5 Qs WITH A DEALMAKER
Eric Hippeau, a managing partner at Lerer Hippeau Ventures, is well-known in the venture community for his firm’s blockbuster investments including Birchbox, BuzzFeed, Casper, and Warby Parker. Two thirds of Lerer Hippeau portfolio companies are based in New York. Why?
“New York is a center of innovation and technology, but it doesn’t have the VC support that you find on the West Coast,” he said. “There are few early-stage funds such as ours that dedicate the majority of their investment to New York, so we felt that was a very good way to build a portfolio.”
Hippeau has had a remarkable career path. Prior to Lerer Hippeau, he served as CEO of The Huffington Post, a managing partner at SoftBank Capital, and the chief executive of Ziff-Davis.
In a conversation with Term Sheet, Hippeau discussed how New York’s landscape has changed, why he thinks Masayoshi Son is not a bubble-maker, and what companies can do about “superstar harassers.”
The following has been edited for length and clarity.
TERM SHEET: The majority of your investments are in New York. How has the NYC tech ecosystem changed in the last few years?
HIPPEAU: Our portfolio is a really good indication of what New York is good at. It is by and large software — anything that is built on cloud computing, open-source, easy to deploy and relatively asset-light technology. About half of our portfolio is enterprise software businesses, and the other half is consumer-facing companies. The two largest buckets are direct-to-consumer e-commerce companies such as Casper and Warby Parker, and media properties such as Axios and BuzzFeed. Those themes have been very stable and consistent since we started investing in 2010.
A new category for us that we’re very excited about is robotics. Paradoxically, you wouldn’t normally think of New York as a place for robotics but it actually has a well-established community that came from the 3D printing world. The people coming from that world are starting to develop robotic products that use 3D printing or hardware products as the basis for these robots.
Are you looking at blockchain companies at all? What are your thoughts on crypto and the blockchain?
HIPPEAU: We’ve been very cautious about crypto. We will only invest when we understand the sector very well, and this is a sector that we are still learning about. We do have one investment in a company called Abra, which is a peer-to-peer money transfer network using the blockchain to transfer funds. We are very much looking at the sector because we believe there’s something important going on, particularly with the infrastructure — the blockchain.
We are very wary of ICOs, however. Our investors expect us to buy equity. In a lot of crypto-type investments, you are buying tokens — therefore, you do not own any equity in the company. That’s not something we feel is part of our mission.
You were the CEO of Ziff-Davis when SoftBank acquired the media company in 2000. You then joined SoftBank Capital as a managing partner. (Softbank Capital was SoftBank’s corporate venture capital practice, which invested in Yahoo, Alibaba and The Huffington Post). What can you tell me about SoftBank’s investment strategy?
HIPPEAU: As you can tell from what’s going on, SoftBank is a big vision investor and has been very, very successful. The first investment I was involved with was Yahoo. Masayoshi Son has a real knack for what’s going to happen in 10 years or 20 years and he makes big bets. Some of those big bets have paid off really nicely. Probably the largest return of any VC investment from what I can tell has been his investment in Alibaba. So I think the Vision Fund is just a continuation of how the world is being transformed in radical fashion because of technology and some big bets. I think it’s courageous, and he has a good track record of success doing that.
Son has been called a one-man bubble-maker. Do you think that’s a fair characterization?
HIPPEAU: I don’t think that’s right. I think bubble-maker means you’re hyping or making investments without any real thought. I don’t think so. I think that we, in the United State, are a little too conservative at times. All you have to do is look at how every day there’s a new investment made in Asia where it’s not uncommon for a bike-sharing company to raise $300 million. So you say, “Wow, how is that possible?” And then you look at the market, where there’s no legacy infrastructure in many cases, and see that it’s a lot easier to build these markets because they’re building them from scratch. Then you begin to realize, “Well, $300 million probably makes a lot of sense if someone wants to dominate that particular market and they’re making a big bet.”
I’m not sure that as a community we’re embracing those sorts of large bets here in the United States. We’ve done it with Uber and some of these other large companies, but I think it happens more frequently in Asia.
Sexual harassment allegations have recently come to the forefront in the venture community. How can people address and solve this problem?
HIPPEAU: There’s a number of ways. One, is obviously, a no-tolerance policy whether that’s sexual harassment or any kind of bullying or any kind of discrimination. None of that should be tolerated in an organization.
