Monthly Archives: December 2013

StrictlyVC: December 20, 2013

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Happy Friday! This is StrictlyVC’s last email until early January. Before signing off, a note of thanks for all the kind words you’ve offered since this product’s launch. All of it, and each of you, is very much appreciated. (Corny sounding, yes, but true!)

If you should see any friends in the industry over the break and want to recommend they sign up for StrictlyVC, that would also be a nice gift (wink). Happy holidays!

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Top News in the A.M.

The University of California is under no obligation to obtain and disclose information about the investment performance of venture capital funds in its portfolio, a California court ruled yesterday.

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Zuora: The Hottest Company You Don’t Know

Zuora isn’t a household name, but the six-year-old is becoming kind of a big deal as private companies go. Its high-touch subscription-billing platform already counts as customers dozens of established corporate giants (HP, Dell, News Corp), newer corporate giants (Box, Docusign, ZenDesk), and up-and-comers (Dollar Shave Club) for whom its technology handles everything from pricing to order management.

Unsurprisingly, investors love the 300-person company. Zuora has raised $128 million to date, including from Benchmark, Index Ventures, Vulcan Ventures, and Marc Benioff of Salesforce.com, where Zuora’s cofounder and CEO, Tien Tzuo, was employee number 10.

Still, Zuora isn’t planning to go public any time soon, say Tzuo. We talked about why earlier this week.

You’ve said that you’d like at least another year or two before tapping the public markets, but it seems like you’d get a warm reception right now.

The private markets are assigning valuations that are as strong if not stronger than pubic markets; there isn’t a lot of inherent value right now to going public. Staying private also allows us to work more on ourselves and to make big bets.

Do you mean acquisitions?

We haven’t made any acquisitions but our private valuation is getting to the size now where it’s starting [to make sense]. I suspect [we’d look at] more adjacent areas, as technology tuck-ins. It’s not a strategy of ours, but staying private gives us more flexibility.

So what kind of big bets are you making?

We’re kind of in a land grab [having recently opened offices in London and Australia, with plans to move into Asia-Pacific]. If we can raise money and focus on [expanding], then it just makes more sense to do that. Our big challenge is evangelizing the shift from a product to a subscription-based economy.

Meaning the renting versus buying economy?

Right. Eighty or 90 percent of companies getting funded now have a subscription model because of [cloud-based servers and other things]. Medical device companies that [used to spend a fortune on equipment] now use services hosted at Amazon and pay as they go for processing power.

Everyone will wake up across the world and realize their business is a subscription-based model. Product-driven society, where you ship as many cars, pens, and computers, is no longer sustainable.

Assuming that’s true, you’re probably as aware as anyone of the types of subscription-based companies that VCs are funding. What are you seeing?

I’m seeing massive niches. Take GoodMouth, which sells toothbrushes. It’s kind of a no-brainer. You’re supposed to change your toothbrush every month or two; GoodMouth sends them to you. With the Internet, you can pick something that has traditionally been too small and scale it to the whole country.

Another example is point-of-sale systems. It might seem like Square has the point-of-sale market locked up, but that’s not so. There are half a dozen companies focused on point-of-sale systems: there’s one that’s focused on grocery stores, another focused on dry cleaners. Very specific vendors can scale to a very large size today, unlike five to ten years ago, and smart VCs know it. Peter Fenton [of Benchmark, who sits on Zuora’s board], has a company in his portfolio called Revinate. It does hotel management systems. That can’t be further afield from the masses, but it’s a multibillion-dollar vertical.

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New Fundings

Cyanogen, a four-year-old, Seattle-based custom Android software developer, has raised $23 million in Series B funding led byAndreessen Horowitz. Benchmark and Redpoint Ventures, which provided the company with $7 million in Series A funding just three months ago, also participated in the round, along with the Chinese company Tencent. Cyanogen has built an open-source operating system that reportedly gives Android owners a more customizable and faster experience than they’d get out of the box with an Android phone.

Floored, an 18-month-old, New York-baed technology company whose 3D capture & visualization software sells to the real estate, architecture, interior design and furniture industries, has raised $5.26 million in Series A funding. RRE Ventures led the round. New investorGreycroft Partners and existing investors Two Sigma Ventures,Lerer Ventures and Felicis Ventures, also participated in the financing, which brings the company’s total capital raised to date to $6.3 million.

Foursquare, the four-year-old, New York-based social location service, has raised $35 million in Series D funding led by DFJ Growth and the Capital Group’s Smallcap World Fund. AllThingsD reports that the round was completed at a valuation slightly north of Foursquare’s last valuation of $600 million. Read more about it here. The company has now raised $106 million in equity, and another $41 million in debt, according to Crunchbase.

Freshdesk, a three-year-old, Walnut, Calif.-based maker of customer support software, has raised $7 million in Series C funding. Existing investors Accel Partners and Tiger Global Management participated in the round. The company has raised roughly $14 million to date.

Folloze, a months-old, Palo Alto, Calif.-based company, has raised $1.97 million, according to an SEC filing that doesn’t list any investors but shows the round’s target is $3.5 million. The company is still operating in stealth mode but says its mission is to “democratize content contribution and distribution in the enterprise” through a “new approach for enterprise content that empowers individuals to outperform in their day-to-day job.” (We know, not so helpful, but there you have it.)

Hightower, a months-old, New York-based company whose mobile technology allows landlords and brokers to collaborate on deals in real time, as well as track important documents and information, has raised $2.12 million in seed funding. Bessemer Venture Partners and Thrive Capital led the round, which also included participation from RRE Ventures, Red Swan, and a gaggle of individual investors. David Tisch, Aaron Levie, Joe Lonsdale, Jason Tan, Chris Howard, Brad Silverberg, Brandon Shorenstein, Lee Linden, and Gary Vaynerchuck, were among them.

Kurtosys, a nine-year-old, London-based company whose financial technology software targets asset managers, has raised $8 million in Series C financing from Triangle Peak Partners and existing investorTrue Ventures. The company has raised $21.7 million altogether, according to Crunchbase.

MyOwnMed, a year-old, Chevy Chase, Md.-based company whose mobile health app captures between-visit health data, has raised $1.3 million in funding, shows an SEC filing. No investors are listed on the form.

ResolutionTube, a months-old, Seattle-based augmented reality collaboration platform for the customer service industry, has raised $1.5 million in seed funding led by Madrona Venture Group with participation from numerous individual investors, including David Cohen, Rudy Gadre, Owen Van Natta, and Vijay Vashee.Acceleprise Ventures also participated in the round.

Robinhood, a two-year-old, Redwood City, Calif.-based company whose free mobile application allows users to read stock news, rate companies, and trade stocks, has raised $3 million in seed funding led by Index Ventures. Tim Draper, Rothenberg Ventures, andAndreessen Horowitz also participated in the financing, among others.

TaxiBeat, a nearly three-year-old, Athens, Greece-based company whose mobile app allows passengers to call a specific, nearby taxi based on distance, user ratings, and car model, has raised $4 million. The money comes from Hummingbird Ventures in London; the company, which is expanding into several European cities and Latin America, has raised $7 million altogether, reports TechCrunch.

Vensun Pharmaceuticals, a 2.5-year-old, Yardley, Pa.-based generic pharmaceutical company, has raised $15.8 million in Series B funding. The round was led by JW Asset Management, which also led Vensun’s 2012 Series A financing. Additional investors in the financing included entities affiliated with Allen Chao, the co-founder of Watson Pharmaceuticals, now Actavis.

Warby Parker, the three-year-old, New York-based online eyeyglasses company, has raised $60 million in new funding led by existing investorTiger Global Management, reports Fortune. Other previous investors to join in the round include General Catalyst Partners, Spark Capital,Thrive Capital, and First Round Capital. The giant round brings the company’s total financing to date to $116 million.

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New Funds

Boulder Ventures, an 18-year-old, Boulder, Colo.-based venture firm that backs early-stage tech and life sciences companies in Colorado and the Mid-Atlantic region, is in the process of raising its sixth fund, shows a new SEC filing. The target listed is $100 million. The filing, which says the first sale has yet to occur, lists three partners: Kyle Lefkoff, Jonathan Perl, and Peter Roshko. One of the firm’s biggest hits in recent years was Rally Software, a Boulder-based company that makes project management software and which held a successful public offering in 2010 after raising around $70 million. (The company’s market cap today is $425 million; SEC filings show that Boulder Ventures owned 10 percent of the company.)

Flywheel Ventures, an 11-year-old, Santa Fe, N.M.-based seed and early-stage venture firm focused on tech and physical sciences ventures in the Southwest/Rockies region, has raised $8.74 million for its second fund, an SEC filing shows. The total offering amount for the vehicle is listed as indefinite. Flywheel’s sole GP is Trevor Loy; among the firm’s most recent investments is ByteLight, a Boston- based retail indoor location company, which raised $3 million in Series A funding earlier this fall, including from Motorola Solutions, the eCoast Angel Network, Sand Hill Angels and Google evangelist Don Dodge.

