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Why PayPal’s Acquisition of Rewards Platform Honey Is a Big Deal

November 21, 2019, 2:50 PM UTC

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

PayPal’s got a lot going on.

It has agreed to acquire Honey, a Los Angeles-based provider of a deal-finding browser add-on and mobile app, for $4 billion. This is PayPal’s largest acquisition to date and the largest acquisition of a tech company in L.A. history.

Just yesterday, we published a Q&A with PayPal CEO Dan Schulman who said his resting heart rate was a cool 48 beats per minute. Not sure I can say mine would be the same if I purchased something for $4 billion, but alas.

Here’s why this deal is interesting:

  • Huge exit for small investors: Honey had only raised $49 million in venture funding. That means this exit will provide a massive windfall for its investors. Santa Monica-based seed-stage firm Mucker Capital, for example, is expected to receive proceeds of $280 million from the $3 million it invested in Honey, according to The Wall Street Journal. Other investors include Citi Ventures, Anthos Capital, Bam Ventures, Plug and Play, Cendana Capital, Ludlow Ventures, and Wonder Ventures. Not exactly a star-studded roster of investors you were expecting to see, right? Wonder Ventures’ Dustin Rosen told the WSJ that a lot of prominent VCs passed on the deal because they didn’t understand the value of Honey’s data.
  • Honey is profitable!: Say what? Honey brought in more than $100 million in revenue last year, and it was profitable on a net income basis in 2018. 
  • Data is everything: PayPal could be interested in Honey’s data on shoppers and help integrate it with PayPal’s network of 24 million merchant accounts. “Combining PayPal’s assets and reach with our technology, we can build powerful new online shopping experiences for consumers and merchants,” said Honey co-founder Ryan Hudson in a statement. “We’ll have the ability to help millions of retailers efficiently reach consumers with offers that deliver more and more value to Honey members.”
  • Personalization is the future: PayPal’s merchants will have the ability to target consumers in a much more personalized and nuanced way. Consider this for a second. PayPal bought Venmo via its $800 million acquisition of Braintree in 2013. Next year, Venmo will roll out a credit card to its users with an in-app experience, a personalized touch, and a mechanism for rewards. This is just my speculation but it sounds like PayPal, Honey, and Venmo will use their combined data insights to create a hyper-personalized shopping experience for the user.

THE STATE OF EUROPEAN STARTUPS: Atomico, a London-based venture capital firm, has a new report out that divulges some interesting insights in the European tech ecosystem. European startups have raised $34.3 billion, which is a record amount of funding so far this year. This is up from $25 billion the year before. That’s promising growth, but 92% of the funding went to all men teams, marking a similar level to 2018. 

Read the full report here.

THIS JUST IN: Minute Media, an Israel-based digital publishing platform, acquired Derek Jeter’s media venture The Players’ Tribune. Financial terms weren’t disclosed. The company had raised approximately $58 million in venture funding from investors including GV, IVP, NEA, and Legendary Entertainment. Read more.

Polina Marinova
Twitter: @polina_marinova
Email: polina.marinova@fortune.com 

VENTURE DEALS

- BigPanda Inc, a Mountain View, Calif.-based operator of a data science platform for centralizing and correlating IT alerts, raised $50 million in Series C funding. Insight Partners led the round, and was joined by investors including Sequoia, Battery Ventures, and Mayfield.

- N3TWORK, a San Francisco-based games, media, and technology company, raised $40 million in Series C funding. Investors include Griffin Gaming Partners, Galaxy Digital via its Galaxy Digital EOS VC Fund, KPCB Holdings, Korea Investment Partners, TABLE, Blue Planet Software and Ocean Road.

- CyberCube Analytics, a San Francisco-based cyber risk analytics company for the insurance industry, raised $35 million in Series B funding. HSCM Bermuda and ForgePoint Capital led the round. 

- Gravitational, an Oakland, Calif.-based provider of infrastructure software solutions, raised $25 million in Series A funding. Kleiner Perkins led the round.

- Superpedestrian, a Cambridge, Mass.-based transportation robotics company, raised $20 million in funding. Investors include Spark Capital, General Catalyst, Hanaco Ventures and Empire Angels.

