CryptocurrencyInvestingBanksReal Estate

Term Sheet — Wednesday, January 31

January 31, 2018, 2:46 PM UTC

5 Qs WITH A DEALMAKER

Good morning, Term Sheet readers.

EXCLUSIVE: Term Sheet has obtained a pitch deck about a new “faircoin” (cryptocurrency) called Valor. I was told the project raised $10 million in the first pre-sale round, is in the process of raising $100 million+ in their second pre-sale round, and targeting a $1 billion public ICO in Q3 of 2018. The team plans to distribute tokens to users all around the world in an effort to create less concentrated ownership.

This is interesting for two reasons:

Several days ago, AngelList CEO Naval Ravikant tweeted that “the more widely distributed cryptocurrencies are, the greater the chance they survive a showdown with governments. Look to the upcoming wave of ‘faircoins.’”

If the Valor team is successful with their fundraising plans, they’ll raise more than $1.1B in 12 months for a project that hasn’t even launched yet. And we thought SoftBank was crazy.

-----

Tim Draper founded DFJ, one of the best-known venture capital firms in the Bay Area. He founded the firm in 1985 before leading investments in Skype, Tesla, and Twitter. But Draper is not a traditional investor. He’s a big proponent of Bitcoin and the blockchain — a view not often held in many VC circles.

Draper first became interested in virtual currencies in 2002 when he met a man from South Korea who told him his son wanted a “virtual sword” for his birthday. “Everyone in Korea was playing this virtual game,” Draper told Term Sheet. “He wanted a virtual sword. He was going to pay real money to buy virtual currency to buy pixels on a screen making up a sword. That was the beginning of my thinking that virtual currencies might actually happen.”

As more people began playing these virtual games, Draper envisioned the need for a global, digital currency not tied to political whims. “So when Bitcoin showed up, I was all over it,” he said.

Term Sheet spoke with Draper about the rise of Bitcoin, Steve Jurvetson’s exit, and his biggest investing regrets. Below is an excerpted conversation. Read the full Q&A here.

TERM SHEET: Cryptocurrency and the blockchain are a hot topic at the moment. You’re known for making numerous investments in the space. In 2014, you bought 30,000 Bitcoin from the U.S. government after the coins were confiscated from the fallout of Silk Road. Why?

DRAPER: Long before the Silk Road purchase, I paid $250,000 and I was supposed to buy 40,000 Bitcoin. The coins they got were on the [Bitcoin exchange] Mt. Gox system. And then, Mt. Gox lost — or stole, depending on how you look at it — all that Bitcoin. When that happened, I threw up my arms and thought this thing was all nonsense. How could the biggest trader lose all the money — or steal it? So I thought it was over.

I was frustrated that I lost that 40,000 Bitcoin, and when the Silk Road auction came up, I thought, “Maybe this is a chance for me to participate in this again.” When people were going into the auction, they were thinking they would get a deal because there were a lot [of Bitcoin], so I actually bid over-market and that’s why I ended up getting all of them.

You were one of the first Americans to become an e-resident of Estonia. How do you see citizenship evolving over time?

DRAPER: I think geographic borders are falling to the point where we can move pretty freely around the world, and many other people from other countries can, too. We can choose the country, state, or city that’s right for us.

Estonia was first, but other governments are now creating virtual governments, which is chipping away at what land-based governments do. A lot of what governments do can be done virtually. Think about keeping track of citizens, redistribution of income, healthcare insurance, welfare, and social security. Many of those things can be handled through universal basic income on the blockchain. This is really challenging all of our perceptions of what government is and does.

As Estonia starts providing more services, they can grab more and more market share of the residents of the world. Think about it — if Estonia starts offering a better healthcare plan than the U.S. does, we’ll just go, “Oh, why don’t we use that?” Or what if they have a more efficient way to provide welfare to citizens?

Control brings poverty whereas freedom brings prosperity and wealth. We are in a very good position because we are a democracy, and we are accepting of new ways of thinking. We are more apt to be accepting of a new technology coming in and transforming how government works. I think the U.S. is well prepared for this.

As an investor in the next 10 years, I’m looking at who’s doing things for blockchain government and who’s doing things to make Bitcoin more useful? This is the beginning of something bigger than I’ve seen in my entire life.