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People

Yesterday, we noted that venture capitalist John Doerr was having a good week, having offloaded Google shares for more than $4 million. But that haul pales in comparison to the $91 million that Facebook board member Marc Andreessen will reportedly see from the sale of 1.65 million class A shares of Facebook in the company’s secondary offering, announced yesterday.

Venture capitalist and Illinois Republican gubernatorial hopeful Bruce Rauner has reportedly “been working overtime to cast himself to voters as a man who picked himself up by his bootstraps, worked for everything he earned and remained humble even as he acquired the wealth and success that earned him a spot as an adviser and confidant to Mayor Rahm Emanuel.” StrictlyVC doesn’t have a horse in this race, but Rauner’s ads are certainly interesting.

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IPOs

Congratulations, America: 2013 was the best year for the U.S. IPO market since 2000. Renaissance Capital breaks down the year here.

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Exits

Inspirato, a three-year-old, Denver-based, private club that provides its members exclusive access to luxury homes and hotels, along with adventure travel experiences, has combined with competitor Portico Club. The new company is being called, unfortunately, Inspirato with American Express. Inspirato has raised nearly $50 million in funding, including from DAG Ventures, Millennium Technology Value Partners, Kleiner Perkins Caufield & Byers, Access Venture Partners and Crunchfund. TechCrunch has an interesting look at the deal, and its backstory, here.

Storyful, a 3.5-year-old, Dublin, Ireland-based company that finds news on social media, has been acquired for $25 million by News Corp, which says it will operate Storyful as a standalone business. Storyful had raised one round of funding, in December 2011, from theAIB Start-Up Accelerator Fund, which is managed by ACT Venture Capital. The amount wasn’t disclosed publicly.

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Job Listings

Microsoft is looking for a corporate development manager in Seattle. This person will help lead small and medium-size deals, as well as help evaluate larger transactions, meaning there’s plenty of deal structuring, negotiating of terms sheets, etc. Microsoft’s corporate development managers also interface with the investment banking, venture capital, and startup communities and conduct special projects that make it easier to identify new business opportunities.

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Data

CB Insights has published a list of the top early-stage VCs in Midwest tech startups, based on follow-on investment rates. In descending order, the top five are: Detroit Venture PartnersPritzker Group Venture CapitalApex Venture PartnersChicago Ventures, and Illinois Ventures. You can read more here.

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Essential Reads

“On the day [Steve] Jobs announced the iPhone, the director of the Android team, Andy Rubin, was six hundred miles away in Las Vegas, on his way to a meeting with one of the myriad handset makers and carriers that descend on the city for the Consumer Electronics Show. He reacted exactly as DeSalvo predicted. Rubin was so astonished by what Jobs was unveiling that, on his way to a meeting, he had his driver pull over so that he could finish watching the webcast. ‘Holy crap,’ he said to one of his colleagues in the car. ‘I guess we’re not going to ship that phone.'”

A professor of robotics discusses the “robot smog” that could pollute cities of the future.

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Detours

Minutes from the Dunley Family Emergency Christmas Celebration Planning Committee Meeting.

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Retail Therapy

On Indiegogo, you can now buy a $65 mind-reading dog translator thatjust might work. We’re just kidding. You might as hold the money out a moving car window and let it go.

You work hard. Sometimes. You deserve a comb that’s made from high-grade titanium, has a black titanium finish, and comes in a custom Italian leather sleeve. You deserve a comb that has the muscular name of Octovo Ti. Did we mention that this comb costs $150? Wait, why are you taking out your plastic comb? It is not “just fine.” Did we mention that quantities are limited. Hello?

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Zuora: The Hottest Company You Don’t Know

images (1)Zuora isn’t a household name, but the six-year-old is becoming kind of a big deal as private companies go. Its high-touch subscription-billing platform already counts as customers dozens of established corporate giants (HP, Dell, News Corp), newer corporate giants (Box, Docusign, ZenDesk), and up-and-comers (Dollar Shave Club) for whom its technology handles everything from pricing to order management.

Unsurprisingly, investors love the 300-person company. Zuora has raised $128 million to date, including from Benchmark, Index Ventures, Vulcan Ventures, and Marc Benioff of Salesforce.com, where Zuora’s cofounder and CEO, Tien Tzuo, was employee number 10.

Still, Zuora isn’t planning to go public any time soon, say Tzuo. We talked about why earlier this week.

You’ve said that you’d like at least another year or two before tapping the public markets, but it seems like you’d get a warm reception right now.

The private markets are assigning valuations that are as strong if not stronger than pubic markets; there isn’t a lot of inherent value right now to going public. Staying private also allows us to work more on ourselves and to make big bets.

Do you mean acquisitions?

We haven’t made any acquisitions but our private valuation is getting to the size now where it’s starting [to make sense]. I suspect [we’d look at] more adjacent areas, as technology tuck-ins. It’s not a strategy of ours, but staying private gives us more flexibility.

So what kind of big bets are you making?

We’re kind of in a land grab [having recently opened offices in London and Australia, with plans to move into Asia-Pacific]. If we can raise money and focus on [expanding], then it just makes more sense to do that. Our big challenge is evangelizing the shift from a product to a subscription-based economy.

Meaning the renting versus buying economy?

Right. Eighty or 90 percent of companies getting funded now have a subscription model because of [cloud-based servers and other things]. Medical device companies that [used to spend a fortune on equipment] now use services hosted at Amazon and pay as they go for processing power.

Everyone will wake up across the world and realize their business is a subscription-based model. Product-driven society, where you ship as many cars, pens, and computers, is no longer sustainable.

Assuming that’s true, you’re probably as aware as anyone of the types of subscription-based companies that VCs are funding. What are you seeing?

I’m seeing massive niches. Take GoodMouth, which sells toothbrushes. It’s kind of a no-brainer. You’re supposed to change your toothbrush every month or two; GoodMouth sends them to you. With the Internet, you can pick something that has traditionally been too small and scale it to the whole country.

Another example is point-of-sale systems. It might seem like Square has the point-of-sale market locked up, but that’s not so. There are half a dozen companies focused on point-of-sale systems: there’s one that’s focused on grocery stores, another focused on dry cleaners. Very specific vendors can scale to a very large size today, unlike five to ten years ago, and smart VCs know it. Peter Fenton [of Benchmark, who sits on Zuora’s board], has a company in his portfolio called Revinate. It does hotel management systems. That can’t be further afield from the masses, but it’s a multibillion-dollar vertical.

Sign up for our morning missive, StrictlyVC, featuring all the venture-related news you need to start you day.




StrictlyVC: December 19, 2013

110611_2084620_176987_imageGood morning! On deck tomorrow: a brilliant (mystery!) founder who has raised $130 million for his pre-IPO startup, including a $50 million round this fall. If you haven’t signed off already for the holidays, stay tuned!

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Top News in the A.M.

Oops. Target is saying this morning that up to 40 million customer credit and debit card records may have been breached over the two-week period ending December 15.

With its share price up, Facebook is planning a secondary sale that will see Mark Zuckerberg among others sell some holdings. Wall Street’s reaction: We’re selling, too.

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Investing in Two Indias

Nikhil Khattau has spent most of his career both building and investing in India-based companies. In fact, in 2007, soon after selling a mutual fund he’d founded to a financial group, Khattau co-founded Mayfield India in Mumbai, where he continues to help the firm.

It isn’t always easy, given that India’s 1.2 billion residents remain very much separated both culturally and economically. “You have to divide India into the country [that wants to be a great global power] and ‘Bharat’ … which is rural India, where 70 percent of people live,” says Khattau.

Khattau tends to invest in non-tech companies that cater to the latter — outfits like Geodesic Techniques, a specialty construction company that creates buildings out of steel and glass. (“Most were made of concrete prior,” says Khattau.) But earlier this week, during a wide-ranging conversation, we discussed India’s metropolitan centers, too. Here’s part of that conversation, edited for length.

I recently read an article positing that given the amount of gold held by people in India, there must be a way to unlock its value, possibly by renting it out. That struck me as an interesting proposition. Would it ever be possible culturally?

Well, gold is used to show whether you’re wealthy or not. But women have also traditionally been given gold jewelry, so if ever they need money, they can pawn or sell their jewelry and have access to liquid cash. When a woman is married off, she’s given a lot of jewelry by her parents as her backstop, really. She then saves it to pass along to the next generation. So looking at gold and gold jewelry in that light, the sharing just doesn’t work.

