Term Sheet — Wednesday, October 10
5 Qs WITH A DEALMAKER
Good morning, Term Sheet readers.
Felix Capital founder Frederic Court likes to invest in founders long before their ventures are considered real businesses. The London-based venture firm backs “digital lifestyle” companies with a customer base that exhibits cult-like loyalty to the brand.
“We’ve backed quite a few companies that have started as accidental businesses,” Court told Term Sheet. “The key is customer love. In today’s world, it’s easy to measure how people are interacting with the brand or product. The emergence of a close-knit community early on is something that we look at very closely.”
Felix Capital has invested in companies including FarFetch (which just IPOed), Peloton, Mejuri, Highsnobiety — and the one I’m personally most intrigued by — Goop.
Goop encapsulates the firm’s investment thesis perfectly — it began as a newsletter of recommendations curated by Paltrow in 2008. Today, it’s a venture-backed lifestyle empire valued at $250 million. Court invested three years ago, and he now sits on Goop’s board and considers Paltrow a visionary entrepreneur.
In this Q&A, Term Sheet spoke with Court about his investments, using Instagram for dealflow, and the rise of the aspirational wellness movement. Read the full Q&A here.
TERM SHEET: You were an early investor in Goop, and you sit on the company’s board. Why did you invest, and what did you see in Gwyneth as a founder?
COURT: I was familiar with Goop because I had been reading the newsletter to get travel recommendations. Gwyneth sent the first Goop newsletter from her kitchen 10 years ago in September 2008. To this day, Goop is very much a curation, and Gwyneth is the tastemaker. When we launched Felix, we got a call from Tony Florence at NEA who thought we would be good partners to Goop. I saw that Gwyneth had tremendous brand equity, but the business was still very small at the time.
Since we invested three years ago, she’s built a tremendous community and a very strong brand. The model was essentially content, but there was clearly a lot of content around products and commerce so there was purchase intent. So when she moved back to L.A, Gwyneth decided that Goop would be her thing. She clearly had opportunities to do more movies, but she really had a passion to work on Goop full-time. When we invested, she was not the CEO, but we had a conviction around her as the founder and the creative force. She is one of the best entrepreneurs I’ve ever had the chance to work with, and she continues to grow with the business.
Clearly we’re onto something with Goop as it’s about creating a new model. It’s a consumer brand that creates contextual commerce where we’re selling a curated list of products — some of which are our own — while creating a lot of content related to issues relevant to a female audience.
Goop has been criticized for peddling pseudo-science. [Goop just agreed to pay $145,000 in a settlement over unsubstantiated claims about vaginal eggs]. As an investor, do you have any personal qualms about the company giving an unfiltered platform to healers, psychics, and mediums?
COURT: Not at all. Obviously, there are some things where, like most startups, we don’t always get it right, but Goop has always been at the forefront of innovation when it comes to well-being. It was early to meditation and early to the benefits of eating less gluten or no gluten, and all these various things. So in the grand scheme of things, Goop is learning as it goes, and the company continues to offer people new well-being propositions.
When we look at the level of demand for the content, people want to understand themselves better and learn to lead a better life, and that’s where Goop can be a tool for a certain audience. But of course, it’s definitely not for everybody. Gwyneth has a point of view — there will be some people who love the point of view, some who don’t mind it, and some who hate it. As investors, we ourselves have a point of view, and we are very bullish on the Goop opportunity.
So you’re saying that as long as there’s demand, it’s acceptable for a company to promote unsubstantiated claims?
COURT: I stand by the company’s public statement on the matter. I understand why people may not relate to the aesthetic and the content, and that’s fine, as long as there are people who do find it relevant. Of course, it goes without saying that you need to respect the law, and that’s what Goop always aims to do. As you grow a startup, you make mistakes, you learn, you iterate, and then make sure it doesn’t happen again. We are fully behind the company’s position on this.
Many of your portfolio companies like FarFetch, Peloton, and Goop sell expensive products. Is indulging in this aspirational wellness movement only for people who are affluent?
COURT: The answer is technically no. But there is a direct correlation between affluence and education generally, especially when it comes to wellness. Goop, for instance, has a lot of content around clean beauty and eating well. That content is available for free and it’s a great resource, but not everyone has that level of awareness or curiosity to learn about it.
