Term Sheet — Friday, September 21
Happy Friday, Term Sheet readers.
And just like that Social Capital is no longer a venture firm. Its founder Chamath Palihapitiya said it won’t raise any new capital and he will turn it into a $2 billion “technology holding company” that he’ll fund almost completely with his own fortune.
In a Medium post (with a photo too dramatic for a post on venture capital), Palihapitiya explains that it became “easier to play the same game as every other VC” — raise a fund, collect fees, manage limited partners, deploy the capital in “obvious things.” He added, “While this is a very reasonable path for most people, it wasn’t right for me and my core team.”
Over time, some of the biggest critics of Palihapitiya have been his own LPs, who claim he didn’t consult them on decisions and kept many in the dark. In an interview with The Information, Palihapitiya made it clear he does not care about investor complaints. “It doesn’t matter,” he said.
Further in the interview comes this quote — one that I had to read twice just to make sure it wasn’t Kanye who said it — “I would rather spend time with the people that are 100% aligned with what I want to do and the person that’s most aligned with what I want to do is me.”
A few notes:
• Who’s still left at Social Capital? The firm has been bleeding people, and the new operation will reportedly employ about 40 people, down from 70 at its peak.
• Remember that SPAC? In September 2017, Palihapitiya raised $600 million in an IPO for a blank check company called Social Capital Hedosophia Holdings. The idea was that Hedosophia would acquire a big tech company and help it circumvent the initial public offering process. I last asked him about it in November, and he said the process is going “really well” and “we have about two years to put the vehicle to use.” it’s unclear what will happen to the entity.
• In October 2017, Palihapitiya also announced a new operating system for early-stage investing called “capital-as-a-service.” Put simply, Social Capital would invest in startups without having to go through the process of a traditional pitch and do it through a data-driven self-serve platform instead. According to The Information, this was a point of contention as LPs claimed they were not consulted before he decided to launch this platform. In a tweet, Palihapitiya said “CaaS will eventually become a company and will be fully funded.” Whether that funding is secured, I do not know.
ADOBE-MARKETO DEAL: Adobe is acquiring Marketo, a marketing software company, from Vista Equity Partners for $4.75 billion, in hopes that the company will beef up its marketing tools to better compete with Salesforce and Oracle. Vista acquired Marketo for $1.8 billion in 2016. Below is a graphic on Marketo’s extensive deal history, thanks to our friends at PitchBook.
WEEKEND READING: In this Institutional Investor profile, we learn what the LeBron James of short selling has been up to. Jim Chanos, the founder of the largest exclusive short selling investment firm Kynikos Associates, has been dubbed a “catastrophe capitalist” because he typically succeeds when others lose money. He will go down in Wall Street history for predicting the demise of Enron.
Kynikos now runs less than $2 billion, and with individual short positions capped at 5% each for risk management purposes, Tesla represents at most about $100 million of the firm’s total short bets, which it currently has on 65 companies. “Crazy companies are trading at really crazy valuations now, on top of their bad businesses,” he said. “That’s kind of exciting. Tesla — I mean that’s some monster valuation for a company that might be bankrupt.”
It’s a really good one. Read the full story here.
THE LATEST FROM FORTUNE...
• One Way the Next Crisis Will Look a Lot Like 2008 (by Geoff Colvin)
• The Booming E-Scooter Market Just Reported Its First Fatality (by Grace Dobush)
• Uber May Be Making a Big Buy in the Food Delivery Business (by Lucas Laursen)
• Google Admits That It Lets Outside Services Share Your Gmail Data (by David Meyer)
• Zumper, a San Francisco-based residential rental startup, raised $46 million in Series C funding. Investors include Axel Springer, Stereo Capital, Blackstone, Dawn Capital, Kleiner Perkins, Breyer Capital, Scott Cook and Goodwater Capital.
• Vezeeta, an Egypt-based digital healthcare platform, raised $12 million in Series C funding. STV led the round, and was joined by investors including BECO Capital, Vostok New Ventures, Silicon Badia and Crescent Enterprises’ CE Ventures.
• MJ Freeway, a Denver-based cannabis technology company, raised $10 million in Series C funding. Batu Capital Investments led the round.