Still, I think in urban India, it could be interesting. We’re seeing [a lot of behaviors] that are more akin to what you’re seeing out West: young people living away from home, earning their own money, wanting to go out and dress up and not necessarily wanting to invest in the hot asset that gold is. It would be complicated, but it’s a non-trivial market. The four biggest metropolitan centers have 10 to 15 million people; the next four have between 5 million and 10 million people. Altogether, city populations [add up to] 350 million.

Is this younger, urban demographic interested in shared transportation other than buses, or is that also premature?

The public transportation system isn’t great. And not everybody can afford their own private transportation, so there’s a unique phenomenon in India where companies provide transportation – sort of like shared taxis. If you look at Google or Amazon or Infosy, for example, they’ll commission thousands of private taxis each month. The taxis are fairly sophisticated, too; they feature GPS systems, and employees have their own codes, all of which enable their employers to know where a cab is and how many people are in it and whether or not it’s running late. It’s sort of like an Uber system, but it’s enterprise-geared.

Why are you focused exclusively on low-tech or no-tech business opportunities?

India is so many generations behind that we’re seeing white spaces where you [in the U.S.] have had developed structures for 30, 50, even 100 years. We’re also able to realize venture-style returns without taking venture-style risk, because the model has been proven time and again. For example, we recently exited from a portfolio company called Fourcee Logistics, which transports liquids [from fatty acids to crude palm oil to molasses] in multi-modal containers. These containers have been around in the rest of the world since the 1950s; Fourcee was first to bring them here.

It really seems that India is developing at two speeds.

Absolutely. The twenty and thirtysomethings are looking for bleeding-edge technologies; they want free, perfect, and now. Then there’s the rest of the country.

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New Fundings

Blacklane, a two-year-old, Berlin-based portal for chauffeur services, has raised roughly $14 million from Daimler AG, which is looking to expand its business beyond car production. According to the WSJ, Blacklane customers can book limousines in 130 cities including New York, Hong Kong and Paris via a website, app or phone. The company doesn’t provide the chauffeur services itself but passes bookings on to local limousine operators.

Hatchbuck, a two-year-old, St. Louis, Mo.-based company that makes sales and marketing software for small businesses, has raised $1.25 million led by Cultivation Capital, and joined by Holekamp Ventures.

Moovit, a two-year-old, Israel-based company whose mobile app makes it easier for users to “ride public transit smarter,” has raised $28 million led by Sequoia Capital. The company had previously raised $3.5 million from BRM Group and Israel Ventures, both of which participated in the new round.

Respira, a three-year-old, Albuquerque, N.M.-based company that’s designing a new inhaler to help with respiratory diseases, disclosed yesterday that it has raised an undisclosed amount of funding from Sun Mountain Capital and Cottonwood Technology Fund.

Rheonix, a six-year-old, Ithaca, N.Y.-based developer of an automated molecular testing technology, has raised $14 million in combination of debt and equity to finish a manufacturing build-out and launch its first commercial product. The round was led by existing investors Cayuga Venture Fund and Rand Capital SBIC, a subsidiary of Rand Capital Corp.

Telly, a four-year-old, San Francisco-based company whose on-demand film and video content service has socially discovery elements, has raised $8 million in Series B funding from new investors Cinemagicand Lumia Capital, along with early investors Azure Capital, Draper Fisher Jurvetson, Felicis Ventures, and Georges Harik. The company, formerly known as Twitvid, is also announcing that it has acquired the Dubai-based company Sha-Sha Entertainment to bring Hollywood and Arabic movies and TV shows to 22 countries in the Arab world. Terms of the acquisition aren’t being disclosed. Telly has raised $21 million to date.

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People

It’s been a lucrative week for venture capitalist John Doerr, who sold 2,889 shares of Google on Monday at an average price of $1,071.44 for a total haul of $4.16 million. Doerr is left with just 275 shares of the company’s stock, valued at approximately $295,000.

Aileen Lee, the founding partner of Cowboy Ventures, shares what she sees as the venture industry’s biggest challenge in 2014: “The industry has to show it can deliver better returns than the public markets. There’s been good liquidity recently, and a nice pipeline of private tech companies should have liquidity for the next few years. But when you look at the number of startups being created each year, you realize the probability of success is not great.”

This week, newly public shares of the jacket brand Moncler turned Remo Ruffini into a billionaire. The Telegraph talks with the man who built the brand to find out how he pulled it off.

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IPOs

Acucela, an 11-year-old, Seattle-based company that develops treatments to fight eye diseases, is looking to raise as much as $125 million in IPO. In a surprise twist, the company plans to go public on the Tokyo Stock Exchange. (Its founder and CEO, Ryo Kubota, is a native of Japan.) Xconomy has more on the company here.

Facebook and Mark Zuckerberg have to face a lawsuit they were hoping to avoid. In a decision made public yesterday, a federal judge said investors could pursue claims that, prior to Facebook’s IPO last year, the company should have disclosed internal projections on how increased mobile usage and product decisions might reduce future revenue. “Plaintiffs have sufficiently pleaded material misrepresentation(s) that could have and did mislead investors regarding the company’s future and current revenues,” wrote the judge in his 83-page decision.

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Exits

Elance and oDesk, both venture-backed freelance marketplaces for online work, have opted to stop competing and instead join forces, they announced yesterday. The merged entity won’t appear much different to outsiders, as both brands will continue to be operated independently. But combining gives the new company more numbers to boast of, including 10 million workers around the world, and $750 million in billings in 2013. AllThingsD has much more here.

Sofort, an eight-year-old, Gauting, Germany-based mobile payments company, has been acquired by its eight-year-old, Stockholm-based rival Klarna, strengthening Klarna’s position relative to PayPal. Terms of the deal weren’t publicly disclosed, but sources tell Dealbook that Klarna paid around $150 million in cash and stock.

Travelatus, a nascent, Moscow-based travel company, has been acquired by its Munich-based rival, Excursiopedia, for undisclosed terms that sources tell VentureBeat was sub $1 million. Together, the companies hope to become a leader in helping travelers find local activities.

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Job Listings

Silas Capital, a venture capital and early-stage private equity firm in New York City, is looking for a plucky intern or two to assist with deal flow. The job can be done remotely, though it requires at least 15 hours a week for a minimum of 8 weeks. To apply, email info (at) silascapital.com, with the word “Resume” in the subject heading. Do not (says the firm) use words like “paradigm”, “synergy”, or “disruption,” not that you were planning to do that. (By the way, StrictlyVC doesn’t know if this is paid or unpaid. Sorry!)

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Data

Pitchbook has run one of its fun where-are-they now features. Today, the research firm has taken a look back at 2005 vintage U.S. venture funds to see how they’ve been performing. It lists nine funds, and their median IRR is a really underwhelming 1.8 percent. The top three performers based on net IRR are Austin Ventures IXClarus Life Sciences I, and Columbia Capital Equity Partners IV. You can learn more here.

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Essential Reads

Rolling Stone does a deep dive into cyberwar and meets with the geeks who are serving on the frontlines.

Quartz expresses just a wee bit of skepticism that Uber’s surge pricing owes entirely to genuine supply issues.

“There’s a big, wide, increasingly poor world out there, and it doesn’t need 99% of what Silicon Valley is selling.”

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Detours

Computer science researchers say that if a laptop — including your MacBook Pro — has a built-in camera, it’s possible for someone to spy on you at any time (without a light to alert you).

There’s a whole world behind that ordinary T-shirt you’re wearing. Take a look; it’s fascinating.

Where did the third season of “Homeland” go wrong? Bill Wyman counts the ways.

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You can look marvelous in sweatpants.

If you’re going to buy these shoes, you’d better have a yacht docked somewhere.

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

 

 




Investing in Two Indias

NikhilNikhil Khattau has spent most of his career both building and investing in India-based companies. In fact, in 2007, soon after selling a mutual fund he’d founded to a financial group, Khattau co-founded Mayfield India in Mumbai, where he continues to help the firm.

It isn’t always easy, given that India’s 1.2 billion residents remain very much separated both culturally and economically. “You have to divide India into the country [that wants to be a great global power] and ‘Bharat’ … which is rural India, where 70 percent of people live,” says Khattau.

Khattau tends to invest in non-tech companies that cater to the latter — outfits like Geodesic Techniques, a specialty construction company that creates buildings out of steel and glass. (“Most were made of concrete prior,” says Khattau.) But earlier this week, during a wide-ranging conversation, we discussed India’s metropolitan centers, too. Here’s part of that conversation, edited for length.

I recently read an article positing that given the amount of gold held by people in India, there must be a way to unlock its value, possibly by renting it out. That struck me as an interesting proposition. Would it ever be possible culturally?

