Term Sheet — Wednesday, August 20

Random Ramblings

Some quick notes to kick off your Wednesday...

• It's a (debt) deal: Digital payments company Square yesterday announced that it had “secured an investment from Victory Park Capital to significantly expand Square Capital,” the company’s small business financing program. My understanding is that this is a loan that expands Square’s own lending capacity, rather than an equity investment that makes Illinois-based Victory Park a Square shareholder.

In general, the Square Capital program is controversial because merchants pay back loans via automatic deductions from credit card and debit card transactions. That means that the effective interest rate increases as sales increase, as opposed to a traditional small biz loan in which the merchant would pay back on their own schedule (although Square Capital does not charge timing penalties, because there is no repayment deadline).

• Bitcoin bucks: Back in February, I wrote a magazine column titled: Why Venture Capitalists Are Right To Be Crazy About Bitcoin. It argued that the protocol ultimately may become more important and ubiquitous than the currency, just the ‘Internet’ ultimately became more important and ubiquitous than email.

That’s also the thinking behind Chain, a new Bitcoin development platform that launched today with $9.5 million in VC funding (led by Khosla Ventures). I’m sure that initial usage will focus on financial transactions but, if Chain succeeds, it likely will be because developers come up with all sorts of other distributed applications. You can read a bit more here.

• Sequoia's signal: Earlier this week we noted how Medallia, a Palo Alto-based provider of customer experience management tracking software, had raised $50 million in VC funding from Sequoia Capital. This brought Sequoia’s total investment in the company to $105 million – easily one of the firm’s five-largest outlays ever to a single company – with no other VC firms in the cap table. So I was curious if the firm had any concern about signaling risk for portfolio companies where it syndicates and/or helps bring in outside leads for follow-on rounds. The reply from partner Doug Leone:

"Honestly there is no signaling or messaging to be taken here. Like WhatsApp this was a unique situation and it's very rare for us to be the sole investor in a company. In fact, in my 26 years of investing, I cannot think of another case where a company has done multiple rounds, where I represented Sequoia on the board, and we were the sole investor."

• Feedback: I received a lot of email in response to yesterday's column on startup stock options and seconday sales. Will do a big mailbag on Friday. 

• Recommended reading: Rich Cohen has a great profile up on Gary Fencik, the former All-Pro safety for the Chicago Bears who now is a partner with private equity firm Adams Street Partners. Check it out here.

• Sinking: I need to do a bit more research on the recent mess at Seaworld (shares down 44% YTD), but I do recall how folks at The Blackstone Group (the company's largest outside shareholder) were relieved when Black Fish -- the documentary critical of the theme park's practices -- didn't receive an Academy Award nomination. What I don't recall them expressing were any concerns about Black Fish virtually going viral on Netflix. Pretty sure this will be a cautionary tale going forward...

• Didn't see that coming: Uber yesterday hired former Obama campaign manager David Plouffe as its senior vice president of policy and strategy. Yes, the same Uber whose co-founder and CEO used to use the Atlas Shrugged coer image as his Twitter avatar. I guess on-demand car services make strange bedfellows…