StrictlyVC: May 22, 2014

Happy Thursday morning, everyone!

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Top News in the A.M.

Facebook announced today that it is changing a privacy setting for new users, making their “friends” the default audience for all posts, rather than the general public.

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With $150 Million in Fresh Funding, Can the Amazon of Russia Deliver?

Dipping into a flourless cake at a French bistro in San Francisco, Maelle Gavet has reason to be in a celebratory mood. The French-born CEO of Ozon, considered the Amazon of Russia, has in the last few weeks sealed up $150 million in fresh backing from investors — money that helped Ozon secure a minority stake last week in LitRes, the leader in Russia’s small but fast-growing e-book market.

The achievements aren’t minor for the company, which Gavet has been leading for the last three years, after a Boston Consulting Group job led her to it. Founded in 1998 as an online bookstore, Ozon had barely issued a press release about its first $3 million round, from the Moscow-based PE firm Baring Vostock, when the dot.com industry imploded. Over the next decade, the company churned through employees, including CEOs, managing to survive but barely until Index Ventures stepped in to lead an $18 million round in the company in 2007. It gave Ozon a needed lifeline. But Ozon has really begun to click on Gavet’s watch.

Gavet’s biggest, and likely smartest, gamble to date has been to invest heavily in Ozon’s own private shipping company, O-Courier, which is making it possible not only for Ozon to fulfill its orders but also to serve as a back-end provider for a growing number of third parties that now rely on its increasingly sophisticated logistics network to deliver their own goods.

She has also been pouring resources into other subsidiaries, including a travel business, Ozon.travel; a shoe business à la Zappos called Sapato.ru; and Ozon Solutions, which offers turnkey solutions to brands that want to sell online but don’t want to pull together retail storefronts themselves.

Ozon, which employs 2,300, is far from profitable because of how much it’s investing in growth. But with roughly half of Russia’s 140 million inhabitants now online, and 20 percent of those 70 million shopping online, the company’s efforts are beginning to pay off. Last year, revenue hit $750 million, up from roughly $500 million in 2012 (which was itself up from $165 million in 2010).

Of course, Ozon still has its share of obstacles, some of which must seem insurmountable to American investors, who passed on Ozon’s newest round of funding. Ozon’s newest backers instead are Sistema and Mobile TeleSystems, two of Russia’s largest publicly traded holding companies, which invested in Ozon last month at a $700 million valuation. (They now own a 20 percent stake in the business.)

Not only are there the obvious geographic, cultural, and economic challenges to navigate (enormous country, terrible roads, cash culture, fewer people than Nigeria and a relatively tiny urban elite with money to spend), but business is utterly entangled with politics, too.

There’s the Ukranian crisis, for one thing, a situation that Gavet says has impacted Ozon indirectly but meaningfully. First, the Russian ruble devalued fairly quickly, making its import contracts far more expensive. Worried banks proceeded to cut customers’ credit lines, and “with retailers everywhere,” notes Gavet, “a lot of your working capital is through credit lines with the banks.” Soon, some European and American investors who Ozon had been talking with about its fundraising “stopped returning our calls,” Gavet tells me with a shrug.

There’s also the little problem of Pavel Durov, the country’s most visible Internet founder, who just fled the country because of the Kremlin’s steady inroads into the ownership of his company, VKontakte, Russia’s leading social network. How could investors not worry that some oligarch will steal her company, too, I ask her over lunch.

“If you look at Yandex [the Russia-based search engine that went public in 2011 on Nasdaq], it’s doing fine,” she says. The Russian Internet company Mail.ru., which went public on the London Stock Exchange in 2010, “is also doing fine. You have a lot of American investors in both of these companies,” she adds, noting that Ozon’s earlier shareholders include some U.S. investors, as well, including Cisco and Intel. (Ozon has raised $271 million altogether, including a $100 million round led by Japan’s Rakuten in 2011.)