If you go to Goop, a lot of the products are generally premium offerings but all the content is free so you can experience the brand that way. With FarFetch, it’s a platform for luxury fashion. And Peloton has a premium offering, so there’s no doubt that it’s a luxury fashion proposition for sure.
But at the same time, we’ve also invested in The Food Assembly, which connects farmers and producers to consumers, and it’s a very affordable proposition. We have also backed Shine Media, which is a free app with a lot of content for well being.
What are some trends in the digital wellness market that Term Sheet readers should know about?
COURT: The big thing to know is that there’s a massive trend especially from the younger generation around wellness and well-being. One trend that we’re very interested in is related to food because you are what you eat. We’ve definitely seen a rise in plant-based eating.
Another one is around clean beauty. Younger people want to know what the ingredients in products are, and you can’t hide behind a complex label anymore. These are two key trends.
We see a growing need for people to be educated around wellness, which is not something that’s taught at home or at school. The success comes when you combine the product with education, which is what Goop does. We see more and more people investing in themselves.
BIG DEAL: SoftBank is reportedly in discussions to take a majority stake in shared office startup WeWork. The investment could total between $15 billion and $20 billion, according to the Wall Street Journal. If completed, this deal would be one of the largest and most eye-popping deals in the last decade. Read more.
THE LATEST FROM FORTUNE...
• Apple Secretly Bought Danish Visual Effects Startup Spektral Last Year (by Lucas Laursen)
• Goldman Sachs Just Put $75 Million into This Cloud Startup (by Jonathan Vanian)
• Can the Whales of Bitcoin Tank the Market? (by Jeff John Roberts)
• Bird CEO: 'The Places Where There Are No Laws, That's Where We Go In' (by Andrew Nusca)
• Starbucks' Stock Rises as Much as 5% after Bill Ackman Announces $900 Million Stake (by Kevin Kelleher)
• Tresata, a Charlotte, N.C.-based analytics software company, raised $50 million in funding from GCP Capital Partners at a $1 billion valuation.
• Divvy Homes, a San Francisco-based fractional homeownership company, raised $30 million in Series A funding (including debt). Andreessen Horowitz led the round, and was joined by investors including Caffeinated Capital, Scifi Ventures (Max Levchin), and DFJ.
• Netlify, a San Francisco-based hosting service for static websites, raised $30 million in Series B funding. Kleiner Perkins‘ Mamoon Hamid led the round, and was joined by investors including Andreessen Horowitz.
• Kettlebell Kitchen, a Brooklyn, N.Y.-based provider of healthy prepared meals and custom meal plans, raised $26.7 million in Series B funding. North Castle led the round.
• RedShelf, Inc., a Chicago-based distributor of digital course materials in higher education, raised $25 million in Series C funding. DNS Capital led the round.
• Loadsmart, a New York-based digital freight broker, raised $21.6 million in Series A funding. Maersk Growth, Connor Capital SB and Chromo Invest led the round.
• Goldbelly, an online food marketplace, raised $20 million in Series B funding. Enlightened Hospitality Investments led the round.
• Pitch, a Berlin-based collaboration software startup, raised $19 million in Series A funding. Index Ventures and BlueYard led the round, and was joined by investors including Neil Rimer.
• Shipwell, an Austin, Texas-based online business freight shipping platform, raised $10 million in Series A funding. Fifth Wall led the round.
• Machinify, a Palo Alto, Calif.-based artificial intelligence firm, raised $10 million in Series A funding. Battery Ventures led the round, and was joined by investors including GV and Matrix Partners.
• BroadSpot Imaging Corporation, a Richmond, Calif.-based medical device company, expanded its Series A funding to a total of $8.6 million. Phoenix Venture Partners led the round.
• CiValue, an Israel-based provider of cloud-based precision marketing and supplier advertising platforms for retailers, raised $6 million in Series A funding. Nielsen and Sonae IM co-led the round.
• Acorus Networks, a France-based cybersecurity company, is raising 5 million euros ($5.8 million) in funding. Investors include Elaia Partners, Partech and Kima Ventures.
• SystemOne, a Massachusetts and South Africa-based provider of disease surveillance and response solutions, raised $5 million in Series A funding. The Rise Fund, which is managed by TPG Growth, led the round, and was joined by investors including EchoVC and B&Y Venture Capital Partners.
