StrictlyVC: October 1, 2013

110611_2084620_176987_imageGood Tuesday morning, readers!

Top News in the A.M.

The government has shut down, meaning 800,000 federal workers will be furloughed, and another million employees will be asked to work without pay.

For you history buffs with some extra time on your hands today, here’s a recounting of every previous government shutdown, along with how they ended.

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The Case for Objective Ratings on AngelList

Last week, AngelList, the hugely popular platform that connects entrepreneurs with accredited investors, introduced what many have heralded as a game-changing new twist to its business. Called its Syndicate program, AngelList now allows angel investors to syndicate investments themselves, work for which they will receive carry. (An angel who syndicates a deal will earn 15 percent of any upside, while AngelList will collect 5 percent.)

If some of these syndicates involve the same groups of investors, and those groups morph into venture funds, don’t be surprised. As some angels have said on social media since AngelList announced its new program, it might allow many of the “best” angels to strengthen their brands and, potentially, move up the investing food chain.

And there’s no reason why angels shouldn’t be able to extract more leverage from their investments, particularly if they’re willing to manage a big syndicate or serve on a company’s board.

Still, while the syndicate program seems like a well-considered start, AngelList might think about providing some public accounting of the track records of its various syndicate leaders. As the gossip site Valleywag pointed out in its inimitable way yesterday, without a structure that manages to disclose something about the investors’ IRRs, the program seems likely to degenerate into a popularity contest. Much of AngelList’s matchmaking still rests on “social proof,” which isn’t quite the same thing as cash on cash returns.

Last week, for example, author and entrepreneur Tim Ferriss raised $350,000 for a logistics startup called Shyp in 53 minutes. Ferriss’ fundraising prowess is impressive, and nobody is prejudging Shyp, but it’s hard not to be skeptical about investments that are closed in less than an hour.

Most VCs wouldn’t wish their fundraising process on their worst enemy, but it does help them demonstrate their qualifications and commitment to the investment process to both their investors and their fellow partners. Through vetting their PPMs with Cambridge Associates, undergoing lengthy and arduous roadshows with family offices and pension funds, and sacrificing a large amount of their own capital – typically 3 percent – in order to launch their funds, venture investors let it all hang out. (Yes, there are top-tier funds that are able to raise funds by picking up the phone a few times, but that’s the exception not the norm.) By the time a firm has raised a fund, they have left a trail of evidence testifying to the work they will put into an investment. Can the same be said of Ferriss?

Obviously, AngelList doesn’t need to replicate the venture business – it’s large enough as it is. But in the interests of both entrepreneurs and the syndicates themselves, it might be time for AngelList to adopt an objective ratings process, one that would provide everyone with more insight into an investor’s qualifications than just his or her Klout score. It would make an already promising program even better.

JamBase

New Fundings

Cydan, a Cambridge, Mass.-based company focused on de-risking compounds with therapeutic and commercial potential, has raised $10 million in new financing from Lundbeckfond Ventures and Bay City Capital. Existing investors NEA and Alexandria Venture Investments also participated.

Dataguise, a seven-year-old company based in Fremont, Calif., has raised $13 million in Series B funding led by Toba Capital, which was joined by undisclosed investors. The company, a maker of data security intelligence and protection software, received a $7.3 million Series A round of financing in 2011, including from tech investor Herb Madan.

HelloFresh — a two-year-old, Berlin-based meal planning startup that invites users to choose from its online recipes, after which it delivers them the ingredients they need — has raised $7.5 million in Series C funding. The round was led by Phenomenon VC of Russia and included Vorwerk VenturesHoltzbrinck Ventures, Investment AB Kinnevik and Rocket Internet. To date, the company has raised $17.5 million altogether.

MokiMobility, an 18-month-old, Salt Lake City, Utah-based company whose cloud-based software helps secure, monitor and otherwise manage mobile devices, has raised $6.6 million in funding from EPIC Ventures, Pelion Venture Partners, Allegis Capital and Plus550.

OMsignal, a two-year-old, Montreal-based company that makes apparel designed to track a wearer’s biometrics, has raised an undisclosed amount of funding from new investor Mistral Venture Partners, whose managing director, Code Cubitt, has joined the board. OMsignal raised $1 million in seed funding earlier this year from Real VenturesGolden Venture Partners, and David Cohen.

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New Funds

Three Crescendo Ventures partners who quietly raised at least $10.5 million for a new fund last year appear to be in the market again. Under the new brand Decathalon AlphaJohn BorchersDavid Spreng and Wayne Cantwell — all longtime GPs at Crescendo in Palo Alto, Calif. — are looking to raise a $150 million fund. They’ve so far secured $12.9 million toward that end, too, says a new SEC filing. (Interestingly, the form lists their location as Park City, Utah. I’ve asked for more information, and I’ll write more about their effort as I learn more.)