Well, gold is used to show whether you’re wealthy or not. But women have also traditionally been given gold jewelry, so if ever they need money, they can pawn or sell their jewelry and have access to liquid cash. When a woman is married off, she’s given a lot of jewelry by her parents as her backstop, really. She then saves it to pass along to the next generation. So looking at gold and gold jewelry in that light, the sharing just doesn’t work.

Still, I think in urban India, it could be interesting. We’re seeing [a lot of behaviors] that are more akin to what you’re seeing out West: young people living away from home, earning their own money, wanting to go out and dress up and not necessarily wanting to invest in the hot asset that gold is. It would be complicated, but it’s a non-trivial market. The four biggest metropolitan centers have 10 to 15 million people; the next four have between 5 million and 10 million people. Altogether, city populations [add up to] 350 million.

Is this younger, urban demographic interested in shared transportation other than buses, or is that also premature?

The public transportation system isn’t great. And not everybody can afford their own private transportation, so there’s a unique phenomenon in India where companies provide transportation – sort of like shared taxis. If you look at Google or Amazon or Infosy, for example, they’ll commission thousands of private taxis each month. The taxis are fairly sophisticated, too; they feature GPS systems, and employees have their own codes, all of which enable their employers to know where a cab is and how many people are in it and whether or not it’s running late. It’s sort of like an Uber system, but it’s enterprise-geared.

Why are you focused exclusively on low-tech or no-tech business opportunities?

India is so many generations behind that we’re seeing white spaces where you [in the U.S.] have had developed structures for 30, 50, even 100 years. We’re also able to realize venture-style returns without taking venture-style risk, because the model has been proven time and again. For example, we recently exited from a portfolio company called Fourcee Logistics, which transports liquids [from fatty acids to crude palm oil to molasses] in multi-modal containers. These containers have been around in the rest of the world since the 1950s; Fourcee was first to bring them here.

It really seems like India is developing at two speeds.

Absolutely. The twenty and thirtysomethings are looking for bleeding-edge technologies; they want free, perfect, and now. Then there’s the rest of the country.

Sign up for our morning missive, StrictlyVC, featuring all the venture-related news you need to start you day.




StrictlyVC: December 18, 2013

110611_2084620_176987_imageHappy Wednesday, everyone! Hope you’re enjoying your holidays. Like you perhaps, StrictlyVC just wants to relax and settle into an oversize sofa with a plate of venture capitalist-shaped sugar cookies already. But stay tuned — we have some good stuff coming over the next couple of days.

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Top News in the A.M.

The price of bitcoin dropped a stunning 50 percent overnight, following an announcement from China’s largest bitcoin exchange that it would no longer be accepting new yuan deposits.

—–

A Storyteller Wade Into a Crowded Market

Tristan Walker is a rarity in Silicon Valley. He’s a gifted storyteller who intimately understands mobile and social media, having interned at Twitter before joining Foursquare, where he led business development for three years.

Those talents will come in handy, as Walker pulls the cover off his eight-month-old startup, Walker & Company, revealing its first product to be … a shaving kit.

Worth mentioning straightaway: This is an exceedingly nice shaving kit. In addition to a pure brass handle and German-made blades, each kit comes with rich pre-shave, shaving, and after-shave lotions, all tucked thoughtfully into an elegant box that’s designed to take 2.5 seconds to open. (It builds anticipation, Walker told me during a recent visit to the company’s offices, located a few miles from Stanford University.)

Priced as the kit is — a user pays $59 for his first, three-month supply, and $29 per month thereafter — it seems reasonably accessible, too, particularly considering the growing percentage of men willing to spend on grooming. According to the research company Mintel, the share of personal care products designed for men has grown to to 5.6 percent from 4.6 percent over the past five years.

Still, to break into a crowded market that already features both high-end competitors and affordable alternatives, Walker needs a compelling story, and he has one that he tells well. As he explains it, black, Latino, and Asian men and women have few personal care options beyond the “ethnic aisle of Walgreen’s,” where they’re left to examine which “dust-covered” product might be remotely suited for their hair texture or skin needs. To underscore his point, Walker, who is African-American, shows me an off-the-shelf hair-care product featuring a balding black man wearing a bath towel.

It’s that underserved market that inspired Walker & Co. The company’s shave kit, for example, has a single blade construction that’s particularly ideal for African-American men, who often struggle with extreme razor burn irritation because their facial hair tends to be curly.

Yet the kit is just the start, says Walker, who observes that people of color will represent the majority of American in the not-too-distant future, as well as that they tend to spend more than other demographic groups on personal care products. (Black women, who represent just 6 percent of U.S. population today, account for 30 percent of hair care spend, says Walker.)

Little wonder Walker is already imagining products such as high-end shampoos suited for the dry hair of African-American women, or skin-care products that address hyperpigmentation.

And none will be relegated to a drugstore aisle, says Walker, who is employing a direct-to-consumer e-tailing strategy, along with reaching people where they gather online. (Among other examples: the urban style blog Street Etiquette will soon begin publishing grooming content co-created with Walker & Co.)

Eventually, Walker & Co. — whose investors include Andreessen Horowitz, SV Angel, Upfront Ventures, and Sherpa Foundry — will also sell its products offline, says Walker. But telling the story comes first, and the shaving kit is not the story; it’s just the prologue.

“This is about fundamentally enabling access. It’s about making things more practical and delightful at the same time,” says Walker.

Traditional consumer packaged goods companies have had their chance, he suggests. Walker & Co. is “going to create the experience that [people of color] deserve.”

dropcam_300x250_learn

New Fundings

Atara Biotherapeutics, a year-old, Thousand Oaks, Calif.-based company that’s developing drugs to treat debilitating diseases, has raised $38.5 million in Series B funding. Amgen Ventures, Celgene Corporation, and EcoR1 Capital led the round, joined by existing investors Alexandria Venture Investments, DAG Ventures, Domain Associates, and Kleiner Perkins Caufield & Byers. FierceBiotech has much more on the company and its backstory here.

Crescendo Biologics, a young, Cambridge, England-based biotech that’s working on differentiated medicines for cancer and psoriasis, has raised $28 million in funding led by Imperial Innovations with participation from new investor Astellas Venture Management and founding seed investor Sofinnova Partners.

Datameer, a four-year-old, San Mateo, Calif.-based company that sells data analytics services to business users, has raised $19 million in Series D funding. Next World Capital led the round. Workday,Software AG and Citi Ventures also participated, alongside with earlier investors Redpoint Ventures and Kleiner, Perkins, Caufield & Byers. The company says it has raised a total of $36.2 million to date.

DreamBox Learning, a seven-year-old, Bellevue, Wash.-based company behind a new interactive and adaptive educational system for teaching children math, has raised $14.5 million in Series A1 financing. The round was led by Netflix CEO Reed Hastings, and included private investments by venture capitalists John Doerr andDeborah Quazzo. GSV Capital also participated in the funding.

Glue Networks, a six-year-old, Sacramento, Calif.-based company that sells an enterprise-grade, cloud-networking service, has raised $12.4 million from undisclosed investors, bringing its total funding to date to $16.9 million.

iROKOtv, a Nigeria-based company behind a video-on-demand platform for Nigerian movies (it’s been dubbed the “Netflix of Africa”), has raised $8 million. The round was led by existing investor Tiger Global, which was joined by the Sweden-based investment companyKinnevik. New investor Rise Capital, a U.S.-based expansion-stage venture firm, also participated in the funding, which brings iROKotv’s total capital raised to $21 million.

Kannuu, a six-year-old, Dallas-based company whose software makes it easier to quickly find content on smart TVs, tablets, and smartphones, has raised $2 million in capital from an unnamed private equity firm.

Maxwell Health, a year-old, Cambridge, Mass.-based SaaS company that aims to simplify employee benefits for businesses, has raised Series A1 financing, led by Vaizra Investments, with participation from Catalyst Health Ventures and existing investors, Tribeca Ventures, Serious Change, Lerer Ventures, BoxGroup and individual investors. To date, the company has raised just less than $10 million.

Planet Labs, a three-year-old, San Francisco-based company with ambitions to map the entire Earth with a fleet of imaging satellites, has raised $52 million in new funding, led by early Facebook investor Yuri Milner. Other new investors include Industry Ventures, Felicis Ventures, Lux Capital, and longtime Venrock partner Ray Rothrock. Previous investors Draper Fisher Jurvetson, Capricorn Investment Group, O’Reilly Alpha Tech Ventures, Founders Fund, First Round Capital, Innovation Endeavors, Data Collective, and AME Cloud Ventures also joined in the round, which brings the company’s total capital raised to date to $65 million.

