Thank God it’s February. We’re not sure how much more of January we could have taken.)
Hope you’re having a nice Wednesday, everyone.:)
Top News in the A.M.
Online lender Social Finance is acquiring a digital-banking startup as it looks to accelerate its expansion into more pockets of consumer finance (and become the central financial services hub for its customers). Its new purchase: Zenbanx Holding, a four-year-old firm that offers online and mobile bank accounts in multiple currencies and performs international money transfers. Terms of the acquisition weren’t disclosed, but a WSJ source pegs the all-stock deal valued at nearly $100 million. More here.
Why East Coast Investors are Better Off if the Market Turns
A new trends report published by the law firm Cooley report suggests that the venture market remains largely healthy for now. In the fourth quarter, for example, Cooley handled 187 “disclosable” (versus stealth) deals that represented more than $2.7 billion of invested capital. That’s 18 percent more deals than it closed in the fourth quarter of 2015 — though the amount of money involved fell 23 percent from the year-earlier period. (VCs were writing smaller checks into a greater number of startups.)
Of slightly more interest to us were the deal terms involved in these fundings, some of which suggest that East Coast VCs have more safeguards than their West Coast peers if the market changes.
We talked with one of the study’s author, Cooley attorney Dave Young, about what he found and what it might mean.
This report seems pretty positive on its face.
I think it shows a surprisingly strong, healthy venture market. In 2015, there was this sense that maybe things were getting overheated, with nontraditional investors coming in and leading later-stage rounds in companies that hadn’t proven themselves yet. And that led to the view that things would slow down meaningfully in 2016. That didn’t really happen, though. People were being more disciplined around valuations and the size of rounds, but a lot of deals were getting done.
You also focus on the terms in this report. Are you starting to see anything onerous?
I’d say founder-friendly terms are still really prevailing, and by that I mean plain vanilla terms. Whenever we inevitably head back to where the economy turns down, terms will get tough, and the levers will shift back toward [investors].
So no pay-to-play provisions [meaning if a company needs to raise money and resorts to insiders for it, those who can’t or don’t want to contribute their pro rata share will see their preferred shares reduced to either common stock or some other subset of equity with fewer rights]. I think there was some expectation that those would start reappearing in deals as this tech boom runs on and on.
We’re seeing some, but it’s been steady over the last three or four quarters or so, which is a good sign. We’re seeing them in situations when it makes sense — when it’s the right tool for that particular situation. But it’s not something people are defaulting to.
That said, sometimes with those down rounds and recaps and pay-to-plays, there’s a bit of a lag, because if companies are having a hard time getting funded, earlier investors will put in six, nine, 12 months of cash. If you have $10 million in a company already, you’d rather do that than see it crater. But you only do it once. Without a new lead investor and a new plan, those companies [are going to go out of business].
East Coast investors have historically been a little more metrics-driven than West Coast investors. Is that still true and does that impact how the market could shake out if there’s a downturn?
This has always been the case, but you see East Coast terms that are way more investor favorable, compared with West Coast [terms]. It’s more surprising to me that that hasn’t changed over time.
How do the terms differ, exactly?
In East Coast deals, you see more of what are called redemption provisions and cumulative dividends. Redemption provisions basically give investors the right to be bought out four or five years down the line — to get their money back if a company joins the living dead. They’re very rarely seen in Silicon Valley, but they appear in 25 to 30 percent of the deals on the East Coast.
New Fundings
AIM, a 1.5-year-old, New York and Seoul-based startup behind an artificial intelligence-powered app for financial investments (largely for customers in Korea), has raised $1.6 million in seed funding from DT&I, Soorim, Seoul Business Agency, and Startup Bootcamp. TechCrunch has more here.
ClearMotion, an eight-year-old, Boston-based digital chassis developer that replaces traditional automotive shock absorbers with software-controlled actuators, has raised $100 million in Series C funding from clients of J.P. Morgan Asset Management, with participation from New Enterprise Associates, Qualcomm Ventures, World Innovation Lab, and Eileses Capital. The company, founded out of MIT, has now raised more than $130 million altogether. More here.
Glide Technologies, an Oxford, U.K.-based pharmaceutical development and device company, has raised £3.2 million ($4 million) in funding from earlier backers Invesco Perpetual, Oxford Technology Venture Capital Trusts, Oxford Capital Partners and Hygea VCT. More here.
Inmoji, a 2.5-year-old, Boston-based startup that creates emoji-focused marketing campaigns, has raised $1.5 million in fresh funding that brings its total funding to $9 million. The capital comes from previous investor John Wigneswaran (a longtime pharma and medical device exec) and a group from MIT’s Sloan business school. TechCrunch has more here.
InovyTec, a six-year-old, Hod-Hasharon, Israel-based developer of emergency medical devices, has raised $3 million in fresh funding from Hong Kong-based Vincent Medical Holdings. The Times of Israel has more here.
Kinestral Technologies, a 6.5-year-old, South San Francisco-based maker of “smart-tinting glass,” has raised $65 million in Series C funding led by glass manufacturer AGC Asahi Glass, with participation from Hermes-Epitek and earlier backers 5AM Ventures, Alexandria Venture Investments, Capricorn Investment Group, Mitsubishi UFJ Capital, and Versant Ventures. Silicon Valley Business Journal has more here.
LatiPay, a year-old Auckland, New Zealand-based cross border payments company looking to expand into Singapore and elsewhere, has raised $3 million in funding from Singapore-based Jubilee Capital Management, with participation from Tuhua Fund, Zino Fund and an unnamed angel investor. e27 has more here.
