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Term Sheet -- Friday, November 10


HOT TAKES

Happy Friday, Term Sheet readers.

Yesterday, we talked about tech startups dipping their toes into the world of publishing. After perusing through Woolly, Casper’s new 96-page branded print magazine, I posed the following questions:

Is it too much of a stretch to think we’re going to see tech startups start scooping up traditional publications plagued by declining ad revenues? Will journalists become branded content creators writing about comfort pants and crystal healing? Are these flashy print magazines just startup marketing materials—or will companies like Airbnb and Casper actually upend lifestyle content as we know it?

I asked for your thoughts, and boy, did you deliver. It’s good to see that Term Sheet readers care so much about quality journalism (as do I), so I think you’ll enjoy the following responses:

Afshar writes: Out of all the sources of media I can choose to consume, I can’t imagine choosing to read something like Woolly. The only reason I’ve ever read Southwest’s in-flight magazine is because the WiFi doesn’t work and I’m a bored, captive audience. Otherwise I’d prefer to read something that caters to my interests. In my opinion, these publications are just a way for tech companies to continue to build and control their brand image. Sure, most media is ad supported, but usually that revenue is diversified. A publication with a single advertiser feels different, and I would always read the content wondering if there’s an ulterior motive. Don’t get me wrong though – I like print and am happy to see a trend occurring that creates jobs for journalists.

David writes: Startups getting into the publishing business might be good business but no one should confuse what they do with news. Newsrooms have generations of culture built up separating the editorial and business operations. When Elizabeth Spiers says “that story’s fantastic but I hate it because it’s being sponsored by a brand….That’s kind of irrational given that most media is ad supported,“ she’s fooling no one. That’s kind of B.S. given that most startups will say anything to justify their actions. I should know—I spent five years saying the same kinds of things as a startup founder. Enjoy the article? Sure, but don’t confuse it for anything more than an ad.

Billy writes: I’m thoroughly convinced that the print journalism you speak to is just another way of building “lifestyle brands” that e-commerce companies are in such pursuit of. I’ve worked at direct-to-consumer companies such as Allbirds and High Camp Supply, and on-demand brands such as a Sprig (now bankrupt on demand food company that raised >$60M)—these are all marketing tactics to drive duration of engagement with the company’s product – what everyone that is building a “lifestyle” brand is focused on. The more ways that I can insert my brand name and brand ethos into your life, the better your customer lifetime value will be for me.

Katie writes: Appreciate you bringing up the topic of sponsored content. It’s funny, I’ve seen ideas been thrown out there for clients/potential client around starting their own publication so you can control your content. It’s definitely happening for brands who can afford it/see the ROI in investing in it. If we are moving toward a world where company-sponsored content is the new norm, it will definitely change how we work in the PR industry too. I’d also argue that this is already a definite reality on social media. The lines are so blurred between what is an ad vs. what someone genuinely recommends, it’s hard to tell anymore.

Georgios writes: Coming from a design / experience background and brand interest I actually don’t see this as a print play but a brand play. I think it serves two purposes:

1. As a unique service artifact to delight and attract users (everyone can do insta but not everyone can publish a magazine). As the insta space becomes saturated this is a differentiated approach to present the brand.

2. As a way to prove legitimacy and passion for a topic. I think the latter is where the value is. ~*~Millennials*~* don’t trust one-dimensional brands and prefer value driven brands. By publishing a mag Airbnb, or Casper, or Away can prove that they are legitimately interested in this field. They’re not making cool luggage because it’s a white space opportunity but because they care so much about travel that they found a way to improve it. It begins to blur the lines of which companies care and which just know how to act like they care.

James writes: It strikes me that Casper’s editorial director is entirely missing the point about a “separation of powers” between those who fund a publication and those who write the material. It’s not that people will hate sponsored content that’s the issue with ownership of publication outlets, it’s that it starts to create possible conflicts of interest. Media supported by third-party ads, with no stake in the publication itself, have no reason to do this, as they can (at least in theory) get support from other brands. Publications directly connected to the ads they’re running can’t.

As to whether it’s more likely to happen, I sadly think so, because, as we’ve seen with things like Amazon’s move offline, online brands can use offline media (from print to physical stores) as brand advertising. It’s not their core revenue stream, so it can freely be run at a loss by online-first companies that can afford it, but it pushes their brand into arenas where their core business doesn’t necessarily reach.

To me, this is a no-brainer to small- or medium-sized companies, as their traditional print competition is dwindling, and the online marketing world is being increasingly dominated by a few players. Print is a brave new world for the online-first brands, with more potential for new challengers to make a mark. The most dangerous thing will come if brands can get their print certified as “entertainment” or “advertising” publications rather than news, and then merrily print journalistic articles. We’ve seen this sort of thing with other media (Fox News positioned as “News Entertainment” springs to mind), so I feel that such a move is a logical (if depressing) one for online brands to make.

