5 Qs WITH A DEALMAKER
Melinda Gates needs no introduction.
She has been the co-chair of The Bill & Melinda Gates Foundation for 18 years. Now, she has quietly entered the venture capital world by investing in female-led or minority-focused venture firms like Aspect Ventures, Female Founders Fund, and Defy Partners.
“I am a big believer in disruptive innovation, but it’s been incredibly disappointing to watch how few women-led businesses are getting funded,” Gates told Term Sheet. “Ultimately, if we want more innovation and better products, we’ve got to put more money behind women and minorities. That wasn’t happening, so I decided to step in and see what I could do to help a little bit.”
Through Pivotal Ventures, her Seattle-based investment and incubation company, Gates is betting that non-traditional funds can bring outsize returns. In a conversation with Term Sheet, Gates discusses the role LPs play in the venture ecosystem, the long-lasting effects of the #MeToo movement, and what industry she’d like to see backed by more venture dollars. Read the full Q&A here.
TERM SHEET: As a limited partner, what are some specific questions you’re asking fund managers before deciding to invest?
GATES: To be clear, I am both investing in emerging fund managers, like Female Founders Fund, and I’m investing in some long-standing funds as well.
I am specifically looking at funds who over-index on women-led and minority-led businesses. Has this leader done this before? How do they think about business? Where have they done a great job in the past? Or if they are emerging, why am I willing to take a little bit more risk on that situation? What is it about those fund managers that makes me think I’ll still get a great return on my money — because I care a lot about that — but also wow, they’re going to find some new ideas out there that others aren’t already going after.
I’m asking a lot of business questions about how they will go about their funding, how they will over-index on women’s businesses, and how they will hold themselves accountable for a great return.
Based on your conversations with top-tier VCs, what are the biggest misconceptions you think they have about these types of funds?
GATES: Many of them think if they have one female at the table, they’ve done their job. Another big one is when they say that they have trouble finding women. Those are just excuses. They don’t know what investing in these areas looks like until they get several women who are partners in their firm.
It’s the same thing we see on the board level. You put one woman on a board — the business won’t change much. She has to assimilate. She can’t carry all of that by herself. You put several women on a board and the questions asked of the business become different. So I think the VC firms haven’t quite woken up to that.
Last year, less than 2% of all venture capital went to female founders & fewer than 8% of investors are women. How much of a role do you think LPs have in driving change, and how soon should we expect to see the stats improve?
GATES: Look at how much the #MeToo movement has disrupted what’s expected in society. The conversations have changed drastically since last fall. So I can’t totally predict when the stats will change, but I can put money where I think there are levers. And I think the LP community is one of the levers.
When you see the LPs starting to move, that’s when I think you’ll start seeing pretty disruptive change, perhaps sometime in the next three to five years.
You’ve previously said the #MeToo movement could backfire if men stop taking meetings with women because they’re afraid they’ll get accused for inappropriate behavior. Can you elaborate on some of the ways you think real change can occur?
GATES: I think real change can occur when the VC community starts to demand that the people it invests in have diversity, the right values, and the right behavior. When they start demanding that, then you’re going to see some real change.
It’s like the pressure that #MeToo has put on boards. Now, boards don’t have a choice. When men or women raise a sexual harassment claim, the board can’t just tuck it away anymore. The VC community doesn’t have as much light on it internally as a corporate board does, but when it starts to wake up to the fact that they’ll have to expect the same things from the companies they invest in, then you’ll see a big shift.
What’s one industry that you’d like to see backed by more venture capital dollars?
GATES: I’d love to see more innovations coming forward that have positive outcomes for young teenagers. I’m sure you’ve seen a lot of the stats about the mental health crisis we’re facing as a nation. We need to figure out how to use all of this innovation and technology to have positive messages and outcomes for kids. This generation has been online faster than any other generation before them and yet they are dealing the most severely with the negative consequences of it.
A BIRD UNICORN: Bird, the Santa Monica-based electric scooter company, is raising $150 million in a round led by Sequoia Capital that will value the company at $1 billion, Bloomberg first reported. Yes, that’s just two months after it raised $100 million in Series B funding at a $300 million valuation.
The funding comes on the heels of Uber’s acquisition of dockless e-bike service Jump Bikes, which is likely to get into scooters as well. LimeBike is rumored to be in the middle of raising a massive round, and Lyft is reportedly developing prototypes of potential scooter designs. I recently wrote about “The Great Scooter Startup War” here.
Sources tell me it’s likely that Bird’s final fundraising amount will be higher than the reported $150 million. To put this insanity into context, Bird is less than a year old….potentially the fastest company ever to gain unicorn status.
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• Ant Financial Services Group, a China-based operator of online payment platform Alipay, raised $10 billion at a $150 billion valuation, according to Reuters. Investors include Singapore’s sovereign fund GIC Pte Ltd, Temasek Holdings (Private) Ltd, and Warburg Pincus LLC. Read more.
