Monthly Archives: September 2014

StrictlyVC: September 30, 2014

Good morning, everyone! Hope your Tuesday is off to a good start. (Web visitors, here’s an easier-to-read version of today’s email.)

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Top News in the A.M.

Activist hedge fund manager Carl Icahn must be doing cartwheels this morning. Eight months after he began calling for eBay to separate the company’s eBay and PayPal businesses into independent publicly traded companies, eBay‘s Board has approved a plan to do just that in 2015. John Donahoe, eBay’s current chief executive, will step down from his role once the separation is complete. Meanwhile, Daniel Schulman, a senior American Express executive, is joining PayPal as president and will become its CEO when the company is spun out on its own.

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Industry Ventures on Its New Fund, Cheap Stakes, and the State of the Market

Hans Swildens is taking a break at his offices in San Francisco. “This is the first Monday in a long time that I haven’t been fundraising,” he says.

It’s easy to understand why he’s exhausted. Swildens’s 15-year-old investment firm, Industry Ventures, has raised one fund after another in recent years, closing on a $425 million secondary fund 10 months ago and its newest vehicle — a $170 million venture capital fund of funds – late last week. At least in today’s market, the fundraising has come easier. In fact, the newest fund’s predecessor was $70 million, and the predecessor to that fund was $30 million.

In conversation with StrictlyVC, Swildens talks about those funds, as well as what he’s seeing more broadly at Industry Ventures, which has assembled stakes in roughly 140 venture firms over the years (including True Ventures and Foundry Group) and developed one of the most intricate views into the startup ecosystem in the process.

Your newest fund will make direct investments in sub-$250 million venture funds. But you’ll also use it to acquire secondary stakes in small venture funds and to co-invest directly with your fund managers. How much of the fund do you think you’ll allocate to each?

We don’t have a hard rule, but in [our previous fund], it was about 40 percent in primary commitments, 40 percent in LP commitments, and 20 percent in co-investments.

It’s such a go-go market. When it comes to snapping up those secondary stakes, where are you finding LPs who want to sell their venture fund shares?

There are always investors who have to sell, though typically, it’s not the endowments or pension funds – it’s everyone else. We just bought two different corporations’ fund interests in two different venture funds. A lot of [sellers] today are individuals and family offices. Sometimes, [micro VC managers will] raise quickly between funds because they’re small and we’ll take half the [individual investors’] old commitment so they [have liquidity] to invest in the manager’s new fund, too. Compared with five years ago, there aren’t as many sellers, though.

Are you chasing after funds? Are they coming to you?

Eighty to ninety percent of what we do is proactive.

How do you decide what to pursue?

We have a relational database and we model the funds; we have a group of associates and partners here – almost 20 now. And we’re an LP in about 20 percent of the managers in the U.S. We have 140 venture firm stakes. And we get reporting on all of them every quarter, so we’re constantly looking at [that information].

What’s performing what’s not performing, in your view?

Some say there are too many people doing seed and Series A deals – that things have grown crowded. But valuations haven’t moved that much in the last three to five years; they’re still in somewhat normal ranges. Late-stage valuations have become more inflated, of course. There are 45 $1-billion-plus companies [in terms of valuation] compared with four [in 2009]. So it’s a little trickier to buy into that market. If you’re buying into those deals, you have to have more conviction around what you’re buying. Our thesis is that it’s better to be in smaller funds that are shopping earlier.

What about your secondary funds, like your 10-month-old, $425 million fund – are you buying into more mature companies and funds with that capital?

We are, but our investment pace is about 25 percent slower than last year owing to us being more conservative about valuations. We’d started to bump into mutual funds and hedge funds that have come into the market with later-stage tender offers and secondary offers, and we decided not to compete head-to-head with them but maybe go a bit earlier in the cycle, writing smaller checks.

Your secondaries business involves buying employee shares. What’s that like these days?

The market has gotten much more complicated as it has evolved, with funds now exclusively doing loan deals for stock, companies that are doing tender offers, companies telling their CFOs to “work with these four parties” and if you aren’t on the list, you can’t get any information. That’s the bad. The good is that we’ve been in the market for more than a decade and everyone knows us, so we’ve been slotted into a lot of these [employee sale] processes.

