Monthly Archives: February 2014

StrictlyVC: February 28, 2014

Have a terrific weekend, everyone.

Also, a quick note that we’ve been having some technical issues this week that we haven’t quite figured out. If you missed any editions, you can always check out our archives here.

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Top News in the A.M.

Well, that’s that. The bitcoin exchange Mt. Gox says it’s filing for bankruptcy protection after losing almost 750,000 of its customers’ bitcoins.

Amazon is reportedly talking to labels about its own music streaming service.

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Talking Turkey with Hummingbird Ventures

From a distance, venture capital in Turkey and the broader Middle East seems to be taking off. Among other things, in December, a Dubai-based investing duo announced they were forming a new, early-stage venture capital firm called Emerge Ventures to focus on Middle East startups. In January, renowned angel investor and entrepreneur Fadi Ghadour disclosed plans to launch a new venture fund to support startups in the Middle East and North Africa. And Earlybird Venture Capital, the 17-year-old, Berlin-based early-stage venture firm, announced that it’s raising a fund to focus on companies in Turkey and Central and Eastern Europe. (It has closed on $110 million so far; it’s targeting $130 million.)

To get a better sense of what’s going on, StrictlyVC talked with Pamir Gelenbe, a venture partner with Hummingbird Ventures, a young, early-stage firm with offices in London, Antwerp, and Instanbul. Among the firm’s investments are Turkish game developer Peak Games, which has raised $18 million to date; and the invite-only shopping site MarkaVIP, which is based in Amman, Jordan, and has raised $15 million.

So what’s happening in the Middle East? Why is there more activity suddenly?

I don’t think there’s been any sudden step change. In fact, we’re excited about that part of the of world because we pretty much have no competition. There are a few funds (including recent entrant Doğa Ventures, founded in late 2012 by famous Turkish businessman Fethi Şimşek). But the competitive intensity in the Bay Area is probably one hundred times what we’re facing.

Are you seeing much innovation? And how’s your deal flow?

It’s okay, but you have to be patient. Some startups copy earlier successful models. A few have developed something truly innovative, and we advise them to move their headquarters to the Bay Area to develop their go-to-market approach and maybe to get acquired, because that isn’t going to happen if you’re sitting in Turkey or the Middle East.

In the grand scheme of things, the scene is pretty small, but entrepreneurship is definitely on everybody’s mind. In Turkey, there are probably two or three entrepreneurship conferences every week. It’s become a big thing. And there are maybe a dozen local VCs in Turkey who are serious and another dozen external VCs who are looking on a regular basis.

What about the rest of the Middle East?

Halve those numbers. The Middle East is very fragmented; it’s 20 countries or so, so unless you’re in digital media, where regulation is immaterial as long as you don’t show profane pictures, you’re fine. But if you’re dealing with e-commerce, you’re dealing with customs and every state’s regulations, and it becomes pretty hard.

In Turkey, e-commerce was really hot then cooled somewhat. Why?

Turkey has a strong logistics network, with the largest fleet of trucks in Europe and very good roads that cover the whole country. It also has a great payments infrastructure. It’s much better than in the U.K., where until recently, you couldn’t send instant transfers between banks but had to wait two days instead. [Turkey] has just leapfrogged all this legacy technology that people have in Western Europe.

But e-commerce has become extremely competitive, with razor-thin margins across the board, so it’s less exciting [to us] as investors.

What have been some of the bigger exits out of Turkey?

eBay bought the Turkish eBay clone [GittiGidiyor in 2011]; Naspers bought [the private online shopping club] Markiphoni [in 2011 for a reported $200 million]. Just this month, a British mobile payments company called Monitise, a public company, announced that it’s acquiring [the Turkish mobile commerce company] Pozitron for $100 million.

You just spent a year living in Instanbul with your family. What were your impressions of it? There’s obviously been a lot of unrest.

Turkey is seeing a crazy pace of urbanization, driven by developers with fairly limited supervision from the government, so there’s no green space in Istanbul. I worry that they’ve built this thing that’s unlivable.

The macro [picture] is also very hard. There are questions about the application of the rule of law. It’s been a rocky 12 months in terms of internal politics.

At the same time, it has good fundamentals, a pretty good infrastructure and an educated population. And people are very fast in Turkey about getting things done. Maybe people are jumpy because they’ve been rocked by economic crises over the years, so people know that you get things done now — you don’t wait until tomorrow. That’s the way things work there, though. My clock speed always goes up a few notches when I’m there.

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New Fundings

Bruin Biometrics, a 4.5-year-old, L.A.-based medical device company whose lead product is a scanner device used to detect pressure ulcers, has raised $10 million round in funding from undisclosed sources. The company has raised $14 million to date.

Dash, a 3.5-year-old, New York-based mobile payment app for restaurants, bars, and clubs that allows users to check-in, view, split, and pay their tab, has raised $1.2 million in second seed round bringing its total funding to $1.9 million. Investors include New York AngelsCaerus Ventures and numerous individuals.

Mobvoi, a 1.5-year-old, Shanghai-based company behind the mobile voice search service Chumen Wenwen, has raised nearly $10 million in Series B financing led by SIG. The company had previously received $1.6 million of Series A funding from Sequoia Capital and ZhenFund in 2012. Similar to Apple’s Siri, Chumen Wenwen will respond with a WeChat message containing the answer to questions asked. Founder Zhifei Li spent 2.5 years as a research scientist at Google before launching the company.More here.

Nok Nok Labs, a 3.5-year-old, Palo Alto, Ca.-based maker of authentication software, has raised $16.5 million in Series B funding led by Lenovo Group, which was joined by earlier investors DCM and ONSET Ventures. The round brings the company’s total funding to date to $31.5 million.

NxThera, a 6.5-year-old, Maple Grove, Mn.-based company that’s working on a minimally invasive treatment for benign prostatic hyperplasia, a noncancerous enlargement of the prostate gland, has raised more than $25 million in Series C funding from investors that were not disclosed. The firm’s previous backers include American Medical SystemsArborteum Ventures and Aberdare Ventures.

Ramen, a new, Boulder, Co.-based startup that’s developing an online crowdfunding service specifically aimed at software products, has raised an undisclosed amount of seed funding, including from Jason Calacanis,Naval Ravikant, and Matt Cutler. Ramen’s site includes both a fundraising platform as well as tools to let potential customers collaborate with teams to develop their products.

Revionics, a 12-year-old, Austin, Tx.-based maker of business intelligence software for retailers, has raised $5 million in funding from Motorola Solutions. The company, which employs 120 employees and moved last fall from California to Texas, has raised roughly $27 million altogether, including from Sierra Ventures.

Snapdeal, a four-year-old, New Delhi, India-based company that runs one of India’s largest online e-commerce marketplaces, has raised $133.77 million in funding led by eBay, which had made a $50 million investment in the company nine months ago. Other investors in the round included Kalaari CapitalNexus Venture PartnersBessemer Venture Partners,Intel Capital and Saama Capital. Snapdeal operates as a marketplace for small merchants; that sets it apart from FlipKart, another leading e-commerce site in India, which stocks and sells its own inventory.

Smarterer, a 3.5-year-old, Boston-based company whose online platform is designed to showcase the skills of job seekers, has raised $1.6 million in funding from Rethink EducationDeborah Quazzo, founder and managing partner of GSV Advisors; and earlier investor True Ventures. The company has raised $4.6 million altogether, including from Google Ventures and a long list of individual investors.

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Exits

Identified, a 3.5-year-old, San Francisco-based predictive analytics company focused on HR, has been acquired by Workday. No financial terms were disclosed. Identified had raised around $22.5 million, according to Crunchbase. Its backers include DeeBek Venturesff Venture Capital,VantagePoint Capital PartnersCapricorn Investment Group,Innovation Endeavors and Transmedia Capital.

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People

Gus Hunt, a former chief technology officer for the CIA, has been named an advisor at the 12-year-old, San Francisco-based investment firm Artis Ventures. A release about the appointment stated that on Hunt’s recommendation, the CIA “made a $600 million, 10-year investment in Amazon’s AWS cloud computing platform in 2013 that set a bold path forward for the agency.”

Nas, the popular rapper, talks with Fortune about his friendship with venture capitalist Ben Horowitz, who seems to feel nearly as passionately about hip hop as he does investing. Says Nas: “The people that think it’s gimmicky are the people who don’t know Ben. It’s funny for me to hear that because I know Ben. You can’t play with Ben with hip-hop. He’ll school you about it. Ben schools me about hip-hop, and I know a lot about it. He’s only true to who he his, and that’s what makes him stand out. There’s nobody else out there were he is at. Hip-hop is an extension of him and him of it. What you see is what you get from Ben.”

Heidi Roizen, the longtime VC who has been a venture partner with DFJ since 2012, has been promoted to a new operating partner position at the firm, following the close of its newest, $325 million, fund. In her new role, Roizen will oversee talent, marketing, business development and investment support roles , as well as work with DFJ’s portfolio companies to provide strategic advice, manage portfolio investments and help identify new investment opportunities. Roizen had founded an early personal computer company, before joining Apple as VP of worldwide developer relations in 1996. She became a VC in 1999, become a managing director of Mobius Venture Capital (where Foundry Group’s Brad Feld also got his start in VC).

James Swartz, a cofounder of Accel Partners, has, with his wife, donated $10 million to Carnegie Mellon University. The gift follows a $67 million gift in November from investor David Tepper to create a new academic hub; the gifts will be used for the construction of a 295,000 square-foot facility in the “Tepper Quad” that will house a number of entities, including the university’s Tepper School of Business.

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Happenings

Disrupt NY is coming up on May 5. The three-day conference will featureFred Wilson of Union Square VenturesNiklas Zennström, who cofounded by Skype and the venture firm Atomico; and Secret co-founders David Byttow and Chrys Bader-Wechseler, among others. More here.

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Data

Chart of the day: The 10 largest VC-backed cyber security exits since 2012, care of CB Insights.

Meanwhile, Pitchbook looks at the performance of the 21, 2006 vintage U.S. venture funds that raised between $250 million and $500 million to see how they’re performing. According to Pitchbook’s research, the median IRR is currently 1.8 percent, and the top performers based on net IRR areBay Partners XIGlobespan Capital Partners VPsilos III, and TPG Biotechnology Partners II.

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Job Listings

Dropbox is hiring a junior corporate development person in San Francisco. Apply here.

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Essential Reads

Google said yesterday that it will fund two years of free transit rides for San Francisco youth. The $6.8 million grant is said to be one of the largest private donations in the city’s history and signals that pressure on tech companies to make a larger contribution to their surrounding communities is having an impact, notes The Verge.

How a hacker intercepted FBI and Secret Service calls with Google Maps.

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Detours

The 127-year-old startup: Visiting Mercedes-Benz’s four-month-old Silicon Valley R&D facility.

A bachelor party house in Singapore.

Fifty strange Google Street View photos.

New dating apps for 2014.

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Retail Therapy

The 360Fly camera; it films what’s in front of you, as well as 360 degrees horizontally and 240 degrees vertically.

Another way to bring your Instagram photos to life.

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Talking Turkey with Hummingbird Ventures

Pamir GelenbeFrom a distance, venture capital in Turkey and the broader Middle East seems to be taking off. Among other things, in December, a Dubai-based investing duo announced they were forming a new, early-stage venture capital firm called Emerge Ventures to focus on Middle East startups. In January, renowned angel investor and entrepreneur Fadi Ghadour disclosed plans to launch a new venture fund to support startups in the Middle East and North Africa. And Earlybird Venture Capital, the 17-year-old, Berlin-based early-stage venture firm, announced that it’s raising a fund to focus on companies in Turkey and Central and Eastern Europe. (It has closed on $110 million so far; it’s targeting $130 million.)

To get a better sense of what’s going on, StrictlyVC talked with Pamir Gelenbe, a venture partner with Hummingbird Ventures, a young, early-stage firm with offices in London, Antwerp, and Instanbul. Among the firm’s investments are Turkish game developer Peak Games, which has raised $18 million to date; and the invite-only shopping site MarkaVIP, which is based in Amman, Jordan, and has raised $15 million.

So what’s happening in the Middle East? Why is there more activity suddenly?

