StrictlyVC: April 3, 2014

Good morning! Hope your Thursday is off to a great start.

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Top News in the A.M.

Nearly four years ago, the U.S. government put the final touches on a secret plan to build a social media project aimed at undermining Cuba’s communist government, the AP is reporting. But the legality of the fake Twitter it created is far from clear.

Pavel Durov, the founder of the Russian social network Vkontakte, who earlier this week announced he was quitting his job as its chief executive, is saying this morning that it was an April Fool’s joke. United Capital Partners, which has fought with Durov since buying a 48 percent stake in Vkontakte from two other co-founders last April, doesn’t think Durov is hilarious. “Needless to say, we do not consider it funny, especially taking into account that the board of Vkontakte is meeting at the moment in Riga [in Latvia] to discuss candidates for Durov’s replacement,” the company told the WSJ.

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Despite an Abundance of VC, Lighter Capital Finds Takers

Lighter Capital emerged on the scene nearly four years ago when money was tight and its business — offering revenue-based financing to nascent, cash-strapped tech startups — seemed perfectly timed. Startups that didn’t want to agree to onerous venture terms yet weren’t candidates for small business loans suddenly had a third choice.

Of course, times have changed. Not only are traditional VCs now looser with money and terms friendlier, but you can’t swing a cat without hitting an angel investor, a micro VC, or an accelerator program. To find out how the Seattle-based company — which last disclosed a $6 million Series A in 2010 — is faring, I called its CEO, B.J. Lackland, last week to learn more.

Lighter Capital is kind of like an OnDeck but focused more exclusively on small software-as-a-service startups. Why?

We really like things with recurring revenue. That’s what we see as the asset that we’re fundraising against.

Explain how your service works to startups unfamiliar with revenue-based loans.

We’ll [loan] a startup that has more than $200,000 in annual revenue and 50 percent in gross margins between $50,000 and $1 million. Say we give them $100,000. They’ll pay us a set percentage of monthly cash receipts — maybe it’s 5 percent — until they’ve paid us a multiple of the $100,000 that we loaned them [depending on the business, its team, and its revenue]. Our interest rates vary from 1 to 10 percent, and we cap the [final payout] at 2.5x.

How long do you give companies to pay you in full?

As long as it takes, though if we can help accelerate [the time it takes to get paid in full], we get a better IRR out of it, so we’re happy to help them if we can. The way we interact [with our customers] is halfway between a bank and a VC.

What’s your pacing like, and what types of entrepreneurs are turning to you?

We’re doing three deals a month, though we’re staring to accelerate the volume. We’re targeting 8 to 10 deals a month now that we’ve really nailed down the instrument and the target. Our entire shtick is that can we use technology to make capital available faster; we can go from loan application to deal in one month.

There’s a lot of interest in the gap we’re filling between banks, VCs and angels. VC are shooting for 10x to 100x. Banks are just looking to not lose their money [so won't always lend to our targets]. And angels want to own more of a startup, while a lot of our entrepreneurs own their entire businesses or else they’ve raised angel funding already but don’t want to become even more diluted [including as they work their way toward a Series A round].

Your product is money, which begs the question: Are you raising another round this year?

Actually, we just completed a financing — a larger, involved deal — that probably won’t be public for a while.

Will you expand beyond lending to software, Saas, and technology companies? OnDeck, which you mention, seems to be doing pretty well by lending to a range of businesses.

We’ll expand eventually, though we want to focus on our beachhead market and really refine the investing strategy and all that. We also intend to bring out new financial products. We think there’s still a huge gulf between us and banks, and that there’s an opportunity to create more lending offerings to companies — either more money or by lending money to slightly larger entities. There’s still very much a need for that.

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New Fundings

Gear Systems, a 1.5-year-old, San Francisco-based startup that’s building gesture recognition technology, has raised $1.9 million in venture capital from K9 VenturesIntel Capital, and CrunchFundsays TechCrunch.

Catarizm, a two-year-old Tokyo-based online booking service for tours and activities like sightseeing and motor sports, has raised $1.93 million from Globis Capital Partners and Jafco Ventures.

