A $20 MILLION BET
Good morning, Term Sheet readers.
My colleague Lucinda Shen wrote an interesting article about Second Measure, a startup that pulls together consumers credit card transactions, analyzes the trends, and sends it out with a roughly two week delay. (Read here on Fortune.com)
In a time when the internet seems to have information on just about everything, getting data earlier than most can be the edge needed for a winning investment.
That's what companies such as [f500link]Goldman Sachs[/f500link], and Citi Ventures are betting on with Second Measure, a startup that pulls together consumers credit card transactions, analyzes the trends, and sends it out with a roughly two week delay—an advantage to quarterly financial statements that come out every three months.
On Tuesday, Second Measure announced $20 million in Series A funding led by Bessemer Venture Partners and Goldman Sachs. The startup, founded by two software engineers that once worked at gaming company Electronic Arts, now counts roughly 150 clients, with asset managers such as Neuberger Berman and venture capital clients such as New Enterprise Associates among the ranks.
It had its start when CEO Michael Babineau, who founded the firm alongside COO Lillian Chou, realized just how many investment firms were falling behind in terms of technology. While many had access to tons of data, sorting the information often lacked finesse. A friend at a hedge fund for example approached Babineau early on, asking how he could sort terabytes of data into a spreadsheet.
"That blew my mind. He was at a $30 billion assets under management hedge fund —I assumed all of them looked like Bridgewater or Renaissance with legions of quants. But most only have a handful of support with no technical support," said Babineau.
Now, the platform can sort customer spending based on company, geography, per customer spending, among other metrics.
In recent years, asset managers have sought to make smarter investment decisions by tapping into the variety of data created by technology. At a time when all have access at the same time to more traditional information sources such as quarterly financial reports and stock prices, alternative data—which is usually delivered more often than quarterly reports—can be a winning edge for traders.
That data includes tracking foot traffic gleaned from satellites, as well as consumer sentiment gathered via social media. Financial consulting firm Opimas estimates that asset management firms will spend $7 billion on such alternative data sources by 2020, up from about $5 billion in 2018.
But it's not only about the public companies. Tools such as Second Measure can be even more valuable than to investors in the private space, where companies aren't required to make financial disclosures to the public.
Citi Ventures though sees an even larger pool of clients than just those in the investing space.
"The opportunity to leverage the data in a new and creative way is not only exciting not only in the investing space, but also across the economy," said Citi Ventures Managing Director Luis Valdich. "Within the corporate world, companies can track how the competition is doing in real time."
Second Measure counts Postmates and DoorDash among its clients.
Still, sorting the credit card data does have its downsides.
Hedge fund managers have long mined credit card data for investment ideas. Second Measure's value comes from its ability to sort that mass of data into trends—for example how much consumers are spending on Uber versus Lyft in a specific location and if one has become more prevalent than the other over time.
But sorting that data is still imperfect. For example, the names of the sellers listed on credit card statements can be opaque, confusing investment decisions. Two different names may be owned by the same company, while conversely, separate brands that may have the potential for a spinoff may also be listed under a single name.
And such corporate changes happen all the time. After all, meal-kit provider HelloFresh recently acquired Canadian cohort Chefs Plate in October, adding to the 13,243 mergers and acquisitions that occurred 2018, according to FactSet.
That means the 60 or so workers currently at Second Measure need to do that groundwork—creating an information sieve that may not always be perfect.
"We have to go through a mess of credit card transactions, and we have to manually do the research, such as the merger and acquisition research," said Babineau. "The more time we spend on transactional data, the more we realize our job is just beginning."
...SPEAKING OF DOORDASH: Food-delivery startup DoorDash is in the process of raising approximately $500 million at a valuation of more than $6 billion, according to The Wall Street Journal. That valuation range would be four to five times where DoorDash was valued in a prior funding round less than a year ago. Temasek Holdings is expected to lead the round.
Quite interesting that the on-delivery economy is hot again after a period of flat rounds and lack of investment. But time passed, market conditions changed, and the on-demand delivery economy began heating up again. As my colleague Adam Lashinsky put it — ”Delivery, of all things, has become the global investment flavor of the month.”
Now, mega-rounds are the new normal for the biggest players in the on-demand delivery space. Rival Postmates recently raised an additional $100 million in venture funding at a valuation of $1.85 billion.
But let’s not forget that DoorDash has a massive capital advantage from none other than the 800-pound gorilla, SoftBank. We’re now in a situation where all the on-demand rivals are well-capitalized. Let’s see what their next prime differentiator will be.
THE GATES ANNUAL LETTER: Bill and Melinda Gates published their annual letter this morning, in which they highlight a “series of surprises.” Read it here.
• Zilingo Pte, a Singapore-based online fashion marketplace, raised $226 million in Series D funding. Investors include Sequoia Capital, Temasek Holdings Pte, Burda Principal Investments, Sofina and EDBI.
• CuriosityStream, a Silver Spring, Md.-based factual streaming service, raised about $140 million in funding. Investors include Blum Capital Ventures and TimesSquare Capital Management.
• Nav, a San Mateo, Calif.-based startup that gives small businesses free access to their credit reports, raised $44 million in funding. Investors include Goldman Sachs Group Inc, Point72 Ventures, and Experian Ventures.