Miramar Digital Ventures, a four-year-old venture capital firm based in Corona Del Mar, Calif., is looking to raise up to $50 million for a new fund, according to an SEC filing. The form lists two partners: Bruce Hallett, who cofounded the firm and was previously managing partner of the Brobeck, Phleger & Harrison Orange County office, and Sherman Atkinson, who joined the firm two years ago and was previously was a CEO-in-Residence with Austin Ventures and before that, COO of Intermix Media. According to the filing, the firm has yet to begin raising capital for the new fund.

Endeavor Global, a New York-based nonprofit organization that selects, mentors and “accelerates” people who it identifies as “high-impact entrepreneurs” has filed a form with the SEC, outlining its plans to raise $50 million dollars in donated capital to further support the entrepreneurs with which it works. (The idea is to plug any returns into the rounds of future entrepreneurs.) The filing lists just $1.275 million in capital raised so far, but according to numerous reports and Endeavor’s own site, numerous supporters have already pledged $1 million to the new fund, including Michael Ahearn, chairman of True North Venture Partners; Edgar Bronfman, Jr, the former chairman of Warner Music Group; Michael Cline, a managing partner of Accretive LLC; Reid Hoffman of LinkedIn and Greylock Partners; and eBay founder and chairman Pierre Omidyar.

Altimeter Capital, the Boston-based investment firm run by travel entrepreneur Brad Gerstner, is raising a $15 million special purpose vehicle, according to an SEC filing, which reflects that the funds have yet to be raised. In late July, Gerstner, who has raised roughly $600 million since 2008 to take long and short positions in mostly public companies, also began raising a $75 million venture fund.

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People

 

More job cuts are forthcoming at Fab.com, its CEO hints in one of those awful emailed memos to employees.

Billionaire businessman Mark Cuban is finally going to trial over regulators’ claims that he engaged in insider trading nine years ago, in a case that many consider to be a huge gamble by the SEC.

Brad Feld and his partners at Foundry Group have decided to stop reading articles about AngelList’s new syndicate program and form a syndicate for themselves to see how it goes.

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Exits

Apparently, not even Debra Chrapaty could save the cloud computing and storage services company Nirvanix, which has shut down. I interviewed Chrapaty earlier this year when she left her post as the CIO of Zynga to join six-year-old Nirvanix as its fifth CEO. Chrapaty is a respected contact of Khosla Ventures, which had invested a $25 million round in Nirvanix in May of 2012 and, in an apparent effort to turn around the company, installed Chrapaty as the company’s executive chairwoman last November, before elevating her to chief executive in March. Nirvanix, founded in 2007, had raised $70 million over five rounds of funding, including from Valhalla PartnersIntel CapitalMission Ventures and Windward Ventures.

Power2Switch, a Chicago-based company whose free service helps consumers shop and compare electricity providers online, has been acquired for an undisclosed amount by competitor Choose Energy of Plano, Texas. Power2Switch launched out of the University of Chicago’s Booth School of Business in 2010 and had raised $1.3 million, including from New World Ventures and Hyde Park Angels. Choose Energy, founded in 2005, raised a $4 million Series A earlier this year from Kleiner Perkins Caufield & Byers and Stephens Capital Partners.

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IPOs

Fully 26 venture-backed IPOs raised $2.7 billion during the third quarter of this year, a 13 percent increase from the second quarter and an 11 percent increase, by dollars according to Thomson Reuters and the National Venture Capital Association. The quarter also marked the first consecutive quarter since 2004 that we’ve seen 20 or more venture-backed IPOs. More here.

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Job Listings

GE is looking for a managing director in its San Ramon, Calif., office to be “primarily responsible for sourcing, planning, and leading strategic investments and/or acquisitions on behalf of GE Software & Analytics.” To be considered, you’ll need a degree in science, tech, engineering, math or finance; at least 15 years of experience in software engineering, tech startups, corporate development, etc; and at least five years of venture or M&A experience.

Rusnano, a company owned by the government of Russia and aimed at commercializing developments in nanotechnology, is looking for a senior analyst in its Menlo Park, Calif. office. The analyst will be “responsible for the company’s institutional investment management platform” and the job requires a couple of years of “strong analytical and quantitative background.” Previous nanotech experience isn’t mandatory but preferred.

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Essential Reads

A Stanford mole (or one of Clinkle’s investors) has leaked the startup’s $25 million secret.

Assuming this is the “new normal,” Salon observes that “for those not lucky enough to have catered foodie gourmet lunches in brand-new downtown office complexes, the new normal sucks.”

What techies should know about the government shutdown.

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Detour

Need energy at the office? Skip the coffee and call your mom.

It’s official. Baseball is dominated by randomness.

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Retail Therapy

The Ralph Lauren “Polo Bear” sweater makes its return to the men’s department, though we cannot recommend wearing it on a date, in your car, at the gym, in the office, or even on a relaxing constitutional around your own home at nighttime. Trust us.

This 500-piece Breaking Bad Lego Lab is fantastic and not much more expensive than that Ninjago Lego set you bought your nephew last winter! Complete with meth-cooking outfit. Extra body parts sold separately.

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