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Last week's triple-digit layoffs at BuzzFeed and Vice were blamed, in many digital media quarters, on unrealistic growth expectations by those companies' venture capitalists. Kind of like what we heard after Mic shut down, except louder.
But it's more complicated than that.
- Let's start with the obvious conflict: I work at a VC-backed digital media startup. And we're not even 2.5 years old yet, so what follows could really come back to bite me in a few years. After all, neither BuzzFeed nor Vice were doing layoffs so early into their existences. So please delete this email immediately after reading.
- Media, like mattresses, isn't software. It doesn't scale the same. And if either VCs or entrepreneurs don't recognize the distinction, they're both going to be in for a world of hurt. Or at least their non-core employees will be.
- But digital media startups can generate returns that satisfy VCs, founders and early employees.
- One recent example would be Business Insider, which raised around $55 million over 7 years, with a $7 million pre-money on its Series A in 2008 and a $166 million pre-money on its Series G in early 2015. Later in 2015 it was purchased by Axel Springer at a valuation north of $440 million (it's a bit complicated with cash on hand and Jeff Bezos rolling over his shares).
- Yes, Business Insider got lucky that Axel Springer had just lost out on buying The Financial Times, but it was still well-positioned as a consolation prize.
- Business Insider founder Henry Blodget tells Axios: "We assessed our 5-year plan carefully with every raise. We wanted to be confident that we could generate a compelling return. We also didn’t want to take more than we needed to. In hindsight, that approach worked well."
- Blodget adds that he doesn't "think it’s categorical that more capital is necessarily bad," pointing out that both BuzzFeed and Vice have built large, highly-valued companies. But the reality is that they've raised around a combined $2 billion, so even achieving Business Insider-level returns for later investors is extremely daunting. Again, this isn't software.
Slack announced that it has filed a confidential registration statement with the SEC for what is expected to be a direct listing.
- Why it's the BFD: Because if an enterprise software company can successfully complete a large direct listing, then it presents a challenge to the IPO market in a way that consumer-facing Spotify didn't.
- Caveats: Slack has much more brand recognition than most other SaaS startups, plus around $1 billion in the bank (i.e., it doesn't need IPO proceeds).
- Investors: Slack has raised over $1 billion, most recently at a valuation north of $7 billion, from firms like Accel, Andreessen Horowitz, Kleiner Perkins, GV, Social Capital.
- Bottom line: Don't be stunned if Slack gets acquired before it lists, particularly given that both Google and Microsoft (or Amazon?) could easily afford the $20 billion that a source says it would take. It's still the much less likely path, but word is that things have changed from the days of "Stewart Butterfield will never sell to a big company, after the Yahoo/Flickr debacle."
Venture Capital Deals
• Databricks, the San Francisco-based maker of the Apache Spark big data analytics platform, raised $250 million in Series E funding at a $2.75 billion valuation. Return backer Andreessen Horowitz led, and was joined by Coatue Management, Microsoft and NEA. http://axios.link/QfVD
• CoverHound, a San Francisco-based online property and casualty insurance marketplace, raised $58 million in Series D funding. Hiscox led, and was joined by Chubb, Aflac Venture and MS&AD. www.coverhound.com
• Ike, a self-driving truck startup, raised $52 million in Series A funding. Bain Capital Ventures led, and was joined by Redpoint Ventures, Fontinalis Partners, Basis Set Ventures and Neo. www.ikerobotics.com
• Fourkites, a Chicago-based supply chain visibility startup, raised $50 million in Series C funding from return backers August Capital, Bain Capital Ventures, CEAS Investments and Hyde Park Angels. www.fourkites.com
