Monthly Archives: October 2013

True Ventures on Spotting Winning Teams

true-ventures_fullSince its 2005 founding, San Francisco-based True Ventures has been making seed-stage bets on startups, with an eye toward plugging up to $10 million into those that break out. 

The firm’s strategy has worked with aplomb. True was the first investor in WordPress parent Automattic — one of the tech industry’s hottest private companies. True also wrote early, small checks to the video ad network Brightroll and the wearable device maker Fitbit, companies that have gone on to raise tens of millions of dollars from eager follow-on investors. I recently caught up with cofounder Jon Callaghan to discuss True’s model, how to know when a startup is souring, and what kinds of companies the firm is backing right now. Our conversation has been lightly edited for length.

True typically gets 20 percent of a company in return for a fairly small first check of $1 million to $2 million. How do you do it?

We’re investing a $200 million fund, so $1 million checks are half of one percent of the fund. If you think about that allocation, it lets us take on an incredible amount of risk. When things work, we have a large enough fund that we can support [the best investments] with $5 million or $10 million – and we do have $10 million in lots of companies. [With] our best companies, we’re the largest shareholder on the lowest cost basis because we were in there on day one.

Some of your founders have enjoyed success before and could presumably sell 20 percent of their company for a bigger check. Why don’t they?

We wouldn’t be doing them any favors by putting too much money in too soon. We’re actually much more aligned by saying, “Here’s $1 million to $2 million to take you through the next 18 to 24 months [to see if your idea works]. Is that worth 20 percent to you?” And it is. It’s a pretty good trade.

When you write a bigger check, you also start bumping into loss aversion. You really don’t want to lose that first check. If you’re in too heavy in the beginning, it’s really scary for any investor. And the last thing that any creative founder needs is a nervous investor.

True has now backed 120 companies. When do you know that you have a great team on your hands, and when do you know a startup is going south?

We like to see a constant thread through [founders’] experiences, meaning that when we hear their story, it’s really clear why they’re doing a particular company. We backed [former Wired editor] Chris Anderson [who founded the unmanned aerial vehicle company 3D Robotics last year] knowing there were a number of threads that led him to his company: his fascination with innovation; his kids’ curiosity in hacking Legos with remote control airplanes; and finally, just knowing that there’s nothing else in the world he’d rather be doing – and this is someone who could be doing anything.

When it comes to the downside, there are a lot of easy tells. Communication gets weird between a founder and the rest of the team. Things just don’t add up. When teams are in flow, you can see it and feel it. Their offices are alive with energy. Those are the good ones. If you spend time at a company and there’s not that energy, then you kind of have to say, “What’s going on here?” It’s usually because some basic stuff is missing. People aren’t on board the mission, or the founder or someone else took the product in a direction that isn’t really resonating with the rest of the team, or the team kind of didn’t have the trust required to get together in the beginning.

True first went after consumer Web companies, then SaaS companies, then infrastructure companies. What does your newest crop of portfolio companies look like?

We think this wave of software and mobile innovation will disrupt very large existing businesses. Hair color is one of two consumer packaged goods companies that we’ve done. In robotics, we’ve funded many interesting and wearable robotics companies that haven’t yet been announced. We now have one of the largest device and wearable portfolios that no one knows about. We also think the car industry, where there’s clearly a huge software opportunity, is really interesting.

It’s a big, scary market, and traditionally you might say, “What? You want to sell to automakers?” But we think there’s a really brilliant team doing something very bold and audacious, and we can and want to take a ton of risk with that first check.

(To read a previously published segment of our chat with Callaghan, on the “Series B Crunch,” click here.) 

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StrictlyVC: October 31, 2013

110611_2084620_176987_thumbnailGood morning! Hope you have a very spooky Thursday. Mmmwhahahahahaaa!

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Top News in the A.M.

The NSA has been covertly tapping the private networks of Yahoo and Google to gather information from hundreds of millions of user accounts, says the Washington Post. The NSA has fired back, calling the report inaccurate, but isn’t offering much of a defense (yet).
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True Ventures on Spotting Winning Teams

Since its 2005 founding, San Francisco-based True Ventures has been making seed-stage bets on startups, with an eye toward plugging up to $10 million into those that break out.

The firm’s strategy has worked with aplomb. True was the first investor in WordPress parent Automattic — one of the tech industry’s hottest private companies. True also wrote early, small checks to the video ad network Brightroll and the wearable device maker Fitbit, companies that have gone on to raise tens of millions of dollars from eager follow-on investors. I recently caught up with cofounder Jon Callaghan to discuss True’s model, how to know when a startup is souring, and what kinds of companies the firm is backing right now. Our conversation has been lightly edited for length.

True typically gets 20 percent of a company in return for a fairly small first check of $1 million to $2 million. How do you do it?

We’re investing a $200 million fund, so $1 million checks are half of one percent of the fund. If you think about that allocation, it lets us take on an incredible amount of risk. When things work, we have a large enough fund that we can support [the best investments] with $5 million or $10 million – and we do have $10 million in lots of companies. [With] our best companies, we’re the largest shareholder on the lowest cost basis because we were in there on day one.

Some of your founders have enjoyed success before and could presumably sell 20 percent of their company for a bigger check. Why don’t they?

We wouldn’t be doing them any favors by putting too much money in too soon. We’re actually much more aligned by saying, “Here’s $1 million to $2 million to take you through the next 18 to 24 months [to see if your idea works]. Is that worth 20 percent to you?” And it is. It’s a pretty good trade.

When you write a bigger check, you also start bumping into loss aversion. You really don’t want to lose that first check. If you’re in too heavy in the beginning, it’s really scary for any investor. And the last thing that any creative founder needs is a nervous investor.

True has now backed 120 companies. When do you know that you have a great team on your hands, and when do you know a startup is going south?

We like to see a constant thread through [founders’] experiences, meaning that when we hear their story, it’s really clear why they’re doing a particular company. We backed [former Wired editor] Chris Anderson [who founded the unmanned aerial vehicle company 3D Robotics last year] knowing there were a number of threads that led him to his company: his fascination with innovation; his kids’ curiosity in hacking Legos with remote control airplanes; and finally, just knowing that there’s nothing else in the world he’d rather be doing – and this is someone who could be doing anything.

When it comes to the downside, there are a lot of easy tells. Communication gets weird between a founder and the rest of the team. Things just don’t add up. When teams are in flow, you can see it and feel it. Their offices are alive with energy. Those are the good ones. If you spend time at a company and there’s not that energy, then you kind of have to say, “What’s going on here?” It’s usually because some basic stuff is missing. People aren’t on board the mission, or the founder or someone else took the product in a direction that isn’t really resonating with the rest of the team, or the team kind of didn’t have the trust required to get together in the beginning.

True first went after consumer Web companies, then SaaS companies, then infrastructure companies. What does your newest crop of portfolio companies look like?

We think this wave of software and mobile innovation will disrupt very large existing businesses. Hair color is one of two consumer packaged goods companies that we’ve done. In robotics, we’ve funded many interesting and wearable robotics companies that haven’t yet been announced. We now have one of the largest device and wearable portfolios that no one knows about. We also think the car industry, where there’s clearly a huge software opportunity, is really interesting.

It’s a big, scary market, and traditionally you might say, “What? You want to sell to automakers?” But we think there’s a really brilliant team doing something very bold and audacious, and we can and want to take a ton of risk with that first check.

(To read a previously published segment of our chat with Callaghan, on the “Series B Crunch,” click here.) 

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New Fundings

Lawdingo, a 22-month-old, San Francisco-based subscription service that connects people with attorneys who make themselves available by phone, has raised a fresh $690,000 in funding. The company, a graduate of the Y Combinator program, received the capital from Atsany Capital, Altair Capital, and numerous individual investors, including Nathaniel StevensKartik Hosanagar, and Gene Alston.

LoopPay, a months-old, Woburn, Mass.-based company that’s working on a mobile payments platform, has raised $5.8 million of a $10.3 million offering, according to an SEC filing. The company has simultaneously been running a fundraising campaign on Kickstarter.

Musement, a year-old, Milan, Italy-based startup that providers users with information and ticketing services to museums, theater events, and even archaeological sites around Italy, has raised $950,000 in seed funding from 360 Capital Partners and Italian Angels for Growth.

PathoGenetix, a 16-year-old, Woburn, Mass.-based company that’s trying to commercialize some efforts around its genome sequence scanning technology, has raised $10 million in Series C funding. The round was financed by previous investors, including Ascension Health VenturesExcel Venture Management and HealthCare Ventures. PathoGenetix last raised money in 2011, in an $11.5 million Series B round.

Revenew, a startup in Palatine, Ill. that has developed an online distributed marketing platform used largely by manufacturers, has raised $5 billion in Series B funding. The round was led by Allos Ventures, with TGap Ventures and Illinois Ventures also participating.

