Investing where the government is falling short

Regardless of red or blue, there is one fact that just about every voter can agree upon: There is always some issue that Capitol Hill or City Hall just isn’t getting right. 

On Monday, venture firm General Catalyst announced a new investing focus on “civic tech” to be headed by partner Katherine Boyle.

So what exactly does that mean? Boyle will focus on investing in companies that are “either working hand-in-hand with the government to solve problems, or building in a way that augments the function of government to help society,” she says (for now, she is the sole partner to lead the charge, though other partners at the firm can also make investments in the space). In other words, General Catalyst is seeking to invest in startups that fill a gap where the authorities have fallen short—firms that solve problems typically tackled by the public sector, but will have the potential to grow with the speed of a private sector company.

Boyle says the venture firm is not looking to invest in, say, software that sells directly to government agencies—a process that can be slow and frustrating for the startup involved. Instead, it is seeking startups that are, say, looking to ameliorate San Francisco’s housing crisis by building guest houses in people’s backyards, or fill America’s shifting workforce needs with re-skilling classes.

“We think civic technology is going to be a growing sector,” Boyle, who is also moving to Miami, told me last week. As part of the thesis, Boyle says General Catalyst is also looking to invest in more aerospace and defense companies. (Boyle led General Catalyst’s 2017 investment in Anduril, a defense technology startup.)

You can read a longer story about Boyle’s “civic tech” project here. But I also left much of our conversation on the cutting-room floor. Boyle argues that as government work grew out of vogue in the 1950s and ‘60s (and then even more so in the wake of the highly unpopular Vietnam War), talent instead flew to private sectors in finance and now, tech. Now, says Boyle, many of those who would have previously sought to work within government are looking to solve problems like carbon emissions from Silicon Valley.

Still, having a private sector company try and fill the gaps of government can create perverse incentives down the line. For example, tax software makers Intuit and H&R Block certainly make it easier for some to fill in their taxes—but as the government grew more tech savvy, the duo also lobbied hard against free tax-prep tech that threatened their business. So I asked Boyle, how does she think about the problem in the context of her startups?

Here’s what Boyle had to say to that end: “I never hear mission-driven founders say: ‘We’re going into this sector because it’s so inefficient and the government is never going to fix itself so we have the opportunity to build a lasting company’… But I do think that it’s an important question to ask down the line.”

Of course, then that brings up the other part of the balancing act, which is: How do you then make strong returns as a fund? In short, it’ll be a dynamic to watch. 

SOOOO, THAT WAS A MISTAKE: Some three years ago, AT&T fought hard to buy up Time Warner for an eye-popping $85 billion. Then-CEO Randall Stephenson extolled the virtues of a potential deal: Combined, AT&T and Time Warner could differentiate itself by offering customers deals bundling wireless service with streaming content. The idea was that data collected from customers could then inform advertisers how best to target audiences. 

Skeptics were—skeptical, to say the least. Falling short of its competitors like Verizon in the arena of 5G, AT&T appeared to be acquiring Time Warner for the sake of growth rather than creating a viable long-term strategy. And while the content arena was attractive, AT&T was stepping into a heavily competitive realm where Netflix and Disney were spending billions. 

“I spend as much time thinking about Amazon and Netflix as I do thinking about Verizon and Comcast now,” Stephenson told Fortune’s Geoff Colvin in May 2019.

In hindsight, that was perhaps one of the reasons why the merger didn’t work out. Under a different CEO (John Stankey), AT&T is now spinning off those expensive assets into a new company in what amounts to an admission that the idea wasn’t such a good one after all. On Monday, the telecom giant said it plans to combine its content assets with Discovery, creating a standalone media company. Still subject to regulatory approval, the combination will bring brands such as the HBO Max and discovery+ streaming services under the same roof. AT&T shareholders are expected to hold about 71% of the business, while Discovery shareholders will receive the rest. AT&T would receive about $43 billion in cash and debt. Read our 2019 full feature on AT&T here.

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

VENTURE DEALS

- Pine Labs, an India-based commerce platform for merchants, raised $285 million valuing it at $3 billion. Investors include Baron Capital Group, Duro Capital, Marshall Wace, Moore Strategic Ventures, and Ward Ferry Management, as well as Temasek, Lone Pine Capital, and Sunley House Capital.

- Ankorstore, a Paris-based curated marketplace for independent brands and retailers, raised $100 million in series B funding. Tiger Global and Bain Capital Ventures led the round and were joined by investors including Index Ventures, Global Founders Capital, Alven, and Aglaé.

- Interline Therapeutics, a San Francisco-based biotech focused on developing therapies correcting dysfunctional protein communities, raised $92 million. Arch Venture Partners and Foresite Capital led the round. 

