StrictlyVC: July 16, 2014

Hi, everyone, hope your Wednesday is off to a great start.

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Top News in the A.M.

The FCC has extended a deadline for comments on proposed rules governing the future of the Internet, after its site crashed under the pressure of the tens of thousands of comments.

Rupert Murdoch’s 21st Century Fox made an $80 billion takeover bid in recent weeks for Time Warner and was rebuffed, reports Dealbook.

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VC: Opportunity for New E-Commerce Brands is “Endless”

In recent years, a seemingly unending procession of direct-to-consumer companies that make and sell everything from men’s pants to eyeglasses to snack foods has sprung up and nabbed venture capital. Think BonobosWarby Parker, and HelloFresh, among many others.

In fact, based on venture cycles, one might be inclined to think that it’s time for investors to move on to the next thing. But Neil Sequeira, a managing director at General Catalyst Partners, heartily disagrees. Sequeira, who sits on the boards of NatureBox (healthy snacks) and the Honest Company (environmentally friendly products), cites startups’ ability to reach customers more quickly, easily, and cheaply as just a few reasons why he thinks the trend of new brands selling directly to shoppers is “endless.”

Sequeira told us more last week at General Catalyst’s new Palo Alto office, a traditional pale yellow home that features whiteboard walls and polished concrete floors (a “home away from home” for founders, says the firm).

You’re very bullish on so-called alternative commerce. What does that mean exactly?

Historically, e-commerce has been defined by the Amazons of the world, where they take a product and resell it via the Web to a consumer. But the reality is that commerce – through online, mobile, and multichannel – is changing. It’s no longer about selling a product and taking a thin margin. It’s about creating your own products and brands and selling them on a subscription basis via [multiple] channels, so you’re mobile, you’re online, [and] you’re opening stores.

Wasn’t the idea to not open stores to keep costs down? And is there a danger that consumers can only absorb so many new brands?

These are multichannel businesses. The stores of Warby Parker [which General Catalyst has backed] do incredibly well. The company started online and created a brand. Now, its stores probably perform better than any optical store in the world.

[As for your second question], I think historical big box retailers are in a heap of trouble. Their infrastructure and distribution systems can’t keep up with what consumers want. They have to make deals with manufacturers, their products go through a distribution facility, then to a store. If the products don’t sell, they have to be sent back. They have to do big-brand advertising and marketing. That’s why you’re seeing a lot of these places struggle. Consumers want their specific needs addressed, versus [the old model of] Proctor & Gamble and Kimberly-Clark and those companies doing things on a macro basis. There’s a lot that incumbents can’t do because of their legacy infrastructure.

How big do you think the opportunity is?

I think the trend is endless. It’s a trillion dollar industry. Of course, it means you have to do things differently – acquire customers differently, market differently, build brand differently – but that’s what great companies will do.

How do you, as an investor, sort through what’s great in a market that’s attracting so many startups?

It has to start with a mission — that can’t be manufactured. NatureBox’s CEO was an obese young man who started eating healthier and who wanted to create something to help kids like him. When [actress] Jessica [Alba] started Honest Company, she had already campaigned on Washington for three years to try to change what goes into kids’ clothing and food. Nobody listened . . .so she started a company. I think consumers hear authenticity.

You also have to find creative acquisition channels. Banner ads and Google clicks aren’t going to work. If [my colleague] tells me to buy something, that’s how you sell it. Beyond social, I think mobile is the next real killer. Having that [purchasing power] in [a consumer’s] pocket and figuring out what they really want will be [increasingly powerful].

How so, outside of a retailers’ ability to send a customer information or a discount based on their location?

There are just so many more applications and data on mobile, and those will continue to proliferate, whereas online [retailers are limited to] a certain amount of traditional marketing channels. Then there’s ease and convenience; you don’t have to sit in front of a computer; you can just “one click” from your mobile. So there’s traditional, there’s social, there’s mobile, there’s on-demand. Meanwhile, the incumbents have to go to buy pre-roll on TV. They aren’t going to be able to change fast enough.