• Cleo, a London-based developer of a digital finance assistant, raised $10 million in Series A funding. Balderton Capital led the round, and was joined by investors including LocalGlobe.
• Alydia Health, a Menlo Park, Calif.-based medical device company, raised $10 million in Series B funding. Global Health Investment Fund led the round.
• Copado, a Spain-based cloud-based release management platform, raised 7.5 million euros ($8.8 million) in Series A funding. Investors include Insight Venture Partners and Salesforce Ventures.
• Yumble, a New York-based healthy kids’ meal brand, raised $7 million in Series A funding. Sonoma Brands led the round, and was joined by investors including Danone Manifesto Ventures, Wharton Professor Martin Lautman, RiverPark Ventures, Launch Capital and Apple Core.
• DataGrail, a San Mateo, Calif.-based personal data privacy startup, raised $4 million in Series A funding. Cloud Apps Capital Partners led the round, and was joined by investors including Gunderson Dettmer.
HEALTH AND LIFE SCIENCES DEALS
• Galera Therapeutics Inc, a Malvern, Penn.-based clinical-stage biotechnology company, raised $150 million in Series C funding. Clarus led the round, and was joined by investors including Adage Capital Management, HBM Healthcare Investments, Nan Fung Life Sciences, RA Capital, Rock Springs Capital, Tekla Capital Management LLC, Correlation Ventures, Galera Angels, New Enterprise Associates, Novartis Venture Fund, Novo Ventures and Sofinnova Ventures.
• uBiome, a San Francisco-based microbial genomics company, raised $83 million in Series C funding. OS Fund led the round, and was joined by investors including 8VC, Y Combinator, and Dentsu Ventures.
PRIVATE EQUITY DEALS
• Capital Partners made an investment in Minimizer, a Blooming Prairie, Minn.-based provider of branded heavy-duty truck aftermarket accessories. Financial terms weren't disclosed.
• Blackford Capital made an investment in Hall Research, a Tustin, Calif.-based maker of A/V hardware and software. Financial terms weren't disclosed.
• CVC Capital Partners will take a majority stake in UnitedLex, an Overland Park, Kansas-based provider of enterprise legal services for corporations, law firms and universities. Financial terms weren't disclosed.
• The Riverside Company made an investment in Hiway, a New Zealand-based provider of specialist recycling solutions for road, rail and pavement stabilization. Financial terms weren't disclosed.
• Farfetch, an online luxury retailer, priced its shares above its targeted range on Friday in a New York flotation that values the company at over $5.8 billion. Its shares are set to start trading on the NYSE on Friday, after the company set the offer price at $20 per share. It will raise $885 million in the listing, with the company issuing 33.6 million new shares. Existing shareholders, including early backers such as Advent Venture Partners and Vitrurian Partners, will sell 10.6 million. Read more.
• Upwork, a Mountain View, Calif.-based marketplace for businesses to hire and manage, plans to raise $135 million in an IPO of 12.3 million priced between $10 to $12. The company posted revenue of $202.6 million and loss of $10.6 million in 2017. Benchmark (15% pre-offering), Sigma Partners (14.2%), and Globespan Capital Partners (12.9%) back the firm. Citi, Jefferies and RBC Capital Markets are underwriters. It plans to list on the Nasdaq as “UPWK.” Read more.
• Y-mAbs Therapeutics, a New York-based developer of monoclonal antibody therapies for pediatric cancer, raised $96 million in an IPO of 6 million shares priced at $16. It has yet to post a revenue. WG Biotech ApS (17.8% pre-offering), Memorial Sloan Kettering (9.8%), and HBM Healthcare Investments (8.9%) back the firm. BofA Merrill Lynch and Cowen are underwriters. It plans to list on the Nasdaq under the symbol “YMAB.” Read more.
• Minute Media acquired Mental Floss, a media brand at the intersection of knowledge and entertainment. Financial terms weren't disclosed. Mental Floss had raised $77 million in venture funding from investors including Goldman Sachs, Vintage Investment Partners, Battery Ventures, Dawn Capital and Qumra Capital.
FIRMS + FUNDS
• Town Hall Ventures, a New York-based venture capital, firm raised $115 million for its debut fund.
• Aly DeNardo joined M Ventures as a partner.