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Term Sheet — Tuesday, January 8

THE STUDENT DEBT BUBBLE

Good morning, Term Sheet readers.

America’s student loan debt problem is nearing a full-blown crisis.

Outstanding student debt hit $1.5 trillion for the first time ever in 2018, and it doesn’t seem to be getting better. In fact, it appears that the trend is only accelerating when you consider that student debt accounted for $600 billion 10 years ago.

In a 2017 commentary piece for Fortune, veteran investor Jim Rogers and former academic dean Robert Craig Baum said the higher education bubble, which is one-sixth (!) of the U.S. economy, “will likely burst with the force of all previous catastrophes combined.”

As people who love running toward large, terrifying, and thorny problems, venture capitalists are eyeing a new model. This morning, I read a New York Times piece by Andrew Ross Sorkin on a company experimenting with an intriguing new education model.

You may have seen online learning startup Lambda School popping up in the Term Sheet venture section below over the course of the last year, and it’s gaining more steam. Today, it raised $30 million in funding from investors Geoff Lewis (founder of Bedrock), GV, GGV Capital, Vy Capital, Y Combinator, and Ashton Kutcher. The new round values the startup at $150 million.

Lambda uses income share agreements — rather than charging students tuition, students attend school for free and are required to pay back a percentage of their income after graduation, but only if they get a job with a good salary.

From Sorkin’s article on how the model works:

At Lambda, students pay nothing upfront. But they are required to pay 17 percent of their salary to Lambda for two years if they get a job that pays more than $50,000. (Lambda says 83 percent of its students get a job with a median salary of $70,000 within six months of graduating.) If they don’t get a job, or their salary is lower, they pay nothing. Payments are capped at $30,000, so a highly paid student isn’t penalized for success, and if a student loses a job, the payments pause.

For now, Lambda has focused heavily on subjects like coding and data science, but it will use the new funding to expand into other subjects that could lead it to become a full-blown university in its own right.

Income share agreements have long been criticized for being modern-day forms of indentured servitude and even described as predatory and discriminatory if taken to the extreme. (Some will argue that Lambda’s 17% of the salary for two years is high.) And of course, there are more high-level questions such as — if we do hit a recession in the near future, how will that affect Lambda’s demand? Will students agree to commit full-time for 30 weeks to the school when money becomes tight?

Needless to say, I’m watching this one closely and thinking more about the looming student debt crisis that has the potential to do irreparable damage if left unaddressed.

THE LATEST FROM FORTUNE…

• Uber Won’t Allow Stock Market Woes to Slow Down Its IPO (by Don Reisinger)

• AMD CEO: Security Flaws ‘A Wakeup Call’ for Chip Makers (by Eliot Brown)

• The Gig Economy Never Really Happened, Say the Economists Who Predicted It (by Erik Sherman)

• Intel and Facebook Teaming Up to Create New AI Chip (by Hallie Detrick)

…AND ELSEWHERE:

SoftBank scraps $16 billion plan to buy most of WeWork. Goldman bet on women-run startups takes shape with $100 million. Seven charts that show Elon Musk on firmer footing. Tax refunds will be paid during shutdown. Connecticut has among the lowest growth in the nation — can links to Silicon Valley help?

VENTURE DEALS

EarlySense, an Israel and Massachusetts-based provider of continuous monitoring solutions for the healthcare industry, raised $39 million in funding. Investors include Hill-Rom, Wells Fargo Strategic Capital, BlueRed Capital, Israel Innovation Fund, Argos Capital, Hotung Capital, Pitango Venture Capital and JK&B Venture Capital.

Humatics Corp, a Cambridge, Mass.-based provider of microlocation systems and analytics software, raised $28 million in funding. Investors include Blackhorn Ventures, JCI Ventures, Fontinalis Partners, Airbus Ventures, Lockheed Martin Ventures and Presidio Ventures.

Headset, a Bellevue, Wash.-based provider of data and analytics to the cannabis industry, raised $12.1 million in Series A funding. Investors include Poseidon Asset Management, AFI Capital Partners, and Canopy Rivers Inc. (TSXV: RIV).

Grabango, a Berkeley-based provider of checkout-free shopping technology for existing stores, raised $12 million in Series A funding. Propel Venture Partners led the round, and was joined by investors including Ridge Ventures, Abstract Ventures, Commerce Ventures and Founders Fund.

LendingFront, a New York-based small business lending software provider, raised $4 million in Series A funding. Information Venture Partners led the round, and was joined by investors including Newark Venture Partners, Revel Partners, Contour Venture Partners, Struck Capital, ValueStream Ventures and Las Olas VC.