• Paladin Cyber, a San Francisco-based provider of cyber protection services for small and medium businesses, raised $3.6 million in seed funding. Lightbank led the round, and was joined by investors including Aquiline Technology Growth, Haystack, Argo Ventures and Clocktower Technology Ventures, as well as existing investors Ground Up Ventures, Hemi Ventures, Sutardja Ventures and Y Combinator.
HEALTH AND LIFE SCIENCES DEALS
• Rgenix, Inc, a New York City-based developer of small molecule and antibody cancer therapeutics, raised $40 million in Series C funding. Lepu Medical led the round, and was joined by investors including Oceanpine Capital, WuXi AppTec’s Corporate Venture Fund, Novo Holdings A/S, Sofinnova Partners, Alexandria Venture Investments LLC and the Partnership Fund for New York City’s Innovate NY Fund.
• Glympse Bio Inc, a Cambridge, Mass.-based provider of a platform that detects human diseases, raised $22 million in Series A funding. LS Polaris Innovation Fund and ARCH Ventures led the round, and were joined by investors including Charles River Ventures, Gilead Sciences, Yonghua Capital, Inevitable Ventures, GreatPoint Ventures, Heritage Provider Network and Rivas Capital.
PRIVATE EQUITY DEALS
• Mason Wells acquired Structural Concepts Corporation, a Muskegon, Mich.-based maker of temperature-controlled food and beverage display cases for food service establishments and supermarkets. Financial terms weren't disclosed.
• HealthEdge Investment Partners, Brook Venture Partners and Eagle Private Capital acquired ITRAC, a Eugene, Oregon-based provider of technology-enabled practice optimization solutions to dental practices. Financial terms weren't disclosed.
• TPG made an investment in FreedomPay, a Radnor, Penn.-based commerce platform. Financial terms weren't disclosed.
• Quest Diagnostics agreed to sell its India medical diagnostics business to Strand Life Sciences, a portfolio company of Quadria Capital. Financial terms weren't disclosed.
• MPK Equity Partners recapitalized Sola Salon Studios, a Denver-based franchisor and operator of salon suites. Financial terms weren't disclosed.
• Silversmith Capital Partners made an investment in DistroKid, a San Francisco-based provider of SaaS-based software for independent musicians and record labels. Financial terms weren't disclosed.
• Spectrum Medical Partners Inc, a portfolio company of HealthEdge Investment Partners LLC, acquired M&H Med Housecalls LLC, a Fort Myers, Fla.-based provider of physicians and mid-level care providers in the post-acute setting. Financial terms weren't disclosed.
• Frontier Capital made an investment in PriceSpider, an Irvine, Calif.-based provider of consumer conversion intelligence and brand optimization software to some of the world’s largest brand manufacturers. Financial terms weren't disclosed.
• Bertram Capital made an investment in Best Version Media, a Brookfield, Wisc.-based hyper-local media and marketing company. Financial terms weren't disclosed.
• Highlander Partners, L.P. acquired SFERRA Fine Linens, LLC, an Edison, N.J.-based luxury linens and home lifestyle company. Financial terms weren't disclosed.
• Aramco, the Saudi state oil giant, still plans for an IPO in 2021, Crown Prince Mohammed bin Salman said in a Bloomberg interview. Read more.
• Volkswagen is close to hiring Citigroup, Deutsche Bank, Goldman Sachs, and J.P. Morgan for a potential listing of its trucking unit, sources told Reuters. Read more.
• Studio City International Holdings, a Hong Kong-based resort spinning out of Melco International, plans to raise $331 million in an IPO of 28.8 million ADSs priced between $10.50 to $12.50. The firm posted revenue of $539.8 million and loss of $76.4 million in 2017. Silver Point Capital backs the firm. Deutsche Bank, Credit Suisse, and Morgan Stanley are underwriters. It plans to list on the NYSE as “MSC.” Read more.
• SolarWinds, an Austin, Texas-based IT infrastructure management software maker, plans to raise $756 million in an IPO of 42 million shares priced between $17 to $19 apiece. It posted revenue of $213.8 million in 2017 and loss of $351.8 million. Thoma Bravo Funds and Silver Lake back the firm. Goldman Sachs, J.P. Morgan, Morgan Stanley, Credit Suisse, BofA Merrill Lynch, Barclays, Citi, Evercore ISI, Jefferies, Macquarie Capital, Nomura Securities and RBC Capital Markets are the underwriters. It plans to list on the NYSE as “SWI.” Read more.
