StrictlyVC: December 4, 2013

110611_2084620_176987_imageGood morning!

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Top News in the A.M.

A federal judge has approved an antitrust suit against the patent advisory firm RPX. (The company, originally backed by Kleiner Perkins, Charles River and Index Ventures, went public in 2011.) The case will test the business model of defensive patent consortiums that allow member-companies to pay to use their vast portfolios.

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In Talk of Amazon and UPS Delivery Drones, a VC Sees Dollar Signs

Amazon and UPS made big news this week, disclosing that they are experimenting with flying parcel carriers, respectively.

But the companies’ eventual use of drones isn’t what’s interesting to VCs like Bilal Zuberi, an investor with Lux Capital who has been studying the drone space for several years. The real story, as far as he’s concerned, is that two major commercial deployment opportunities have come into view, validating the market for unmanned aerial vehicles (UAVs) — and creating exit opportunities for them.

The development is of particular interest to Zuberi, whose firm owns a piece of CyPhy Works. CyPhy builds UAV hardware and software and could ultimately be involved in delivering your Amazon loot.

Jeff Bezos hasn’t invested in the company, but CyPhy was founded by iRobot cofounder Helen Greiner, and Zuberi tells me that Bezos is “close to the iRobot family.” (Bezos has invested in Rethink Robotics, a manufacturing robot company started by iRobots cofounder Rodney Brooks.)

Even if Amazon — which acquired the robotics company Kiva System last year, paying $775 million for the company and putting its robotics warehouse workers to use — doesn’t buy CyPhy, Zuberi suggests that Amazon’s embrace of delivery robots could encourage other potential acquirers from Walmart to FedEx to enter the market.

“People always ask me, ‘If you’re successful, who would buy you guys?’ Well, Amazon [has bought a robotics company]. Why would UPS or FedEx not buy one of these [UAV] companies?”

Of course, that’s all years down the road. UAVs, currently used in military applications, can’t access U.S. national airspace until the beginning of 2015. And initially, only limited drone activity will be permitted so that the Federal Aviation Administration can adjust its policies if need be.

Even then, observes Zuberi, companies like Amazon and UPS will likely stick to demo deployments for a while, as they figure out a raft of likely issues that extend well beyond picking up and delivering boxes to the right location. Among numerous other considerations, the companies will need to determine how to tightly integrate the technology into their supply chains and ensure the drones’ sensors can operate safely in crowded neighborhoods.

Zuberi thinks that by the time drones are flying paper towels to consumers, the technology will work as it should.

“I love where you have military and government use cases involved,” he says, “because they test and they test for resiliency and redundancy. These guys can’t have failures. Everything has to be perfect.”

JamBase

New Fundings

Blaze Bioscience, a three-year-old, Seattle-based biotech company, has raised $9 million in Series B funding from unnamed backers. The company is developing what it calls Tumor Paint. According to a recent NPR segment that featured the technology, one part is a protein that can enter the bloodstream and find a cancerous tumor; the other part is a fluorescent dye that glows when a light is shone on it. (The hope is the “paint” will help doctors more easily distinguish a malignancy from healthy tissue.)

DataSift, a three-year-old, San Francisco-based social analytics platform, has raised $42 million in Series C financing. Insight Venture Partners led the round with participation from previous investors Scale Venture PartnersUpfront VenturesIA VenturesNorthgate CapitalDaher Capital and Cendana Capital. The new funding brings the total capital raised by the company to roughly $72 million.

Gridstore, a four-year-old, Mountain View, Calif.-based company that makes low-cost storage devices with their own CPU and memory resources, has raised $11 million in Series B funding. Acero Capital led the round. The company’s previous investors, including GGV CapitalInvestec Ventures Ireland LimitedONSET Ventures and some of the original angel investors, also participated in the financing. Altogether, Gridstore has raised roughly $26 million to date.

MOVE Guides, a two-year-old, London-based startup whose software-as-a-service platform aims to help companies more easily relocate employees, has raised $1.8 million in seed funding from Notion Capital and New Enterprise Associates, which were joined by numerous angel investors. The round brings the company’s total funding to date to $2.4 million.

Rumr, a months-old, L.A.-based company behind a new, still-stealth messaging app, has raised $800,000 according to a new SEC filing. PandoDaily recently reported that numerous prominent investors participated in the round, including Khosla VenturesGoogle VenturesGreycroft Partners, and angel investor Paige Craig. The outlet also revealed that the teen-focused app will enable senders to hide their identity from recipients.

SitterCity, the 12-year-old, Chicago-based online resource for in-home care, has secured a $4.5 million credit facility from Square 1 Bank. Just last month, the company closed on $13 million in new funding from investors Point Judith CapitalApex Venture PartnersBaird Venture PartnersNew World Ventures and Bright Horizons Family Solutions, a round that brought its total equity funding to date to roughly $43 million.

