Term Sheet -- Wednesday April 4

5 Qs WITH A DEALMAKER

Jeff Fagnan believes that if you’re a startup founder, you have a social responsibility to become an angel investor — whether you want to or not. “We feel like if someone helped you, you need to pay it forward as well,” he told Term Sheet.

Fagnan, the founder and general partner of seed-stage venture capital firm Accomplice, is well known in the Boston startup ecosystem. The firm’s portfolio companies include AngelList, Carbon Black, DraftKings, Hopper, PillPack, Veracode, and Zoopla.

But he recently noticed something — startup founders are typically the ones who have the best deal flow and the best access to the hottest early-stage companies. The problem is that they often lack the capital necessary to be successful angel investors. Fagnan partnered with Naval Ravikant’s AngelList and formed Spearhead, a program that gives founders a $200,000 fund so they can start investing.

Fagnan spoke with Term Sheet about founders-turned-angel investors, his time working at a SoftBank affiliate fund, and how DraftKings is faring after its failed merger with rival FanDuel. Below is an excerpted conversation. Read the full Q&A here.

You invested in DraftKings’ seed round. Last year, the company’s proposed merger with rival daily fantasy sports site FanDuel unraveled over antitrust concerns. How is DraftKings doing now, and is it true they are considering an IPO?

They’re considering a bunch of things, and right now, I think they’re focused on continuing to grow market share. That’s one where we led the initial seed investment a long time ago. We were the very first investor, and we believed before anybody else. It’s an example of entrepreneur resilience and what [DraftKings CEO] Jason Robins has done is remarkable. They’ve matured a lot, and I think you’ll see DraftKings as a public company. One hundred percent.

Soon?

I’m always wrong when I give answers about timing, so I won’t do that. [TS NOTE: Robins recently said an IPO won’t happen “for at least a couple of years.”]

You recently announced Spearhead, a program to fund and mentor new angel investors. What was the motivation behind turning founders into angel investors?

Naval [Ravikant] and I frequently have dinner and wine and talk about what’s going on, and then one day we had an observation. The observation was: It is not the celebrity angel investor who had the best deal flow and the best access. It was founders who wanted to back their close friends and people they felt were truly talented.

A lot of them contribute personal capital and mentorship despite the fact that they don’t have a whole lot in their bank account. So we looked at it as — the best people to be angel investors may not have the capital to be an angel investor. And we formed Spearhead to build a new subset of angel investors who don’t think of themselves as angel investors today because they don’t have the net worth. Let’s take the people who have been the most helpful with their mentorship and let’s help them get paid for that mentorship by actually being able to invest in the people they believe in the most.

You used to be a partner at Seed Capital partners, which was an early-stage SoftBank seed fund in Boston. Given your experience there, what are your thoughts on what SoftBank is doing to the tech financial landscape through its $100 billion Vision Fund?

I don’t have all that much knowledge on the Vision Fund specifically. All I can say is that Masayoshi Son and SoftBank have a history of betting big and being right. People will take pot shots at whatever they do, but when Masa says, “I’m all in,” he’s the type of person who’s truly all in. And if you look at it from a track record perspective, it’s damn impressive what they’ve pulled off. Knowing Masa and what he’s been able to do over time, I would not bet against him. I definitely think he’s shaking things up in an industry where I always appreciate anyone who comes in with a differentiated, contrarian play. I think you need that no matter what.

How will some of these macro-investing trends, such as VC firms raising mega-funds and venture-backed companies staying private longer, affect early-stage startups in the long-run?

Innovation is a continuum. The companies coming out of MIT today and the companies we’re working with that are pre-product, they’re not even going to be thought about as being players in the market for another five to seven years. It’s hard for me to look out and think of what’s the macro-economic environment in five or seven years. If I had to focus too much on that, I probably wouldn’t do a single investment right now.

Companies are definitely staying private longer. In our latest fundraise for Accomplice II, our message to our LPs was: “We invest early, we’re patient capital. We know how to deliver a multiple on investment, but this takes time.” We’ve been in projects for 10 to 12 years. We believe in not selling out early.

Read the full Q&A here.

