StrictlyVC: May 8, 2014

Happy Thursday morning, everyone! We’re still working on getting the newsletter to each of you, which is a giant pain in the arse or else we just have terrible email juju. In the meantime, here’s yesterday’s edition, featuring a very personable Mike Abbott of Kleiner Perkins, in case you missed it.


Top News in the A.M.

Some big names in tech — including retailing giant Amazon — have gathered together to sign a letter protesting the proposed net neutrality rules the FCC is considering ahead of its May 15 meeting.


In Accelerator Wars, the Teacher Becomes the Student

Dave McClure once followed Y Combinator’s moves closely, looking to emulate parts of its structure. Now, the famed, nine-year-old tech accelerator looks to be playing catch-up with Dave McClure.

This week, for example, Y Combinator announced it would start running its Startup School, a one-day networking event, in New York and London. Y Combinator, which will continue to run its three-month sessions from its headquarters in Mountain View, Ca., is casting a wider net because “if we focus on the U.S., we miss maybe 95 percent of the best founders,” said the outfit’s new president, Sam Altman, at a TechCrunch conference in New York.

Y Combinator also announced its intentions this year to “get bigger,” with Altman handed the reins by cofounder Paul Graham to grow it. Toward that end, the incubator has recently added six people to its roster of partners, and Altman says Y Combinator’s upcoming class could have upwards of 95 companies, making it the biggest in the program’s history.

Y Combinator’s new initiatives have received a fair amount of attention. But they look oddly familiar to McClure, founder of the four-year-old venture fund and accelerator program, 500 Startups. Indeed, 500 Startups was premised on the idea that venture investing is far more scalable than widely believed, and that to really nab the best deals, an outfit has to go global.

Each year, 500 Startups backs roughly 300 startups. Half of them pass through the firm’s three-month-long accelerator program, where they’re hosted at 500 Startup’s offices in San Francisco or Mountain View. (The outfit accepts roughly 30 startups each quarter, alternating between the two places.) 500 Startups also invests in another 150 seed-stage firms outside its accelerator program each year. About 20 percent of all of those companies are international, says McClure; 80 percent are U.S.-based companies, with roughly half coming from the Bay Area.

Part of what makes 500 Startups work at its scale, seemingly, is that it’s investing in far more than ideas. Most of the startups it funds have a functional prototype. Most have customers at some scale. Some even have million-dollar-per-month revenue run rates

It also believes in “failing on a budget, and failing quickly,” says McClure. (500 Startups a net $75,000 in each company for a 7 percent stake.) And 500 Startups thinks investing is something that can be taught, quickly, to other people, who now represent the outfit’s interests around the world, including Brazil, India, Southeast Asia, China, and Mexico. “Some say it takes 10 years to become a great investor. We think it takes 20 decisions,” says McClure.

We’ll see what happens. 500 Startups has yet to land an Airbnb or Dropbox – companies that have pushed the value of Y Combinator-backed startups into the tens of billions of dollars, at least on paper.

Then again, 500 Startups is younger and has a promising portfolio, along with several big exits under its belt. Among them: the 3D printing company Makerbot (acquired for roughly $600 million), the social marketing company Wildfire (acquired by Google for $350 million), and the video site Viki (acquired by Japan’s Rakuten for $200 million).

500 Startups has closed two funds totaling $73 million so far and is now investing out of a third fund that’s targeting $100 million, shows an SEC filing.

I ask McClure what he thinks of Y Combinator’s newest moves, and he says, laughing: “Welcome to the party, Sam.” But he also notes that, “We’ll have to work harder. We were hoping to have the international stage to ourselves for five years and it now it looks like it might have been four.”

In the meantime, McClure takes some pleasure in noting that “we were the first out of the gate on a number of things that Y Combinator is just now paying attention to. I’m a huge fan of [Paul Graham] and Y Combinator itself,” he adds. “But I think we probably influenced their strategy.”