Runnable, a new, Palo Alto, Calif.-based startup that wants to make it easier to discover and reuse code snippets, has raised $2 million in seed funding from Sierra Ventures. Also joining in the round were Resolute VCAngelPad500 Startups, and numerous individual investors, including Hiten Shah, cofounder of the analytics company KISSmetrics.

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New Funds

One of Israel’s newest venture funds appears to be raising fresh capital, possibly for a sidecar vehicle. Back in June, TechCrunch reported that Benchmark’s Michael Eisenberg and Genesis Partners’ Eden Shochat had joined forces to create a new, early-stage firm in Tel Aviv called Aleph. (According to an SEC filing, they raised $140 million for the effort this summer.) A new filing shows the duo has raised an additional $11.1 million of what is listed as a $14 million target

Kaiwu Capital, a China-based early-stage venture capital firm that last year set out to raise its first fund with a target of $150 million, is two-thirds of the way there, judging by a new SEC filing, which shows the fund has so far raised $98 million. The fund is also now called Kaiwu Walden Capital, suggesting that it’s now affiliated with the global venture firm Walden International. (In related news, the WSJ reports that venture activity in China is finally picking up, after a sluggish first half of the year.)

Montage Capital, an early-stage firm focused on investing in financial services, e-commerce, and resources like energy, food and water companies that are between their angel and Series A rounds, has raised $8 million in funding, according to a new SEC filing that shows the fund’s target as $25 million. Montage, based in Menlo Park, Calif., was founded by Todd Kimmel, who was most recently a general partner at Mayfield Fund, which he joined in 2009. Before Mayfield, Kimmel worked as a principal at Advanced Technology Ventures.

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IPOs

At least two very eager analysts have initiated coverage of Twitter‘s IPO with “buy” ratings.

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Exits

Aggregate Knowledge, an eight-year-old, San Mateo, Calif.-based analytics firm, has been acquired by the 18-year-old telecom services firm Neustar for $119 million in cash and stock. Neustar was seemingly interested the audience segmentation and campaign planning services of Aggregate Knowledge, among other things. (Ad Age has a good write-up about the deal.) Aggregate Knowledge had raised about $64 million over the years, including from First Round CapitalKleiner Perkins Caufield & ByersDAG VenturesOVP Venture Partners and Foundation Capital.

Avado, a three-year-old, Seattle-based maker of patient relationship management software, has been acquired by the publicly traded online health information provider WebMD. The price of the acquisition wasn’t publicly disclosed but TechCrunch sources say that Avado was purchased for an amount “in the $20 million to $30 million range.” Avado had raised just $1 million earlier this year, including from The Partnership Fund for New York City and healthcare-focused angel investors, including Andy Palmer.

ServiceMesh, a five-year-old, Austin-based cloud services management company, has been acquired by the publicly traded IT management company Computer Sciences Corp (CSC), in Falls Church, Va. Terms of the deal were not disclosed. ServiceMesh had raised $15 million from Ignition Partners in 2011.

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Data

The National Venture Capital Association and Cambridge Associates are releasing some new data through June 30 of this year, and they note that recent returns have boosted numbers across the 1-, 3-, 5-, 10- and 20-year horizons. They still don’t look great when compared with major public indices but it’s something! Click here to learn more.

There’s a new report out from UC Hastings law professor Robin Feldman, who surveyed roughly 200 VCs and their portfolio companies about patent assertion entities (PAEs). Law.com covers the news, but some highlights include that more than half of the VCs and 40 percent of the portfolio companies interviewed said the costs of defending against PAEs’ demands typically exceed $100,000. As for timing, Only 11 percent of companies surveyed said they were approached over alleged patent infringement within a year of their first round of funding. Nearly a third said they were approached before receiving any funding at all.

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Happenings

It’s Halloween! Enjoy it.

You might also want to check out the second day of Web Summit, in Cork, Ireland. If you don’t happen to strolling around Cork, you can catch some of the higher-profile presentations — including interviews with Atomico’s Niklas Zennström, DropBox CEO Drew Houston, and Tesla CEO Elon Musk —  via a live stream at the Web Summit site.

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People

Tassos Gianakakos is the new CEO of MyoKardia, a year-old, San Francisco-based company that’s developing therapies for genetic heart disease. Until now, the company has been led by interim CEO Charles Homcy, a venture partner at Third Rock Ventures, which invested $38 million in MyoKardia in a Series A round in September 2012. Gianakakos was most recently a senior VP and the chief business officer of the publicly traded biopharmaceutical company MAP Pharmaceuticals (since acquired by Allergan for $1 billion).

Actor and tech startup investor Ashton Kutcher has yet another new role: as a product engineer at Lenovo. It’s no joke.

It’s official. Star venture capitalist Michael Moritz received his knighthood from Queen Elizabeth yesterday at Buckingham Palace.

Yancey Strickler, a cofounder of the five-year-old, popular crowdfunding site Kickstarter, has been appointed as its chief executive, reports GigaOm. Meanwhile, cofounder Perry Chen, the company’s CEO until now, becomes its chairman.

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Job Listings

Pinterest is looking for a partner operations manager to grow the number of businesses on the platform (and to recruit a team toward that end). Requirements include 10 years of experience in a related field, a love of both strategic and tactical work, and management experience.

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Essential Reads

Faced with inaction at the federal level, states are rushing to create privacy laws, creating a patchwork of rules that Internet companies will have to avoid overstepping.

Google Glass wearer was ticketed yesterday for driving while wearing Google Glass, but laws around the head-mounted computers are far from clear.

Facebook released its third quarter numbers yesterday. The upshot, says AllThingsD: Marketers love us — teens, slightly less so.

Twitter was sued yesterday for $124 million by two financial advisers who say the company had them organize a private sale of its shares to stoke interest in its IPO, then canceled it.

Can tweeting make you smarter?

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Detours

Awkward Halloween photos.

These two win for best Halloween costumes ever.

Meet the guy who drove across the U.S. in a record 28 hours and 50 minutes.

In recognition of Movember, Esquire brings you the world’s longest moustache. This cookie duster began life 30 years ago and is now so long that its wearer has to wrap it around his neck several times before stuffing the rest of it deep into his turban. It’s a lot of work, but apparently, it is worth it. Says the man: “For me, the moustache is everything.”

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Retail Therapy

Trongs and Dip Cups, for when you really want to eat, but you don’t want to touch your food like some lousy commoner.

Brilliant. Kohler makes a $200 showerhead with a Bluetooth-compatible speaker. Now we just need to get our Queen playlist queued up.

Please feel free to send us any and all story suggestions (anonymous or otherwise) by clicking hereIf you’re interested in advertising in our email newsletter, please click here. To sign up for the newsletter, visit strictlyvc.com.


StrictlyVC: October 30, 2013

110611_2084620_176987_imageGood morning! Thanks for reading, and stay tuned; we’ve got some great stuff coming, including more with Jon Callaghan of True Ventures and a deep dive into the giant that is New Enterprise Associates.

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Top News in the A.M.

Big deal: PricewaterhouseCoopers is buying Booz & Company.
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Venture Heavyweights Sit Back as Deal Sizes Soar

It’s been a banner week for a number of Internet companies.

Last Wednesday, social network Pinterest acknowledged closing on a $225 million round that valued the company at $3.8 billion. Shortly thereafter, AllThingsD reported that Snapchat, the messaging app, is now weighing a $200 million investment round that would value the company at $3.5 billion. And just yesterday, NextDoor, a social network for neighbors, raised $60 million in fresh capital.

But the reality is that some of today’s biggest venture heavyweights have pulled back dramatically on late-stage deals.

Two weeks ago, during a visit to Andreessen Horowitz, Marc Andreessen told me his firm has “done almost no growth investments in the last year and a half.”

Yesterday, Ravi Viswanathan, who co-heads New Enterprise Associates’ Technology Venture Growth Equity effort, told me much the same. “If you chart our growth equity investing over the last few years, it’s been very lumpy,” said Viswanathan. “Last year, I think we did four or five growth deals. This year, I don’t think we did any.”

That’s saying something for a firm that is right now investing a $2.6 billion fund that it raised just a year ago.

Andreessen attributes his firm’s reluctance to chase big deals to an influx of “hot money.” The partnership is “way behind on growth [as an allocation of our third fund],” Andreessen told me, “and that’s after being way ahead on growth in 2010 and 2011, because so many investors have come in crossed over into late stage and a lot of hedge funds have crossed over, which is traditionally a sign of hot times, hot money.” He added, “What we’re trying to do is be patient. We have plenty of firepower. We’re just going to let the hot money do the high valuation things while it’s in the market. We’ll effectively sell into that.”

