Friday Feedback
This is Erin Griffith filling in for Dan Primack while he’s on vacation.
New York is melting, Dan returns next week, and the deals news is as slow as a Friday in August. In other words, time for some Friday Feedback.
• First up is my column on AngelList’s three billion-dollar exits:
Kevin writes: Down the line, AngelList will have some massive unicorn power law returns where syndicates played at attractive entry points. However, if we estimate that the AL syndicate for Cruise was the Series A near a $100 million valuation, the syndicate for Dollar Shave Club was at a $500 million valuation, and Authy was acquired by Twilio for a pittance, AL should really not be touting $1 billion exits that only produced 1.5-8x returns. Venture is all about outsized returns. This latest marketing is more akin to late stage VC logo hunting for branding purposes rather than returns.
An AngelList angel that backed Authy writes: I can’t complain about the return, but could’ve had a better return by investing in the Twilio IPO…
• Next up, responses to my column on Hampton Creek’s mayo-buying shenanigans:
Alexander writes: In business and tech media it's been popular to portray founders as hard-working entrepreneurs and investors as evil sources of capital. So when you uncover questionable/unethical behavior by some founder, the investors either remain evil “peddlers" or they're dumb for putting "founders first"? Why is it so difficult to portray this business as having two groups, investors and founders, the vast majority of whom are hard-working, ethical business people, with some rotten apples on both sides?
(My response: Yes, #NotAllInvestors, but Zenefits, Theranos, Hampton Creek, and plenty of small, lesser-known examples, goes beyond a few "rotten apples" and shows the power dynamic may have swung too far in favor of founders in recent years.)
Matthias writes: Regarding your point that “CPG companies shouldn't be funded with the same growth expectations as tech startups," they absolutely should. There is a current and unfortunate perspective pervading the investor community around CPG performance that has resulted in these opportunities being wildly underfunded/appreciated and I think we ought peddle hard in the other direction. CPG often outperforms tech -- Dunkin Donuts is more profitable than Facebook, Google, LinkedIn or eBay...
Shep writes: What’s the difference between the Fed buying bonds, or US farm subsidies, and what Hampton Creek just did? Is it that the Fed and the US Farm subsidies are “out in the open”, and Hampton Creek operated w/o disclosure? Aren’t they all accomplishing the same thing – artificially propping up the market, which most of us would agree is a bad thing, to ultimately accomplish a greater good? Can’t Hampton Creek make the same argument – that they are temporarily supporting the market while chubby out of shape middle aged has-beens like me figure out that the product actually tastes pretty good, and is a lot better for us than the ‘full strength’ original mayo, which contributes to heart disease, clogged arteries, etc?
• Lastly, responses to my column on shorting the startup market:
Adam writes: It’s incredibly difficult to time the short of a stock (especially a high-momentum stock in technology or China) and many hedge funds were long technology stocks through most of the market increase (before selling their positions prior to the most significant part of the collapse).
It’s also really hard to bet on on macroeconomic events, because even if you’re right, it’s incredibly difficult to time the market and understand the second order effects that would affect any trade you’d want to make.
To draw the same parallel to the housing bubble, there were many individuals who were vocal about housing prices being overvalued, but set up an incorrect trade (i.e. Hedged with long exposures to emerging markets, which also were dragged down with the rest of the market).
Sean writes: I have seen anecdotally that interest in shorting has quieted compared to earlier this year, but interest in hedging remains. In other words, "How do you hedge private investments with public ones and vice versa?" An example of the latter (and taking a different twist on one of your examples) is hotel owners/operators looking to invest in Airbnb to hedge their exposure.
• Signing off: It’s been a pleasure writing for you for the past two weeks, Term Sheet readers. (If you agree, stay in touch by following me on Twitter.)
I want to also give a shout-out to Michelle Toh, Fortune’s recently hired Hong Kong-based editor, who has been hugely helpful in compiling a bunch of the deal items that run alongside these missives. Thanks Michelle! Dan is back Monday.
THE BIG DEAL
• Hewlett Packard Enterprises is buying SGI, the Fremont, Calif.-based computing hardware maker founded by Jim Clark in the 1980s, for around $275 million. Read more.
VENTURE CAPITAL DEALS
• UpGuard, a Silicon-Valley based cybersecurity firm, has raised $17 million in Series B funding from Pelion Venture Partners and Square Peg Capital. www.upguard.com
• Xperiel, a Sunnyvale, Calif.-based provider of a mobile app development tool that works with Internet-connected equipment in sports stadiums and other facilities, has secured $7 million in funding from investors including Major League Baseball, the Los Angeles Dodgers, Andy Bechtolsheim, and Diane Greene. Read more.