Founder Showcase

New Fundings

Beroomers, a 10-month-old, Valencia, Spain-based student accommodation marketplace, has raised $200,000 in seed funding from the Plug and Play accelerator program along with numbers angel investors.

Bulu Box, a 2.5-year-old, Lincoln, Neb.-based company that mails out monthly boxes of nutritional product samples from its headquarters, has raised $2 million led by Dundee Venture Capital. Other participants in the round included Midwest Venture AllianceMid-American Angels Investments and Two Bridges Capital.

Flatiron Health, a two-year-old, New York-based company that aggregates cancer-patient data from numerous sources to help doctors make more informed treatment decisions, has raised $130 million in Series B funding, most of it from Google VenturesFirst Round CapitalLaboratory Corporation of America and angel investors also participated in the round, which brings the company’s total funding to $138 million. (Much more on the deal and what the funding is being used for here.)

Hassle, a two-year-old, London-based online marketplace centered around home clearning, has raised $6 million in Series A funding from Accel Partners. TechCrunch has much more here.

IHear Medical, a four-year-old, San Leandro, Ca.-based company that’s developing a Web-enabled hearing aid system, has raised $2.5 million in new funding led by Lighthouse Capital, a Shanghai-based venture capital firm focused on medical devices and IT. Other participants in the round include earlier backers Aphelion Capital and Highlight Capital. The company has raised $5.3 million to date, according to Crunchbase.

Igneous Systems, a year-old, Seattle-based data center infrastructure company, has raised $23.6 million in Series A funding led by New Enterprise AssociatesMadrona Venture GroupRedpoint Ventures and Isilon Systems co-founder Sujal Patel also participated in the round.

Layer, a year-old, San Francisco-based company whose technology helps developers to easily integrate messaging, voice and video into apps, has raised $14.5 million in Series A funding from HomebrewAME Cloud Ventures (the investment vehicle of Yahoo cofounder Jerry Yang), CrunchFundFuel Capital and other investors. TechCrunch’s sources say the outfit’s post-money valuation is in the “mid-$60 million range.” The company has raised $22 million to date, shows Crunchbase.

LimeRoad, a two-year-old, Gurgaon, India-based social commerce platform for women, has raised $15 million in new funding led by Tiger Global Management (which has also funded India e-commerce companies Flipkart and Myntra). Earlier investors Lightspeed Venture Partners and Matrix also participated in the round, which brings LimeRoad’s total funding to $20 million.

LiquidPlanner, a 6.5-year-old, Seattle, Wa.-based maker of priority-based, predictive project management software, has raised $8 million in Series B funding from TVC Capital, a San Diego-based growth equity firm. It’s the company’s first round of venture funding.

Maxta, a 4.5-year-old, Sunnyvale, Ca.-based enterprise storage platform developer, has raised $25 million in Series B funding led by new investors Tenaya Capital and Intel Capital. Earlier investorAndreessen Horowitz also participated in this round, which brings Maxta’s total funding to $35 million.

Motif Investing, a four-year-old, San Mateo, Ca.-based online broker, has raised $35 million in new funding from JPMorgan ChaseWicklow Capital, and Balderton Capital, along with earlier investors Foundation CapitalIgnition Partners, and Norwest Venture Partners. Motif has raised $86 million to date. Dealbook has much more detail on the deal and the company here.

Perfecto Mobile, a 7.5-year-old, Woburn, Ma.-based hardware and software platform focused on remote access and automated testing for mobile devices, has raised $20 million in new funding from new investor FTV Capital. Earlier investors CarmelVertex, and Globespan Capital Partners also participated in the round, which brings Perfecto’s total funding to roughly $49 million.

Pinnacle Engines, a 6.5-year-old, San Carlos, Ca.-based maker of ultra-efficient engine designs, has raised an undisclosed amount of Series C funding from Mitsui Global InvestmentVenturEast and an unnamed strategic partner along with its existing investors Bessemer Venture PartnersNew Enterprise Associates and Infield Capital. The company has raised $30 million to date.