Sojern, a six-year-old, San Francisco-based “travel engagement platform” that makes it easier for companies like American Express to target and engage with customers, has raised $10 million in Series C funding. Triangle Peak Partners led the round with participation fromNorwest Venture Partners, Trident Capital, Focus Ventures andIndustry Ventures. According to Crunchbase, Sojern has raised about $42 million to date.

Trinity Pharma, a nine-year-old, Waltham, Mass.-based company that sells its cloud-based data management and analytics services to the life sciences industry, has raised $15 million. Health Enterprise Partners, a New York-based growth equity firm, led the investment, which is Trinity’s first outside funding.

ViewRay, a nine-year-old, Cleveland, Oh.-based medical device company that’s been developing advanced radiation technology to treat certain cancers, has secured $30 million in funding from existing investors Aisling Capital, Fidelity Biosciences, Kearny Venture Partners and OrbiMed Advisors, along with new investor Cowealth Medical Holding Co. Hercules Technology Growth Capitalprovided additional debt financing. ViewRay has raised at least $120 million over the years, according to Crunchbase.

Wildcraft, a 19-year-old, Bangalore, India-based maker of outdoor gear, has raised Rs 70 crore from Sequoia Capital. The Times of India has much more.

WyzAnt, an eight-year-old, Chicago-based tutor-student marketplace, has raised $21.5 million in funding from Accel Partners. TechCrunchexplains the funding, which represents WyzAnt’s first institutional round.

—–

People

TiVo co-founders Michael Ramsay and Jim Barton are reportedly on the verge of releasing a new TV companion device that will combine video discovery with smart TV (i.e. Internet) functionality — kind of like a next-generation TiVo. GigaOm has more here.

—–

Exits

PeerCDN, a year-old, Palo Alto, Calif.-based startup that made Javascript code to “turbocharge” users’ Websites, has been acquired by Yahoo for undisclosed terms. Yahoo told TechCrunch of the acquisition: “Yahoo has acquired PeerCDN. The team has a solid background in domain expertise and a passion for video that makes them a perfect fit for Yahoo. Three engineers have joined our media organization in Sunnyvale.”

StackMob, a four-year-old, San Francisco-based mobile platform designed to help developers easily build mobile business with full-featured applications, has been acquired by PayPal for undisclosed terms. The company’s team will be joining PayPal. StackMob had raised $7.5 million from Trinity Ventures, Harrison Metal Capital, and Baseline Ventures.

—–

Job Listings

The Ontario Teachers Pension Plan — Canada’s largest single-profession pension plan, with roughly $130 billion in net assets — is looking for a Toronto-based senior investment associate. The pension invests in funds, it co-invests, and it even leads investments; this associate would join its technology, media, and telecommunications team to make and manage direct investments in those verticals, as well as weigh in on co-investment opportunities.

—–

Data

So far this year, according to Dealogic, 166 companies have raised $64 billion through IPOs. That compares to roughly 120 last year, and the fewer than 80 IPOs each year in 2011, 2010, 2009, and 2008. The volume of secondary offerings this year (in terms of number of deals and dollars raised), is also on track to break records. This piece nicely sums up what we’ve seen — and what we can expect to see over the next few months.

—–

Essential Reads

Hope you haven’t gone shopping at the Apple store lately. Its new Mac Pro becomes available for sale tomorrow. The price: $2,999.

Should energy startups be funded as charities? Actor Will Smith thinks so, and he’s putting his money where his mouth is.

—–

Detours

How to fire someone.

A billionaire’s Detroit buying spree starts to spread.

David Denby doesn’t mince words in his review of Martin Scorsese’s “The Wolf of Wall Street,” calling it “relentless, deafening, deadening, and, finally, unilluminating.” (We’re still going.)

—–

Retail Therapy

Explore the ocean floor in your very own, $360,000 submarine. Because you were smart enough to buy Facebook shares at their all-time low. (Right? No? Sorry. We screwed that one up, too.)

—–

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




A Storyteller Wades Into a Crowded Market

BevelKitTristan Walker is a rarity in Silicon Valley. He’s a gifted storyteller who intimately understands mobile and social media, having interned at Twitter before joining Foursquare, where he led business development for three years.

Those talents will come in handy, as Walker pulls the cover off his eight-month-old startup, Walker & Company, revealing its first product to be … a shaving kit.

Worth mentioning straightaway: This is an exceedingly nice shaving kit. In addition to a pure brass handle and German-made blades, each kit comes with rich pre-shave, shaving, and after-shave lotions, all tucked thoughtfully into an elegant box that’s designed to take 2.5 seconds to open. (It builds anticipation, Walker told me during a recent visit to the company’s offices, located a few miles from Stanford University.)

Priced as the kit is — a user pays $59 for his first, three-month supply, and $29 per month thereafter — it seems reasonably accessible, too, particularly considering the growing percentage of men willing to spend on grooming. According to the research company Mintel, the share of personal care products designed for men has grown to to 5.6 percent from 4.6 percent over the past five years.

Still, to break into a crowded market that already features both high-end competitors and affordable alternatives, Walker needs a compelling story, and he has one that he tells well. As he explains it, black, Latino, and Asian men and women have few personal care options beyond the “ethnic aisle of Walgreen’s,” where they’re left to examine which “dust-covered” product might be remotely suited for their hair texture or skin needs. To underscore his point, Walker, who is African-American, shows me an off-the-shelf hair-care product featuring a balding black man wearing a bath towel.

It’s that underserved market that inspired Walker & Co. The company’s shave kit, for example, has a single blade construction that’s particularly ideal for African-American men, who often struggle with extreme razor burn irritation because their facial hair tends to be curly.

Yet the kit is just the start, says Walker, who observes that people of color will represent the majority of American in the not-too-distant future, as well as that they tend to spend more than other demographic groups on personal care products. (Black women, who represent just 6 percent of U.S. population today, account for 30 percent of hair care spend, says Walker.)

Little wonder Walker is already imagining products such as high-end shampoos suited for the dry hair of African-American women, or skin-care products that address hyperpigmentation.

And none will be relegated to a drugstore aisle, says Walker, who is employing a direct-to-consumer e-tailing strategy, along with reaching people where they gather online. (Among other examples: the urban style blog Street Etiquette will soon begin publishing grooming content co-created with Walker & Co.)

Eventually, Walker & Co. — whose investors include Andreessen Horowitz, SV Angel, Upfront Ventures, and Sherpa Foundry — will also sell its products offline, says Walker. But telling the story comes first, and the shaving kit is not the story; it’s just the prologue.

“This is about fundamentally enabling access. It’s about making things more practical and delightful at the same time,” says Walker.

Traditional consumer packaged goods companies have had their chance, he suggests. Walker & Co. is “going to create the experience that [people of color] deserve.”

Sign up for our morning missive, StrictlyVC, featuring all the venture-related news you need to start you day.




StrictlyVC: December 17, 2013

110611_2084620_176987_imageHi, very happy Tuesday morning, all!

—–

Top News in the A.M.

Google, Facebook, Amazon, and Microsoft are expanding their efforts to control more of the world’s Internet backbone, raising tensions with telecom companies over who runs the Web.

President Obama is meeting with tech executives today including Yahoo CEO Marissa Mayer and Twitter CEO Dick Costolo. On the agenda: a discussion about “national security and the economic impacts of unauthorized intelligence disclosures,” said a White House official.

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Why Andreessen Horowitz’s Fourth Fund is Likely Around the Corner

Yesterday, in a WSJ series on venture capitalists’ predictions for 2014, Managing Partner Scott Kupor of Andreessen Horowitz was asked if “venture capital returns have improved enough to draw renewed limited-partner interest in 2014.”

Kupor said the question was really “whether investment dollars will continue to be concentrated in the top firms that enable them to generate above-average returns.”

Kupor shied from saying that fundraising for Andreessen Horowitz will be a walk in the park as always, but it’s a safe bet to make. In fact, it’s likely that Andreessen Horowitz will announce its next big fund in January or very soon after. (The firm declined to comment for this story.)

Consider, for starters, that early last week, the firm announced a new general partner, Balaji Srinivasan, who cofounded a genetic-testing company that makes a saliva-based test for more than 100 serious inheritable diseases. VCs don’t always bring in fresh GPs before a new fund raise, but it’s a little cleaner that way. And Srinivasan gives Andreessen Horowitz an even stronger case to make to investors, given his background in consumer-facing healthcare — an increasingly attractive area of investment where he bolsters Andreessen Horowitz’s expertise.

It’s been almost two years since Andreessen Horowitz debuted two funds totaling $1.5 billion. Most venture firms raise money every three years, but that’s never been the modus operandi of Andreessen Horowitz, whose biggest bets include SkypeTwitterFacebook, andGitHub. (Readers might recall that Andreessen Horowitz collected $300 million for its first fund in 2009, $600 million for its second fund in 2010, and a $200 million co-investment fund in 2011, before announcing its biggest funds to date – a $900 million fund with a $600 million parallel fund — in January 2012.)