“You can always [hypothesize] over whether the government is going to be interested at some point. But if you look at the facts, there is no issue,” she says. “I do think there are industries that are considered to be strategic by any government; I’m not sure that online retail has ever been one of them,” she adds with a laugh.

money-ears

New Fundings

Drizly, a two-year-old, Cherborn, Ma.-based on-demand alcohol delivery company, has raised $2.5 million in fresh funding led by earlier investor Continental InvestorsVayner RSESuffolk Equity, and other previous investors also participated. The company has raised $7.3 million altogether, including from Atlas VentureFairhaven Capital Partners,Reynolds & Company Venture PartnersBreakaway Ventures, and many individual investors.

Evergage, a 3.5-year-old, Somerville, Ma.-based software platform whose detailed analytics help its companies better engage with customers, has raised $4 million in Series A funding led by G20 Ventures. Other, earlier investors to participated included Point Judith Capital and Advanced Technology Ventures. Evergage, which has raised roughly $6.3 million altogether, was originally called Apptegic.

Load DynamiX, a 6.5-year-old, Santa Clara, C.-based maker of testing and analytics products for data centers, has raised $12 million in financing led by HighBar Partners. Founded as SwiftTest, the company, renamed HighBar last year, has raised $19.3 million altogether, including from Core Capital PartnersMiramar Venture PartnersBenhamou Global VenturesKinetic Ventures, and Azure Capital Partners.

Lysogene, a 4.5-year-old, Paris-based biotech company focused on intracerebral gene therapy aimed at treating neuro-degenerative diseases, has raised 16.5 million euros ($22.6 million) in Series A funding led by earlier investor Sofinnova PartnersBpifrance and Novo Seeds also participated in the round.

Mimosa Networks, a two-year-old, Campbell, Ca.-based company that builds outdoor gigabit wireless platforms, has raised $20 million in Series C funding led by earlier investor New Enterprise Associates. Another earlier investor, Oak Investment Partners, also participated in the round, which brings the company’s total funding to $38 million.

Roli, a five-year-old, London-based whose new kind of musical instrument, the Seaboard Grand, reimagines the piano, has raised $12.8 million in Series A funding led by Balderton Capital. Other participants in the funding included FirstMark CapitalIndex Ventures and Universal Music. The WSJ has more on the company and its oddly compelling product here.

SimpliSafe, a 7.5-year-old, Cambridge, Ma.-based company that makes a portable, wireless home security system, has raised $57 million in funding from Sequoia Capital after what TechCrunch had last month described as an intense bidding war. The company was started by HBS graduates Chad and Eleanor Laurans after several of their friends’ homes were robbed.

Smartling, a five-year-old, New York-based translation technology company, has raised $25 million in Series D funding led by Iconiq Capital Partners. The company has now raised roughly $63 million from investors, including Tenaya CapitalHarmony PartnersVenrockU.S. Venture PartnersIDG VenturesFirst Round Capital and Felicis Ventures.

Storehouse, a year-old, San Franciso-based company behind a visual storytelling app, has raised $7 million in Series A funding led by
Sherpa Ventures. Earlier seed investors True VenturesLerer Ventures,Designer Fund and unnamed angel investors also participated in the round. The WSJ has more on the company here.

Treasury Intelligence Solutions, a 4.5-year-old, Walldorf, Germany-based cloud-based international payment service, has raised 4 million euros ($5.4 million) in Series B financing led by new investor ZobitoTarget Partners also participated.

X.ai, a new, New York City-based company that has built and maintains an artificial intelligence-powered personal assistant, has raised $2.1 million in seed funding led by IA VenturesSoftbank VC and Lerer Ventures.

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IPOs

JD.com, the Beijing-based e-commerce company, priced its shares at $19 yesterday, higher than its initially proposed range of $16 to $18 per share. The pricing reflects a big appetite for tapping China’s growth, but a miscalculation could impact Alibaba’s impending IPO, notes TechCrunch.