• OnTruck, a Spain-based haulage tech platform, raised 25 million euros ($28.8 million) in Series B funding. Cathay Innovation led the round, and was joined by investors including GP Bullhound, Atomico, Idinvest Partners, Total Energy Ventures, Point 9 Capital and Samaipata Ventures.
• CTRL-labs, a New York City-based developer of a neural interface technology, raised $28 million in Series A funding. Lux Capital and GV led the round, and was joined by investors including Vulcan Capital, Founders Fund, the Amazon Alexa Fund, Spark Capital, Matrix Partners, Breyer Capital and Fuel Capital.
• CoreView, an Italy-based provider of Office 365 management solutions, raised $20 million in funding. Insight Venture Partners led the round.
• Propeller Health, a Madison, Wisc.-based digital therapeutics company, raised $20 million in funding. Aptar Pharma led the round, and was joined by investors including Safeguard Scientifics, Social Capital, Hikma, 3M Ventures and SR One.
• SocialChorus, a San Francisco-based employee communications platform, raised $12.5 million in funding. Arrowroot Capital and Kohlberg Ventures led the round, and were joined by investors including Western Technology Investment.
• Comet, a Paris-based freelancer marketplace, raised 11 million euros ($12.8 million) in funding. Pierre-Eric Leibovici and Stanislas Lot from Daphni led the round, and were joined by investors including Pierre Entremont and Bruno Raillard from Otium.
• Moleaer, a Los Angeles-based developer of industrial scale nanobubble systems, raised more than $6 million in funding. Energy Innovation Capital led the round.
• Vulcan Cyber, an Israel-based continuous vulnerability remediation solution, raised $4 million in seed funding. Investors include YL Ventures.
• Bright Cellars, a Milwaukee, Wisc.-based personalized wine subscription service powered by data science, raised $2.8 million in funding. Investors include Cleveland Avenue, Northwestern Mutual’s Cream City Venture Capital and CSA Partners.
• Gravyty Technologies, a Boston-based provider of AI-enabled fundraising software, raised $2 million in funding. Investors include NXT Ventures, Launchpad Venture Group, John Huysmans, Stage 1 Ventures and The Venture Capital Fund of New England.
HEALTH AND LIFE SCIENCES DEALS
• Lion TCR, a Singapore-based developer of engineered T-cell immunotherapy against viral-related cancer and chronic hepatitis B, raised $20 million in Series A funding. Investors include Yashang Capital and Westlake Ventures Capital.
PRIVATE EQUITY DEALS
• Delos Capital and HRS Management made an investment in US Fitness, an operator of health and fitness clubs. Financial terms weren’t disclosed.
• Tikehau Capital invested 114 million euros ($132.5 million) in Nexteam Group, a France-based specialist in precision mechanics and the machining of complex and hard metal parts for aviation.
• Bregal Sagemount invested in GPS Insight, a Scottsdale, Ariz.-provider of GPS tracking and ELD solutions for businesses and government agencies with fleets of vehicles. Financial terms weren’t disclosed.
• FireMon, which is backed by Insight Venture Partners. agreed to acquire Lumeta Corporation, a Somerset, N.J.-based provider of cyber situational awareness. Financial terms weren’t disclosed.
• Uxin, a Beijing-based used car marketplace, filed for a $500 million IPO. The firm posted revenue of $298.6 million in 2017. Jeneration Capital (22.3%), Kingkey Investment Group (14.8%), Redrock Holdings (14.1%), Baidu (10%), and Tiger Global (9%) back the firm. Morgan Stanley, Goldman Sachs, J.P. Morgan, CICC, and Chinese Renaissance are underwriters in the deal. The firm plans to list on the Nasdaq as “UXIN.” Read more.
• Allegro Merger, a New York-based SPAC, filed for a $130 million IPO in an offering of 13 million units priced at $10 apiece. Eric Rosenfeld of Crescendo Partners backs the firm. Cantor Fitzgerald is underwriter in the deal. The firm plans to list on the Nasdaq as “ALGRU.” Read more.
• MeiraGTx, a New York City-based gene therapy firm, plans to raise $75 million in an IPO of 5 million shares priced between $14 to $16. The firm has yet to post a revenue. Kadmon Corp. (17.7%), Perceptive Advisors (16.1%), and Alexandria Equities (8.2%) back the firm. BofA, Barclays, and Evercore ISI are joint bookrunners in the deal. The firm plans to list on the Nasdaq as “MGTX.” Read more.
• KKR agreed to buy BMC, a Houston, Texas-based enterprise software company, from a consortium of rivals including Bain Capital and Golden Gate Capital for $8.3bn, according to the Financial Times. Read more.
• Bridgepoint agreed to sell Pret A Manger, a U.K.-based sandwich shop chain, for £1.5 billion ($2 billion) to JAB Holdings. The deal values Pret at about 15 times earnings before interest, tax, depreciation and amortisation. Read more.
• Myriad Genetics agreed to acquire Counsyl, a South San Francisco-based provider of DNA screening, for $375 million. Counsyl had raised approximately $237 million in venture funding from investors including Goldman Sachs, Founders Fund, Pilot Growth Equity and Felicis Ventures.