StrictlyVC: June 19, 2014

Good morning, everyone! Sorry for the late send-off this a.m.; StrictlyVC got a late start on today’s column.

Hope you have a great Thursday.


Top News in the A.M.

The FCC’s annual broadband report is out. “The good news,” reports GigaOm, “is that, overall, the country’s average broadband speed is 36 percent faster than what it was in 2012. The bad news is that DSL subscribers are getting left out of the party, and that severe congestion points are making life worse for everyone on the internet.”


Is the RealReal the Real Deal?

At a low-slung, 45,000-square-foot warehouse in an industrial corner of San Francisco, I’m hovering over a purse. It’s in the hands of Graham Wetzbarger, the director of authentication at The RealReal, a 2.5-year-old luxury consignment company that also operates a 10,000-square-foot warehouse in L.A. and a 20,000-square-foot warehouse in Manhattan.

Holding up the bag for closer inspection, Wetzbarger shakes his head. “The Louis Vuitton Neverfull is like the unofficial bag of Asia; it’s so popular that everyone has one or more than one.” This, adds Wetzbarger, is no Neverfull, pointing to the quality of purse’s lining, its exposed zipper tape, and a spot of loose stitching. “It’s also more slouchy than it should be [given its age]. Then, when we look at the date code, the formatting is all wrong, too.” He shows me a leather tag featuring a number series. “This combination would mean it was made in the 84th week of 1962.” [Eye roll.] Louis Vuitton “wasn’t even doing date codes until the ‘80s.”

The devil is truly in the details for The RealReal, a fast-growing online marketplace that’s taking business from both eBay and Sotheby’s by making it simple for dowagers and other well-heeled consumers to sell their lightly used designer goods. The company is now processing roughly 40,000 pieces of clothing, shoes, handbags, fine jewelry and fine art a month, and this year, it projects that it will do more than $100 million in revenue. In fact, the business is growing so quickly that the biggest challenge for Julie Wainwright, RealReal’s founder and CEO, is managing all the moving parts of her business.

It’s easy to see why 2.5 million people have registered to use the site. The RealReal takes authenticity so seriously that it employs authenticators like Wetzbarger, along with a staff gemologist, and a horologist. In addition, the company trains its customer-facing teams on how to spot and handle “fakes.”

The RealReal also makes it easy for its growing base of consigners to turn underused items in their home into cash. To sell an item, a consumer simply sends an item to the company based on the list of 750 brands like Chanel and Prada that RealReal accepts. RealReal also has 30 salespeople around the country who visit clients’ homes, which “allows us to get product we’d never get, from people who’d never even think of consigning,” says Wainwright. In return for doing practically nothing, consigners receive up to 70 percent of each sale.

Once they do, they’re hooked, Wainwright says. “When people get their first check, they’re delighted. They had no idea they had that much money sitting around their house.”

In fact, says Wainwright, she’s begun to notice a change in consumer behavior that bodes well for RealReal. “Once people start consigning, they change the way they buy retail. Once they understand the value of the resell items, they [rationalize more new purchases], knowing they can pay a high price . . . and make a lot of that money back by reselling [those goods].”

Still, the company has its challenges, the biggest of which, right now, is managing its growth. “It’s hard,” says Wainwright candidly. She points to the company’s two-story warehouse in Manhattan, which has been a headache for the company since almost the start. Because it’s union-controlled, no one can operate the elevator on Saturdays or Sundays. Time Warner Cable, which goes down regularly in the city, only recently approved a two-year-old order for fiber.

Fortunately, the company will soon vacate the city and move into a 125,000-square-foot warehouse in New Jersey, but the move has taken much longer than Wainwright anticipated. “Our warehouses are crazy full, because it never occurred to me that it would take seven months to negotiate a lease in New Jersey and another three months to get it refurbished.”

Dealing with used inventory can be trying, too. The company’s buyers – 60 percent of whom buy 7 items a year — often become sellers. Its consigners are repeat customers, typically offloading items on RealReal three times a year. But adding inventory – which the company must do each month to keep growing – can be tricky, especially in summer months when many of its consigners are away on vacation.

That’s saying nothing of RealReal’s stiff competition. In addition to other new consignment marketplaces, eBay – which sells between $2 billion and $4 billion in luxury goods each year – looks unprepared to cede much territory. For example, eBay Valet, a service introduced last December, invites users to take a picture of an item. The company then evaluates the item, estimates its value, then sends the user a prepaid box to ship it to eBay.

There isn’t a lot of room for error. As other e-commerce companies like OneKingsLane and Fab have shown, growth can slow suddenly. And while RealReal is growing quickly, it isn’t yet profitable. Despite having raised $43 million from investors, it’s hard to see how RealReal won’t require more money to turn the corner.

