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Investors are betting that the next Warby Parker will spring from Amazon

November 18, 2020, 3:05 PM UTC

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Where Amazon walks, a graveyard follows. The phenomenon was clear yesterday, when investors spooked by its pharmacy offering drove shares of traditional drugstores down.

But now, venture capitalists are considering the company’s platform fertile ground to grow new consumer-facing brands.

On Wednesday, venture capitalists such as General Catalyst, Khosla Ventures, and Arbor Ventures injected $175 million in Series A funding into Heyday, a company that acquires and incubates companies that sell products on Amazon. That’s right: $175 million for a company that just came out of stealth and hired its first employee in August—though it did not disclose the division between debt vs. equity.

The bet is that consumers want to shop in a centralized marketplace, a space currently dominated by Amazon—and that sizable businesses can spring from the e-commerce giant. Heyday CEO and co-founder Sebastian Rymarz points to Anker Innovations, a Chinese company selling eponymous portable batteries that’s now valued at $11.8 billion in trading in Shenzhen after getting its start almost entirely on Amazon.

“Warby Parker and Dollar Shave Club dominate in direct to consumer,” Rymarz says. “We don’t think that it’s going to be those brands that are going to win in marketplaces. [Marketplace] brands need a whole new stack…to be able to rank well on digital shelves and to optimize listings.”

Heyday’s investors aren’t the only ones running with this thesis. Thrasio, another acquirer of companies that list products on Amazon, recently raised $260 million in Series C funding led by Advent International and says it is a profitable unicorn. And there’s Perch and Heroes in Europe—each of which have millions to buy up consumer brands listing on marketplaces.

Heyday both launches and acquires brands that list on marketplaces. On the acquisition side, the company plans to buy only profitable businesses with $2 million to $20 million in revenue that it believes can be ten times larger, investing between $3 million to $20 million in a company. With more data on marketplaces and consumers, Ramyrz and his cohorts believe they can help brands better target customers and organize their supply chains.

While I colloquially say such firms are betting that a big consumer-facing brand like Warby Parker could spring from Amazon, there are also key differences. Many direct-to-consumer brands appear to have control over their operations. By relying on a marketplace, companies like Heyday and Thrasio face the issue of platform risks.  It’s what famously made life difficult for gamemaker Zynga, which early on made much of its games based on Facebook’s network. It’s also an issue the media business knows well, as more news is delivered via Google or Facebook

It’s well-known on Amazon too. The marketplace giant has been accused of using data from independent sellers on its website to launch competing products. And what’s to say that Amazon won’t suddenly change its listing algorithm, upending companies on its platform altogether? Rymarz acknowledges those risks, though he believes Amazon has still allowed, and has a key stake in, allowing the overall marketplace to proliferate.

The ultimate prize here, though, is whether such brands can use Amazon as a launching pad to attract consumers all on their own merit and through their own channels.

Heyday has not yet reached unicorn status, though it plans to reach $200 million in annualized revenue by the end of 2021 and $1 billion by the end of 2023.

I HATE YOU, I LOVE YOU, I HATE THAT I LOVE YOU: Adam Neumann may be suing SoftBank—and there’s no shortage of ugliness there—but the Japanese giant’s CEO Masayoshi Son says he still loves the WeWork co-founder and believes Neumann will be successful in the long term. Son believes Neumann has made mistakes and that he himself is to some extent responsible for those errors, Son said at the New York Times DealBook conference. Son added: “I still love him. I still respect him…I’m a big believer that someday he will be very successful.” 

Again, this all comes as Neumann is aggressively suing the Japanese giant over its scrapped plans to acquire $3 billion of WeWork stock, including from Neumann himself, and as SoftBank has reported billions of losses on that particular investment. You can watch the full interview here.

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

This story has been updated to clarify that Heyday did not disclose the mix between equity in debt in the round.

VENTURE DEALS

- Relativity Space, a Long Beach, Calif.-based maker of 3D printed rockets,  is raising a $500 million D round led by Tiger Global, valuing it at $2.3 billion, per CNBC. Read more.