• MightyTV, a New York-based maker of a video discovery app, has secured $2 million in seed capital from Canaan Partners and Spark Capital. mighty.tv/
• Leaf, a smartphone-controlled automated home-grow system for cannabis based in Tel Aviv, has raised $2 million in seed funding. CJV Capital led the round, which included Phyto Partners and Advanced Nutrients, according to TechCrunch. Read more.
• Nexamp, a Boston-based solar developer and installer, has taken an investment of undisclosed size from Diamond Generating Corp., a subsidiary of Mitsubishi Corp (NASDAQ: MSBHY). nexamp.com/
PRIVATE EQUITY DEALS
• CVR Energy, a Texas-based refiner owned by Carl Icahn, is preparing an offer for Delek U.S. Holdings, a refiner in Arkansas and Texas, according to The New York Post. Read more.
• FIMI is in advanced discussions to acquire the Israeli subsidiary of British security giant G4S, according to Haaretz. The deal could reportedly be valued at $104.9 million. Read more.
• Stem, a provider of energy storage solutions based in Millbrae, Calif., has raised up to $100 million in financing from affiliates of Starwood Energy Group Global. www.stem.com
• Valentus Specialty Chemicals, a portfolio company of Huron Capital Partners, has acquired the wood floor finishes business of New Rochelle, N.Y.-based Paint Over Rust Products. No financial terms were disclosed.
IPOs
• Medpace Holdings (NASDAQ: MEDP) shares jumped on their first day of trading, opening at $28.15, and closing up 20% at $27.67. The a Cincinnati-based clinical contract research group is backed by Cinven.
EXITS
• Microsoft has acquired Beam, a Seattle-based game streaming service, for an undisclosed amount. Beam had raised money from Courtside Ventures, Ore Ventures, and Techstars. beam.pro/
• AcuityAds (TSXV:AT), a Toronto-based marketing tech firm, is acquiring 140 Proof, a social and mobile targeting tool provider based in San Francisco, for up to $20 million. 140 Proof raised $5.5 million in funding from investors including BlueRun Ventures, Founders Fund, and SV Angel. www.140proof.com
• KB Holding has acquired Kings Super Markets and Balducci’s Food Lovers Markets from Angelo, Gordon & Co. and MTN Capital Partners. Terms were not disclosed. kingsfoodmarkets.com www.balduccis.com
• Carlyle Group LP and Brazilian investor Guilherme Paulus have raised a collective 1.230 billion reais ($394 million) in a partial exit from Brazilian travel agency CVC Brasil Operadora SA, Reuters reports. Read more.
OTHER DEALS
• Breezeworks, a service business automation platform based in San Francisco, has acquired the app business of Prompt.ly, a field software app maker based in San Francisco. Terms were not disclosed. www.prompt.ly
• Tencent Holdings, China’s leading social network and online entertainment firm, and PCCW, a Hong Kong-based telecom, media and IT solutions player, have backed STX Entertainment, a Los Angeles-based movie studio. Financial terms of the deal were not disclosed, but the deal puts STX’s estimated valuation at close to $1.5 billion. Read more.
• Daetwyler, a Swiss electronic components distributor, could potentially sweeten its bid for Premier Farnell, a British distributor of tech solutions, after another offer was submitted by Avnet, a Phoenix-based electronic components distributor, according to Reuters. Read more.
• Steinhoff International Holdings, a South African retailer, has raised its bid for Poundland, a British variety store chain, to 610 million pounds ($793 million), according to Bloomberg. Read more.
• South Korean conglomerates SK Networks and CJ Corp have submitted separate bids to acquire South Korean home appliance rental company Tongyang Magic, according to Reuters. Read more.
• Partners Group, InfraRed Capital Partners, DEME Concessions Wind, GE Energy Financial Services, and L’Agence de l’environnement et de la maîtrise de l’énergie will invest $1.8 billion million in the construction of Merkur Offshore, a construction-ready wind farm based in Hamburg, Germany.
FIRMS & FUNDS
• GSV Ventures has raised $6.5 million for its fifth fund, according to an SEC filing. The target is $250 million. gsvcap.com/
MOVING IN, ON & UP
• Citigroup has appointed Jennifer Fox and Toby King co-heads of its North American healthcare investment banking division. It also named Brad Wolff head of West Coast life sciences, reports Reuters. Read more.
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