StrictlyVC: February 21, 2014

110611_2084620_176987_imageGood morning, everyone, hope you have a super weekend. See you back here on Monday.

Also, quick (giant) thank you to those of you who reach out every week to let me know you’re enjoying StrictlyVC. As someone who is still trying to figure this out, it’s so very much appreciated!


Top News in the A.M.

Microsoft head honcho Satya Nadella talks with the New York Times about his new role.

Amazon gets its TV box ready, again.


Scribd CEO Trip Adler on Books, Froth, and the Company’s Next Round

Scribd has had a circuitous arc. Started in San Francisco in 2007, Scribd’s original concept was to allow anyone to take any kind of written content and slap it on the Web. (Fifty million documents have been uploaded since.) By 2009, it was also running an electronic book market, allowing authors and publishers to upload their works, then set their own price for them and keep most of the revenue. In 2011, Scribd also launching a news reading app called Float. (It later folded Float back into the company.)

But the company thinks it has struck on its most promising transformation yet, as a digital lending library that charges $8.99 per month for unlimited access to roughly 100,000 titles from publishing partners like HarperCollins that can be read on pretty much any kind device.

The company is about a year into the shift, though it only announced it in October of last year. Earlier this week, I talked with cofounder and CEO Trip Adler to see how it’s going – and whether Scribd might raise more funding to move past competitors (including, potentially, Amazon) that also want to become the Netflix of books.

What can you tell us about how your new business is going? Are you releasing subscriber numbers?

We aren’t, but they look good. Since launching a little over a year ago, the [number of subscribers has] been growing 50 to 100 percent each month. I haven’t seen anything grow quite this fast [at Scribd].

Your business is increasingly reliant on subscriptions, whereas your document sharing business is largely ad supported. How much of that $8.99 is going in your pockets versus publishers whose books you’re renting?

We pay publishers based on reading activity, so if a customer reads a book, we pay the publisher for the book.

That seems like an expensive proposition. How much do the books cost you?

Some of the romance books might cost a few dollars; some of the best-sellers can cost up to $15. We have some power readers who will read many books in one month, but the typical user reads a book a month, and we’re optimizing around the average user, who costs us less [than the $8.99 monthly subscription fee]. The model has been profitable since we launched it.

You’re gathering a lot of data about how people consume books, including what prompts them to skip ahead, and whether people aremore likely to finish biographies than business titles. Will you start charging publishers for these analytics?

Analytics isn’t part of our business model yet. So far, we’re just sharing it with publishers very openly, but it could be something down the road that we turn into a business model.

How are you marketing this new service?

Most of it has been organic; we have 80 million monthly active users, so we’re mostly marketing it to that audience, and growth hasn’t been a problem. We’re also starting to do more paid ads, and we’re talking to journalists like you.

How big is Scribd at this point, and is it profitable?

We have 55 employees, mostly in engineering and design. And we’ve been profitable for a while and growing revenue pretty steadily – 90 percent year over year since we started the company.

You’ve raised $26 million so far, with your most recent, $13 millionround closing in 2011. Are you back in the market or will you be soon?

We might fundraise if it feels like we have a use for the cash, but it hasn’t been a priority for us. Right now, we’re just focused on making the product the best that we can.

People are throwing a lot of money around right now.

Things do seem frothy to me. The valuations that companies are getting are just crazy. For that reason, it could be a good time to fundraise. If you can build a company and get it profitable, funding comes naturally, though. It’s harder to build a profitable business than to raise money.


New Fundings

Acompli, a year-old, San Francisco-based company that’s building a mobile email application to work as an all-in-one productivity app for the iPhone, has raised $7.3 million in Series A funding led by Redpoint Ventures. Other investors to join the round included Harrison Metal and Felicis Ventures.

Brand Embassy, a 2.5-year-old, Prague-based social customer care platform, has raised $1 million in seed funding from investors that include Rockaway Capital and Spread Capital. The company’s SaaS platform allows companies to answer customer questions through social media channels like Facebook and Twitter; it’s used by Vodafone and TMobile, among others, says FinSMEs.