That’s not to say later-stage deals don’t have their champions right now. At this week’s TechCrunch Disrupt conference, venture capitalist Bill Gurley of Benchmark told the outlet that “a global reality is that some of these companies have systems, they have networks in them, that cause early leads to always play out with really huge platforms.” People “laugh or write silly articles about the notion of a pre-revenue company having a very high valuation,” added Gurley.  But “if you talk to some of the smartest investors on Wall Street, or go talk to guys like Lee Fixel or Scott Shleifer at Tiger, they’re looking for these types of things. They’re looking for things that can become really, really big.”

Still, Viswanathan’s concerns sound very similar to Andreessen’s when I ask him why NEA has pulled back so markedly from later stage investments.

“It’s an amazing tech IPO market, and that drives growth,” Viswanathan observed. “But I’d say the growth deals we saw last year [were] elite companies getting high valuations. There are still great opportunities out there. But right now, it feels like there are high valuations even for the lesser-quality companies.”

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New Fundings

9Lenses, a three-year-old, Sterling, Va.-based company that makes cloud-based survey and analytics software for enterprises, has received $1.1 million in Series A funding to add to the $3 million the company closed on earlier this fall. The funding comes from Icon Venture Partners. 9Lenses earlier investors were Kinetic Ventures and CEB.

Altia Systems, a two-year-old, Cupertino, Calif.-based company that makes video and Web collaboration software, has raised new funding from Naya Ventures, a two-year-old venture fund specializing in mobile and cloud companies in the U.S. and India. Altia isn’t breaking out the amount of Naya’s investment but says it has raised $6.7 million to date.

Brighter, a two-year-old, Santa Monica, Calif.-based company whose online marketplace is used to connect people with new dentists, has raised $15 million in Series C funding led by Tenaya Capital. Previous investors Mayfield Fund and Benchmark also participated. The company has raised $28 million to date.

Calithera Biosciences, a 3.5-year-old, South San Francisco, Calif.-based biotech company that develops cancer therapies, has closed $35 million in Series D financing. Adage Capital Partners led the round, with participation from Longwood FundMorgenthaler VenturesAdvanced Technology Ventures and Delphi Ventures. The company has raised roughly $90 million to date.

IfOnly, a 22-month-old, San Francisco-based startup that raises money for charity by enlisting experts in cooking, sports and entertainment to offer “life-enriching experiences,” has raised $12 million in funding. The company had earlier raised $3 million. Its backers include New Enterprise AssociatesKhosla VenturesFounders FundAmerican Express Ventures, and Allen & Co., along with numerous high-profile operators. Among them are Salesforce.com CEO Marc Benioff, Nextdoor founder Nirav Tolia, Zynga founder Mark Pincus, and Yahoo CEO Marissa Mayer.

Jibe, a 3.5-year-old, New York-based company that makes cloud-based recruiting software, has secured a $4 million credit facility from Silicon Valley Bank just eight months after raising a $10 million, Series B round that was led by Longworth Venture Partners and included Polaris PartnersLerer VenturesDFJ Gotham, and Thrive Capital. The company has raised around $17 million in equity altogether.

Layer, a seven-month-old, San Francisco-based company that promises to help developers build messaging, voice, and video into their apps in minutes, has raised $6 million from a syndicate of investors that includes Greycroft PartnersData CollectiveCrunchFunde.venturesFUEL Capital, and SV Angel. The young company had earlier raised $1.5 million from many of the same investors.

Pixlee, an 18-month-old San Francisco-based company that helps brands create user-generated advertising campaigns (using photos and videos produced by customers) has raised $1.5 million in seed funding. The company’s backers include Andreessen HorowitzXSeed CapitalRothenberg Ventures, angel investor Ariel Polar and Mark Gorenberg, a longtime managing director at the venture firm Hummer Winblad.

Qliance Medical, a seven-year-old, Seattle-based company that operates health clinics, has raised $5.5 million, according to an SEC filing that was flagged by Geekwire. Qliance already counts Jeff BezosMichael Dell, comedian Drew CareySecond Avenue PartnersNew Atlantic Ventures, and Clear Fir Partners among its investors. This newest round of funding appears to bring Qliance’s total funding to date to roughly $32 million.

Rockabox, a five-year-old, London-based startup that offers targeted video distribution and engagement software to brands, has raised $4.5 million in Series A funding led by Notion Capital. Existing investors Frog Capital and fourteen17 also participated in the round.

Securus Medical Group, a two-year-old, Cleveland, Oh.-based medical device company, has raised $6.5 million in Series B financing. New investor 3X5 Special Opportunity Fund led the round with participation from RiverVest Venture Partners and the University of Michigan Investment in New Technology Startups program. Securus is developing clinical tools to monitor core body temperature within body cavities.

Trustev, a year-old, Cork, Ireland-based company focused on online identity verification, has raised $3 million in seed funding from Greycroft PartnersMangrove Capital PartnersACT Venture CapitalEnterprise Ireland, and Wayra.

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New Funds

Akkadian Ventures, a San Francisco-based firm that purchases stock in private companies from entrepreneurs, early employees and angel investors, appears to be raising more capital, judging by two new SEC filings. Akkadian Entrepreneurs III, LP doesn’t list a target but officially began fundraising two weeks ago and has closed on $3.12 million, according to its Form D. A separate filing, for Akkadian Holdings III, LP, shows that Akkadian has raised a separate $2.75 million pool. Last year, the firm raised a $22 million fund.

The life-sciences focused firm venBio — a private equity and venture capital outfit that invests across early- to late-stage companies, as well as in spin-outs, PIPEs, and mezzanine deals — appears to be raising a fresh $60 million, according to an SEC filing. The firm, which has offices in San Francisco and New York, began fundraising for its current vehicle in 2010, according to its Form D. It closed on $177 million last year; its latest filing lists its new target as $237 million.

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IPOs

How much do investors love ad tech? We might learn more today when Criteo, the French ad retargeting company begins trading its American Depositary Shares (ADS) on the Nasdaq under the “CRTO” ticker. Early indications are that it will do just fine. On Monday, Criteo sold 8.08 million ADS, up from a previously planned 7.2 million shares; it also raised its expected price range to $27 and $29 per share from its previous $23 to $26 per share range. 

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Exits

Perka, a 2.5-year-old, Portland, Ore.-based creator of mobile loyalty programs for small- and mid-size businesses, has been acquired by the e-commerce and payment processing company First Data Corp. Terms of the deal were not disclosed, but Perka will continue to operate autonomously for now. TechCrunch has a good overview of what First Data is aiming to do with Perka, along with another recent acquisition, the mobile payments startup Clover. First Data is itself owned by the private equity firm KKR.

Soluto, a five-year-old Tel Aviv-based company whose software helps manage PCs and other devices remotely, has been acquired for $100 million by Asurion Corporationreports Globes. Asurion, based in Nashville, Tenn., sells insurance for phone and other electronic devices. Soluto’s founders own at least 20 percent of the company, reports Globes. Other investors, who’d given the company $18 million over the years, include Index VenturesBessemer Venture PartnersGiza Venture CapitalProxima Ventures, and CrunchFund.

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Data

Pitchbook has released its fourth-quarter venture capital valuations and trends report. Among the report’s most interesting findings: Median pre-money valuations are at a ten-year high. Valuations for seed and Series D or later rounds shot up 100 percent and 116 percent, respectively, between 2009 and the third quarter of this year. And the number of venture deals that included liquidation participation (both capped and uncapped) has fallen from 71 percent in 2008 to less than 35 percent over the first three quarters of this year. You can download the full report here.

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Happenings

It’s not too late to descend on the three-day ARM TechCon 2013 conference at the Santa Clara Convention Center in the Bay Area, where 5,000 hardware and software engineers will ostensibly be milling around later today. Here’s more information.

The second day of VentureBeat‘s GamesBeat conference gets underway today in Redwood City, south of San Francisco. You can click here for more details.

RSA is also into the second day of its Europe 2013 conference in Amsterdam. Here are the details.

And kicking off today in Dublin, Ireland: Web Summit, a two-day conference that features no end of big industry names, including Nest founder and CEO Tony Fadell, Box cofounder and CEO Aaron Levie, and Kevin Rose of Google Ventures. You can learn much more about what’s happening and when here.

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People

Steve Jobs‘s childhood home on Crist Drive in Los Altos — a one-story ranch where Jobs built the first Apple computers, aided by Apple cofounder Steve Wozniak and Jobs’s younger sister Patricia — has been added to a list of historic Los Altos properties, reports the SJ Merc. You can read more about it here.

Arthur Johnson is joining the venture firm Andreessen Horowitz as an operating partner focused on corporate development, reports Fortune’s Dan Primack. Johnson was most recently the COO of Cisco’s WebEx group. Before Cisco, Johnson held biz dev positions at Rocket Lawyer and Intuit.

Chamath Palihapitiya, founder of the investment firm The Social+Capital Partnership, owns the equivalent of $5 million in bitcoin. He wants to triple his holdings, too, reports TechCrunch.

