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Top News in the A.M.
The Department of Labor just filed a lawsuit against software giant Oracle for discriminatory employment practices. More here.
Facebook Agreed to Pay More for Oculus Than We Realized; Here’s Why
Facebook CEO Mark Zuckerberg testified in a Dallas court yesterday as part of a lawsuit claiming that Oculus VR, the startup Facebook acquired for roughly $2 billion, was based on stolen technology. Unsurprisingly, Zuckerberg defended Oculus and in the process revealed a number of new details about the negotiations involved in purchasing the company. Among them: that Facebook agreed to pay $700 million in employee retention bonuses for “key people.”
It was news to the rest of us. When Facebook announced the deal back in 2014, it said it was paying a “total of approximately” $2 billion, including $400 million in cash and 23.1 million shares of Facebook. It said the agreement “also provides for an additional $300 million earn-out in cash and stock” based on Oculus meeting certain milestones. It said bupkis about that extra $700 million in retention bonuses.
Was its own release “fake news?” It’s commonly known that the actual price paid for a company and what the public sees in headlines is rarely the same, owing to factors like the fluctuating value of an acquirer’s stock. But a $700 million difference? Isn’t that notable?
Actually, no, said a handful of bankers and analysts with whom we spoke yesterday. Here’s why. That original press release from Facebook addressed the price paid for Oculus to its former owners (including its founders, Andreessen Horowitz, Matrix Partners, and Spark Capital, among others). That’s the $2 billion, plus that $300 million earn-out component.
Meanwhile, the $700 million that Zuckerberg referenced yesterday takes into account the ongoing costs following the close of the deal, and those costs — in the form of employee incentives — aren’t typically considered in the purchase price as they’re paid out over time, as one co-chair of a corporate securities group told us.
In short, new employees have to work for that money.
Tom Peters, cofounder of the San Francisco-based investment bank Iverness Advisors, agrees with that view. As a former managing director at Montgomery & Co., Peters worked on the sale of MySpace to News Corp. in 2005, and says that while the deal is referred to this day as costing $580 million, it was really $630 million by the time every i was dotted and t was crossed. “The devil is always in the details,” he says.
When it comes to this particular disparity, while it may seem “shockingly big,” he says the money that was set aside for compensation to certain Oculus employees for continuing to work at Facebook must have been separated out from purchase price, which is a “not uncommon” practice, he says. “It’s often viewed as in a different category, including because of accounting guidelines that tell you to account for things in different ways.” (He notes, for example, that tax treatments and tax consequences differ when it comes to purchase prices versus compensation.)
In the end, “it was a judgment call,” says a San Francisco-based investment banker who asked not to be named. “Certainly, Facebook could have mentioned the possibility of additional payments at the time of the acquisition. Then again, does it want to be known for paying big retention bonuses and earn-outs? You can see the case [for leaving out that information].”
New Fundings
Collibra, a nine-year-old, New York-based company that automates data management processes, has raised $50 million in Series C funding led by ICONIQ Capital, with participation from Battery Ventures and return backers Dawn Capital, Index Ventures and Newion Investments. TechCrunch has more here.
Deputy, a nine-year-old, Sydney, Australia-based maker of workforce software that manages employees, shift changes, log-ins, and payroll, has raised $25 million in Series A financing from OpenView. GeekTime has more here.
InsideSales, a 12.5-year-old, Provo, Ut.-based predictive analytics platform that helps salespeople focus on finding and engaging prospects at the right time, has raised $50 million in fresh funding today. The round was led by earlier backer Polaris Partners, along with newcomers QuestMark Partners and the Irish Strategic Investment Fund. Earlier backers Microsoft, Kleiner Perkins Caufield Byers, HWVP, USVP, Epic Ventures and Zetta Venture Partners also joined the round, which brings InsideSales’s total funding to more than $250 million. TechCrunch has more here.
Iris Automation, a year-old, Vancouver, British Columbia-based startup that’s developing collision avoidance systems for industrial drones, has raised $1.5 million in seed funding led by Bee Partners, with participation from Social Capital, GGV Capital, Liquid 2, Kevin Moore and Paul Bucheit. TechCrunch has more here.
Laugh.ly, a months-old, San Francisco-based streaming service for stand-up comedy (it features a library of comedians’ stand-up sets), has raised $2.25 million in seed funding led by New York Angels. Other participants in the round include Barbara Corcoran, the Wharton Alumni Angel Network, Social Capital, Backstage Capital, Treehouse Capital, Accelerator Ventures and Atlas Holdings. TechCrunch has more here.