I don’t think there’s been any sudden step change. In fact, we’re excited about that part of the of world because we pretty much have no competition. There are a few funds (including recent entrant Doğa Ventures, founded in late 2012 by famous Turkish businessman Fethi Şimşek). But the competitive intensity in the Bay Area is probably one hundred times what we’re facing.

Are you seeing much innovation? And how’s your deal flow?

It’s okay, but you have to be patient. Some startups copy earlier successful models. A few have developed something truly innovative, and we advise them to move their headquarters to the Bay Area to develop their go-to-market approach and maybe to get acquired, because that isn’t going to happen if you’re sitting in Turkey or the Middle East.

In the grand scheme of things, the scene is pretty small, but entrepreneurship is definitely on everybody’s mind. In Turkey, there are probably two or three entrepreneurship conferences every week. It’s become a big thing. And there are maybe a dozen local VCs in Turkey who are serious and another dozen external VCs who are looking on a regular basis.

What about the rest of the Middle East?

Halve those numbers. The Middle East is very fragmented; it’s 20 countries or so, so unless you’re in digital media, where regulation is immaterial as long as you don’t show profane pictures, you’re fine. But if you’re dealing with e-commerce, you’re dealing with customs and every state’s regulations, and it becomes pretty hard.

In Turkey, e-commerce was really hot then cooled somewhat. Why?

Turkey has a strong logistics network, with the largest fleet of trucks in Europe and very good roads that cover the whole country. It also has a great payments infrastructure. It’s much better than in the U.K., where until recently, you couldn’t send instant transfers between banks but had to wait two days instead. [Turkey] has just leapfrogged all this legacy technology that people have in Western Europe.

But e-commerce has become extremely competitive, with razor-thin margins across the board, so it’s less exciting [to us] as investors.

What have been some of the bigger exits out of Turkey?

eBay bought the Turkish eBay clone [GittiGidiyor in 2011]; Naspers bought [the private online shopping club] Markiphoni [in 2011 for a reported $200 million]. Just this month, a British mobile payments company called Monitise, a public company, announced that it’s acquiring [the Turkish mobile commerce company] Pozitron for $100 million.

You just spent a year living in Instanbul with your family. What were your impressions of it? There’s obviously been a lot of unrest.

Turkey is seeing a crazy pace of urbanization, driven by developers with fairly limited supervision from the government, so there’s no green space in Istanbul. I worry that they’ve built this thing that’s unlivable.

The macro [picture] is also very hard. There are questions about the application of the rule of law. It’s been a rocky 12 months in terms of internal politics.

At the same time, it has good fundamentals, a pretty good infrastructure and an educated population. And people are very fast in Turkey about getting things done. Maybe people are jumpy because they’ve been rocked by economic crises over the years, so people know that you get things done now — you don’t wait until tomorrow. That’s the way things work there, though. My clock speed always goes up a few notches when I’m there.

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StrictlyVC: February 27, 2014

Happy Thursday, everyone! A quick note: We know many of you who open the email daily didn’t see it either yesterday or Tuesday. (It’s in your spam folders.) We’ve figured out the issue (we hope). In the meantime, just know that if ever you don’t see the newsletter and aren’t inclined to fish around for it, just email me at connie@strictlyvc.com and I’ll fire another one off to you.

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Top News in the A.M.

Eeek. Britain’s surveillance agency GCHQ, with aid from the NSA, reportedly intercepted and stored webcam images of millions of internet users not suspected of wrongdoing, secret documents reveal.

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Jeff Clavier on “When to Push and When to Pull”

This week, StrictlyVC sat down with investor Jeff Clavier of SoftTech VC to talk shop. Yesterday, we featured part of that chat, with Clavier discussing the less glamorous aspects of his work, from expensive mistakes to entrepreneurs who don’t exactly hang on their investors’ every word.

In this second installment, Clavier shares his insights into what’s happening in seed-stage investing, where SoftTech has been playing since its 2004 founding.

You aim to own five to 10 percent of each startup that you back. Why is that the right range? Why not invest in fewer companies for slightly more ownership?

It works because if you try to own 20 percent of a startup, there’s no room for syndication, and we believe fundamentally that the core proposition of the seed stage world is to own enough that any outcome is meaningful, without using any sharp elbows.

But you have to partner with other investors who are adding value. There’s always a lot of work to do in seed deals, and it often goes on for a year to a year-and-a-half (before the company raises more funding or starts to wind down). And it screams at you, what investors haven’t done because a startup is one of 100 other startups they’ve backed.

Are you finding that Series A investors are being any more or less accommodating of seed investors in today’s market?

If there’s one term sheet, then you have to face reality [and take their terms]. If it’s a multiple term sheet situation, then you have a negotiation. If you come in with a convertible note, then you’re stuffed, because there’s no pro rata right, and the VCs will basically tell you to go f off. At least, some of the best and most aggressive will.

What’s been your experience specifically?

We’ve done well recently. In the last four months, we’ve [seen 10 of our portfolio companies close] Series A rounds and five [of them close] Series B rounds. A top-tier firm did three of our Series A [deals] and we could only get pro rata in one. But I don’t think that’s a new development; it’s happened all along. Everything is a negotiation. [Larger funds have to weigh] how big a spot they want to leave you in the cap table versus their own ownership requirements. But it’s not like we won’t deal with those guys again. If you have a reputation, people don’t want to f__k with you. You just have to know when to push and when to pull.

These days, seed investors often own 20 percent of a startup by the time it meets with more traditional VCs. Is that becoming a problem?

It’s true that when companies come to traditional VCs, the cap table has a chunk of 20 percent [up] from 5 percent. But it is what it is. The companies that come to them have been de-risked. Seed is the new A, and A is the new B. We’ve seen this [directly]. We’ve [participated in] traditional Series A [rounds], between $4.5 million and $6 million; we’ve also done Series A [rounds that are] between $8 million and $10 million. We’ve had a $15 million Series A round.

How big a check will you write to maintain your stake in a startup?

Well, we’re always trying to… generate 10x on a seed, Series A or Series B investment … One of the biggest checks we’ve written was $1.6 million in Vungle [a mobile ad startup that makes 15-second in-app videos]. Vungle just announced a $17 million Series B at a pretty hefty valuation [led by ThomVest Ventures], and we participated in full.

Do you feel like things are working in the industry, structurally?

There is so much institutional money that the funds being raised have to be put to work somewhere, so a lot of entrepreneurs are being funded who shouldn’t be. But it’s always hard to know who [should receive follow-on funding]. Somebody’s piece of junk is someone else’s Pinterest.

Is there bifurcation happening in seed investing? We’re hearing more about early seed and seed prime and seed extension deals…

No. You have incubators, which is a sh_t show now, there are so many of them. You also have early-stage funds like [K9 Ventures, whose founder, Manu Kumar] is almost like a quasi-founder.

We really value the fact that Manu is working with entrepreneurs at that ideation phase. But we don’t typically do it. For example, when we invested in Coin [a card-shaped connected device that contains users’ credit, debit, gift, loyalty and membership card information], we saw a big, bulky piece of plastic. But at least we saw plastic. When Manu got involved, there was nothing but a vision.

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New Fundings

ClearSlide, a four-year-old, San Francisco-based SaaS company whose platform is designed for sales teams, has raised $50 million in Series C funding led by The Social+Capital PartnershipGreylock Partners,Bessemer Venture PartnersFelicis VenturesComcast Ventures andSilicon Valley Bank also participated in the round, which brings ClearSlide’s total funding to $90 million.

EdSurge, a three-year-old, Burlingame, Ca.-based site that covers and analyzes education technology, has raised $1.5 million in funding from a list of investors that includes GSV CapitalNewSchools Venture Fund,LearnCapital, and numerous individual investors, including renowned serial entrepreneur Judy Estrin. EdSurge was co-founded by CEO Betsy Corcoran, a former executive at Forbes.

Kairos, a two-year-old, Miami, Fla.-based facial recognition startup, has raised $1.2 million in Series A funding from New World AngelsFlorida Angel NexusvenVeloInnovision VenturesTrue Venture Innovations, and Lyonsden Investments. Kairos has raised $1.7 million altogether, according to Crunchbase.

Little Borrowed Dress, a two-year-old, New York City-based online bridesmaid-dress rental company, has raised $1.25 million in seed funding from Index VenturesAndreessen HorowitzLaunch CapitalNeu Venture CapitalNYC Seed, and numerous individual investors, including David Tisch and Joanne Wilson. The company rents bridesmaid dresses that it manufactures itself and rents for prices beginning at $50.

NuoDB, a four-year-old, Cambridge, Ma.-based cloud-based database management system, has raised $14.2 million in new funding led by French software developer Dassault Systèmes. Earlier investors Canvas Venture FundHummer Winblad Venture Partners and Longworth Venture Partners, also participated in the round, which brings the company’s total funding to $26.2 million.

Respiratory Motion, a three-year-old, Waltham, Mass.-based medical device company that makes a respiration monitoring system, has raised $5.8 million in Series B financing led by Easton Capital, a life sciences venture firm. The company expects to raise an additional $3 million to the round, it said in a statement.

Spire Technologies and Solutions, a 6.5-year-old, Bangalore-based company that sells supply chain management, customer relationship management, and fraud intelligence software, has raised $8 million in Series A funding from an unnamed strategic investor. The deal was reportedly completed at a post-money valuation of $23 million.

XipLink, a 6.5-year-old, Montreal, Canada-based maker of wireless bandwidth optimization appliances and software modules, has raised $1.5 million from Best Funds, an investment firm in Ontario.

Zefr, a 4.5-year-old, Venice, Ca.-based software platform for brand and content management on YouTube (it was formerly known as Movieclips), has raised $30 million in funding led by Institutional Venture Partners. Previous backers, including U.S. Venture PartnersShasta Ventures,First Round Capital and Richmond Park Partners, also participated.

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New Funds

A former chief of the Atlanta-based tech business incubator ATDC (for Advanced Technology Development Center) has launched a venture firm.Tech Square Ventures, founded by Blake Patton, will focus on seed-stage and early stage companies. The Atlanta Business Chronicle has more on the new fund and the venture boom that Atlanta is experiencing.

Collaborative Fund, a three-year-old, New York-based venture fund focused on collaborative-consumption models, has raised $33 million for a new fund, the firm announced in a blog post yesterday. It has also brought on as a venture partner Jay Kim, who co-founded the video game developer Nexon Corp. in 1994. Investors in Collaborative’s second fund include former Sequoia Capital general partner Tom McMurray and artist Shepard Fairey. The outfit invested its first, $10 million, fund across roughly 30 companies, notes TechCrunch, including TaskRabbit, Lyft, and Kickstarter. Collaborative Fund was founded by Craig Shapiro, who was most recently president of the media company GOOD and before that, the head of content and strategy acquisition at Virgin Mobile USA.

RRE Ventures, the 20-year-old, New York-based early-stage venture fund, is raising a sixth fund with a $250 million target, shows an SEC filing. The firm raised its fifth fund, a $230 million vehicle, in 2011. According to Fortune, RRE may increase the fund by up to $50 million if there’s enough to demand — but it’s unlikely to go much higher than that. StrictlyVC interviewed firm cofounder Jim Robinson a few months ago and he’d said then that “fund sizes go in an out of vogue, but you go bigger either to do bigger deals or hire more people. Bigger deals have never been our business model.” Meanwhile, he’d added, “When you have 10 VCs standing in a field, they’ll argue about the weather.”

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Exits

Bookfresh, a 6.5-year-old, San Francisco-based online scheduling service for small business owners, has been acquired by the mobile payment company Square. Terms of the deal were not disclosed. Bookfresh had raised $500,000 from investors Baseline VenturesHatch VenturesNBC Universal, and SV Angel.

YumPrint, a three-year-old, Seattle-based recipe technology startup, has been acquired by Walmart for an undisclosed amount. The company, which never disclosed outside investors, will be folded into Walmart’s e-commerce division, WalmartLabs, reports the San Jose Mercury News.

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People

Katie Bolin says she has joined Spark Capital as an associate in its Boston office. Bolin comes to the early-stage venture firm from Google, where she worked as an analytical lead, according to her LinkedIn bio. Before Google, Bolin spent a couple of years at the digital marketing giant Digitas.

Kris Bjornerud, previously an investment director at the L.A.-based startup accelerator Amplify, has been named executive director, while the organization’s cofounder and former executive director, Jeff Solomon, moves into an entrepreneur-in-residence role. Bjornerud nabbed his MBA at USC’s Marshall School of Business in 2012, working in finance both before and afterward. He joined Amplify as an investment director in early 2012.

