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Term Sheet — Wednesday, May 2

May 2, 2018, 1:46 PM UTC

5 Qs WITH A DEALMAKER

In February, Reddit co-founder Alexis Ohanian said he would step down from his daily role at the company to return to investing.

Ohanian is now full-time at Initialized Capital, the early-stage VC firm he co-founded with Garry Tan in 2012. The firm has more than $250 million in assets under management, and its investments include Coinbase, Instacart, Zenefits, Opendoor, Soylent, Cruise Automation, and Standard Cognition.

“I still use Reddit to discover burgeoning trends,” Ohanian told Term Sheet. “It’s a big part of why Initialized was the first check in Coinbase. You could see these trends popping on r/Bitcoin, for example. The early, organic communities served as really great focus groups.”

Ohanian, who recently had a daughter with wife and tennis champion Serena Williams, took 16 weeks of parental leave before making the decision to leave his operating role at Reddit.

In a conversation with Term Sheet, Ohanian discusses the elements he looks for in a founder before investing, his outlook on cryptocurrency, and the new data-driven investing platform he’s building in-house. Read the full Q&A here.

TERM SHEET: You stepped away from your duties at Reddit to focus on Initialized Capital. Why now?

OHANIAN: We are at such an interesting time right now. The first time this Internet thing got built up, I was just a kid in my parents’ house building websites, but I couldn’t have a big impact. Right now, it feels like the innovations that will get started in the next 10 years will have a huge impact on the world.

I’m proud of all the work we did to turn around Reddit in the last three years, but I think about the impact I could have at one company versus the potential I could have investing in dozens of great, multibillion-dollar companies — and that’s the way I want to scale my next decade.

What are some of the key elements you look for in a company or founder before investing?

OHANIAN: There has to be a relentlessness to the founder. It’s easy to have an idea. It’s easy to print out some business cards. Where it starts getting hard is when you actually start testing some version of your idea, getting it in front of customers, and then finding out they’re not willing to buy your product. Even though we’re working with early-stage founders, there’s a clear indication very early on of what they’ve been able to build, not what they’re able to talk about. That makes a big difference.

I’m looking for the basic things — is the founder able to meet a deadline and execute? But I’m also looking for more complex things — are they able to operate in a world of uncertainty? There’s no syllabus for entrepreneurship.

You told me you were planning to double down on investment opportunities in emerging technologies such as blockchain. What are your views on what’s happening with cryptocurrency and the blockchain at the moment?

OHANIAN: Last year, it was all about AI and machine learning, This year, it’s all about blockchain. Most of it is just hype and BS, just like how it was with AI and ML. Most of the really vital, protocol-level, basic infrastructure around software and blockchain will need to get built in the next year or two for us to really see the Web 3.0 we’re really hoping for. So those are the types of companies we’re investing in now. These are the types of things I think will build the foundation for a very different, much better Internet.

I was a kid in the 90s without much leverage when the first Internet was being built, so I see this as a hell of an opportunity. We’re still figuring it out. We still don’t have a Netscape, but it’s coming.

What’s interesting is we’re seeing more teams with business and product backgrounds moving to start or join blockchain projects. So you have your earliest adopters who are very hard core on the engineering side, and now we’re starting to see people who have experience at later-stage startups who understand the UX and business portion of it. This stuff doesn’t actually change the world unless everyone is using it. And the way everyone is using it is if there are interfaces that make sense and that there’s product that’s beautiful and effective. That’s just starting to happen now. As an investor, I get to have a front row seat to this new Internet.

If you were to give a ballpark number for what you think Bitcoin and Ethereum will be worth by the end of the year, what would it be?

OHANIAN: At the end of the year, Bitcoin will be at $20,000. And Ethereum will be at $15,000. [Note: After publication, Ohanian said he misspoke. He meant to say Ethereum will be at $1,500.] Great, now people can call me out if I'm wrong.

At Initialized, you’re working on rolling out a new data-driven investing platform. The goal was to increase deal flow diversity and help founders gain access to the firm’s network. How is that project going?

