Good Monday morning, everyone! Hope you had a great weekend.
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Top News in the A.M.
Yesterday, Google pledged to help developers create wearable devices, saying it will release an Android-based software development kit in the next two weeks.
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Josh Stein on the New DFJ
DFJ has done what a lot of firms struggle to pull off; it has undergone a management shift without completely spooking LPs, who recently committed to give the firm $325 million for its newest fund. The transition was 18 months in the making, says Josh Stein, who joined DFJ a decade ago and who now, along with longtime partners Andreas Stavropoulos and Steve Jurvetson, runs DFJ without firm cofounders Tim Draper and John Fisher. (Draper and Fisher remain on the management committee.)
Late last week, I talked with Stein — who has led investments for DFJ inYammer, Redfin, and Box, among other companies – to learn about the new vision for the firm. Our conversation has been edited lightly for length.
Along with transition at the top of Draper, the firm has decided to return its focus to mostly U.S. companies, cut out clean tech as a sector of interest, and scale back on the size of its partnership. What drove the latter decision?
DFJ had broadened pretty significantly [in numerous ways] and we thought we made better decisions when we had five or six people around the table rather than 10 or 12. We just think venture is very idiosyncratic in that it doesn’t scale very well. One person making all the decisions himself doesn’t have that cognitive diversity. But 10 or 15 [people around the table] is like a corporate meeting.
We’re also focused on developing the next generation team, so bringing in people like Bubba [Muraka, a former product manager at both Facebook and Microsoft who joined the firm last May]. I’m 40, and [during this last fundraise], I got questions about LPs about my own succession plan. I said, “Really? I just got here.”
You’re focusing on consumer tech, mobile, business and enterprise technology. What else should we expect to see from DFJ going forward?
We also focus on disruptive technology, things that aren’t about building an app or putting together a Web site. Something like Uber is an incredible service with powerful network effects, but there’s no real technical innovation there. Contrast that to [DFJ-backed] Tesla or SpaceX or [biofuels startup] Synthetic Genomics or [D-Wave Systems], our quantum computing company. Just [Wednesday], we announced that we’re backing [human genome pioneer] Craig Venter in his newest endeavor, Human Longevity. [Editor’s note: Venter’s new company, which just closed a $70 million Series A round, plans to scan the DNA of as many as 100,000 people a year with the hope that the information will lead to new, life-extending therapies. Venter is also the cofounder of Synthetic Genomics.]
Steve Jurvetson is the partner who most associate with DFJ’s more disruptive startups. Is that still the case?
Definitely. Within our three pillars, Andreas and Bubba lead our consumer efforts, I tend to lead the firm’s enterprise efforts, and Steve leads our disruptive efforts. But it’s player-coach; we all do deals that fall into all three categories; there [just happen to be certain partners] who push the thinking forward.
Are you seeing many disruptive deals? What’s particularly intriguing to the firm of late?
Well, we’d love to see a third of our capital [flow to disruptive deals] but it’s less than a third [owing to lack of opportunity]. We see lots of brilliant, revolutionary ideas, but they have to be achievable within a reason period of time or they’re just science projects. Of course, sometimes, it’s counterintuitive. When we did SpaceX, a lot of people thought we were nuts, that we’d headed down a 10-year-long rat hole. Now, it’s a very big company according to every big metric.
One thing we’re seeing a lot of innovation around right now is dynamic systems, and specifically things that are using some kind of artificial intelligence combined with sensors and actuators. A self-driving car would be the best example, or autonomous robots that can walk over uneven terrain. We don’t have a huge number of [related] bets, but we’re really excited about the ones we have.
Is there a natural ecosystem of syndicate partners for DFJ on these types of deals? Who else is looking most closely at “out there” stuff?
There’s a small ecosystem of investors looking. Khosla Ventures and Founders Fund are two that jump to mind. I think Google Ventures and Google as a corporate entity have also been very forward leaning. But I think [that ecosystem] is getting broader every day now that firms are seeing successes like Tesla, which is valued at $30 billion.
