Term Sheet — Monday, February 4

LISTEN UP

Good morning, Term Sheet readers.

Believe it or not, there's money in podcasts.

Spotify is in advanced talks to acquire Gimlet Media, the Brooklyn-based narrative podcast company, for more than $200 million in cash, according to Recode. Gimlet has raised approximately $28.5 million in venture funding from investors including WPP, Stripes Group, LioneTree Partners, Graham Holdings, Betawarks, Cross Culture Ventures, and Lowercase Capital. Two years ago, the startup was reportedly valued at roughly $70 million.

Podcasting may be a relatively small industry in the U.S, but if I had to guess, Spotify has bigger ambitions than that. Just take a look at the stats: The U.S. Podcasting industry brought in $314 million in ad revenue in 2017. Yet the global picture is much different.

The podcast industry in China is 23x larger, estimated to be worth an eye-popping $7.3+ billion. Why? Perhaps because the model is different. Many of the podcasts in China are paid via subscription, while podcasts in America are mostly free or ad-supported. Individual podcasters in China can make $8 million per year with 250,000 listeners. For context, Serial, which was America’s most popular podcast ever, made only about $500,000 in its first year after a whopping 19 million downloads.

It’s important to note that Spotify had actively looked into ways to enter the Chinese market for a number of years. China-based Tencent Music is one of Spotify’s largest shareholders. In its filing to go public, Spotify wrote, “Spotify believes the Tencent Transactions allow Spotify to invest in the long term potential of the music market in China and, in turn, TME to invest in the long term potential of the music market outside of China.”

Of course, I’m just speculating about the possibilities here, but the bigger point I want to make is that headlines that claim the podcasting business is small are misleading. It may be small in the U.S., but if you’re a company looking to expand into other territories, it’s an incredibly lucrative opportunity.

Andreessen’s Connie Chan wrote an excellent essay on multimodal business models. She notes that product success is not just about having a good product, but also having the right business model.

An excerpt from her post on how podcasts in China make money:

Some podcasts rely on sponsorships and ads the way we do in the US, but podcast hosts can also receive tips that are split between podcaster and platform. In the following example, tip options vary from $.30 to $21. This new model means everyone can make money and content creators have more funds to invest in better production and better content; everyone wins.

In other words, the U.S. Podcasting market is still in its infancy because content creators are using basic monetization techniques, while Chinese podcasters is experimenting with gamification, coupons, and limited-time memberships.

I’ll be curious to see what Spotify does with Gimlet if the deal goes through, but I’m willing to bet that with Tencent as a partner, it will have some creative ideas.

(On a related note, check out this comprehensive list of the best business podcasts I compiled thanks to recommendations from fellow Term Sheet readers.)

Read this column on Coins2Day.com.

VENTURE DEALS

• Go-Jek, an Indonesia-based ride-hailing firm, raised around $1 billion in funding at a valuation between $9 billion and $10 billion. Investors include Alphabet Inc’s Google, JD.com Inc and Tencent Holdings, according to Reuters. Read more.

• brumbrum, an Italy-based e-commerce platform for buying and leasing cars, raised €20 million ($23 million) in Series B funding. Accel led the round, and was joined by investors including Bonsai ventures, eVentures, and United Ventures.

• Wyze Labs Inc, a Seattle-based smart home technology company, raised $20 million in Series A funding. Norwest Venture Partners led the round.

• Magnolia Medical Technologies, a Seattle-based medical device company, raised $20 million in Series C funding. RTW Investments led the round, and was joined by investors including SightLine Partners, Canepa Healthcare, and HealthQuest Capital.

• Bud, a U.K.-based fintech startup that helps banks connect their apps and data to other financial service providers, raised more than $20 million in Series A funding. Investors include HSBC, Goldman Sachs, ANZ, Investec’s INVC fund, and InnoCells.

• Extend Fertility, a New York-based fertility services company, raised $15 million in Series A funding. Investors include Regal Healthcare Capital Partners.

