Who Really Loses Out When Well-Funded Startups Don’t Deliver?
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In today’s Term Sheet, there are four companies that have raised more than $100 million in funding. We used to refer to a bombshell funding as a “mega-round.” Now, it’s just a regular Wednesday.
A new New York Times story delves into the far-reaching effects of overcapitalization. When SoftBank pours hundreds of millions of dollars into companies, many contractors who work with those money-losing companies are left holding the bag.
The hotel startup Oyo, for example, which raised $1.55 billion in funding from SoftBank, promised local hoteliers in India big fees from business travelers if they rebranded through Oyo and upgraded their properties. So people like Sunil Solankey, who runs the 20-room Four Sight Hotel in a New Delhi suburb, spent 600,000 rupees, or $8,400, to reupholster the hotel’s furniture and add new linens, according to the story.
The lucrative corporate guests never came, and Oyo’s payments ended. Now Solankey is on the verge of eviction. This is the reality of what happens to countless small business owners who decide to work with a well-funded startup that doesn’t make good on its promises.
Earlier this year, I wrote about Munchery, the meal delivery startup that raised more than $125 million in venture funding and reached a valuation of $300 million at its peak before unceremoniously crashing down to Earth. Many small business owners went without payment, and one such owner, who claimed she was owed more than $20,000, called out the venture capitalists behind the defunct startup. “It’s not a lot of money to you, but to us it’s missed rent payments, layoffs, and waiting another year to expand to offer benefits,” wrote Three Babes Bakeshop owner Lenore Estrada on Medium.
It’s a reminder that it’s not only deep-pocketed investors who lose out when a bet goes bad. A lot of vendors and suppliers do too — and unlike the shareholders invested in the business, they can’t simply write off the losses and walk away.
And it’s not just the small startups — breakneck growth can break even the titans of the industry. Munchery was a case study on a much, much smaller scale than some of the companies backed by the 800-pound gorilla that is SoftBank. But if those companies go bust, the ripple effects of the implosions will be much wider and much more severe.
- Convoy, a Seattle-based nationwide digital freight network, raised $400 million in Series D funding at a $2.75 billion post-money valuation. Generation Investment Management and T. Rowe Price Associates co-led the round, and were joined by investors including Baillie Gifford, Fidelity Management and Research Co., Durable Capital Partners LP, CapitalG and Lone Pine Capital.
- Guild Education, a Denver, Colo.-based company helping large employers offer college tuition, raised $157 million in Series D funding at a valuation of $1 billion. General Catalyst led the round.
- ACV Auctions Inc., a Buffalo, N.Y.-based dealer-to-dealer online automotive marketplace, raised $150 million in Series E funding. Wellington Management Company and Fidelity Management & Research Co. co-led the round, and were joined by investors including Bain Capital Ventures, Bessemer Venture Partners and Tribeca Venture Partners.
- Stradigi AI, a Montreal-based artificial intelligence company, raised C$53 million ($40.3 million) in Series A funding. The Fonds de solidarité FTQ and Investissement Québec co-led the round, and were joined by investors including Holdun Family Office, Segovia Capital Ltd and Cossette Inc.
- XACT Robotics, an Israel-based developer of a hands-free robotic system, raised $36 million in funding.
- Sera Prognostics, Inc., a Salt Lake City, Utah-based health diagnostics, raised $36 million in Series D funding. Blue Ox Healthcare Partners led the round.
- DroneDeploy, a San Francisco-based drone software solution, raised $35 million in Series D funding. Bessemer Venture Partners led the round.
- Sigma Computing, a San Francisco-based developer of analytics tools for cloud data warehouses, raised $30 million in funding. Investors include Altimeter Capital and Sutter Hill Ventures.
- Apervita, a Chicago and Boston-based platform for value-based collaboration in healthcare, raised $22 million in funding. Investors include Optum Ventures, Pritzker Group Venture Capital, Baird Capital, Math Ventures and Levy Family Partners.
- Banza, a New York-based pasta brand, raised $20 million in funding. Investors include Enlightened Hospitality Investments and Prelude Growth Partners.
- Threekit, a Chicago-based platform that brands and retailers use to create immersive product experiences, raised $20 million in Series A funding. Shasta Ventures led the round, and was joined by investors including Salesforce Ventures and former San Francisco 49ers Hall of Famer Steve Young.
- PureLiFi, an Edinburgh, Scotland-based developer of Li-Fi technology, raised $18 million in Series B funding. The investors included Temasek.
- Ping, a San Francisco-based provider of automated timekeeping, raised $13.2 million in Series A funding. Upfront Ventures led the round, and was joined by investors including BoxGroup, First Round Capital, Initialized Capital and Ulu Ventures.