OHANIAN: We’ve spent the better part of this year understanding our networks internally. Between me and Garry, we have a lot of networks, but often the relationships of those networks are unclear. So the key step was aggregating those networks and figuring out who are the people we vouch for. And for the second version, we’re working on a more searchable version of this to roll out to our most trusted founders in the network.

In other words, the goal is to narrow down the best people to be working with — whether it’s a company that needs to hire someone or whether it’s someone we want to invest in. The challenge is how to make sure we’re going beyond the people who are thinking of emailing us. Who are the founders we’re not looking at but should be? As VCs, we need to use software to help us catch our blind spots.

Read the full Q&A here.

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VENTURE DEALS

Frontier Car Group, a Berlin-based tech startup which develop and operates used car marketplaces within emerging markets, raised $41 million in Series B funding. Investors include Balderton Capital, TPG Growth, Fraser McCombs Capital, and Autotech Ventures.

Skykick, a Seattle-based provider of SaaS cloud automation and management products for Microsoft information technology service providers, raised $40 million in funding. Investors include Karl-Theodor zu Guttenberg, Craig Nerenberg, and Brenner West Capital.

Soothe, a Las Vegas-based provider of massage services, raised $31 million in Series C funding. The Riverside Company led the round.

Humu, a Mountain View, Calif.-based behavioral-change software company, raised $30 million in Series B funding. Institutional Venture Partners led the round.

Bizongo, an India-based platform for packaging solutions, raised $22 million in Series B funding. B-Capital and International Finance Corporation led the round, and were joined by investors including Accel & IDG Ventures.

Soft Robotics, a Cambridge, Mass.-based manufacturer of robotic grippers and control systems, raised $20 million in funding. Investors include Scale Venture Partners, Calibrate Ventures, Honeywell Ventures, Tekfen Ventures, Yamaha Motor Co., Ltd., and Hyperplane Venture Capital.

Cera, a London-based technology-enabled homecare start-up, raised $17 million in Series A funding. Investors include Guinness Asset Management, Yabeo, and Kairos.

BenchSci, a Canada-based AI-powered search engine for biological products, raised $8 million in Series A funding. iNovia Capital led the round, and was joined by investors including GradientVentures, Golden Venture Partners, Afore Capital, Real Ventures, and Radical Ventures.

Passage AI, a Mountain View, Calif.-based developer of AI-powered conversational interfaces, raised $7.3 million in Series A funding. Blumberg Capital led the round.

Regulus Cyber, an Israel-based developer of cyber security and operational solutions for drones, robots, and autonomous systems, raised $6.3 million in funding. Investors include Sierra Ventures, Canaan Partners Israel, the Technion and F2 Capital.

Raven Telemetry, a Canada-based artificial intelligence company for manufacturing, raised $6.1 million in funding. Investors include Tobi Lütke, Harley Finkelstein, Rob Lander, and other angel investors.

Trusted Key Solutions Inc., a blockchain-based secure digital identity company, raised $3 million in seed funding. Founders Co-Op led the round, and was joined by investors including Pithia, Inc.

HEALTH AND LIFE SCIENCES DEALS

Rapid Micro Biosystems, a Lowell, Mass.-based provider of automated, growth-based, rapid microbial detection technology for the healthcare product manufacturing sector, raised $60 million in funding. Investors include Bain Capital Life Sciences, Xeraya Capital, Asahi Kasei Medical, Longitude Capital, Quaker Partners, TVM Capital, and Richard K. Mellon and Sons.

PRIVATE EQUITY DEALS

Pinewell Capital acquired Avon Engineered Fabrications Inc, a Picayune, Miss.-based maker of military-grade performance inflatable products. Financial terms weren't disclosed.

ProAmpac, which is owned by PPC Partners, acquired Gateway Packaging Company, a Tenn.-based flexible packaging and technical products company. Financial terms weren't disclosed.

Highline Aftermarket, a portfolio company of The Sterling Group, acquired South/Win, a Greensboro, N.C.-based maker of automotive fluids. Financial terms weren't disclosed.

MW Industries Inc, a portfolio company of American Securities, acquired LaVezzi Precision Inc, a Glendale Heights, Ill.-based maker of medical implants, device components and surgical instrumentation. Financial terms weren't disclosed.