Joe DearCalPERS‘ chief investment officer, has passed away, following a battle with prostate cancer. Dear, who was married with two children, was just 62. The pension released a statement last night calling Dear an “invaluable member of the CalPERS Executive Team, an incredible leader of the Investment Office and a good friend to all those who knew and worked closely with him.” Dear took over as CIO in 2009, just months before CalPERS assets hit a recession low of $164.7 billion. Under Dear, assets had grown to new heights of $283 billion, says the pension. Ted Eliopoulos, CalPERS’ senior investment officer for real estate, has been serving as acting CIO since last June; he’ll continue in the role until a search for a permanent replacement is announced.

In a move that should burnish its nerd cred, Lightspeed Venture Partners, is sponsoring the San Jose Spiders, a professional Ultimate Frisbee team that competes in the American Ultimate Disc League, through its 2014 season. “Ultimate is a sport filled with players that work in technology and startups,” said Spiders owner Andrew Zill in a statement. “For instance, Google co-founder Sergey Brin, WhatsApp co-founders Brian Acton and Jan Koum, Pebble founder Eric Migicovsky, and Quora co-founder Charlie Cheever are all Ultimate players.”

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Happenings

It’s your last chance to register for the 2014 Columbia Business School Private Equity & Venture Capital Conference in New York, which runs tomorrow from 8 a.m. to 6 p.m. EST. You can learn more here.

Also, a reminder that the Female Founders Conference takes place this Saturday at the Computer History Museum in Mountain View, Ca. Things kick off at 1:30 PST with a speaker line-up that includes VMware founderDiane GreeneEventbrite cofounder Julia HartzHomejoy founderAdora Cheung, and Mattermark founder Danielle Morill.

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Data

Pitchbook has taken a look at 2005 vintage U.S. funds-of-funds that raised pools of between $500 million and $1 billion to see how they’re faring. Turns out there are 13 funds that fit the bill, and according toPitchbook, their median IRR as of today is 6 percent (so, not too great compared to, say, the S&P 500, which is right now up 54 percent since early 2005). The top performers of the group: Adams Street Partnership Fund 2005 USMesirow Private Equity III, and Siguler Guff Distressed Opportunities Fund II.

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Job Listings

Cisco is looking for a senior management in its corporate development group to help it execute on its always brisk M&A activity. The job is in San Jose. Apply here.

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Essential Reads

Last year, Google employed 9.7 percent of Mountain View, California’s entire workforce and owned 10.7 percent of all its taxable property. That’s not as great for Mountain View as you might think, reports The Verge.

More states are moving to ban Google Glass while driving.

How much do startups pay for office space? Priceonomics takes a stab at the question.

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Detours

A particular kind of genius: Remembering Harold Ramis.

This guy recreated famous movie romance scenes with his boss’s dog.

Oh, no. “Plastic surgeons are seeing increased interest in ‘facial hair transplants,’ which consist of the doctors ‘filling in a few gaps or doing a complete beard construction,'” reports Vanity Fair. “Patients are shelling out up to $7,000 for the procedure, with one New York City doctor assessing: ‘Whether you are talking about the Brooklyn hipster or the advertising executive, the look is definitely to have a bit of facial hair.'”

Heroglyphs.

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Retail Therapy

A very funny (and all too resonant) update on an old classic: Goodnight Nanny-Cam.

We though it was impossible, but we almost miss business cards now.

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Jeff Clavier on “When to Push and When to Pull”

Jeff Clavier.2This week, StrictlyVC sat down with investor Jeff Clavier of SoftTech VC to talk shop. Yesterday, we featured part of that chat, with Clavier discussing the less glamorous aspects of his work, from expensive mistakes to entrepreneurs who don’t exactly hang on their investors’ every word.

In this second installment, Clavier shares his insights into what’s happening in seed-stage investing, where SoftTech has been playing since its 2004 founding.

You aim to own five to 10 percent of each startup that you back. Why is that the right range? Why not invest in fewer companies for slightly more ownership?

It works because if you try to own 20 percent of a startup, there’s no room for syndication, and we believe fundamentally that the core proposition of the seed stage world is to own enough that any outcome is meaningful, without using any sharp elbows.

But you have to partner with other investors who are adding value. There’s always a lot of work to do in seed deals, and it often goes on for a year to a year-and-a-half (before the company raises more funding or starts to wind down). And it screams at you, what investors haven’t done because a startup is one of 100 other startups they’ve backed.

Are you finding that Series A investors are being any more or less accommodating of seed investors in today’s market?

If there’s one term sheet, then you have to face reality [and take their terms]. If it’s a multiple term sheet situation, then you have a negotiation. If you come in with a convertible note, then you’re stuffed, because there’s no pro rata right, and the VCs will basically tell you to go f off. At least, some of the best and most aggressive will.

What’s been your experience specifically?

We’ve done well recently. In the last four months, we’ve [seen 10 of our portfolio companies close] Series A rounds and five [of them close] Series B rounds. A top-tier firm did three of our Series A [deals] and we could only get pro rata in one. But I don’t think that’s a new development; it’s happened all along. Everything is a negotiation. [Larger funds have to weigh] how big a spot they want to leave you in the cap table versus their own ownership requirements. But it’s not like we won’t deal with those guys again. If you have a reputation, people don’t want to f__k with you. You just have to know when to push and when to pull.

These days, seed investors often own 20 percent of a startup by the time it meets with more traditional VCs. Is that becoming a problem?

It’s true that when companies come to traditional VCs, the cap table has a chunk of 20 percent [up] from 5 percent. But it is what it is. The companies that come to them have been de-risked. Seed is the new A, and A is the new B. We’ve seen this [directly]. We’ve [participated in] traditional Series A [rounds], between $4.5 million and $6 million; we’ve also done Series A [rounds that are] between $8 million and $10 million. We’ve had a $15 million Series A round.

How big a check will you write to maintain your stake in a startup?

Well, we’re always trying to… generate 10x on a seed, Series A or Series B investment … One of the biggest checks we’ve written was $1.6 million in Vungle [a mobile ad startup that makes 15-second in-app videos]. Vungle just announced a $17 million Series B at a pretty hefty valuation [led by ThomVest Ventures], and we participated in full.

Do you feel like things are working in the industry, structurally?

There is so much institutional money that the funds being raised have to be put to work somewhere, so a lot of entrepreneurs are being funded who shouldn’t be. But it’s always hard to know who [should receive follow-on funding]. Somebody’s piece of junk is someone else’s Pinterest.

Is there bifurcation happening in seed investing? We’re hearing more about early seed and seed prime and seed extension deals…

No. You have incubators, which is a sh_t show now, there are so many of them. You also have early-stage funds like [K9 Ventures, whose founder, Manu Kumar] is almost like a quasi-founder.

We really value the fact that Manu is working with entrepreneurs at that ideation phase. But we don’t typically do it. For example, when we invested in Coin [a card-shaped connected device that contains users’ credit, debit, gift, loyalty and membership card information], we saw a big, bulky piece of plastic. But at least we saw plastic. When Manu got involved, there was nothing but a vision.

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StrictlyVC: February 26, 2014

110611_2084620_176987_imageHappy Wednesday, everyone!

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Top News in the A.M.

The White House is reportedly reviewing four ways to revamp NSA phone surveillance.

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The Deal on Being a Micro VC, with Jeff Clavier

Jeff Clavier once worked for the venture investment arm of Reuters. But he decided he might do better on his own by sprinkling tiny amounts of money across what appeared to be a new crop of capital-efficient Internet companies. It was 2004. Sitting with Clavier at Founders Den, a popular clubhouse for San Francisco entrepreneurs, Clavier recalls that at Reuters, he’d made “some, but not a lot of money,” making the $250,000 that he and his wife set aside to stake his fund, SoftTech VC, “a nontrivial risk.”

Fast forward, and that gamble appears to have paid off. Clavier turned his first $1 million fund into a second $15 million fund in 2007, then a $55 million third fund in early 2012. Clavier isn’t speaking about fundraising, but judging from the firm’s most recent SEC filing, an $85 million fourth fund is around the corner, too.

“It was a crazy thing to do, but it worked,” shrugs Clavier, an unrepentant Frenchman. To date, roughly 20 percent of SoftTech’s 144 portfolio companies have been acquired, including the financial service Mint (Intuit), the online shopping services Kaboodle (Hearst), the content company Bleacher Report (Time Warner), and the game maker Tapulous (Disney).

Given how many people seemingly want to be known as “micro VCs” these days, this reporter asked Clavier to elaborate on what the job really entails. (Tomorrow, I’ll feature more on Clavier’s portfolio and his thoughts the current market.)

What’s the biggest misconception about what you do?

I think people have to understand that it’s harder that it looks, and that while people might give you [a small bit of capital first fund], you really need to be successful to be allowed to raise a next fund.

Everyone thinks: I was a successful angel; I can be good at managing a micro fund. But the answer is no. Being an angel means having a good nose, being at the right place at the right time, and putting in small amounts of money after you’ve made quite a bit of money yourself, so that you’re not really risking anything. But managing other people’s money is a massive responsibility. Too often I get calls [from budding micro VCs] like, ‘Dude, I have this report to issue,’ or ‘Should I audit my fund?’ And those are panicked calls.

Have we reached a tipping point? Are there too many seed-stage funds?

There are so many. And I’m more than welcoming to the industry, but you wonder what people are thinking when they want to start yet another micro VC fund. The market doesn’t need it. [As it stands], there will be a contraction at some point.

What are some mistakes from which you’ve learned?

To be honest, the biggest mistakes we’ve made are the companies we’ve passed on: LinkedIn, Twilio, Airbnb, Square Pinterest. All of those were in our hands, and we said no.

Wow.

You make mistakes. It’s your job to see everything, and hopefully make enough right decisions enough times that you make money for your investors.

The challenge for very early stage investors is that when we see things, they’re pretty ugly. They don’t work yet. Sometimes, we just fall in love with the entrepreneur and we nail it. But take Airbnb. I heard of it when it was AirBed & Breakfast and they were selling a service that helped you get an air bed at someone’s place when you went to [an out-of-town] conference. Hmm [said mockingly], let me think. [Laughs.] And it was a total screw-up.

Any other missteps that might be instructive?

One of the mistakes I made, I think, was that I stayed on my own for too long. I don’t think I was clear on the real opportunity to build a firm around this strategy until around late 2008, 2009. Then I brought on my awesome partner Charles [Hudson] in 2010. [Clavier soon after added principal Stephanie Palmeri.]

I wouldn’t do the solo GP thing again. But my own evolution has been defined by the fact that I started 10 years ago, when the only mentor I had at the time, because he’d gotten going slightly earlier, was Josh Kopelman of First Round [Capital].

What else should those who want to follow your path consider doing?

First, I’d say open a new bank account, define a budget, say $250,000, and give yourself 25 shots of $10,000 to invest over two or three years. Take your time, but forget about that money because the most likely outcome is that you lose everything, and if it comes back, it will take a long time; most exits take seven to nine years.

Beyond that, try and figure out whether you’ll be good at being a coach: supporting, helping, kicking, yelling a bit if needed, being tough, but not driving, because entrepreneurs don’t work for you and often don’t listen to you.

You also have to be really good at context switching, depending on the size of your portfolio, switching every half hour to an hour from one company to another to another, always on the lookout for portfolio value add [like new hires]. You have to be happy to work 10 to 12 hour days, then do email and still go to bed feeling like you’ve accomplished nothing because it’s so varied that having a sense of achievement and success is nearly impossible.

You’ve noted that mistakes are inevitable. But are there any “tells” when it comes to good or bad founders? Any unifying threads?

No, you can never predict. Sometimes we look back at teams we backed and we say, what the f__k were we thinking? It was just so obvious those guys would fail, but of course, when we invested, we didn’t feel that.

It is really good to know what you’re good at and what you’re not good at. We made a couple of investments in next-generation e-commerce companies that literally got obliterated and we lost close to $1 million, twice, and that sucks. We actually stay away from that category now, the subscription thing, we’re done with it. It isn’t that there aren’t good types of companies; we’re just not good at sniffing those.

Anything else people should expect to experience?