DFJ raised its newest growth fund last year. Do you have thoughts about some of the seemingly crazy valuations we’re seeing for later-stage deals? What’s your gut tell you about the health of the market?
I think people like to predict doom too fast. If the market is soft, technology is ending; it it’s hot, it’s a bubble. The truth is always somewhere in between.
The way I think about growth investments is less about valuation but total loss of principal versus partial loss of principal. When you buy Google or Apple stock, you could say the shares are highly valued, but you won’t lose all your money. The odds of Google going out of business in the next 10 years is probably zero. Even with a massive correction, Google maybe goes down 50 percent.
[Similarly], with Workday’s last private round [an $85 million injection in 2011, about 20 months before it went public], it was doing $100 million in revenue. With [online real estate broker] Redfin, the [still-private, DFJ-backed] company isn’t too far off from doing $100 million in revenue. These are stable businesses with recurring revenue, so there’s not a lot of capital risk there; it’s just a question of how big your return is going to be.
The deals where you could lose all your money in at a huge valuation – a Snapchat where you could literally lose [everything] if the company doesn’t figure out a business model or the next hot thing comes along and people move on – that’s what scares me.
New Fundings
Brammo, a 12-year-old, Ashland, Or.-based electric motorcycle maker, has raised $9.5 million in a still-open Series D fundraising round, reports EVWorld. The new funding comes from Canadian venture firm Terracap Ventures and the international insurance company Aviva Investors. The company is targeting $16 million; it has raised $63 million to date, including from Polaris Industries, Alpine Energy, and NorthPort Investments.
DataRPM, a two-year-old, Fairfax, Va.-based company that promises to let anyone quickly create and deploy a custom analytics platform, has raised roughly $6 million in funding, including from Interwest Partners, shows an SEC filing.
Domain Surgical, a 6.5-year-old, Salt Lake City-based medical device company that claims to have developed an advanced surgical technology, has raised $35 million in new funding from OrbiMed Advisors andBioStar Ventures.
Huodongxing, a Beijing-based online ticketing platform, has raised “tens of millions of U.S. dollars” in Series B financing, says China Money Network. SAIF Partners led the round, with earlier investors Qualcommand DCM — which led the company’s Series A round in 2011 — also participating.
Illumagear, a two-year-old, Seattle-based company whose hardware product can attach to any hard hat to produce a ring of light around the wearer, has raised $1.9 million, according to an SEC filing that shows the company is targeting a round of $2.7 million. The company had previously raised $750,000 in funding.
JD.com, the 16-year-old, Beijing-based Chinese e-commerce company, has sold a 15 percent stake in its business to Tencent Holdings, one of China’s biggest Internet companies, for $214.7 million. Tencent has also agreed to buy an additional 5 percent stake in JD.com after its planned $1.5 billion listing on the Nasdaq is completed. (JD.com filed for the offering in late January.)
Kannact, a two-year-old, Portland, Or.-based tablet-based, healthcare collaboration tool that promises to help providers, caregivers, and patients proactively manage a patient’s health through individualized care plans and real-time video conferencing with the patient, has raised $165.3 million, according to an SEC filing that shows a target of $200 million. No investors are listing on the filing.
Knowledge Delivery Systems, a 13-year-old, New York-based online learning platform that promises to help users further their professional development, including through state certification and master’s degree programs, has raised $6 million in funding led by Edison Ventures. The round was characterized as the company’s first institutional capital.
Lyft, the 6.5-year-old, San Francisco-based company whose ride-sharing app competes with Uber, has partially raised a $150 million round of fresh funding, Re/code reported on Saturday after spying this filing. Re/code notes that no investor names appear in the filing, but its sources say that the private equity firm Coatue Management is among other firms that have been in advanced talks with Lyft.
