StrictlyVC: December 17, 2013

110611_2084620_176987_imageHi, very happy Tuesday morning, all!

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Top News in the A.M.

Google, Facebook, Amazon, and Microsoft are expanding their efforts to control more of the world’s Internet backbone, raising tensions with telecom companies over who runs the Web.

President Obama is meeting with tech executives today including Yahoo CEO Marissa Mayer and Twitter CEO Dick Costolo. On the agenda: a discussion about “national security and the economic impacts of unauthorized intelligence disclosures,” said a White House official.

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Why Andreessen Horowitz’s Fourth Fund is Likely Around the Corner

Yesterday, in a WSJ series on venture capitalists’ predictions for 2014, Managing Partner Scott Kupor of Andreessen Horowitz was asked if “venture capital returns have improved enough to draw renewed limited-partner interest in 2014.”

Kupor said the question was really “whether investment dollars will continue to be concentrated in the top firms that enable them to generate above-average returns.”

Kupor shied from saying that fundraising for Andreessen Horowitz will be a walk in the park as always, but it’s a safe bet to make. In fact, it’s likely that Andreessen Horowitz will announce its next big fund in January or very soon after. (The firm declined to comment for this story.)

Consider, for starters, that early last week, the firm announced a new general partner, Balaji Srinivasan, who cofounded a genetic-testing company that makes a saliva-based test for more than 100 serious inheritable diseases. VCs don’t always bring in fresh GPs before a new fund raise, but it’s a little cleaner that way. And Srinivasan gives Andreessen Horowitz an even stronger case to make to investors, given his background in consumer-facing healthcare — an increasingly attractive area of investment where he bolsters Andreessen Horowitz’s expertise.

It’s been almost two years since Andreessen Horowitz debuted two funds totaling $1.5 billion. Most venture firms raise money every three years, but that’s never been the modus operandi of Andreessen Horowitz, whose biggest bets include SkypeTwitterFacebook, andGitHub. (Readers might recall that Andreessen Horowitz collected $300 million for its first fund in 2009, $600 million for its second fund in 2010, and a $200 million co-investment fund in 2011, before announcing its biggest funds to date – a $900 million fund with a $600 million parallel fund — in January 2012.)

A little basic math also points to a new fund in the very near future. When I sat down with firm cofounder Marc Andreessen in mid-October, he told me then that the firm’s third fund was “about 70 percent committed.” And if you’ve been following the news, you’ll notice the firm has led a string of very big investments since.

Yesterday, Crowdtilt, a crowdfunding platform, announced it had raised $23 million in Series B funding led by Andreessen Horowitz. Last Friday, the startup Oculus VR revealed that it had raised $75 million to more broadly market its virtual reality headset. Its lead investor: Andreessen Horowitz. And last Wednesday, Andreessen Horowitz made a giant bet on Bitcoin, leading a $25 million investment in Coinbase, a company that makes it easier to buy and sell the digital currency.

That’s saying nothing of the smaller deals in Andreessen Horowitz has helping to fund, including Koru, a young education startup, and Doctor on Demand, a new company behind a mobile app that connects users with physicians for a consultation fee.

For a gun-slinging firm that likes to make outsize bets when it spies the chance, that doesn’t leave a lot powder — especially when taking into account reserves for follow-on fundings.

“We’ll probably raise a new fund next year,” Andreessen had told me back in October. My guess: we can expect it much sooner than later.

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New Fundings

Infinio, a two-year-old, Cambridge, Mass.- maker of storage caching software, has raised $12 million in Series B financing from existing Investors, including Bessemer Venture Partners, Highland Capital Partners, Lightspeed Venture Partners and Osage University Partners. The company has now raised $24 million to date.

Invincea, a four-year-old, Fairfax, Va.-based cyber security company, has raised $16 million in Series C funding. New investors Aeris Capitaland Dell Ventures led the round with participation from return backersGrotech Ventures, Harbert Ventures and New Atlantic Ventures.

Nanotronics Imaging, a five-year-old, Cuyahoga Falls, Oh.-based maker of optical inspection tools, has raised $7 million in Series B funding from Founders Fund, whose founder, Peter Thiel, will join the board. Last year, the New York Times featured the company in a piece that sheds more light on what’s interesting about its technology.