Creads, a 5.5-year-old, Paris-based advertising agency platform that invites brands to state their requirements, and for freelancers and outside agencies to address them, has raised $4.1 million from CM-CIC Capital Privé.

ElasticBox, a 2.5-year-old, Mountain View, Ca.-based startup that aims to make developing and deploying apps on any cloud infrastructure easier, has raised $9 million in Series A funding from Nexus Venture Partners and Intel Capital. The company had previously raised $3.4 million in seed funding from Nexus Venture Partners, Andreessen HorowitzIntel CapitalAngelPadSierra Ventures and Caffeinated Capital.

EyeSee360, a 16-year-old, Pittsburgh-based maker of a panoramic video camera, the 360Fly, has raised an undisclosed amount of funding from Catterton Partners. The company originally formed as an offshoot of Carnegie Mellon University’s Robotics Institute, where its tech was developed.

FiscalNote, a year-old, Bethesda, Md.-based analytics platform that aggregates information about government regulations in real time, is in the market for new funding, says cofounder Tim Hwang. The company — which raised a $1.2 million seed round in September from Mark CubanNew Enterprise AssociatesFirst Round Capital, and AME Cloud Ventures – is looking for up to $8 million to scale its sales team and expand its reach into Europe and South America.

Fonemine, a nine-year-old, Sunnyvale, Ca.-based whose technology helps enterprises build and manage mobile apps, has $4.5 million in Series B funding led by Michigan eLab, an Ann Arbor, Mi.-based venture capital firm.

Fresh Direct, a 12-year-old, Long Island City, Ny.-based food and grocery delivery service, has raised $10 million in funding, according to an SEC filing. The company has raised at least $91 million to date, shows Crunchbase. Among those listed on the filing is portfolio manager Jeff Deutschman of Apollo Global Management.

GameChanger Media, a five-year-old, New York-based company that makes scorekeeping software for amateur baseball, softball and basketball teams, has raised $6.8 million led by Trilogy Equity Partners. Earlier investors, including Tenfore Holdings and Costanoa Venture Capital, also participated. The company has raised roughly $10.5 million altogether, according to Crunchbase.

Imgur, a five-year-old, San Francisco-based photo sharing service that’s grown very popular in recent years, has raised its first institutional funding in the form of a $40 million investment from Andreessen Horowitz. The round also included a smaller contribution from Reddit, the company says. The New York Times looks at the company, and the deal, here.

Lyft, the 6.5-year-old, San Francisco-based ridesharing service known for the pink moustaches its drivers sport, has raised $250 million in fresh funding, led by the hedge fund Coatue Management, which was joined by the Chinese Internet company Alibaba and hedge fund Third Point Management. Earlier investors Andreessen HorowitzFounders Fund and Mayfield Fund also participated. The company has now raised $332.5 million altogether.

Newlight Technologies, an 11-year-old, Irvine, Ca.-based company using a microorganism-based biotechnology process to convert air and greenhouse gas into carbon-negative thermoplastics, has raised $9.2 million in Series C funding from (unnamed) new and existing investors, bringing the company’s total capital raised to date to $18.8 million.

Nujira, a 12-year-old, U.K.-based fabless semiconductor company, has raised $20 million in fresh funding from existing investors including Amadeus Capital PartnersClimate Change CapitalEnvironmental Technologies FundSAM Private Equity and NES Partners. The company has raised previously raised roughly $38 million, shows Crunchbase.

OpenFin, a 3.5-year-old, New York-based financial app technology startup, has raised $4 million in Series A funding led by Bain Capital Ventures. OpenFin’s secure runtime technology promises to improve trading and real-time data applications at financial institutions. The company has now raised $7 million to date, it says.

Personal Genome Diagnosis, a 3.5-year-old, Baltimore, Md.-based company that provides cancer genome analysis to oncology researchers, has raised $2.8 million from several undisclosed private investors. The company had raised at least $100,000 in seed funding in 2010, according to an SEC filing.

The Roberts Group, a 33-year-old, New York-based company that provides market data cost and inventory management solutions to the financial services industry, has received an undisclosed amount of funding from Polaris Partners.