Kanye West cozies up to yet another tech entrepreneurTony Hsieh of Zappos and Las Vegas’s Downtown Project. (How long before West launches his own venture capital fund?)

Tom Wheeler, a longtime wireless industry lobbyist who in 2005 became a managing director at the venture capital firm Core Capital in Washington, D.C., has a new job. Yesterday, he was confirmed to be the new chairman of the Federal Communications Commission.

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Job Listings

Facebook is looking for a business development manager to join the company’s Menlo Park, Calif. headquarters. The ideal candidate is “obsessed with technology, social media and business strategy” and has at least six years of related business development experience at an Internet or other tech company. You can apply here.

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Essential Reads

Twitter pulls a Facebook, adding photos and videos to users’ Twitter streams, largely in order to attract and accommodate more advertising.

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Detours

Strategies for getting kids to fluently speak more than one language.

The many faces of Lou Reed.

Seventy-five years ago today, one million American thought aliens had invaded earth.

Would you like to join my start-down?

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Retail Therapy

Balls of steel. Get some.

Vinyl Me, Please. It’s a new record club founded by DJs who will send you a new release or vintage vinyl album; a limited edition piece of art inspired by the album; a weekly, curated playlist tailored expressly to your taste; and a cocktail pairing for your listening pleasure — all for $23 a month. Sign us up! (H/T: Huckleberry.)

Introducing Bongo, a Bluetooth speaker made of bamboo and hemp cloth. Ideal for lovers of retro design and actor Woody Harrelson.

Please feel free to send us any and all story suggestions (anonymous or otherwise) by clicking hereIf you’re interested in advertising in our email newsletter, please click here. To sign up for the newsletter, visit strictlyvc.com.


Venture Heavyweights Sit Back as Deal Sizes Soar

Hanging Boxing GlovesIt’s been a banner week for a number of Internet companies.

Last Wednesday, social network Pinterest acknowledged closing on a $225 million round that valued the company at $3.8 billion. Shortly thereafter, AllThingsD reported that Snapchat, the messaging app, is now weighing a $200 million investment round that would value the company at $3.5 billion. And just yesterday, NextDoor, a social network for neighbors, raised $60 million in fresh capital.

But the reality is that some of today’s biggest venture heavyweights have pulled back dramatically on late-stage deals.

Two weeks ago, during a visit to Andreessen Horowitz, Marc Andreessen told me his firm has “done almost no growth investments in the last year and a half.”

Yesterday, Ravi Viswanathan, who co-heads New Enterprise Associates’ Technology Venture Growth Equity effort, told me much the same. “If you chart our growth equity investing over the last few years, it’s been very lumpy,” said Viswanathan. “Last year, I think we did four or five growth deals. This year, I don’t think we did any.”

That’s saying something for a firm that is right now investing a $2.6 billion fund that it raised just a year ago.

Andreessen attributes his firm’s reluctance to chase big deals to an influx of “hot money.” The partnership is “way behind on growth [as an allocation of our third fund],” Andreessen told me, “and that’s after being way ahead on growth in 2010 and 2011, because so many investors have come in crossed over into late stage and a lot of hedge funds have crossed over, which is traditionally a sign of hot times, hot money.” He added, “What we’re trying to do is be patient. We have plenty of firepower. We’re just going to let the hot money do the high valuation things while it’s in the market. We’ll effectively sell into that.”

That’s not to say later-stage deals don’t have their champions right now. At this week’s TechCrunch Disrupt conference, venture capitalist Bill Gurley of Benchmark told the outlet that “a global reality is that some of these companies have systems, they have networks in them, that cause early leads to always play out with really huge platforms.” People “laugh or write silly articles about the notion of a pre-revenue company having a very high valuation,” added Gurley.  But “if you talk to some of the smartest investors on Wall Street, or go talk to guys like Lee Fixel or Scott Shleifer at Tiger, they’re looking for these types of things. They’re looking for things that can become really, really big.”

Still, Viswanathan’s concerns sound very similar to Andreessen’s when I ask him why NEA has pulled back so markedly from later stage investments.

“It’s an amazing tech IPO market, and that drives growth,” Viswanathan observed. “But I’d say the growth deals we saw last year [were] elite companies getting high valuations. There are still great opportunities out there. But right now, it feels like there are high valuations even for the lesser-quality companies.”

Photo courtesy of Corbis.

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StrictlyVC: October 29, 2013

110611_2084620_176987_imageGood morning, everyone — hope you have a happy Tuesday!

Top News in the A.M.

Google is reportedly in talks with Asian suppliers to mass produce a smartwatch.

Nextdoor, the social network for neighbors, has just raised a whopping $60 million in fresh capital. (More below in New Fundings.)

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True Ventures’ Jon Callaghan on the Series B Crunch

Late last week, I visited Jon Callaghan, a cofounder of eight-year-old True Ventures, a firm that makes seed-stage investments in companies that it can afford to back for the long haul. The firm’s string of hits includes the book recommendation site Goodreads, which raised $2.75 million and sold to Amazon this year for $150 million; 3D printing company Makerbot Industries, which raised $10 million and sold to Stratasys this year for $403 million in stock; and Automattic, the still-private parent company of WordPress. At True’s San Francisco offices, surrounded by a sea of glass windows and polished wood floors, Callaghan shared his views on a number of things, from the firm’s operations to the democratization of startup capital. We’ll feature more of that interview in StrictlyVC this week; what follows is a part of our discussion that centered on the growing shortage of Series B funding for startups.

Years ago, you told me that True only does its own follow-on rounds, meaning in companies it has already backed. Has the firm reconsidered that stance, given that fewer and fewer firms are focused on Series B size investments? You’re investing a $200 million fund. Meanwhile, it seems like an underserved market.

It’s a really interesting part of the market. We’re not building a new product for that market. It’s not in front of us right now, though I personally think about how we can solve the needs of great entrepreneurs, and that’s a big, huge problem in the ecosystem right now.

What’s creating this bottleneck, in your view? 

There are definitely too many seed-funded companies. But I think it goes back to risk. I don’t think the normal venture capital model is designed to take extremely large product/market risks. What that means is when companies get through the A [round] to the B and they still have big unanswered questions around product/market, it’s really hard for the normal industry to fund that.

What would you do that’s not being done?

You make sure that [the size of] your investments are relative to your [overall] fund [size] and you embrace the idea of investment failure as part of the model.

Other VCs will accuse you of being patronizing. They’ll say that failure and risk are very much part of their models. What are you suggesting that’s different?

Well, we’re talking about a big gap in the market – B rounds – and the reason those rounds aren’t getting funded is [the startups don’t have] enough traction.

For the most part, the industry has gravitated toward strong, traction proof points because that’s a good business. Put $5 million or $20 million into a business that’s working and write it up? That’s a fantastic business. But it’s different than taking high risks on B rounds. So to your point, I think there’s a product to be built that’s structured around taking high risk in B rounds.

If True Ventures were to do it, what would it look like?

I think there’s probably a $3 million to $5 million B round product to be built that’s sort of in the $15 million to $20 million pre [valuation] range, and in order to do that you’d need a fund large enough to have follow-on capital for each of those. You can run the math. Thirty to 40 companies [in the portfolio] would be pretty optimal.

I think it’s a really interesting slice of the industry, and it’s not rational for Sand Hill Road to come down and do it because [those investors already] have a really good model. There are some funds out there that are really well-equipped to do this and do a phenomenal job, including Foundry Group and Spark Capital — they embrace really big product and market risks. But [most] VCs will fund B and C rounds for things that have product/market fit and traction.

Those are good companies, too. But there are an awful lot of companies that get through A rounds that don’t have all of those things and shouldn’t die or go away.

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New Fundings

Cyphort, a 2.5-year-old San Jose, Calif.-based cyber security business that offers its customers advanced threat monitoring and mitigation services, has closed $15.5 million in Series B funding. The round was led by Trinity Ventures. Previous investors Foundation Capital and Matrix Capital participated. Cyphort has raised $23.7 million to date.

eRecycling Group, a four-year-old, Irving, Texas-based recycling company that refurbishes and resells smartphones and other mobile devices, has raised $105 million in Series C funding led by previous investor Kleiner Perkins Caufield & Byers. Kleiner was joined by new investor Silver Lake Kraftwerk, along with other previous investors in the company, including OpenAir Equity PartnersSJF VenturesNGEN PartnersRRE Ventures and TAP Advisors.

Magisto, two-year-old company with offices in Tel Aviv and New York, has raised $13 million from Qualcomm and SanDisk Ventures. The company helps users create videos and slideshows that can then be easily shared on social networks. The company has raised $18.5 million to date, including from Magma Venture Partners and Horizons Ventures, which also participated in its new round.

