StrictlyVC: November 13, 2014

Good day, dear readers! We have a longer-than-usual column today, so we scrapped some other sections, but much like the Terminator, they will be back. (Psst, web visitors, here’s an easier-to-read version of today’s email.)

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Top News in the A.M.

Senate Majority Leader Harry Reid yesterday moved to advance a bill that would usher in sweeping reforms to the NSA’s mass-surveillance practices, “a surprising move” intended to address the program before Republicans take over the Senate next year, writes the National Journal.

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Unrest at Nest

Sitting on stage last week at a San Francisco conference, Greg Duffy, the 28-year-old co-founder and CEO of Dropcam, which makes Internet-connected video cameras, fielded questions from an audience of startup founders. It should have been a time to celebrate. After all, last June, Duffy sold Dropcam to Nest Labs for $555 million. As the panel discussion came to a close, however, Duffy sounded an ominous note. Referring to a longtime colleague who was sharing the stage with him, he told the crowd that Liz Hamren is “the best VP of marketing in the business.” He then added, laughing, “She’s also my former VP of marketing. You can read from that what you want into my current situation.”

Duffy insists that everything is “great” at Nest, but a cursory look at employee reviews at the jobs site Glassdoor tells a different story. Despite the fact that longtime Apple executive and Nest co-founder and CEO Tony Fadell has received rock star treatment from many journalists (Fast Company dubbed him the “$3.2 Billion Man” for the amount Google paid for Nest this past January; others have wondered if he is the next Steve Jobs), he has received only a 46 percent approval rating across 26 reviews. By contrast, Duffy, who was Dropcam’s CEO until the merger, shows a 100 percent approval rating across six reviews.

Some of these Glassdoor reviews claim that Nest is “killing everything that was special about working at Dropcam” and that “everything we built is being carelessly dismantled after [the] acquisition.” One review states, “Everything revolves around the CEO. It’s a dangerous mix of cult of personality and Stockholm syndrome. Comments like ‘He’s the next Steve Jobs’ are not uncommon, while people proudly say things like ‘I’m used to Tony screaming at me.’ Everyone dreads meetings with Tony because he will flip if he doesn’t like what he sees. Somehow that’s perceived as good leadership.”

Sources who spoke to StrictlyVC and asked to remain anonymous say Fadell has fashioned a hierarchical structure reminiscent of TV’s “Game of Thrones.”

According to one employee, “Almost every decision, no matter how small,” goes through either Fadell or Matt Rogers, who cofounded Nest with Fadell and was previously a senior manager at Apple. (Through a spokesperson, Fadell and Rogers declined to answer questions for this story.)

“It’s always, ‘Tony and Matt want us to do this. We have to hit this deadline because Tony and Matt want us to.’ You definitely see people taking the path of least resistance because they don’t want to upset Tony.”

Another employee calls it a “huge meeting culture, to the point where anyone at the director level or up spends their entire day in meetings, many of them duplicative meetings about the same subject, over and over to the point where a lot of people have complained.”

Coming from Dropcam, which boasted a much more egalitarian culture, a clash seems all but inevitable.

Yet these employees also suggest that the differences between Dropcam and Nest are not just stylistic. One Nest employee says that Nest, which employs between 700 and 800 people, will see roughly double the revenue of Dropcam this year but that Dropcam, which employs 100 people, is growing its revenue eight times as fast, thanks largely to its subscription business.

Many employees were reportedly disappointed to sell to Google because “we were firing on all cylinders, with a sensor product about to be released and an outdoor camera about to come out in 2015 and great sales. It just felt like we’d been chopped off at the knees.”

Says one insider, now at Nest, “There had been rumors earlier in the summer that Google was going to acquire Dropcam, so we had an inkling that something was happening. But when the founders finally called the staff together to announce that we’d been acquired by Nest, there was dead silence in the room. You could have heard a pin drop.”

No wonder Dropcam investor and former board member Mark Siegel sounds less than elated when asked about the company’s sale to Nest. “I think there was a great independent company to be built, and I wasn’t shy about telling that to these guys,” he says of Duffy and his cofounder, Aamir Virani.

Siegel, a longtime managing director at Menlo Ventures, says Dropcam was on a “terrific ramp” when it was acquired. Its Wi-Fi cameras were finally being sold via both Amazon and Apple, and the company was in early negotiations with Best Buy. Morever, “We were about to launch in a bunch more retail locations,” he says.