For anyone getting going in this industry, they have to be clear that bad news comes first. So you invest in a company, and if it’s a really crappy deal, within six months to a year, you’ll have to tell your investors you lost their money. And unless there’s something exceptional happening in the portfolio where you have a very early win, you will have bad news after bad news after bad news until you get some good news. You have to have the guts to say, “This is why we failed and this is where we screwed up.”

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New Fundings

All in One Medical, an 11-year-old, Wolverhampton, U.K.-based maker of disposable curtains and blinds that aim to prevent the spread of harmful pathogens in medical settings, has raised $5 million in funding fromBeringea Private Equity. The company used a portion of the proceeds to acquire Fantex UK Limited, a maker of biodegradable biocides.

Casper, a year-old, New York-based, still-stealth startup that says it’s developing a “vertically integrated” approach to the mattress industry, has raised $1.6 million in seed funding led by Lerer Ventures, with participation from Norwest Venture PartnersCrosslink PartnersVaizra Investments, and Correlation Ventures.

Cheetah Medical, a 13-year-old, Newton Center, Ma.-based company that’s focused on a noninvasive way to monitor the cardiovascular system of patients, has raised $9 million in funding led by Fletcher Spaght Ventures, with participation from Springfield Investment Management,MVM Life Science PartnersRobert Bosch Venture Capital andAscension Health Ventures. The company raised an earlier, $20 million, round from investors in 2010, shows Crunchbase.

Clarity Software Solutions, a 6.5-year-old, Madison, Cn.-based document management company for the health insurance industry, has raised an undisclosed amount of funding from North Bridge Growth Equity.

CounterTack, a 6.5-year-old, Waltham, Ma.-based cyber security company, has closed its Series B round with $15 million. Its investors include Goldman SachsFairhaven Capital and Siemens Venture Capital.

CyberSense, a five-month-old, Menlo Park, Ca.-based cyber security company, has raised $5 million in Series A funding from BRM Group andOpus Capital.

D.light, a 6.5-year-old, San Francisco-based solar lighting company, has raised $11 million in Series C funding. The investors included DFJ,Omidyar NetworkNexus India CapitalGray Ghost VenturesAcumen Fund and Garage Technology Ventures.

Hickies, a three-year-old, Brooklyn-based developer of a footwear elastic lacing system made of polymers that adapt to shoe size and contract with the foot’s movement, has raised $4.2 million in funding led by the venture arm of a global (unnamed) footwear brand and the Collaborative Fund.

If You Can, a two-year-old, San Mateo, Ca.-based startup that uses gameplay to teach children social and emotional learning skills, has raised $6.5 million in Series A funding led by Greylock PartnersAlmaz Capitalalso participated in the round, alongside other, unnamed investors. The company, founded by serial entrepreneur Trip Hawkins, had previously raised $2.8 million from founders, angels and seed funds, includingAndreessen HorowitzFounders Fund, and Maveron.

Kahuna, a two-year-old, Mountain, View, Ca.-based mobile marketing platform, has raised $11 million in funding from Sequoia Capital, with Sequoia partner (and AdMob founder) Omar Hamoui, joining its board of directors. Kahuna has now raised roughly $13 million altogether, including from Promus VenturesSoftTech VCCostanoa Venture Capital.

Opternative, a year-old, Chicago-based company that operates an online eye exam, has raised $1 million in seed financing led by Tribeca Venture Partners and Chicago Ventures, which were joined by individual investors.

Piazza, a four-year-old, Palo Alto, Ca.-based online platform that invites students to post questions anonymously and their classmates and professors collectively answer, has raised $8 million in Series B funding led by Khosla Ventures, which was joined by existing investor, Bessemer Ventures. The funding actually closed last year, but was not announced publicly, says TechCrunch, which notes that the company’s total funding to date is now $15.5 million.

Spree Commerce, a 2.5-year-old, Bethesda, Md.-based company whose open source software enables retailers to create customized storefronts, has raised $5 million in Series A funding led by Thrive CapitalVegas Tech Fund and Red Swan also participated in the round, alongside previous backers True Ventures and AOL Ventures.

Thesan Pharmaceuticals, a three-year-old, Carlsbad, Ca.-based company focused on creating treatments for dermatological disorders like acne and atopic dermatitis, has raised $49 million in Series B financing led by earlier investor Novo VenturesSV Life SciencesLundbeckfond Ventures, and Novartis Venture Fund also joined in the round.

The Trade Desk, a 4.5-year-old, Ventura, Ca.-based digital ad firm that runs a demand-side platform, has raised $20 million in Series B funding led by Hermes Growth Partners. Earlier investor IA Ventures also participated in the round.

Tradeshift, a 3.5-year-old, San Francisco, Ca.-based business-to-business platform, just raised $75 million in Series C funding from Scentan Ventures. The company has raised roughly $115 million to date, including from Notion CapitalKite Ventures and ru-Net Holdings.

Workboard, a year-old, Palo Alto, Ca.-based maker of status reporting software for enterprise managers, has raised $2.75 million led by Granite Ventures and Opus Capital, with participation from Crosslink Capital and Shea Ventures. The company’s first product is still in private beta.

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New Funds

Ignite100, a rare U.K. accelerator to run outside of London, has raised $1.16 million from mostly U.K.-based angel investors to fund three new programs from June 2014 to April 2015. More here.

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Exits

SocialVest, a 4.5-year-old, Atlanta-based online retail marketplace that allows customers to make brand name purchases and direct a portion of the payments to non-profit organizations, has been acquired by a philanthropy-focused online shopping mall called PlanG Holdings. Terms of the deal aren’t being disclosed. SocialVest had raised $1.85 million in funding, including from Bluff Point Associates.

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People

Marc Andreessen, whose firm has invested millions of dollars in Coinbaseand other, related startups, appeared on CNBC yesterday morning, where he compared the failings of the Bitcoin exchange Mt. Gox, to the failed brokerage firm MF Global, which filed for bankruptcy in 2011. ““This is like MF Global, not some huge breakdown of the underlying technology or other exchanges,” said Andreessen. “Bitcoin protocol is unchanged and other Bitcoin exchanges and companies are doing fine.” Dealbook has more on Andreessen’s appearance here.

Speaking of Andreessen Horowitz, firm cofounder Ben Horowitz announced yesterday that he’ll be donating all proceeds from his new book, The Hard Thing About Hard Things, to the American Jewish World Service, whose mission is fighting hunger, disease and poverty in developing countries. Horowitz says the money is intended to support its efforts to “help women fight for their basic rights throughout the world.” The book will be released March 4.

Zappos CEO Tony Hsieh recently decided on a particular tattoo to celebrate his 40th birthday. To show their allegiance to Hsieh, friends — they call themselves “Zapponians” — all gathered at the same Las Vegas tattoo parlor to receive the same, small circular tattoo. One could view the act as supportive; Gizmodo suggests the stunt is worrisome and that things have grown cult-like in Las Vegas, where Hsieh is famously self-funding the revitalization of several downtown blocks. (I wouldn’t go that far, but after visiting Downtown Project in late 2012, I had questions about Hsieh’s circle, too; I’d written about that here.)

Venture capitalist Fred Wilson called yesterday a “sad day” for the Bitcoin sector, though Wilson isn’t crying too hard over the apparent blow-up of theMt. Gox exchange, saying the fiasco has created an opportunity to buy the digital currency on the cheap (comparatively). “I always feel good buying when there is blood in the streets in any market,” wrote Wilson on his blog.

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Happenings

Coming up on Friday, you might want to catch the 2014 Columbia Business School Private Equity & Venture Capital Conference in New York, which runs from 8 a.m. to 6 p.m. local time. You can learn more here.

It’s a few months away, but while you’re planning your spring itinerary:Bitcoin 2014: Building the Digital Economy, a two-day conference centered on the digital currency, will be taking place in Amsterdam beginning May 15. Registration is now open.

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Data

As competition for top tech deals heats up among top investment banks,Goldman Sachs has turned up its private tech investing, participating in more than 60 deals since 2009. CB Insights takes a look at where Goldman has been applying most of its financial muscle.

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Job Listings

OpenView Venture Partners is looking for a research analyst in Boston. Apply here.

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Essential Reads

Inside the high-stakes battle to control how you talk to friends.

A U.S. district judge in San Francisco yesterday dismissed a lawsuit against games maker Zynga, its founder Mark Pincus, and the underwriters of the company’s IPO, Morgan Stanley and Goldman Sachs. The suit alleged fraudulent and misleading handling of Zynga’s public offering in December 2011.

Tech is taking over New York. The sector has reportedly become one of the fastest growing in New York City’s office market, with total leasing volume by tech companies growing by more than 2000 percent from 2008 to 2013. In January alone, tech outfits represented 21 percent of all leases, up from 10 percent in December, says the commercial real estate company Jones Lang LaSalle. Among the biggest leases signed in January: 144,000 square feet nabbed by Twitter on West 17th Street and 118,425 square feet secured by IBM at 51 Astor Place.

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Detours

Another reason not to like open-plan offices: they could be making people sick.

Tensions are rising in San Francisco, and it could lead to a make-or-break year for 49ers coach Jim Harbaugh.

Yesterday, we sent you to the subscription-only National Law Journal for a list of the top go-to law schools of 2014. That was sort of an accident (sorry). Unfortunately, we can’t give you access to the full list, but you can find the top 10 schools here.

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Retail Therapy

A small trailer with a vintage look and feel.

A T-shirt to get you attention. (As if you needed more!)

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The Deal on Being a Micro VC, with Jeff Clavier

Jeff ClavierJeff Clavier once worked for the venture investment arm of Reuters. But he decided he might do better on his own by sprinkling tiny amounts of money across what appeared to be a new crop of capital-efficient Internet companies. It was 2004. Sitting with Clavier at Founders Den, a popular clubhouse for San Francisco entrepreneurs, Clavier recalls that at Reuters, he’d made “some, but not a lot of money,” making the $250,000 that he and his wife set aside to stake his fund, SoftTech VC, “a nontrivial risk.”

Fast forward, and that gamble appears to have paid off. Clavier turned his first $1 million fund into a second $15 million fund in 2007, then a $55 million third fund in early 2012. Clavier isn’t speaking about fundraising, but judging from the firm’s most recent SEC filing, an $85 million fourth fund is around the corner, too.

“It was a crazy thing to do, but it worked,” shrugs Clavier, an unrepentant Frenchman. To date, roughly 20 percent of SoftTech’s 144 portfolio companies have been acquired, including the financial service Mint (Intuit), the online shopping services Kaboodle (Hearst), the content company Bleacher Report (Time Warner), and the game maker Tapulous (Disney).

Given how many people seemingly want to be known as “micro VCs” these days, this reporter asked Clavier to elaborate on what the job really entails. (Tomorrow, I’ll feature more on Clavier’s portfolio and his thoughts about the current market.)

What’s the biggest misconception about what you do?

I think people have to understand that it’s harder that it looks, and that while people might give you [a small bit of capital first fund], you really need to be successful to be allowed to raise a next fund.

Everyone thinks: I was a successful angel; I can be good at managing a micro fund. But the answer is no. Being an angel means having a good nose, being at the right place at the right time, and putting in small amounts of money after you’ve made quite a bit of money yourself, so that you’re not really risking anything. But managing other people’s money is a massive responsibility. Too often I get calls [from budding micro VCs] like, ‘Dude, I have this report to issue,’ or ‘Should I audit my fund?’ And those are panicked calls.

Have we reached a tipping point? Are there too many seed-stage funds?

There are so many. And I’m more than welcoming to the industry, but you wonder what people are thinking when they want to start yet another micro VC fund. The market doesn’t need it. [As it stands], there will be a contraction at some point.

What are some mistakes from which you’ve learned?

To be honest, the biggest mistakes we’ve made are the companies we’ve passed on: LinkedIn, Twilio, Airbnb, Square Pinterest. All of those were in our hands, and we said no.

Wow.

You make mistakes. It’s your job to see everything, and hopefully make enough right decisions enough times that you make money for your investors.

The challenge for very early stage investors is that when we see things, they’re pretty ugly. They don’t work yet. Sometimes, we just fall in love with the entrepreneur and we nail it. But take Airbnb. I heard of it when it was AirBed & Breakfast and they were selling a service that helped you get an air bed at someone’s place when you went to [an out-of-town] conference. Hmm [said mockingly], let me think. [Laughs.] And it was a total screw-up.

