StrictlyVC: October 16, 2014

Good Thursday morning, everyone! (Btw, an easier-to-read version is here.)

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Top News in the A.M.

Facebook has just rolled out a new emergency check-in feature for natural disasters.

Apple is hosting its iPad and iMac event today, which you can check out live.

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One Company Where Data Breaches are Welcome News

When it comes to data breaches, the headlines this year have become a blur, with the vulnerabilities of one corporate giant after another – American Express, eBay, Home Depot, JPMorgan Chase, Target – put on full display for the world. The pace of breaches has been accelerating, too, with roughly 600 data breaches in 2013 and what experts expect will be800 breaches by the end of this year.

The trend is lousy for consumers, but it’s exceedingly positive for TeleSign, a 10-year-old, L.A.-based company that handles new account verification and two-factor authentication services for hundreds of huge properties, including nine of the 10 biggest U.S.-based web companies.Yesterday, StrictlyVC caught up with TeleSign CEO Steve Jillings to learn more about his business – and whether TeleSign, which closed on roughly $50 millionin funding in July, might ever raise another round from private investors. Our chat has been lightly edited for length.

You handle crucial authentication services for some of the biggest, savviest tech companies in the world. Why is this something they’re outsourcing?

We’re in a business that’s easy to do badly and incredibly hard to do well. A lot of the big tech companies have users in every corner of the world. We’re localized in 87 different languages and deliver authentication events into more than 200 countries and territories – places I’ve never heard of. And our 250 employees — roughly half of whom are in engineering – are focused on authentication 24/7. It’s like asking, “Why aren’t you generating your own power?” Because you can flip a switch and it just works.

Who are your most direct competitors?

Our biggest competitive set are companies that do try doing it themselves. A lot of messaging companies that offer up cheap messaging feeds tell their clients that it’s easy to make work and here’s how you do it. We get lots of customers who eventually give up and outsource the entire thing to us. With 20 or 30 people, you just can’t get on top of it. Making this stuff work globally, using messaging as a delivery platform, the complexities are difficult.

You’re talking about delivering PIN codes as part of the two-factor authentication process. I sign in to Twitter, it asks me for my password, then shoots a code to my phone to ensure that I’m who I say I am.

Exactly. We deliver access PIN codes, and we deliver the bulk of them through SMS or in a voicemail, and now we’re starting to deliver them through mobile authentication apps.

People think when you send an SMS, it simply, magically arrives at the other end, but there are many things that can go wrong using the telco layer. And if a customer is waiting on a PIN code that doesn’t arrive, you have a pretty unhappy customer.

Apple and others are starting to do more with biometrics to authenticate users. Could biometrics put you out of business?

Face recognition and voice stuff is cool, but that’s about as far as it goes. Biometrics has been around for years, but you probably can’t name one biometric company that’s been successful or gotten to any degree of scale. Voice has too much latency. Facial [biometrics] is getting better, but it’s nowhere near prime time. We think behavioral biometrics is interesting, but that’s also super early. We’re integrating some aspects of biometrics in our stack as incremental data points, but to say it can replace what we do would be a stretch.

How do you make two-factor authentication easier, so that more people take advantage of it?

Well, a lot of our clients are now looking at it and saying they’re going to make it mandatory, meaning it will become an opt-out feature rather than opt-in. But we’re also very focused on reducing user friction. It won’t be long before the user experience will be simpler, so that when someone who has registered an account comes back [to use it], we’ll be able to authenticate them based on information that they know, what we know about their device, and their behavior.

You’ve said in other interviews that your revenue is doubling every year, that it was $24 million in 2012, $50 million last year, and that it’s on track to double again this year. So what’s next? Are you thinking about an IPO? Might you raise more private capital?

We’ve raised $78 million, including $50 million this summer, and most of that’s still in the bank. The only scenario where we’d raise more now is if we had the opportunity to acquire a company that we couldn’t absorb [with our current resources]. There are a lot of interesting technology companies out there that will struggle to get to scale but that have technology that could be additive to the things we’re doing, and we can get technology in front of the biggest companies in the world in no time at all.

In the meantime, our goal is to be IPO ready by the end of 2015. We’ll financially be at the scale that we could go public. We think five quarters away is good timing for us. But right now, it’s more of a discipline thing than a hard-and-fast thing.

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New Fundings

AdNear, a two-year-old, Singapore-based company whose location intelligence platform caters to advertisers, has raised $19 million in Series B funding from new investors Telstra and Global Brain (a Japanese venture firm), along with earlier investors Sequoia Capital and Canaan Partners. The company has raised $44.5 million altogether, shows Crunchbase. Tech in Asia has more here.

Blue Box, an 11-year-old, Seattle-based managed cloud hosting provider, has raised $10 million in Series B funding led by an undisclosed strategic investor, with participation from earlier backers Founder Collective,Voyager Capital and the company’s executive team. The company has now raised at least $19.1 million, shows Crunchbase.

Fresvii, a two-year-old, Redwood City, Ca.-based mobile cloud platform designed for smartphone game developers, has raised $1.8 million in funding from Japanese venture capital firm Nissay Capital. VentureBeat has more here.

Indicative, a year-old, New York-based service that helps marketers and product managers analyze data from websites and apps, has raised $2 million in seed funding, including from Acadia Woods Partners, Rose Tech Ventures, and Bertelsmann Digital Media Investments, along with numerous individual investors. TechCrunch has more here.

Osmo, a nearly two-year-old, Palo Alto, Ca.-based hardware games device for kids that connects to any iPad, has raised $12 million in Series A funding led by Accel Partners, with participation from Upfront Ventures and earlier backer K9 Ventures.