- Waybridge, a New York-based supply chain platform for raw materials, raised $30 million in Series B funding. Rucker Park Capital and Craft Ventures led the round.'

- Carewell, a Charlotte-based platform for caregivers, raised $25 million. Sageview Capital led the round and was joined by investors including Headline (formerly e.ventures), NextView Ventures and Primetime Partners.

- Authomize, a Tel Aviv-based security and identity startup, raised $16 million in Series A funding. Innovation Endeavors led the round and was joined by investors including Blumberg Capital, Entree Capital and M12.

- Jifflenow, a San Jose, Calif.-based meeting automation platform, raised $11.9 million. Trousdale Capital led the round.

- Clinch, a New York-based consumer intelligence company, raised $10 million in Series A funding. D Squared Capital led the round.

- Forager, a Portland, Me.-based company focused on connecting local farmers with grocers, raised $4 million. Investors included Duncan Saville of ICM and Coastal Enterprises.

PRIVATE EQUITY

- KKR invested $95 million in Lenskart, an India-based eyewear retailer. 

- Insight Partners invested $290 million in CivicPlus, a Manhattan, Kan.-based provider of cloud-based software for local governments. 

- Healogics, a Jacksonville, Fla.-based provider of wound care, raised $240 million. Clayton Dubilier & Rice, Partners Group, and Northwestern Mutual invested $75 million. Marathon Asset Management invested some $165 million 

- BlackRock Long Term Private Capital acquired a majority stake in Transaction Data Systems, a pharmacy software solutions and services provider. Financial terms weren't disclosed.

- Kelso & Company acquired Silver Spur, a Cerritos, Calif.-based provider of specialty glass and plastic packaging. Financial terms weren't disclosed.

- Resolute Industrial Holdings, backed by AE Industrial, acquired All American Portable Air, a Nashville, Tenn.-based climate control and services company. Financial terms weren't disclosed.

EXITS

- Mindray will acquire HyTest, a developer of antibodies and antigens, from Summa Equity for €545 million ($662 million).

- KKR is in talks to acquire ERM Group, a London-based sustainability-focused consultancy, from investors Omers Private Equity and Alberta Investment Management. A deal could value it at $3 billion, per Bloomberg.

- Roark Capital acquired NBC Holdings, a franchisor of bakeries also known as “Nothing Bundt Cakes," from Levine Leichtman Capital Partners. Financial terms weren't disclosed.

- Apeel acquired ImpactVision, a San Francisco-based maker of imaging technology that “sees'' inside fruits and vegetables it treats. ImpactVision has been backed by investors including AgFunder and Acre Venture Partners. Financial terms weren't disclosed.

- StepStone acquired Mya, a San Francisco-based conversational A.I. tech company. Investors include Foundation Capital. Financial terms weren't disclosed.

OTHER

- General Mills acquired a division of Tyson Foods that makes pet treats for $1.2 billion.

- Crown Resorts, a Australian casino operator, rebuffed Blackstone’s roughly $6.5 billion buyout offer, saying it undervalues the company. 

- AT&T is in talks to merge WarnerMedia with Discovery, per Bloomberg. A deal would likely result in a new, publicly traded company. 

- Substack acquired People & Company, a New York-based team-training and community-building consultancy. Financial terms weren't disclosed. 

IPOS

- Marqeta, an Oakland, Calif.-based payments company, filed for an IPO. Granite Ventures and Iconiq back the firm. 

- JD Logistics, a Beijing-based supply chain logistics company, is aiming to raise as much as $3.4 billion in a Hong Kong IPO. 

- Zenvia, Brazil-based maker of a customer experience platform, postponed plans to raise roughly $213 million via an IPO.

- NerdWallet, a San Francisco-based consumer financial advice website, filed confidentially for an IPO, per Reuters. Its investors include iGlobe Partners and IVP.

SPACS

- Bright Machines, a San Francisco-based manufacturing software business, will go public via merger with SCVX, a SPAC. A deal values the firm at $1.6 billion. 

F+FS

- Siguler Guff, a New York-based private equity investment firm, raised $240 million for its first direct investment emerging markets fund, GEMCo.

- Framework Ventures, a San Francisco-based venture capital fund in the decentralized finance space, raised $100 million for its second fund.

- Semble Ventures, a San Francisco-based venture firm formerly known as Amaranthine, is seeking to raise $50 million.

PEOPLE

- Andreessen Horowitz promoted Christopher Lyons to general partner overseeing the Cultural Leadership Fund.

- Jana Messerschmidt left Lightspeed Venture Partners to focus on Hashtag ANGELS, per her Twitter.

- Innovation Endeavors, a Palo Alto, Calif.-based investing firm, named Amir Shevat as a venture partner.

- CircleUp Growth Partners, a San Francisco-based investor, named Madeline Darcy as a general partner. She was previously at Victress Capital.