When a venture capital-backed merger goes awry

America’s second largest grocery chain, Albertsons Co., acquired meal kit startup Plated for about $200 million in 2017. But the integration of the duo was less than perfect—Plated’s co-founders left one after another, and then in 2019, Albertson’s pulled the meal kits from stores, laid off about 10% of Plated’s staff, and eventually ended the online subscription side of the service altogether.

Now former Plated shareholders are suing Albertsons.

They accuse the company of purposely pushing Plated to miss revenue targets following the merger, targets that could’ve resulted in potentially millions more in payouts to investors. One source tells Term Sheet that the so-called earnout, which was dependent on hitting revenue thresholds over the course of three years following the combination, could have been in the nine figures.

Instead, according to the lawsuit, Plated shareholders have not yet earned any of the payout.

“Albertsons lured the Plated shareholders into the sale of their business with promises and representations about its plans to fully support and grow Plated’s existing subscription business,” the lawsuit filed in the Delaware Court of Chancery alleged. Post-closing however, Albertsons “carved out the parts of Plated that it wanted and undercut the e-commerce business at multiple opportunities in order to impair the ability to reach an earnout.”

While the shareholders were unnamed in the complaint and were represented by Shareholder Representative Services in the docket, sources tell Term Sheet that the tally includes 8VC, Kite Ventures, Greycroft, FF Venture Capital, as well as Plated co-founders Nick Taranto and Josh Hix.

Albertsons’ decision to acquire Plated came amid a massive shift in the grocery e-commerce business. Amazon had just acquired Whole Foods a few months earlier in 2017, galvanizing grocery chains to take a harder look at their digital capabilities. But the meal kit industry was beginning to hit a snag, with the IPO of Blue Apron falling flat on Wall Street.

Plated investors allege that after the merger, it became clear that Albertsons executives did not “buy into the idea of e-commerce generally” and were antagonistic to the idea, alleging the company repeatedly failed to act on suggestions made by the startup team and imposed changes that led to customers cancelling their subscriptions.

Albertsons declined to comment. The venture capital firms and co-founders also did not respond to requests for comment.

A SHIFT BACK TO CONSUMER? It’s not secret—enterprise startups have somehow become sexier than consumer-facing ones in recent years—at least when counting the green. In 2019, venture-capital backed companies selling to businesses raised a third more funding than consumer tech firms, in part because the Amazons and Alphabets of the world have such staying power. 

But amid calls for Big Tech regulation and a backlash against the firms, could there be more space for green shoots? “I have no doubt that consumer investing will come back,” says Mike Volpi of Index Ventures. “The question is when.” Read more.

CALL TO ACTION: Do you know—or invest in, or run—a startup that is tackling key social or environmental issues as part of its business model? If so, Fortune wants to hear from you. We’re soliciting nominations for the Impact 20, a new Fortune list that recognizes venture-backed and private equity-backed companies that are doing well by doing good.

We’ll be looking for relatively established startups that have already shown that they can solve important problems—and are already generating some revenue doing so. To nominate a company, use this form. Fortune editors will announce the final list in late September.Finally, Term Sheet will be off on Monday in observance of Labor Day! Let’s all hope for fewer (or maybe more?) work-from-home snafus.

Lucinda Shen
Twitter: @shenlucinda
Email: lucinda.shen@fortune.com

VENTURE DEALS

- Zomato, an Indian food delivery startup, raised $62 million from Temasek. Read more.

- Nreal, a Beijing-based developer of mixed reality glasses, raised $40 million in Series B funding. Kuaishou Technology led the round and was joined by investors including Sequoia Capital China, GP Capital, GL Ventures and CCEIF Fund. 

- Dreame Technology, a Beijing-based maker of smart vacuums and hair dryers, raised $14.6 million in additional Series B funding. IDG Capital led the round and was joined by investors including Xiaomi, Shunwei Capital, Peak Valley Capital, and Edge Ventures. Read more.

- Moteefe, a-London-based on-demand clothing platform, raised $11 million in funding. BGF led the round and was joined by investors including Gresham House Ventures and Force Over Mass Capital. Read more.

- OK Play, a Los Angeles-based maker of an app for young children and their parents, raised $11 million in funding. Investors included Obvious Ventures, Forerunner Ventures, Greycroft, Abstract Ventures, Dreamers VC, Collab + Sesame, LEGO Ventures, Muse Capital, Progression Fund, and individual investors including Twitter’s Biz Stone, Thrive Capital’s Josh Kushner, Headspace’s Rich Pierson, FabFitFun’s Michael and Daniel Broukhim, K5 Global’s Michael Kives and Bryan Baum, as well as Tamara Mellon, Kevin Wall, Sue Smalley, and Michael Ovitz.

- Demodesk, a Munich, Germany-based online sales and customer meeting startup, raised $8 million in funding. Balderton Capital led the round and was joined by investors including Target Global and Funders Club.

- ThruWave, a Seattle, Wash.-based developer of 3D millimeter wave imaging for supply chain and logistics, raised $6.4 million in seed funding. E14 Fund and Ubiquity Ventures led the round and were joined by investors including Root Ventures, Blue Sky Capital, WRF Capital, In-Q-Tel, and Tsingyuan Ventures. 

- Anvilogic, a San Francisco-based collaborative security operations center content platform, raised $4.4 million. Foundation Capital led the round and was joined by investors including Point72 Ventures, Dan Warmenhoven (former CEO of NetApp) and Nikesh Arora (CEO of Palo Alto Networks).