Any other missteps that might be instructive?

One of the mistakes I made, I think, was that I stayed on my own for too long. I don’t think I was clear on the real opportunity to build a firm around this strategy until around late 2008, 2009. Then I brought on my awesome partner Charles [Hudson] in 2010. [Clavier soon after added principal Stephanie Palmeri.]

I wouldn’t do the solo GP thing again. But my own evolution has been defined by the fact that I started 10 years ago, when the only mentor I had at the time, because he’d gotten going slightly earlier, was Josh Kopelman of First Round [Capital].

What else should those who want to follow your path consider doing?

First, I’d say open a new bank account, define a budget, say $250,000, and give yourself 25 shots of $10,000 to invest over two or three years. Take your time, but forget about that money because the most likely outcome is that you lose everything, and if it comes back, it will take a long time; most exits take seven to nine years.

Beyond that, try and figure out whether you’ll be good at being a coach: supporting, helping, kicking, yelling a bit if needed, being tough, but not driving, because entrepreneurs don’t work for you and often don’t listen to you.

You also have to be really good at context switching, depending on the size of your portfolio, switching every half hour to an hour from one company to another to another, always on the lookout for portfolio value add [like new hires]. You have to be happy to work 10 to 12 hour days, then do email and still go to bed feeling like you’ve accomplished nothing because it’s so varied that having a sense of achievement and success is nearly impossible.

You’ve noted that mistakes are inevitable. But are there any “tells” when it comes to good or bad founders? Any unifying threads?

No, you can never predict. Sometimes we look back at teams we backed and we say, what the f__k were we thinking? It was just so obvious those guys would fail, but of course, when we invested, we didn’t feel that.

It is really good to know what you’re good at and what you’re not good at. We made a couple of investments in next-generation e-commerce companies that literally got obliterated and we lost close to $1 million, twice, and that sucks. We actually stay away from that category now, the subscription thing, we’re done with it. It isn’t that there aren’t good types of companies; we’re just not good at sniffing those.

Anything else people should expect to experience?

For anyone getting going in this industry, they have to be clear that bad news comes first. So you invest in a company, and if it’s a really crappy deal, within six months to a year, you’ll have to tell your investors you lost their money. And unless there’s something exceptional happening in the portfolio where you have a very early win, you will have bad news after bad news after bad news until you get some good news. You have to have the guts to say, “This is why we failed and this is where we screwed up.”

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




StrictlyVC: February 25, 2014

110611_2084620_176987_imageHappy Tuesday, everyone! Hope it’s off to a good start.

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Top News in the A.M.

Please do not give up on bitcoin, plead leading bitcoin startups, after Mt. Gox, once the world’s biggest bitcoin exchange, went down yesterday. Its founder is still unaccounted for, reports Reuters. (According to the Winklevoss twins’ new Winkdex, shares of bitcoin are currently trading at slightly less than $500. Since December, they’ve been as high as $1,163 and as low as $382. )

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Paul Graham Gets Back to Basics

Y Combinator cofounder Paul Graham spoke at the Launch conference in San Francisco yesterday afternoon in a “fireside chat” with the event’s founder, Jason Calacanis.

While it wasn’t exactly a hard-hitting interview – these things are rarely intended to be – Calacanis managed to surface a lot during their conversation. Graham spoke at length about about Y Combinator’s earliest days, for example; addressed a couple of the controversies he has found himself embroiled in over recent months; and explained the rationale behind his decision to relinquish day-to-day control over Y Combinator. (He’s basically exhausted and wants his “brain back.”) Calacanis also asked Graham plenty about what indicates to him that a startup might succeed or fail. Here’s some of what Graham — whose platform has helped launch Airbnb, Dropbox, and Stripe, among more than 600 other companies — had to say:

On one of the quickest ways to get crossed off the list during an application interview with Y Combinator:

“The founders have to get along. If the founders hate each other, you’re in big trouble,” and it happens “very, very often,” said Graham. “You don’t know how good friends you are with somebody until you try to start a startup with them. That’s why it works so badly when you have some startup that’s started by some dude in business school who has this idea for some startup, and then he goes and finds some, like, 20-year-old meek, undergraduate computer science major to realize his vision, and that’s the founding team … If you go into a Y Combinator interview, and one of you looks in terror to the other one before answering questions, that’s one of our secret tells. Or if you roll your eyes while your cofounder is speaking, which has actually happened, or if you stand up your cofounder – like you don’t show up for the interview… these have all happened.”

On a founder type that Graham may have misjudged earlier on his career:

“The one thing is people who are very smart, but that’s it. People who are very smart but ineffectual. We used to have more faith in brains. It turns out you can be surprisingly stupid if you’re sufficiently determined. And anyone can tell this empirically. There are some parts of America where there are a lot of rich people and they’re not very smart – parts of Manhattan and Florida and L.A. You don’t have to be supersmart if you’re fearsomely effective.”

Calacanis asked him the most important thing for startups to focus on:

“There’s a meta answer to that,” said Graham. “The most important thing for startups to do is to focus, because there are so many things you could be doing, but one of them is the most important, so you should be doing that and not any of the others. So you should not be grabbing coffee with investors. When you want to raise money, you shift into fundraising mode and you go and raise money. You do not promiscuously meet with investors in the middle of the day when you should be working simply because they send you an email saying, ‘Hey, let’s grab coffee.’ There are a 1,000 things you could be doing, and only one of them is the most important … and you work on that.”

On the essence of growing a startup:

“You have to start with a small, intense fire. Suppose you’re the Apple I. I think they made something like 500 of those things. So all they had to do was find 500 people to buy these things and they launched Apple. Apple! So you’ve got to find a small number of people – it’s necessarily going to be a small number of people…who want what you’re making a lot… You don’t have to do any better than Apple and Facebook. You’ve got to know who those first users are and how you’re going to get them, and then you just sit down and have a party with those first few users and you just focus entirely on them and you make them super, super happy.”

(If you’re interested in reading more from this interview, click here.)

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New Fundings

AdStage, a two-year-old, San Francisco-based ad tech startup, has raised $1 million in seed financing from previous investor Digital Garage in a round that brings the company’s total funding to $2.5 million. Others of AdStage’s earlier investors include Freestyle CapitalQuest Venture Partners500 StartupsLaunch FundXG Ventures and individual investors.

Quanttus, a two-year-old, Cambridge, Ma.-based maker of wearable devices, has raised $19 million in Series A funding from Khosla Ventures and Matrix Partners. The round follows a previous $3 million seed financing led by Vinod Khosla of Khosla Ventures.

Shape Security, a three-year-old, Mountain View, Ca.-based enterprise security company that automated malware and bots by way of a polymorphic security appliance that it produces, has raised $40 million in Series C funding led by Norwest Venture Partners and Sierra Ventures. Other participants in the round, which brings Shape’s total funding to $66 million, included Kleiner Perkins Caufield & ByersVenrockGoogle VenturesTomorrowVentures, and Allegis Capital.

SimilarGroup, a 6.5-year-old, Tel Aviv-based company whose sites analyze Web sites across the Internet, has raised an undisclosed amount of Series C funding entirely from Naspers, the South African multinational media group that owns minority stakes in major Internet companies, including Tencent and Mail.ru Group. TechCrunch sources say the Series C is in the tens of millions of dollars. Up to this point, SimilarGroup has raised $7.1 million, says Crunchbase, including from Yossi Vardi, the renowned Israeli investor.

SpareFoot, a 6.5-year-old, Austin, Tx.-based online storage marketplace, has raised $10 million in funding from earlier investor Insight Venture Partners. Its other major investors include Capital FactoryFloodgate and Silverton Partners. SpareFoot has raised $26 million to date.

TraceLink, a four-year-old, Woburn, Ma.-based company whose software helps companies connect, integrate, and collaborate with their supply chain partners, has raised $5.5 million in its first round of venture funding; it was led by FirstMark Capital.

Voalte, a five-year-old, Sarasota, Fla.-based healthcare-focused mobile communications platform, has raised $36 million in Series C funding led by Bedford Funding, a tech-focused private equity firm. Voalte’s technology is designed help improve care coordination through voice calls, alarms and alerts and secure text messaging.

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New Funds

Athenahealth, the 17-year-old, publicly traded, Watertown, Ma.-based company that sells Internet-based business services to physician practices, is launching an accelerator to cultivate digital health care startups, reports Venture Capital Dispatch. The company says that demand for its services have surged as doctors look to outsource more, including billing; the accelerator hopes to come up with new services more quickly. According to Venture Capital Dispatch, the accelerator plans to recruit two to three companies this year that will operate out of a 2,500 square-foot space at its headquarters and expects to house 10 companies altogether.

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IPOs

2U, a 6.5-year-old, Landover, Md.-based company that builds online learning platforms to help nonprofit colleges and universities in their student enrollment and other services, has filed the paperwork to raise up to $100 million in an IPO. The company has raised nearly $100 million in private funding over the years; its biggest shareholders include Redpoint Ventures, which owns 23.2 percent of the company; Highland Capital Partners, which owns 11.4 percent; Novak Biddle Venture Partners, which owns 11 percent; and Bessemer Venture Partners, which owns 8.3 percent.

Everyday Health, the 12-year-old, New York-based health sites operator and apps maker, has filed for an IPO valued at up to $115 million. The company has raised $30 million from VCs, according to Crunchbase. Among its biggest shareholders are: WF Holding Company, which owns 25.4 percent of the company; Rho Ventures, which owns 25.4 percent;Scale Venture Partners, which owns 7.2 percent; Foundation Capital, which owns 5.2 percent; and NeoCarta Ventures, which owns 5.2 percent.

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Exits

BlueKai, a 6.5-year-old, Cupertino, Ca.-based “intelligent marketing” company, was acquired yesterday by software giant Oracle. Terms of the deal weren’t disclosed, but the outlet AdExchanger pegged the price at $300 million to $450 million. BlueKai is the fourth marketing and advertising tech company that Oracle has acquired in recent years. As AdExchanger notes, in May 2012, Oracle bought the social marketing software startup Vitrue for an estimated $300 million. It then purchased the marketing automation firm Eloqua for around $810 million in December 2012. And last December, Oracle acquired the email and cross-channel marketing software company Responsys for $1.5 billion. BlueKai had raised around $50 million from investors, including Redpoint Ventures,Battery VenturesGGV CapitalSplit Rock Partners, and e.ventures.

Cloudant, a 5.5-year-old, Boston-based cloud database startup, has been acquired by IBM for an undisclosed amount. Cloudant had raised roughly $16 million from investors, including Avalon VenturesIn-Q-Tel, andSamsung Ventures. GigaOm has more on the deal here.

Monster Worldwide yesterday announced that it has acquired TalentBin, a 3.5-year-old, San Francisco-based startup that used data to help recruiters discover hard-to-find technical talent, and Gozaik, a 20-month-old, Woburn, Ma.-based “social recruiting” startup that relied heavily on Twitter to find its job listings. Terms of the transactions were not disclosed. TalentBin had raised $3.2 million from investors, including First Round CapitalCharles River VenturesFoundation CapitalLightbank, andNew Enterprise Associates. Gozaik doesn’t appear to have publicly disclosed any outside funding.

StopTheHacker, a 5.5-year-old, Burlingame, Ca.-based anti-malware firm, has been acquired by CloudFlare, a website security and content delivery service. StopTheHacker had raised just $1.1 million, reportedly, including from Runa Capital. Terms of its acquisition aren’t being disclosed, says TechCrunch.

Veveo, a 10-year-old, Andover, Ma.-based intelligent search, personalization, and recommendation mobile phone service, is being acquired by Rovi Corp. for $62 million in cash and up to $7 million in additional cash payments based on certain milestones. Rovi supplies information on TV programs, movies, celebrities, books, games, and sports to content providers in more than 50 countries. Veveo disclosed just one, $14 million, round of funding in 2007, from Matrix PartnersNorwest Venture Partners, and North Bridge Venture Partners.

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People

Investor Marc Andreessen says more net neutrality laws aren’t going to help anything. Here’s his point of view laid out in tweets.

