StrictlyVC: February 13, 2014

110611_2084620_176987_imageHappy Thursday, readers. Do you have a game plan for Valentine’s Day? Because, you know, it’s tomorrow. (Just trying to keep you out of trouble.)

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Top News in the A.M.

Comcast is acquiring Time Warner Cable for $45.2 billion in stock, say reports, a deal that combines the biggest and second-biggest cable television operators in the country. (Isn’t this a walking talking anti-trust suit?) Reporter Om Malik looks at what drove the deal.

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For eShares, a Race to Win Over Startups — and Their Cap Tables

Henry Ward, the cofounder and CEO of 18-month-old eShares in Palo Alto, has a business that’s arguably great for startups. eShares digitizes paper stock certificates along with stock options, warrants, and derivatives to create a real-time picture of who owns what at a startup. The company insists that it also makes it dead simple to transfer ownership of these things.

“Right now,” says Ward, “a company can hire Wilson Sonsini or [startup stock exchange] SecondMarket to create a liquidity program for employees to allow them, say, to sell up to 10 percent of their vested options to existing shareholders. But it can be a costly, three-month-long process that involves figuring out demand and supply. We offer the same thing with a click of a button,” he says, referring to eShares’ clean, simple interface.

Now it’s just a race to convince law firms – gatekeepers for most startups and their paper certificates – of eShare’s merits.

So far, three law firms – Perkins Coie, Gunderson Dettmer, and DLA Piper – have handed over access to 350 companies’ cap tables. But eShares aims to become the private market equivalent of the Depository Trust & Clearing Corporation, which provides clearing and settlement services to the public financial markets. And to get there, it needs to sign up the top 10 to 20 law firms — before someone else does.

The competition is growing by the month. Among the companies that eShares needs to fence out are SecondMarket, Nasdaq Private Market (as it will be known), and upstarts like CapShareDocDep, and TruEquity.

Ward is clearly in it to win it, touting eShare’s advantages as a transfer agent capable of moving stock certificates directly from one person to another. (He likens broker-dealers like SecondMarket to Craigslist, which matches buyers and sellers but is incapable of handling transactions and isn’t exactly a marvel of modern technology from a design perspective.)

Ward also insists that eShare’s pricing model makes more sense than that of competitors, some of which exclusively rely on a SaaS model. Though eShares charges companies $159 a month or roughly $1,900 a year to maintain an ongoing valuation report (an alternative to spending $5,000 for every 409a valuation), it also charges a $20 fee every time a company issues a new grant and another $20 every time someone exercises the sale of one of their holdings. The model means eShares isn’t constrained by the number of startups up and running. As long as companies are hiring and their employees and investors are moving shares around, eShares is making money. Presumably.

Still, eShares will need to further distinguish itself from the pack, which it has numerous plans to do. In April, for example, eShares will begin buying “zombie investments” from investors whose shares have gone to zero and would otherwise be stuck waiting until the startup is dissolved to write off their investment. It’s not a great business, notes Ward. But it could further endear eShares to investors – who can then recommend eShares to their other portfolio companies.

The 12-person company — which has so far raised $1.8 million, including from Draper VC, Expansion VC, K9 Ventures, Subtraction Capital and IronPort cofounder Scott Banister — will also need to raise more capital later this year, says Ward.

“We have a very sticky value proposition, and once companies are on the platform, they’re on for life. But it’s a slow growth model,” he explains. “Getting companies to use eShares as a master record isn’t an impulse purchase for them.”

Ward doesn’t kid himself. He freely admits that if a “new entrant comes in and the market bifurcates, it’ll be much harder for us.”

But that won’t happen if he can help it. “We’re in a land grab,” he says. “It’s a race to a monopoly.”

money-ears

New Fundings

Architizer, a 3.5-year-old, New York-based online marketplace for architectural construction projects, has secured $2 million in seed funding led by Gaspar Global VenturesAlessandro Piol, and Joanne WilsonAccording to co-founder Marc Kushner, a scion of one of the New York area’s pre-eminent real estate dynasties, the money will help the firm pursue the international construction supplies market.

