Good morning, Term Sheet readers.
It’s been a pleasure to hear from many of you since I took over Term Sheet. I look forward to your thoughtful responses every day. Term Sheet will take a break next week, but I’ll be back in your inboxes on Tuesday, Jan. 2. Feel free to stay in touch on Twitter. Wishing you a wonderful holiday season, and a Happy New Year. See you in 2018!
SEQUOIA UPDATE: We have more details on Sequoia Capital’s rumored mega-fund. While still in the early stages, the firm’s third global fund target is $5 billion. Many people immediately jump to the conclusion that this is a response to SoftBank, but a source tells Term Sheet that’s not the case, especially since the Sequoia Fund would pale in comparison to SoftBank’s $100 billion Vision Fund. Regardless, it’s still a massive amount of capital that will be pumped into startups, likely inflating already-inflated tech valuations.
TAX TALK: In light of the GOP tax bill, I want to highlight an excerpt from a collaboration between Fortune and ProPublica. In the piece, Peter Elkind investigates a major tax-avoidance scheme not addressed by the tax plan. Here’s a snippet:
“A preliminary IRS analysis of syndicated partnerships this summer showed investors claimed an average of $9 in tax deductions for every dollar they invest. People have accomplished that by exploiting a giant loophole: The size of the tax deduction is based on a claim about how much the land’s value is diminished by the promise not to develop it.
By law, that estimate is delivered by an appraiser hired by the taxpayer. The appraiser is free to assert that the donated land is actually worth many times what investors paid for it, often just months before. That, in turn, inflates the deduction. The process is abetted by law firms, brokers, and accountants who pocket millions in fees.”
PE PREDICTIONS: Our friends at PitchBook shared a report of private equity predictions for 2018. Here are six themes you can expect to see next year:
- The number of active US private equity investors continues will shrink.
- Buyout multiples to remain elevated.
- Secondary buyouts will continue gaining in stature.
- PE investing in software to proliferate.
- Niche fundraising will continue its rise.
- LP net cashflows to continue falling.
For Term Sheet readers in the private equity space, do you agree or disagree with these predictions? I’d love to hear from you.
THE LATEST FROM FORTUNE...
• How high can Bitcoin's price go in 2018? (by Jen Wieczner & Robert Hackett)
• Has Apple lost its design mojo? (by Rick Tetzeli)
• 34 business books you won’t be able to put down (by Polina Marinova)
• Airbnb co-founder Joe Gebbia on how 'dog-fooding' leads to great design (by Leigh Gallagher)
Eric Schmidt stepping down as Alphabet’s executive chairman to become a ‘technical advisor.’ Goldman is reportedly getting into bitcoin and crypto trading. Lessons from the Ample Hills fundraise. Are there any stock bears left in America?
• Blue Frog Robotics, a Paris-based robotics startup, raised funding of an undisclosed amount. Fenox Venture Capital led the round.
HEALTH AND LIFE SCIENCES DEALS
• Tessa Therapeutics, a Singapore-based biopharmaceutical company focusing on T cell therapy for solid tumors, raised $80 million in funding. Temasek led the round, and was joined by investors including EDBI, Karst Peak Capital, Heliconia and Heritas.
• FLX Bio Inc, a South San Francisco-based biopharmaceutical company focused on activating the immune system against cancer, raised $60 million in Series C funding. Investors include GV, The Column Group, Kleiner Perkins, Topspin Partners and Celgene Corporation.
PRIVATE EQUITY DEALS
• The Hartford agreed to sell Talcott Resolution, its run-off life and annuity businesses, to a group of investors led by Cornell Capital LLC, Atlas Merchant Capital LLC, TRB Advisors LP, Global Atlantic Financial Group, Pine Brook and J. Safra Group for $2.05 billion.
• DW Healthcare Partners made an investment in SoClean Inc, an Oxford, Mass.-based provider of sleep apnea cleaning solutions. Financial terms weren't disclosed.
• AC&A Enterprises Holdings, LLC, a portfolio company of AE Industrial Partners, acquired EnCore Composite Structures, Inc, a division of the EnCore Group. Financial terms weren't disclosed.
• Keywords Studios (LSE:KWS) acquired Sperasoft, a Santa Clara, Calif.-based game and IT development company, for $27 million.
• CyrusOne Inc agreed to buy Zenium Data Centers, a London-based hyperscale data center provider, for $442 million. Sellers include Quantum Strategic Partners.