In what’s becoming an intriguing corporate governance battle, activist investor Carl Icahn has accused eBay board members Marc Andreessenand Scott Cook of conflicts of interest in a public letter published yesterday. Forbes has some of the strongest allegations here, including that Andreessen profited unfairly by participating in a consortium that bought a controlling stake of the eBay subsidiary Skype for $1.9 million. (The group sold Skype to Microsoft just 18 months later for $8.5 billion.) eBay quickly came to the defense of both board members, saying Icahn “unfortunately has resorted to mudslinging attacks against two impeccably qualified directors.” Of Skype specifically, eBay said the “company explored all options for divesting Skype, including an IPO and sale to a strategic buyer, and pursued the option that offered the highest return at the time, which was the sale of a controlling stake.”

Sibyl Goldman, executive vice president of new media at Ryan Seacrest Productions, has been recruited by Facebook to become its head of entertainment partnerships. According to Variety, Goldman will be based in L.A. and charged with building a bigger team focused on outreach efforts to studios, networks and celebrities. More here.

Yahoo CEO Marissa Mayer has reportedly been trying, without success, to recruit Mary Meeker of Kleiner Perkins Caufield & Byers to the company’s board. Re/code, which has the story, notes that the last time Mayer added a renowned tech player, entrepreneur Max Levchin, it was late 2012.

Yesterday morning, on CBS, where he was promoting his newest book, Google Chairman Eric Schmidt was asked about reports that Google had bid $10 billion for the messaging service WhatsApp. His response: “Not in the way you’re thinking about. We’re certainly aware of them…Let me not talk about this specific conversation with WhatsApp. Let’s just say that we like WhatsApp…and we like some other things, too, including our own products.”

Ted Schlein, a longtime general partner at Kleiner Perkins Caufield & Byers, talked with Deborah Gage of the WSJ yesterday about some of the more interesting trends he’s seeing around cyber security. Among his many observations: “Crowdsourced threat intelligence or vulnerability analysis is an idea that’s going to be used by a lot of other parties to help us solve our problems because we ourselves can’t afford to do that. AlienVault, the open threat exchange which is crowdsourcing the threats, is brilliant. Rather than buy a threat feed, you get it from the universe. It’s the closest you’ll get to real-time threat detection.”

Eric Tilenius is the newly appointed CEO of BlueTalon, a Redwood City, Ca.-based big data startup that helps companies analyze information from both internal and external databases and that has just completed a $1.5 million seed round from Data Collective. Prior to joining BlueTalon, Tilenius was an EIR at Scale Venture Partners, and before joining Scale, he was a general manager at Zynga. (He has also served as CEO of Netcentives and Answers.com.) Tilenius told StrictlyVC last week of the move,”Ultimately, the team and product at BlueTalon won me over; I felt this was an incredible opportunity I could not afford to miss.”

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Happenings

Launch Festival is rolling into its second day in San Francisco. You can learn more about the agenda here; to see a live stream of the event, use this link.

Mobile World Congress continues on in Barcelona. You can see a live feed here.)

Apparently, it’s also not too late to register for the RSA Conference, happening all this week at San Francisco’s Moscone Center. More information here.

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Job Listings

Coinbase, the well-funded, San Francisco-based bitcoin startup that has been likened to an early PayPal, is looking for a business development exec. To apply, send your resume here.

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Essential Reads

Samsung revealed its Galaxy S5 yesterday at a trade show in Barcelona and it looks like a big hit.

A San Francisco-based high-tech writer was robbed of her Google Glassat a local bar last weekend while explaining to friends how the device works. After pursuing her attacker and getting the Glass back, a second assailant reportedly stole her purse and its contents. According to the San Francisco Chronicle, she was told that she and her friends were “destroying the city.”

Ford is reportedly dropping Microsoft as a software partner to power its in-car entertainment and communications systems, in favor of, erm,Blackberry. (Tweeted Upstart founder Dave Girouard of arrangement: “Blackberry? Seriously? Ford moves from internal combustion engine to horse-drawn carriage.”)

The difference between beacons and geofencing. (You already know this, of course. We include it for StrictlyVC’s other readers.) H/T: MediaREDEF

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Detours

American Aqueduct: The Great California Water Saga

A list of the “go-to” law schools, 2014 edition.

Sunday night, HBO broadcast the hilarious full trailer for Mike Judge’s new series, “Silicon Valley,” which debuts April 6. (We were already excited; now we can hardly wait.)

It’s random, but this clip also made us horse laugh.

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Retail Therapy

Starting to think about your next billion-dollar idea? You might use this to get inspired.

Throwing knives. For the friend who has everything(?).

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The Startup Whisperer, Paul Graham, on Getting Back to Basics

Paul-GrahamCombinator cofounder Paul Graham spoke at the Launch conference in San Francisco yesterday afternoon in a “fireside chat” with the event’s founder, Jason Calacanis.

While it wasn’t exactly a hard-hitting interview – these things are rarely intended to be – Calacanis managed to surface a lot during their conversation. Graham spoke at length about about Y Combinator’s earliest days, for example; addressed a couple of the controversies he has found himself embroiled in over recent months; and explained the rationale behind his decision to relinquish day-to-day control over Y Combinator. (He’s basically exhausted and wants his “brain back.”) Calacanis also asked Graham plenty about what indicates to him that a startup might succeed or fail. Here’s some of what Graham — whose platform has helped launch Airbnb, Dropbox, and Stripe, among more than 600 other companies — had to say:

On one of the quickest ways to get crossed off the list during an application interview with Y Combinator:

“The founders have to get along. If the founders hate each other, you’re in big trouble,” and it happens “very, very often,” said Graham. “You don’t know how good friends you are with somebody until you try to start a startup with them. That’s why it works so badly when you have some startup that’s started by some dude in business school who has this idea for some startup, and then he goes and finds some, like, 20-year-old meek, undergraduate computer science major to realize his vision, and that’s the founding team … If you go into a Y Combinator interview, and one of you looks in terror to the other one before answering questions, that’s one of our secret tells. Or if you roll your eyes while your cofounder is speaking, which has actually happened, or if you stand up your cofounder – like you don’t show up for the interview… these have all happened.”

On a founder type that Graham may have misjudged earlier on his career:

“The one thing is people who are very smart, but that’s it. People who are very smart but ineffectual. We used to have more faith in brains. It turns out you can be surprisingly stupid if you’re sufficiently determined. And anyone can tell this empirically. There are some parts of America where there are a lot of rich people and they’re not very smart – parts of Manhattan and Florida and L.A. You don’t have to be supersmart if you’re fearsomely effective.”

Calacanis asked him the most important thing for startups to focus on:

“There’s a meta answer to that,” said Graham. “The most important thing for startups to do is to focus, because there are so many things you could be doing, but one of them is the most important, so you should be doing that and not any of the others. So you should not be grabbing coffee with investors. When you want to raise money, you shift into fundraising mode and you go and raise money. You do not promiscuously meet with investors in the middle of the day when you should be working simply because they send you an email saying, ‘Hey, let’s grab coffee.’ There are a 1,000 things you could be doing, and only one of them is the most important … and you work on that.”

On the essence of growing a startup:

“You have to start with a small, intense fire. Suppose you’re the Apple I. I think they made something like 500 of those things. So all they had to do was find 500 people to buy these things and they launched Apple. Apple! So you’ve got to find a small number of people – it’s necessarily going to be a small number of people…who want what you’re making a lot… You don’t have to do any better than Apple and Facebook. You’ve got to know who those first users are and how you’re going to get them, and then you just sit down and have a party with those first few users and you just focus entirely on them and you make them super, super happy.”

Calacanis also managed to back into a question about how Graham righted the ship when, in 2012, it began to seem that Y Combinator was accepting too many startups into the program for its own good. (Its summer 2012 class welcomed 80 teams.) Considering that Y Combinator intends to grow much bigger, and may even spread to other cities eventually, according to Graham, his answer seems noteworthy:

“We thought, ‘Why does this batch suck so bad? Why do we hate our life?’ There were startups, like halfway through the batch, I still didn’t know what they were doing. And we were asking what went wrong and it was so obvious…It was N squared, specifically,” said Graham. “It would be no problem having that many partners dealing with that many startups, so long as they were sharded,” he added, referring to a programming word that means a horizontal partition. “So we redesigned YC to be sharded and it has been ever since and it works just fine. Like, 68 [teams], no problem … We have three siloes, each one overseen by a group of partners. So basically, it’s like three little Y Combinators. And we know little Y Combinator works.”

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StrictlyVC: February 24, 2014

110611_2084620_176987_imageGood Monday morning!

Between Train Town, tennis lessons, and the finale of “Downton Abbey” (is it wrong to hope Rose is shipped to America next season?), StrictlyVC ran out of time yesterday to write today’s column. But enjoy the intel below and stay tuned for some good stuff coming this week!

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Top News in the A.M.

Messaging giant WhatsApp, which already has 465 million users, will add voice services in the second half of this year, says TechCrunch.

Comcast and Netflix announced an agreement Sunday in which Netflix will pay Comcast for faster and more reliable access to Comcast’s subscribers. The deal, notes the New York Times, is a “milestone in the history of the Internet, where content providers like Netflix generally have not had to pay for access to the customers of a broadband provider.”

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New Fundings

Beauty Noted, an 18-month-old, Sausalito, Ca.-based company that hasn’t yet launched but superficially looks like a Pinterest for beauty products, has raised $1.7 million of a $2.2 million round, shows an SEC filingKate Thorp, former CEO of Real Girls Media and Lot21, is chief executive.

Bigtincan, a three-year-old, Waltham, Ma.-based maker of mobile content software, has raised $5 million in its first round of venture capital led bySouthern Cross Venture Partners.

Carwow, a 3.5-year-old, U.K.-based, new car buying platform, has raised $2.8 million in seed funding led by Balderton Capital, which was joined byEpisode 1 VenturesSamos Investments, and numerous individual investors.

Changers, a four-year-old, Berlin-based startup that turns eco-friendly behavior into a game, has closed $1.5 million in Series A financing. The German government-backed fund BFB Frühphasenfonds Brandenburgled the round, says TechCrunch, with participation from clean energy specialist Heliocentris and other, unnamed private investors.

ClubLocal, a 3.5-year-old, Encino, Ca.-backed platform to book and buy household services like plumbing, has closed $10.7 million in funding. Investors include Groupon and numerous individual investors.

CourseHorse, a three-year-old, New York-based startup that helps people locate and enroll in local classes (beginning in New York City) has raised $3 million in new funding, shows an SEC filing. The company has raised $3.5 million to date, including from New York Angels and Golden Seeds.

eCommera, a 6.5-year-old, London-based company that offers advisory, support and software services to retailers that are developing and operating e-commerce businesses, has raised $41 million in Series C funding led by Dawn Capital. Other participants in the round includedWest Coast CapitalFrog CapitalePlanet CapitalWPP and new partner Wti. The company has raised at least $51.4 million to date, shows Crunchbase.

GC Aesthetics, a 6.5-year-old, Dublin, Ireland-based maker of breast implants, has raised $60 million led by OrbiMed Advisors, which contributed $40 million. Another $20 million came from Montreux Equity Partners and Oyster Capital. The company has raised $90 million to date.

Granular, a 4.5-year-old, San Francisco-based maker of cloud software and analytics for farmers (that was formerly called Solum), has raised $4.2 million from Andreessen HorowitzGoogle Ventures and Khosla Ventures. No financial terms were disclosed, but the company disclosed at the same time that Monsanto Company has bought its soil science business. Granular has raised roughly $28 million so far, according to Crunchbase.

Hubub, a 4.5-year-old, New York-based online community platform whose visitors gather around user-generated topics, has raised $8.5 million in Series A funding. The investors included Edgar Bronfman, Jr.Todd Ruppert, the former CEO of T. Rowe Price Global Investment Services; and Tom Kalaris, former CEO of Barclays Wealth & Investment Management.

Kerecis Limited, a 6.5-year-old, Isafjordur, Iceland-based emerging tissue-regeneration company, has raised $2 million in the A3 series funding fromNSA Ventures, Iceland government’s venture capital fund; Omega3 ehf, an investment fund affiliated with London-based Novator; Capital ehf1924 ehfSkógur ehfKlofningur ehf; and Hradfrystihusid-Gunnvor hf. The company’s technology takes decellularized fish skin that has had all its cells and antigenic materials removed and applies it to areas of tissue damage where it recruits the body’s own cells and (so goes the ultimate goal) converts it into functional, living tissue.