Somo, a five-year-old, London-based mobile marketing and advertising company, has raised $5.5 million in funding. The money comes from MMC Ventures, a London-based venture firm that has previously provided Somo with an undisclosed amount of funding.

WealthForge Holdings, a 4.5-year-old, Richmond, Va.-based licensed broker-dealer and investment banking firm that focuses on private investments in small companies, has raised $2.5 million in Series A funding. New Richmond Ventures, a Richmond-based investment firm, and SenaHill Partners, a New York City-based merchant bank, were the lead investors in the round.

Wealthfront, a six-year-old, Palo Alto, Ca.-based online investment management company, has raised $35 million in new funding led by Index Ventures and Ribbit Capital. Earlier investors The Social+Capital PartnershipGreylock Partners and DAG Ventures also participated along with numerous individual investors, including Marissa MayerKevin RosePaul KedroskyMark and Ali PincusAlison Rosenthal and Tim Ferriss. The round brings total funding for the company — which was formerly known as kaChing Group and changed its name to Wealthfront in October 2010 — to $65 million.

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New Funds

Visionnaire Ventures, a new, San Carlos, Ca.-based seed and early-stage venture firm, has raised a debut fund of $80 million, according to an SEC filing. The firm makes seed, early and growth-stage investments in startups that “leverage technology to evolve consumer interactive entertainment experiences,” according to its site.

Visionnaire was cofounded by Taizon Son, the youngest brother of SoftBank founder Masayoshi Son. The younger Son is also cofounder of the Japanese video game company GungHo Online Entertainment. (Now a publicly traded company, Gungho reportedly made Son a billionaire last year. Indeed, Gungho and Softbank — an early investor in Gungho — used some of the run-up in Gungho’s stock to acquire a 51 percent stake inSupercell, the Helsinki-based mobile gaming company, last year.)

Visionnaire’s site says that it invests in both the U.S. and Asia. Its managing partner is Susan Choe, who previously cofounded an online gaming company called Outspark and spent several years in a variety of roles at Yahoo.

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IPOs

Cheetah Mobile, a 4.5-year-old, Beijing-based security software maker, a unit of the Chinese software company Kingsoft Corp., filed to go public yesterday. Reuters has much more on the company and why it hopes to list in the U.S. here.

Lumena Pharmaceuticals, a three-year-old, San Diego-based developer of treatments for serious liver diseases, has also filed to go public, just a few weeks after raising $45 million in Series B funding. The company, which has raised roughly $70 million from VCs, is looking to raise $75 million in its offering. Its principal shareholders include Alta Partners, which owns 34 percent of the company; New Enterprise Associates (17 percent); RiverVest Venture Partners (14.9 percent), Pappas Ventures(12.2 percent); and Adage Capital Partners (7.9 percent).

Rubicon Project, the venture-backed, digital ad tech company, saw its shares rise nearly 34 percent yesterday after it priced its shares at the low end of its estimated price range of between $15 and $17 a share. Investors Business Daily has more here.

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Exits

AccessClosure, a 12-year-old, Mountain View, Ca.-based company that makes extravascular closure devices, is being acquired by publicly traded Cardinal Health for $320 million in cash. AccessClosure had raised at least one round of funding, according to Crunchbase, which shows a $2.8 million round led by New Leaf Venture Partners and Three Arch Partners.

Big Frame, a 2.5-year-old, Hollywood, Ca.-based media company that works with YouTube influencers to create and market video content ,has been acquired by AwesomenessTV, the digital media arm of Dreamworks Animation, for $15 million. Big Frame had raised a $3.4 million round in 2012 from Anthem Venture PartnersDFJ FrontierPritzker Group Venture CapitalLowercase Capital, and Launchpad LA, among others.

Sociomantic Labs, a 4.5-year-old, Berlin-based ad tech firm that specializes in programmatic and retargeting advertising with an emphasis on e-commerce, has been acquired by Tesco, the world’s second-largest retailer after Walmart. The companies are disclosing the acquisition price, but sources tell TechCrunch it’s in the “low hundreds of millions of dollars.”