What do you make of some newer funds that lend money to shareholders and employees rather than acquire their shares outright? Would you ever get into the business of loaning employees money against their shares?

We’d consider it, but our preference is to buy the stock. We’ve been doing this long enough to know that in good markets, loan structures work for both parties, but in bad markets, that’s not true, and three or four years from now, we don’t want regrets on either side.

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New Fundings

AnyPresence, a 3.5-year-old, Reston, Va.-based mobile development platform, has raised $6 million in Series B funding led by CNF Investments, with participation from earlier backers Kinetic Ventures and Grotech Ventures. AnyPresence customer Citrix Systems also joined the round, which brings the company’s total funding to roughly $13.5 million. GigaOm has more here.

AvidBiologics, a three-year-old, Toronto-based oncology drug development company, has raised an undisclosed amount of financing led by Lumira Capital, with participation from MaRS Investment Accelerator Fund, MaRS Innovation, and Rosseau Asset Management.

Comprimato, a 1.5-year-old, Brno, Czech Republic-based provider of compression solutions, has raised $1.27 million in new funding from existing backers Credo Ventures and Y Soft Venture Capital. The company has now raised roughly $1.5 million altogether.

Credivalores-Crediservicios, an 11-year-old, Bogota, Columbia-based consumer finance company that’s among the country’s fastest growing non-banking financial institutions, has raised $34 million from Gramercy Funds Management, an emerging markets investment manager.

Datorama, a two-year-old, New York-based company whose marketing analytics platform is used by advertisers and ad agencies, has raised $15 million in Series B funding led by Marker and earlier investor Innovation Endeavors. Cedar Fund, also an earlier investor, joined the round, which brings the company’s total funding to $18 million, shows Crunchbase.

Ender Labs, a two-year-old, Salt Lake City-based company whose cloud-based EventBoard service allows companies to manage conference room scheduling and meeting space, has raised $1.5 million in seed funding from Google Ventures, Zetta Venture Partners and numerous individual investors, including Salesforce founder Marc Benioff.

Game Play Network, a two-year-old, L.A.-based company that operates as Oddz and operates a real money gaming platform, has raised $7.5 million convertible note, shows an SEC filing. The company has previously raised at least $7 million in equity, show previous filings.

LifeBond, a seven-year-old, Caesarea, Israel-based company in clinical trials with biocompatible devices for tissue repair, has raised roughly half of a $25 million Series D round, reports VentureWire. Earlier investors Pitango Venture Capital, Giza Venture Capital, Aurum Ventures MKIGlenRock Israel and former Omrix Biopharmaceuticals CEO Robert Taub participated.

MediaRadar, a nearly eight-year-old, New York-based ad sales intelligence service for publishers, has raised $6.7 million from investors, including Bain Capital Ventures, shows an SEC filing. The company was founded by Todd Krizelman, who famously cofounded TheGlobe.com in 1999 with his Cornell University classmate Stephen Paternot.

MoviePass, a 3.5-year-old, New York-based subscription-based business that sells monthly passes to movie theaters, has raised $2.2 million in Series A funding led by former Facebook executive Chris Kelly and Structure Capital, with participation from previous investors AOL Ventures, True Ventures, Lambert Media, Moxie Pictures, and numerous angel investors. The company has raised nearly $3 million to date. TechCrunch has more here.

Pomelo Fashion, a 10-month-old, Thailand-based “fast fashion” online fashion brand and e-tailer, has raised $1.6 million seed funding to begin scaling its apparel concept throughout Asia. The round was led by Jungle Ventures, with participation from Skype’s former head of engineering Toivo Annus, 500 Startups, Fenox Ventures, and Queensbridge Venture Partners, among others. The company has now raised $2 million altogether.

Pristine, a 17-month-old, Austin, Tx.-based company whose Google Glass-based app allows medical professionals to get remote help from experts via a live streaming video feed, has raised $5.4 million in funding led by S3 Ventures, with participation from Capital FactoryHealthFundr, and other unnamed investors. VentureBeat has more here.

Privcap Media, a three-year-old, New York-based digital communications company serving the private capital markets, has raised $1.3 million in second-round funding from the private equity firm Noson Lawen Partners among other undisclosed investors. The company has raised $1.8 million since its founding.

