Hi, everyone. Semil Shah here, filling in with a shortened version of StrictlyVC while Connie is out for a couple of weeks. If you’d like to talk about today’s column or anything else, you can find me on Twitter at @semil.
Top News in the A.M.
Google has revealed the identity of a user to police after discovering child abuse imagery in his Gmail account.
LP Chris Douvos on the (Still) Difficult Case for VC
Chris Douvos is a rare animal — an LP who doesn’t shy from expressing his opinions publicly.
Since 2011, Douvos has been a managing director with Venture Investment Associates, a fund of funds group that commits capital to venture capital, growth capital, and private equity groups. Douvos worked previously for TIFF (The Investment Fund for Foundations) and the endowment for Princeton University, “despite having not one, but two degrees from Princeton’s bitter rival, Yale,” as he says at his personal blog. We caught up last week for an email chat, part of which we’ll run separately later this week.
Are you the only LP who blogs? Do you think other LPs will and/or should in the future?
I think I was the most prolific blogger. Some others had tried it, but it’s time-consuming to keep it up; I’m not writing as much as I’d like nowadays, either, so I’ve got to sharpen the pencil again. Too many topics, not enough time! It’s also tricky for LPs because part of the voodoo we do is done in the shadows. We’re in an information business and knowledge is a scarce currency There’s a real “close to the vest” mentality and LPs are always glad to share their second-best ideas, but that’s about it. I’d be surprised if many LPs pick up the blogging standard, as a result.
What’s the bull and bear LP view on the rise of equity crowdfunding and platforms such as AngelList, for example?
I love crowdfunding and think that AngelList Syndicates has the opportunity to be massively disruptive to the funds world. I’m an investor in AngelList’s Maiden Lane fund and am watching what happens there very closely. My neighbors in Palo Alto are building a crowdfunding platform for real estate that’s really getting traction. There’s going to be evolution in all this stuff, of course, but having a front row seat is pretty exciting; after all, sometimes, we make the road by walking.
As for the the broader LP world, it’s hard to say if there’s really a bull or bear view, as most LPs are still watching to see how some of this stuff shakes out. It’s more of a curiosity at the moment. Also, beyond [Bay Area] area codes, not that many people are really thinking about this stuff yet. As LPs, we’re trained to be patient, have an extremely long horizon, and gather data. Also, most LPs tend to be very risk averse. Jeremy Grantham famously says that 90 percent of decisions in finance first take into account career risk, and I think that’s true. It’s hard to get LPs to think — much less act — at start-up speed. That’s not a knock, it’s may even be a compliment as too many people have been run over by steamrollers looking to pick up shiny new pennies. That’s particularly true in long-dated, illiquid asset classes like VC.
Companies are staying private longer, especially the breakouts. How does that affect an LP’s strategy?
Venture capital is already the longest-dated, furthest-out-of-the-money option that most institutions invest in. In a post-Lehman world, institutions realized that illiquidity wasn’t free; it carried a risk premium for a reason. And once these institutions had touched the hot coal of liquidity risk, many started to actively seek to shorten the duration of their portfolios. Also, there’s a question about the evaluation horizon for funds. You rarely see results before a GP comes back with their next fund, and in a lot of cases, the evaluation horizon stretches longer than people’s attention span or tenure at an institution. This principal-agent problem is a big issue.
To be sure, some risk appetite is seeping back into the market now, but people are asking hard questions about how long it takes to see distributions. Indeed, we’re seeing more interim liquidity, but seeing companies stay private longer makes it harder for the PE portfolio manager to make the case for VC in the Monday meeting at a multi-asset class pool of assets.
Airbnb, the six-year-old, San Francisco-based home-sharing company, has officially closed a new round of funding, shows an SEC filing first flagged by VentureBeat. The filing, which shows the round closed with $475 million, doesn’t list any new investors, including TPG Growth,Dragoneer Investment Group, and T. Rowe Price, all of which were separately reported to be involved with the financing.
Scytl, a 13-year-old, Barcelona-based maker of secure electronic voting technology, has tacked on $44 million to a round it began raising in April. The money, from Vy Capital, Adams Street Partners and Industry Ventures, brings the total round to $104 million. Earlier participants included Vulcan Capital, SAP Ventures, Balderton Capital, Nauta Capital and Spinnaker. Altogether, Scytl has raised $113.2 million, shows Crunchbase.
WearYouWant, a three-year-old, Bangkok-based fashion retail site, has raised $1.5 million in Series A funding, reports TechCrunch. The round was led by Digital Media Partners and Japanese e-marketing firm OPT SEA. Other investors include IMG Investment Partners and WearYouWant co-founder Julien Chalte.
German magazine-publishing giant Bauer Media has been investing in more digital media startups, and today, it announced Bauer Venture Partners, a new fund with $134 million set aside to invest in startups over the next decade. Created alongside VC Thomas Preuss, late of Neuhaus Partners, the fund will invest in European tech startups at a range of stages, reports GigaOm.
Loxo Oncology, a year-old, Stamford Ct.-based company that develops targeted small molecule therapeutics to treat cancer in genetically defined patient populations, went public on Friday, selling 5.3 million shares at $13 a piece. The stock closed at the same price. The company’s private investors include Aisling Capital, OrbiMed, Array BioPharma, AI Loxo Holdings, and New Enterprise Associates.
Mobileye, a 15-year-old, Har Hotzvim, Israel-based company whose software algorithms and camera-based technology helps drivers see and manage traffic risks, had a promising public market debut Friday. Its shares, priced at $25 a piece, ended their first day at $37. Bloomberg has more here. The company’s private investors include Goldman Sachs, Fidelity, Enterprise Holdings, and Blackrock.
Caviar, a two-year-old, San Francisco-based food delivery service whose app lets users track their order on a map, is reportedly being acquired by the payments company Square for $90 million in stock. TechCrunch had reported on the talks last month, writing the Caviar would be sold to Square for up to $100 million. The official announcement is expected this week.
Shiva Rajaraman, the executive in charge of YouTube‘s consumer products, is headed to Spotify, reports Recode. According to Recode’s report: “Rajaraman’s departure is notable for multiple reasons, but the most obvious is that one of his jobs was to shepherd YouTube’s long-delayed music subscription service. And now he’s headed to the world’s biggest music subscription service.”
Pinterest cofounder Evan Sharp talks to the Atlantic about when he knew he had something bigger than a bookmarking site. “You build something and it’s like, what can I build on top of that and what can I build on top of that and what can I build on top of that. Great companies, I think, are the ones that see what they’ve built and can build on top of it and iterate their product.”
Wealth managers are increasingly enlisting spy tools to map portfolios. The New York Times has more here.
Nike is looking for a director of business development for its “innovation” unit to research, source, evaluate, and model partnership opportunities across the company, including, footwear, apparel, equipment, materials science, exploration, and athlete research. The job is in Portland, Or.
Yelp has the power to make or break proprietors, both financially and, apparently, psychologically. Now, an upscale hotel in Hudson, Ny., is fighting back by charging couples who book weddings at its venue $500 for every bad Yelp review posted online by their guests.
Here are some of the terrifying possibilities that have Elon Musk worried about artificial intelligence.
Drone use is outpacing regulations in New York.
The power of a round face.
NFL players’ stunning evolution since the organization’s 1920 founding.
Quite a whisky advertisement: “The Gentlemen’s Wager,” a short film from Johnnie Walker starring Jude Law.
Five great sets of stationary, for those times when email just won’t cut it.