Wainwright has navigated tough waters before. Back in 2000, she was brought in to manage, a fast-growing pet supply startup that became a poster child for dot com failures when the market went south. Despite being dealt a difficult hand, she still managed to return investors’ capital.

With her eyes set on profitability in 2015, Wainwright is determined to manage growth before it overwhelms her company. It’s a quality problem. With consigners flooding her warehouses with high-priced goods, she has a closet anyone would envy.


New Fundings

Calm, a two-year-old, San Francisco-based company whose apps are designed to calm the minds of users (think crashing waves and light rain sounds), has raised $578,000 in seed funding from investors, including Launch fund and Automattic CEO Matt Mullenweg. The company has raised more than $1 million to date.

ClearCare, a 4.5-year-old, San Francisco-based company that sells software for scheduling, messaging and more to the home-care industry, has raised $11 million in Series B funding led by Bessemer Venture PartnersCambia Health Solutions, along with earlier investors Voyager CapitalQualcomm Ventures and Harbor Pacific Capital, also participated in the round, which brings the company’s total funding to date to $15.5 million.

Galvanize, a 1.5-year-old, Denver-based startup that runs coding classes, provides workspaces, and invests in startups in San Francisco and Denver, has raised $18 million in Series A funding led by University Ventures Fund. The company will use the money in part to expand into New York City, it says.

HelloFresh, a two-year-old, New York-based dinner kit delivery business (yes, another one), has raised $50 million in a new funding led by Insight Venture Partners and earlier investor Phenomen Ventures. The company has now raised $67.5 million altogether, including from Rocket InternetInvestment AB KinnevikHV Holtzbrinck Ventures, and Vorwerk Direct Selling Ventures.

Ibotta, a two-year-old, Denver-based coupon app the mobile couponing app that rewards users who engage with brands with small payments or cost savings, has raised $20 million in Series B funding led by Jim Clark, cofounder founder of Silicon Graphics, Netscape, and myCFO, among other things. Clark’s longtime friend Tom Jermoluk, also previously of Silicon Graphics, also invested in the round. Ibotta had raised an undisclosed amount of Series A funding last year from Great Oaks Venture Capital. TechCrunch has much more on the company here.

Imprint Energy, a 3.5-year-old, Alameda, Ca.-based startup that’s developing miniature rechargeable batteries, has raised $6 million in Series A funding led by Phoenix Venture Partners. Flextronics’ Lab IX and AME Cloud Ventures also participated.

LogFire, a 6.5-year-old, Atlanta-based maker of cloud-based inventory and warehouse management software, has raised $8.25 million in Series A funding led by Edison VenturesFulcrum Equity Partners also participated in the round.

Mantis Vision, a nine-year-old, Israel-based company whose mobile 3D technology is being used by Google for its 3D-sensing Project Tango smartphone, has raised $12.5 million in funding from Qualcomm VenturesSamsung Ventures; Flextronics’ hardware venture arm, Lab IX; and the optical manufacturing firm Sunny Optical Technology. TechCrunch has more here.

Modern Meadow, a three-year-old, Brooklyn-based company that’s growing leather from skin cells for the purpose of helping fashion designers and leather goods makers more ethically meet demand for their products, has raised $10 million in Series A funding led by Horizons Ventures. The company had earlier raised $250,000 in federal grants and $3 million in seed funding from Peter Thiel’s Breakout LabsSequoia CapitalArtis Ventures and Iconiq. Venture Capital Dispatch has more here.

Namely, a 2.5-year-old, New York cloud-based human resources management platform, has raised $4.7 million from earlier investors Bullpen CapitalLerer VenturesTrue Ventures and Vayner RSE. The company has raised $8.3 million to date.

Ostrovok, a four-year-old, Moscow-based accommodations booking startup, has raised $12 million in funding from Vaizra Capital Russia, a fund backed by two co-founders of Vkontakte, the Russian social network. The company has now raised roughly $50 million altogether. Earlier investors include Yuri MilnerAccel PartnersEsther DysonGeneral Catalyst PartnersFounders Fund, and Atomico Ventures.

Pixability, a six-year-old, Boston-based software company that aims to help major brands dramatically increase their YouTube impact on target audiences, has added $4 million to its Series B round, to close it at $8.1 million. The new funding was led by Point Judith Capital and included Quad/GraphicsProgress Ventures, and unnamed individuals. Beta Boston has more here. The company has raised $9.4 million to date.