Portal Instruments, a two-year-old, Cambridge, Ma.-based medical device company that’s developing needle-free drug-delivery systems, has raised $11 million in Series A funding led by Sanofi AS, PBJ Capital and an undisclosed U.S. medical-device company.

Quantopian, a three-year-old, Boston-based company behind a browser-based algorithmic trading platform, has raised $15 million in Series B funding to create its own hedge fund. Bessemer Venture Partners led the round, with participation from Wicklow Capital and earlier backers Khosla Ventures and Spark Capital. The company has now raised $23.8 million to date, shows Crunchbase.

Razer, a 16-year-old, Carlsbad, Ca.-based company that sells high-end precision-gaming hardware, including tablets and a “smartband” device called Nabu, has raised an undisclosed amount of funding led by Intel Capital at a valuation of more than $1 billion, reports TechCrunch.

Sapience Analytics, a five-year-old, Pune, India-based company that makes employee productivity software, has raised around $7.4 million in Series B funding from Orios Venture Partners. TechCircle has more here.

Tongal, a five-year-old, Santa Monica, Ca.-based social media platform that connects creative professionals with brands and causes that need their work, has raised $5 million in Series C funding from earlier investor Insight Venture Partners. The company has raised $21.5 million altogether.

Viewics, a nearly six-year-old, Sunnyvale, Ca.-based healthcare analytics and data platform company, has raised $8 million in funding led by Canvas Venture Fund. VentureBeat has more here.

Welltok, a five-year-old, Denver-based health optimization company, has raised $25 million in new funding from Bessemer Venture Partners. The company has now raised $73 million altogether.

Wilshire Axon Sports, a 1.5-year-old, L.A.-based online fan engagement platform, has raised $2 million in Series A funding led by Mosaik Partners, with participation from an outfit called Albrekca and earlier backer KGC Capital.

Wirkn, a three-month-old, Toronto, Ontario-based mobile platform whose first app promises users the ability to create a video profile that “shows their personality” to potential employers, has received $400,000 in seed funding led by Kinetic Companies and numerous, unnamed angel investors.

Wit.ai, a year-old, Palo Alto, Ca.-based natural language startup, has raised $3 million in a seed funding led by Andreessen Horowitz, with participation from Ignition Partners, New Enterprise Associates, A-Grade Investments, SV Angel, Eric Hahn, Alven Capital, and TenOneTen. The Rude Baguette has more here.

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New Funds

Causeway Media Partners, a 1.5-year-old, Boston-based growth equity firm that focused on sports-related media and tech opportunities, has officially disclosed in an SEC filing that it closed on $125.6 million for its debut fund. (We talked about that $125 million fund and more with the firm in early July.)

SAP Ventures, which spun out of SAP four years ago as an independent venture arm, is changing its name to Sapphire Ventures. The firm currently manages $1.4 billion from SAP, including more than $900 million on which it closed last year (a $405 million fund of funds and a $650 million pool that’s being invested in growth-stage companies). It has so far used that capital to invest in roughly 125 companies, including Gild, which makes hiring software and Ping Identity, which makes cloud-based identity management software; it has also backed several venture funds, including Amplify Partners and Data Collective. But when Sapphire raises its next fund in two or three years, it will be talking with investors outside of SAP, too, says a spokeswoman.

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IPOs

Bank of America Merrill Lynch researchers observed in a note this morning that the S&P 500 index peaked right after Alibaba‘s September 19th IPO — eight minutes after its IPO, to be exact. “Since then US and global stocks have fallen 10 percent and cyclical sectors such as energy, materials and industrials have been decimated,” they added.

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Exits

Anametrix, a four-year-old, San Diego-based company whose cloud-based software presents a holistic view of the effectiveness of paid, owned and earned media, has been acquired by Ensighten, whose software helps companies manage the code on their websites that controls digital marketing functions. Terms of the acquisition weren’t disclosed.

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People

Actor Christian Bale is reportedly in talks to play Steve Jobs in the Sony biopic “Jobs” that’s being written Aaron Sorkin, who is dividing the film into three long scenes, each taking place backstage before one of Apple’s famous product launches. Variety has the story.

Stephen Blyth, the new head of Harvard’s endowment, will have his work cut out for him, reports Harvard Magazine. More here.

TV personality Stephen Colbert is threatening to sue Google for getting his height wrong, listing it as 5’10” rather than 5’11”. “Seriously, 5’10?,” said Colbert on his show yesterday. “Those are Matt Damon numbers. That’s down there in the stale air Johnny Depp is sucking.”

George Lucas, the creator of “Star Wars,” on why so many Hollywood tycoons and directors were in attendance at Vanity Fair’s New Establishment Summit in San Francisco last week: “Do you smell that?” Lucas said to the New York Times. “It’s the smell of money.”

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Jobs

Google Capital, the growth equity fund backed by Google, is looking for an associate. The job is in Mountain View, Ca.

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Essential Reads

Apple will stop selling Fitbit devices at its retail stores as it makes room for its own Apple Watch.

LinkedIn‘s advertising business has “become the fastest growing business in LinkedIn’s history,” CEO Jeff Weiner tells Ad Age, adding, “I don’t mean the fastest growing marketing-solutions business. I mean the fastest growing business, period.”

HBO has finally decided to offer a standalone broadband version of its service beginning next year, but it’s likely to come at a cost to parent Time Warner.

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Detours

The ump who blew the ’85 World Series wants a rematch.

Some perfume commercial.

As hourly wages for entry level work fall, more parents extend the deadline for their kids’ financial independence.

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Retail Therapy

An upscale portable brew kit, for the urbanite who likes to hike.

Is it us or does this have disaster written all over it?


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