Term Sheet — Friday, August 10

MORE DEBT

Happy Friday, Term Sheet readers.

WeWork has raised another $1 billion in funding from SoftBank to grow. The financing came in the form of a subordinated convertible note, meaning that if there’s another funding round of at least $1 billion, or if the company goes public, SoftBank’s loan will convert to equity.

According to the WSJ, the note, which accrues interest of 2.8% a year starting next September, gives WeWork the ability to focus further on growth by leasing & buying new buildings.

“There is no investor closer to us than SoftBank and it was an opportunistic financing that we were able to do,” WeWork Financial Chief Artie Minson told the WSJ.

WeWork is one of the world’s most valuable startups at nearly $20 billion, but its losses are no joke. In documents related to its bond offering, WeWork reportedly lost $933 million on $886 million in sales last year. In the first half of this year, it lost $723 million on $764 million in sales.

As my colleague Aaron Pressman noted in April, there’s an even deeper concern about WeWork’s basic business model, and it’s reminiscent of several banking crises of the past. He writes:

WeWork itself has to enter into long-term leases on its office space, typically for 10- or 20-year terms. At the same time, its startup and gig economy fueled clientele are renting month to month. Banks have gotten into trouble because they relied on funding from savings and checking account depositors that could be yanked daily, while the loans they made with that money didn’t have to be paid back for years. In bad times, depositors wanted their money back all on one day, but the banks didn’t have it, creating the classic run on the bank disaster scenario.

MILITARY + SILICON VALLEY SOUND-OFF: I got an overwhelming amount of responses to the ‘Silicon Valley should stop ostracizing the military’ piece I linked to in yesterday’s Term Sheet. In the op-ed, Founders Fund partner Trae Stephens and Oculus VR founder Palmer Luckey that the tech industry has a responsibility to help the U.S. Maintain its global lead.

Here are several responses that stood out:

Alyssa: This opinion piece appears to have been written entirely in a vacuum, and is devoid of the current goals of the defense community or understanding of the decision-making process of any governmental body. The U.S. Government remains a democracy, but projects for the military begin with a mandate, not a whiteboard brainstorm session. You don't get a choice on if your work will help people rather than harm them. Do I agree that our best and brightest tech minds would be an asset to government projects in their area of expertise? Absolutely. Do I think that those government projects want folks who desire a debate around the ethics surrounding any new technologies with military applications, or that those folks would blindly participate in projects whose outcomes they have no final control over? That seems far less likely.

Bob: I couldn’t agree more with their position. Tech companies have been developed, grown and prospered in the greatest period of economic success and stability the world has ever known. These entrepreneurs need to get out of their echo chamber and show some appreciation for the country in which they live. In fact, it’s simply screwing their shareholders to not take advantage of all relevant business opportunities for the technology that they have.

Rachel: I agree with a lot of what the authors are saying however the government does not really share with these tech companies why and how the technology is being used. Maybe the companies don’t need to know all the details but just an assertion that the technology is not used for destruction but to “promote peace” as the authors vehemently proclaim. I truly believe the United States is a great world leader but it needs to do more to gain the trust of the people. If collaboration is indeed the path then it must be a two-way path where the government at least listens to the concerns of the tech industry since they are the experts (in a sense).

Paul: Stephens and Luckey are right on the mark. The world is a messy place, and decisions are about choosing the best available option, not the best theoretical option. For now, at least, the world is clearly better off with a robust US defense sector. It surely would not be better off if, say, China or Russia or any number of other players leaped ahead of the US in key defense industries. And, as Stephens and Luckey note, a lot of today’s consumer technology is rooted in defense R&D.

VENTURE DEALS

• Domino Data Lab, a San Francisco-based provider of an open data science platform, has secured $40 million in funding. Sequoia Capital and Coatue Management led the round.

• Appetize, a Los Angeles-based modern point of sale operating software company, raised $23 million in Series B funding. Investors include 32 Equity.

• Wonderschool, a platform which enables teachers to start preschools out of their homes and parents to discover them, raised $20 million in Series A funding. Andreessen Horowitz led the round, and was joined by investors including Omidyar, Gary Community Investments, First Round, Cross Culture, Uncork Capital, Rethink Education, Edelweiss, and Lerer Hippeau.

• Yesware, a Boston and San Francisco-based email productivity platform for salespeople, raised $15 million in funding. Foundry Group led the round, and was joined by investors including Battery Ventures, GV, IDG and Shea Ventures.

• Akili Interactive, a Boston and San Francisco-based prescription digital medicine company, raised $13 million in funding. Investors include CLSA, Omidyar Technology Ventures, Digital Garage Group and Fearless Ventures.

