Happy Wednesday, everyone!
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Top News in the A.M.
Google was formally accused in a letter this morning by the European Commission of “abusing its dominant position in the markets for general internet search services” in Europe by “systematically favouring its own comparison shopping product in its general search results pages. The Commission has also formally opened a separate antitrust investigation into Google’s mobile operating system Android. Google has already issued a statement explaining why it “strongly” disagrees with the letter.
Nokia has announced plans to acquire rival telecom equipment maker Alcatel-Lucent for $16.6 billion in shares. More here.
Yahoo is reportedly about to acquire Foursquare for around $900 million. TechCrunch has the story here.
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FLAG’s Peter Denious: “It’s a Good Time to Be Asking Questions”
Roughly one year ago, FLAG Capital Management, the limited partnership, revealed that after 20 years, Diana Frazier would step down from her role as co-head of U.S. venture capital, and that Peter Denious, who formerly headed the firm’s emerging markets efforts, would assume her role.
Denious has been fairly quiet since then, possibly because the move came about as FLAG – which has backed Accel Partners, Andreessen Horowitz, Redpoint Ventures, Spark Capital and Union Square Ventures, among others — was beginning to raise its ninth fund of funds.
Denious still declines to discuss that effort, but he did talk with us this week about his observations – and concerns – about the current state of the venture industry. Here’s part of that conversation, edited for length.
You recently created a presentation called “Venture Portfolio Management in the Age of the Unicorn,” stating that FLAG has exposure to 56 so-called unicorns across 100 positions but suggesting that you have concerns about whether investors are taking enough money out of those deals. Are you talking with them about it?
We talk with them pretty openly and actively about it. We’ve always been big believers that you have to be both a great investor who can attract world-class entrepreneurs, as well as be a world-class portfolio manager.
It’s easy for VCs operating inside partnerships to get involved in their 10 or so investments, but it’s important for somebody to be thinking about the dynamics of generating returns, too. It’s a piece that we think is relevant in a time when things are up and to the right.
Given the number of secondary shops to descend on Silicon Valley in the last couple of years, I’d guess that plenty of firms are selling portions of their stakes. What are you seeing?
These are case by case situations. Obviously, we’ve looked into our portfolio and across those exposures, and where the VC has an embedded return of at least 10x, we’ve been seeing them take chips off the table. We think as long as managers are having the discussion, they’ll arrive at the right answer.
Are you concerned by how few companies are going public, relative to the number of richly funded late-stage companies we’re seeing?
I don’t think that each of whatever the number of agreed-upon unicorns that we’re seeing will do well. Some will be severely tested when the capital runs dry, and anyone who says otherwise must be wearing a pretty strong pair of rose-colored glasses.
By the same token, the amount of transformation and disruption in these companies’ respective industries is truly amazing. I do think there’s a subset of these companies that deserve to be very big. Do they deserve to be $50 billion, $100 billion [in value]? That’s subject to debate, but many will be very profitable if they aren’t already.
So you’re more troubled by valuations than underlying business models.
In most cases, we don’t have a business model problem. We don’t see a lot of nonsense, as with the last [late ‘90s] cycle. What’s debatable is valuation and are people paying too much for growth as these businesses scale, and I think that’s all to be determined. Who are we to say that this company at that valuation is too low or too high?
We’re typically early-stage and not growth or late-stage investors and part of the reason we don’t invest there is because as you move later and later on the continuum, you’re taking more of the valuation risk. I don’t think anyone would question the 10 most highly valued unicorns. The question is whether the premiums being paid for their growth is justified, and again, only time will tell. I do think that late-stage and crossover ventures are the most at risk, but that’s what they get paid to do.
But you anticipate a day of reckoning?
With respect to the pool of these late-stage companies, one can argue that so much late-stage capital has allowed for more unicorns to be created than would otherwise be the case. When that capital goes away, you’ll see more exits at the sub-$1 billion level.
Some [may go public.] I think it’s too early to draw too many conclusions about IPOs, which were down in the first quarter; we’ll know more in the next few quarters. But it’s a good time to be asking questions. I do think there will be a day of reckoning.
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New Fundings
99designs, a seven-year-old, San Francisco-based online graphic design marketplace, has raised $10 million in Series B funding led by Recruit Strategic Partners, with participation from earlier investor Accel Partners. The company has now raised $45 million altogether, shows Crunchbase.
Acorns, a three-year-old, Newport Beach, Ca.-based finance company that allows individuals to round up purchases and automatically invest the change, has raised $23 million in Series C funding co-led by Greycroft Partners and e.ventures, with participation from Sound Ventures, Garland Capital, and MATH Venture Partners. To date, Acorns has raised $32 million.
Bedrock Data, a three-year-old, Boston-based data integration platform for businesses, has raised $3.1 million in Series A funding led by .406 Ventures, with participation from Boston Syndicates, Maiden Lane, and Visible Measures CEO Brian Shin. BostInno has more here.