RevolutionCredit, a two-year-old, Irvine, Ca.-based provider of behavioral credit insights, has raised an undisclosed amount of funding from Accion‘s Venture Lab, a $10 million initiative that provides seed capital and management support to financial start-ups targeting disadvantaged and low-income segments of society.

Udemy, a four-year-old, San Francisco-based online marketplace for teaching and learning, has raised $32 million in new venture funding led by Norwest Venture Partners. Earlier backers Insight Venture Partners and MHS Capital also participated in the round, which brings the company’s total funding to $48 million.

Workshare, a 16-year-old, London-based maker of enterprise collaboration apps, has secured $8.4 million in the form of a revolving line of credit from the Technology Finance Division of Wells Fargo Capital Finance. The line of credit follows $33.8 million in funding the company raised in 2012. The company has raised $63.6 million altogether.



Delicious, the social bookmarking service, is being acquired by Science Inc., the L.A.-based technology investment and advisory firm. Science is acquiring the tool from Avos Systems, a company formed by YouTubecofounders Chad Hurley and Steve Chen. Dealbook has much more here.

Stackdriver, a two-year-old, Boston-based company that sells monitoring services for cloud-powered applications, has been acquired by Google for an undisclosed amount of money. The company had raised $15 million from Flybridge Capital Partners and Bain Capital Ventures.



A friend of Rocky Agrawal — the PayPal director of strategy whose bizarre tweets last weekend may have cost him his job — persuasively argues that Agrawal may have bi-polar disorder and that PayPal should have handled the situation differently.

Katie Cotton, the VP of worldwide corporate communications at Apple, is retiring after more than 18 years at the company to spend more time with her children, says the company. Cotton served as a gatekeeper to co-founder Steve Jobs and current CEO Tim Cook and will remain best remembered by journalists for those oft-spoken words: “We have no comment.”

Chang Dong-hoon, head of Samsung Electronics‘ mobile design team, offered to resign last week over criticism of the company’s latest Galaxy S smartphone. Samsung has evidently accepted that resignation, appointing Lee Min-hyouk, vice president for mobile design, to succeed Dong-hoon. Reuters has more here.

Shawn Price is no longer the head of SAP‘s cloud business unit, sources tell Re/code. More here on what’s happening inside the German business software giant.

The investors at Rembrandt Venture Partners have ditched Sand Hill Road for a full floor in San Francisco’s Transamerica Pyramid, the tallest building in San Francisco. “When we saw the 360-degree views and full-floor layout, we fell in love with it,” says general partner Scott Irwin. San Francisco has drawn a growing number of venture firms in recent years. Some, including True VenturesNorwest Venture PartnersKleiner Perkins Caufield & Byers and Founders Circle Capital, rent office space in the city’s funky South Park neighborhood, built around what in the 1850s was a private garden for high-end residences. Others, including Alsop Louie PartnersMaveronSigma West, and Next World Capital, are turning the city’s Jackson Square neighborhood into another venture hub. “We set out to find a creative brick [and] timber space in Jackson Square,” says Irwin, but like most property in San Francisco these days, “the options were very limited.”


Job Listings

SurveyMonkey (backed by Tiger Global and Google) is looking for a director of business development. The job is in San Francisco.


Essential Reads

Strava, the mobile-fitness app that’s popular with competitive cyclists and runners is hoping it can lure a new type of customer: the government.

Meet gaming’s biggest rock star, Markus Persson, better known as “Notch.”



The robot car of tomorrow might just be programmed to hit you.

Thirty-second tech trick: How to use disposable Gmail addresses.

Iconic romantic scenes remade with burritos.


Retail Therapy

Horror Campout: A terrifying overnight camping experience that you can’t miss – unless you want to live. Mmwhahaha.

We’re buying new business cards just so we can trot this out as often as possible.


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