Good morning!
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Top News in the A.M.
Things are gettin’ real: Twitter just raised its expected price range from between $17 to $20 per share to $23 to $25 per share.
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Former Sequoia Partner Mark Kvamme at the Center of Controversy Again
Mark Kvamme, a former partner with Sequoia Capital, has cultivated numerous fans since moving to Ohio in early 2011. But he has also attracted critics who worry that Kvamme’s relationships with some of the state’s biggest power brokers are a little too cozy.
In the latest controversy, press reports on Friday revealed that Drive Capital, Kvamme’s new, Columbus-based venture firm, received a $50 million commitment from Ohio State University in July, despite concerns that the fund is unproven.
As of early August, Drive Capital had raised $181 million for its fund, which is targeting $300 million.
Kvamme did not respond to a request for comment over the weekend. Ohio State officials also did not respond to requests for more information over the weekend.
Records released to the Associated Press and Cleveland’s Plain Dealer newspaper on Friday show that university officials were pushing back against the school’s investment in Drive Capital until April, over concerns that the firm’s Midwest investing thesis was based on “the attractiveness of what is perceived as an underserved market” rather than proof of concept.
An email on April 5 from Ohio State’s chief investment officer, Jonathan Hook, to the school’s chief financial officer, Geoff Chatas, shows Hook told Kvamme directly that the school’s officials “did not see his fund as a good investment.” Later emails show that between April and July, when the investment was made, Kvamme and his wife, Megan, dined with then-president of the university Gordon Gee, during which time Kvamme seems to have secured a verbal commitment from Gee.
“Your thoughtful questions, insightful comments, and sense of humor always give us food for thought accompanied by the delicious meal,” Kvamme wrote Gee in an email dated May 15. “We also always come away from our dinners with more ideas on how we can make Ohio the center of innovation and creativity.”
In his email, Kvamme also asked Gee to approach other major universities for funding commitments, including the University of Michigan, Indiana University, and the University of Wisconsin.
Gee replied to Kvamme that he would “see how we can best get other institutions to join with us.”
Joseph Alutto, who succeeded Gee as the school’s interim president in July, had also questioned the size of the investment that Ohio State was planning to make in Drive Capital in the weeks before Alutto took his new office. Writing to Chatas in June, Alutto asked: “What is the justification for a $50 million investment rather than one in the $20-30 million range you had described as more typical? Let’s discuss.”
Several weeks later, in an email to Chatas signed by “G,” the sender wrote that he had convinced Alutto to “honor the Kvamme agreement,” adding, “We are back on solid ground. Make that happen quickly.” (The name and email address of “G” were redacted by OSU when it submitted the emails to the media.)
Venture capital is very much a relationship-driven business, of course. And surely, Kvamme looks as good a bet as any. Kvamme led Sequoia’s early investment in LinkedIn – a bet that has paid off handsomely for Sequoia’s LPs. Kvamme also borders on VC royalty. His father, Floyd, is a partner emeritus at Kleiner Perkins, and his ex-father-in-law is famed venture capitalist Pierre Lamond, long one of Sequoia Capital’s most powerful partners.
Still, the investment appears to represent the largest commitment to a venture firm that Ohio State has made. Venture capital investments represented just 0.7 percent, or $21.7 million, of the $3.1 billion that the university was managing as of June 30.
The agreement is also attracting scrutiny as Gee has reportedly been seeking an investment from Kvamme. According to the emails provided to news outlets on Friday, Gee, who remains at Ohio State in an emeritus position and as a law professor, talked about soliciting a $1.5 million contribution from Kvamme to help establish a higher-education policy center.
An OSU spokeswoman told the Plain Dealer that it’s “important to note that exchanges about Mr. Kvamme as a possible donor took place well after the investment was made, and on the Center in particular, Gordon did not even know about the idea for such an institute at the time he started advocating for the investment opportunity.”
Combined with school officials’ apparent change of heart, the “huge departure” for the university has critics like Brian Rothenberg, the executive director of the public interest group ProgressOhio in Columbus, concerned.
“Mark Kvamme seems to have a very inquisitive mind and he doesn’t mind pushing the envelope, but it’s a toxic mix with public money,” says Rothenberg.
Rothenberg has been focused on Kvamme’s activities for some time. In fact, ProgressOhio is challenging the constitutionality of JobsOhio, a private nonprofit that Ohio Governor John Kasich created with Kvamme’s help in January 2011. Gee joined the board six months later.