Remind, a three-year-old, San Francisco-based secure mobile communication product for teachers, students and parents, has raised $40 million in Series C funding led by previous investors Kleiner Perkins Caufield & Byers, The Social+Capital Partnership and First Round Capital. The company’s latest round of funding brings its total capital raised to $59 million.

Sendwithus, a year-old, San Francisco-based email content management platform, has raised $2.3 million in funding led by Baseline Ventures, with participation from Initialized Capital, SV Angel, Maiden Lane VenturesAcequia Capital and numerous individuals, including Paul Buchheit.

TriggerMail, a 1.5-year-old, New York-based personalized triggered email service for marketing managers, has raised $6 million in Series A funding led by FirstMark Capital, shows a new SEC filing that says seven investors participated in the round. The company had previously raised $1.2 million, including from TechStars.

Yuemei, a 2.5-year-old, Beijing, China-based online marketplace for cosmetic surgery procedures, has raised an unspecified amount of Series A funding, reports Tech In Asia. More here on the opportunity it’s chasing.

Ziffi.com, a five-year-old, Mumbai, India-based online appointment booking engine, has raised Rs 15 crore in Series A funding from Orios Venture Partners. The company was known until recently as DocSuggest but recently expanded beyond its focus on doctor and clinic appointments into salons and spas. The Economic Times has more here.

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New Funds

General Catalyst Partners, an early investor in the payment technology company Stripe, is setting aside $10 million to invest exclusively in seed-stage startups that are building their technology atop Stripe’s application programming interfaces. The initiative is called GC Stripe Platform and it’s being run by Hemant Taneja, a managing director at the firm. Venture Capital Dispatch has much more here.

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IPOs

Zalando, Europe’s largest online-only fashion retailer, priced shares yesterday at $27.28 for its upcoming IPO, valuing itself at $6.8 billion, which would make it the largest Germany tech public offering since the 2000 listing of Deutsche Telekom, notes Forbes. According to its prospectus, the five-year-old, Berlin-based company expects to start trading on the Frankfurt stock exchange tomorrow.

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Exits

Bluestem Brands, a 12-year-old, Eden Prairie, Mn.-based consumer products company that owns Fingerhut, among other things, is being acquired by commercial real-estate lender Capmark Financial Group for about $565 million in cash. Bain Capital Ventures, Battery Ventures,Brookside Capital, Fortress Investment Group, Goldman SachsPetters Group and Prudential Capital are Bluestem investors.

News Corp. is buying publicly traded Move, the owner of property websites such as realtor.com, for about $950 million, reports Reuters. More here.

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People

The richest people in America, 2014 edition.

Hammad Akbar, the 31-year-old, chief executive of four-year-old, Pakistan-based mobile spyware maker InvoCode, was arrested over the weekend, charged with illegally marketing an app that monitors calls, texts, videos, and other communications on mobile phones “without detection,” reports Ars Technica. The app, called StealthGenie, was sold and advertised using a computer located at an Amazon Web Services center in Ashburn, Va., according to government officials.

On Friday, Beats Electronics filed a false advertising and unfair competition lawsuit against entrepreneur Steve Lamar, who claims he’s a cofounder and who is using his history at Beats to promote a new headphones company he has launched. Lamar has battled with Beats cofounder Jimmy Iovine numerous times since the company’s 2006 founding. The Hollywood Reporter has the story here.

Three years ago, Twitter received a tax break to stay in San Francisco. Cofounder Biz Stone has been trying to return the favor since, including by helping pair one tech company with each of San Francisco’s 116 public schools.

Kevin Systrom, the cofounder of Instagram, joined Wal-Mart’s board of directors as its 15th member yesterday. Fortune has more here.

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Job Listings

Atlassian, a well-funded software company, is looking for a corporate development manager in San Francisco to help identify acquisition targets, among other things.

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Essential Reads

Entrepreneur Elon Musk isn’t kidding about this whole Mars thing. We need a million people to move from here to there to ensure the future of humanity, he argues in a new interview with Aeon.

Basis, the Intel-owned maker of a health-tracking watch called the B1 Band, is introducing a new high-quality wristwatch that Recode calls “pretty compelling.”

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Detours

Potato Salad Guy delivers on his promises.

How false rumors get spread.