Albireo Energy, which is backed by Huron Capital, acquired Energy Management Control Corp, a Long Island City, N.Y.-based provider of integrated building solutions in the New York City area. No financial terms were disclosed.

Vorteq Coil Finishers LLC, a portfolio company of Peninsula Pacific, acquired Wheeling Services & Supply Inc, a Woodstock, Ill.-based producer of pre-painted aluminum products serving the residential building and construction market. Financial terms weren't disclosed.

TA Associates invested in Datix, a U.K.-based healthcare patient safety software provider. Financial terms weren't disclosed.

OTHER DEALS

Ontario Systems acquired Justice Systems, Inc., a court case management software provider and electronic payments solutions for state and municipal court systems. Financial terms weren't disclosed.

FlockU, a King of Prussia, Penn.-based digital media company, was acquired by Becker Associates LLC. Financial terms weren't disclosed.

Nokia will sell its health division to Eric Carreel, the co-founder and former chairman of Withings. Financial terms weren't disclosed.

IPOs

QSR Brands, a Malaysian fast-food operator, is weighing an IPO of 2 billion ringgit ($510 million). Johor Corp backs the firm. Read more.

Huya Broadcasting, a Guangzhou-based eSports live streaming platform spinning out of YY, says it plans to raise $165 million in an IPO on 15 million ADSs priced between $10 to $12. The firm posted revenue of $335.8 million and loss of $12.4 million in 2017. YY (55.5% pre-IPO) and Tencent (39.8%) back the firm. Credit Suisse, Goldman Sachs, and UBS Investment Bank are underwriters in the deal. It plans to list on the NYSE as “HUYA.” Read more.

Carbon Black, a Waltham, Mass.-based cloud-based security software maker, said it plans to raise $144 million in an IPO on 8 million shares priced between $17 to $18. The firm posted revenue of $162 million and loss of $55.2 million in 2017. Atlas Venture (17% pre-IPO), Highland Capital Partners (14.9%), Kleiner Perkins Caufield & Byers (8.8%), Point 406 Ventures (7.7%), and Sequoia Capital (9.9%) back the firm. Morgan Stanley and J.P. Morgan are underwriters in the deal. The firm plans to list on the Nasdaq as “CBLK.” Read more.

Alzheon, a Framingham, Mass.-based biopharmaceutical firm developing Alzheimer’s disease, withdrew plans for a $70 million IPO. The firm posted loss of $5.5 million in 2017. Ally Bridge Group (17.5%) and Aptus Holdings (5.2%) back the firm. Citigroup and Piper Jaffray were joint bookrunners in the deal. The firm planned to list on the Nasdaq as “”ALZH.”  Read more.

EXITS

BeneVir Biopharm, Inc, a Gaithersburg, Md.-based biotechnology company developing oncolytic immunotherapies for the treatment of cancer, agreed to be acquired by Janssen Biotech, Inc, for $1.04 billion. The seller was Pansend Life Sciences of HC2 Holdings.

Marketo acquired Bizible, a Seattle-based provider of marketing performance management software. Financial terms weren't disclosed. Bizible had raised approximately $37.7 million in venture funding from investors including Scale Venture Partners, Madrona Venture Partners, MHS Capital and Investment Group of Santa Barbara.

High Road Capital Partners sold All Integrated Solutions, a Wisconsin-based distributor of industrial OEM fasteners, Class C components and MRO products, to MSC Industrial Supply Co, for about $86 million.

Cisco (NASDAQ: CSCO) will acquire Accompany, a Los Altos, Calif.-based provider of a relationship intelligence platform. Financial terms weren't disclosed.

FIRMS + FUNDS

LS Power Equity Advisors LLC, a New York-based power and energy infrastructure manager, raised $2.25 billion for its fourth fund, LS Power Equity Partners IV.

GoldPoint Partners LLC, a New York-based private equity firm, raised $850 million for its sixth co-investment fund.

Goodwater Capital, a San Mateo, Calif.-based venture capital firm, has set a $350 million target for its third fund, according to an SEC filing.

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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.