Are there any businesses or segments you might avoid at this point because they seem saturated?

Is there a lot of room for another Warby Parker? I don’t think so. But consumer products that are serving niches? Probably. Maybe you don’t want to compete with Google on last-mile delivery. When you have folks who have unending resources and they’re going after a market hard, it can be a challenge. But I don’t worry about the retailers. I don’t think there are that many areas that are shut off.

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New Fundings

IIX, a three-year-old, Palo Alto, Ca.-based network peering company, has raised $10.4 million in Series A funding from New Enterprise Associates. The company has now raised $16.2 million in equity and debt, shows Crunchbase.

Bay Dynamics, a 13-year-old, San Francisco-based cybersecurity startup, has raised $8 million in Series A funding from Comcast Ventures.

Captricity, a three-year-old, Berkeley, Ca.-based cloud-based service that converts information on paper to digital data, has raised $10 million in Series B funding led by Atlas Venture, with Social+Capital also participating. The company has raised $14 million altogether, including from SurveyMonkey CEO Dave Goldberg, LinkedIn founder Reid Hoffmann and Lotus Software founder Mitch Kapor.

ClusterFlunk, a three-year-old, Iowa City, Ia,-based startup whose app allows students to talk to the other students that are specifically in their classes, has raised $1 million from Lightbank. The company had raised $100,000 in seed funding last year.

Fangdd, a three-year-old Shenzhen, China-based online real-estate platform that connects buys and sellers and eases transactions between them, has raised $80 million in Series B funding from CDH Investments‘ venture capital arm, Vision Knight Capital, and Lightspeed China Partners.

JFrog, a six-year-old, Netanya, Israel company whose software allows developers to store and manage binary code and control their full software release flow, has raised $7 million in Series B funding from VMware and earlier investor Gemini Ventures. The company has raised $11.5 million to date.

Motionsoft, a 29-year-old, Alexandria, Va.-based company that makes marketing software for fitness, gym, and recreation club managers, has raised $10 million in Series B funding led by Route 66 Ventures, with earlier investor Edison Partners participating. The company has raised $21.2 million to date, shows Crunchbase.

Neon Labs, a two-year-old, San Francisco-based Carnegie Mellon University spin-out whose technology automatically selects the best frame in a video to become a thumbnail, has raised $4.1 million in Series A funding led by Mohr Davidow Ventures. Earlier investors True Ventures and serial entrepreneur Steve Blank also participated in the round, which brings the company’s funding to $5 million. VentureWire has more here.

NetBase Solutions, a 10-year-old, Mountain View, Ca.-based social-media analytics company, has raised $10.2 million in Series D funding from new investor SAIF Partners and earlier investors Altos VenturesThomvest Ventures, and WestSummit Capital. The company has raised $51.6 million, shows Crunchbase.

Plastiq, a three-year-old, Boston-based online platform that enables consumers to use their credit cards for payments from any Internet-enabled device, has raised $10 million in Series B funding led by Khosla Ventures. Earlier investors Atlas Ventures and Flybridge Capital Partners also participated in the round, which brings Plastiq’s total funding to $20.3 million.

RedMart, a 2.5-year-old, Singapore-based online grocery-delivery service, has raised $23 million in funding from investors including Facebook co-founder Eduardo SaverinGarena, an online games and social platform company; SoftBank Ventures; and Visionnaire Ventures. The company has raised $28.4 million to date, shows Crunchbase. The WSJ has more here.

Zooz Mobile, a four-year-old, Ra’anana, Israel-based company that makes secure payment software for e-commerce websites and applications, has raised $12 million in Series B funding led by Blumberg CapitalAccess IndustriesCamp One Ventures and earlier investors XSeed Capitallool ventures and Rhodium also participated in the round, which brings the company’s funding to $15.5 million.

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New Funds

Siemer Ventures, a 12-year-old L.A.-based venture firm that focuses on late-stage seed business-to-business and business-to-consumer opportunities, has announced the first closing of Wavemaker Fund III, a $45 million venture capital fund. The firm, which plans to focus especially on Southern California and Southeast Asia startups, is also renaming itself Wavemaker Partners.