• ARYA Sciences Acquisition, an SPAC formed to acquire a healthcare business, raised $125 million in an offering 12.5 million units at $10. Perceptive Advisors backs the firm. Jefferies is underwriter. It plans to list on the Nasdaq as “ARYAU.” Read more.
• Riley Exploration Permian, an Oklahoma City-based oil and gas firm fracking in the Permian Basin, plans to raise $100 million in an IPO of 6.7 million shares priced between $14 to $16. The firm posted revenue of $21.8 million in the year ending September and loss of $12.2 million. Yorktown Partners backs the firm. SunTrust Robinson Humphrey and The Seaport Group are underwriters. It plans to list on the NYSE as “REPX.” Read more.
• Valtech, a London-based maker of outsourced IT services, plans to raise $100 million in an offering 6.7 million shares priced between $14 to $16. The firm posted revenue of $272.6 million and loss of $1.7 million in 2017. Verlinvest backs the firm. J.P. Morgan and Morgan Stanley are underwriters. It plans to list on the Nasdaq as “VTEC.” Read more.
• Niu Technologies, a Beijing, China-based lithium-ion electric scooter maker, plans to raise $95 million in a US IPO of 8.3 million ADSs priced between $10.50 to $12.50. It posted revenue of $116.3 million in 2017 and loss of $27.9 million. GGV (11.2% pre-offering) backs the firm. Credit Suisse and Citigroup are underwriters. It plans to list on the Nasdaq as “NIU.” Read more.
• Axonics Modulation Technologies, an Irvine, Calif.-based maker of neural implants for overactive bladder, filed for an $86 million IPO. It posted revenue of $128,000 in 2017 and loss of $18.1 million. Andrea Partners (14.4%), Longitude Venture Partners (12.9%), and Coöperatieve Gilde Healthcare (12%) backs the firm. BofA Merrill Lynch and Morgan Stanley are underwriters. It plans to list on the Nasdaq as “AXNX.” Read more.
• SI-BONE Inc, a Santa Clara, Calif.-based medical device company, plans to raise $84 million in an IPO of 6 million shares priced between $13 to $15. It posted revenue of $48 million in 2017 and loss of $23.1 million. Redline Capital Management, Orbimed, Novo A/S, Skyline Ventures, and Montreux Equity Partners back the firm. Morgan Stanley and BofA Merrill Lynch are underwriters. It plans to list on the NASDAQ as “SIBN.”Read more.
• PhaseBio Pharmaceuticals, a Malvern, Penn.-based early-stage biotech developing orphan diseases treatments, plans to raise $65 million in an IPO of 5 million shares priced between $12 to $14. It has yet to post a revenue, and posted loss of $10.2 million in 2017. New Enterprise Associates, Zeneca, and Hatteras Venture Partners back the firm. Citi, Cowen and Stifel are bookrunners. It plans to list on the Nasdaq as “PHAS.” Read more.
• EdtechX Holdings Acquisition, a London-based blank check company formed to acquire an education technology business, raised $55 million in an IPO. IBIS Capital backs the firm. Chardan Capital Markets and I-Bankers Securities are underwriters. It plans to list on the Nasdaq as “EDTXU.”
• Fortive Corporation (NYSE: FTV) acquired Accruent, Inc., an Austin-based provider of physical resource management software, for approximately $2.0 billion in cash. The seller was HCAP Partners.
• The Allstate Corporation (NYSE: ALL) agreed to acquire InfoArmor, Inc., a Scottsdale, Ariz.-based provider of employee identity protection for $525 million in an all-cash transaction. InfoArmor was backed by Summit Partners.
FIRMS + FUNDS
• HealthpointCapital, a private equity firm focused on musculoskeletal healthcare, raised $100 million for its fourth fund. The target is $500 million.
• Aldrich Capital Partners, a Vienna, Va.-based private equity firm, raised over $256 million for its debut fund.
• MPE Partners promoted Matthew Yohe and Graham Schena to partners, Charlie Rossetti to principal and Evan Fisher to senior associate. Also, Michael Duffy has rejoined as a vice president.
• Blue Delta Capital Partners named Dave Keffer and Phil Nolan as general partners.
• FTV Capital promoted Robert Anderson to partner.