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Why It’s So Hard to Regulate the Idealists: Term Sheet

As a conference-circuit regular and former McKinsey consultant, writer Anand Giridharadas has seen firsthand business leaders' efforts to solve social problems. Fortune’s Adam Lashinsky sat down with Giridharadas, who reveals why he’s come to see those efforts as more self-serving than world-changing.

This part caught my eye:

Pious tech leaders particularly bother Giridharadas—precisely because they wield power under the flag of idealism. 

Each has a self-serving narrative, he argues: "Uber just wants to create micro-entrepreneurship in America. Google just wants to organize all the world's information. Facebook just wants to build a universal community of mankind. And I really think they believe it … Our society is way more defenseless against the idealists than the realists. We don't regulate the idealists well, because to some degree we are sucked in by their story."

After I read this, I immediately thought of Juul, the embattled e-cigarette maker. Although Juul found itself at the center of a federal investigation for deceptive marketing that reportedly helped hook teens on nicotine, the scrutiny was not enough to keep opportunistic investors away. (It just raised $325 million in equity in debt funding to expand globally; see in deal section below.)

Juul is a little bit of a Silicon Valley anomaly. It's growing at lightning speed (roughly $1.8 billion in annual retail sales). It's one of the most valuable U.S. startups (a valuation of $16 billion). It has innovative technology.

Similar to its Silicon Valley startup peers, Juul was founded with good intentions. It aimed to give the world's billion smokers an alternative to combustible cigarettes. 

But its growth got out of hand with the wrong demographic, and it's a little too late for damage control. So founders have to consider from the very inception of their company — Could my technology be used in ways that harm, and if so, what safeguards can we put in place to avoid losing control of the product? 

Because once the genie is out of the bottle, there's no going back. Now, Juul has been investigated, sued, and accused of using deceptive marketing practices aimed at teens. 

But the company's chief executive still has idealistic, world-changing dreams. In November, Juul CEO Kevin Burns told Fast Company that he’d welcome a strategic investment partner like the Gates Foundation, which would highlight Juul’s public benefit potential. 

“What I love about [Gates] is they’re not talking about policy, they’re handing out vaccinations for deadly diseases that they’re trying to eradicate off the face of the earth in a very pragmatic way,” he said. “That’s exactly what we need to do. We need to get the product in adult smokers’ hands.”

It sounds good, but that doesn’t mirror the company’s current reality. That’s an idealistic goal. To echo what Giridharadas said: We are way more defenseless against the idealists than the realists.

VENTURE DEALS

Root Insurance, a Columbus, Ohio-based car insurance startup, will raise $350 million in funding at a valuation of $3.65 billion. DST Global and Coatue Management will co-lead the round.

Juul Labs, a San Francisco-based e-cigarette maker, raised $325 million in equity and debt funding. No investors were named. Read more.

Simon Data, a Brooklyn, N.Y.-based enterprise customer data platform, raised $30 million in Series C funding. Polaris Partners led the round, and was joined by investors including .406 Ventures and F-Prime Capital.

Incorta, a San Mateo, Calif.-based no-ETL data warehouse, raised $30 million in Series C funding. Sorenson Capital led the round, and was joined by investors including GV, Kleiner Perkins, M12, Telstra Ventures and Ron Wohl. 

Blokable, a Clyde Hill, Wash.-based developer of multifamily housing, raised $23 million in Series A funding. Vulcan Capital led the round, and was joined by investors including Building Ventures, Jason Calacanis’ LAUNCH, Kapor Capital, Marc Benioff, Motley Fool Ventures, Ten Eighty Capital and Dennis Joyce.

VeganNation, a developer of an application which provides cryptocurrency trading services, raised $10 million in funding. The investors were not named.

Ally, a Seattle-based business execution startup, raised $8 million in Series A funding. Accel led the round, and was joined by investors including Founders Co-op, Vulcan Capital and Lee Fixel.

Idein Inc, a Tokyo-based developer of an IoT platform, raised $7.8 million in funding. Global Brain led the round.

Syzygy Plasmonics, a technology company developing a photocatalyst, raised $5.8 million in Series A funding. The Engine and The GOOSE Society of Texas co-led the round, and was joined by investors including Evok Innovations.

INTERNAL, a San Francisco-based no-code SaaS tool for rapidly deploying a company’s internal console, raised $5 million in seed funding. Craft Ventures led the round, and was joined by investors including Pathfinder.

Cere Network, a San Francisco-based blockchain CRM ecosystem platform, raised $3.5 million in funding. Investors include Binance Labs, Neo Global Capital, Fenbushi Capital, Arrington XRP Capital, Kenetic Capital, Alphabit Fund, Block VC, Kosmos Capital, LD Capital, Monday Capital, Pre Angel Fund and Republic Labs.

PTO Exchange, a Woodinville, Wash.-based employee benefits platform, raised $3 million in seed funding from WestRiver Group.

Podcorn, a marketplace enabling podcasters and brands to collaborate for native branded content, raised $2.2 million in seed funding. Global Founders Capital led the round, and was joined by investors including Bessemer, 500 Startups, and Alumni Ventures Group.