- Hive, a New York-based productivity platform, raised $10.6 million in a Series A funding. Comcast Ventures led the round, and was joined by investors including Tribeca Venture Partners, Vocap Investment Partners, and Rembrandt Venture Partners.
- LawnStarter, an Austin, Texas-based on-demand platform for outdoor services, raised $10.5 million in funding, from Edison Partners.
- cnvrg.io, an Israel-based data science platform, raised $8 million in funding. Investors include Jerusalem Venture Partners and Hanaco VC.
- Risalto Health, a New York-based digital health services company focused on the delivery of musculoskeletal care, raised $7 million in funding from Health Catalyst Capital Management.
- ACATUS, a Germany-based debt capital markets platform, raised 5.5 million euros ($6 million) in Series A funding. DIP Capital LLP and coparion co-led the round, and were joined by investors including Partech, Berliner Effektengesellschaft AG and Berliner Volksbank Ventures.
- SimpleCitizen, a Salt Lake City, Utah-based digital immigration and visa solution, raised $5.8 million in seed funding. Kickstart Seed Fund led the round, and was joined by investors including Pelion Ventures, Peterson Venture Partners, TSVC, Y Combinator, AppleTree Capital, Kima Ventures, Comcast Ventures, LP, and Investo.
- Popwallet, a New York-based mobile wallet marketing automation platform, raised $4 million in funding. Stout Street Capital led the round, and was joined by investors including Loeb.nyc, 3Lines Venture Capital, IrishAngels, Cultivation Capital, MATH Venture Partners and Entrepreneurs Roundtable Accelerator.
- Mapxus, a Hong Kong-based indoor mapping technology startup, raised $3 million in funding. Beyond Ventures led the round.
- Elektra Labs, a Boston-based healthcare-security company, raised $2.9 million in seed funding. Maverick Ventures led the round, and was joined by investors including Arkitekt Ventures, Boost VC, Founder Collective, Lux Capital, SV Angel and Village Global.
- Uploadcare, a Delaware-based end-to-end cloud platform, raised $1.7 million in funding. Runa Capital and Vendep Capital led the round.
- Stampede, a Leith, Scotland-based provider of Wi-Fi based customer engagement and marketing analytics, raised 1 million pounds ($1.1 million) in seed funding. Investors include Techstart Ventures, Galvanise Capital and the Scottish Government.
HEALTH & LIFE SCIENCES DEALS
- Avidity Biosciences, a La Jolla, Calif.-based biotechnology company focused on the treatment of rare muscle disorders and other serious diseases, raised $100 million in Series C funding. Investors include RTW Investments, Cormorant Asset Management, LP, CureDuchenne, Logos Capital, Partner Fund Management, Perceptive Advisors LLC, ST Pharm, Alethea Capital, Alexandria Venture Investments, Boxer Capital of Tavistock Group, Brace Pharma Capital, EcoR1 Capital and Takeda Ventures.
PRIVATE EQUITY DEALS
- Spectrum Equity invested $75 million into Spreedly, a Durham, N.C.-based platform that enables businesses to optimize their online and mobile payments through a single API connection.
- BHI Energy, a portfolio company of AE Industrial Partners, acquired Plaska Transmission Line Construction, LLC, an Amarillo, Texas-based electrical contractor providing distribution, transmission, and storm restoration services for customers throughout Texas, Arizona, Kansas, New Mexico, and Oklahoma. Financial terms weren't disclosed.
- The Hilb Group, a portfolio company of Abry Partners, acquired G&N Insurance, a Southborough, Mass.-based property and casualty insurance agency. Financial terms weren't disclosed.
- IPKeys Power Partners acquired N-Dimension Solutions Inc, an Ontario-based provider of cybersecurity monitoring. Financial terms weren't disclosed.
- YX Asset Recovery, a Changsha, China-based consumer debt collector, now says it plans to raise $81 million in an IPO of 9.3 million ADSs priced at between $7.75 to $9.75 apiece. 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.
- Bunker Hill Capital sold ASPEQ Heating Group, a St. Louis, Mo.-based manufacturer of highly engineered electric‐heating and thermal‐management technologies, to Industrial Growth Partners. Financial terms weren't disclosed.
- BlackRock and GIC agreed to acquire Kellas Midstream, a U.K.-based owner and operator of gas infrastructure from Antin Infrastructure Partners. Financial terms weren't disclosed.
- GI Partners sold Kellermeyer Bergensons Services, an Oceanside, Calif.-based provider of facilities management services, to an affiliate of Cerberus Capital Management. Financial terms weren't disclosed.
FIRMS + FUNDS
- Artist Capital Management, a New York-based private equity firm, raised $100 million for its first fund, the Artist Esports Edge Fund.
- Angular Ventures, a U.K.-based venture capital firm, raised $41 million for its debut fund.
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