, a Irvine, Calif.-based provider of advanced cybersecurity solutions, raised Series A funding of an undisclosed amount from CyberSEC3.
HEALTH AND LIFE SCIENCES DEALS
• Mission Bio, Inc, a San Francisco-based single-cell DNA analysis company, raised $10 million in Series A funding. Mayfield Fund led the round.
PRIVATE EQUITY DEALS
• Siris Capital Group, LLC agreed to acquire Intralinks Holdings, Inc, a New York-based company focused on secure data sharing and enterprise collaboration solutions and a subsidiary of Synchronoss Technologies, Inc, for approximately $1 billion. Siris has also agreed to invest $185 million in Synchronoss as part of the deal.
• Ruby Tuesday Inc (NYSE:RT) will be acquired by NRD Capital for an enterprise value of about $335 million. The $2.40 per share offer represents a premium of about 21% over Friday’s closing price. Read more at Fortune.
• Transom Capital Group acquired all of LOUD Technologies’ (OTCPK:LTEC) brands. The new company will be named LOUD Audio. Financial terms weren’t disclosed.
• Comvest Partners made an investment of an undisclosed amount in Citizens Rx, an Oak Park, Ill.-based pharmacy benefit management provider for public and private companies and health plans.
• Invo Healthcare, which is backed by The Wicks Group, The Jordan Company and Post Capital Partners, acquired Autism Home Support Services, a Northbrook, Ill.-based provider of home- and center-based applied behavioral analysis therapy to children diagnosed with autism spectrum disorder. Financial terms weren’t disclosed.
• Castanea Partners acquired a minority stake in Tatcha, a San Francisco-based luxury skincare brand. Financial terms weren’t disclosed.
• Truck Hero Inc, a portfolio company of CCMP Capital Advisors LP, agreed to buy Omix-ADA Inc, a Suwanee, Ga.-based developer and supplier of Jeep parts and accessories. Financial terms weren’t disclosed.
• CIP Capital made an investment of an undisclosed amount in Wilson Human Capital Group Inc, a Tampa, Fla.-based staffing recruitment firm. Financial terms weren’t disclosed.
• SFW Capital Partners made an investment of an undisclosed amount in DZone Inc, a Cary, N.C.-based platform for software developer focused technical content.
• Evolve IP acquired Clearlogin, a Westfield, N.J.-based identity authentication technology provider. Financial terms weren’t disclosed.
• JBS, a Brazilian food company and the world’s largest beef processor, withdrew plans to sell shares of its subsidiary JBS Foods International in the U.S. That IPO was filed to raise $100 million. The move was part of a larger operational reorganization after plans to move the company’s headquarters to Ireland were scrapped.
• BP Midstream Partners, the U.K.-based petroleum company, said it plans to raise $850 million inan offering of 42.5 million shares between $19 to $21 a piece. BP was said to be considering an IPO for its some of its assets, including crude oil, natural gas, and refined product pipelines located in the Midwest and on the U.S. Gulf Coast. In 2016, it booked revenue of $103 million and earnings of $45.9 million. Citi, Goldman Sachs, Morgan Stanley, Barclays, Credit Suisse, J.P. Morgan, and UBS are joint bookrunners in the deal. The company plans to list on NYSE as “BPMP.”
• National Vision Holdings, a Duluth, Ga.-based eye care provider, said it plans to raise $300 million in an offering of 15.8 million shares between $18 to $20 a piece. The company posted revenue of $1.2 billion on earnings of $14.8 million in 2016. KKR(77% pre-offering) and Berkshire Partners (18%) back the company. KKR, BofA Merrill Lynch, Goldman Sachs, Citi, Morgan Stanley, Jefferies, UBS Investment Bank, and Wells Fargo are joint bookrunners in the deal. The company plans to list on the Nasdaq as “EYE.”
• MongoDB, a New York-based cloud company, said it plans to raise $168 million by offering 8 million shares between $20 to $22. In 2016, the company posted revenue of $101.4 million and loss of $86.7 million. The company, which is valued at about $1.6 billion, is backed by investors including Sequoia Capital(16.9% pre-offering), Flybridge Capital(11.6%), Union Square Ventures(9.7%) and NEA(7.2%). MongoDB serves clients including Adobe, eBay, and Citigroup. Morgan Stanley, Goldman Sachs, Barclays, Allen & Company, Stifel, Canaccord Genuity, and JMP Securities are named underwriters in the deal. The company plans to list on the Nasdaq as “MDB.”
• ForeScout Technologies, a San Jose, Calif.-based cybersecurity company, said it plans to raise $101 million by offering 4.8 million shares between $20 and $22 a piece. In 2016, the company posted revenue of $166.8 million and loss of $74.8 million. Accel(15.2% pre-IPO), Amadeus Capital(19.6%), Meritech Capital Partners(13.4%), Pitango(14%), and Wellington Management(7.7%) back the company. Morgan Stanley, J.P. Morgan, and Citigroup are joint bookrunners in the deal. ForeScout plans to list on the Nasdaq as “FSCT.”
• Merchants Bancorp, a Carmel, In.-based bank focused on FHA loans, said it plans to raise $100 million in an offer of 5.6 million shares between $17 to $19 a piece. The company posted assets of $3.1 billion by mid 2017. For 2016, Merchants posted revenue of $82.5 million. Sandler O’Neill + Partners, Stephens, Raymond James, and SunTrust Robinson Humphrey are joint bookrunners in the deal. The company plans to list on the Nasdaq as “MBIN.”
• Hexindai, a Beijing, China-based consumer lending firm, said it plans to raise at least $30 million by offering 2.7 million ADSs, or at most, 8.9 million ADSs between $9 to $11 a piece. The company posted revenue of $22.9 million in the 12 months ending March 2017 and income of $7.5 million. Network 1 Financial Securities is underwriter in the deal. The company plans to list as “HX.”
• Patron Technology, a portfolio company of Providence Strategic Growth, acquired SeatAdvisor Inc, a San Diego-based ticketing software company. Financial terms weren’t disclosed. SeatAdvisor previously raised approximately $4.3 million in venture funding from investors including Alcatel Ventures, Sorrento Ventures, and Venture Catalyst.
• Riverside Partners sold Pilgrim Quality Solutions, a Tampa, Fla.-based provider of compliance management software and services for the life sciences sector. The buyer was not named. Financial terms weren’t disclosed.
• Frontera Energy Corp, which is backed by Catalyst Capital Group, agreed to acquire a 36.36% ownership stake in Pacific Midstream Limited for a cash consideration of $225 million. The seller was International Finance Corp.
FIRMS + FUNDS
• Frontenac, a Chicago-based private equity firm, raised $325 million for its eleventh flagship private equity fund.
• Illumina Ventures, a San Francisco-based venture capital firm, raised $230 million for its debut fund.
• Off Road Capital Partners, a New York-based investment firm, raised $46.4 million for its inaugural fund, according to an SEC listing.
• Next Frontier Capital, a Bozeman, Minn.-based venture capital firm, raised $22 million for its second fund. The fund’s target is $30 million.
• Scott Barclay joined Data Collective as partner.
• Jeff Gruccio joined AlpInvest Partners as a principal.
• Crayhill Capital Management named Shamafa Khan as a managing director and head of investor relations and marketing.
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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.