The job, which brought Kvamme to Ohio from Silicon Valley, was expected to last just five months. But by August 2011, Kvamme had acquired an Ohio’s driver’s license, along with a farm outside Sunbury, Ohio. Apparently, he had also fallen in love. (Kvamme is now married to the daughter of a former director of the Ohio Office of Budget and Management.)
In 2011, Kvamme said he hoped to create 30,000 new Ohio jobs through JobsOhio. But from the outset, the program, which manages roughly $100 million per year in public and private money, has operated under a shroud of secrecy. (The bill that created JobsOhio states that “records created or received by JobsOhio are not public records.”)
ProgressOhio and others have characterized that lack of transparency as unconstitutional. The Supreme Court of Ohio will begin hearing oral arguments relating to the case this Wednesday.
New Fundings
Alianza, a four-year-old, Lindon, Utah-based cloud-based voice platforms company, has raised $3.5 million, according to a new SEC filing. Signal Peak Ventures is among its investors.
Campus Quad, a new, San Carlos, Calif.-based company that’s working with universities to foster greater student engagement over its mobile platform, has raised $500,000, according to an SEC filing. No investors are listed on the form, which shows the money raised came through a combination of debt, options and warrants rather than equity.
Game Play Network, a year-old, L.A.-based company that appears to be in the business of online advance-deposit wagering (a form of horse race gambling where bettors have to fund their accounts before placing bets), has raised $6.175 million as part of a $20 million fundraise, according to an SEC filing. Among the company’s investors is Santa Monica Capital Partners.
Hoopika Biotech, a two-year-old, Vienna-based biotech company focused on developing next-generation vaccines, has raised $25.7 million from new investors Boehringer Ingelheim Venture Fund, Takeda Ventures, and BioMedPartners. Previous investors Sofinnova Partners and Forbion Capital Partners also participated in the funding. The company has now raised about $35 million altogether.
InVision App, a three-year-old, New York-based company that helps its clients create interactive, Web application prototypes, has raised $11.6 million in Series A funding from Tiger Global, along with previous investor FirstMark Capital, according to an SEC filing. FirstMark had provided the company with $1.5 million in seed funding last year.
Malauzai Software, a four-year-old, Austin, Tex.-based company that makes mobile banking apps for community financial institutions, has completed $3 million in new funding. It isn’t revealing the source of the capital. Last year, Live Oak Banking Company provided the company with $2.3 million in funding.
Owlstone, a Norwalk, Conn.-company that’s commercializing a breathalyzer that can detect cancer and other diseases, has raised $772,000 as part of a $1.25 million round, according to an SEC filing. Among those listed on the filing is Thomas Finn, president of global health care at Procter & Gamble. You can learn much more about this company here.
RapidMiner, a six-year-old, Burlingame, Mass.-based predictive analytics platform, has raised $5 million in Series A funding led by Earlybird Venture Capital and Open Ocean Capital.
RockLive, a nearly four-year-old, San Francisco-based company that describes itself as a mobile development lab, has raised $1.1 million in seed funding from baby-faced Canadian crooner Justin Bieber, according to Crunchbase. In August 2012, RockLive raised a separate $1.6 million round from investor Shervin Pishevar and boxer Floyd Mayweather among others.
Svelte Medical Systems, a six-year-old, New Providence, N.J.-based stent maker, has raised $22 million in a round led by CNF Investments and New Science Ventures. The company has raised roughly $65 million to date.
Thinfilm Electronics, an eight-year-old, Oslo, Norway-based company that produces paper-thin electronic components, has raised $24 million from Invesco Asset Management, which secured 46.7 million shares of the publicly traded company for its investment. Invesco, which acquired 13 percent of ThinFilm in a private placement earlier this month, now owns 23 percent of the company.
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New Funds
Aligned Partners Fund, a two-year-old early-stage venture capital firm led by Jodi Sherman Jahic and Susan Mason, has raised $25.9 million for its first fund, according to a new SEC filing that shows the pair began fundraising in November 2011. Prior to cofounding Aligned Partners, Jahic was the managing director of Sherman Capital Group, a San Francisco-based venture fund; she also led wireless investments at Voyager Capital and logged time earlier in her career at Anderson Consulting (now Accenture). Mason, meanwhile, spent 15 years with the early-stage firm ONSET Ventures.