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• Exclusive: Former Uber CEO Travis Kalanick, Minted Co-Founder Melissa Kim Join StyleSeat Board (by Kirsten Korosec)

• SEC Charges $32 Million DJ Khaled-Backed Centra ICO With Fraud (by Lucinda Shen)

• Exclusive: Slack Promotes April Underwood to Chief Product Office (by Michal Lev-Ram)

...AND ELSEWHERE

John Williams to become next New York Fed Leader. Amazon considers India’s Walmart-tied Flipkart. Home solar dims. Dropbox underwriters exercise options. Spotify now billions for Tencent, Sony. Who was the YouTube shooter? Morgan Stanley fires broker with history of abuse, stalking claims. WPP looks into CEO Martin Sorrell. Longfin’s fall. Elliott goes after Hyundai. Anbang gets $10 billion rescue. La Colombe hire Moelis in bid for $1 billion valuation. The women breaking up Silicon Valley’s boy’s club. SoftBank waived day-to-day control of Fortress to win deal.

VENTURE DEALS

• Impossible Foods, a Redwood City, Calif.-based plant-based meat maker, raised $114 million in convertible note financing. Temasek and Sailing Capital led the round.

• Formlabs, a Somerville, Mass.-based 3D printing firm, raised $30 million from 11 investors, according to an SEC filing.

• Red Balloon Security, a New York-based firm, raised $21.9 million in Series A funding. Bain Capital Ventures led the round, and was joined by investors including Greycroft, American Family Ventures, and Abstract Ventures.

• Axonics Modulation Technologies, an Irvine, Calif.-based developer of rechargeable sacral neuromodulation treatments for urinary and fecal dysfunction, raised $20 million in equity funding. Longitude Capital led the round, and was joined by investors including Gilde Healthcare.

• DeepScale raised $15 million of Series A funding. Point72and next47 led the round, and was joined by investors including Autotech Ventures and Trucks Venture Capital.

• Insider, a Singapore-based firm that helps companies grow, raised $11 million in Series B funding. Sequoia led the round.

• Verbit, a Palo Alto, Calif.-based artificial intelligence firm, raised $11 million in seed funding. HV Holtzbrinck Ventures, Vertex Ventures and Oryzn Capital led the round.

• BioConsortia, a Davis, Calif.-based provider of goods to increase crop yield, raised $10 million in Series D funding. Otter Capital led the round and was joined by investors including Khosla Ventures.

• Yellow, San Paulo-based dockless bike firm, raised $9 million in seed round funding. Monashees and Grishin Robotics led the round.

• Threat X, a Denver-based SaaS web application firewall provider, raised $8.2 million in a Series A funding round. Grotech Ventures and Access Venture Partners led the round.

• Stackery, a Portland, Ore.-based business software provider, raised $5.5 million in funding. Steve Kishi of HWVP led the round and was joined by investors including Voyager Capital, Pipeline Capital Partners, and Founders’ Co-op.

• Shine, a New York City-based daily motivational text messaging firm, raised $5 million in Series A funding. Comcast Ventures led the round and was joined by investors including betaworks, Eniac Ventures, Female Founders Fund, Felix Capital, BBG Ventures, and The New York Times.

• Fyde, a Palo Alto, Calif.-based cybersecurity firm, raised $3 million in seed-stage funding. Draper Nexus and Vertex Ventures were the investors.

• Legit, a Cambridge, T.X.-based intellectual property software maker, raised $2.6 million in seed funding. Eniac Ventures led the round and was joined by investors including Elementum Ventures and Max Ventures.

• TRUSTX, a New York City-based advertising marketplace, raised $2.2 million in funding. CBSi, ESPN, Meredith, FOX News, and NBCUniversal were the investors.

• Engage Ventures, an Atlanta-based independent/external venture fund, added Goldman Sachs as an LP in the fund taking our total fund size for this first pilot fund to $18 million.

• IfOnly, a San Francisco-based experiences marketplace, raised an undisclosed amount in Series D funding Mastercard led the round, and was joined by investors including Hyatt Hotels Corp, Sotheby’s, NEA, Founder’s Fund, Khosla Ventures, and TriplePoint Capital. Financial terms weren't disclosed.