Middle Peak Medical, a Palo Alto-based medical device company that’s focused on treating mitral valve disease, has raised a fresh $3 million in funding. The money comes from BioMedinvest and Edwards Lifesciences, along with previous investors Wellington PartnersSeventure Partners, and High-Tech Gruenderfonds. (The last three invested a separate, $8.5 million in the company just five months ago in a financing that appears to have been Middle Peak’s first institutional round.)

Nextdoor, a 3.5-year-old, San Francisco company that creates private social neighborhood nextworks to residents can keep each other up to date on the latest happenings, has landed a $60 million round of fresh funding led by Kleiner Perkins Caufield & Byers and Tiger Global ManagementComcast Ventures, a new investor, along with previous investors Benchmark CapitalGreylock Partners, and Shasta Ventures, also participated in the round, which brings Nextdoor’s total financing to approximately $100 million.

OpenBay, a young, Cambridge, Mass.-based online service and mobile app for booking automotive repairs, has raised an undisclosed amount of funding from Andreessen Horowitz and Google Venturesreports Boston Business Journal. Others of OpenBay backers include Boston Seed CapitalStage 1 Ventures, and numerous angel investors, including Andy PalmerJim Pallotta, and Jit Saxena.

Paxata, a 22-month-old, Redwood City, Calif.-based data analysis startup, has raised $8 million in Series B funding led by Accel PartnersWalden Riverwood — a new tech-focused venture capital fund that was cofounded by Walden international founder Lip Bu Tan  — has also backed Paxata.

PeopleMatter, a four-year-old, North Charleston, S.C.-based workforce management platform that’s focused on the service industry, has raised $16 million in Series E funding. The round was led by StarVest Partners, and included the company’s earlier investors C&B CapitalHarbert Venture PartnersIntersouth PartnersMorgenthaler VenturesNoro-Moseley Partners and Scale Venture Partners. PeopleMatter has raised $63.4 million to date.

Q Factor Communications, a 20-month-old, Waltham, Mass.-based startup focused on seamlessly delivering media-rich content over wireless devices, has raised $6.5 million in Series A funding from Sigma Prime Ventures and Venrock.

Rumble Entertainment, a two-year-old, San Mateo, Calif.-based maker of free, multiplatform games, has raised $15 million led by the Korean gaming company NexonTriplePoint CapitalKhosla Ventures, and Google Ventures also participated in the round. Rumble was formed by veterans of games makers Playdom, Zynga, Activision Blizzard, and Electronic Arts and just released its first game in beta, called KingsRoad. The company has now raised just short of $40 million altogether.

Snapverse, a young, Boston-based company whose iPhone app songs allows users to create 20-second-long music videos to songs by popular artists, has raised more than $4 million, including from John Hannan, co-founder of New York-based private equity firm Apollo Global Management. Snapverse also announced in a release this morning that it has signed a deal to license music from Universal Music Group, Warner Brothers and Sony Music Entertainment.

Stratoscale, a Herzeliya, Israel-based company that’s building a new virtualization technology meant to improve the performance of data centers, has raised $10 million in Series A funding from Battery Ventures and Bessemer Venture Partners. VentureBeat profiled the company here.

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Fund News

Norwest Venture Partners appears to be crushing it in 2013. The WSJ’s Deborah Gage has more.

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IPOs

Tableau Software is gearing up for a secondary offering, according to this SEC filing. Tableau staged a very successful IPO in May. The shares opened at $47 (after being priced at $31); today, they are trading at $67.

Trading pre-IPO shares gets trickier.

Twitter‘s IPO is highly anticipated, but other billion-dollar IPOs this year should take a teeny bit of the pressure off, notes Dealbook.

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Exits

NextBio, a nine-year-old, Santa Clara, Calif.-based company whose software platform allows life science researchers to discover and share phenotypic and genomic across public and proprietary data, is being acquired by Illumina, a publicly traded manufacturer of DNA sequencing machines. Terms of the deal weren’t disclosed.

Virtela, a 13-year-old Denver-based cloud-computing company, is being acquired by Japan’s NTT Communications Corp. for approximately $525 million. NTT is buying Virtela at the same time that it’s spending $350 million for a 80 percent stake in 13-year-old, Sacramento, Calif.-based RagingWire Data Centers, which operates massive data centers in the Sacramento region and in Virginia. Norwest Venture Partners was the earliest and largest investor in Virtela; RagingWire had raised $230 million in debt funding just last month. Reuters reports that NTT is trying to ramp up its overseas networks through acquisitions.

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Happenings

Ad Age is hosting its first-ever Data Conference in New York City today. You can check out the agenda here.

VentureBeat‘s GamesBeat conference gets underway today in Redwood City, Calif., about 30 miles south of San Francisco. Click here to survey the agenda.

RSA is kicking of its Europe 2013 conference in Amsterdam today. Among its speakers: Amit Yoran, an RSA exec who was previously the CEO of NetWitness (which RSA acquired in 2011) and before that (briefly), the head of the CIA’s venture capital arm, In-Q-Tel. Here are the details.

TechCrunch Europe continues. You can find coverage here.

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People

Speaking of the TechCrunch Europe conference, during a panel discussion yesterday, venture capitalist Matt Cohler of Benchmark Capital called Berlin the world’s next great global startup hub, not for the first time. (Cohler also referred to himself and his Benchmark colleagues as “artisans.” StrictlyVC has since imagined Cohler sitting at his workbench, poring over business plans with a set of handmade tools.)

Skype executive Mark Gillett is off to head up “value creation” at Silver Lake, reports AllThingsD.

Thanks for a job well done? Tesla Motors CEO Elon Musk has hired his divorce lawyer as the company’s top attorney.

Performer Kanye West is apparently planning to sue YouTube cofounder Chad Hurley for uploading video of West’s recent engagement to Kim Kardashian at San Francisco’s AT&T Park, where Hurley was an invited guest. (Because Kanye West and Kim Kardashian are very private people. Obviously.)

Job Listings

Twitter is looking for a corporate development and strategy principal to help identify and evaluate targets of interest for the company. Candidates need at least 10 years of experience, including at least four years of experience at a tech company or in another role that required rigorous analysis and knowledge of the tech industry (like venture capital or corporate development). An engineering degree is preferred. Apply here.

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Essential Reads

Apple wants to bust your iPhone. It’s not your imagination.

Hundreds of executives from large companies in the U.S., Canada, and U.K. tell Forrester Research that Facebook ads create less value than any other digital marketing opportunity.

Redpoint’s Tomasz Tunguz writes about how to measure “dark social.” (Earlier this month, writer Alexis Madrigal had an even more comprehensive piece on the phenomenon. It’s definitely worth reading if you haven’t already.)

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Detours

It’s bad bosses, not workloads, that cause depression at work, according to a new study (and everyone’s life experience).

More and more, robots are beginning to look, act, and perform tasks like humans.

One year ago today, Superstorm Sandy slammed into New Jersey, becoming the second costliest hurricane in U.S. history. The Atlantic has posted some amazing photos of the damaged areas, along with images of the very slow progress being made. (Starting with photo no.12, the images are interactive and feature “before” and “after” scenes.)

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Retail Therapy

White and blue gingham shirts are always in style, but we like this red and blue checkered number for a change of pace.

Coming out November 12: Dogfight: How Apple and Google Went to War and Started a Revolution. (Author Fred Vogelstein is a superb writer; we’re pre-ordering this one.)

Talk about your bling: Someone has created 22-karat gold toilet paper. Finally, an easy way to literally throw money straight down the toilet.

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True Ventures’ Jon Callaghan on the Series B Crunch

JDCHeadshot1Late last week, I visited Jon Callaghan, a cofounder of eight-year-old True Ventures, a firm that makes seed-stage investments in companies that it can afford to back for the long haul. The firm’s string of hits includes the book recommendation site Goodreads, which raised $2.75 million and sold to Amazon this year for $150 million; 3D printing company Makerbot Industries, which raised $10 million and sold to Stratasys this year for $403 million in stock; and Automattic, the still-private parent company of WordPress. At True’s San Francisco offices, surrounded by a sea of glass windows and polished wood floors, Callaghan shared his views on a number of things, from the firm’s operations to the democratization of startup capital. We’ll feature more of that interview in StrictlyVC this week; what follows is a part of our discussion that centered on the growing shortage of Series B funding for startups.

Years ago, you told me that True only does its own follow-on rounds, meaning in companies it has already backed. Has the firm reconsidered that stance, given that fewer and fewer firms are focused on Series B size investments? You’re investing a $200 million fund. Meanwhile, it seems like an underserved market.

It’s a really interesting part of the market. We’re not building a new product for that market. It’s not in front of us right now, though I personally think about how we can solve the needs of great entrepreneurs, and that’s a big, huge problem in the ecosystem right now.

What’s creating this bottleneck, in your view? 