Benchling, a nearly three-year-old, San Francisco-based platform that makes it easy to edit, analyze, and collaborate on DNA sequences, has raised $5 million funding led by Andreessen Horowitz, with participation from Thrive Capital. Benchling had previously raised an undisclosed amount of seed funding from backers that include Y Combinator, Rock Health, FF Angel, SV Angel, Tim Draper, Geoff Ralston, Kevin Mahaffey, and Matt Huang.
CrossChx, a three-year-old, Columbus, Oh.-based company whose software helps reduce medical errors by identifying patients via fingerprint scan, has raised $15 million in Series B funding led by Khosla Ventures, with participation from earlier investor Drive Capital. The company has now raised $20 million altogether.
Grofers, a 1.5-year-old, Gurgaon, India-based startup that provides quick delivery of products from local brick-and-mortar merchants, has raised $35 million Sequoia Capital and Tiger Capital, just two months after the same investors provided the company with $10 million in Series A funding. Grofers has now raised $45.5 million altogether. TechCrunch has more here.
Innocrin Pharmaceuticals, a 15-year-old, Durham, N.C.-based clinical-stage pharmaceutical company developing small-molecule inhibitors to treat certain breast and prostate cancers, has raised $28 million in Series D funding led by Eshelman Ventures, with participation from earlier backers Novartis Venture Fund, Lilly Ventures, Hatteras Venture Partners, Intersouth Partners, and A&B Equity Holdings.
LovetheSign, a 2.5-year-old, Milan, Italy-based home design e-commerce platform, has raised roughly $4 million in Series A funding led by United Ventures, with participation from unnamed angel investors from the Italian fashion and design industry. TechCrunch has more here.
OnePlus, a two-year-old, Shenzhen, China-based smartphone maker that offers high-end phones at less than half the price of flagship models by Samsung and Apple, is in funding talks with Silicon Valley venture capitalists to help double its workforce, reports Bloomberg. Co-founder Carl Pei isn’t sharing how much the company wants to raise; he says “the most important part is access to experience and senior-level talent that will help us scale further.”
PepperTap, a six-month-old, Gurgaon, India-based on-demand grocery delivery service, has raised $10 million in Series A from SAIF Partnersand from Sequoia Capital, which invested a $1.2 million in seed funding in the startup last month, reports TechCrunch. If it seems like on-demand grocery startups in India are suddenly awash in funding, it isn’t your imagination. In addition to Grofers (see above), ZopNow, featured in yesterday’s newsletter, also just received funding ($10 million, led by Dragoneer Investment Group).
Poachable, a year-old, Seattle-based anonymous talent marketplace (users tell Poachable about themselves and it gauges employers’ interest without revealing their identify), has raised $750,000 in seed funding from Vulcan Capital and angel investors, including former Drugstore.com CEO Dawn Lepore.
PolicyBazaar, a seven-year-old Gurgaon, India-based online insurance policy aggregator, has raised roughly $40 million (Rs 248 crore) in Series D funding from PremjiInvest, the personal investment vehicle of Wipro chairman Azim Premji, among other new and existing backers, including Tiger Global, Ribbit Capital, Steadview Capital and ABG Capital. VCCircle has more here.
RetailNext, a 7.5-year-old, San Jose, Ca.-based maker of in-store retail analytics, has raised a whopping $125 million in growth funding led by Activant Capital Group, with participation from earlier backers August Capital, StarVest Partners, Nokia Growth Partners, Commerce Ventures, American Express, Pereg Ventures and Qualcomm Ventures. Siguler Guff & Company also joined the round as a first-time investor. The company has now raised $184 million altogether.
Skyport Systems, a two-year-old, Mountain View, Ca.-based enterprise security company, has raised $30 million in Series B funding led by Index Ventures, with participation from Intel Capital and earlier backer Sutter Hill Ventures. The company has now raised $37 million altogether.
TouchBistro, a 3.5-year-old, Toronto, Ontario-based iPad-based restaurant point-of-sale system enabling owners to manage reservations and take orders instantly, has raised $6 million in Series A funding, including from Just Eat, a publicly traded, U.K.-based online marketplace for restaurant delivery. Other backers include Difference Capital, Kensington Capital Partners and Relay Ventures. The company has now raised roughly $12 million altogether.
UniKey, a five-year-old, Winter Park, Fl.-based smart lock maker, has raised $10 million in Series A funding from Asset Management Ventures, AXCIT, Broadway Angels, CBRE, ff Venture Capital, Samsung Ventures, Haas Portman, Oriza Ventures and other, unnamed investors. According to TechCrunch, the company had raised $2.9 million in seed funding. More here.
WorldViz, a 13-year-old, Santa Barbara, Ca.-based virtual-reality company whose platform helps enterprise customers to develop their own VR content, has raised an undisclosed amount of funding from Intel Capital. VentureBeat has more here.