HEALTH AND LIFE SCIENCES DEALS

• Allogene Therapeutics, San Francisco-based biotech company backed by Two River and focused on cancer treatment including immunotherapies, raised undisclosed amount of funding. TPG, Vida Ventures, BellCo Capital, the University of California Office of the Chief Investment Officer, and Pfizer led the deal.

PRIVATE EQUITY DEALS

• KKR invested $172 million in Cherwell Software, a Colorado Springs, Colo.-based ITSM platform. In February 2017, KKR previously made a $50 million investment in the firm.

• Wind River, an Almaeda, Calif.-based software provider to the embedded systems world, was acquired by TPG from Intel. Financial terms weren't disclosed.

• Blue Wolf Capital Partners acquired a majority stake in The State Group, a Toronto-based industrial service contractor. Yellow Point Equity Partners has a minority investment. Financial terms weren't disclosed.

• Azuga, a San Jose, California-based a provider of connected vehicle and fleet technologies, gained a majority investment from Sumeru Equity Partners. Financial terms weren't disclosed.

• AeroCision, a Chester, Conn.-based provider of aerospace engine components, was acquired by Liberty Hall Capital Partners. AeroCision will be integrated into portfolio company Bromford Industries. Financial terms weren't disclosed.

• Owen & Co., a Toronto-based portfolio company of Novacap mattress maker, merged with sister company Kingsdown. Financial terms weren't disclosed.

• ATA RiskStation, a Dallas-based provider of cloud-based portfolio risk analytics, gained an investment from Caruth Capital Partners. Financial terms weren't disclosed.

• Conga, a Broomfield, Colo.-based portfolio company of Salesforce Ventures and Insight Venture Partners, acquired Counselytics, a New York City-based firm using AI analytics on emails, invoices, and more. Financial terms weren't disclosed. Read more.

• Kian Capital recapitalized The Retrofit Source, an Atlanta-based automotive lighting maker. Financial terms weren't disclosed.

• Prairie Capital recapitalized Family Allergy & Asthma, a consortium of allergists in Kentucky and Indiana. Financial terms weren't disclosed.

• Texas Hydraulics, a portfolio company of Wynnchurch Capital, acquired The Oilgear Company, a Traverse City, Mich.-based provider of hydraulic pumps and valves. Financial terms weren't disclosed.

• Sorenson Capital and Webster Capital recapitalized Home Brands Group Holdings, a Phoenix-based bathroom remodelling franchise. Financial terms weren't disclosed.

• Bain Capital Private Equity acquired World Wide Packaging, Florham Park, N.J.-based provider of cosmetic packaging components. Financial terms weren't disclosed.

• Davey Coach Sales, a portfolio company of Progress Equity Partners, acquired Intermountain Coach, a Colorado Springs-based dealer of mid-sized buses. Financial terms weren't disclosed.

• PPC Partners acquired C.H. Guenther & Son, a San Antonio, T.X.-based private label food maker. Financial terms weren't disclosed.

OTHER DEALS

• Pfizer, the drug making giant, is in talks with Procter & Gamble regarding a sale of its consumer health business, CNBC reported.

IPOs

• GrafTech International, a Brooklyn Heights, Ohio-based firm making graphite electrode products, said it plans to raise $850 million in an IPO of $37.8 million shares priced between $21 to $24 apiece. The firm posted sales of $550.7 million and income of $8 million in 2017. J.P. Morgan, Credit Suisse, Citi, RBC Capital Markets, HSBC Corp. and BMO Capital Markets are joint bookrunners in the deal. It plans to list on the NYSE as “EAF.” Read more.

• IBS IT Services, a Russian tech firm partnering with the nation’s businesses and government bodies, is seeking an IPO on the Moscow Exchange. An IPO may raise about $100 million. Read more.

EXITS

• The MedHealth Group agreed to acquire Work Health Group, a Melbourne-based provider of occupational rehabilitation care management services, from The Riverside Co. Financial terms weren't disclosed. Read more.

• Renew Power agreed to acquire Ostro Energy Private Limited, an Indian renewable energy platform, from Actis.