Good morning, Term Sheet readers. Tech writer Danielle Abril here, filling in for Lucinda.
I’ve been keeping an eye on the mysterious ghost kitchen.
Ghost kitchens, or commissary kitchens that are geared toward delivery, first crossed my path when I heard that former Uber CEO Travis Kalanick had been quietly working on a new venture called CloudKitchens since 2016. Since then, the Los Angeles-based startup has raised $400 million from Saudi Arabia’s sovereign-wealth fund. Other companies like Miami-based Reef Kitchens, New York-based Zuul Kitchens, and even DoorDash have made their way into the industry.
In the middle of a pandemic, which has led to an increased demand for food delivery, I’ve been wondering: Did the coronavirus also bolster the opportunity for ghost kitchens?
Investors from Accel, Battery Ventures, and 500 Startups all believe so. What they didn’t agree on are which ways ghost kitchens would likely be used—for delivery-only brands or as an expansion mechanism for restaurants seeking a low-cost way to reach new customers.
“This has been an oncoming tsunami that’s going to affect the overall restaurant business,” said Scott Tobin, general partner at Battery Ventures, which has invested in a startup that develops restaurant brands solely for delivery. “It’s been slowly brewing. I think COVID is just going to be an accelerant.”
Last year, investors funneled about $2.9 billion into U.S. ghost kitchen companies, according to data from PitchBook. But over the course of the first quarters of this year, investments merely totaled $426 million. The investment total is not necessarily an indicator of investor sentiment towards ghost kitchens, though. As Binh Tran, 500 Startups venture partner, pointed out, ghost kitchens are capital-intensive due to the real estate associated with the business. So the barrier to entry is much higher than that of software companies, for instance.
Tran said he believes the shift in consumer behavior and need for ghost kitchens is likely here to stay. DoorDash, which opened its first kitchen in Redwood City, Calif. last year, said it’s seen a rise in inquiries from restaurants about its kitchen space, even though it’s already maxed out with six brands there.
Amit Kumar, partner at Accel, agrees. “This rapid wave of adoption is a transformative event for the space, and unlikely to be undone even in a post-Covid world as restaurateurs start leaning into these new revenue streams,” he said. “We’re certainly doubling back to see how this impacts our view on the space and opportunities for investment.”
Danielle Abril
Anne Sraders curated today’s Term Sheet.
VENTURE DEALS
-Infobip, a London-based cloud communications platform for businesses and customers, raised over $200 million in Series A funding from One Equity Partners, Reuters reports citing sources. The deal valued Infobip at over $1 billion.
-Validity Finance, a New York City-based commercial litigation finance firm, raised $100 million in funding from backers including TowerBrook Capital Partners.
-Omega Therapeutics, a Cambridge, Mass.-based biotech firm focusing on epigenetics, secured $85 million in funding from founder Flagship Pioneering. Read more.
-Guideline, a San Mateo, Calif.-based small businesses 401(k) provider, raised $80 million in Series D funding. Generation and Greyhound Capital led the round, and were joined by investors including Tiger Global Management, Felicis Ventures, Propel Venture Partners, Lerer Hippeau, Xfund and BoxGroup.
-Instrumental, a Palo Alto-based manufacturing optimization software platform, raised $20 million in Series B financing. Canaan led the round, and was joined by investors including Eclipse Ventures, Root Ventures, Stanford StartX Fund, and First Round Capital. Read more.
-AI Foundation, a San Francisco-based online AI platform, raised $17 million in Series B funding. Mousse Partners led the round, and was joined by investors including Founders Fund, Biz Stone, You & Mr Jones and Alpha Edison.
-Candis, a Berlin-based automated bookkeeping software company, raised €12 million ($14 million) in Series B funding. Viola Ventures and Rabo Frontier Ventures led the round, and were joined by investors including Lightspeed Venture Partners, Point Nine Capital, Speedinvest and 42CAP.
-Alydia Health, a Menlo Park, Calif.-based medical device company focused on preventing maternal death, raised $13.9 million in Series C funding. AXA Investment Managers led the round, and was joined by investors including Global Health Investment Fund and Avestria Ventures.
-Whistic, a Pleasant Grove, Utah-based vendor security platform for buyers and sellers, raised $12 million in Series A funding. Emergence led the round, and was joined by investors including Album VC. Read more.
-Magnetis, a São Paulo, Brazil-based digital investment manager platform, raised $11 million in Series B funding. Redpoint eventures led the round, and was joined by investors including Vostok Emerging Finance.
-Siilo, a Netherlands-based collaboration app for healthcare professionals, raised $10.5 million in Series A funding. Heal Capital led the round, and was joined by investors including Philips Health Technology Venture Fund and EQT Ventures.
-Polyarc, a Seattle-based virtual reality game maker, raised $9 million in Series B funding. Hiro Capital led the round, and was joined by investors including Vulcan Capital and Galaxy Interactive via its Galaxy EOS VC Fund.
-KloudGin, a Sunnyvale, Calif.-based cloud-based field service and asset management provider, raised $8.2 million in Series A funding from Cloud Apps Capital Partners.