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Exits

Intelligent Healthcare, a 24-year-old, Santa Monica, Ca.-based SaaS company that provides patient data integration and analysis services to physician groups, hospitals and health plans, has been acquired by 15-year-old ZirMed of Louisville, Ky., which makes revenue cycle management software. Terms of the deal weren’t disclosed. Intelligent Healthcare doesn’t appear to have outside investors. ZirMed is backed by Sequoia Capital, which first provided the company with an undisclosed amount of funding in 2010.

It’s official. India’s online fashion retailer Myntra has been acquired by India’s biggest e-commerce company, Flipkart, for an undisclosed amount that various outlets are pegging at roughly $300 million.

ThreatGRID, a four-year-old, New York-based malware analysis and sandboxing technology company, is being acquired by Cisco for undisclosed terms. ThreatGrid had raised an undisclosed amount of funding from In-Q-Tel, the investment arm of the CIA, and individual investors. You can find more on the deal here.

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People

Investor Marc Andreessen talks with the Washington Post, including about the many businesses bitcoin has the potential to disrupt: “Digital stocks. Digital equities. Digital fundraising for companies. Digital bonds. Digital contracts, digital keys, digital title, who owns what — digital title to your house, to your car. . . And if I sell you my car, automatically you get title, and you get the key that lets you operate the car, and it’s all digital, and it’s all unique, and it can’t be cracked. You’ve got digital voting, digital contracts, digital signatures. You’ve got unique pieces of digital content. If you guys wanted to know exactly who had every piece of content you ever made, you can track that. It’s this long list.”

Venture capitalist Fred Destin, who left Boston-based Atlas Venture recently after a decade with the firm, is now a London-based partner atAccel Partners.

Cisco’s longtime “chief futurist” Dave Evans has left to launch a stealth startup.

E-commerce company Fab is laying off up to 90 New York-based employees today in a fourth wave of layoffs reports Re/code. The move shrinks Fab’s global staff to 200, down from roughly 700 at its peak.

Speaking of Atlas Venture, Dave Grayzel is now a partner on its life sciences investing team. Since 2010, Grayzel has been a managing director for the Atlas Venture Development Corp., which focuses on acquiring drug assets and partnering with pharmaceutical companies to commercialize them. Grayzel had spent the previous eight years as a VP at Infinity Pharmaceuticals.

Palmer Luckey and the company he cofounded, Oculus VRare being sued by Zenimax Media and its subsidiary id Software, where Oculus VR chief technical officer John Carmack once worked. The claim: that they stole and misappropriated “trade secrets relating to virtual reality technology” dating back to Carmack’s employment at id Software. The immediate response: “There is not a line of Zenimax code or any of its technology in any Oculus products.”

Venture capitalist Emily Melton has rejoined DFJ as a partner. Melton began her career in VC as an analyst at DFJ in 2000. In 2009, she left the firm as a partner to join Mayfield Fund, where she stayed just two years, turning to angel investing and advising part-time and, in 2013, working as a venture partner for U.S. Venture Partners for roughly six months. Melton focuses on consumer and mobile technology, healthcare technologies and marketplaces.

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Data

In the first quarter of 2014, Apple reportedly accounted for the largest share of smartphones for three of the top four U.S. mobile carriers: 52 percent at AT&T, 51 percent at Verizon Wireless, and 36 percent at Sprint, while taking the second place spot behind Samsung on the more value-oriented T-Mobile/Metro PCS with 24 percent. More here.

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Essential Reads

“Someone out there likes anonymous money,” reports Wired. “In only a month, the little-known bitcoin alternative known as Darkcoin has rocketed nearly tenfold in value–from around 75 cents a coin to almost seven dollars. Its selling point: Darkcoin offers far greater anonymity than bitcoin, mixing up users’ transactions so that it’s incredibly difficult to trace a payment to a person.”

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Detours

Best commencement speeches ever, via Huckberry.

Food service jobs of the tech industry’s rich and famous.

A new Bentley video that was shot, somewhat amazingly, on an iPhone 5S, and edited on an iPad Air — inside a Bentley.

Heather Havrilesky on how to write.

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Retail Therapy

A 3D machine that makes pancakes, people.

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