- Decibel, a London & Boston-based company that measures experiences on websites and apps, raised $17 million in Series B funding. Draper Esprit led the round, and was joined by investors including Eight Road Ventures and John Simon.

- CHEQ, a New York-based cybersecurity company, raised $16 million in Series B funding. The investors were Battery Ventures and MizMaa Ventures.

- Samasource, a San Francisco-based provider of training data for AI technologies, raised $14.8 million in Series A funding. Ridge Ventures led the round, and was joined by investors including Social Impact Ventures, Bestseller Foundation and Bluecrest Limited Capital.

- Parabol, an Alhambra, Calif.-based meeting app for agile teams and remote workers, raised $4 million in funding. CRV led the round, and was joined by investors including Haystack and Slack Fund.

- PerceptiLabs, a San Francisco-based startup which helps businesses utilize machine learning through its drag-and-drop tool, raised $2 million in seed funding. Investors include Luminar Ventures and Brightly Ventures.

- Give InKind, a Seattle-based social support platform, raised $1.5 million in funding. Investors include Trilogy Equity Partners, Madrona Venture Group, SeaChange Fund, Keeler Investments, FAM Fund, Grubstakes, Alliance of Angels and X Factor Ventures.

HEALTH & LIFE SCIENCES DEALS

- Werewolf Therapeutics, a Cambridge, Mass.-based oncology biotherapeutics company, has secured $56 million in Series A financing. MPM Capital and Longwood Fund led the round, and were joined by investors including Taiho Ventures, Arkin Bio Ventures, UPMC Enterprises and DC Investment Partners.

- Lucence, a Singapore-based genomic medicine company, raised $20 million in Series A funding. IHH Healthcare led the round.

- Phoenix Molecular, a Vancouver, British Columbia and San Diego-based developer of precise cancer therapeutics targeting essential kinases, raised $12 million in seed funding. Investors include Pallasite Ventures and World Changing Ventures.

- Genesis Therapeutics, a South San Francisco-based biotech company working on AI-technology to optimize drug discovery and development, raised $4.1 million in seed funding. Investors include Andreessen Horowitz and Felicis Ventures.

PRIVATE EQUITY DEALS

- FirePower Equity Inc acquired a majority stake in The Installation Group, a Sudbury, Ontario-based installation and service partner to Canadian satellite TV and internet subscribers. Financial terms weren't disclosed. 

- Brighton Park Capital acquired a majority stake in Relatient, a Franklin, Tenn.-based patient engagement vendor. Financial terms weren't disclosed. 

- Lynx Equity Limited acquired Prime Flooring LLC, an Ephrata, Wash.-based full-service flooring company. Financial terms weren't disclosed. 

- Sun Capital Partners, agreed to sell SOS Security LLC, a Parsippany, N.J.-based provider of outsourced security services and solutions. Financial terms weren't disclosed. 

EXITS

- Hippo acquired Sheltr, a San Francisco-based platform for protective maintenance services for homeowners. Financial terms weren't disclosed. Sheltr had raised $3.2 million in venture funding from investors including Nyca Partners, MetaProp NYC, 122West Ventures, and South Park Commons.

- CAI Capital Partners sold CSAT Solutions, a Houston-based electronic and digital device repair partner for global original equipment manufacturers, to Insight Equity. Financial terms weren't disclosed. 

- Branford Castle Partners sold Surface Preparation Technologies, a Mechanicsburg, Penn.-based provider of rumble strips and related roadway safety services, to Dominus Capital. Financial terms weren't disclosed. 

FIRMS + FUNDS

- ZMC, a New York-based private equity firm, raised $775 million for ZMC III, L.P. and ZMC III - Parallel, L.P.

- .406 Ventures, a Boston-based venture firm, raised $294 million for its fourth fund.

- Balance Point Capital Partners, a Westport, Conn.-based private equity firm, raised more than $85 million for its fourth fund, according to an SEC filing.

PEOPLE

- Compass Acquisition Partners named John Fischer as managing director of asset management. Previously, Fischer was at TruAmerica.

- .406 Ventures promoted Payal Agrawal Divakaran to partner, and hired Kevin Wang as an associate and Joseph SantaBarbara as controller.

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