At the Starbucks inside the CIA’s Langley, Va., compound, they don’t take names, there are no frequent-customer award cards, and baristas are escorted from work each day by agency “minders.” It’s also reportedly one of the busiest Starbucks locations in the country. “Obviously,” one officer tells the Washington Post, “we are caffeine-addicted personality types. ” (H/T: John Paczkowski)

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Retail Therapy

Twenty-one “awesomely designed products” that Wired’s editors are dying to own.




Industry Ventures on Its New Fund, Cheap Stakes, and the State of the Market

Hans SwildensHans Swildens is taking a break at his offices in San Francisco. “This is the first Monday in a long time that I haven’t been fundraising,” he says.

It’s easy to understand why he’s exhausted. Swildens’s 15-year-old investment firm, Industry Ventures, has raised one fund after another in recent years, closing on a $425 million secondary fund 10 months ago and its newest vehicle — a $170 million venture capital fund of funds – late last week. At least in today’s market, the fundraising has come easier. In fact, the newest fund’s predecessor was $70 million, and the predecessor to that fund was $30 million.

In conversation with StrictlyVC, Swildens talks about those funds, as well as what he’s seeing more broadly at Industry Ventures, which has assembled stakes in roughly 140 venture firms over the years (including True Ventures and Foundry Group) and developed one of the most intricate views into the startup ecosystem in the process.

Your newest fund will make direct investments in sub-$250 million venture funds. But you’ll also use it to acquire secondary stakes in small venture funds and to co-invest directly with your fund managers. How much of the fund do you think you’ll allocate to each?

We don’t have a hard rule, but in [our previous fund], it was about 40 percent in primary commitments, 40 percent in LP commitments, and 20 percent in co-investments.

It’s such a go-go market. When it comes to snapping up those secondary stakes, where are you finding LPs who want to sell their venture fund shares?

There are always investors who have to sell, though typically, it’s not the endowments or pension funds – it’s everyone else. We just bought two different corporations’ fund interests in two different venture funds. A lot of [sellers] today are individuals and family offices. Sometimes, [micro VC managers will] raise quickly between funds because they’re small and we’ll take half the [individual investors’] old commitment so they [have liquidity] to invest in the manager’s new fund, too. Compared with five years ago, there aren’t as many sellers, though.

Are you chasing after funds? Are they coming to you?

Eighty to ninety percent of what we do is proactive.

How do you decide what to pursue?

We have a relational database and we model the funds; we have a group of associates and partners here – almost 20 now. And we’re an LP in about 20 percent of the managers in the U.S. We have 140 venture firm stakes. And we get reporting on all of them every quarter, so we’re constantly looking at [that information].

What’s performing and what’s not performing, in your view?

Some say there are too many people doing seed and Series A deals – that things have grown crowded. But valuations haven’t moved that much in the last three to five years; they’re still in somewhat normal ranges. Late-stage valuations have become more inflated, of course. There are 45 $1-billion-plus companies [in terms of valuation] compared with four [in 2009]. So it’s a little trickier to buy into that market. If you’re buying into those deals, you have to have more conviction around what you’re buying. Our thesis is that it’s better to be in smaller funds that are shopping earlier.

What about your secondary funds, like your 10-month-old, $425 million fund – are you buying into more mature companies and funds with that capital?

We are, but our investment pace is about 25 percent slower than last year owing to us being more conservative about valuations. We’d started to bump into mutual funds and hedge funds that have come into the market with later-stage tender offers and secondary offers, and we decided not to compete head-to-head with them but maybe go a bit earlier in the cycle, writing smaller checks.

Your secondaries business involves buying employee shares. What’s that like these days?

The market has gotten much more complicated as it has evolved, with funds now exclusively doing loan deals for stock, companies that are doing tender offers, companies telling their CFOs to “work with these four parties” and if you aren’t on the list, you can’t get any information. That’s the bad. The good is that we’ve been in the market for more than a decade and everyone knows us, so we’ve been slotted into a lot of these [employee sale] processes.

What do you make of some newer funds that lend money to shareholders and employees rather than acquire their shares outright? Would you ever get into the business of loaning employees money against their shares?

We’d consider it, but our preference is to buy the stock. We’ve been doing this long enough to know that in good markets, loan structures work for both parties, but in bad markets, that’s not true, and three or four years from now, we don’t want regrets on either side.