-byrd, a Berlin and Vienna-based logistics firm, raised €5 million ($5.8 million) in Series A funding. Rider Global led the round, and was joined by investors including VentureFriends, FJ Labs, Speedinvest, Reflex Capital, Hermann Hauser and KK Incube.
-StreamLayer, a Chicago-based live video and connected TV technology platform, raised $4 million in funding. KB Partners led the round, and was joined by investors including Green Dolphin Capital and TYH Capital.
PRIVATE EQUITY
-Warburg Pincus and DTCP agreed to acquire a controlling stake in Community Fibre, a London-based full fibre broadband provider. Existing investors include Amber Infrastructure and RPMI Railpen. Financial terms were not disclosed.
-BC Partners agreed to take IMA SpA, an Italy-based machinery maker, private, in partnership with IMA’s majority shareholder. The deal is valued at €2.9 billion ($3.4 billion). Read more.
-Morgan Stanley Infrastructure Partners (MSIP) bought a 49.99% stake in New York-based broadband provider Altice USA’s fiber business Lightpath for $2.3 billion.
-Crestview Partners invested in Upwell Water, a San Francisco-based specialty finance company focused on water. The investment, along with previous investments from 2040 Fund and Upwell, will create a $1 billion water financing company.
-The Riverside Company invested in GSB & Associates, a Kennesaw, Georgia-based custom flavor developer. Financial terms were not disclosed. Read more.
-W2O, backed by New Mountain Capital, acquired Discern Health, a Baltimore, Md.-based healthcare consulting firm. Financial terms were not disclosed.
-Madison Dearborn Partners agreed to acquire IPL Plastics, a Canada-based packaging company, for C$981 ($735 million) on an enterprise basis.
-BP Energy Partners invested up to $60 million in equity in Catalyst Power Holdings, a New York-based retail energy and energy solutions provider.
-Partnerize, backed by Accel-KKR, acquired Pepperjam, a Philadelphia-based affiliate marketing services provider. Financial terms were not disclosed.
-Cerevel Therapeutics, backed by Bain Capital, will combine with Arya Sciences Acquisition Corp II (Nasdaq: ARYBU), a New York City-based blank check company sponsored by Perceptive Advisors. A group of healthcare investors have agreed to commit $320 million in addition to $150 million from Arya II. The combined company is expected to receive $445 million in net proceeds and will go public under “CERE”.
OTHERS
-Recursion acquired Vium, a San Mateo, Calif.-based digital biomarkers provider. Financial terms were not disclosed.
-Clarivate will merge with CPA Global, a Jersey, Channel Islands-based intellectual property software and technology services provider in an all-stock transaction, for an implied enterprise value of $6.8 billion. Read more.
-ZenBusiness acquired Joust, an Austin-based banking platform geared toward self-employed individuals. Financial terms were not disclosed.
-MightyHive, backed by S4 Capital, will merge with Orca Pacific, a Seattle-based Amazon marketing agency and consultancy firm. Financial terms were not disclosed.
-Mimecast (NASDAQ: MIME) acquired MessageControl, a Chicago-based messaging security software developer. Financial terms were not disclosed.
IPOS
-Oak Street Health, a Chicago-based provider of primary care for Medicare patients in the Midwest, now plans to raise $250 million by offering 15.6 million shares priced between $15 to $17. It posted revenue of $540 million in 2019 and a loss of $137.2 million. General Atlantic, Newlight, and Humana back the firm. It plans to list on the NYSE as “OSH.” Read more.
-Forum Merger III, a Delray Beach, Fla.-based blank check company and third of its kind led by co-CEOs Marshall Kiev and David Boris, filed for a $250 million IPO. It is targeting investments based in the U.S. with aggregate enterprise values between $500 million and $2 billion, but did not specify a particular industry. It plans to list on the Nasdaq as “FIIIU”. Read more.
-Vital Farms, an Austin, Texas-based pasture-raised eggs producer, now plans to raise $156 million by offering 7.8 million shares priced between $19 and $21 in an IPO. It plans to list on the Nasdaq as “VITL”. Read more.
-BigCommerce, an Austin-based e-commerce software developer, plans to raise $130 million in an IPO by offering 6.9 shares priced between $18 and $20. Investors include General Catalyst and GGV Capital. It is planning to list on the Nasdaq as “BIGC”. Read more.
-Petra Acquisition, a New York City-based blank check company led by CEO and chairman Andreas Typaldos, filed for a $125 million IPO. It is targeting investments in the cannabis industry. It plans to list on the Nasdaq as “PAICU”. Read more.
-Acutus Medical, a Carlsbad, Calif.-based medical device maker to treat arrhythmia, plans to raise $125 million by offering 7.4 million shares priced between $16 and $18 in an IPO. It plans to list on the Nasdaq as “AFIB”. Read more.
EXITS
-Calspan Technology Holding Corporation acquired Aero Systems Engineering, a St. Paul, Minn.-based aerospace and ground-based testing solutions provider, from Gen Cap America. Financial terms were not disclosed.
PEOPLE
-H.I.G. Capital added Timur Akazhanov as a managing director. Akazhanov was previously at Blackstone.