Secret, a six-month-old, San Francisco-based mobile app that lets people anonymously share information with friends, has raised $10 million in venture funding at a post-money valuation of $50 million, says TechCrunch. Google Ventures reportedly led the round, with Kleiner Perkins Caufield & Byers participating. In December, Secret raised $1.2 million in seed funding from Google Ventures, Kleiner Perkins, SV Angel,Index Ventures and others.
ShowEvidence, a three-year-old, Santa Clara, Ca.-based company that makes cloud-based performance-assessment software (for students, professional development and more), has raised an undisclosed amount of money from Follett Corporation.
Specialists on Call, a 10-year-old, Reston, Va.-based platform that provides hospitals with emergency telemedicine consultations with board certified specialists, has raised $31.6 million in new funding, shows anSEC filing. An affiliate of Warburg Pincus provided the funds. The company has raised roughly $37 million to date, shows Crunchbase.
Wayfair, the 12-year-old, Boston-based online retailer of home furnishings and decor, has raised $157 million in Series B financing led by T. Rowe Price Associates. The company has now raised around $360 million to date, shows Crunchbase, including from Battery Ventures, Great Hill Partners, HarbourVest Partners, and Spark Capital.
Workable, a 20-month-old, Athens, Greece-based company whose online platform aims to simplify the recruiting process, has raised $1.5 million in funding led by Greylock IL, an affiliated fund of Greylock Partners in Silicon Valley. Workable raised $950,000 in seed funding last year.
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New Funds
A new investment fund has sprung up in Polson, Montana, called Frontier Angel Fund II. The founder, Liz Marchi, declined to tell the local paper how much the fund will be investing or if it’s still fundraising but said the plans to work with a syndicate of angel investment funds around the country to back regional startups, and that the operation will be based out of her barn. (Love.)
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IPOs
Shares of the digital coupon company Coupons.com nearly doubled in their trading debut Friday, closing at $28.50 from their offering price of $16 each. Bloomberg columnist Jonathan Weil doesn’t get why.
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Exits
Bustle, a women’s lifestyle site launched seven months ago by Bleacher Report founder Bryan Goldberg, has parted ways with one of its seed investors, Google Ventures. TechCrunch reports that Google pulled its initial funding of $100,000 out of the company in the wake of some “tone deaf” comments made by Goldberg about Bustle’s mission. PandoDaily reports that Goldberg, a regular contributor to PandoDaily, opted to buy out Google Ventures with his own money as his relationship with the outfit became strained over time.
Yahoo may be in talks to buy a Galway, Ireland-based technology company, SindiceTech, to “gain control of the company’s know-how,”reports the Sunday Independent. According to its report, Yahoo had originally planned to buy the company in December for roughly $25 million, but the negotiations collapsed.
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People
On Friday, Salesforce CEO Marc Benioff and the nonprofit Tipping Point took the wraps off a new initiative called SF Gives that hopes to raise $10 million over the next 60 days for Bay Area antipoverty programs. Persuading 20 companies to contribute $500,000 apiece is just the start, says Benioff, who hopes the program will ultimately raise $100 million. Not that it will be easy, he tells the San Francisco Chronicle. Though numerous tech companies have already written out checks to the program, including LinkedIn, Google, Jawbone and Box, “We still have some pretty epic companies here who have had IPOs and aren’t giving – and aren’t part of this and won’t join,” says Benioff. “There is a dark side here. We get a guy on the phone, and he will say, ‘No. No. That’s not for us. We’re not doing this.’ ”
Paul Ceglia, who famously claimed in 2010 that he was entitled to half of Facebook, lost a bid on Friday to throw out charges that he faked a contract, destroyed evidence and created bogus e-mails in a civil suit against Facebook cofounder Mark Zuckerberg. A federal grand jury in Manhattan had indicted Ceglia in 2012 on charges of mail fraud and wire fraud, but his attorney, David Patton, has been trying to argue that federal statutes for those crimes can’t be applied to false claims made in civil litigation.