Netgain, a 16-year-old, St. Cloud, Mn.-based company offering IT-as-a-service for healthcare providers, has raised $25 million in funding from Bluff Point Associates. Tech.mn has more here.
Reserve, a 2.5-year-old, New York-based startup offering table and customer management tools for restaurants, has raised $10 million in Series B funding led by Expa, the startup studio where it was first incubated. Other investors include First Round Capital and Human Ventures. Reserve has now raised more than $27 million altogether. TechCrunch has more here.
Trussle, a 1.5-year-old, London-based online mortgage broker, has raised £4.5 million ($5.7 miillion) in funding led by Orange Growth Capital,with participation from existing investors LocalGlobe, Zoopla, Seedcamp, and angel investors Ed Wray and Ian Hogarth. The Times has more here.
Uptake, a 2.5-year-old, Chicago-based predictive analytics startup that was founded by Groupon cofounder Brad Keywell, has raised $40 million from Revolution Growth. The company has been valued at $2 billion in the deal, says the WSJ. More here.
Wealthsimple, a 2.5-year-old, Toronto, Canada-based robo-adviser startup, has raised C$20 million ($15.3 million) from Power Financial Corp. Reuters has more here.
Xometry, a 3.5-year-old, Gaithersburg, Md.-based on-demand manufacturing marketplace, has raised $23 million in new funding from GE Ventures and earlier investors, including Highland Capital Partners. More here.
Exits
Fingerprint Cards, a Gothenburg, Sweden-based company, is paying $106 million to acquire Delta ID, a five-year-old, Newark, Ca.-based iris recognition technology company. According to Crunchbase, Delta ID had raised roughly $6 million, including from Intel Capital. More here.
Video app Flipagram is getting acquired by the Chinese company Toutiao for an undisclosed amount. Flipagram was once a social media darling — raising money from both Kleiner Perkins and Sequoia Capital and attracting both star VCs John Doerr and Michael Moritz to its board — but the startup appeared to lose momentum over the last year. TechCrunch has more here.
Kickstarter, the crowdfunding service, has acquired the 1.5-year-old Canadian video streaming startup Huzza. The purchase follows a close collaboration between the two parties that led to the launch of Kickstarter Live back in November, a live streaming feature with real time feedback designed to give creators a direct channel of communication with their community. Terms aren’t being disclosed. It doesn’t look like Huzza raised outside funding (tho’ we aren’t positive about that). TechCrunch has more here.
Publicly traded games maker Take-Two Interactive has acquired Social Point, a nine-year-old, Barcelona-based social game publisher, for $276 million. According to Crunchbase, Social Point had raised roughly $44 million from investors, including Highland Capital Partners Europe, Idinvest Partners, and Nauta Capital. TechCrunch has more here.
IPOs
ForeScout, a 16-year-old, San Jose, Ca.-based security company, has filed confidentially for an IPO, reports TechCrunch. The company has raised more than $158 million since it was founded, including from Accel Partners, Meritech Capital Partners and Pitango Venture Capital. More here.
People
Michael Cardamone has joined SaaStr Ventures as a venture partner. Cardamone — an early Box employee — is also a managing director at Acceleprise, an enterprise software focused accelerator.
Billionaire hedge fund manager Ray Dalio’s honeymoon with President Donald Trump is looking to be short lived. Bloomberg has the story here.
Star VC Jim Goetz is stepping away from his management responsibilities at Sequoia Capital, and Roelof Botha is stepping up. We have more here.
Martin Hauge, long a partners at the Nordic venture capital firm Creandum, has joined the growth-stage venture firm Frog Capital as its non-executive chair. More here.
Angela Tran Kingyens, a data scientist, PhD and former entrepreneur, has been promoted to principal at Version One Ventures, which she joined as an associate in 2013. Before joining Version One, Kingyens co-founded Insight Data Science, a YC-backed Silicon Valley startup that helps PhDs transition from academic research to careers in the industry.
Facebook COO Sheryl Sandberg — who did not join the global Women’s March on January 21nd and has stayed relatively mum about the new U.S. administration — opened up about her stance at an event this morning, saying that a personal obligation kept her from joining the massive protest. “I think we don’t know what’s going to be effective yet,” she added. “It’s very early days of the new administration, but we know that the issues for women in leadership are real and it is about the steps we take as a society. It’s about the public policy we take. It’s also about the individual steps women take.” TechCrunch has more here.
Officials in New Zealand released documents last night related to investor Peter Thiel’s application to become a citizen there. Wrote Thiel on a form that would eventually help win him citizenship: “I am happy to say categorically that I have found no other country that aligns more with my view of the future than New Zealand.” The New York Times has more here.
Jobs
Grishin Robotics, a hardware-focused venture firm that’s currently investing its second ($100 million) fund, is looking to hire an analyst or associate. The job is in Menlo Park, Ca.
Essential Reads
Amazon said yesterday that it plans to build its first air cargo hub to accommodate its growing fleet of planes, signaling the company is ramping up its expansion into transporting, sorting and delivering its own packages. The WSJ has more here.
Snap is now working on virtual reality lenses that let people overlay images onto landscapes in the real world. The Information has more here.
Detours
Every single Ivy League school has now spoken out against Trump’s executive order on immigration.
Kung fu plus wildly out-of-place music! (H/T: Awesomer.)
Beyonce is pregnant — with twins!
Retail Therapy
The best noise-canceling headphones of 2017. We’re going to be needing some of these.