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People

Caterina Fake is one of 16 entrepreneurs whom Bloomberg has asked the question: How do ideas really happen? Fake, who cofounded the photo-sharing site Flickr, tells the outlet it’s less than sudden, despite perceptions otherwise. “Most often, ideas evolve over time .. With my current startup, Findery, I thought I had the idea when I was camping with my daughter in 2010. But then my ex-husband reminded me that I’d actually talked about doing that in 2005.”

Michael Skok, a general partner with North Bridge Venture Partners, says his firm, one of few still stationed in the Boston suburbs, is moving to Boston or Cambridge later this year. According to the Boston Globe, Battery VenturesPolaris PartnersAtlas VentureBessemer Venture PartnersHighland Capital PartnersCharles River Ventures, and Matrix Partners have all moved (or are on the cusp of moving) out of the burbs and into the city, as the venture industry has shifted from a lean-back to lean-in model (i.e., closer to entrepreneurs).

Nick Solaro is the newest partner of Drive Capital, the Columbus, Ohio, venture firm launched by former Sequoia Capital partners Mark Kvammeand Chris Olsen. The WSJ has the story. Solaro has spent the last four years working in business development at Google in Mountain View, where he focused on Android. Before Google, Solaro cofounded a pet care site called PetWave. Solaro has also spent time as a junior investment professional at Technology Crossover Ventures and as an analyst at Goldman Sachs and UBS.

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Happenings

The VentureScape conference is coming up in a few weeks, and it’s pretty clear that its chair, Venky Ganesan of Menlo Ventures, isn’t messing around. This year, for example, venture-backed entrepreneurs are invited to attend. (Note: their VCs have to be NVCA members.)

The two-day, San Francisco-based event, taking place May 13 and 14, will also feature some high-wattage speakers, including former Secretary of State Condoleeza Rice, who’ll give an hour-long keynote address; GE honcho Jeff Immelt, who will be interviewed by venture capital honcho Peter Thiel; and academic Vivek Wadhwa, who will go toe-to-toe with reporter-entrepreneur Kara Swisher of Re/code in discussing racial and gender discrimination in Silicon Valley.

Ganesan also says to look for an LP panel, featuring Peter Dolan of Makena Capital, as well as panels designed around cybersecurity, corporate venturing, young VCs, female VCs, growth-equity investing, and CFOs, among others.

As for entertainment, among other acts, veteran VC Ray Rothrock will be performing with his son in their band Up and to the Right. “His son is really good,” says Ganesan. “Ray,” he adds, “is okay.”

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Job Listings

Bessemer Venture Partners is looking for a full-time associate in Menlo Park, Ca.

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Data

Dow Jones did some number crunching to determine which cities, outside the U.S., are the biggest startup hubs. What it found: London is leading the pack, with Paris following closely behind. But Berlin and Moscow are catching up to both. Venture-capital investors closed 104 deals with Berlin-based startups in 2013, a 22 percent increase over 2012 and an 89 jump from 2011. Investors in London, meanwhile, closed 135 deals with startups in the U.K. capital last year — which is 2 percent fewer than from 2012 but up 26 more than closed in 2011. Overall, says Dow Jones, European companies raised $7.26 billion in venture capital last year across 1,330 deals, which is 16 percent of the deals done globally.

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Essential Reads

Tech columnist Farhad Manjoo takes readers for a tour inside Stanford University’s Virtual Human Interaction Lab.

Microsoft is trying to be your friend – and it’s kind of working.

According to an as-yet unpublished study, the Mayo Clinic has found that incorporating a smartphone app into cardiac rehabilitation can reduce emergency room visits and hospital readmissions by 40 percent.

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Detours

Extreme adventures in work avoidance.

Women who stay up late tend to have similar risk-taking tendencies as men, according to researchers from the University of Chicago.

At 23, many people around the world are still in college. Gossy Ukanwoke, “Nigeria’s Mark Zuckerberg,” has instead launched one: Beni American University, Nigeria’s first private online university.

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Retail Therapy

Vibrant maps.

Pillow cases for nut jobs.

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