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WeWork Employees Call Out Ex-CEO Adam Neumann’s ‘Platinum Parachute:’ Term Sheet

October 24, 2019, 1:51 PM UTC

This article originally ran in Term Sheet, Fortune’s newsletter about deals and dealmakers. Sign up here.

“You’ve got to be kidding me.” 

That was one of the comments posted on WeWork’s staff-wide communications system Tuesday, according to a Bloomberg report (paywalled link). Dozens of employees expressed indignation in messages to colleagues on internal Slack channels. 

The outrage comes after Softbank agreed to provide WeWork $5 billion in new financing and up to $3 billion in a tender offer for existing shareholders. Softbank will also speed up an existing $1.5 billion financing commitment. After closing, and following the tender offer, Softbank will own approximately 80% of the co-working giant.

The deal will value WeWork at approximately $8 billion. Ex-CEO Adam Neumann has the right to sell $970 million of shares, or roughly one-third of his stake, in the tender offer.

As Neumann walks away a billionaire, 90% of current and former employees are left holding stock options that are under water at the roughly $20-a-share valuation implied by the SoftBank deal. They’re expecting thousands of layoffs. 

More from the Bloomberg report: 

  • Mike Adams, who sold a startup to WeWork, described the payout to Neumann as an “injustice.”
  • Another former employee described Neumann’s deal as a “platinum parachute.”
  • Another: “So we’re too broke to pay employees severance, but Adam gets $200m?” Several employees reportedly noted the irony that WeWork could not afford severance to people it planned to lay off, but that SoftBank agreed to pay a hefty fee to Neumann. 

After my comments about how many WeWork employees were left high and dry, some Term Sheet readers weren’t as sympathetic. One tweeted: “At some point there is responsibility on the employee who takes a job to work at a company that has a) never proven it can turn a profit and b) is hemorrhaging billions a year.”

Another emailed: “Hard to feel sorry for them when (a) there have been deep concerns about the valuation and business model for a long time and (b) the vast majority of start-up employees never cash out of their options.”

Even so, I stand by my comments. 

There were red flags along the way, but all hell broke loose only after WeWork’s S-1 revealed the reality of the company’s financial woes. In 2018, I wrote about the big lessons Silicon Valley could learn from the Theranos scandal. One of the central points was that accountability, transparency, and verification are king — especially when there’s big money on the line. But as USVP’s Dafina Toncheva said, “I have noticed that when a company is doing well and growing rapidly, private investors tend to forgive more.”

And so, we shouldn’t be surprised when history repeats itself.

Read more.

VENTURE DEALS

 

- Total Expert, a Minneapolis-based marketing and customer engagement technology platform for banks, lenders and financial services, raised $52 million in Series C funding. Georgian Partners led the round, and was joined by investors including Emergence and Rally Ventures.

- Viz.ai, a Palo Alto, Calif.-based developer of synchronized healthcare software, raised $50 million in Series B funding. Greenoaks led the round, and was joined by investors including Threshold Ventures, CRV along with existing investors GV and Kleiner Perkins.

- Very Good Security, a San Francisco-based data security company, raised $35 million in Series B funding. Goldman Sachs’ Merchant Banking Division led the round and was joined by investors including Andreessen Horowitz and Vertex Ventures US.

- Coople, a Switzerland-based on-demand staffing platform, raised $32 million in Series C funding. Investors include Goldman Sachs Private Capital and One Peak Partners.

- PeerNova Inc, a San Jose, Calif.-based enterprise software company in the financial industry, raised $31 million in funding. Mosaik Partners led the round, and was joined by investors including Medici Ventures and Intuitive Venture Partners.

- Triller, a New York-based AI-powered music video platform, raised $28 million in Series B funding. Proxima Media led the round, and was joined by investors including Mahi de Silva.

- Grafana Labs, a New York-based company behind open source projects including Grafana and Loki, raised $24 million in Series A funding. Lightspeed Venture Partners led the round, and was joined by investors including Lead Edge Capital.

- AVIA, a Chicago-based partner for digital health insights, raised $22 million in funding. First Trust Capital Partners LLC led the round.

- ​Augmedix​, a San Francisco-based developer of health-centric applications for Google Glass, raised $19 million in Series B funding. Investors include Redmile Group, McKesson Ventures, DCM Ventures, and Wanxiang Healthcare Investments.

- VoltDB, a Bedford, Mass.-based data platform, raised $10 million in Series C funding. The investors were not named.