What is an investment you passed on that you still regret?

DRAPER: I got talked out of Google. I sat by Sergey [Brin] on an airplane, and he gave me the whole pitch, and I was all excited about it. But when I went to my partners, they told me we already have six search engines in our portfolio and another one just wouldn’t make any difference. I said, “I really like the guys, and it’s a cute name,” but that really wasn’t enough to carry the day.

We also missed Facebook. My daughter was a big Facebook fan, and I knew we were on to something, but we got into a bidding war, and we finally backed out because we were too cheap. It started at a $20 million valuation, and it crept up and up and up to a $115 million valuation, and that’s when we dropped out. We lost that one, and that one was a total bummer.

And then for other reasons, we missed Airbnb and Uber. So yeah, I’ve missed everything.

DFJ had a tumultuous last couple of months (Partner Steve Jurvetson was ousted; there were allegations of a “sex party” following a DFJ event). Although there have been various reports, I’d love to hear directly from you about what’s going on.

DRAPER: For me, I started managing Draper Associates and I moved to San Mateo most of the days of the week. I’m still one of the managers of DFJ, so this does affect me because I’m managing the firm, but the money I’m managing is at Draper Associates now.

Jurvetson has been an amazing partner and just a brilliant guy, and he’s done it for so many years with us. I’ve been honored to work with him, and the partnership of DFJ is handling this as well as they possibly can in facing a tsunami of interest.

But he was your co-founder, so how have you and the firm dealt with his departure from the firm?

DRAPER: We’ve had plenty of turmoil over the years, and when you invest in cutting-edge things in a very volatile financial world, you run into a lot of issues. It’s been a tremendous ride, and we’re still going.

Read the full Q&A here.

THE LATEST FROM FORTUNE...

A Memo to the Cities Amazon Passed Over (by Steve Case)

Female Founders Got 2% of Venture Capital Dollars in 2017 (by Valentina Zarya)

President Trump Urges Cooperation During State of the Union Address

Why Bitcoin May Not Be Digital Gold After All (by Jen Wieczner)

...AND ELSEWHERE

Corporate debt? More like preferred shares. Liberty Mutual Insurance seeks bids for $1 billion in private-equity and real estate stakes. Trump ups proposed infrastructure spending to $1.5 trillion in State of the Union address. Facebook bans crypto ads. Tencent-led group invests $5.4 billion in Dalian Wanda’s property arm. FEMA food and water distribution to Puerto Ricans ends. The latest in electric vehicles: an electric Harley-Davidson.

VENTURE DEALS

Wag, a Los Angeles, Calif.-based dog walking app, raised $300 million in funding. Investors include the SoftBank Vision Fund.

Asana, a San Francisco-based productivity and collaboration service, raised $75 million in Series D funding. Generation Investment Management led the round.

EBANX, a Brazil-based provider of Latin American payment methods to international merchants, raised $30 million in funding. FTV Capital led the round, and was joined by investors including Endeavor Catalyst Fund.

GameMine Inc, a Los Angeles-based mobile game publisher, raised $20 million in Series A funding. The investors were not named.

Victor, a London-based private jet charter marketplace, raised $18 million in funding. The investors include BBA Aviation and BP Ventures.

Bench, a Canada-based bookkeeping service for SMBs, raised $18 million in B-1 funding, according to TechCrunch. iNovia Capital led the round, and was joined by investors including Bain Capital Ventures, Altos Ventures, and Silicon Valley Bank. Read more.

Origami Logic, a Mountain View, Calif.-based provider of marketing performance measurement solutions, raised $15.2 million in financing. Viola Ventures and Saban Ventures led the round.

Halo Neuroscience, a San Francisco-based developer of a neurostimulation headset, raised $13 million in Series B funding. TPG led the round, and was joined by investors including Lux Capital, JAZZ Venture Partners and Xfund.

Astound, an enterprise software company applying machine learning and natural language processing, raised $11.5 million in Series A funding. Vertex Ventures and Pelion Venture Partners co-led the round, and were joined by investors including The Hive, Slack Fund, and Moment Ventures.

Funraise, a Long Beach, Calif.-based nonprofit fundraising software provider, raised $9.7 million in Series A funding. Toba Capital led the round.