• Virtuo, a Paris-based car rental startup, raised $23 million. Investors include Iris Capital, Balderton Capital and Raise Ventures.
• Axonius, an Israel-based cybersecurity asset management startup, raised $13 million in Series A funding. Bessemer Venture Partners led the round, and was joined by investors including YL Ventures, Vertex, WTI and Emerge.
• RapidDeploy, a New York-based cloud-based computer aided dispatch and analytics platform, raised $12 million in Series A financing. Investors include GreatPoint Ventures and Samsung NEXT.
• Human API, a San Mateo, California-based health data network, raised $10 million in funding. Investors include Guardian Life Insurance Company, SCOR Life and Health Ventures, BlueRun Ventures and SciFi VC.
• C2A Security, an Israel-based provider of in-vehicle solutions preventing cyberattacks, raised $6.5 million in Series A funding. Maniv Mobility and ICV led the round, and were joined by investors including Labs/02.
• Evisort, a Boston-based artificial intelligence contract management company, raised $4.5 million in seed funding. Village Global and Amity Ventures led the round, and were joined by investors including Serra Ventures.
• Haute Hijab, a New York-based direct-to-consumer hijab brand, raised 2.3 million. Cue Ball led the round, and was joined by investors including Ludlow Ventures, Sinai Ventures, Maveron, Muse Capital, AngelList, and The Helm.
• CourseStorm, an online class registration and enrollment management platform, raised $1.15 million in funding. Investors include CEI Ventures, Maine Venture Fund and LearnLaunch.
• iFarm Project, a Russia-based developer of modular automated farms to produce natural vegetables, salads, and berries year-round, raised $1 million in funding. Gagarin Capital led the round.
• Flex Fleet Rental, a Salt Lake City, Utah-based provider of medium-term truck rentals to commercial customers, raised funding of an undisclosed amount. Investors include TRP Capital Partners and Waterfall Asset Management.
HEALTH AND LIFE SCIENCES DEALS
• Culture Biosciences, a South San Francisco-based biotech company developing a digital biomanufacturing platform, raised $5.5 million in funding. Section 32 led the round, and was joined by investors including Refactor Capital and Verily.
PRIVATE EQUITY DEALS
• Stellex Capital Management made an investment in Cisco Equipment, an Odessa, Texas-based provider of equipment, services, parts and supplies to the midstream infrastructure, general construction, agriculture and general industrial markets. Financial terms weren't disclosed.
• Brevet Capital acquired PanOptis, a Plano, Texas-based intellectual property management and finance company. Financial terms weren't disclosed.
• Investcorp acquired a controlling stake in Revature, a Reston, Va.-based technology talent development company. Financial terms weren’t disclosed.
• 1 Priority Environmental Services LLC, a portfolio company of O2 Investment Partners, acquired Earth Services & Abatement Inc, a provider of environmental remediation and selective demolition services. Financial terms weren't disclosed.
• Redwood Logistics, which is backed by CI Capital Partners, will acquire Strive Logistics, a Chicago and Austin-based provider of third party logistics solutions. Financial terms weren't disclosed.
• EnCap Investments LP invested $300 million into Pegasus Resources, a Fort Worth, Texas-based mineral and royalty company.
• Alantra Private Equity agreed to acquire a majority stake in Frías Nutrición, a Spain-based food producer. Financial terms weren't disclosed.
• Peloton Interactive, the video-streaming exercise bike maker, has reportedly been interview banks for an IPO this year, the Wall Street Journal reports citing sources. Read more.
• Unity Technologies, the video game development platform, is reportedly readying for an IPO, Cheddar reports citing sources. Read more.
• Amazon.com agreed to buy eero, a San Francisco-based company that makes home routers. Financial terms weren't disclosed. Eero raised $90 million in funding from investors including First Round Capital, Menlo Ventures, AME Cloud Ventures, Initialized Capital, and Homebrew Ventures.
• Ingersoll-Rand plc made an offer to acquire Precision Flow Systems, a provider of fluid management systems, from BC Partners Advisors LP and The Carlyle Group for $1.45 billion.
• EQT acquired Kodiak Gas Services, a Houston, Texas-based provider of compression equipment for the extraction of oil and transportation of gas, from The Stephens Group. Financial terms weren't disclosed.
• SumUp acquired Shoplo, a Poland-based “multi-channel” e-commerce platform. Financial terms weren't disclosed. Shoplo raised approximately $795,000 from investors including bValue Venture Capital, MassChallenge, Xevin Investments, and Protos Venture Capital.
• Insight Equity acquired Eddy Packing, a processor of smoked, cooked, and fresh pork, beed, and poultry products, from Mason Wells. Financial terms weren't disclosed.
• H.I.G. Capital sold Caraustar Industries Inc, an Austell, Ga.-based maker of recycled materials, to Greif Inc for $1.8 billion.
• Ardian agreed to acquire Celli, an Italy-based beverage solutions company. The seller was Consilium. Financial terms weren't disclosed.
FIRMS + FUNDS
• PeakSpan Capital, a New York-based private equity firm, raised $265 million for its second.
• Morgan Creek Digital, a New York-based asset management firm focused on digital assets, raised $40 million for its debut venture capital fund, Morgan Creek Blockchain Opportunities Fund.