Neurala, a nine-year-old, Boston-based software company behind The Neurala Brain, a deep learning neural networks platform, has raised $14 million in Series A funding led by Pelion Venture Partners, with participation from Sherpa Capital, Motorola Solutions Venture Capital, SK Ventures, Idinvest Partners, with earlier backers 360 Capital and Draper Associates Investments. TechCrunch has more here.
Pipedrive, a six-year-old, New York-based company that makes sales pipeline software, has raised $17 million in Series B funding led by Atomico, with participation from earlier backers Bessemer Venture Partners and Rembrandt Venture Partners. TechCrunch has more here.
Process Street, a two-year-old, New York-based platform for workflow automation, business process management and reporting, has raised $1.3 million in fresh seed funding from Blackbird Ventures and AirTree Ventures.The company had previously passed through the AngelPad accelerator program. More here.
ProtectWise, a 3.5-year-old, Denver-based security startup that records network traffic DVR-style and saves it in the cloud, has raised $25 million in new funding from Arsenal Venture Partners, Top Tier Capital Partners, Tola Capital, and unnamed strategic investors. The company has now raised more than $67 million altogether. TechCrunch has more here.
Zeotap, a two-year-old, Berlin-based startup that helps telecom companies sell their data to advertisers, has raised €12 million (roughly $13 million) in Series B funding. The capital came from New Science Ventures and location services provider HERE, as well as previous investors Capnamic Ventures and Iris Capital. Zeotap has now raised more than $20 million. TechCrunch has more here.
New Funds
Alchemist Accelerator, a three-year-old, San Francisco-based accelerator program that makes seed and early-stage investments, has raised $2.5 million for a new fund, including from Johnson Controls, Ericsson, and Analog Garage, the venture arm of Analog Devices. TechCrunch has more here.
Tej Kohli, an Indian entrepreneur and philanthropist with an estimated net worth of $6 billion, say he has earmarked an initial $25 million for a program called the The Kohli Impact Investment Initiative that will be invested through his investment firm, Kohli Ventures. The idea is to funnel capital to ideas and technologies with societal and environmental benefits, including via sectors that include artificial intelligence, fintech, ag tech and renewables. More here.
A new fintech-focused venture firm called Motive Partners, founded by a team of fintech entrepreneurs and investors, is launching today with offices in London and New York. The outfit isn’t revealing its fund size but earlier this month it quietly filed a Form D with the SEC noting that it was raising $150 million. TechCrunch has more here.
New Enterprise Associates, the 40-year-old venture firm, has signaled its intention to raise $3 billion for its 16th fund in a new SEC filing. More here.
Google is taking over Twitter’s mobile app developer platform Fabric, as well as its Answers mobile app analytics, and Crashlytics crash reporting system. The moves come as Twitter looks to cut its non-essential divisions. TechCrunch has more here.
Hewlett Packard Enterprise is acquiring the eight-year-old, Westborough, Ma.-based data-storage startup SimpliVity for $650 million in cash, a steep discount to the startup’s most recent $1 billion valuation. SimpliVity had raised more than $275 million from investors, including Accel Partners, CRV and Kleiner Perkins Caufield & Byers. The WSJ has more here.
Jason Child, CFO of Jawbone, the troubled consumer tech company, has left the company. Child had joined Jawbone in July 2015 from Groupon, where he had served as CFO for nearly five years and took the company public. The Verge has the story here.
Compass, the real estate startup that was recently assigned a $1 billion valuation, has a new COO: Maëlle Gavet. Gavet was most recently an EVP at Priceline. Earlier, she was CEO of Ozon, an Amazon-like company in Moscow. (We had lunch with her at the time to discuss the challenge of doing business in Russia.)
Daniel Springer is taking the reigns as CEO of the electronic signature company DocuSign. Springer was most recently an operating partner at the private equity firm Advent International. More here.
Jobs
Google is looking to hire a corporate development analyst to help with sourcing deals. The job is in Mountain View, Ca.
Essential Reads
Theranos is closing down its last remaining blood-testing facility after the lab reportedly failed a regulatory inspection.
These six-wheeled robots from Starship Technologies are about to start delivering food in the U.S.
Facebook is launching its first official startup incubator.
What I wish I’d known about equity before joining a unicorn.
Detours
More proof that eating hot peppers is good for you.
What a $250 million house looks like.
Pitchbot, for perfecting your startup pitch.
Retail Therapy
Apache sunglasses, for your own fictional Vietnam War film.