WEEKEND READS: If you’re looking for some non-branded content to read over the weekend, here are my picks:

Are we ready for intimacy with androids? (WIRED) **highly recommend**

Louis C.K. is accused by 5 women of sexual misconduct (The New York Times)

The brothers who bought South Africa (Bloomberg Businessweek)

DEALBOOK HIGHLIGHTS: The New York Times’ DealBook conference was yesterday. Here are some of the highlights:

• “The culture went wrong, the governance went wrong, the board went in a very bad direction. I think winning gives some excuses for bad behavior,” said Dara Khosrowshahi said in his first public interview as Uber’s new CEO. He added that his goal is to take the company public by 2019.

“I have never offered to sell CNN. There is absolutely no intention that we would ever sell CNN,” said Randall L. Stephenson, CEO of AT&T. He said selling the cable network in an effort to complete the $85.4 billion acquisition of Time Warner has never been a consideration.

“People are looking for an independent voice, a real independent voice, that at least has an inkling of what they’re talking about,” Mark Cuban said. Cuban said he is at least “considering” a presidential run, but added that he’s reluctant to put his three kids through the process.

Polina out. Have a great weekend!

THE LATEST FROM FORTUNE…

• Uber just lost another battle in the U.K. (by David Meyer)

• HPE will now sell ‘Blockchain 2.0’ for cars, banks and planes (by Jen Wieczner)

• Your next lifesaving antibiotic may not work (by Clifton Leaf)

• WeChat owner Tencent is expanding way beyond China (by Adam Lashinsky)

…AND ELSEWHERE

How to break out of the national tax nightmare. Is Bitcoin the world’s most dramatic bubble? The medical research gap that’s leaving women’s health startups behind. Snap’s rise and fall. Jony Ive on Apple’s new HQ and the disappearing iPhone.

VENTURE DEALS

Nio, a China-based electric vehicle startup, raised more than $1 billion in its funding at a $5 billion valuation, according to TechCrunch. Tencent Holdings Ltd led the round. Read more.

Ecological Service Partners, a Washington, D.C.-based ecological restoration provider, raised $250 million in funding. The investors were not named.

Bolt Threads, an Emeryville, Calif.-based biotech company spinning microbes into spider silk, raised $106 million in Series D funding. Investors include Foundation Capital and 8VC. Read more.

Scoop Technologies, a San Francisco-based developer of an application for carpooling, raised $20 million in Series B funding. G2VP led the round.

EclecticIQ, a Netherlands-based provider of cyber threat intelligence technology solutions, raised 14 million euros ($16.3 million) in funding. Keen Ventures Partners led the round.

Panorama Education, a Boston-based data analytics company, raised $16 million in Series B funding. Emerson Collective led the round, and was joined by investors including Spark Capital, Owl Ventures, SoftTechVC and the Chan Zuckerberg Initiative DAF.

Hostmaker, a London-based Airbnb management company, raised $15 million in Series B funding. Sansiri and Gaw Capital led the round, and were joined by investors including DN Capital, Ventech and DSGCP.

Vade Secure, a France-based provider of predictive email defense solutions, raised $12 million. ISAI was the lead investor.

Nanomix, Inc., an Emeryville, Calif.-based developer of mobile, point-of-care diagnostics, raised approximately $9 million in funding.

Welkin Health, a San Francisco-based digital health company, raised $8 million in Series A funding. Thrive Capital led the round.

Embodied Intelligence, an Emeryville, Calif.-based developer of AI software that teaches robots new skills, raised $7 million in seed funding. Amplify Partners led the round, and was joined by investors including Lux Capital, SV Angels, FreeS, 11.2 Capital and A.Capital.  

Enveil, a Fulton, Md.-based data security company, raised $4 million in funding. Investors include Thomson Reuters, Bloomberg Beta, and DataTribe.

Sourceress, an AI recruitment platform, raised $3.5 million in funding. Investors include Lightspeed Venture Partners.

Peloton Innovations, a Canada-based security startup studio, raised C$3 million ($2.4 million) in seed funding. Razor Suleman, Globalive Capital and Tim Hockey led the round.

ScaleFactor, an Austin, Texas-based smart finance and accounting platform that enables businesses to operate in real-time, raised $2.5 million in seed funding. Investors include Next Coast Ventures, Techstars Ventures, Firebrand Ventures, Matchstick Ventures, Edison Factory and Flyover Capital.

PRIVATE EQUITY DEALS

Eurazeo and Primavera Capital Group agreed to make an investment in WorldStrides, a Charlottesville, Va.-based education provider. Eurazeo will acquire a majority stake in WorldStrides in the $500 million range while Primavera will make a minority investment.

Katena Products, which is backed by Audax Private Equity, acquired Rhein Medical Inc, a St. Petersburg, Fla.-based supplier of ophthalmic surgical instruments. Financial terms weren’t disclosed.

OTHER DEALS

Blackstone Group LP will acquire ShyaHsin Packaging, a China-based cosmetics packaging firm, for about $800 million to $900 million, according to Reuters. Read more.

B. Riley Financial, Inc. will acquire magicJack VocalTec, Ltd. (Nasdaq:CALL), a Voice over IP cloud-based communications company, for approximately $143 million.