• Aire, a U.K.-based credit scoring startup, raised $11 million in Series B funding. Investors include Crane Venture Partners, Experian Ventures and Orange Digital Ventures.

• CoreTigo, an Israel-based provider of industrial mission critical wireless connectivity solutions, raised $10 million in funding . Qualcomm Ventures and Sierra Ventures led the round, and were joined by investors including Magma Venture Partners, Cardumen Capital and Meron Capital.

• Aureus Analytics, a Singapore-based predictive analytics platform for the insurance industry, raised $3.1 million in funding. Investors include Connecticut Innovations, Alpine Meridian and Multi-Act.

• Orca AI, an Israel-based provider of AI-backed navigational solutions for the shipping industry, raised $2.6 million in seed funding. MizMaa Ventures led the round.

• Valued, a San Francisco-based provider of compliance solutions that help HR professionals combat workplace bullying and harassment, raised $1.7 million in seed funding. BootstrapLabs led the round.

HEALTH AND LIFE SCIENCES DEALS

• Sustainable Bioproducts, a biotechnology company developing a new way to grow edible protein, raised $33 million in Series A funding. 1955 Capital led the round, and was joined by investors including Breakthrough Energy Ventures, ADM Ventures, Danone Manifesto Ventures, and the Liebelson family office.

PRIVATE EQUITY DEALS

• Ultimate Software (Nasdaq: ULTI) agreed to be acquired by an investor group led by Hellman & Friedman in an all-cash transaction for $331.50 per share in cash – representing an aggregate value of approximately $11 billion.

• The Carlyle Group acquired a majority stake in SERgroup, a Germany-based enterprise content management solutions software company. Financial terms weren't disclosed.

• Periscope Equity LLC made an investment in Power Digital Marketing Inc, a San Diego-based digital marketing agency. Financial terms weren't disclosed.

• Merfish Pipe & Supply, a portfolio company of One Equity Partners, will combine with United Pipe & Supply under Merfish Pipe Holdings. Financial terms weren't disclosed.

• Paragon Metals, a Hillsdale, Mich.-based supplier of engineered precision components, was acquired by Stellex Capital Management. Financial terms weren't disclosed.

OTHER DEALS

• C.H. Guenther & Son LLC acquired Wback GmbH, a Germany-based supplier of baked goods. Financial terms weren't disclosed.

• Shell New Energies US LLC, a subsidiary of Royal Dutch Shell plc, will acquire Greenlots, a provider of electric vehicle (EV) charging and energy management software and solutions. Financial terms weren't disclosed.

IPOs

• TCR2 Therapeutics, a Cambridge, Mass.-based biotech developing T cell immunotherapies for cancers, says it plans to raise $75 million (40% insider) in an offering of 5 million shares priced between $14 to $16. MPM Capital (19% pre-offering), F2 Capital (16%) and UBS (15%) back the firm. Jefferies, SVB Leerink, and BMO Capital Markets are underwriters. It plans to list on the Nasdaq as “TCRR.” Read more.

EXITS

• Arlington Capital Partners agreed to sell MicroPact Inc, a Herndon, Va.-based provider of case management and business process management applications for government, to Tyler Technologies. Financial terms weren't disclosed.

• Kofax, which is backed by Thoma Bravo, acquired Nuance Document Imaging, a Plantation, Fla.-based provider of print management and cost recovery, from Nuance Communications Inc. The price of the acquisition was $400 million, according to PEHub. Read more.

• LNK Partners sold Fitness Connection, an operator of health clubs, to Roark Capital. Financial terms weren't disclosed. [This item has been updated.]

FIRMS + FUNDS

• TSG Consumer Partners, a San Francisco-based private equity firm, raised $4 billion for its eighth fund, TSG8 L.P. (Including its parallel fund TSG8 Parallel L.P.).

• Ascribe Capital, a New York-based private equity firm, raised $825 million for its fourth fund, Ascribe Opportunities Fund IV.