- PingCAP, a San Mateo, Calif.-based open-source software developer, raised $270 million in Series D funding. GGV Capital, Access Technology Ventures, Anatole Investment, Jeneration Capital and 5Y Capital led the round. Read more.

- Klaviyo, a Boston-based email marketing platform going up against Mailchimp, raised $200 million in Series C funding. Accel led the round and was joined by investors including Summit Partners.  

- Gojek, the Southeast Asian ride-hailing giant, raised $150 million from Telkomsel. Read more.

- Cato Networks, a Tel Aviv-based network for sharing resources, raised $130 million in Series E funding valuing it at $1 billion. Lightspeed Venture Partners  led the round and was joined by investors including Coatue, Greylock, Aspect Ventures/Acrew Capital, and Singtel Innov8.

- Kandou, a Switzerland-based semiconductor company, raised $92.3 million in Series C funding. Investors include Bessemer Venture Partners, Climb Ventures, and Swiss Select Opportunities.

- Elevation Oncology, a New York-based biopharmaceutical company focused on cancers, raised $65 million in Series B funding. venBio Partners and Cormorant Asset Management led the round.

- Medable, a Palo Alto, Calif.-based telemedicine trial platform, has raised about $64 million of a planned $94 million in funding. Read more.

- K Health, a New York-based digital primary startup, raised $42 million in Series D funding. Valor Equity Partners led the round and was joined by investors including Marcy Venture Partners, Atreides Management, PICO Venture Partners, 14W, and Max Ventures

- EdgeQ, a Santa Clara, Calif.-based 5G chip company, raised $51 million in total funding. Investors include Threshold Ventures, Fusion Fund, and Yahoo! co-founder Jerry Yang.

- Yubo, a Paris-based social platform, raised $47.5 million in Series C funding. Investors included Idinvest, Iris Capital, Alven, Sweet Capital, and Gaia Capital Partners.

- Fireblocks, a New York-based digital asset custodian, raised $30 million in Series B funding. Paradigm led the round and was joined by investors including Cyberstarts, Tenaya Capital, Swisscom, Galaxy Digital, Digital Currency Group, and Cedar Hill Capital

- OakNorth, a U.K.-based lender to small and medium-sized businesses backed by SoftBank, sold $30 million in secondary shares to Sumitomo Mitsui Banking Corporation.

- ControlUp, a San Jose, Calif.-based way to monitor, troubleshoot, and remediate desktops, raised $27 million in Series C funding. JVP and K1 Investment Management led the round.

- Headway, a New York-based way to search for therapists, raised $26 million in Series A funding. Thrive and GV led the round and were joined by Accel , GFC and IA Ventures. Read more.

- Mati, a San Francisco-based API user verification process, raised $13.5 million in Series A funding. Tribe Capital led the round, joined by Spero Ventures, Amaranthine, Operator Partners, Aglae Ventures, and Comma VC

- OXIO, a New York-based cloud-based mobile carrier, raised $12 million in Series A funding. monashees and Atlantico Capital led the round and were joined by FinTech Collective and Multicoin Capital. 

- Upfront Healthcare, a Chicago-based communication and patient engagement platform, raised $11.5 million in Series B funding. Baird Capital and LRVHealth co-led the round and were joined by Echo Health Ventures, Nashville Capital Network and Hyde Park Venture Partners.

- Seldon, a London-based company seeking to scale machine learning models, raised £7.1 million in Series A funding. AlbionVC and Cambridge Innovation Capital led the round.

- Northstar, a Los Angeles-based provider of financial wellness benefits for employees, raised $7.3 million in Series A funding. M13 led the round and was joined by investors including Foundation Capital and Workday Ventures. 

- Ubiq Security, a San Diego, Calif.-based cybersecurity startup, raised $6.4 million in a seed funding. Okapi Venture Capital led the round and was joined by investors including TenOneTen Ventures, Cove Fund, DLA Piper Venture, Volta Global, and Alexandria Venture Investments

- WattBuy, a New York-based online electricity marketplace, raised $3.3 million in Series A funding. Evergy Ventures led the round and was joined by investors including Updater, Avesta Fund, Yoav Lurie, John Sherman, and Bill Gatreaux.