Progreso Financiero, a nine-year-old, Menlo Park, Ca.-based financial services company that targets the credit needs of the Hispanic market, has raised $47 million in funding led by Institutional Venture Partners. The round, being disclosed today, closed last August. Others of its investors include The Catalyst Fund of CFSICharles River VenturesCore Innovation CapitalGreylock Partners, and Madrone Capital Partners. Its new funding brings the total capital raised by the company to $170 million.

Puppet Labs, a nine-year-old, Portland-based IT automation company, has raised $40 million in fresh funding, following a $30 million round last year. Earlier investors CiscoGoogle VenturesKleiner Perkins Caufield & ByersTriangle Venture Capital GroupTrue Ventures and VMware participate in the round, which brings the company’s total funding to $86 million.

Spotlight Ticket Management, a five-year-old, L.A.- based company whose technology helps companies understand the effectiveness of their spending on tickets — including to amusement parks, country clubs, and conferences — has raised $6 million in Series A funding from Point Judith CapitalCoyote Ridge Ventures and City National. The company has raised $8.5 million to date.

TaoDangPu, a two-year-old, Beijing-based online pawn shop focused on high-end jewelry and watches, has raised $30 million in Series B financing led by TBP Capital, with earlier investor BlueRun Ventures participating,says China Money Network. Reportedly, the company had previously raised “several million” dollars in Series A funding from BlueRun, Northern Light Venture Capital and a third, unnamed investor.

ThoughtSpot, a two-year-old, Redwood City, Ca.-based business intelligence software company that’s reportedly making big strides in how easily its corporate customers can search their data, has raised $30 million in new funding led by Khosla Ventures. Box CEO Aaron Levie and earlier investor Lightspeed Venture Partners also participated in the round, which brings the company’s total funding to $40.7 million.

Wayin, a three-year-old, Denver-based company whose software gathers social media postings and displays it in real time on its clients’ sites, mobile apps, or, in the case of sports teams, scoreboards, has raised at least $12.1 million in Series C round, per an SEC filing flagged by Xconomy.The company, cofounded by Sun Microsystems cofounder and CEO Scott McNealy, has raised $32.5 million to date; its investors include U.S. Venture Partners.

Western Oncolytics, a 2.5-year-old, Cleveland, Oh.-based company whose virus-based therapy promises to target many types of cancers and even cancerous cells that may be undetected in a patient’s body, has raised $275,000 in seed funding from undisclosed individual investors.

Zerto, a five-year-old, Boston-based maker of disaster-recovery technology for virtualized data centers, has raised $26 million in Series D funding led by new investor Harmony Partners. Earlier investors Battery VenturesGreylock ILRTP Ventures and U.S. Venture Partners all participated in the round, which brings Zerto’s total funding to $60.2 million.


New Funds

Greycroft Partners, the eight-year-old, early-stage venture firm with offices in New York and L.A., has just closed on its first growth fund, a $200 million vehicle, reports the WSJ. The company, whose bets have included Maker Studios and Buddy Media, needed more dry powder for its expansion-stage companies, particularly as “many of our companies are not in San Francisco and have a harder time tapping into these expansion-stage funds in the Valley,” partner Ian Sigalow tells the outlet.

Shasta Ventures, the 10-year-old, early-stage, Sand Hill Road firm that counts Nest Labs among its stand-out investments, has raised $300 million for its fourth fund — its largest to date. Altogether, Shasta has raised a little more than $1 billion, with its previous funds each totaling between $210 and $265 million. The WSJ has more here.



Finnish e-retailer One Nordic Furniture, which sells ready-to-assemble design furniture and accessories, has been acquired by online retailer Fab for an undisclosed amount of cash and stock. One Nordic’s team will own 5 percent of the combined company once the deal has closed.

SnappyTV, a four-year-old, San Francisco-based video publishing and distribution platform that lets content owners edit and share media content across the Web, has been acquired by Twitter for an undisclosed amount. The company appears to have raised just $760,000 in seed funding from Great Oaks Venture Capital, Transmedia Capital, and Freestyle Capital.



Another week, another $4 million in John Doerr‘s pocket.


Job Listings

Sands Capital Management is looking to hire a senior research associate to join its life sciences team. The job is in Arlington, Va.



A new study by Pepperdine University and Dun & Bradstreet suggests that access to capital increased in the second quarter of the year, while demand for funding fell.


Essential Reads

Walt Mossberg on Amazon’s smartphone ambitions.




A Twitter tracking tool that will let you know, nearly in real time, when someone changes their bio.

Fifteen classic movie scenes reimagined by a couple, using their chubby-cheeked baby and a whole lot of cardboard.

Why trophy wives may not really be a thing after all.


Retail Therapy

Behold, the $7,000 briefcase (in case you were wondering).


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