Cylance, a two-year-old, Irvine, Ca.-based “math-based” threat detection and prevention company, today announced it has closed $20 million in Series B funding from Blackstone and earlier investors Khosla Venturesand Fairhaven Capital, among others. Cylance has raised $35 million altogether, according to Crunchbase.

e-Chromic Technologies, a three-year-old, Boulder, Co.-based company that says its electrochromic thin film can turn standard windows into energy-efficient “smart” windows, has raised $600,000 in seed financing led by Amplifier Ventures, a seed-stage firm in McLean, Va.

Ezetap, a three-year-old, Bangalore-based mobile payment company focused on emerging markets, has raised $8 million in Series B funding led by Helion AdvisorsSocial+Capital and Berggruen Holdings. The company has raised roughly $11.5 million to date.

GigaOm, the seven-year-old, San Francisco-based media company, has raised $8 million in new funding led by Shea Ventures. Earlier investors, including True VenturesAlloy Ventures and Reed Elsevier Ventures, also participated in the funding. The company has raised roughly $22 million over the years, shows Crunchbase.

Inpria, a 6.5-year-old, Corvallis, Or.-based developer of high-resolution photoresists, has raised $4.7 million of a committed $7.3 million in financing led by Samsung Ventures, with participation from Intel Capital andApplied Ventures.

Meetup, a 12-year-old, New York-based online network of local groups, has closed a secondary round from three key investors — Twitter cofounderEv Williams, Zappos CEO Tony Hsieh, and Behance co-creator Scott Belsky – reports VentureBeat. The round was “kept small,” allowing 10 to 15 current and former employees to exercise their expiring stock options, Meetup’s CFO tells the outlet. Meetup itself “did not take in any money in this transaction.”

Mindbody, a 13-year-old, San Luis Obispo, Ca.-based maker of business management software for beauty, health and wellness industries, has raised $50 million from a syndicate of current and new investors, includingBessemer Venture PartnersInstitutional Venture PartnersCatalyst InvestorsW Capital Partners, and Montreux Equity Partners.

Modern Family Doctor, a 6.5-year-old, Bangalore-based chain of primary healthcare clinics and pharmacies, has raised a Series B round of undisclosed size from Bamboo Finance with participation of existing investor Saama Capital. In 2011, the company raised $2 million from Saama Capital.

Ornim Medical, a 10-year-old, Kfar-Saba, Israel-based biomedical technology company that’s developing non-invasive patient monitoring devices for cerebral and tissue blood flow, has raised $10 million in funding led by OrbiMed Israel, with participation from GE and Agate venture capital fund. The company has raised $20 million to date.

Smarter Remarketer, a 3.5-year-old, Indianapolis-based company tht makes customer intelligence software for retailers, has raised $7 million in financing led by Battery Ventures. The company has raised $10.3 million altogether, shows Crunchbase.


New Funds

Crystal Tech Fund, a new Ashburn, Va.-based venture fund, is targeting a $50 million fundraise, shows an SEC filing. The firm’s founder is Paul Singh, a former partner at 500 Startups, who tells the outlet InTheCapital that he’s looking invest in “tech enabled” companies in the post-seed space. Says Singh: “This is definitely the next logical step for me, and I think this is the next logical step for what the market needs.” Singh follows in the path of several other firms to explicitly target startups that have raised seed funding but not yet obtained Series A funding, including Venture51Capital Partners (the new fund of Ronny Conway), and Bullpen Capital, which StrictlyVC profiled last week.

IDG Ventures USA, the early-stage, San Francisco-based venture firm, looks to be sewing up its third fund, judging by an SEC filing first flagged by VentureBeat. The filing states that the firm has raised $65.2 million and is targeting $100 million. IDG is focused on media, enterprise IT, and consumer Internet companies and is managed by Alex RosenPat Kenealy, and Phil Sanderson. The group, which was established in San Francisco in 2006, raised its last fund in 2009. You can check out its portfolio here.



Dachis Group, a six-year-old, Austin, Tx.-based social and brand analytics company, has been acquired by another social media analytics company, 4.5-year-old, New York-based Sprinklr. Dachis had raised $37.5 million from Austin Ventures. Terms of the deal weren’t disclosed.