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




StrictlyVC: September 29, 2014

Hi, everyone, welcome back! Happy Monday.

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Top News in the A.M.

Today, Facebook is rolling out its rebuilt ad platform, Atlas, allowing Facebook to sell ads on sites that aren’t on Facebook.

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Don’t Panic: VCs and Bubble Trouble

Several of the country’s most prominent venture capitalists have sent the startup world into a hysteria in recent weeks. Bill Gurley of Benchmark kicked off the panic when in an interview with the Wall Street Journal, he lamented that companies have taken their burn rates to levels not seen since 1999 and noted that “more humans in Silicon Valley are working for money-losing companies than [they] have been in 15 years. . .”

Fred Wilson of Union Square Ventures weighed in the following day, writing at his popular blog: “The thing I like so much about Bill’s point of view is that he does not focus on valuations as a measure of risk. He focuses on burn rates instead. That’s very smart and from my experience,very accurate.”

Roughly a week later, Marc Andreessen decided to explain on Twitter why he agrees with both Wilson and Gurley. Using even more vivid language than his peers, Andreessen wrote that “when the market turns, and it will turn, we will find out who has been swimming without trunks on: many high burn rate co’s will VAPORIZE.”

The truth is that none of the VCs needed to broadcast their thoughts so pointedly. Gurley has been saying for years that there’s a problem with later-stage investing. It’s largely because his firm believes so strongly that there’s an inverse correlation between how much money an outfit accepts and the returns it produces that Benchmark continues to raise funds in the neighborhood of $425 million instead of raising more capital, which it could easily do.

It isn’t the first time that Andreessen has voiced concern over burn rates, either. Back in July, he warned entrepreneurs against “[p]ouring huge money into overly glorious new headquarters” and of “[a]ssuming more cash is always available at higher and higher valuations, forever. This one will actually kill your company outright.”

So why clang the alarm bell more forcefully now? Well, burn rates really are rising at later-stage companies, as Pitchbook data underscores. But it’s also worth remembering that while VCs might be friendly and respect one another, when it comes to business, they do what it takes to burnish their own brands. Surely Wilson, Gurley, and Andreessen are genuinely astonished by some wild spending on the part of startups, but they’re also competing with each other – in this case, about who first noticed that startup spending is out of control and who feels the most disgusted by it.

The warnings are also – and perhaps primarily — a defensive move. A flood of late-stage money has poured into the venture industry. While that’s been good for VCs in some cases – Tiger Global and T. Rowe Price are among other newer entrants to mark up investors’ earlier deals – that capital isn’t as welcome as it might have been a year ago, given that it just keeps coming. (As Fortune reported last week, Tiger Global is raising another $1.5 billion fund, just five months after raising its last $1.5 billion fund. It’s hard for anyone to compete with that kind of money, even Andreessen Horowitz, which has raised roughly $4 billion since launching five years ago.)

Gurley and Andreessen have grown increasingly transparent about their disdain for some newer funding sources, in fact. In April, in one of Andreessen’s famous series of tweets, he warned founders to be “highly skeptical” of growth-stage investors outside Silicon Valley, saying they offer founders “breathtaking high-valuation term sheet[s],” then convince the teams to “go exclusive and shut off other talks,” which limits founders’ options going forward.

On Saturday, presented on Twitter with a year-old chart that suggests rising burn rates don’t necessarily point to a bubble, Gurley tweeted: “[C]hart also doesn’t include 2014 (major uptick) and new sources late stage $$ (which is the majority of funding).” He then added, “I never said there was a valuation bubble — I just said burn rates and ‘risks’ are quite high.”

You can’t blame Andreessen, Gurley or Wilson for commenting on the market. These are frothy times, and if trouble is just up ahead, it’s better to be on record for acknowledging some of the risky behavior they’re seeing.

If in the meantime their warnings prompt more companies to eschew these “new sources of late stage money” zeroing in on them, well, that’s probably okay, too.

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New Fundings

Agrisoma Biosciences, a 13-year-old, North Vancouver, British Columbia-based agriculture technology company, has held the first close on what’s expected to be an $8 million Series A funding. Cycle Capital Management led the financing, with participation from earlier investor BDC Venture Capital. According to Crunchbase, the company has previously raised $2.3 million.

