Why Facebook's Secretive Cryptocurrency Project Matters: Term Sheet

INVESTING IN LIBRA

Well, here’s a financing you don’t see every day.

Visa, Uber, Mastercard, PayPal and Stripe will invest approximately $10 million each in a consortium to back Facebook’s new cryptocurrency, according to The Wall Street Journal.

Although the project is still largely under wraps, Facebook has been recruiting high-profile backers to help start a crypto-based payments system called Libra. Libra is rumored to be a “stablecoin” whose value will be pegged to a basket of government-issued currencies to avoid the volatility of other cryptocurrencies. Facebook is reportedly seeking to raise up to $1 billion to fund the effort.

The idea is to create a cryptocurrency that consumers can use to send money to each other or make purchases on Facebook and across the Internet. (Remember, Facebook has nearly 2.4 billion monthly active users.) Some of the members of the consortium could serve as “nodes” along the system that verify transactions and maintain records of them, which would create a brand-new payments network.

Here are a few outstanding questions:

• Will Facebook slowly pivot its business from an ad-based model to a financial services model? This could have sweeping ramifications for the future of the tech giant and its shareholders.

• $10 million is not pocket change. We need to get better clarity on what these investors are getting in exchange. There are reports that each company that runs a node on Facebook’s platform will have full access to all transactional data. In other words, Visa, PayPal, and friends would also get access to some or all of Facebook users’ financial data.

• What will it mean for companies like Uber to participate in this project? How will that affect the ride-hailing company’s economics? It’s worth thinking about whether Uber starts using the coin within its ecosystem where riders and drivers exchange Libra coins rather than dollars. Does this change the unit economics of a ride because there would be little to none transaction fees?

• There have been no rumors yet of traditional venture capitalists backing Libra. Does this mean that running a node on the platform wouldn’t produce venture-scale returns?

We’ll hopefully know the answers to these questions once Facebook publishes its white paper on Libra this coming Tuesday.

A PET-FRIENDLY IPO: I still remember the chatter in the newsroom when we found out PetSmart paid $3.35 billion to buy online pet supplies retailer Chewy in 2017. It was the largest e-commerce acquisition in history. Now, it’s hitting Wall Street.

Chewy priced its initial public offering Thursday at $22 a share. That's above the expected range and values Chewy at $8.8 billion. The company will raise $1 billion from the stock sale and will trade on the New York Stock Exchange under the ticker symbol CHWY. Sales increased 68% last year to more than $3.5 billion, but the company is still losing money. It reported a net loss of $268 million in 2018, following a $338 million loss a year earlier.

MONZO IS COMING TO THE U.S: With nearly 2 million customers in the U.K., the rapidly growing banking unicorn Monzo announced plans to launch in the U.S. My colleague Lucinda reports:

It is adding about 200,000 customers a month, and raised 85 million pounds in its most recent round of funding. That puts its valuation north of 1 billion pounds, with investors including Accel, Thrive Capital, and General Catalyst. However reports suggest that Monzo may be raising more funding from a U.S. investor that could value the firm at about 2 billion pounds.

Read the full story here.

VENTURE DEALS

• SecurityScorecard, a New York City-based provider of security ratings, raised $50 million in Series D funding. Riverwood Capital led the round, and was joined by investors including Evolution Equity, Intel Capital, Two Sigma, AXA Ventures and Accomplice.

• Zava, a London-based digital healthcare and telemedicine provider, raised $32 million in Series A funding. HPE Growth led the round.

• Sense Photonics, a company building LiDAR and 3D sensor solutions for autonomous vehicles, industrial equipment and other applications, raised $26 million in Series A funding. Acadia Woods and Congruent Ventures co-led the round, and were joined by investors including Prelude Ventures, Samsung Ventures and Shell Ventures.

• VidMob, a full stack creative technology platform, raised $25 million in Series B funding. BuildGroup led the round, and was joined by investors including Acadia Woods, Herington LLC, Interlock Partners, Macanta Investments, LP’s of Manifest and You & Mr Jones.

• Apollo, a San Francisco-based startup that provides a number of developer and operator tools and services around the GraphQL query language, raised $22 million in funding. Andreessen Horowitz and Matrix Partners co-led the round, and were joined by investors including Trinity Ventures and Webb Investment Network.

• Traction Guest, a Canada-based provider of cloud-based solutions for enterprise visitor management, raised $13 million in Series A funding. Bessemer Venture Partners led the round.

• SURE, an insurance technology platform, raised $12.5 million in Series B funding. W. R. Berkley Corporation led the round.

• CreatorIQ, a Los Angeles-based company that helps businesses run influencer marketing campaigns, raised $12 million in Series B funding. TVC Capital led the round.

• IRL, a social activity planning app, raised $11 million in funding. Investors include Goodwater Capital, Founders Fund and Kleiner Perkins.

• Athena Security, an A.I. security camera startup, raised $5.5 million in seed funding. Pathfinder led the round.