Simple, a 4.5-year-old, Portland, Or.-based banking startup, has been acquired for $117 million in cash by the Banco Bilbao Vizcaya Argentaria, a 150-year old, Spanish banking operation. Simple had raised roughly $15.3 million from investors, including SV AngelFirst Round CapitalLerer Ventures500 StartupsShasta Ventures, and IA Ventures., a three-year-old, London-based startup that tries to detect online ad fraud, has been acquired by Google for undisclosed terms. Cnet has more on the deal here.

Tedemis, an eight-year-old, Paris-based software company focused on personalized email marketing, has been acquired by the publicly traded digital performance advertising company Criteo for $23 million in cash, with another $5.4 million being deferred based on agreed milestones. Tedemis describes itself as venture-backed though hasn’t disclosed how much it has raised or from which investors.

Xora, a 15-year-old, Mountain View, Ca.-based market specialist in mobile workforce management, is being merged into the mobile workforce management and optimization software company ClickSoftware Technologies for $14.7 million in cash, plus working capital and cash adjustments. Xora has raised roughly $20 million over the years, including from Rho Capital PartnersDawntreader VenturesBlueStream Ventures, and Split Rock Partners.



ML co-inventor Tim Bray is leaving Google after a four-year run, saying he didn’t want to move to California from his beloved Vancouver. In a self-styled Q&A, Bray asks if everyone won’t be working remotely in the future, to which he answers: “I don’t know. I’m pretty sure it’s possible to build a company around the notion of a distributed workforce, but I don’t know how far you can scale it. Anyhow, that’s not the kind of company Google has chosen to build. How reasonable is it to argue, given the results they’ve been getting?”

Om Malik, the popular founder of the media property GigaOm, announced yesterday that he’s relinquishing his day-to-day involvement with the business and becoming a partner at True Ventures, the early-stage venture firm where he has been a venture partner for several years. “I’m looking forward to a long-needed break after more than 25 years at the daily grind of writing the first draft of history,” Malik wrote in a post yesterday. More here.

Jon Mills, the founder and former CEO of a 3.5-year-old, San Francisco-based analytics startup called Motionloft, has been arrested by the FBI following allegations that he misled investors about an acquisition of the company while spending lavishly on private jets, expensive dinners, and parties with celebrities. TechCrunch has the story.

Andrew Reed, formerly a San Francisco-based tech banker with Goldman Sachs, has joined Sequoia Capital‘s growth equity practice, along withMatt Huang, who co-founded a social media analytics company called that was acquired by Twitter. Dan Primack of Fortune has the story.



Oasis, the newest iteration of the Montgomery Technology Conference, takes place March 4th and 5th in Santa Monica, Ca., and the line-up looks interesting. Speakers include John Chen, the newest CEO of Blackberry (he’s widely credited with turning around an ailing Sybase, where he was CEO previously); Paul Maritz, the CEO of VMWare spin-off Pivotal; andFacebook‘s director of growth and monetization, Rob Goldman. You can request an invitation here.



CB Insights looks at which stages and geographies are seeing the most mobile messaging deals.


Job Listings

HarbourVest Partners, the giant private equity investment firm, is looking for an associate to join its secondary investment group. The job is in London. More information here.


Essential Reads

How Google “blew its chance” to acquire WhatsApp for even more than the $19 billion that Facebook paid for it.

Tesla‘s superstar CEO Elon Musk has confirmed “conversations” with Apple, but he says any acquisition is “very unlikely” at the moment.

Invasion of the taxi snatchers: Businessweek’s Brad Stone on industry disrupting Uber.

Wall Street has ceased to be the career destination of a certain kind of status seeker. Guess where that person wants to work now.



The dark power of fraternities.

“In two hours on President’s Day, [Girl Scout] Danielle [Lei] sold 117 boxes outside the [medical marijuana] clinic — people gobbled up all her Dulce de Leches and blazed through the Tagalongs.”

What is success? “Was Michael Jordan a successful basketball player or a very bad basketball player? No one has ever been able to answer this question.”


Retail Therapy

This strikes us as a pretty bad idea. (Maybe it’s a generational thing?)

Long-suffering Cleveland sports fans, this one is for you.


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