Trufa, a brand-new, Heidelberg, Germany-based company that develops predictive analytics applications, has raised $4.5 million in Series A funding led by Accel Partners. Trufa was just spun out of this company.

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New Funds

Biomark Capital has spun off of Burrill Capital, a San Francisco-based venture capital firm focused on drugs, diagnostics, medical devices, healthcare delivery, wellness and digital health. Burrill Capital had announced that it had raised $505 million in “aggregate capital commitments” roughly one year ago, but it had actually raised closer to $200 million. “Partly as a result of the size difference, the team responsible for investing the cash has split off from Burrill into a new venture firm,” says Xconomy, which has the full story, including which partners have joined Biomark and which haven’t.

Industry Ventures, the 13-year-old, San Francisco-based, venture-capital-focused investment firm, has closed on a $425 million secondary fund — Industry Ventures Secondary VII —  to buy up founder and employee stakes, as well as a $200 million Special Opportunities Fund that Industry plans to use to invest in larger transactions. The new funds bring the firm’s total capital under management to more than $1.7 billion, it says.

According to the WSJ, the Bloomberg administration is working with large pharmaceutical companies and venture capitalists to create a $100 million fund to invest in fledgling life sciences companies in New York. The city will invest $10 million in the fund, along with $40 million from pharmaceutical companies Celgene CorporationEli Lilly, and GE Ventures. The Economic Development Corp. is seeking a venture-capital firm to manage the fund and invest at least $50 million.

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People

Floodgate cofounder Ann Miura-Ko and Google Ventures’ Bill Maris are part of a new “40 Under 40” list that Silicon Valley Business Journal has just published.

Emily White, the director of business operations at Facebook’s Instagram photo-sharing unit, is leaving the company to become COO of Snapchatreports AllThingsD. The hot messaging app company has been searching for someone to help lead the business, says the outlet; more, the hiring signals to the world that Snapchat plans to remain independent for now.

Venture capitalist Fred Wilson made a “grandmaster move” in pledging $10,000 to help every member of a Brooklyn school’s championship chess team head to the National Championship this year, reports the New York Daily News. Wilson, who has also blogged about teaching chess to children, has made “all the difference in the world,” said Steven Colding, the team’s coach. “We raised $6,000 in [additional funding in] four days, just because he said something.”

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IPOs

An IPO is the only way to go for Seattle-based DocuSign, CEO Mike Dinsdale tells the WSJ. “It would be close to impossible for anyone to pay us what we are valued at because we cross more than one vertical,” said Dinsdale, who added: “We won’t be acquired. An IPO is logical at some point.”

Twitter‘s IPO is sparking lots of investor interest in other so-called social startups.

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Exits

Crunchyroll, a five-year-old, San Francisco-based video service for Japanese Anime and Asian media, has sold a majority interest to The Chernin Group, former News Corp president Peter Chernin’s holding company. Terms of the acquisition weren’t disclosed, but sources have told numerous outlets that the price tag was close to $100 million. Crunchyroll had raised a reported $4.8 million, including from Venrock.

Rhythm NewMedia, an eight-year-old, Mountain View, Calif.-based mobile video advertising platform focused exclusively on smartphones and tablets, has been acquired by the publicly traded video search tool company blinkx for $65 million in cash and stock. Rhythm had raised nearly $29 million from investors, including Lightspeed Venture PartnersRembrandt Venture Partners, and Morgenthaler Ventures.

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Job Listings

Pinnacle Ventures, a Menlo Park, Calif.-based venture firm that provides both debt and equity financing to startups, is looking for an associate. The job is a two-year commitment “with possibility for growth if the candidate performs well.” Applicants should ideally have between one and three years of experience working in investment banking, venture capital, private equity, or an operating role.

Data

Pitchbook has scanned some data on the West Coast’s largest venture financings of the year (a good reminder of how massive some of them have been). In descending order, the top five are solar power installation company SunRun ($630 million), the private car service app Uber ($258 million), the social network Pinterest ($225 million), the short-term rentals platform Airbnb ($200 million), and, yes, again, Pinterest ($200 million).

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Essential Reads

Listen up: Software Americans living in San Francisco are tired of being called “techies.” Says one complainant to the San Francisco Chronicle, ”If you use the word ‘techie,’ we know you’re not in tech. A lot of negative terms like that – yuppie, hipster – are outsider terms. We don’t call each other techies – at all, ever.”

Thanks to a patent that the USPTO has just awarded Apple, our iPhones may someday unlock, as well as hide messages, using facial recognition technology.

Over the last half-year, Google has quietly acquired seven startups to create a new generation of robots, and Andy Rubin, the engineer who built Google’s Android software, is spearheading the effort.

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Detours

Couples that drink together stay together, says a, hiccup, new study.

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Retail Therapy

If this Jaguar isn’t the most beautiful car in the world, it surely comes close.

And this, dear friends, is what overdoing it on every level looks like.

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