VirZOOM, a Cambridge, Mass.-based virtual reality fitness game platform, raised $5.5 million in seed funding. Investors include Skywood Capital, Eastham Capital, Fairhaven Capital and Equity Resource Investments.

Packback, a Chicago-based developer of AI-powered learning communities popular among college faculty, raised $4.2 million in Series A funding. University Ventures led the round, and was joined by investors including Mark Cuban, Wintrust Ventures, and Wildcat Capital.

HEALTH AND LIFE SCIENCES DEALS

Engine Biosciences, a San Francisco- and Singapore-based biotech company using genomics and AI aiming to accelerate drug discovery, raised $10 million in seed funding. DHVC (Danhua Capital) and 6 Dimensions Capital co-led the round, and were joined by investors including WuXi Apptec, EDBI, Pavilion Capital, Baidu Ventures, WI Harper, and Nest.Bio Ventures.

Nicoya Lifesciences Inc, a Canada-based nanotechnology startup, raised C$2 million ($1.6 million) in funding. Ripple Ventures and Golden Triangle Angel Network co-led the round, and was joined by investors including MaRS Investment Accelerator Fund, BDC Capital, Garage Capital, Angel One, Maple Leaf Angels, and Innovation Grade Ventures.

PRIVATE EQUITY DEALS

APCT Holdings, a portfolio company of Saugatuck Capital, acquired Cartel Electronics, a Placentia, Calif.-based maker of prototype and quick-turn rigid printed circuit boards for commercial applications. Financial terms weren't disclosed.

H.I.G. Capital acquired Town & Country Holdings Inc, a Lakewood, N.J.-based provider of kitchen textiles, table linens, and other home products. Financial terms weren't disclosed.

Capitala Group invested $15 million in debt and equity in US Bath Group LLC, a Fairland, Ind.-based provider of custom bathroom products.

Care Advantage, a portfolio company of BelHealth Investment Partners, acquired Ready Hands Inc, an Alexandria, Va.-based provider of personal care services for the elderly and disabled. Financial terms weren't disclosed.

One Equity Partners agreed to acquire a majority stake in Media Solutions, a provider of media processing, delivery and TV service platforms, from Ericsson (NASDAQ:ERIC). Ericsson will continue to own a 49% stake in the Company. Financial terms weren't disclosed.

OTHER DEALS

Fujifilm Holdings (TSE:4901) is set to take over Xerox Corp (NYSE:XRX) in a $6.1 billion deal, combining the U.S. company into their existing joint venture. Read more at Fortune.

Finastra acquired Olfa Soft SA, a Switzerland-based cutting edge FX e-trading platform for banks and financial institutions. Financial terms weren't disclosed.

IPOs

MTech Acquisition, an Orlando-based blank check company formed to acquire a cannabis-related firm, priced its IPO, saying it raised $50 million IPO of 5 million units priced at $10. Investors including Steven Van Dyke and Scott Sozio of Hypur Ventures back the firm. EarlyBirdCapital is sole bookrunner in the deal. The company plans to list on the Nasdaq as “MTECU.”

Avast Software, a London-based antivirus software maker, has reportedly chosen Morgan Stanley and UBS to IPO in London, Reuters reports citing sources. CVC Capital backs the firm. The IPO would be the largest U.K. tech IPO. Read more.

EXITS

Red Hat acquired CoreOS, a San Francisco-based container management startup, for $250 million. CoreOS had raised approximately $50 million in venture funding from investors including GV and Kleiner Perkins Caufield & Byers.

SoftBank will acquire a $51% stake in Line, a Japan-based developer of mobile messaging apps. The mobile business is valued at around $15 million, according to TechCrunch. Read more.

FIRMS + FUNDS

Sequoia Capital, a Menlo Park-based private equity and venture capital firm, aims to raise up to $8 billion for a global fund, according to Reuters. Read more.

Andrew Ng, who formerly led artificial intelligence projects at Google and Baidu Inc, raised a $175 million fund to invest in AI startups, according to Reuters. Read more.

PEOPLE

Philip S. Kemp, Jr. joined Snow Phipps Group as a managing director.

SHARE TODAY'S TERM SHEET

View this email in your browser.

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