Magisto, a 2.5-year-old, New York-based service for creating and editing personal movies on mobile devices, has raised $2 million from Mail Ru Group. Magisto is also backed by Horizons VenturesMagma Venture PartnerQualcomm Ventures and SanDisk Ventures. The company has raised $20.5 million to date, according to Crunchbase.

mCASH, a 7.5-year-old, Oslo, Norway mobile payment startup, has raised $7 million in funding from Northzone and Entrée Capital. Arctic Startup has more here.

Newlans, an 11-year-old, Acton, Ma.-based company that makes an analog wideband signal processing architecture for RF semiconductor applications, has raised $15 million in Series B funding led by Intel Capital. Earlier investors Paladin Capital and Lockheed Martin Corporation also participated in the round, which brings the company’s total funding to $22 million.

Saisei, a three-year-old, Sunnyvale, Ca.-based company that makes virtual network appliances, has raised $5.6 million Series A funding round led byOxygen Ventures, which was joined by earlier, individual investors.

Seno Medical Instruments, a 8.5-year-old, San Antonio, Tx.-based medical device company that uses lasers and ultrasound to diagnose breast cancer, has raised $39 million in Series C funding led by MedCare Investment Funds, which was joined by unnamed individual investors. The company has raised at least $51 million to date.

SoundFocus, an 18-month-old, San Francisco-based company whose iOS app adjusts music based on a person’s unique abilities to hear different frequencies (and which is reportedly building a hardware equivalent of the app), has raised $1.7 million from Kapor CapitalY-CombinatorGreg BadrosOvo FundRTA Capital, Vegas Tech Fund, and individual investors.

VivaReal, a 4.5-year-old, Sao Paulo, Brazil-based real estate marketplace in Latin America that connects, buyers, sellers, and renters with properties, has raised $12.7 million in new funding, shows an SEC filing. The company has raised roughly $32 million since 2011, show filings, including from investors Valiant Capital PartnersKaszek VenturesMonashees Capital, and a long list of individual backers, like former eHarmony CEOGreg Waldorf.

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New Funds

Deep Fork Capital, a 10-year-old, San Francisco-based venture firm, is targeting $50 million for its raising a second fund, shows an SEC filing. Deep Fork was founded by Aubrey McClendonAndre de Baubigny andTimothy Komada, who provided all the money for Deep Fork’s first fund — reportedly a $500 million pool. (McClendon, it’s worth noting, cofounded and long served as CEO of the oil and natural gas company Cheapeake Energy Corporation, whose public market cap is currently $17.7 billion.) The three came together in 2002 when Komada and de Baubigny, a former investment banker, founded a wine storage business called Vintrust that raised money from investors, including McClendon. (Vintrust reportedly ran aground in 2009.) One of Deep Fork’s newest investments is in Amplify L.A., a startup accelerator that raised $8 million in Series B funding last month.

Maven Ventures, a five-year-old, Los Altos, Ca.-based seed-stage fund focused on mobile and consumer Web startups, has raised $4.2 million, shows an SEC filing. Maven Ventures was founded by Jim Scheinman, an early employee at the social network Friendster who went on to work for two startups founded by Michael and Xochi Birch. Scheinman was first the head of biz dev at their birthday alert company BirthdayAlarm; according to his LinkedIn bio, he later became the first employee of their social network Bebo, acquired by AOL in 2008 for $850 million in cash.

Morningside Group, a 28-year-old investment group with offices in Boston, Hong Kong, Shanghai and Beijing, has raised more than $400 million in capital for three new funds, according to filings with SEC first flagged by peHUB. The documents, filed Thursday, show that the firm has raised $279 million for Morningside China TMT Fund III, $40 million for Morningside China TMT Fund III Co-Investment, and $93 million for Morningside China TMT Special Opportunities Fund. Morningside was founded by billionaire brothers Ronnie and Gerald Chan, whose Hang Lung Group is among Hong Kong’s biggest real estate companies. (Gerald Chan has reportedly acquired gobbled up more than $100 million in real estate around Harvard Square in recent years, too.) Morningside invests in both private equity and venture capital deals in North America, Europe and Asia Pacific; one of its newest portfolio companies is Cheyipai, a used car trading platform in China.

PTV Sciences (for Pinto Technology Ventures), an 11-year-old, Austin Tx.-based venture firm that seeks out growth opportunities in healthcare and life sciences, is looking to raise up to $200 million for its fourth fund, shows an SEC filing that says the first sale has yet to occur. The firm raised its last fund in 2010.

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IPOs

Chukong Technologies, a four-year-old, Beijing-based mobile-gaming company, hopes to raise around $150 million through a IPO in the U.S. in the second half of this year, reports Bloomberg. Chukong develops leisure games for smartphones and according to its site, “Fishing Joy,” one of its most popular games, has attracted more than 200 million users in China. The company has raised just north of $83 million, according to Crunchbase; its investors include Northern Light Venture Capital,Steamboat VenturesSequoia Capital, and GGV Capital.

Roku, the 13-year-old, Saratoga, Ca.-based maker of set-top boxes that connect TVs to the Internet, is weighing an IPO this year, according to Bloomberg sources, who say the company hasn’t yet selected a banker. Last May, Roku raised $60 million in new funding from Hearst and an unidentified institutional investor. They joined News Corp.British Sky Broadcasting GroupMenlo VenturesGlobespan Capital Partners and others backers who’ve collectively invested roughly $130 million in the company to date.

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Exits

Appslingr, a year-old, San Francisco-based startup that was incubated by the Alchemist Accelerator and has been building a system that lets people access any of their files and use any application on any device, was just acquired for an undisclosed amount by Otoy. L.A.-based Otoy is a cloud graphics company that itself just closed an undisclosed amount of Series D funding led by Yuri Milner two weeks ago. (Milner is just one of many heavy hitters associated with the company, whose board includes Google Chairman Eric Schmidt, former IBM president Sam Palmisano, and Ari Emanuel, the cofounder and co-CEO of William Morris Endeavor.) You can read more about the deal here.

Burstly, a four-year-old, Santa Monica, Ca.-based company, has been acquired by Apple for an undisclosed amount. Burstly makes an in-app ad management platform called SkyRocket that helps developers monetize their applications, and it’s the parent company of a popular mobile app testing platform called TestFlight. TechCrunch reported the news on Friday. Burstly had raised $7.3 million, according to Crunchbase, including from Upfront VenturesRincon Venture Partners, and SoftBank Capital.

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People

Herbert Allen III, who took over his family-run firm, Allen & Co., in 2002, has turned the relatively small, 180-employee bank, into a serious Silicon Valley deal maker, all without establishing a California office. Powerful friends like investors Marc Andreessen and Peter Thiel have helped.

Billionaire investor Mark Cuban made a surprise appearance at the annual “SEC Speaks” conference in Washington on Friday. Wearing a gray hoodie, Cuban, who last fall beat the SEC in a years-long case against him, “sat in the back of the large auditorium, lighting up the Twitter-sphere with lively commentary about speeches from top SEC officials,” reports Reuters.

Drive Capital, the newly closed Midwest-focused venture firm of former Sequoia partners Mark Kvamme and Chris Olsen, has named two partners to the firm: Robert Hatta and Ned Schwartz. Hatta joins as a talent partner; he was VP of talent for JumpStart Ventures, a Chicago-based seed-stage fund. Schwartz joins Drive after spending five years as an investor at Norwest Venture Partners and General Atlantic.

Todd Force, previously a CFO at the computer server company Rackable Systems, is joining the mobile software company MobileIron as CFO it prepares for an IPO, says the WSJ. MobileIron could be valued at more than $2 billion, according to the piece, which reports that MobileIron generated more than $100 million in revenue last year, according to a source.

Erin Gleason has just joined the venture firm Founders Fund as its first in-house communications person. Gleason came from the public relations firm the Hatch Agency and spent several years in public relations at Foursquare and Google before that.

On Friday, Y Combinator cofounder Paul Graham announced that he’s handing over leadership of the popular startup incubator to Sam Altman, a part-time YC partner since 2011 who also happens to have been part of the first YC startup class in 2005. (Altman’s startup, the location-based services startup Loopt, was acquired by Green Dot Corp in March 2012.) In a blog post, Graham said of the move that Altman is better equipped to continue scaling out Y Combinator. “I’m convinced there’s a fundamental change happening in the way work gets done. It’s becoming normal to start a startup.There will be a lot more startups in 10 years than there are now, and if YC is going to fund them, we’ll have to grow proportionally bigger. Of all the people we’ve met in the 9 years we’ve been working on YC, Jessica [Livingston, Graham’s wife and cofounder] and I both feel Sam is the best suited for that task.”

Futurist Ray Kurzweil, who is today Google‘s director of engineering, is profiled in his San Francisco home by The Guardian, and he tells the outlet that robots will be more intelligent than humans in 15 years. Says one critic of Kurzweil who is quoted in the piece, biologist PZ Myers: Kurzweil’s theories are a “very bizarre mixture of ideas that are solid and good with ideas that are crazy. It’s as if you took a lot of very good food and some dog excrement and blended it all up so that you can’t possibly figure out what’s good or bad.”

Peter Thiel and MIT business professor Andrew McAfee squared off last Thursday night in a public debate about technological innovation and it’s relationship to widening income inequality. “I wouldn’t mind paying more in taxes if I felt the money was being spent as well as it was spent in the ‘30s or ‘50s,” Thiel told Forbes reporter Jeff Bercovici immediately after the discussion. “I live in the Marina area in San Francisco. They built the Golden Gate Bridge in three and a half years in the 1930s, ‘33 to ‘36. They’re now building an access road to the bridge that’s taken eight years and possibly will end up costing more in inflation adjusted dollars than the whole bridge cost in the ‘30s. So it’s one of the reasons I personally don’t want to pay more taxes, because I feel the government spends the money so extraordinarily badly. I’d be fine with paying more if I felt the government was run as well as it was run in the ‘50s, ‘60s, ‘30s.”

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Happenings

The three-day Launch Festival kicks off today in San Francisco. The agenda features a VC panel, a keynote by Paul Graham, and, of course, lots of startup demos.

The Samsung Unpacked 2014 event is happening today in Barcelona, Spain (where Samsung is expected to unveil the highly anticipated new Galaxy S5). The Korean electronics giant kicks off the event at 8 p.m. local time (11 a.m. PST); you can check it out live right here.

Samsung Unpacked is part of the broader, four-day-long trade show Mobile World Congress in Barcelona, featuring keynotes by Facebook CEO Mark Zuckerberg, WhatsApp CEO Jan Koum, and IBM CEO Virginia Rometty, along with lots of new product announcements. (You can see a live feed here.)

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Data

You might not guess it, but private equity and venture capital investments were up last year over 2012, says the Latin American Private Equity and Venture Capital Association. A total of $6.04 billion was committed to Brazil, compared with $5.7 billion in 2012. Investments in Latin America also increased, to $8.9 billion, up 13 percent from the $7.9 billion in 2012. The region had 233 deals last year, a slight drop from 237 in 2012. Dealbook has more here.

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Job Listings

Intuit is looking for a corporate development senior analyst to help identify, evaluate and help execute on M&A opportunities. The job is in Mountain View, Ca.

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Essential Reads

Apple is already building its next massive business and no one seems to have noticed.

The telecom industry has convened for its biggest get-together of the year at the Mobile World Congress event. Meanwhile, it’s never been less clear what it means to be a mobile-phone company.

WhatsApp was acquired by Facebook for a stunning $19 billion last week, but when it went down on Saturday for a few hours, some of the tweets about the outage were priceless.

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Detours

“I had an epiphany the other day,” writes Georgetown University law professor Rosa Brooks. “I was in the middle of marking up a memo on U.S. drone policy while simultaneously ordering a custom-decorated cake for my daughter’s sixth grade musical cast party and planning my remarks for a roundtable on women in national security. Suddenly, it hit me: I hate Sheryl Sandberg.”

In his new GQ column, Momofuku founder David Chang sends a “sweet and salty valentine” to what he considers to be the most underrated meat in America: Yes, we’re talking bologna.

Tips for pulling an all-nighter.

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Retail Therapy

This new Garmin watch can track your progress in six different sports and deliver iPhone users notifications for calls, email and texts, among other things. Engadget says it “might be the only smart wristwear you need if your life revolves around fitness.” (To that, we say, we wish.)

Think you’ve seen everything down on Sand Hill Road? Just wait until someone pulls up in one of these jaw-droppers.