You address the issue through education, culture, and awareness of what is inappropriate. You have to be aware of what’s going on. You can’t just sweep things under the rug. The New York Times published a story about “superstar harassers,” the likes of Harvey Weinstein, and how companies over the years have looked the other way because they want to protect their stars. People have to be aware that it does not matter who it is — whether it’s someone who is the face of the company or someone who has a lot of ownership — those people should be treated the exact same way as everybody else. It’s a cultural thing that used to be reinforced all the time. People need to feel safe and that they have a voice. The moment there’s something inappropriate, it should be taken seriously.
Read the full Q&A here.
THE LATEST FROM FORTUNE…
• Peter Thiel’s Founders Fund goes big on Bitcoin (by Jonathan Vanian)
• Why a blockchain company is focusing on sustainable fish (by Jeff John Roberts)
• Marijuana stocks soar as California legalizes recreational pot (by Lucinda Shen)
• The disturbing details of Silicon Valley’s underground sex party scene (by Kirsten Korosec)
Inside the relentless deal-making of Masayoshi Son. Vice Media places two executives on leave. The US government blocks MoneyGram’s $1.2B sale to Alibaba’s Ant Financial. Second-tier crypto coins are starting to catch up to Bitcoin.
• SoYoung, a China-based online marketplace for aesthetic medical treatments, raised $60 million in Series D funding. Apax Digital led the round.
• Rubikloud Technologies, a Canada-based developer and operator of a cloud-based enterprise data platform for retailers, raised $37 million in Series B funding. Intel Capital led the round, and was joined by investors including iNovia Capital and OTEAF. Existing investors Horizons Ventures and Access Industries also participated.
• NodeSource, a San Francisco, Calif.-based company focused on Node.js security and performance, raised $17.5 million in Series B funding. Investors include Silicon Valley Bank, Industry Ventures, Crosslink Capital and RRE Ventures.
• ProFinda, a London-based AI startup, raised £4.8 million ($5.7 million) in funding, according to Tech.eu. Investors include Notion Capital and Nextlaw Ventures. Read more.
• Urban Jungle, a London-based fintech startup focusing on insurance, raised $1.3 million in seed funding. Rob Devey led the round.
• PageUp, a Melbourne, Australia-based maker of cloud-based, enterprise talent management software, raised funding of an undisclosed amount from Battery Ventures.
HEALTH AND LIFE SCIENCES DEALS
• Centrexion Therapeutics Corporation, a Boston-based developer of treatments for chronic pain, raised $67 million in Series D funding. New Enterprise Associates led the round, and was joined by investors including Quan Capital, ArrowMark Partners, certain investment funds advised by Clough Capital Partners L.P., InterWest Partners, 6 Dimensions Capital and Efung Capital.
• Expansion Therapeutics, Inc., a San Diego, Calif.-based drug discovery and development company, raised $55.3 million in Series A funding. Investors include 5AM Ventures, Kleiner Perkins, Novartis Venture Fund, and Sanofi Ventures. RA Capital Management and Alexandria Venture Investments also participated.
• PEAR Therapeutics, a Boston and San Francisco-based provider of prescription digital therapeutics, raised $50 million in Series B funding. Temasek led the round, and was joined by investors including 5AM Ventures, Arboretum Ventures, JAZZ Venture Partners, Novartis, EDBI and the Bridge Builder’s Collaborative.
• CMAB Biopharma Inc, a China-based provider of process development and manufacturing services for biologic products, raised $38 million in Series A funding. C-Bridge Capital and BioBAY led the round, and were joined by investors including I-Bridge Capital and Qianhai FoF.
PRIVATE EQUITY DEALS
• Ascensus, which is backed by Genstar Capital and Aquiline Capital Partners, acquired Dedicated Defined Benefit Services, a Glendale, Calif.-based provider of defined benefit plans. Financial terms weren’t disclosed.
• ClearLight Partners acquired a majority stake in Paul Frederick, a Fleetwood, Pennsylvania-based maker and seller of men’s apparel and related accessories. Financial terms weren’t disclosed.
• Winchester Interconnect Corporation, a portfolio company of Snow Phipps Group, acquired C&M Corporation, a Dayville, Conn.-based producer of custom cable, from The Watermill Group. Financial terms weren’t disclosed.
• Solace Capital Partners acquired CST Industries, Inc., a Kansas City, Kansas-based tank and dome manufacturer. Financial terms weren’t disclosed.
