StrictlyVC: November 1, 2016

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How to Sell Your Company to China

Michael Levit knows a thing or two about China. As an executive vice president at the e-commerce services company Vendio, he stayed with the company for six months after Alibaba agreed to acquire it in 2010. (It marked the Chinese conglomerate’s first U.S. acquisition.)

Levit says it was long enough to develop a consumer shopping project called Dealio that Alibaba had no interest in owning. So, he helped spin it off, renamed it Spigot, and eventually turned it into an application advertising company. (Users installing one app would receive a suggestion for another.) Roughly a year ago, Spigot also sold to a China-based company, publicly traded Genimous, for a reported $252 million.

Now Levit is taking the lessons learned from those experiences, and turning it into his next startup. Specifically, he has teamed up with longtime friend and advisor Rick Marini — cofounder of Tickle (sold to Monster) and Branch (picked up by Hearst) —  to form Dragonfly Partners, a new advisory firm that’s matching U.S. companies looking to get sold with China-based companies that are hungry for revenue.

They’ve also brought in a third partner, Gary Hsueh, who was most recently Yahoo’s global head of search partnerships and an investment banker with Goldman Sachs before that.

I sat down with Levit yesterday to learn more about the business, and how it might help Silicon Valley founders who might be ready to hand over the keys.

TC: This business sounds perfectly timed. What inspired it?

ML: Selling Spigot was wonderful, but the sales process was very challenging and tedious, and partially that’s because there aren’t many people who understand cross-border transactions and specifically how you take a U.S. company and sell it to China. Thankfully, I still have a number of friends from my Alibaba days, including David Wei (who was Alibaba’s CEO when Vendio was bought). He remains one of my mentors and helped us through that process.

TC: How many companies have you been working with, and have you sold anything yet?

ML: The first two companies that we advised informally are [the ad tech company] Media.net, sold to a Beijing-based company called Miteno for $900 million in August, and [mobile ad tech company] AppLovin, which sold last month to the private equity firm Orient Hontai Capital for $1.4 billion.

TC: You’re not an investment bank, but it sounds like you’re not far afield from one.

We’re akin to being an investment bank, though frankly there are a lot of people on the ground in China who are formal investment bankers [working with us]. What [we’re more focused on is talking with entrepreneurs about] whether China is real, what do the numbers look like, what do [China-based companies] want, how do you create your financial forecast, how do you create the right PowerPoint presentation, and help put those materials together before you even meet with a bank. Then we make the introduction to the bank.

TC: Which banks are you working with?

ML: There are a couple that we work with, including CV Capital. We’re also starting to work with [the private equity firm] CSC Venture Capital [the private equity firm that has committed to invest $400 million on the AngelList platform].

You have massive pools of capital in China that want to be deployed in the U.S.; you have entrepreneurs in the U.S. who want do business in China. What’s missing is a level of trust and understanding of how the two sides do business with each other. CSC solved that problem in part by partnering with AngelList. We’re doing something similar for much bigger deals and for M&A.

Frankly, some companies in China will promise you the sun, moon, and stars, and won’t give you any of it. Conversely, there are other companies that are soft-stated and that you’d never find and that have $90 billion [in market cap]. There are multiple entities like that because of the scale of China. We want to be the trusted layer that helps founders find those entities.

More here.

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New Fundings

AirPR, a five-year-old, San Francisco-based company that provides analytics, insights, and measurement tools to the PR industry, has raised $5 million in Series B funding led by Storm Ventures, with participation from Salesforce Ventures and earlier backers Mohr Davidow and Correlation Ventures. The company has now raised $10 million altogether. TechCrunch has more here.

Cirina, a two-year-old, San Francisco-based startup developing non-invasive tests for early cancer screening, has disclosed $12 million in Series A funding led by Shanghai-based Decheng Capital. More here.

Classy, a 10.5-year-old, San Diego, Ca.-based fundraising platform for social enterprises, has raised $30 million in Series C funding led by JMI Equity, a growth equity firm. Earlier backers Bullpen Capital, Galileo Partners, Mithril Capital Management and Salesforce Ventures also joined the round. TechCrunch has more here.

Cross River Bank, an eight-year-old, Fort Lee, N.J.-based community bank that’s become a major player in the marketplacing lending space, has raised $28 million in growth-equity funding led by Battery Ventures, with participation from Andreessen Horowitz and Ribbit Capital. The WSJ has more here.

CounterTack, a nine-year-old, Waltham, Ma.-based maker of endpoint detection and response technologies for the enterprise, has raised $10 million in new funding from TenEleven Ventures, Fairhaven Capital, Goldman Sachs, Razor’s Edge, ManTech International, Siemens Venture Partners, Alcatel-Lucent, EDBI, and Mitsui & Co. More here.

Emissary, a three-year-old, New York-based service that connects salespeople with executives at companies they are targeting, has raised $10 million in Series A funding co-led by Canaan Partners and G20 Ventures. The company has now raised $12 million altogether. More here.

Jobs

Prehype, a six-year-old venture development firm in New York, is looking to hire a venture associate. More here.

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(Alarming) Data

Female CEOS get more tough press than male leaders do, according to a new analysis by the Rockefeller Foundation and public-relations and research firm Global Strategy Group. It finds that nearly 80 percent of media stories about companies in crisis cited the CEO as a source of blame when the company’s leader was a woman, compared with 31 percent of stories assigning blame to male CEOs. The WSJ has more here.

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Essential Reads

Palantir Technologies has won a second chance at a contract to build the next phase of the U.S. Army’s integrated combat data system, an undertaking potentially worth hundreds of millions of dollars.

“In a stunt that begs to be spoofed by Mike Judge for his HBO series ‘Silicon Valley,’ Menlo Ventures portfolio company Flirtey delivered socks from the sky above the Rosewood Hotel during the firm’s annual limited partner meeting,” reports TechCrunch. More here.

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Detours

LeBron James hosts a Warriors-themed Halloween party.

How hitting the snooze button messes with your mind.

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Retail Therapy

Mahabis slippers. They got soles. (H/T: Uncrate.)