Carson, creators of an integrated technology platform and service for unstaffed residential buildings, raised $3 million in seed funding. BuildingLink led the round.

HEALTH AND LIFE SCIENCES DEALS

Cabaletta Bio Inc., a Radnor, Penn.-based biotechnology company focused on the discovery and development of T cell therapies for B cell-mediated autoimmune diseases, raised $50 million in Series B funding. Investors include Deerfield Management Company, Boxer Capital of Tavistock Group, Redmile Group, Cormorant Capital, Adage Capital Management, and 5AM Ventures.

Frequency Therapeutics, a Woburn, Mass.-based clinical-stage biotechnology company, raised $42 million in Series B funding. Taiwania Capital Management and Axil Capital led the round, and was joined by investors including Yonjin Capital, DF Investments, Polaris Founders Capital, Alexandria Venture Investments, CoBro Ventures, Korea Investment Partners and Emigrant Capital.

Apic Bio Inc, a Cambridge, Mass.-based gene therapy company developing novel treatment options for patients with rare genetic diseases, raised $40 million in Series A funding. Morningside Venture Investments Ltd led the round, and was joined by investors including The Alpha-1 Project, A1ATD Investors and ALS Investment Fund.

Exscientia, a U.K.-based AI-driven drug discovery company, raised $26 million in Series B funding. Investors include Celgene Corporation, GT Healthcare Capital Partners and Evotec AG.

PRIVATE EQUITY DEALS

Dynamic Quest, which is backed by Spire Capital, acquired Carolina Networks, a Greensboro, N.C.-based managed service provider. Financial terms weren’t disclosed.

Trive Capital made an investment in California Brazing, a Newark, Calif.-based maker of components for space, aircraft connectivity, specialty electronic and various defense applications. Financial terms weren’t disclosed.

OTHER DEALS

Motorola Solutions, Inc. (NYSE: MSI) acquired VaaS International Holdings, Inc, a California and Texas-based data and image analytics company, for $445 million in a combination of cash and equity.

IPOs

Alector, a South San Francisco-based biotech building therapies for neurodegeneration, files for an IPO of up to $150 million. The firm posted revenue of $18.5 million in the nine months ending September, and loss of $34.9 million. Merck’s Venture fund (6% pre-offering), OrbiMed Private Investments (21.4%), and Polaris Venture Management (21.7%) back the firm. Morgan Stanley, BofA Merrill Lynch, Cowen, and Barclays are underwriters. It plans to list on the Nasdaq as “ALEC.” Read more.

EXITS

Plaid acquired Quovo, a market platform for wealth and brokerage data. Financial terms weren’t disclosed. Quovo had raised approximately $21 million in venture funding from investors including Salesforce Ventures, Portag3 Ventures, IGM Financial, FinTech Collective, F-Prime Capital Partners, and Napier Park Global Capital.

ClassPass agreed to acquire GuavaPassa Singapore-based fitness platform. Financial terms were not disclosed GuavaPass had raised approximately $5 million in venture funding from investors including Vickers Venture Partners. [This item has been updated.]

TriArtisan Capital Partners is in talks to buy P.F. Chang’s, a Chinese food restaurant, for as much as $700 million, according to Bloomberg. Centerbridge is the seller. Read more.

Healthgrades acquired Influence Health, a Birmingham, Ala.-based developer of customer relationship management for hospitals. Financial terms weren’t disclosed. Influence Health had raised approximately $11.5 million from investors including Eastside Partners.

Deltek acquired Avitru, a collaborative software platform, from Alpine Investors. Financial terms weren’t disclosed.

Transom Capital Group acquired SemiTorr Group, Inc, a Tualatin, Ore.-based distributor of high purity products, from Riverlake Partners. Financial terms weren’t disclosed.

Gladson, which is backed by The Jordan Company and Wicks Capital Partners, acquired Edgenet, a Nashville-based product content management software provider. Financial terms weren’t disclosed.

Lovell Minnick Partners acquired ATTOM Data Solutions, an Irvine, Calif.-based provider of national real estate data and analytics. The sellers were Renovo Capital and Rosewood Private Investments. Financial terms weren’t disclosed.

FIRMS + FUNDS

Madryn Asset Management, a New York-based alternative asset management firm, raised $289.65 million for its new healthcare fund, according to an SEC filing. The target is $500 million.

PEOPLE

Hamilton Robinson Capital Partners promoted Lane Carpenter to vice president.

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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.