NCT Ventures, a 27-year-old venture capital firm based in Columbus, Oh., is hoping to raise a new, $75 million fund, according to an SEC filing. The firm doesn’t provide much information at its site, but one of its partners is Jeff Bell, who was VP of global marketing at Microsoft from 2006 through 2008. Among its exits is Clearsaleing, an ad analytics company that raised just $3.25 million and sold for an undisclosed amount to publicly traded GSI Commerce in 2011. GSI Commerce was acquired for about $2.4 billion by eBay in early 2012.
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IPOs
In an SEC filing on Friday, Zulily, the Seattle-based flash deals site for mothers, revealed plans to go public on Nasdaq and to price its shares between $16 and $18. The company is planning to sell 6.3 million shares of class A common stock (which would amount to roughly $238 million if it prices at the high end of its range). Among Zulily’s biggest shareholders are Maveron, which owns 23.5 percent of the company; August Capital, which owns 7.4 percent; and Andreessen Horowitz, which owns 7.3 percent;
Renaissance Capital takes a look at some of the other IPOs coming up.
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People
Allen DeBevoise, the cofounder and current CEO of eight-year-old Machinima, a popular YouTube network that caters to gamers, is looking for a replacement for himself. DeBevoise says the company needs “more professional management.”
Henri Lamiraux, Apple’s Vice President of Engineering for the iOS iPhone, iPad, and iPod touch operating system, has left the company, reports Mark Gurman of 9to5mac.com.
“This is going to come off a little cocky,” warns venture capitalist Chamath Palihapitiya, before telling reporter Liz Gannes that he has cracked the code for making startups grow.
Sequoia Capital has hired Blair Shane as its chief marketing officer, reports AllThingsD. Shane replaces Sequoia’s longtime marketing partner Mark Dempster, who says he left Sequoia to launch an “independent advisory service for founders.”(Dempster’s LinkedIn profile still shows him at Sequoia.) Previously, Shane ran marketing for the Stanford Graduate School of Business and the California Academy of Sciences.
Fab‘s creative director and co-founder, Bradford Shellhammer is out the door of the seemingly beleaguered company. On his personal blog, he writes that he has “an explorer’s heart. And I don’t sit still. And I want to make other things in this world.”
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Data
Aileen Lee, the former Kleiner Perkins partner turned cofounder of Cowboy Ventures, asked her team to to examine some venture numbers dating back to 2003, and she published their findings on TechCrunch this past weekend. Among their conclusions: Over the last decade, 39 companies have sprung into existence that are now valued at $1 billion by either public market or private investors; enterprise-oriented billion-dollar companies have delivered much higher returns on investment than consumer-facing giants; and there’s very little educational diversity among the billion-dollar companies’ cofounders. Lee’s data suggests the “vast majority” of all cofounders went to “selective” universities, with Stanford leading the pack.
Worth noting, there’s already plenty of disagreement over Lee’s findings. Venture capitalist Fred Wilson weighs in here with his own observations.
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Happenings
It’s a big week for conferences, beginning with Defrag 2013, a three-day conference that’s kicking off this morning in Broomfield, Colo. (It’s been likened to a small-scale TED event.) Today’s line-up looks interesting, with “life business coach” Jerry Colonna and venture capitalist Brad Feld speaking on the emotional challenges of entrepreneurship. You can learn more here.
Getting underway tomorrow with the help of featured speaker Jack Dorsey is the GigaOm Roadmap conference in San Francisco. Click here for more details.
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Job Listings
Square, the mobile payments company, is looking for a business associate in San Francisco. The job is described as a hybrid of planning and sales strategy. Ideally, says the company, candidates will have worked for a top-tier management consultancy, investment bank or in a similar capacity at another firm and will feel comfortable interacting with senior management on a regular basis.
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Essential Reads
Bill Gates on the Internet’s limits: “I certainly love the IT thing,” he tells the Financial Times. “But when we want to improve lives, you’ve got to deal with more basic things like child survival, child nutrition.”
Mobile-phone based hearing aids could become a big deal in health technology. Here’s a snapshot of what’s happening.
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Detours
We love this conversation between Alec Baldwin and Dick Cavett at New York’s “21” Club.
Researchers at the Norwegian University of Science and Technology have created a very simple way of assessing how well your body functions compared with how well it should work, given your age. If you dare, you can try it out here.
In defiance of standing desks, a writer — like Marcel Proust and Mark Twain before him — lies down to work.
Harrison Ford begs his agents for sweet mercy.
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Retail Therapy
Flip-flops for Burning Man.
A shampoo that startup geeks will appreciate.
The $225 Clairisonic brush, for your face. Hey, why stop with your hair?
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