- Avo, a Walnut, Calif.-based startup for businesses managing data quality across teams, raised $3 million in seed funding. GGV Capital led the round and was joined by investors including Heavybit and Y Combinator.

- Urban Jungle, a London-based startup offering renters insurance, raised an additional £1.6 million in funding from existing investors.

- Mustard, a Los Angeles-based motion analysis app for athletics coaching, raised $1.7 million in funding. Investors included Shasta Ventures and Intersect VC.

- Justpoint, a New York-based startup using artificial intelligence for analysis of individual medical malpractice claims, raised $1 million in seed funding. Vivek Garipalli, founder and CEO of Clover Health, led the round and was joined by investors including Amino Capital, Whoa Ventures, and Harry Langenberg of Optima Tax Relief.

- Teemyco, a Stockholm-based virtual office company, raised $1 million in seed funding. VC Luminar Ventures led the round and was joined by investors including Antler and Gazella.

PRIVATE EQUITY

- Silver Lake Partners is in talks to invest $1 billion in the retail arm of India’s Reliance Industries, per the Financial Times. The deal could value the unit at about $57 billion. Read more.

- CompuSoft, backed by TA Associates, agreed to acquire Soft Tech, a Virginia-based software provider for makers of windows and doors. Financial terms weren't disclosed.

- Trinity Hunt Partners acquired MainStreet Family Urgent Care, a Birmingham, Ala.-based provider of clinics in the state. Financial terms weren't disclosed.

- ECI Software Solutions, backed by firms including the Apax Group, acquired ThermoGRID, a Dubuque, Iowa-based solution for small to medium residential service companies. Financial terms weren't disclosed.

- E.B. Bradley Co., a portfolio company of PSP Partners, acquired Jacknob, a New York-based provider of toilet partition hardware and accessories. Financial terms weren't disclosed.

- CORE Business Technologies, a portfolio company of Banneker Partners, acquired two government payments software businesses: Instant Payments and eGov Strategies.

OTHERS

- SoftBank Group is exploring assembling a group of bidders for TikTok’s India assets, per DealStreetAsia. SoftBank is already a shareholder in ByteDance, TikTok’s owner. Read more.

- Yandex is spinning out its self-driving car unit from MLU BV, a ride-hailing and food delivery joint venture operated in partnership with Uber. Yandex and Uber were said to be considering an IPO of the unit last year that could have valued it at $7.7 billion. Read more.

- Yum China (NYSE: YUMC), the operator of KFC and Taco Bell in China, is is set to raise $2.22 billion in its secondary Hong Kong listing, per Reuters. Read more.

- Altice USA Inc (NYSE: ATUS) and Rogers Communications (TO: RCIB) are still pursing deal talks for Cogeco Inc’s (TO: CGO) assets after a C$10.3 billion bid was rejected by the Canadian telecom company’s board. Read more.

BREAKUPS, HANGUPS, AND BANKRUPTCIES

- America Movil (MX: AMXL) agreed to cancel plans to acquire Telefonica Moviles El Salvador, Telefonica’s unit there, due to regulatory hurdles. Read more.

EXITS

- Episerver, backed by Insight Partners, acquired Optimizely, a San Francisco-based experimentation platform, for an undisclosed sum. The acquisition values Optimizely at below its last $600 million valuation, per Bloomberg. Firms including Goldman Sachs backed Optimizely. Read more.

- Kimberly-Clark (NYSE:KMB) plans to acquire Softex Indonesia, a diaper maker in the region, for $1.2 billion in cash from shareholders including CVC Capital Partners Asia Pacific.

- Permira is again considering an exit from Dr Martens, a U.K.-based shoe company. Read more.

 

IPOS AND SPACS

- The Hut Group, an e-commerce group, plans to list on the London Stock Exchange. The company could raise £920 million ($1.22 billion) valuing it at £4.5 billion. Read more.

- QuantumScape, a San Jose-based battery startup backed by Volkswagen, plans to go public via merger with Kensington Capital Acquisition Corp, a SPAC. The deal gives the combined company an enterprise value of $3.3 billion.

- KnowBe4, a Clearwater, Fla.-based cybersecurity startup, is preparing for an IPO in the U.S.  The IPO could value KnowBe4 at over $2 billion, per Reuters. KKR backs the firm. Read more.

- TPG Pace Tech Opportunities, a Fort Worth, Texas-based blank check company formed by TPG Pace Group targeting the tech industry, filed to raise $450 million. Read more.

- PG Pace Beneficial Finance, a Fort Worth, Texas-based blank check company formed by TPG Pace Group targeting a business with an ESG slant, filed to raise up to $350 million. Read more.

- Falcon Capital Acquisition, a blank check company formed by Ariliam Group and Eagle Equity Partners targeting a media business, filed to raise $300 million. Read more.

- Aspirational Consumer Lifestyle Corp., a blank check company formed by executives of LVMH and L Catterton targeting a consumer business, filed to raise $225 million. Read more.

- Mission Produce, a California-based supplier of fresh avocados, filed to raise $100 million. Read more.

- Madewell Group, an apparel brand, withdrew plans for an $100 million IPO. TPG and Leonard Green back the firm.

- Bill Ackman’s SPAC held preliminary discussions with Stripe, the New York-based payments company, about going public. Read more.

F+FS

- Tectonic Ventures plans to raise $75 million for its second flagship fund, per an SEC filing.

- Xfund raised $120 million for its third fund.

PEOPLE

-Columbia University hired Kim Lew as chief executive of its $11 billion endowment.