There are definitely too many seed-funded companies. But I think it goes back to risk. I don’t think the normal venture capital model is designed to take extremely large product/market risks. What that means is when companies get through the A [round] to the B and they still have big unanswered questions around product/market, it’s really hard for the normal industry to fund that.

What would you do that’s not being done?

You make sure that [the size of] your investments are relative to your [overall] fund [size] and you embrace the idea of investment failure as part of the model.

Other VCs will accuse you of being patronizing. They’ll say that failure and risk are very much part of their models. What are you suggesting that’s different?

Well, we’re talking about a big gap in the market – B rounds – and the reason those rounds aren’t getting funded is [the startups don’t have] enough traction.

For the most part, the industry has gravitated toward strong, traction proof points because that’s a good business. Put $5 million or $20 million into a business that’s working and write it up? That’s a fantastic business. But it’s different than taking high risks on B rounds. So to your point, I think there’s a product to be built that’s structured around taking high risk in B rounds.

If True Ventures were to do it, what would it look like?

I think there’s probably a $3 million to $5 million B round product to be built that’s sort of in the $15 million to $20 million pre [valuation] range, and in order to do that you’d need a fund large enough to have follow-on capital for each of those. You can run the math. Thirty to 40 companies [in the portfolio] would be pretty optimal.

I think it’s a really interesting slice of the industry, and it’s not rational for Sand Hill Road to come down and do it because [those investors already] have a really good model. There are some funds out there that are really well-equipped to do this and do a phenomenal job, including Foundry Group and Spark Capital — they embrace really big product and market risks. But [most] VCs will fund B and C rounds for things that have product/market fit and traction.

Those are good companies, too. But there are an awful lot of companies that get through A rounds that don’t have all of those things and shouldn’t die or go away.

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StrictlyVC: October 28, 2013

110611_2084620_176987_imageGood Monday morning and thank you for reading! If you aren’t part of StrictlyVC yet, you can head right over here to sign up.

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Top News in the A.M.

spy hub in Germany, NSA operations in France, and now, reports that the NSA spied on more than 60 million phones call in Spain in one month alone. This is becoming more awkward by the day.
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Homebrew Separates Itself from the Pack

This summer, yet another San Francisco-based, seed-stage venture fund was formed. Called Homebrew, the firm’s cofounders are Hunter Walk, who spent much of the previous decade working as a product manager at Google, and Satya Patel, who has bounded between operating and investing roles over the last 15 years, including most recently at Twitter, Battery Ventures, and Google, where he met Walk. The two began fundraising in January; they closed the fund with $35 million in late April and made the news official in July.

Whether the firm can compete in what is an increasingly crowded part of the startup ecosystem is another story. Not only does Homebrew have many hundreds of angel investors and dozens of other seed-stage firms as competitors on deals, but it also has to contend with AngelList’s month-old Syndicates program, which enables angel investors to quickly mobilize a group of investors to back a deal.

Homebrew’s timing might look lousy, but it will make sense over time, suggests Walk, who argues that there are still unexploited niches in seed funding.

For starters, Homebrew is looking to lead or co-lead syndicates with initial checks of $500,000 to $800,000 as a part of an institutional round that’s between $1.25 million to $2.5 million. “There’s a lot of money from talented people who want to invest between $50,000 and $250,000 in companies, but a small number who want to step up and lead these rounds before there’s much data to crunch,” says Walk.

Homebrew expects to back 20 to 25 startups with its first fund, and it intends to own 10 to 15 percent of each company for its efforts.

Walk says Homebrew’s investment principles also set the firm apart. One of these is its focus on startups that level the playing field for individuals and small businesses. As an example, Walk points to Twilio, a service that helps developers build apps for text messaging and other services on phones. (Homebrew is not an investor.) Walk also highlights Plaid, a startup whose goal is to make it easier for developers to build financial applications. (Plaid recently raised $2.8 million from Spark Capital, Google Ventures, NEA, Felicis Ventures and Homebrew.)

I ask Walk about the far bigger need in the market for Series B funding. After all, it often seems that there are too few funds to accommodate the many seed- and early-stage companies that are looking for follow-on investments. Does Homebrew risk watching its seed-stage deals fall off a cliff?

Walk says Homebrew raised money from four institutional investors partly with that issue in mind. If Homebrew needs to raise more money to support its existing portfolio (à la the new Clover Fund of Felicis Ventures), it already has relationships with people in the business of writing big checks.

Another point of differentiation with other seed funds? Walk says Homebrew’s startups (it has backed six so far) have solid business models involving monthly recurring subscriptions and transaction-based fees. While no guarantee of success, Walk figures this focus on revenue might help his companies’ chances of raising money from Series A and B investors when they go to market.

“We didn’t pick ‘revenue-first businesses’ to time the market, or because we think they’re more fundable,” adds Walk. “But the type of companies we back do have clearer investment and exit paths.”

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New Fundings

Accio Energy, a five-year-old, Ann Arbor-based wind energy company, has raised $710,000 in debt and options, according to an SEC filing. The company has previously raised venture financing from Ann Arbor-based Resonant Venture Partners, the economic development group Automation Alley and the Frankel Commercialization Fund, which is run by business students at the University of Michigan.

BeautyBooked, a one-year-old, New York-based company whose platform invites users to search, discover, and book spa and salon appointments, has raised $530,000 in seed funding from New York Angels and Innovation Garden, a New Jersey-based accelerator program.

ByteLight, a 2.5-year-old, Boston-based company has raised $3 million in Series A funding from Flywheel VenturesMotorola Solutions Venture CapitalSand Hill Angels, the eCoast Angel Network, and Google evangelist Don Dodge. (If you missed it, Dodge spoke with StrictlyVC about ByteLight and competing technologies recently.) ByteLight’s technology relies on LED lights in the ceilings of stores, which pulse at a rate that’s faster than the human eye can see but that a phone camera can pick up to pinpoint shoppers’ locations.

Deal Décor, a two-year-old San Francisco-based e-commerce startup focused on high-end furniture, is raising $500,000 in seed funding, according to an SEC filing, which shows the company has raised $235,000 toward that end. Deal Décor closed on $1.2 million in seed funded just two months ago, in a round that included Signia Venture PartnersPlug & Play Ventures, and numerous individuals. Deal Décor has attracted a lot of attention over the last year or so. You can learn more about the company here and here.

Eatrue, a young, San Francisco-based maker of nutritional supplement energy bars, has raised $400,00 of a $1 million private offering, according to an SEC filing. Along with founder Daniel Grossman, the filing lists as directors Mel and Patricia Ziegler, the founders of Banana Republic.

Mobius Therapeutics, a seven-year-old, St. Louis-based pharmaceutical company developing a drug that can help with glaucoma surgery, has raised $5 million, according to an SEC filing. The Series B funding was led by the St. Louis-based venture capital firm Cultivation Capital. Mobius raised a previous, $1.7 million, round last year.

nPulse Technologies, a two-year-old, Charlottesville, Va.-based data security analytics company, has raised $1 million in fresh funding, according to an SEC filing. The company disclosed a separate, $1.95 million in funding just three months ago.

Rail Yard, a two-year-old, Austin-based startup whose online marketplace connects commercial building tenants with telecom and other tech services, has raised $750,000 as part of a $965,000 offering, according to an SEC filing. The Austin Business Journal reports that Rail Yard has collected the capital from a syndicate of unnamed angel investors.

Snapchat, a two-year-old, Pacific Palisades, Calif.-based mobile-messaging service that’s particularly popular with teens, is considering raising up to $200 million at a valuation of $3.5 billion, AllThingsD reported on Friday. That would be more than triple the valuation that venture firms assigned Snapchat in June, when it raised $60 million. To date, the company has raised $73 million, including from Lightspeed Venture PartnersBenchmark CapitalSV Angel and Institutional Venture Partners.

Trod Medical, a seven-year-old, Belgium-based medical company that makes surgical instruments designed to treat prostate cancers and destroy localized lung tumors, has raised $6.1 million in a round led by Capricorn Venture Partners and Vesalius Biocapital. Other investors in the funding include Gemma Frisius Fund; the spin-off fund of the University of Leuven in Belgium; and the Flemish investment company PMV.

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New Funds

On Friday, Boulder-based Foundry Group announced the closing of its fourth fund, Foundry Group Select. As firm cofounder Brad Feld wrote in a post about the fund, it has a rather different focus than the firm’s previous funds. Specifically, it will be invested “solely in our Foundry Group and previous funds’ portfolio companies that have achieved significant success,” writes Feld. Here’s the filing. For those concerned that Foundry will no longer be funding new startups, a quick reminder that it raised its last, $225 million fund just one year ago.

Bip Financial, an Atlanta firm that invests in emerging, high-growth opportunities (including, in the past, restaurant franchises), is raising a new venture fund according to an SEC filing. According to the Form D, fundraising for Bip Early Stage I began two weeks ago and the firm has so far secured $6.5 million toward an amount that is listed as “indefinite.”