Qazzow, a two-year-old, Seattle-based maker of customer service software, has raised $2.4 million in Series A funding. WRF Capital andVoyager Capital led the round with participation from Summit Capitaland the W Fund.

Sailthru, a three-year-old, New York-based maker of marketing personalization software that makes it easier for brands to create personalized interactions with consumers in real-time, has raised $20 million Series C funding. Scale Venture Partners led the financing, which included Benchmark, RRE Ventures, DFJ Gotham, AOL Ventures and Occam Partners. Sailthru has raised $28 million altogether.

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New Funds

McRock Capital, a Toronto-based venture capital fund, has held an initial close on $50 million, the firm announced yesterday. The firm’s anchor tenant is BDC Venture Capital; other investors in the fund include unnamed Canadian and U.S.-based institutional investors and family offices.

McRock was founded by veteran VCs Scott MacDonald and Whitney Rockley; its focus is on the “industrial Internet,” or opportunities “where sensors and software and large industrial markets intersect” particularly in large industrial markets looking to streamline their operations and make them more efficient. The firm’s fund announcement comes weeks after McRock announced it will be working with GE Canada to fund connectivity and analytics companies targeting Canada’s oil, gas, and mining sectors.

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People

Blaise Agüera y Arcas, a longtime Microsoft engineer and software designer who was reportedly a top figure in the creation of Microsoft’s Bing Maps service, is joining Google.

Violin Memory, the flash-storage player, just fired CEO Don Basile, following the company’s poor post-IPO performance and disappointing quarterly results. Company chairman Howard Bain will serve as interim CEO.

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Exits

Gopago, a four-year-old, San Francisco-based startup whose mobile app enables users to pay ahead for goods they plan to pick up at a store, has reportedly been acquired by Amazon. Italian newspapers — interested in the story because Gopago’s founders are Italian — say terms of the deal aren’t being disclosed. They also portray Gopago’s acquisition as centered narrowly on the company’s technology. (TechCrunch, which picked up the story, says it isn’t yet clear if any Gopago employees will go to work at Amazon.)

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Job Listings

PayPal is looking for a director of business development. To apply, you need seven-plus years in business or market development at multiple companies, experience with mobile commerce/mobile apps, and an MBA from a top school. Former experience in venture capital, private equity, or corporate development is considered a plus.

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Data

In case you’re curious: Pitchbook took a look at 2007 vintage U.S. venture funds with energy holdings to see which are faring the best. Of the 36 funds they dug up, the median IRR is currently 4.08 percent, and the top performers based on IRR are ARCH Venture Fund VII,Flagship Ventures Fund 2007, and Technology Partners Fund VIII.

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Essential Reads

C’mon Silicon Valley, ditch the lazy lady tech.

“How much traction do you have?” Even angel investors are now asking the question, which is generally starting to come too soon, argues Keith Teare, founder the Palo Alto, Calif.-based incubator Archimedes Labs.

Yuri Milner, the Russian entrepreneur and early Facebook investor, is spending time less time focused on seed-stage investing. The result, says Y Combinator: he’s no longer part of the program he helped devise, which sees a group of investors invest in every single startup to pass through Y Combinator. Milner and SV Angel pioneered the model in early 2011, agreeing to commit up to $150,000 per company; by late 2012, SV Angel had bowed out and the remaining group of investors — Milner, Andreessen HorowitzGeneral Catalyst, and Maverick Capital, had lowered what they were willing to commit to each startup to $80,000. Now, with Milner out entirely, Khosla Ventures is stepping into his shoes, says the organization.

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Detours

Infographic: What you look like to a social network.

Oculus Primed: Meet the geniuses who finally mastered virtual reality.

Apple supplier Pegatron is now using facial recognition technology to screen applicants for its iPhone plant. The idea: to guard against the growing problem of underage workers making their way into factories in China.

Can’t find a way to explain Santa Claus to your
children? This video would probably make things much worse.

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Retail Therapy

This Henry Wingman bag is perfect for the style-conscious bike commuter who dresses in an actual suit every day.

Wow, 4,000 years later, somehow is trying to update the umbrella! Does it work? We can’t say. But we like the idea.

Moustache tie clips. (Just try finding a better stocking stuffer; we dare you.)


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