• Lunchr, a French provider of corporate credit cards for meals, raised €30 million. Index Ventures led, and was joined by return backers Daphni, Idinvest and Kima Ventures. http://axios.link/zfyz
🚑 CathWorks, an Israeli maker of interventional cardiology devices, raised $30 million in Series C funding led by Deerfield Management. http://axios.link/4TsK
• Cuyana, a San Francisco-based luxury lifestyle brand for women, raised $30 million in Series C funding from H.I.G. Growth Partners and d.Luxury Brands. http://axios.link/p3d2
• Catalytic, a Chicago-based robotics process automation platform, raised $30 million in Series B funding. Intel Capital led, and was joined by Redline Capital and return backers NEA, Boldstart and Hyde Park Angels. http://axios.link/Kqns
• Blue Hexagon, a Sunnyvale-based deep learning platform focused on providing network threat protection, raised $25 million in Series B funding from Benchmark and Altimeter. www.bluehexagon.ai
⛽ Aurora Solar, a Palo Alto-based solar energy software startup, raised $20 million in Series A funding. Energize Ventures led, and was joined by Spectrum 28 and Pear Ventures. http://axios.link/1nxV
• Dv01, a New York-based lending data analytics platform, raised $15 million in Series B funding. Pivot Investment Partners led, and was joined by Regions Financial, Quantum Strategic Partners, Jefferies, Illuminate Financial Management and OCA Ventures. http://axios.link/k6LG
• Festicket, a UK-based booking site for festival tickets, raised $10.5 million in Series D funding from Edge Investments. http://axios.link/oF10
• Productboard, a product management software startup with offices in Prague and San Francisco, raised $10 million in new Series A funding. Index Ventures led, and was joined by return backers Kleiner Perkins, Credo Ventures, Rockaway Capital and Reflex Capital. http://axios.link/zlCs
• By Humandkind, a direct-to-consumer personal care brand that avoids single-use plastics, raised $4 million. Lerer Hippeau led, and was joined by Red Sea Ventures, BoxGroup, SV Angel and Great Oaks VC. www.byhumankind.com
• Perksy, a market intelligence startup that seeks to gamify consumer research, raised $4 million in seed funding led by Bain Capital Ventures. http://axios.link/CS4T
• Step, a San Francisco-based financial platform for teens, raised $3.8 million in seed funding from Crosslink Capital, Collaborative Fund and Sesame Ventures. www.step.com
• Valued, a San Francisco-based provider of HR compliance software, raised $1.7 million in seed funding led by BootstrapLabs. www.valued.co
• Power Digital, a San Diego-based digital marketing agency, received an investment from Periscope Equity. www.powerdigitalmarketing.com
Private Equity Deals
🚑 CEI Vision Partners, a Cincinnati-based portfolio company of Revelstoke Capital Partners, acquired Virginia Eye Consultants, an ophthalmology group comprised of 17 providers in the Norfolk, Virginia Beach and Chesapeake markets. www.cvphealth.com
• DiscoverOrg, a Vancouver, Wash.-based marketing intelligence company whose backers include The Carlyle Group, acquired ZoomInfo, a Waltham, Mass.-based B2B data provider, from Great Hill Partners. http://axios.link/z7Xr
🚑 FEMME, a Brazilian women’s healthcare company, raised an undisclosed amount of funding from L Catterton’s Latin American fund. www.laboratoriodamulher.com.br
🚑 Kadiant, a new autism services company led by Lani Fritz, is being formed via a $300 million equity commitment from TPG Capital. www.kadiant.com
• Kofax, a portfolio company of Thoma Bravo, agreed to acquire Top Image Systems (Nasdaq: TISA), an Israel-based provider of automated data capture solutions, for around $16 million. Kofax also completed its $400 million purchase of the imaging unit of Nuance Communications (Nasdaq: NUAN).
• PumpMan, a Baldwin Park, Calif.-based portfolio company of Soundcore Capital Partners, acquired Southwest Waterworks Contractors, a Phoenix-based designer, installer and repairer of pumps and pump systems. www.pumpman.com
• Saco Foods, a Middleton, Wis.-based portfolio company of Benford Capital, acquired sun dried tomatoes maker California Sun Dry Foods. www.sacofoods.com
🚑 Sun Capital Partners acquired Langhorne, Penn.-based dental services group Simply Beautiful Smiles.