“There was plenty that had to be built,” he notes. “But it’s very rare that you get the kind of consumer love for a product that you see with Dropcam. Even when we had some bumps in the road – like problems with the contract manufacturer early on—it didn’t affect consumer ratings, because the product was so good.”

“There were some concerns about what it meant to be an independent, small company going up against a Google/Nest,” observes Siegel. “That’s true of any [situation like this]. The real question is, ‘Was [competing directly with Dropcam] Nest’s priority?’ Now, maybe from the inside looking out, you can ask Greg if that was an overblown fear.”

To some of the employees we talked to, Nest’s priority seems to be separating itself from Google, not rolling out new products. At a Dublin conference, Fadell was asked about the cultural differences between Apple and Google. Painting a picture that sounds like Nest today, he said that from its earliest days, Apple had a “much more hierarchical structure, and the communications structure was very understood,” while at Google, “everyone could just talk to everyone and learn about everything, and there was much more transparency.”

“I’m not saying one is better than the other,” Fadell continued, “but it’s very different. The very first day, when the [Nest] deal was announced, I got all these various individuals from inside Google saying, ‘Oh, congratulations,’ and ‘I want to work with you,’ and ‘Is there something we can help you with?’ And at Apple, it was very structured. It wasn’t like you were going to send a message to Steve [Jobs] for any reason and say congratulations and flood his email box.”

Asked about Dropcam’s merger with Nest after his stage presentation last week, Duffy was quick to describe Dropcam’s integration with Nest as “very positive. Aamir and I spend a lot of time with Tony and Matt” and “there’s a lot of mutual respect.”

Unfortunately, Duffy politely declined to answer any further questions. “Google policy,” he explained.

Then he made his way toward a clutch of founders who hoped they might catch a few more minutes of his time.

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New Fundings

Body Labs, a 2.5-year-old, New York-based company that deploys body-modeling software for applications in the apparel, CAD and video gaming industries, has raised $2.2 million in seed funding from unnamed investors. Venture Capital Dispatch has more here.

Blueprint Medicines, three-year-old, Cambridge, Ma.-based company that’s developing highly selective kinase inhibitors for genomically defined cancers, has raised $50 million in Series C financing led by Partner Fund Management, with other new investors — Wellington Management Company, RA Capital, Tavistock Life Sciences, Perceptive AdvisorsSabby Capital, Cowen Investments and Redmile Group — participating along with a long list of previous investors.

CareLuLu, a 1.5-year-old, San Francisco-based online marketplace that connects parents with child care and preschool programs, has raised $1.7 million in seed funding led by Khosla Ventures, with participation from CrunchFund, the Startup Factory, and 500 Startups.

Denim LA, the two-year-old, L.A.-based parent company of direct-to-consumer denim seller DSTLD, has raised $4.4 million in seed funding from Amplify.LA, Baroda Ventures, CAA Ventures, CrunchFund, Plus Capital, TenOneTen, WaveMaker Partners, Zillion, and individual investors.

Full Spectrum Laser, a six-year-old, Las Vegas, Nv.-based company that makes laser and 3-D printer equipment, has raised $10 million in growth financing from Summer Street Capital.

Gogobot, a four-year-old, Menlo Park, Ca.-based site and mobile app focused on helping users discover things to do based on their friends, interests and travel style, has raised $20 million in Series C funding fromHomeAway, with participation from earlier backers Battery Ventures and Redpoint Ventures. The company has raised $39 million to date.

Gr8code, a six-month-old, Tampa, Fl.-based outfit that will soon start running a nine-week developer camp, says the venture firm OmniElite Financial Group will invest $5.4 million in the camp over four years. The Tampa Bay Times has more here.

Lawn Love, a months-old, San Diego-based online lawn service that helps users find, book, and pay for landscaping or lawn care, has raised $1.9 million in seed funding from Allegro Venture Partners, Binary CapitalLaunch Capital, Next Level Capital and individual investors.

League, a six-month-old, Toronto-based digital health and wellness platform that will let users create “leagues” of health professionals that work together to deliver personalized programs, has raised $4 million in seed funding led by OMERS Ventures with Foundation Capital, Real Ventures and Infinite Potential Group participating.

Lover.ly, a two-year-old, New York-based startup behind a wedding planning site, is closing on a $3.5 million Series A, the company tells VentureWire. It had previously raised $4 million, largely from individual backers, including angel investor Joanne Wilson.

Quandl, a three-year-old, Toronto-based data management platform and marketplace where people can buy, sell, and download financial and economic data, has raised $5.4 million from August Capital. Venture Capital Dispatch has much more here.