EARTH AI, an Australia-based mineral targeting startup, raised funding of up to $2.5 million from Gagarin Capital.

R Fitness, an Indonesia-based boutique fitness brand, raised $1.25 in funding. Investors include Intudo Ventures, Agaeti Ventures, Sinar Mas Digital Ventures, Sinar Mas Land, Centre Park, RHL Ventures and East Ventures. 

HEALTH & LIFE SCIENCES DEALS

Juvenescence, a British Virgin Islands-based life sciences company focused on increasing human longevity and treating diseases of aging, raised $100 million in Series B funding. Investors include Grok Ventures.

PRIVATE EQUITY DEALS

CIP Capital made an investment in Benefit Resource Inc, a Rochester, N.Y.-based third-party administrator of pre-tax benefits and COBRA services. Financial terms weren’t disclosed. 

LaSalle Capital made an investment in Professional Recovery Consultants, a Durham, N.C.-based revenue cycle management services provider. Financial terms weren’t disclosed. 

General Atlantic will acquire a majority stake in Morphe Holdings, a beauty company. The seller was Summit Partners.

The Riverside Company made an investment in Performance Systems Integration, a Portland, Ore.-based fire and life safety services. Financial terms weren’t disclosed. 

Lovell Minnick Partners agreed to acquire a majority stake in Inside Real Estate, a Salt Lake City, Utah-based end-to-end SaaS platform for the residential real estate market. Financial terms weren’t disclosed. 

Kings III Emergency Communications, which is backed by Rockbridge Growth Equity, acquired ESRM Communications, a Pompano Beach, Fla.-based provider of service and installations for elevator phones and elevator cameras. Financial terms weren’t disclosed. 

CloudScale Capital Partners made an investment in RiverMeadow Software Inc, a Los Gatos, Calif.-based multi-cloud migration platform. Financial terms weren’t disclosed. 

OpenGate Capital acquired InRule Technology Inc, a Chicago-based decision management platform and business rules management system. Financial terms weren’t disclosed. 

SK Capital agreed to acquire the Performance Products & Solutions business from PolyOne Corporation in a transaction valued at approximately $775 million.

OTHER DEALS

Bayer (DB:BAYN) will sell its animal-health business to Elanco for $7.6 billion, according to The Wall Street Journal. Read more.

Accenture (NYSE: ACN) acquired Parker Fitzgerald, a U.K.-based strategic adviser and consulting partner to global financial institutions. Financial terms weren’t disclosed. 

IPOs

SpringWorks Therapeutics, a Stamford, Conn.-based biotech for rare cancers, filed for an $115 million IPO. The firm has yet to post a revenue and posted a loss of $17.8 million in 2018. Pfizer, Bain, OrbiMed, and Perceptive Life Sciences back the firm. It plans to list on the Nasdaq as “SWTX.” Read more.

IGM Biosciences, a Mountain View, Calif.-based biotech firm developing antibody therapies for cancer, filed for an $100 million IPO. The firm posted loss of $22.7 million in 2018 and has yet to post a revenue. Haldor Topsøe Holding, Baker Bros., Janus Capital, and Redmile Group back the firm. It plans to list on the Nasdaq as “IGMS.” Read more.

10x Genomics, a Pleasanton, Calif.-based maker of instruments for analyzing biological information, filed to raise up to $100 million in an initial public offering. It posted revenue of $146.3 million and loss of $112.5 million in 2018. Foresite Capital, Venrock, Paladin Capital, and Fidelity back the firm. It plans to list on the Nasdaq as “TXG.” Red more.

Satsuma Pharmaceuticals, a South San Francisco-based clinical-stage biotech for migraines, filed to raise $86 million in an IPO. The firm has yet to post a revenue and posted a loss of $7.3 million in 2018. RA Captial, TPG Biotechnology Partners, and Shin Nippon Biomedical Laboratories back the firm. It plans to list on the Nasdaq as “STSA.” Read more.

Alerus Financial, a Grand Forks, N.D.-based financial services firm, filed to raise $75 million in an IPO. The firm posted net interest income of $75.2 million, noninterest income of $102.7 million, and net income of $25.9 million in 2018. It plans to list on the Nasdaq as “ALRS.” Read more.

Pepper Group, an Australian nonbank lender, has reportedly tapped a bank for an IPO in the country. KKR backs the firm. Read more.

EXITS

Siris agreed to acquire TPx Communications, a Los Angeles-based managed services provider. The sellers include Investcorp and Clarity Partners. Financial terms weren’t disclosed. 

Grain Management agreed to acquire a majority stake in Summit Broadband, an Orlando, Fla.-based fiber-optics telecommunications provider. The seller was Cable Bahamas Ltd. Financial terms weren’t disclosed. 

Mill Point Capital acquired Pioneer Transformers, a Canada-based provider of liquid-filled and dry-type power transformers. The seller was Pioneer Power Solutions Inc. Financial terms weren’t disclosed. 

FIRMS + FUNDS

Coefficient Capital, a New York-based venture capital firm, raised $63.55 million for its first fund, according to an SEC filing. The target is $150 million.