• TPG Capital, Madison Dearborn Partners and Patton Vision have revived their takeover interest in movie theater chain Reading International, with a nonbinding $444 million offer, per Bloomberg.
• Vector Capital completed its previously announced purchase of Aspect Software, a Phoenix-based provider of customer engagement and workforce optimization software. www.aspect.com
• Warren Equity Partners acquired M&D Distributors, a distributor of aftermarket parts for diesel-powered engines in Texas, Oklahoma, and Louisiana. www.mddistributors.com
🚑 Avedro, a Waltham, Mass.-based maker of ophthalmic devices for treating corneal ectatic disorders, set IPO terms to 5 million shares at $14-$16. It would have a fully-diluted market value of around $290 million, were it to price in the middle, and plans to trade on the Nasdaq (AVDR) with BofA Merrill Lynch as lead underwriter. The company reports a $19 million net loss on $19 million in revenue for the first nine months of 2018, and has raised over $225 million from firms like OrbiMed (35.7% pre-IPO stake), InterWest Partners (22.7%), HealthQuest Partners (10.7%) and De Novo Ventures (5.9%). www.avedro.com
🚑 Cibus, a San Diego-based developer of plant and microbial platforms for breeding technologies, set IPO terms to 6.67 million shares at $14-$16. It would have a market value of around $350 million, were it to price in the midle, and plans to trade on the Nasdaq (CBUS) with Morgan Stanley as lead underwriter. The company raised around $180 million in VC funding from firms like Fidelity, New Ventures Fund, Alexandria Venture Investments and Cormorant Asset Management. www.cibus.com
• Twilio (NYSE: TWLO) completed its $2 billion all-stock purchase of SendGrid, a Denver-based email marketing company that had raised over $200 million from firms like Bain Capital Ventures, Bessemer Venture Partners, Foundry Group and Uncork Capital.
• Gannett Co. (NYSE: GCI), publisher of USA Today, rejected a $1.3 billion takeover offer from MNG Enterprises. http://axios.link/fMFc
🚑 GlaxoSmithKline (LSE: GSK) agreed to pay up to 3.7 billion for the rights to a lung cancer immunotherapy from Merck (DE: MRCG). http://axios.link/iwa3
• Microsoft (Nasdaq: MSFT) acquired DataSense, a data management platform for the education market. http://axios.link/Wws3
• Mubadala Investment Co. sold 34.9 million common shares of chipmaker Advanced Micro Devices (Nasdaq: AMD), which had a market value of $842 million at yesterday’s market close. http://axios.link/hNAR
⛽ Tesla Motors (Nasdaq: TSLA) acquired San Diego-based energy storage company Maxwell Technologies (Nasdaq: MXWL) for $218 million, or $4.75 per share (55% premium on Friday’s close), in an all-stock transaction. http://axios.link/bAYU
• Vivendi is considering a partial sale of Universal Music Group, which could be valued at around $25 billion, per Bloomberg. http://axios.link/7zEw
• Hidden Harbor Capital Partners raised over $265 million for its debut fund, which will focus on control investments in lower middle-market companies. www.hh-cp.com
• Alex Navab, who left KKR in late 2017, is seeking up to $4 billion for a new namesake private equity fund, per PE Hub. http://axios.link/lWy4
• Kerrie Cohen (ex-Barclays) joined Warburg Pincus as head of communications, while Sarah McGrath (ex-Prosek Partners) joined as associate director of communications. www.warburgpincus.com
• Bryan Taylor, former co-head of TPG Capital’s tech group, is joining Advent International as a managing partner and head of tech investing in a new Bay Area office. www.adventinternational.com
• Thomas Whiteaker joined IBM Ventures as a partner. He previously was with Propel Venture Partners.