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StrictlyVC: February 21, 2014

110611_2084620_176987_imageGood morning, everyone, hope you have a super weekend. See you back here on Monday.

Also, quick (giant) thank you to those of you who reach out every week to let me know you’re enjoying StrictlyVC. As someone who is still trying to figure this out, it’s so very much appreciated!

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Top News in the A.M.

Microsoft head honcho Satya Nadella talks with the New York Times about his new role.

Amazon gets its TV box ready, again.

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Scribd CEO Trip Adler on Books, Froth, and the Company’s Next Round

Scribd has had a circuitous arc. Started in San Francisco in 2007, Scribd’s original concept was to allow anyone to take any kind of written content and slap it on the Web. (Fifty million documents have been uploaded since.) By 2009, it was also running an electronic book market, allowing authors and publishers to upload their works, then set their own price for them and keep most of the revenue. In 2011, Scribd also launching a news reading app called Float. (It later folded Float back into the company.)

But the company thinks it has struck on its most promising transformation yet, as a digital lending library that charges $8.99 per month for unlimited access to roughly 100,000 titles from publishing partners like HarperCollins that can be read on pretty much any kind device.

The company is about a year into the shift, though it only announced it in October of last year. Earlier this week, I talked with cofounder and CEO Trip Adler to see how it’s going – and whether Scribd might raise more funding to move past competitors (including, potentially, Amazon) that also want to become the Netflix of books.

What can you tell us about how your new business is going? Are you releasing subscriber numbers?

We aren’t, but they look good. Since launching a little over a year ago, the [number of subscribers has] been growing 50 to 100 percent each month. I haven’t seen anything grow quite this fast [at Scribd].

Your business is increasingly reliant on subscriptions, whereas your document sharing business is largely ad supported. How much of that $8.99 is going in your pockets versus publishers whose books you’re renting?

We pay publishers based on reading activity, so if a customer reads a book, we pay the publisher for the book.

That seems like an expensive proposition. How much do the books cost you?

Some of the romance books might cost a few dollars; some of the best-sellers can cost up to $15. We have some power readers who will read many books in one month, but the typical user reads a book a month, and we’re optimizing around the average user, who costs us less [than the $8.99 monthly subscription fee]. The model has been profitable since we launched it.

You’re gathering a lot of data about how people consume books, including what prompts them to skip ahead, and whether people aremore likely to finish biographies than business titles. Will you start charging publishers for these analytics?

Analytics isn’t part of our business model yet. So far, we’re just sharing it with publishers very openly, but it could be something down the road that we turn into a business model.

How are you marketing this new service?

Most of it has been organic; we have 80 million monthly active users, so we’re mostly marketing it to that audience, and growth hasn’t been a problem. We’re also starting to do more paid ads, and we’re talking to journalists like you.

How big is Scribd at this point, and is it profitable?

We have 55 employees, mostly in engineering and design. And we’ve been profitable for a while and growing revenue pretty steadily – 90 percent year over year since we started the company.

You’ve raised $26 million so far, with your most recent, $13 millionround closing in 2011. Are you back in the market or will you be soon?

We might fundraise if it feels like we have a use for the cash, but it hasn’t been a priority for us. Right now, we’re just focused on making the product the best that we can.

People are throwing a lot of money around right now.

Things do seem frothy to me. The valuations that companies are getting are just crazy. For that reason, it could be a good time to fundraise. If you can build a company and get it profitable, funding comes naturally, though. It’s harder to build a profitable business than to raise money.

money-ears

New Fundings

Acompli, a year-old, San Francisco-based company that’s building a mobile email application to work as an all-in-one productivity app for the iPhone, has raised $7.3 million in Series A funding led by Redpoint Ventures. Other investors to join the round included Harrison Metal and Felicis Ventures.

Brand Embassy, a 2.5-year-old, Prague-based social customer care platform, has raised $1 million in seed funding from investors that include Rockaway Capital and Spread Capital. The company’s SaaS platform allows companies to answer customer questions through social media channels like Facebook and Twitter; it’s used by Vodafone and TMobile, among others, says FinSMEs.

Cylance, a two-year-old, Irvine, Ca.-based “math-based” threat detection and prevention company, today announced it has closed $20 million in Series B funding from Blackstone and earlier investors Khosla Venturesand Fairhaven Capital, among others. Cylance has raised $35 million altogether, according to Crunchbase.

e-Chromic Technologies, a three-year-old, Boulder, Co.-based company that says its electrochromic thin film can turn standard windows into energy-efficient “smart” windows, has raised $600,000 in seed financing led by Amplifier Ventures, a seed-stage firm in McLean, Va.

Ezetap, a three-year-old, Bangalore-based mobile payment company focused on emerging markets, has raised $8 million in Series B funding led by Helion AdvisorsSocial+Capital and Berggruen Holdings. The company has raised roughly $11.5 million to date.

GigaOm, the seven-year-old, San Francisco-based media company, has raised $8 million in new funding led by Shea Ventures. Earlier investors, including True VenturesAlloy Ventures and Reed Elsevier Ventures, also participated in the funding. The company has raised roughly $22 million over the years, shows Crunchbase.

Inpria, a 6.5-year-old, Corvallis, Or.-based developer of high-resolution photoresists, has raised $4.7 million of a committed $7.3 million in financing led by Samsung Ventures, with participation from Intel Capital andApplied Ventures.

Meetup, a 12-year-old, New York-based online network of local groups, has closed a secondary round from three key investors — Twitter cofounderEv Williams, Zappos CEO Tony Hsieh, and Behance co-creator Scott Belsky — reports VentureBeat. The round was “kept small,” allowing 10 to 15 current and former employees to exercise their expiring stock options, Meetup’s CFO tells the outlet. Meetup itself “did not take in any money in this transaction.”

Mindbody, a 13-year-old, San Luis Obispo, Ca.-based maker of business management software for beauty, health and wellness industries, has raised $50 million from a syndicate of current and new investors, includingBessemer Venture PartnersInstitutional Venture PartnersCatalyst InvestorsW Capital Partners, and Montreux Equity Partners.

Modern Family Doctor, a 6.5-year-old, Bangalore-based chain of primary healthcare clinics and pharmacies, has raised a Series B round of undisclosed size from Bamboo Finance with participation of existing investor Saama Capital. In 2011, the company raised $2 million from Saama Capital.

Ornim Medical, a 10-year-old, Kfar-Saba, Israel-based biomedical technology company that’s developing non-invasive patient monitoring devices for cerebral and tissue blood flow, has raised $10 million in funding led by OrbiMed Israel, with participation from GE and Agate venture capital fund. The company has raised $20 million to date.

Smarter Remarketer, a 3.5-year-old, Indianapolis-based company tht makes customer intelligence software for retailers, has raised $7 million in financing led by Battery Ventures. The company has raised $10.3 million altogether, shows Crunchbase.

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New Funds

Crystal Tech Fund, a new Ashburn, Va.-based venture fund, is targeting a $50 million fundraise, shows an SEC filing. The firm’s founder is Paul Singh, a former partner at 500 Startups, who tells the outlet InTheCapital that he’s looking invest in “tech enabled” companies in the post-seed space. Says Singh: “This is definitely the next logical step for me, and I think this is the next logical step for what the market needs.” Singh follows in the path of several other firms to explicitly target startups that have raised seed funding but not yet obtained Series A funding, including Venture51Capital Partners (the new fund of Ronny Conway), and Bullpen Capital, which StrictlyVC profiled last week.

IDG Ventures USA, the early-stage, San Francisco-based venture firm, looks to be sewing up its third fund, judging by an SEC filing first flagged by VentureBeat. The filing states that the firm has raised $65.2 million and is targeting $100 million. IDG is focused on media, enterprise IT, and consumer Internet companies and is managed by Alex RosenPat Kenealy, and Phil Sanderson. The group, which was established in San Francisco in 2006, raised its last fund in 2009. You can check out its portfolio here.

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Exits

Dachis Group, a six-year-old, Austin, Tx.-based social and brand analytics company, has been acquired by another social media analytics company, 4.5-year-old, New York-based Sprinklr. Dachis had raised $37.5 million from Austin Ventures. Terms of the deal weren’t disclosed.

Simple, a 4.5-year-old, Portland, Or.-based banking startup, has been acquired for $117 million in cash by the Banco Bilbao Vizcaya Argentaria, a 150-year old, Spanish banking operation. Simple had raised roughly $15.3 million from investors, including SV AngelFirst Round CapitalLerer Ventures500 StartupsShasta Ventures, and IA Ventures.

Spider.io, a three-year-old, London-based startup that tries to detect online ad fraud, has been acquired by Google for undisclosed terms. Cnet has more on the deal here.

Tedemis, an eight-year-old, Paris-based software company focused on personalized email marketing, has been acquired by the publicly traded digital performance advertising company Criteo for $23 million in cash, with another $5.4 million being deferred based on agreed milestones. Tedemis describes itself as venture-backed though hasn’t disclosed how much it has raised or from which investors.

Xora, a 15-year-old, Mountain View, Ca.-based market specialist in mobile workforce management, is being merged into the mobile workforce management and optimization software company ClickSoftware Technologies for $14.7 million in cash, plus working capital and cash adjustments. Xora has raised roughly $20 million over the years, including from Rho Capital PartnersDawntreader VenturesBlueStream Ventures, and Split Rock Partners.

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People

ML co-inventor Tim Bray is leaving Google after a four-year run, saying he didn’t want to move to California from his beloved Vancouver. In a self-styled Q&A, Bray asks if everyone won’t be working remotely in the future, to which he answers: “I don’t know. I’m pretty sure it’s possible to build a company around the notion of a distributed workforce, but I don’t know how far you can scale it. Anyhow, that’s not the kind of company Google has chosen to build. How reasonable is it to argue, given the results they’ve been getting?”

Om Malik, the popular founder of the media property GigaOm, announced yesterday that he’s relinquishing his day-to-day involvement with the business and becoming a partner at True Ventures, the early-stage venture firm where he has been a venture partner for several years. “I’m looking forward to a long-needed break after more than 25 years at the daily grind of writing the first draft of history,” Malik wrote in a post yesterday. More here.

Jon Mills, the founder and former CEO of a 3.5-year-old, San Francisco-based analytics startup called Motionloft, has been arrested by the FBI following allegations that he misled investors about an acquisition of the company while spending lavishly on private jets, expensive dinners, and parties with celebrities. TechCrunch has the story.

Andrew Reed, formerly a San Francisco-based tech banker with Goldman Sachs, has joined Sequoia Capital‘s growth equity practice, along withMatt Huang, who co-founded a social media analytics company called Hotspots.io that was acquired by Twitter. Dan Primack of Fortune has the story.

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Happenings

Oasis, the newest iteration of the Montgomery Technology Conference, takes place March 4th and 5th in Santa Monica, Ca., and the line-up looks interesting. Speakers include John Chen, the newest CEO of Blackberry (he’s widely credited with turning around an ailing Sybase, where he was CEO previously); Paul Maritz, the CEO of VMWare spin-off Pivotal; andFacebook‘s director of growth and monetization, Rob Goldman. You can request an invitation here.

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Data

CB Insights looks at which stages and geographies are seeing the most mobile messaging deals.

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Job Listings

HarbourVest Partners, the giant private equity investment firm, is looking for an associate to join its secondary investment group. The job is in London. More information here.

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Essential Reads

How Google “blew its chance” to acquire WhatsApp for even more than the $19 billion that Facebook paid for it.

Tesla‘s superstar CEO Elon Musk has confirmed “conversations” with Apple, but he says any acquisition is “very unlikely” at the moment.

Invasion of the taxi snatchers: Businessweek’s Brad Stone on industry disrupting Uber.

Wall Street has ceased to be the career destination of a certain kind of status seeker. Guess where that person wants to work now.

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Detours

The dark power of fraternities.

“In two hours on President’s Day, [Girl Scout] Danielle [Lei] sold 117 boxes outside the [medical marijuana] clinic — people gobbled up all her Dulce de Leches and blazed through the Tagalongs.”

What is success? “Was Michael Jordan a successful basketball player or a very bad basketball player? No one has ever been able to answer this question.”

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Retail Therapy

This strikes us as a pretty bad idea. (Maybe it’s a generational thing?)

Long-suffering Cleveland sports fans, this one is for you.

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