Anki, a 4.5-year-old, San Francisco-based company that makes intelligent, robotic toy cars and other consumer robotics, has raised $55 million in Series C funding, led by J.P. Morgan, with participation from earlier investors Andreessen Horowitz, Index Ventures and Two Sigma. The company has raised $105 million altogether, reports Recode.

Argus Cyber Security, a 1.5-year-old, Tel Aviv, Israel-based automotive cyber security company that protects “connected” vehicles from malicious attacks, has raised $4 million in Series A funding, including from Magma Venture Partners and Vertex Venture Capital.

Cohealo, a 3.5-year-old, Boston-based startup focused on helping hospitals manage costly medical equipment through smarter analytics, has raised $3.1 million, shows an SEC filing that lists a $5.7 million target. MedCity News has more here.

Credit Karma, a six-year-old, San Francisco-based company whose tools promise to help users track and manage their credit scores, has raised $75 million in growth funding, including from previous investors Google Capital, Tiger Global Management and Susquehanna Growth Equity. Less than a year ago, the company raised $85 million in Series C funding led by Google Capital. The company has now raised $193.5 million altogether. Venture Capital Dispatch has more here.

InnoLight Technology Corporation, a six-year-old, Suzhou, China-based high-speed optical transceiver supplier, has raised $38 million in Series C funding led by Lightspeed China Partners and Google Capital— an investment that marks Google’s first venture foray into China, notes ZDNet.

Isonas, a 15-year-old, Boulder, Co.-based maker of IP proximity card reader-controllers, has raised $5.3 million in funding, shows a new SEC filing that says 33 investors participated in the round.

miDrive, the 2.5-year-old, U.K.-based startup whose mobile app pairs users with local driving instructors, has raised £2 million ($1.6 million) in Series A funding, including from MBM Capital Partners and Holiday Extras. The company has raised $3.3 million altogether, shows Crunchbase.

Parcel, a year-old, New York-based company that delivers packages to people after working hours (when users shop online, their orders are sent to Parcel’s facilities), has raised $1 million in seed funding led by Liberty City Ventures. Great Oaks Venture Capital, TechStars founder David Cohen, Galvanize, and other individual investors also joined the round, reports Venture Capital Dispatch.

Qubit, a 4.5-year-old, London-based company whose software collects and processes large data sets for marketers, helping them optimize their sites in real time, has raised $26 million in Series B funding led by Accel Partners. Salesforce Ventures and earlier backer Balderton Capital also participated in the round, which brings the company’s total funding to $34.9 million altogether, shows Crunchbase.

Superpedestrian, a six-year-old, Cambridge, Ma.-based company behind the Copenhagen Wheel, a technology that turns standard bikes into electric hybrids, has raised $4 million led by Spark Capital. General Catalyst Partners and numerous individual investors also participated in the round, which brings the company’s total funding to $6.2 million, shows Crunchbase.

Verengo Solar, a six-year-old, Torrance, Ca.-based company that makes and sells residential solar products, has raised $15.4 million in new fund, according to a new SEC filing that shows a $25.4 million target. The company had previously raised $22.2 million from investors, including the private equity investor Angeleno Group.

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New Funds

BlueDelta Capital Fund, a five-year-old, Mclean, Va.-based venture firm specializing in growth capital investments in the U.S. government technology market, is looking to raise $75 million, shows an SEC filing that states the first sale has yet to occur. Cofounder Mark Frantz has been a managing general partner of In-Q-Tel, a principal with Carlyle Venture Partners, and a partner at RedShift Ventures, among other things. Cofounder Kevin Robbins worked in corporate development at SRA International. Among the firm’s portfolio companies is Shared Spectrum, a Vienna, Va.-based company whose software helps customers make better use of spectrum resources and that raised $3 million from investors a year ago.

Cowboy Ventures, the seed-stage investment firm led by Aileen Lee, is targeting $55 million for its second fund, shows an SEC filing that states the first official sale has yet to occur. The firm closed its debut fund of $40 million in 2012 after Lee left Kleiner Perkins Caufield & Byers, which is an anchor investor in that fund. Cowboy’s investments include the personal grooming products company Dollar Shave Club; smart lock maker August; and NuORDER, an online iPad application for fashion brands and retailers.