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IPOs

Line, the Japan-based social message service, might be going public in the U.S., say bankers, who think the company could be valued at up to $20 billion. Reuters has more here.

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Exits

Freshplum, a 2.5-year-old, San Francisco-based company that helps e-commerce sites offer personalized discounts to visitors who might not make a purchase otherwise, has been acquired by five-year-old, Burlingame, Ca.-based TellApart, an ad tech startup. TechCrunch has the story here. FreshPlum had raised $2.7 million from a long line of investors, including CRV, Greylock Partners, New Enterprise Associates, Google Ventures, and SV Angel. TellApart has raised $17.8 million from investors.

SmartThings, a two-year-old, Washington, D.C.-based company whose smartphone app allows its users to monitor and control everyday things in their home, office, and car through sensors, is close to being acquired bySamsung for “around $200 million,” reports TechCrunch. SmartThings has raised $15.5 million from investors including Greylock PartnersHighland Capital PartnersFirst Round CapitalSV AngelLerer Ventures, Yuri Milner’s Start FundA-Grade InvestmentsCrunchFund and Box Group.

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People

New Jersey Governor Chris Christie and Facebook CEO Mark Zuckerberg enjoyed an “intimate dinner” Monday night in Ketchum, Idaho, reports Fortune. Unfortunately, the outlet’s sources didn’t strain to hear the conversation, but it’s a good guess that the two were discussing Zuckerberg’s $100 million gift to the Newark, N.J. school system. The two might have been talking about the governor’s political future, too, notes Newsweek, which reminds readers that Zuckerberg hosted a fundraiser for Christie at his Palo Alto, Ca. home last year.

Box CEO Aaron Levie talks with Buzzfeed about his company’s trajectory and how he “synthesizes” what comes next. Says Levie, “I spend a lot of time with customers. I used to be 80 percent product and 20 percent video games. Kidding! Now I’m probably 40 percent to 50 percent product and 50 percent customers.”

Former Ford CEO Alan Mulally has just been appointed to Google‘s board of directors. Mulally retired from Ford on July 1.

Hanneke Smits, the London-based chief investment officer of Adams Street Partners, is leaving the firm after 17 years to take a career break, reports VentureWire.

Reporting dynamo and self-described “worst gold digger” Kara Swisher is profiled in a new, 5,000-word piece in New York Magazine that explores her sources’ love-hate relationship with her. (It’s terrific.) Marc Andreessen says, for example, that “a lot of people” thought it was “hilarious” that a major investor in Swisher’s new media company is former Yahoo CEO Terry Semel, “given how thoroughly she savaged the sh*t out of him. It’s like PTSD or Stockholm syndrome.”

Peter TaylorTwitter‘s 57-year-old former manager of data center deployment, is suing the company, saying he was terminated two-and-a-half years into the job over age and medical bias. SFWeekly has more here.

Gautam Thakar, an eBay exec who’d been CEO of Shopping.com, has been newly appointed to the role of president and CEO of LivingSocial, the troubled daily deals business. He’ll officially join the company in mid-August.

Where the Winklevii work.

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Job Listings

Salesforce.com is looking for a senior manager to join its corporate development group in San Francisco.

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Happenings

It’s the last day of Fortune’s Brainstorm Tech conference in Aspen. You can watch a live stream of the event here.

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Data

The mid-stage venture funding gap, by the numbers.

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Essential Reads

Apple and IBM are teaming up to push iOS into the enterprise.

Is Rand Paul’s Silicon Valley charm offensive working?

Yahoo’s dependence on Alibaba is starting to get silly, argues Kevin Kelleher.

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Detours

Tatia Pilieva captured the world’s attention with her video of strangers kissing. Now, the filmmaker has made a sequel.

Former NYT executive editor Jill Abramson is “not ashamed of getting fired.”

How to take better dog portraits.

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Retail Therapy

Selfie sticks.

Tiny pocket knives.

Interpol is coming.

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