• Goode Partners made an investment of an undisclosed amount in Marolina Outdoor Inc, a Charleston, S.C.-based maker of performance apparel for fishing and hunting enthusiasts.
• Jopari Solutions, Inc, a Concord, Calif.-based provider of integrated payment and compliance solutions to workers’ compensation and health insurance industry payers, received an investment of an undisclosed amount from WestView Capital Partners.
• Thompson Street Capital Partners recapitalized Gurobi Optimization, LLC, a Houston-based math programming solver. Financial terms weren’t disclosed.
• Maravai LifeSciences, a portfolio company of GTCR, acquired Glen Research Corp, a Sterling, Va.-based provider of reagents and services for DNA research. Financial terms weren’t disclosed.
• DialogTech acquired Swydo, a Netherlands-based provider of digital marketing dashboards, reports and visualizations. Financial terms weren’t disclosed.
• Barracuda Networks, Inc. (NYSE: CUDA) acquired PhishLine, a Waukesha, Wisc.-based SaaS platform for social engineering simulation and training. Financial terms weren’t disclosed.
• Samling Group, a Malaysian timber firm, is planning to raise over 1 billion ringgit ($250 million) in an IPO of its automotive segment, Bloomberg reports citing those with knowledge of the matter. The company is said to exploring a dual listing in Kuala Lumpur and Singapore. Read more.
• Liberty Oilfield Services, a Denver, Colo.-based fracking equipment maker, said it plans to raise $161 million in an offering of 10.7 million shares between $14 and $16 a piece. Riverstone, Carlyle, and Oakmont are major shareholders in the deal. Morgan Stanley, Goldman Sachs, Wells Fargo Securities, Citi, J.P. Morgan and Evercore ISI are joint bookrunners in the deal. The company plans to list on the NYSE as “LBRT.”
• Didi Chuxing agreed to acquire a majority stake in 99, a Brazil-based ride-hailing app, according to Reuters. According to local reports, the deal values 99 at $1 billion. The company had raised approximately $240 million in funding from investors including SoftBank, Riverwood Capital, Tiger Global, and Qualcomm Ventures.
• Apple acquired Buddybuild, a Canada-based startup specializing in creating software development tools for coders. Financial terms weren’t disclosed. Buddybuild raised approximately $7.6 million in venture funding from investors including Kleiner Perkins Caufield & Byers, First Round Capital, and Amplify Partners. Read more at Fortune.
• Microsoft agreed to acquire Avere Systems, a Pittsburgh, Penn.-based provider of high-performance storage for cloud, hybrid and on-premises environments. Financial terms weren’t disclosed. Avere Systems had raised approximately $86 million in venture funding from investors including Menlo Ventures, Norwest Venture Partners, and Lightspeed Venture Partners.
• Terminus acquired BrightFunnel, a San Francisco-based B2B marketing analytics software. Financial terms weren’t disclosed. BrightFunnel had raised approximately $9 million in venture funding from investors including Crosslink Capital.
• Colony NorthStar Inc sold The Townsend Group, a Cleveland, Ohio-based provider of investment management and advisory services focused on real estate and real assets, to Aon plc, for $475 million.
• BNY Mellon Investment Management sold investment boutique CenterSquare Investment Management, a Plymouth Meeting, Penn.-based investment boutique, to Lovell Minnick Partners. Financial terms weren’t disclosed.
• Envestnet acquired FolioDynamix, a Secaucus, N.J.-based provider of cloud-based wealth management technology platform, from Actua Corp, for $195 million.
FIRMS + FUNDS
• Transom Capital, a Los Angeles-based private equity firm, raised $300 million for its third fund, according to an SEC filing.
• Arsenal Venture Partners, a Winter Park, Fla.-based venture capital firm, has set a $150 million target for its third fund, according to an SEC filing.
• Pioneer Square Labs, a Seattle-based investment firm, raised a $40.8 million venture capital fund, according to an SEC filing.
• Dan Petrozzo joined Oak HC/FT as a venture partner.
• Bethany Mayer joined Siris Capital Group as an executive partner.
SHARE TODAY’S TERM SHEET
View this email in your browser.
Polina Marinova produces Term Sheet, and Lucinda Shen compiles the IPO news. Send deal announcements to Polina here and IPO news to Lucinda here.