A little basic math also points to a new fund in the very near future. When I sat down with firm cofounder Marc Andreessen in mid-October, he told me then that the firm’s third fund was “about 70 percent committed.” And if you’ve been following the news, you’ll notice the firm has led a string of very big investments since.

Yesterday, Crowdtilt, a crowdfunding platform, announced it had raised $23 million in Series B funding led by Andreessen Horowitz. Last Friday, the startup Oculus VR revealed that it had raised $75 million to more broadly market its virtual reality headset. Its lead investor: Andreessen Horowitz. And last Wednesday, Andreessen Horowitz made a giant bet on Bitcoin, leading a $25 million investment in Coinbase, a company that makes it easier to buy and sell the digital currency.

That’s saying nothing of the smaller deals in Andreessen Horowitz has helping to fund, including Koru, a young education startup, and Doctor on Demand, a new company behind a mobile app that connects users with physicians for a consultation fee.

For a gun-slinging firm that likes to make outsize bets when it spies the chance, that doesn’t leave a lot powder — especially when taking into account reserves for follow-on fundings.

“We’ll probably raise a new fund next year,” Andreessen had told me back in October. My guess: we can expect it much sooner than later.

dropcam_300x250_learn

New Fundings

Infinio, a two-year-old, Cambridge, Mass.- maker of storage caching software, has raised $12 million in Series B financing from existing Investors, including Bessemer Venture Partners, Highland Capital Partners, Lightspeed Venture Partners and Osage University Partners. The company has now raised $24 million to date.

Invincea, a four-year-old, Fairfax, Va.-based cyber security company, has raised $16 million in Series C funding. New investors Aeris Capitaland Dell Ventures led the round with participation from return backersGrotech Ventures, Harbert Ventures and New Atlantic Ventures.

Nanotronics Imaging, a five-year-old, Cuyahoga Falls, Oh.-based maker of optical inspection tools, has raised $7 million in Series B funding from Founders Fund, whose founder, Peter Thiel, will join the board. Last year, the New York Times featured the company in a piece that sheds more light on what’s interesting about its technology.

Qazzow, a two-year-old, Seattle-based maker of customer service software, has raised $2.4 million in Series A funding. WRF Capital andVoyager Capital led the round with participation from Summit Capitaland the W Fund.

Sailthru, a three-year-old, New York-based maker of marketing personalization software that makes it easier for brands to create personalized interactions with consumers in real-time, has raised $20 million Series C funding. Scale Venture Partners led the financing, which included Benchmark, RRE Ventures, DFJ Gotham, AOL Ventures and Occam Partners. Sailthru has raised $28 million altogether.

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New Funds

McRock Capital, a Toronto-based venture capital fund, has held an initial close on $50 million, the firm announced yesterday. The firm’s anchor tenant is BDC Venture Capital; other investors in the fund include unnamed Canadian and U.S.-based institutional investors and family offices.

McRock was founded by veteran VCs Scott MacDonald and Whitney Rockley; its focus is on the “industrial Internet,” or opportunities “where sensors and software and large industrial markets intersect” particularly in large industrial markets looking to streamline their operations and make them more efficient. The firm’s fund announcement comes weeks after McRock announced it will be working with GE Canada to fund connectivity and analytics companies targeting Canada’s oil, gas, and mining sectors.

—–

People

Blaise Agüera y Arcas, a longtime Microsoft engineer and software designer who was reportedly a top figure in the creation of Microsoft’s Bing Maps service, is joining Google.

Violin Memory, the flash-storage player, just fired CEO Don Basile, following the company’s poor post-IPO performance and disappointing quarterly results. Company chairman Howard Bain will serve as interim CEO.

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Exits

Gopago, a four-year-old, San Francisco-based startup whose mobile app enables users to pay ahead for goods they plan to pick up at a store, has reportedly been acquired by Amazon. Italian newspapers — interested in the story because Gopago’s founders are Italian — say terms of the deal aren’t being disclosed. They also portray Gopago’s acquisition as centered narrowly on the company’s technology. (TechCrunch, which picked up the story, says it isn’t yet clear if any Gopago employees will go to work at Amazon.)

—–

Job Listings

PayPal is looking for a director of business development. To apply, you need seven-plus years in business or market development at multiple companies, experience with mobile commerce/mobile apps, and an MBA from a top school. Former experience in venture capital, private equity, or corporate development is considered a plus.

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Data

In case you’re curious: Pitchbook took a look at 2007 vintage U.S. venture funds with energy holdings to see which are faring the best. Of the 36 funds they dug up, the median IRR is currently 4.08 percent, and the top performers based on IRR are ARCH Venture Fund VII,Flagship Ventures Fund 2007, and Technology Partners Fund VIII.

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Essential Reads

C’mon Silicon Valley, ditch the lazy lady tech.

“How much traction do you have?” Even angel investors are now asking the question, which is generally starting to come too soon, argues Keith Teare, founder the Palo Alto, Calif.-based incubator Archimedes Labs.

Yuri Milner, the Russian entrepreneur and early Facebook investor, is spending time less time focused on seed-stage investing. The result, says Y Combinator: he’s no longer part of the program he helped devise, which sees a group of investors invest in every single startup to pass through Y Combinator. Milner and SV Angel pioneered the model in early 2011, agreeing to commit up to $150,000 per company; by late 2012, SV Angel had bowed out and the remaining group of investors — Milner, Andreessen HorowitzGeneral Catalyst, and Maverick Capital, had lowered what they were willing to commit to each startup to $80,000. Now, with Milner out entirely, Khosla Ventures is stepping into his shoes, says the organization.

—-

Detours

Infographic: What you look like to a social network.

Oculus Primed: Meet the geniuses who finally mastered virtual reality.

Apple supplier Pegatron is now using facial recognition technology to screen applicants for its iPhone plant. The idea: to guard against the growing problem of underage workers making their way into factories in China.

Can’t find a way to explain Santa Claus to your
children? This video would probably make things much worse.

—–

Retail Therapy

This Henry Wingman bag is perfect for the style-conscious bike commuter who dresses in an actual suit every day.

Wow, 4,000 years later, somehow is trying to update the umbrella! Does it work? We can’t say. But we like the idea.

Moustache tie clips. (Just try finding a better stocking stuffer; we dare you.)




Why Andreessen Horowitz’s Fourth Fund is Likely Around the Corner

moneymoneymoneyYesterday, in a WSJ series on venture capitalists’ predictions for 2014, Managing Partner Scott Kupor of Andreessen Horowitz was asked if “venture capital returns have improved enough to draw renewed limited-partner interest in 2014.”

Kupor said the question was really “whether investment dollars will continue to be concentrated in the top firms that enable them to generate above-average returns.”

Kupor shied from saying that fundraising for Andreessen Horowitz will be a walk in the park as always, but it’s a safe bet to make. In fact, it’s likely that Andreessen Horowitz will announce its next big fund in January or very soon after. (The firm declined to comment for this story.)

Consider, for starters, that early last week, the firm announced a new general partner, Balaji Srinivasan, who cofounded a genetic-testing company that makes a saliva-based test for more than 100 serious inheritable diseases. VCs don’t always bring in fresh GPs before a new fund raise, but it’s a little cleaner that way. And Srinivasan gives Andreessen Horowitz an even stronger case to make to investors, given his background in consumer-facing healthcare — an increasingly attractive area of investment where he bolsters Andreessen Horowitz’s expertise.

It’s been almost two years since Andreessen Horowitz debuted two funds totaling $1.5 billion. Most venture firms raise money every three years, but that’s never been the modus operandi of Andreessen Horowitz, whose biggest bets include SkypeTwitterFacebook, and GitHub. (Readers might recall that Andreessen Horowitz collected $300 million for its first fund in 2009, $600 million for its second fund in 2010, and a $200 million co-investment fund in 2011, before announcing its biggest funds to date – a $900 million fund with a $600 million parallel fund — in January 2012.)

A little basic math also points to a new fund in the very near future. When I sat down with firm cofounder Marc Andreessen in mid-October, he told me then that the firm’s third fund was “about 70 percent committed.” And if you’ve been following the news, you’ll notice the firm has led a string of very big investments since.

Yesterday, Crowdtilt, a crowdfunding platform, announced it had raised $23 million in Series B funding led by Andreessen Horowitz. Last Friday, the startup Oculus VR revealed that it had raised $75 million to more broadly market its virtual reality headset. Its lead investor: Andreessen Horowitz. And last Wednesday, Andreessen Horowitz made a giant bet on Bitcoin, leading a $25 million investment in Coinbase, a company that makes it easier to buy and sell the digital currency.

