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U.S. VC Investments Headed For $100B Year

by: VCDeals

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Venture capital investments in U.S. companies is expected to reach $100B in 2018, according to PitchBook’s Q3 Venture Monitor. U.S. companies have already raised $84.1B across 6,583 deals, higher than 2017’s total of $82B. Fewer companies are raising (2017 ended with 9K deals) but the deals are larger with 39 unicorn deals in Q3 alone.

Invisalign competitor: Align Technology (NASDAQ:ALGN) competitor/affiliate SmileDirectClub grabbed $380M at a $3.2B valuation. Clayton, Dubilier & Rice led with assists from Kleiner Perkins and Spark Capital. Align itself invested $46.7M in the startup in 2016 and $12.8M last year for a 19% stake.

SmileDirectClub is a direct-to-consumer teeth aligner that connects licensed dentists and orthodontists with those wanting straighter teeth. The company has helped over 300K customers in the four years since its launch. The American Association of Orthodontists isn’t a fan, filing complaints against SmileDirectClub in 36 states.

Competitors: Other competitors in the space include startups Uniform Teeth ($4M in funding), Candid ($15M), and Orthly.

Data warehouse: Capital One (NYSE:COF) Growth Ventures Cloud participated in a $263M round in data warehouse Snowflake, pushing total funding over $928M and valuation to $3.5B. Sequoia Capital led with participation from Meritech Capital, Altimeter Capital, Madrona Venture Group, Redpoint Ventures, Sutter Hill Ventures Iconiq Capital, and Wing Ventures.

Snowflake runs on both Amazon Web Services and Microsoft Azure. New customer adds include Netflix, DoorDash, and Netgear while Capital One is among the existing clients. Snowflake’s mid- to long-term plan is an IPO with this round allowing it to go directly to IPO” with sufficient capital that going public would be the next funding step. CFO Thomas Tuchscherer has experience from bringing Talend public in 2016.

Competitors: Data warehousing is a crowded space including the likes of Amazon (NASDAQ:AMZN) Redshift, Google (GOOG, GOOGL) BigQuery, Oracle (NYSE:ORCL) Exadata, Microsoft (NASDAQ:MSFT) Azure SQL Data Warehouse, Teradata (NYSE:TDC), and the merging Cloudera (NYSE:CLDR) and Hortonworks (NASDAQ:HDP).

Brazilian digital banking: Tencent (OTCPK:TCEHY, OTCPK:TCTZF) invested $180M for an undisclosed partial stake in Brazilian mobile banking solution Nubank. The investment included a $90M capital increase and $90M for the stake.

Nubank offers a virtual credit card and digital banking service managed through a mobile app. The no-fee products are attractive in the local market recovering from economic turmoil and recession. Nubank has issued 5M credit cards and signed up 2.5M digital payment accounts.

Competitors: Local competition includes products pushed by big banks like Digio from Banco CBSS.

Box competitor: Goldman Sachs (NYSE:GS) Private Capital forked out $75M to Box (NYSE:BOX) competitor Egnyte, which leans more “hybrid niche” than its publicly-traded rival. Funding stood at $62.5M before the Goldman infusion. Private Capital VP Holger Staude will join the Egnyte board.

Egnyte provides secure enterprise file sharing and content governance from the cloud down. The company has 450 employees and over 14K customers including Nasdaq, Thoma Bravo, and AppDynamics. Egnyte predicts this will be the final round before an IPO.

Allbirds: T. Rowe Price (NASDAQ:TROW) led a $50M Series C in wool sneaker standard-bearer Allbirds. Tiger Global and Fidelity Investments helped out, pushing total funding to date up to $75M and a reported $1.4B valuation.

Allbirds makes eco-friendly wool shoes for men, women, and children in a few classic styles. The startup began as a direct-to-consumer online retailer but now has a few brick-and-mortar locations and more to come fueled by this investment. Shipping is available in the U.S., New Zealand, Australia, and Canada and will come to the U.K. this week.

Competitors: Allbirds is synonymous with wool shoes in some circles but other eco-friendly shoe startups include Instagram darling Rothy’s, which creates ballet shoes and sneakers for women out of plastic and has about $7M in funding.

Talking: SoftBank (OTCPK:SFTBF, OTCPK:SFTBY) is in talks to purchase a majority stake in co-working startup WeWork (VWORK) for $15B to $20B. The investment could come through the Vision Fund, which already owns about 20% of WeWork from a $4.4B equity funding last year.

Exits: ServiceNow (NYSE:NOW) acquired the natural language query tech of FriendlyData for undisclosed terms and software company Anaplan (NYSE:PLAN) went public yesterday, opening up 43% from its pricing.

Fund watch: Kismatic co-founder Joseph Jacks has formed OSS Capital, which invests solely in open-source startups. Open source gained increased attention in recent weeks with the Cloudera-Hortonworks merger, the Elastic (NYSE:ESTC) IPO, and Microsoft opening up 60K of its patents to the Open Invention Network. Find out more about OSS Capital here.

Correction: Article updated to correct the size of SmileDirectClub's funding.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.