Elite SEM Inc, which is backed by Mountaingate Capital, acquired OrionCKB, a Boston-based social advertising agency. Financial terms weren’t disclosed.

InVivo will buy Jardiland, a France-based gardening chain, for an undisclosed amount, according to Reuters. Read more.

IPOs

PPDAI Group, a Shanghai, China-based peer-to-peer lending platform, raised $221 million in an offering of 17 million shares at $17, within its range. The company posted revenue of $175.1 million and loss of $8.7 million in 2016. Backers include Sequoia Capital China(25.5% pre-IPO) and Lightspeed China Partner(10.4%). Credit Suisse and Citi are underwriters in the deal. The company plans to list on the NYSE as “PPDF.”

Apellis Pharmaceuticals, a Crestwood, Kentucky-based company raised $150 million in an offering of 10.7 million shares at $14 a piece. In 2016, the company posted loss of $27.1 million. Morningside Venture Investments(28% pre-IPO), Potentia Holdings(9.9%), and venBio Funds(9.4%) back the company. Citigroup and J.P. Morgan are underwriters in the deal. The company plans to list on the Nasdaq as “APLS.”

Luther Burbank, a Santa Rosa, Calif.-based residential loan-focused bank, filed for an $150 million IPO. In 2016, the company posted income of $52.1 million and assets of $5.1 billion. Keefe, Bruyette & Woods and Sandler O’Neill + Partners are joint bookrunners in the deal. The company plans to list on the Nasdaq as “LBC.”

Erytech Pharma, a Lyon, France biotech developing cancer treatments, raised $109 million in an offering of 4.7 million ADSs at $23.36 a piece. In 2016, the company, posted revenue of $4.9 million and loss of $25.7 million. Baker Bros Advisors(15.4% pre-offering) and Auriga Partners (9.8%) back the company. Jefferies, Cowen & Company, and Oddo BHF are joint bookrunners in the deal. The firm plans to list on the Nasdaq as “ERYP.”

Bandwidth, a Raleigh, N.C.-based API software company, raised $80 million in an offering of 4 million shares at $20  a piece, the low end of its range. In 2016, the company posted revenue of $152 million and income of $22.4 million. The company is backed by Carmichael Investment. Morgan Stanley, KeyBanc Capital Markets, Baird, Canaccord Genuity, and JMP Securities are underwriters in the deal. The company plans to list on the Nasdaq as “BAND.”

Quanterix, a Lexington, Mass.-based protein detection test maker, filed for a $57.5 million IPO. In 2016, the company posted revenue of $17.6 million and loss of $23.2 million. ARCH Venture Partners(21.8% pre-offering) and Bain Capital(12.7%) back the company. J.P. Morgan and Leerink Partners are joint bookrunners in the deal. The company plans to list on the Nasdaq as “QTRX.”

EnteraBio, a Jerusalem-based oral drug maker for thyroid conditions, filed for a $50 million IPO. In 2016, the company posted loss of $5.4 million. D.N.A Biomedical Solutions(43.7% pre-offering), Centillion Fund(21.1%) and Pontifax(8.9%) back the company. Oppenheimer & Co. is sole underwriter in the deal. The company plans to list on the Nasdaq

EXITS

Musical.ly Inc., a Santa Monica, Calif.-based maker of a lip-syncing app popular, agreed to be acquired by Beijing Bytedance Technology Co. for as much as $1 billion. Read more at Fortune.

Dynatrace, a portfolio company of Thoma Bravo, acquired Qumram, a Switzerland-based provider of advanced session replay technology for mobile and web applications. Financial terms weren’t disclosed. Qumram raised approximately $4.6 million in venture funding from investors including Mundi Ventures, 3wVentures, and Zirkonia.

VerticalScope acquired VarageSale, a Canada-based buy-and-sell website and mobile app. Financial terms weren’t disclosed. VarageSale raised approximately $60 million in venture funding from investors including iNovia Capital, Lightspeed Venture Partners, Real Ventures, Sequoia Capital and Version One Ventures.

Elastic acquired Swiftype, a San Francisco-based developer of an artificial intelligence powered enterprise search platform, according to TechCrunch. Financial terms weren’t disclosed. Swiftype had raised approximately $22 million in venture funding from investors including NEA, Kleiner Perkins Caufield Byers, and Andreessen Horowitz. Read more.

Knowlton Development Corporation will acquire Aromair Group’s U.S. subsidiary Aromair Fine Fragrance Company Inc. Financial terms weren’t disclosed.

FIRMS + FUNDS

Baring Private Equity Asia, a Hong Kong-based private equity firm, plans to raise $6 billion for a new Asian fund, according to Reuters. Read more.

PEOPLE

WhiteHorse Capital promoted Gina Provenzale, Jeff Wells and John Yeager to managing director.

Neuberger Berman Breton Hill named Ram Ramaswamy as managing director and head of investment solutions. Previously, Ramaswamy was at Goldman Sachs Asset Management.

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Polina Marinova produces Term Sheet, and Lucinda Shen compiles the IPO news. Send deal announcements to Polina here and IPO news to Lucinda here.

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