- Maude, a Brooklyn, N.Y.-based sexual wellness company, raised $3.7 million in seed funding. CASSIUS led the round and was joined by investors including True, Outbound Ventures, Vice Ventures, and Patina Brands.

- Nozzle.ai, an ecommerce and advertising platform for Amazon, raised $2.6 million (£2 million) in funding. Investors include Parkwalk Advisors, The Angel CoFund, and UCL Technology Fund.

- Cooper, an Amsterdam professional network, raised $2 million in seed funding. Comcast Ventures led the round and was joined by investors including LocalGlobe, 468 Capital, and Combine.

- KisanHub, a U.K.-based supply chain management platform, raised £1.12 million in seed funding.

Low Carbon Innovation Fund 2 led the round and was joined by investors including Future Fund.

PRIVATE EQUITY

- Sverica Capital Management invested in DeFY Security, a Pennsylvania-based provider of cybersecurity solutions. Financial terms weren't disclosed.

- SyBridge Technologies, backed by Crestview Partners, acquired X-Cell Tool and Mold, a Fairview, Penn.-based medical tooling industry and supplements company. Financial terms weren't disclosed.

- Belcan, backed by AE Industrial Partners, acquired Avista, a Platteville, Wisconsin-based provider of software engineering services to those in the aerospace, defense, industrial and medical industries. Financial terms weren't disclosed.

EXITS

- Nexi will acquire Nets, a Danish payments company, for €7.8 billion ($9.3 billion) from Hellman & Friedman.

- Clearlake Capital Group agreed to acquire The Wellness Pet Food Holdings Company, a pet foods brand, from Berwind Corporation. Financial terms weren't disclosed.

- KKR agreed to acquire Argenta, a New Zealand-based animal health-focused pharma services platform, from the Tomlinson Group, who will retain a stake. Financial terms weren't disclosed.

- Gridiron Capital acquired GSM Outdoors, an Irving, Texas-based retailer of supplies for hunters and outdoors activities, from Sentinel Capital Partners. Financial terms weren't disclosed.

OTHER

- Mars agreed to acquire Kind North America, a U.S.-based maker of energy bars. Financial terms weren't disclosed. Read more.

- The Deutsche Boerse plans to acquire a 80% stake in Institutional Shareholder Services , a Rockville, Md.-based ESG data provider, for about $1.8 billion.

- Talkspace, a New York-based online therapy app, is weighing a potential sale that could value it at $1 billion, per Bloomberg. Firms including Revolution and Norwest back the firm. Read more.

- Autodesk (Nasdaq: ADSK) acquired Spacemaker, a Norwegian maker of building evaluation software, for $240 million.

- Eldridge will acquire The Killers’ music publishing catalog from studio albums released prior to 2020.  Financial terms weren't disclosed.

- Wunderkind, formerly BounceX, plans to acquire SmarterHQ, an Indianapolis-based provider of a marketing platform. SmarterHQ was backed by investors including Battery Ventures.

IPO

- Robinhood Markets, the stock trading fintech, is considering an IPO for the first quarter of 2021, per Bloomberg. Read more.

- Ozon Holdings, a Russian e-commerce platform, filed to raise up to $825 million in an IPO. Backers include Sistema, Baring Vostok Private Equity, and Index Ventures. Read more.

SPAC

- Arrival, a maker of electric vans and buses, is in talks to combine with CIIG Merger Corp., a SPAC, per Bloomberg. Backed by investors including BlackRock, Arrival could be valued at $5 billion to $6 billion following a transaction. Read more.

F+FS

- Council Capital, a healthcare-focused private equity firm, raised $200 million for its fourth fund.

- Union Square Ventures is raising between $100 million to $200 million for its first climate-tech focused venture fund, per the WSJ. Read more.

PEOPLE

- OpenView Venture Partners added Sanjiv Kalevar as an investor.