- LabGenius, a U.K.-based provider of an A.I.-driven drug discovery platform, raised more than $10 million in Series A funding. Lux Capital and Obvious Ventures led the round, and was joined by investors including Felicis Ventures, Inovia Capital, Gigafund and Air Street Capital.

- Raydiant, a Mountain View, Calif.-based cloud-based, dynamic display platform, raised $7 million in funding. 8VC co-led the round, and was joined by investors including Atomic, Bloomberg Beta, Lerer Hippeau, SV Angel and Transmedia Capital. 

- Bespoke Financial, a Los Angeles-based cannabis industry lender, raised $7 million in funding. Casa Verde led the round, and was joined by investors including Capital Partners and Outbound Ventures.

- Beam, a Massachusetts-based newly launched wellness brand offering CBD products, raised $5 million in funding. Obvious Ventures led the round.

- Logixboard, a Seattle-based digital partner for freight forwarders, raised $4.2 million in seed funding. Social Leverage led the round.

- Tines, a Dublin-based cybersecurity automation company, raised $4.1 million in Series A funding. Investors include Blossom Capital.

- OctoML, a Seattle-based deep learning startup, raised $3.9 million in funding. Madrona Venture Group led the round, and was joined by investors including Amplify Partners.

- Foundries.io, a U.K.-based developer of software platforms for embedded product development, raised $3.5 million in funding. Crane Venture Partners led the round, and was joined by investors including Backed VC.

- Voca.ai, an Israel-based provider of human artificial intelligence virtual agents, raised funding of an undisclosed amount. Investors include American Express Ventures, lool ventures and Flint Capital.

PRIVATE EQUITY DEALS

- Tender, which is backed by Victor Capital Partners, acquired RapidPure, a Lakeland, Fla.-based provider of water purification products. Financial terms weren't disclosed. 

- Avon Machining, a portfolio company of Speyside Equity, acquired Plasma-Tec, a  Michigan-based precision supplier for rapid turnaround of machined wear components. Financial terms weren't disclosed. 

- Pine Tree Equity recapitalized Shortridge Academy Ltd, a Milton, N.H.-based therapeutic boarding school. Financial terms weren't disclosed.

IPOs

- GFL Environmental Holdings, an Ontario, Canada-based waste management firm, now plans to raise $1.9 billion in an IPO of 87.6 million shares priced at a range of $20 to $24 apiece. The firm posted $1.9 billion in revenue in 2018 and loss of $483.3 million. BC Partners, Ontario Teachers, and GIC back the firm. It plans to list on the NYSE and TSX as “GFL.” Read more.

- BRP Group, a Tampa-based provider of insurance distribution, plans to raise $230 million in an initial public offering of 16.4 million shares priced at $14, the low end of its range. The firm posted revenue of $79.9 million in 2018 and income of $2.7 million. It plans to list on the Nasdaq as “BRP.” Read more.

- YX Asset Recovery, a Changsha, China-based consumer debt collector, filed for an IPO to raise $200 million in an IPO. The firm posted $110.4 million in revenue in 2018 and income of $18.1 million. Ping An Life Insurance backs the firm. It plans to list on the NYSE under an undisclosed symbol. Read more.

- SiTime, a Santa Clara, Calif.-based maker of microelectromechanical systems, filed for an IPO to raise $100 million in an IPO. The firm posted $85.2 million in revenue in 2018 and loss of $9.3 million. MegaChips Corporation backs the firm. It plans to list on the Nasdaq as “SITM.” Read more.

- Fangdd Network Group, a Shenzhen-based online real estate trading platform, says it plans to raise $98 million in an IPO of 7 million ADSs priced at $13 to $15 apiece (20% insider bought). It posted revenue of $69.4 million in 2018 and loss of $2.3 million in 2018. It plans to list on the Nasdaq under the symbol “DUO.” Read more.

- OneWater Marine, a Buford, Ga.-based recreational boat retailer, postponed plans to raise as much as $64 million in an IPO. The firm posted revenue of $603 million in the year ending Sept. 2018 and income of $29.3 million. LMI Holdings, and Goldman Sachs back the firm. It previously planned to list on the Nasdaq under “ONEW.” Read more.

EXITS

- NMS Capital sold ettain, a Charlotte, N.C.-based provider of information technology services to companies in need of temporary IT services and support. The buyer was Alvarez & Marsal Capital. Financial terms weren't disclosed. 

PEOPLE

- Kell Reilly joined General Atlantic as a managing director.