• Taxfix, a Berlin-based tax startup, raised $13 million in Series A funding. N26 and Valar Ventures co-led the round, and were joined by investors including Creandum and Redalpine.

• Appcues, a Boston-based user onboarding software platform, raised $10 million in Series A funding. Sierra Ventures led the round, and was joined by investors including Accomplice Ventures.

• Root AI, a Somerville, Mass.-based AI-powered robotics company focused on indoor farming, raised $2.3 million in funding. First Round led the round, and was joined by investors including Accomplice, Schematic Ventures, Liquid2 Ventures and Half Court Ventures.

HEALTH AND LIFE SCIENCES DEALS

• Apexigen Inc, a biopharmaceutical company, raised a total of $73 million in funding. Decheng Capital led the $15 million Series B round while 3E Bioventures Capital, Virtus Inspire Ventures and SV Tech Ventures led the $58 million Series C round.

• SQZ Biotechnologies, a Boston, Mass.-based cell therapy company, raised $72 million in Series C funding. Investors include Everblue, Illumina Ventures, Invus, Orient Life, Viva Ventures Biotech Group, Bridger Healthcare Partners, Global Health Science Fund, GV, JDRF T1D Fund, NanoDimension and Polaris.

• Therachon, a Basel, Switzerland-based biotechnology company focused on rare diseases, has closed $60 million in financing. Novo Holdings led the round with participation from Cowen Healthcare Investments, Pfizer Ventures, Tekla Capital Management LLC, Versant Ventures, OrbiMed, Bpifrance and Inserm Transfert Initiative.

• Ambys Medicines, a Redwood City, Calif.-based developer of new medicines patients suffering from chronic liver diseases, raised $60 million in Series A funding. Investors include Third Rock Ventures and Takeda.

• Modulus Discovery Inc, a Tokyo-based early-stage drug discovery company, raised $7.2 million in Series A funding. Fast Track Initiative Inc led the round, and was joined by investors including PeptiDream Inc and DBJ Capital Co. Ltd.

PRIVATE EQUITY DEALS

• Peak Rock Capital agreed to acquire the TNT Crust business, a manufacturer and distributor of pizza crusts, from Tyson Foods, Inc. (NYSE: TSN). Financial terms weren't disclosed.

• Apothecary Products LLC, which is backed by Norwest Equity Partners, acquired SOFT Style, a Boulder, Colo.-based maker of breastfeeding support products. Financial terms weren't disclosed.

• Simplura Health Group, which is backed by One Equity Partners acquired Helping Hand Home Health & Hospice Agency. Financial terms weren't disclosed.

• Junction Energy Capital and Ara Partners Group invested in Puralube, Inc, a Wayne, Penn.-based technology platform with a proprietary process for producing high-quality base oils. Financial terms weren't disclosed.

OTHER DEALS

• Emergent BioSolutions (NYSE: EBS) agreed to acquire PaxVax, a Redwood City, Calif.-based developer of vaccines against various infectious diseases, for $270 million in cash.

• Cimpress made a majority investment of $29 million in VIDA & Co, a company that offers apparel, accessories and home decor products.

IPOs

• Spartan Energy Acquisition, a New York-based blank check seeking a company in the energy business, raised $400 million in an offering of 40 million units priced at $10. Apollo executives back the firm. Citi and Credit Suisse are underwriters. It plans to list on the NYSE as “SPAQU.” Read more.

• Mesa Air Group, a Phoenix, Ariz.-based regional air carrier, raised $116 million in downsized offering of 9.6 million shares priced at $12 apiece, down from 10.7 million shares priced between $14 to $16. It booked $643.7 million in the year ending September. American Airlines (19.8% pre-offering), Corre Opportunities (16.8%), and Citigroup (13.2%) back the company. Raymond James, BofA Merrill Lynch, Cowen, Stifel, and Imperial Capital are the joint bookrunners. It plans to list on the Nasdaq as as “MESA.” Read more.

• Westwing, a Frankfurt-based online furniture retailer, is weighing an IPO in late 2018, Reuters reports citing sources. Rocket Internet backs the firm. Read more.

EXITS

• Orsted agreed to acquire Lincoln Clean Energy, a Chicago-based developer and operator of wind farms, from I Squared Capital for $580 million.

• Arbor Investments sold Rise Baking, a Minneapolis, Minn.-based retailer of bakery products, to Olympus Partners. Financial terms weren't disclosed.

• Gryphon Investors sold Washing Systems, a manufacturer of products for the commercial laundry processing industry, to Kao Corporation. Financial terms weren't disclosed.

• Rock Gate Partners agreed to sell Walpar, a Birmingham, Ala.-based metal highway sign structure specialist, to Valmont Industries, Inc. Financial terms weren't disclosed.