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IPOs

Twitter is waiting until after its IPO to name a woman to the board, reports AllThingsD, whose sources say the company is particularly interested in someone experienced in international relations.

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Happenings

TechCrunch Disrupt Europe was in full swing today in Berlin, with featured speakers that included Marc Samwer, who most recently founded Global Founders Fund with his brothers; AOL chief Tim Armstrong; and numerous members of Benchmark Capital, including Matt Cohler and Bill Gurley. The conference has already wrapped up for the day, but you can see the presentations you missed here.

Samsung’s developer conference also gets underway in San Francisco today. It looks seriously geeky, but it’s a quick way to learn about Samsung’s latest developer tools and SDKs. Maybe you can also corner David Eun, EVP’s of Samsung’s new Open Innovation Center, who will be speaking around 11 a.m PST. More information about the event is here.

Nokia‘s Abu Dhabi event in review. (BBC Video.)

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People

On Friday, a San Mateo County judge ruled in favor of allowing famed venture capitalist Vinod Khosla to block public access to a beach in Half Moon Bay where he owns 200 acres of oceanfront property. Fishermen, sunbathers and surfers have been accessing Martins Beach for at least half a century, according to the San Francisco Chronicle. Now, they can only access the beach by swimming to it.

New York Times reporter Nick Bilton may soon see his new book about Twitter turned into a feature-length movie. (Our prediction: Bradley Cooper will be cast as Jack Dorsey.)

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Job Listings

Wilson Sonsini is looking for a corporate associate with two to three years of relevant corporate experience in “one or more of the areas of venture capital, initial public offerings or mergers and acquisitions. Superior academic credentials, excellent verbal, written and interpersonal skills required. An interest in startup or venture capital practice preferred.” The job is in New York.

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Essential Reads

Twitter agreed to stay in San Francisco in exchange for a tax break that now looks like it will cost the city tens of millions of dollars in lost revenue.

The New Yorker looks at why electric vehicles have stalled. Says an analyst quoted in the piece: “The one company that’s been able to succeed so far has been Tesla. They’re not selling to normal consumers, but to the people who already have a Porsche in their garage. If Tesla is serious about going into the mass market, they’re going to have their head handed to them.”

The NYSE really doesn’t want a replay of the Facebook botched offering when Twitter goes public. Here’s how much it doesn’t want that.

Google is reportedly building a floating retail store for Google Glass, but it doesn’t yet have the permits needed to anchor it at its final destination, off the coast of San Francisco.

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Detours

In almost every European country, bikes are outselling new cars.

The hidden benefits of food stamps.

Mind-reading technology speeds ahead.

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Retail Therapy

These are great pants.

Sex Panther cologne. Of course, you wouldn’t want to be caught with it in your own bathroom vanity, placed in strategic proximity to your latest copy of Harvard Magazine. We highlight it only as a gag gift.

Does underwear really need this much innovating?

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Homebrew Separates Itself from the Pack

Hunter WalkThis summer, yet another San Francisco-based, seed-stage venture fund was formed. Called Homebrew, the firm’s cofounders are Hunter Walk, who spent much of the previous decade working as a product manager at Google, and Satya Patel, who has bounded between operating and investing roles over the last 15 years, including most recently at Twitter, Battery Ventures, and Google, where he met Walk. The two began fundraising in January; they closed the fund with $35 million in late April and made the news official in July.

Whether the firm can compete in what is an increasingly crowded part of the startup ecosystem is another story. Not only does Homebrew have many hundreds of angel investors and dozens of other seed-stage firms as competitors on deals, but it also has to contend with AngelList’s month-old Syndicates program, which enables angel investors to quickly mobilize a group of investors to back a deal.

Homebrew’s timing might look lousy, but it will make sense over time, suggests Walk, who argues that there are still unexploited niches in seed funding.

For starters, Homebrew is looking to lead or co-lead syndicates with initial checks of $500,000 to $800,000 as a part of an institutional round that’s between $1.25 million to $2.5 million. “There’s a lot of money from talented people who want to invest between $50,000 and $250,000 in companies, but a small number who want to step up and lead these rounds before there’s much data to crunch,” says Walk.

Homebrew expects to back 20 to 25 startups with its first fund, and it intends to own 10 to 15 percent of each company for its efforts.

Walk says Homebrew’s investment principles also set the firm apart. One of these is its focus on startups that level the playing field for individuals and small businesses. As an example, Walk points to Twilio, a service that helps developers build apps for text messaging and other services on phones. (Homebrew is not an investor.) Walk also highlights Plaid, a startup whose goal is to make it easier for developers to build financial applications. (Plaid recently raised $2.8 million from Spark Capital, Google Ventures, NEA, Felicis Ventures and Homebrew.)

I ask Walk about the far bigger need in the market for Series B funding. After all, it often seems that there are too few funds to accommodate the many seed- and early-stage companies that are looking for follow-on investments. Does Homebrew risk watching its seed-stage deals fall off a cliff?

Walk says Homebrew raised money from four institutional investors partly with that issue in mind. If Homebrew needs to raise more money to support its existing portfolio (à la the new Clover Fund of Felicis Ventures), it already has relationships with people in the business of writing big checks.

Another point of differentiation with other seed funds? Walk says Homebrew’s startups (it has backed six so far) have solid business models involving monthly recurring subscriptions and transaction-based fees. While no guarantee of success, Walk figures this focus on revenue might help his companies’ chances of raising money from Series A and B investors when they go to market.

“We didn’t pick ‘revenue-first businesses’ to time the market, or because we think they’re more fundable,” adds Walk. “But the type of companies we back do have clearer investment and exit paths.”

Photo of Hunter Walk courtesy of Pinar Ozger.

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StrictlyVC: October 25, 2013

110611_2084620_176987_thumbnailIt’s Friday! [Happy Friday dance.] Have a great weekend, everyone, and stay tuned for next week; we have good stuff coming, including a deep dive with Jon Callaghan of True Ventures into the state of the industry today.

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Top News in the A.M.

Germany and France would like to talk with the U.S. about its trans-Atlantic spying.

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Singapore Sling: Entrepreneurs Head In – and Out – of Tiny Island Nation

Murli Ravi is the head of South Asia investments for JAFCO Asia, and from his perch in Singapore, he’s never seen so much cross-border activity as in the last 12 months. Ravi joined JAFCO in 2008, after studying the regional venture community as a senior analyst with INSEAD. “Let’s just say I’ve made three trips the U.S. in 2013. I made zero trips to the U.S. in the four years prior,” he observes.

Late yesterday, I Skyped with Ravi to learn more.

Globalization is an ongoing trend. What are you seeing?

I cover a lot of territory – Southeast Asia, India, Australia – and I’m seeing a preponderance of people not just coming to Singapore and staying here, including U.S. companies, but I’m seeing startups in Singapore whose attitude is to quickly expand. I see many more of them looking to enter China and India, which are both about five hours away [from Singapore] by plane, and even sometimes Japan and Europe and the U.S.

What’s changed in the last 12 months?

I think Southeast Asia as a whole just has a much larger pool of talent coming online now for startups to harness. Also, historically, broadband penetration wasn’t high. Incomes were low. The smart guys would typically leave. All of those patterns are reversing.

What types of companies are coming to Singapore from the U.S.?

Broadly, you have a lot of small U.S companies and Australian companies and even Japanese companies that are realizing that Southeast Asia is an interesting market. If you just look at the English-speaking countries across the region – India, Australia, Singapore, Malaysia, the Philippines, and almost all the others have some English in a business context – that’s close to two billion people, or roughly 30 percent of humanity.

You also see companies move here because [their product is better suited to the market in Asia]. I sit on the board of a company called Bubbly , formerly Bubble Motion, that was founded in the Valley but moved to Singapore.

I remember reading about that move and thinking that it boiled down to lower costs for the company.

Well, Bubbly is a social messaging service like Twitter, except that instead of read and tweet, you speak and listen, which also appeals to the markets here. Unlike on Twitter, where you’re talking to the world and hoping someone will talk back, with Bubbly, it feels like someone is talking to you because you hear them in your ear, whether it’s a friend or a celebrity who has recorded a message about picking up her kids or an upcoming show. Unlike on Twitter, by the way, consumers here are also willing to pay to listen to celebrities. Right now, the biggest markets for Bubbly are India, Japan, Indonesia, Philippines – all of which have their own celebrities.

Are Western celebrities taking advantage of the platform?

There are soccer players from the English community on the platform. Snoop Dogg is on Bubbly, too. Some celebrities transcend boundaries.

Snoop Dogg is an appealing character, though I believe his new name is Snoopzilla, for the record. Do other recent transplants jump to mind?

A couple of other companies that have taken the same route are Vuclip — which hasn’t quite moved its headquarters to Asia, but does focus mostly on Asian and especially Indian audiences — andMig33 — which did move and has seen success in Indonesia in particular.