That’s saying nothing of the smaller deals that Andreessen Horowitz has helping to fund, including Koru, a young education startup, and Doctor on Demand, a new company behind a mobile app that connects users with physicians for a consultation fee.

For a gun-slinging firm that likes to make outsize bets when it spies the chance, that doesn’t leave a lot dry powder — especially when taking into account reserves for follow-on fundings.

“We’ll probably raise a new fund next year,” Andreessen had told me back in October. My guess: we can expect it much sooner than later.

Sign up for our morning missive, StrictlyVC, featuring all the venture-related news you need to start you day.




StrictlyVC: December 16, 2013

110611_2084620_176987_imageHi, everyone — good Monday morning! Just a quick, weekly reminder that if you have a tip, quibble, juicy gossip, or anything else you’d like to share, I’m always available at connie@strictlyvc or @cookie. To sign up,click here!

—–

Top News in the A.M.

Tim Armstrong is finally winding down Patch, the network of local news sites he helped found in 2007. The move brings to an end AOL’s “hunt to own the lucrative local advertising market.”

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A VC Helps Prisoners Start Over, with Startups

Lately, the Bay Area tech community has come under fire for being overly detached from the broader community. But no one could accuse Chris Redlitz, a local venture capitalist, of being elitist.

Three years ago, Redlitz cofounded the non-profit Last Mile program — an entrepreneurship course for inmates at California’s San Quentin prison. Today, Redlitz, who also cofounded Transmedia Capital in San Francisco (it has backed NewsleRap Genius, and TrialPay among others) is busily teaching volunteers how to replicate the model at L.A. County Jail. A state prison in Michigan is next, according to Redlitz, who says there’s “a lot of interest from different facilities. The challenging is managing it.”

I asked Redlitz was driving him:

Why start the program?

I live in Marin [County], pretty close to San Quentin, and know people who were doing mentoring there – it has a [college degree-granting] program – so I went in and met some of the guys. I’d never been in a prison before and had the same perception of it that any have, that it’s ominous and everyone there is Charles Manson. I realized how wrong I was and I went home to my wife and said, “I think we could do something inside.”

Last Mile has been cited as evidence of startup mania. Are you turning prisoners into founders or providing them with basic business skills?

Several former inmates have created their own companies since Last Mile was started. One, whose goal was to become a programmer, now has his own Web consulting business and is totally self-sufficient. Another started a project inside [prison], a teen tech hub, and is now growing it in Richmond, [Calif., 15 miles northeast of San Francisco]. We want [former inmates] to go through an internship [first] so if they want to start a business eventually, they’ll have some experience. But there’s no anxiousness that, “You have to start a business.” Some of these people have been incarcerated for 15 to 20 years, so it’s a process to re-acclimate and get some confidence.

The program involves twice weekly meetings over six months with up to 15 inmates who then present at a Demo Day. Who comes?

We had 100 people from the outside during our last Demo Day, including 12 VCs. The room holds about 300, so the rest were invited inmates. Some [investors] said the pitches were as good or better than they’d heard on the outside.

Do the most successful candidates have a particular profile?

I’m not sure yet to be honest. There are people who’ve been through the program who I thought were never going to make it. Others who we think are shoo-ins struggle. They’re from all different ethnicities and economic backgrounds, though we don’t accept anyone [who has committed] crimes against women and children and other things that we consider less appropriate.

What about murder?

We have guys who are in for murder. I think it’s important not to judge all crimes the same. Many of the guys have been in gangs, so you have to look at that background and where they come from.

We do require that they’ve graduated or are close to graduating from the prison’s university program. Otherwise, it’s just like in the real world: Some people don’t know they have special talents and can be effective entrepreneurs. Maybe these guys are A Type personalities. They were just selling the wrong stuff.

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New Fundings

Abeona Therapeutics, a year-old, Cleveland, Oh.-based biotech startup focused on Sanfilippo Syndrome, a rare, terminal, genetic disorder that kills afflicted children before they reach their mid-teens, has raised $750,000 in seed financing. Investors include The Children’s Medical Research Foundation, as well as the organizations Team Sanfilippo, Stop Sanfilippo and Fondation Sanfilippo. Abeona has now raised just north of $2 million altogether.

Allegiance Software, an eight-year-old, South Jordan, Utah-based company, has raised $6.5 million in new funding, according to an SEC filing that lists the round’s target as $15.6 million. Allegiance’s software helps companies collect customer feedback in real time, including over social media, to engage and retain them users. According to Crunchbase, Allegiance has raised roughly $38 million over the years, including from Allegis Capital, Nippon Venture Capital, andRembrandt Venture Partners.

Crowdtilt, a two-year-old, San Francisco-based crowdfunding platform, has raised $23 million in Series B funding led by its Series A lead investors, Andreessen Horowitz, reports TechCrunch, which says the company “wasn’t looking to raise another round.” Other investors in the round include SV Angel, DCM, Felicis Ventures, and a long string of individuals, with Sean Parker, Matt Mullenweg, Oliver Jung, Naval Ravikant, Alexis Ohanian, and Elad Gil among them.

eGifter, a three-year-old, Melville, N.Y-based company behind a mobile gifting app, has raised $1.7 million, according to an SEC filing. Investors include Newlight Management, Wheatley Partners, and BDS Venture Fund. The company has now raised nearly $3 million in 2013.

Fashion Playtes, a five-year-old, Beverly, Mass.-based online company that allows girls to design their own dresses and more for purchase, has raised $2.8 million, according to an SEC filing; the Form D shows the company is targeting a $4.2 million round. Fairhaven Capital, an existing investor, is listed on the filing. Other previous investors includeNew Atlantic Ventures, Golden Seeds, and LaunchCapital.

Oktogo, a four-year-old, St. Petersburg, Russia-based hotel booking site, has raised $5 million in fresh funding led by VEB Innovations,reports TechCrunch. The company, which spent $2 million to acquire a guide company called Travel.ru is September, is also rebranding itselfTravel.ru. To date, Travel.ru has raised $31 million. Along with VEB, others of its backers include Mangrove Capital Partners, Ventech, andVTB Capital Investment Management.

PassportParking, a nearly four-year-old, Charlotte, N.C.-based company that makes parking-management software for municipalities, universities, and private parking operators, has raised a $6 million in Series A funding co-led by Grotech Ventures and Relevance Capital.A consortium of angel investors also participated in the round, which brings the company’s funding to around $7 million.

Pixalate, an 18-month-old, Santa Monica, Calif.-based real-time ad analytics platform, has raised $4.6 million in Series A funding led byJavelin Venture Partners.

QuickPay, a three-year-old, San Francisco-based company whose mobile app enables users to find, reserve and pay for parking at locations across the country, has raised $5.5 million in funding fromFontinalis Partners, Ecomobilite Ventures, and IncWell, a seed-stage venture firm in Birmingham, Mich. According to Crunchbase, the company — led by Powerset cofounder Barney Pell — has raised roughly $9 million to date, including from Advanced Technology Ventures and Andreessen Horowitz.

Wildflower Health, a two-year-old, San Francisco-based mobile health engagement platform whose customers include health plans and Medicaid clients, has raised an undisclosed amount of Series A funding. Investors in the round include KMG Capital Partners, Cambia Health, and HealthTech Capital.

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New Funds

Four Rivers Group, a seven-year-old, San Francisco-based, expansion-stage venture firm that focuses on enterprise companies, has raised $52 million for its third fund, shows an SEC filing that was first flagged by Fortune. Farouk Ladha founded the firm and serves as its managing partner. Prior to founding Four Rivers, Ladha was a managing director at SVB Capital, the venture capital arm of Silicon Valley Bank.

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People

Last Thursday night, Silicon Valley’s biggest stars joined (somewhat inexplicably) with Hollywood celebrities to honor the winners of the Breakthrough Prizes, which recognize scientific research. As the San Jose Mercury News puts it, there was even a “hold-your-breath, Oscar-like moment” when estranged couple Sergey Brin and Anne Wojcicki appeared together on stage to present a prize for research on Parkinson’s disease, which afflicts Brin’s mother. In the end, “Wojcicki took only a minor swipe at the Google founder, noting that his casual dress at a black-tie event showed that he is ‘genetically challenged at dressing,'” writes the Merc.

Two more are out at struggling smartphone maker Blackberry, says the Journal. Its EVP in charge of global sales, Rick Costanzo, will be leaving by early next year; Chris Wormald, who heads BlackBerry’s M&A strategy, will be gone by December’s end.