Razberi, a three-year-old, Carrollton, Tx.-based company that makes network video services for professional video surveillance and security applications, has raised $3.5 million in Series A funding led by LiveOak Venture Partners.

Scopely, a nearly four-year-old, mobile entertainment network that’s amassing a suite of games built by internal and external developers, has raised $35.8 million led by Evolution Media Partners and Highland Capital Partners, with Knoll Ventures, Greycroft Partners, The Chernin Group, and Sands Capital Ventures also participating. The company had earlier raised $8.5 million. TechCrunch has more here.

Speakaboos, a six-year-old, New York-based multilingual interactive storybook service for reading books online and offline, has raised $6.5 million in Series B financing led by Rick Segal, managing partner of ReThink Education, and Al Sayegh Group. A group of unnamed individual investors also participated.

The Fashion, a 1.5-year-old, London-based fashion site that aggregates the products of numerous fashion sites into a single online destination, has raised $1.7 million in seed funding from the Copenhagen-based firm North East Venture Capital and The Danish Growth Fund.

VersionOne, a 12-year-old, Alpharetta, Ga.-based company that helps manage life cycles of software development projects, has raised $20 million in new funding from LLR Partners. The company has raised roughly $27 million to date, including from OpenView Venture Partners.

Xiaomi, the 4.5-year-old, Beijing-based smartphone maker (reportedly in talks to raise up to $1.5 billion in new capital), is acquiring a stake in China’s largest video streaming company, Youku Tudou. It marks the first step for the company to provide its own content, as the WSJ reports here.

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Exits

Big Fish Games, a 12-year-old, Seattle-based game development studio, has been acquired by the racetrack operator Churchill Downs for $885 million, including $485 million in up-front payments and another $350 million based on performance milestones. Big Fish had raised at least $92.5 million from investors over the years, including an $83.8 million venture round in 2008 from Balderton Capital, General Catalyst Partners, and Salmon River Capital.

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Essential Reads

Twitter is planning to fix its growth problem. Here’s the game plan.

Facebook is updating its privacy policies to clear the way for its payments push and location-based ads.

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Detours

A 40-year hunt for a bully.

Why you shouldn’t lie to your kids, even for good reasons.

The inside track on how to swing a hotel room upgrade, spa treatment or an impossible-to-get table at the new, cool resto.

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Retail Therapy

Now that we’ve discovered them, we’re going to be needing these foosball erasers.


2 comments on “StrictlyVC: November 13, 2014
  1. Caroline M says:

    Sad to see what’s going on with Dropcam. Maybe there are going to bring out some hidden cameras out soon haha 😉

17 Pings/Trackbacks for "StrictlyVC: November 13, 2014"
  1. […] were suggestions of a culture clash with Dropcam and Nest going back to November. According to a report in Strictly VC, Nest’s “meeting culture” had zapped creativity out of Dropcam, leaving many […]

  2. […] there have been suggestions of a culture clash emerging between Dropcam and Nest. According to a report in Strictly VC back in November, Nest’s “meeting culture” had zapped creativity out of Dropcam, […]

  3. […] have been suggestions of a culture clash emerging between Dropcam employees and Nest. According to a report in Strictly VC back in November, Nest’s “meeting culture” had zapped creativity out of Dropcam, […]

  4. […] have been suggestions of a culture clash emerging between Dropcam employees and Nest. According to a report in Strictly VC back in November, Nest’s “meeting culture” had zapped creativity out of Dropcam, […]

  5. […] really offer any context for why Duffy or Matsuoka have left the company, we’ve seen reports elsewhere that allege culture clashes between Dropcam and […]

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  9. […] really offer any context for why Duffy or Matsuoka have left the company, we’ve seen reports elsewhere that allege culture clashes between Dropcam and […]

  10. […] really offer any context for why Duffy or Matsuoka have left the company, we’ve seen reports elsewhere that allege culture clashes between Dropcam and […]

  11. […] really offer any context for why Duffy or Matsuoka have left the company, we’ve seen reports elsewhere that allege culture clashes between Dropcam and […]

  12. […] really offer any context for why Duffy or Matsuoka have left the company, we’ve seen reports elsewhere that allege culture clashes between Dropcam and […]

  13. […] really offer any context for why Duffy or Matsuoka have left the company, we’ve seen reports elsewhere that allege culture clashes between Dropcam and […]

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  16. […] actually supply any context for why Duffy or Matsuoka have left the corporate, we’ve seen stories elsewhere that allege tradition clashes between Dropcam and […]

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