Axine Water Technologies, a 3.5-year-old, Vancouver-based developer of wastewater treatment technologies, has raised $5.6 million Series A financing from The Roda Group, along with earlier investors Chrysalix Energy Venture Capital and BDC Venture Capital. The company has raised roughly $7 million to date, according to Crunchbase.

BlueConic, a 3.5-year-old, Boston-based customer engagement software maker, has raised $3 million in Series A funding led by Sigma Prime Ventures.

CloudPassage, a 4-year-old, San Francisco-based software SaaS company, has raised $25.5 million in Series C funding led by Shasta Ventures, with Meritech Capital Partners, Seagate CEO Stephen Luczo and return backers BenchmarkMusea Ventures and Tenaya Capital participating.

Curious.com, a 10-month-old, Menlo Park, Ca.-based online platform that provides instructional videos on a wide variety of subjects, has raised $15 million in Series B funding from new investor GSV Capital, along with previous investors Redpoint VenturesBill Campbell, and Altamont Capital Partners cofounder Jesse Rogers.

Cybereason, a two-year-old, Cambridge, Ma.-based cyber security startup formed former Israeli intelligence agency members, has secured $4.6 million in Series A funding from Charles River Ventures. TechCrunch has more on the company here.

Hoopla, a 3.5-year-old, San Jose, Ca.-based maker of software that incorporates gamification with data meant to motivate and track sales team performance, has raised $8 million in Series B funding led by Trinity Ventures, with participation from previous investors Safeguard ScientificsIlluminate Ventures and additional private investors. The company has raised $10.8 million altogether, according to Crunchbase.

Miramar Labs, a 7.5-year-old, Sunnyvale, Ca.-based medical electromechanical device maker, has raised $10 million in Series D funding from Aisling CapitalCross Creek CapitalDomain Associates,Morgenthaler Ventures, and RusnanoMedInvest. Miramar has raised around $66 million altogether.

Oorja Protonics, a 10-year-old, Fremont, Ca.-based maker of liquid fuel cell technology, has raised an undisclosed amount of Series E funding from Mingxin China Growth Fund and DAG Ventures. The company has raised at least $20 million prior, including from Sequoia CapitalDAG Capital, and Artis Ventures.

Otoy, a four-year-old, Sherman Oaks, Ca.-based company that’s building rendering technology for running games and other applications in the browser, has raised an undisclosed amount of Series D funding led by Yuri Milner, who was joined by former Morgan Stanley CEO, John MackAutodeskTaylor FrigonGeorge Gilder and The Roddenberry Trust.

RetentionGrid, a 10-month-old, Berlin, Germany-based company whose analytics promise to predict and produce repeat business, has raised €520k in in seed funding, led by Connect Ventures, with participation from a long line of individual investors.

Sideband Networks, a two-year-old, Sunnyvale, Ca.-based maker of application aware performance monitoring software, has raised $6 million in Series A funding from undisclosed sources.

Tapiture, a 18-month-old, Venice, Ca.-based social curation and e-commerce platform, has raised $2.25 million in seed funding led by JUMP Investors.

Tintri, a 5.5-year-old, Mountain View, Ca.-based startup that provides storage for virtualization and cloud customers, has raised $75 million in Series E funding led by by Insight Venture Partners, with participation from existing investors Lightspeed Venture PartnersMenlo Venturesand New Enterprise Associates. The company has now raised $135 million altogether.

Welltok, a four-year-old, Denver-based company whose health platform tries to optimize consumers’ health by aligning activities with incentives, has raised $22.1 million in Series C funding led by New Enterprise AssociatesIBM and Qualcomm Ventures also participated. The company has raised close to $50 million to date.

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New Funds

Arizona State University has received $1 million from a state-backed job creation organization to create a university venture capital fund to fund companies that have passed through the school’s accelerator programs. The school is reportedly looking to raise up to $10 million altogether for the fund, and to make investments of between $50,000 and $250,000, any proceeds from which would be funneled into new investments.