You also have companies like Line and Kakaotalk that didn’t originate in Southeast Asia but now have a huge user base in this region. Coincidentally or otherwise, these messaging companies have a lot of similarities with Bubbly.

What about enterprise companies?

It’s so far been a little less common for enterprise companies to move here, and I see that as a major untapped opportunity. There are lots of inefficiencies in the way big business is done in some of the countries here, which gives more competitive firms from elsewhere a potential advantage if they choose to come here. Equally, some startups from this region who are able to thrive here have shown that they are quite capable of stepping onto the world stage, because the historical lack of resources available to small companies is a sort of trial by fire.

cpc

New Fundings

Flint, a young, Redwood City, Calif.-based mobile payments startup that targets mobile entrepreneurs, has raised $6 million in Series B funding from the wireless service provider Digicel GroupSVG VenturesStorm Ventures, and True Ventures. The company has raised $9 million to date.

Iris Mobile, a five-year-old, Chicago-based mobile marketing company, has raised $3 million in Series A funding from Origin VenturesHyde Park AngelsHyde Park Venture PartnersOCA Ventures, and Illinois Ventures.

Itembase, a two-year-old, Berlin-based startup behind an online platform that helps users track their purchase data, has raised $3.25 in Series A funding from High-Tech GründerfondsRheingau FoundersGerman Startups GroupsWesttech VenturesHR Alpharound, and individual investors. In concert with the funding, the company announced it also has a new board chair: early Skype investor Morten Lund.

iMoney Group, an 18-month-old Kuala Lumpur company that has created an online personal finance platform and is expanding across Southeast Asia, has raised $2 million in Series A funding from Fenox Venture Capital500 StartupsVogel VenturesJungle VenturesEcona AG, and Rebright Partners. Earlier this year, the company raised $500,000 in seed financing from Asia Venture Group.

Komli Media, a seven-year-old, Mumbai-based digital advertising platform company, has raised $30 million from new investor Peepul Capital, along with previous investors Helion Venture PartnersNorwest Venture PartnersNexus Venture Partners, and Draper Fisher Jurvetson. Komli has raised roughly $100 million to date.

Tiger Pistol, a two-year-old, Melbourne, Australia-based social media marketing company, has raised $1 million from Rampersand, a new firm. Tiger Pistol has raised $2 million to date.

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IPOs

Yesterday, in a revised SEC filingTwitter set an initial price range for shares in its IPO at $17-$20, for a valuation of about $11 billion. The filing shows that Twitter plans to price the offering on Nov. 6th.

Line, a two-year-old Japan-based messaging application that allows people to exchange information, play games, and send virtual stickers, is expected to go public next year on the Tokyo stock exchange, according to a Nikkei.com report flagged by TechCrunch. Nikkei reports that Line’s valuation is expected to fall somewhere between $800 million and $1 billion. According to the New York Times, Line has 230 million registered users — a number it took Facebook five years to reach.

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Exits

Clipless, a months-old mobile coupon app for Android, has been acquired by deal aggregator 8coupons for an undisclosed amount. Clipless never disclosed outside funding; 8coupons, a seven-year-old, New York-based company hasn’t either, though TechCrunch reports that its valuation is $30 million.

ZeroVM, a year-old, Tel Aviv-based cloud technology company, was acquired yesterday by the publicly traded Web-hosting company Rackspace. Terms of the deal were not disclosed.

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Happenings

The New York Times is holding its Global Forum Asia conference in Singapore today. By the time StrictlyVC hits your inbox, it’ll be over, but you can check out what you missed here, including recorded interviews with HP’s Meg Whitman and Airbnb’s Brian Chesky.

TechCrunch Disrupt Europe gets underway this weekend in Berlin. You can learn more here.

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People

Eric Olson has joined Origin Ventures, the Chicago-based early-stage venture capital firm, as an associate. Olson most recently served in Chicago Mayor Rahm Emanuel’s administration, working with a group tasked with assessing Chicago’s economy and helping it grow at a faster rate. Before that, Olson was a management consultant at A.T. Kearney and an associate at DFJ Portage Ventures.

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Job Listings

Boston-based Third Rock Ventures – which invests in biotech drug, device, and diagnostic companies – is looking to hire a senior associate with three to five years of work experience in the life sciences industry for its San Francisco office. Applicants should have an MBA;  an undergrad degree in life sciences is “strongly preferred.”

The California Public Employees’ Retirement System is looking for a senior portfolio manager to focus on its co-investment program. (H/T: peHUB)

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Essential Reads

The decline of Wikipedia.

Paul Graham pegs the value of all companies to pass through his eight-year-old Y Combinator at $13.7 billion.

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Detours

There’s been a lot of speculation that teens aren’t driving because they’re too busy with their social media and/or they’re more environmentally conscious than earlier generations. A new study says the real reason is much simpler: they’re broke.

Former NSA director Michael Hayden is overheard talking on background to a reporter while riding a commuter train.

Insights into why you look like your dog.

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Retail Therapy

Children will drop their ice cream cones when you race down the street on one of these babies.

We’ve no idea what problem this is solving.

Star Wars Lightsaber Thumb Wrestling Kit. (We know. You can thank us later.)

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Please feel free to send us any and all story suggestions (anonymous or otherwise) by clicking hereIf you’re interested in advertising in our email newsletter, please click here. To sign up for the newsletter, visit strictlyvc.com.

 


Singapore Sling: Entrepreneurs Head In – and Out – of Tiny Island Nation

Singapore_Skyline_Panorama

Murli Ravi is the head of South Asia investments for JAFCO Asia, and from his perch in Singapore, he’s never seen so much cross-border activity as in the last 12 months. Ravi joined JAFCO in 2008, after studying the regional venture community as a senior analyst with INSEAD. “Let’s just say I’ve made three trips the U.S. in 2013. I made zero trips to the U.S. in the four years prior,” he observes.

Late yesterday, we Skyped with Ravi to learn more.

Globalization is an ongoing trend. What are you seeing?

I cover a lot of territory – Southeast Asia, India, Australia – and I’m seeing a preponderance of people not just coming to Singapore and staying here, including U.S. companies, but I’m seeing startups in Singapore whose attitude is to quickly expand. I see many more of them looking to enter China and India, which are both about five hours away [from Singapore] by plane, and even sometimes Japan and Europe and the U.S.

What’s changed in the last 12 months?

I think Southeast Asia as a whole just has a much larger pool of talent coming online now for startups to harness. Also, historically, broadband penetration wasn’t high. Incomes were low. The smart guys would typically leave. All of those patterns are reversing.

What types of companies are coming to Singapore from the U.S.?

Broadly, you have a lot of small U.S companies and Australian companies and even Japanese companies that are realizing that Southeast Asia is an interesting market. If you just look at the English-speaking countries across the region – India, Australia, Singapore, Malaysia, the Philippines, and almost all the others have some English in a business context – that’s close to two billion people, or roughly 30 percent of humanity.

You also see companies move here because [their product is better suited to the market in Asia]. I sit on the board of a company called Bubbly , formerly Bubble Motion, that was founded in the Valley but moved to Singapore.

I remember reading about that move and thinking that it boiled down to lower costs for the company.

Well, Bubbly is a social messaging service like Twitter, except that instead of read and tweet, you speak and listen, which also appeals to the markets here. Unlike on Twitter, where you’re talking to the world and hoping someone will talk back, with Bubbly, it feels like someone is talking to you because you hear them in your ear, whether it’s a friend or a celebrity who has recorded a message about picking up her kids or an upcoming show. Unlike on Twitter, by the way, consumers here are also willing to pay to listen to celebrities. Right now, the biggest markets for Bubbly are India, Japan, Indonesia, Philippines – all of which have their own celebrities.

Do other recent transplants jump to mind?

A couple of other companies that have taken the same route are Vuclip — which hasn’t quite moved its headquarters to Asia, but does focus mostly on Asian and especially Indian audiences — and Mig33 — which did move and has seen success in Indonesia in particular.

You also have companies like Line and Kakaotalk that didn’t originate in Southeast Asia but now have a huge user base in this region. Coincidentally or otherwise, these messaging companies have a lot of similarities with Bubbly.

What about enterprise companies?

It’s so far been a little less common for enterprise companies to move here, and I see that as a major untapped opportunity. There are lots of inefficiencies in the way big business is done in some of the countries here, which gives more competitive firms from elsewhere a potential advantage if they choose to come here. Equally, some startups from this region who are able to thrive here have shown that they are quite capable of stepping onto the world stage, because the historical lack of resources available to small companies is a sort of trial by fire.

Corrections: The original version of this story featured news of a particular celebrity on Bubbly; while the celebrity is expected on the platform soon, he isn’t yet “live” on the network, we were told after this piece was published.

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