• Kango, a company that provides ridesharing for kids, raised $3.6 million in Series A funding. National Express led the round.

• Riverlane, a U.K.-based quantum computing software developer, raised 3.25 million pounds ($4.1 million) in seed funding. Cambridge Innovation Capital and Amadeus Capital Partners led the round, and was joined by investors including Cambridge Enterprise.

• Anvl, an Indianapolis-based workforce-first safety software company, raised $2 million in seed funding. Investors include Revolution’s Rise of the Rest Seed Fund and High Alpha Capital.

• Willow Industries, a Denver-based developer of cannabis and hemp decontamination technology, raised $2 million in funding. AFI Capital Partners and Welcan Capital co-led the round, and were joined by investors including Halley Venture Partners and Flatiron Venture Partners.

• PetScreening.com, a screening platform that allows property managers to outsource their pet risk assessment and assistance animal validation processes, raised funding of an undisclosed amount. Grotech Ventures led the round, and was joined by investors including Camber Creek and Relevance Capital.

• Soltage LLC, a New Jersey-based independent power producer, raised funding of an undisclosed amount, from Prudential Capital Group.

HEALTH AND LIFE SCIENCES DEALS

• BlackThorn Therapeutics, a San Francisco-based neurobehavioral health company, raised $76 million in Series B funding. Investors include Polaris Partners, Premier Partners, Scripps Research, Vertex Ventures HC, Alexandria Venture Investments, Altitude Life Science Ventures, ARCH Venture Partners, Biomatics Capital, GV, Johnson & Johnson Innovation – JJDC, Inc. and Mercury Fund.

PRIVATE EQUITY DEALS

• BARBRI Inc, which is backed by Leeds Equity Partners LLC, acquired The Center for Legal Studies, a provider of online programs and training courses for paralegals and other legal support professionals. Financial terms weren't disclosed.

• TPG Growth acquired Nova IVI, an India-based provider of fertility treatment services. Financial terms weren't disclosed.

• Wealth Enhancement Group, a portfolio company of Lightyear Capital, agreed to buy Planning Solutions Group, a Fulton, Md.-based financial advisory business. Financial terms weren't disclosed.

OTHER DEALS

• AppOnboard acquired Buildbox, a Palo Alto, Calif.-based no-code mobile game developer. Financial terms weren't disclosed.

IPOs

• Alibaba, the Chinese e-commerce heavyweight, has reportedly filed confidentially for an IPO in Hong Kong. It is said to have picked CICC and Credit Suisse to lead the offering, Bloomberg reports. Read more.

• Chewy, a Dania Beach, Fla.-based pet product ecommerce firm, now plans to raise $832 million in an IPO of 46.5 million shares (88% insider) priced above range at $22 apiece. The firm posted $3.5 billion in sales for the year ending January 2019 as well as loss of $269 million. PetSmart backs the firm. Allen & Company, J.P. Morgan, and Morgan Stanley are underwriters. It plans to list as “CHWY.” Read more.

• Change Healthcare, a healthcare tech firm, plans to raise $750 million in an offering of 41.9 million shares priced between $16 to $19. The firm posted revenue of $3.3 billion and income of $176.7 million in the year ending March 2019. McKesson, Blackstone, and Hellman & Friedman back the firm. Barclays, Goldman Sachs, and J.P. Morgan are underwriters. Read more.

• Linx, a São Paulo, Brazil-based maker of business management solutions for Latin American retailers, plans to raise $254 million in an offering 29.3 million shares (33% insider) priced at $8.68 apiece. Genesis Asset Managers backs the firm. Goldman Sachs, Morgan Stanley, Jefferies, BofA Merrill Lynch and Itau BBA are underwriters. It plans to list on the NYSE as “LINX.” Read more.

• Morphic Holding, Waltham, Mass-based maker of oral small-molecule integrin therapeutics for various chronic diseases, plans to raise $75 million (40% from insiders) in an IPO of 5 million shares priced between $14 to $16 apiece. It posted revenue of $3.4 million in 2018 and loss of $23.8 million. • GlaxoSmithKline (9.8% pre-offering) and Pfizer (9.3%) back the firm. Jefferies, Cowen, BMO Capital Markets, and Wells Fargo Securities are underwriters. It plans to list on the Nasdaq as “MORF.” Read more.

EXITS

• VMware, Inc. (NYSE: VMW) agreed to acquire Avi Networks, a company focused on multi-cloud application delivery services. Financial terms weren't disclosed. Avi Networks had raised approximately $115 million in venture funding from investors including Lightspeed Venture Partners, Menlo Ventures, DAG Ventures, Greylock Partners, and Cisco Investments.

• KKR agreed to sell KCF Technologies, a producer of copper foils and flexible copper clad laminates, to SKC, an affiliate of SK Group. The deal is valued at 1.19 trillion won ($1 billion).