Illumina, a San Diego-based life science tools company, announced the launch of its Illumina Accelerator Program yesterday, which it’s calling the first business accelerator focused solely on creating an innovation ecosystem for the genomics industry. Through the accelerator’s six-month program, Illumina will provide invited participants with technology and business guidance and $100,000 in support, including access to sequencing systems and reagents and lab space close to the company’s planned R&D facilities in San Francisco’s Mission Bay. Initial partners include investor Yuri Milner, who will offer each participating company $100,000 in exchange for convertible notes, and Silicon Valley Bank.

The Walt Disney Company announced Wednesday it is launching a three-month Los Angeles-based accelerator in partnership with Techstars. Ten media and entertainment startups will receive up to $120,000 in cash and a convertible note. Cody Simms, a former exec with StumbleUpon and Yahoo, will oversee the accelerator as managing director.

Yahoo yesterday announced a $10 million partnership between its nine-year-old Yahoo Labs division and Carnegie Mellon University, to focus on mobile and personalization projects. Yahoo will be giving researchers at Carnegie Mellon access to Yahoo’s APIs and data services so that they can experiment and build products using real mobile data from users. Yahoo will also fund research for students and faculty members. CNet has more here.

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IPOs

Jumei.com, a Chaoyang, China-based e-commerce company that sells cosmetics from lines such as Clinique and Kiehl’s, is planning a U.S. IPO and hopes to raised around $500 million, reports Bloomberg. The news follows reports that retailer JD.com, formerly known as 360buy Jingdong, has also filed to go public in the U.S. Jumei has raised at least $10 million from Sequoia Capital and VentechMore here.

Already this year, 31 companies have sold their shares to the public for the first time, a 72 percent increase from this point in 2013, Kathleen Smith of Renaissance Capital tells USA Today. If the trends continue as they have, she says, 2014 could be the best start to a year since the dot-com boom of 2000. (Yikes.)

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People

Yesterday, we reported that CrunchFund has joined the special situations firm Clearlake Capital Group as investors in the decades-old, New York-based e-tailer Bluefly. In a twist, the company is announcing the appointment today of Melissa Payner as its chief merchandising officer. Payner has extensive experience in e-commerce, including as a former CEO of Spiegel catalog, president of Chicos FAS, and, most interestingly, CEO of Bluefly from 2003 through 2012.

Gary Vaynerchuk – the renowned social media marketer whose Manhattan-based agency, VaynerMedia, helps companies promote their brandss — is launching a $25 million seed fund that’s backed by Miami Dolphins owner Stephen Ross. Re/code has the story.

Dennis Woodside, a Google veteran who most recently ran the Motorola Mobility handset unit, has joined the fast-growing online storage company Dropbox as its first chief operating officer, reports the WSJ.

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Happenings

The 11th annual Media Summit New York kicks off March 4th. Learn more here.

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Job Listings

Secondaries market giant Coller Capital is looking for a senior associate in New York.

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Essential Reads

Jawbone, maker of a popular speaker line and the the activity-tracking Up wristband, is poised to complete a new $250 million round of funding that values the company at $3.3 billion, reports Re/code, which says the round was oversubscribed and that its lead investor is San Francisco-based Rizvi Traverse ManagementMuch more here.

Facebook is testing out a 30-person water shuttle to transport employees from San Francisco to Redwood Shores, Ca., a few miles from its headquarters. It joins Google in looking for ways to transport its employees outside of the big corporate shuttle buses that have spurred protests this year.

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Detours

The full-fat paradox: Why whole milk may keep us lean.

Valentine Cards Featuring Dictators and Philosophers.

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Retail Therapy

This waterproof MP3 player “isn’t too groundbreaking,” “holds only 4 GB of music” and “doesn’t offer any great way to scan through songs.” But it comes packaged in a clear bottle of water that you could conceivably drink at some point, though please do not unless someone has triple dog dared you, in which case you must, obviously. (Note: remove MP3 player first.)

Make-out pillows.

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