Renowned investor Ron Conway and wife Gayle hosted a gala in San Francisco last weekend in honor of Pinterest CEO Ben Silbermann, and the tech cognoscenti showed up in full force, including Square founderJack Dorsey, Sequoia‘s Roelof Botha, and Vinod Khosla of Khosla Ventures. You can see pictures of the event at the site of Drew Alitzer, San Francisco’s favorite society photographer.
Chris Kay, who has spent the last seven years or so as a managing director of Citi Ventures — the last four of them as its global head — just left to join the publicly traded health care company Humana. Before joining Citi’s corporate venture arm, Kay spent 12 years in various leadership positions at Target.
Bill Maris, Google Ventures‘ managing partner, has sold a condominium in Palo Alto, Ca., that was widely reported to be located next door to Apple CEO Tim Cook. No word on who paid the $2.8 million for the property, though if Cook acquired it for privacy’s sake, he’d join a growing number of CEOs who’ve nabbed neighboring properties for the much the same reason, including Elon Musk, Mark Zuckerberg, and (maybe) Marissa Mayer.
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Happenings
The Game Developers Conference is around the corner, taking place in San Francisco March 17th through the 21st. Speakers include Gavin Moore, the creative director of Sony Computer Entertainment, and Chris DeWolfe, CEO of SGN.
Box‘s developers conference in San Francisco is coming up Wednesday, March 26, with informational sessions that will feature Andreessen Horowitz cofounder Ben Horowitz, Palantir cofounder Joe Lonsdale, and Evernote CEO Phil Libin, among others. Click here to register, and use the promo code nextgendev.
Meanwhile, the SXSW festival is already well underway in Austin; if you aren’t there and want to keep up on some of what’s happening, click here.
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Pulsar Venture Capital, an early-stage venture firm firm that was founded in Russia in 2009, is looking for a venture capital associate who will be based in the Bay Area.
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Data
Global IPO activity has leaped 70 percent to hit $28.2 billion in 2014 so far, compared with the same period last year, reports Reuters.
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Essential Reads
Instagram has inked its first major ad deal with an agency, securing a year-long commitment from Omnicom to spend up to $100 million, but the an even bigger revenue stream for the Facebook subsidiary may be tied to e-commerce, suggests Jenna Wortham of the New York Times.
Google was built with the help of an army of “spiders” deployed to crawl the Web, and sophisticated algorithms to rank the value of pages. But it can’t easily navigate the apps where users are spending most of their time,reports the WSJ.
“[A]nyone working on a TorCoin, PKICoin, or other AppCoin, do get in touch,” says Andreessen Horowitz partner Balaji Srinivasan, tweeting that he and Angellist cofounder Naval Ravikant “think of this as [the] next kind of startup.” Ravikant outlines why here.
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Detours
Tom Coates’s San Francisco home live-tweets the movements of its many gadgets, from the lighting in the kitchen to Coates’s weigh-ins. For a time,reports the Times, it also tweeted the results. “I have stopped doing that recently because I’ve put on a ton of weight,” Coates said.
The origins of 13 “True Detective” set pieces. (Speaking of which, what’sso funny about the show anyway, asks the New Yorker.)
Did you invent bitcoin? Take this quiz to find out.
The activist hedge fund manager Bill Ackman bet a billion dollars on the collapse of the nutritional supplement company Herbalife, then launched an extraordinary, if unsuccessful, campaign to kill it.
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A painting that’s also a wireless speaker.
Black playing cards.
“Oud Wood.” “Oud Tobacco.” “Tuscan Leather.” Tom Ford, what’s next? “Humidor?” “Boat Shoe”? “Squash Ball”? We are on tenterhooks.
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DFJ as done what a lot of firms struggle to pull off; it has undergone a management shift without completely spooking LPs, who recently committed to give the firm $325 million for its newest fund. The transition was 18 months in the making, says Josh Stein, who joined DFJ a decade ago and who now, along with longtime partners Andreas Stavropoulos and Steve Jurvetson, runs DFJ without firm cofounders Tim Draper and John Fisher. (Draper and Fisher remain on the management committee.)