Yoyo, a two-year-old, London-based mobile wallet startup that focuses primarily on university campuses, has raised $10 million in Series A funding led by the Imperial College-affiliated Imperial Innovations, reports Business Insider. Imperial Innovations had also provided the company with $1.2 million in seed funding in 2013. Other investors in the new round include angel investors, including Philip Riese, former president of American Express consumer cards.
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New Funds
Dentsu, the 113-year-old, Tokyo-based advertising powerhouse that has struggled to expand internationally, has just established a venture capital fund, Dentsu Ventures Global Fund I, with 5 billion yen (roughly $42 million). The fund will target companies in U.S., Europe and Asia, says the company.
New Enterprise Associates, the 38-year-old venture firm, has closed its 15th fund with $2.8 billion, as well as closed a co-investment fund of $350 million to invest alongside the main fund in growth deals. Together, the two funds top the $3 billion fund that Technology Crossover Ventures raised in 2007 (It remains the largest single venture fund ever raised, according to industry tracker Dow Jones VentureSource.) NEA commits around 70 percent of its capital to IT deals and another 30 percent to healthcare.
MAB Capital Management, a private equity group led by beverage entrepreneur Marc Bushala, has created a $50 million fund to invest in early-stage beverage businesses, reports VentureWire. The new fund, Liquid Asset Brands Innovation Fund I, plans to invest between $3 million and $10 million in early-stage U.S.-based beverage businesses that are already generating revenue.
Menlo Ventures has closed its 12th fund with $400 million, the same size as its previous fund. Two of its six general partners, Doug Carlisle, who joined the firm in 1982, and John Jarve, who joined in 1985, will begin to retire after this fund, reports Venture Capital Dispatch. More here.
Viola Private Equity has raised $250 million for the firm’s second growth-stage fund targeting technology companies based in Israel. GeekTime has more here.
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IPOs
Shopify, a nine-year-old, Ottawa, Ontario-based commerce platform that allows anyone to sell online via a professional-looking online storefront and Shopify’s payment solutions, has registered plans to raise up to $100 million in an IPO. According to Crunchbase, the company has raised $122 million from investors over the year, including from Felicis Ventures(which isn’t listed on the filing), Georgian Partners (which owns 5.9 percent), Bessemer Venture Partners (30.3 percent), FirstMark Capital (11.9 percent), Insight Venture Partners (not listed on the filing), and OMERS Ventures (6.1 percent).
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Exits
BlaBlaCar, a nine-year-old, Paris-based car-sharing site that connects drivers with empty seats and paying passengers to offset distance travel costs, is acquiring the German group Carpooling.com, its main European rival, as well as Hungary-based AutoHop, reports the Financial Times. According to its report, the “combined entity will make BlaBlaCar the leading ride-sharing service in Europe, where it will control more than a 90 per cent share of large markets such as Germany, Spain and Italy. It will also create one of the world’s biggest ride-sharing services with 20 million users across 18 markets.”
Datazen, a 13-year-old, Toronto-based mobile business intelligence and data visualization service, has been acquired by Microsoft for undisclosed terms. ZDNet has more here.
LinX Computational Imaging, a four-year-old, Israel-based company that develops and markets miniature cameras for tablets and smartphones, has been acquired by Apple for around $20 million, suggests the WSJ.
Segway, the 14-year-old, Bedford, New Hampshire transportation company, has been acquired — for a third time — selling to three-year-old, Beijing, China-based Ninebot, a company whose remarkably similar self-balancing robotic scooters have just attracted $80 million in fresh funding from Xiaomi, Sequoia Capital, and Shunwei Foundation. The companies will reportedly remain separate for now. Bloomberg has more here.
Temasek Holdings, the Singapore-based government-owned investment firm, has completed its acquisition of SVB India Finance, a debt venture firm run by Silicon Valley Bank, for roughly $48 million. The newly rebranded unit will be called InnoVen Capital India. The outlet e27 has more here.
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People
Annabelle Long, managing partner of Bertelsmann Asia Investments, talks with Venture Capital Dispatch about the roles played by former employees of Alibaba, Tencent and Baidu and the heated pace of investment in China. (As the article notes, China’s tech sector raised $7.2 billion in private funding deals last year, compared to $1.6 billion in 2013, according to the Centre for Asia Private Equity Research.)
Mark Pincus, who recently returned to Zynga as CEO, receives a scathing write-up in the San Francisco Chronicle, which suggests he’s back at the company because “no one could stop him.”
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Data
Last year, only 11 percent of the tech IPOs were profitable; that’s less than the 13 percent of unprofitable tech IPOs that hit the market 2000. The Information has more here (subscribers only).
Surprise: According to Pew Research Center, Facebook remains the most used social media site among American teens ages 13 to 17, and boys visit the site more often than girls.
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Essential Reads
The biggest thing in app making: small packages of code.
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Detours
Junk food with Michelin-style plating.
If you have to ask where your invite is, you’re not on the A-List.
A super-gross diagnostic tool that could save your life.
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Retail Therapy
Vermont Maple Sriracha. We have absolutely no idea how we’d use this, but you might.