YouTube cofounder Chad Hurley has filed legal documents in response to the lawsuit filed against him by Kanye West and Kim Kardashian. The couple is suing Hurley over a few minutes of video footage that Hurley filmed of their recent engagement at AT&T Park in San Francisco, then posted to his newest video-sharing site, MixBit.Hurley had signed a waiver stating that he couldn’t film or post such footage, but he says he was misled into believing he was signing a waiver that would allow the couple to use Hurley’s image in an upcoming TV special.

Keith Rabois of Khosla Ventures talked with operator-investor Semil Shah over the weekend and the video outtakes are worth watching. On trying to identify promising entrepreneurs, Rabois notes that: “If you look at all the great technology companies and rank them by market cap, of the top 20, 10 to 15 were created and founded by people who had very different profiles than ‘central casting.’ So you can’t use a traditional resume and a traditional background as your filter or you’re going to miss all the most interesting companies.” Rabois, who was COO of payments company Square until February of this year, added that when hiring a “VP or marketing, VP of engineering, CFO, etc.” he could “probably look at a resume or a LinkedIn profile and in three seconds or less decide if it belonged in an ‘interview,’ ‘pass,’ or ‘study carefully’ [pile]. It’s very hard to do that with founders.”

Russian entrepreneur Oleg Tinkov became a billionaire in October when his online bank, Tinkoff Credit Systems, went public. But don’t call him an oligarch. It “means a person who works close to the government,” he tells the Wall Street Journal, whereas Tinkov is outspoken and even publicly critical of the Kremlin. Asked if he doesn’t run the risk of getting himself in trouble with Vladimir Putin and company, Tinkov tells the outlet. “I don’t get involved in politics and I hope it doesn’t get involved in me.”

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IPOs

Celsus Therapeutics, an eight-year-old, London-based clinical-stage biotech developing anti-inflammatory synthetic drugs, has filed to go public to raise up to $12 million. Until recently, the company’s name was Morria Biopharmaceuticals. Its biggest outside investors include Baker Bros. Advisors, which owns 13.1 percent; Franklin Advisors, which owns 17.4 percent; Broadfin Capital, which owns 8.7 percent; andSabby Management, which owns 8.7 percent.

Delivery Agent, an eight-year-old, San Francisco-based company that enables TV viewers to shop for things they see on screen, is planning to go public next year in an offering expected to value the company at up to $1 billion, sources tell the WSJ. The company has raised $117 million in funding over the years, including from Bessemer Venture Partners,Cardinal Venture Capital, Intel Capital, and Samsung.

Nimble Storage, a five-year-old, San Jose, Calif.-based company that sells hybrid flash/disk storage arrays to enterprises, went public on Friday and investors drove up the initial price of $21 a share to a close of $33.93, a gain of 61 percent. “Companies are gathering an enormous amount of information and making lots of real-time decisions” that require faster and more efficient storage technology like the kind Nimble makes, CEO Suresh Vasudevan told Investor’s Business Daily.

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Exits

Boston Dynamics, a 21-year-old, Waltham-Mass.-based engineering company that has long designed mobile research robots for the government, has been acquired by Google, the company confirmed on Friday. Terms of the deal were not disclosed, but the acquisition marks the eighth robotic company that Google has acquired in the last six months. Observes John Markoff of the New York Times, the move is “also the clearest indication yet that Google is intent on building a new class of autonomous systems that might do anything from warehouse work to package delivery and even elder care.”

Insightera, a four-year-old company with offices in San Mateo, Calif., and Petah Tikva, Israel, has been acquired by the marketing software company Marketo for a $6 million in cash and $14 million in stock. Insightera’s software helps companies personalize content on their Websites and had raised $8 million over the years, including fromLightspeed Venture Partners, Opus Capital, and Glilot Capital Partners. Marketo went public seven months ago; Insightera marks its first acquisition since the event.

Moped, a two-year-old, Berlin-based company behind a messaging app, has been acquired by 6Wunderkinder, a three-year-old, Berlin-based startup behind a popular task management app called Wunderlist. Terms of the deal were not disclosed but a 6Wunderkinder spokeswoman told GigaOm it was a “technology acquisition only” and that the firm hadn’t acquired the Moped brand or hired its team. Moped had raised $1 million from Earlybird Venture Capital, Lerer Ventures,SV Angel and Betaworks. Meanwhile, 6Wunderkinder has raised roughly $24 million, including from Sequoia Capital, Atomico, andEarlybird Capital.

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Job Listings

Google is looking for a corporate development associate in Mountain View, Calif. Responsibilities include identifying and evaluating acquisition targets and supporting deal execution. To apply, you’ll need at least two years of experience in corporate development, venture capital, private equity, or investment banking. An MBA or other advanced degree is preferred.

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Data

Fifty-six start-ups focusing on home automation (think appliances, energy, security, etc.) have attracted $468 million in venture capitalsince 2012, according to CB Insights. As the Washington Post observes, home automation technology is a subset of the so-called “Internet of Things,” a term for a network of connected devices. Altogether, start-ups related to the Internet of Things, meaning that they have sensors that allow devices to communicate, have attracted $752 million in the past year, across 112 deals.

The 2013 US venture capital boom, in charts.

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Essential Reads

Have you noticed? Non-tech giants are gobbling up startups.

Fascinating cautionary tale: This computer engineer told the U.S. Army he’d invented a way to wield sound. He hasn’t been allowed to speak about it since. The Army ordered the USPTO to declare the invention top secret. That means the PTO can’t review his patent application, and the engineer is forbidden from using, or even talking about it. Worse, the Army has told the engineer the classification probably won’t be lifted during his lifetime.

Rapper Nas and his manager have invested in 40 startups so far — andthey’re just getting started.

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Detours

Drat. Studying more can’t really improve students’ fluid intelligence, says a new report by researchers at M.I.T, Harvard and Brown.

Teens are often associated with driving and texting, but adults are much worse when it comes to putting down their phones behind the wheel, says a new AAA study.

Everyone on Facebook knows the sensation of feeling a little left at times, but for many, Instagram presents a newer, more constant form of torture.

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Retail Therapy

We love this roll-up backgammon set. Not ideal for the plane but perfect once you arrive at your destination.

Bicycle chocolates!

Watch out: Esquire is trying to kill you.

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A VC Helps Prisoners Start Over, With Startups

outofsfsan-quentin-19991Lately, the Bay Area tech community has come under fire for being overly detached from the broader community. But no one could accuse Chris Redlitz, a local venture capitalist, of being elitist.

Three years ago, Redlitz cofounded the non-profit Last Mile program — an entrepreneurship course for inmates at California’s San Quentin prison. Today, Redlitz, who also cofounded Transmedia Capital in San Francisco (it has backed NewsleRap Genius, and TrialPay among others) is busily teaching volunteers how to replicate the model at L.A. County Jail. A state prison in Michigan is next, according to Redlitz, who says there’s “a lot of interest from different facilities. The challenging is managing it.”

I talked with Redlitz last week about what’s driving him:

Why start the program?

I live in Marin [County], pretty close to San Quentin, and know people who were doing mentoring there – it has a [college degree-granting] program – so I went in and met some of the guys. I’d never been in a prison before and had the same perception of it that many have, that it’s ominous and everyone there is Charles Manson. I realized how wrong I was and I went home to my wife and said, “I think we could do something inside.”

Last Mile has been cited as evidence of startup mania. Are you turning prisoners into founders or providing them with basic business skills?

Several former inmates have created their own companies since Last Mile was started. One, whose goal was to become a programmer, now has his own Web consulting business and is totally self-sufficient. Another started a project inside [prison], a teen tech hub, and is now growing it in Richmond, [Calif., 15 miles northeast of San Francisco]. We want [former inmates] to go through an internship [first] so if they want to start a business eventually, they’ll have some experience. But there’s no anxiousness that, “You have to start a business.” Some of these people have been incarcerated for 15 to 20 years, so it’s a process to re-acclimate and get some confidence.

The program involves twice weekly meetings over six months with up to 15 inmates who then present at a Demo Day. Who comes?

We had 100 people from the outside during our last Demo Day, including 12 VCs. The room holds about 300, so the rest were invited inmates. Some [investors] said the pitches were as good or better than they’d heard on the outside.

Do the most successful candidates have a particular profile?

I’m not sure yet to be honest. There are people who’ve been through the program who I thought were never going to make it. Others who we think are shoo-ins struggle. They’re from all different ethnicities and economic backgrounds, though we don’t accept anyone [who has committed] crimes against women and children and other things that we consider less appropriate.

What about murder?

We have guys who are in for murder. I think it’s important not to judge all crimes the same. Many of the guys have been in gangs, so you have to look at that background and where they come from.

We do require that they’ve graduated or are close to graduating from the prison’s university program. Otherwise, it’s just like in the real world: Some people don’t know they have special talents and can be effective entrepreneurs. Maybe these guys are A Type personalities. They were just selling the wrong stuff.

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