Industry Ventures, the 14-year-old, San Francisco-based fund of funds firm, has raised $170 million for its newest fund, shows an SEC filing. The fund targets primary commitments and early secondary purchases in smaller venture capital funds, as well as direct investments alongside its managers. It brings the firm’s total capital under management to more than $2 billion.

Magma Venture Partners, a 15-year-old, Tel Aviv, Israel-based firm, has closed on a new, $150 million fund to invest exclusively in Israeli entrepreneurs. The fund comes just 18 months months after Magma raised its previous, $100 million fund. Magma was among the first investors in the mobile navigation startup Waze, acquired by Google for $966 million last year, as well as Onavo, the mobile intelligence startup acquired by Facebook a year ago for $120 million. The firm typically writes checks of between $500,000 and $6 million, and says it expects to fund up to 30 new companies with its new pool of capital.

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Exits

Sage Labs, a Boyertown, Pa.-based developer of transgenic animal models with made-to-order disease for research, has been acquired by the British gene editing company Horizon Discovery Group for up to $48 million. Sage was a subsidiary of the publicly traded company Sigma-Aldrich until last year, when it was purchased by management and the venture firm Telegraph Hill Partners and made private. MedCity News has the story here.

Spaces, a year-old, Bay Area company that was developing a program to let remote workers collaborate on the same document simultaneously, has been acquired by the workplace collaboration startup Slack, co-founded by Stewart Butterfield. Financial terms of the all-stock deal aren’t being disclosed. The WSJ has more here.

Shopkick, the five-year-old, Redwood City, Ca.-based shopping loyalty app company, has been acquired by the South Korean wireless firm SK Telecom for about $200 million, according to the WSJ. Shopkick has raised at least $20 million from investors including Greylock PartnersKleiner Perkins Caulfield & Byers, SV Angel, and Citi Growth Ventures & Innovation Group.

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People

Hiroshi (“Mickey”) Mikitani, the 49-year-old founder and chairman of the online retailer Rakuten, is building a house in central Tokyo that’s estimated to cost at least $21 million. That might not be much for a billionaire, but it underscores a shortage in the city’s luxury housing market, reports Bloomberg.

Jason Rhodes has been appointed a partner in the life sciences investment group of Atlas Venture, one of Boston’s most active venture capital firms. Rhodes was most recently the president and chief financial officer at the biopharma company Epizyme. Rhodes also helped foundFidelity Biosciences, Fidelity’s investment division focused on biopharmaceutical companies, medical technology, and healthcare IT. BetaBoston has the story here.

Google executive chairman Eric Schmidt and former SVP of products Jonathan Rosenberg, recently published a new book entitled “How Google Works.” To promote the effort, Schmidt appeared on Bloomberg TV last week, where he talked of the “brutal competition between Apple and Google over Android and iOS . . .” He also answered a question about what goes through his mind when he drives past an Apple Store and sees people lined up around the block to purchase iPhones. “I’ll tell you what I think,” said Schmidt. “Samsung had these products a year ago.”

Almost a year into the job, FCC Chairman Tom Wheeler has established a record as a formidable opponent to the cable and wireless industries he used to represent as a lobbyist, says the New York Times.

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Job Listings

The venture investment arm of the Center for Innovative Technology, which makes seed and early-stage investments in Virginia-based technology, clean tech and life science startups, is looking for an investment director.

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Data

Is your startup burn rate normal? Mattermark cofounder Danielle Morrill publishes a guide for seed and Series A startups.

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Essential Reads

It’s been another rough few days for Uber. Courts in Berlin and Hamburg upheld bans on the company’s service, saying on Friday that the company did not comply with German laws on the carriage of passengers. Meanwhile, in bad news for business right here in the U.S., a San Francisco-based UberX driver reportedly smashed a passenger’s head with a hammer after the two argued over which route the UberX driver should take.

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Detours

Is Apple’s new campus as earth-friendly as the company makes it sound?

Introducing the “anti-psychopath.”

You can make your own invisibility cloak, and for just $100.

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Retail Therapy

Wall murals that take you away.




Don’t Panic: On VCs and Bubble Trouble

panic buttonSeveral of the country’s most prominent venture capitalists have sent the startup world into a hysteria in recent weeks. Bill Gurley of Benchmark kicked off the panic when in an interview with the Wall Street Journal, he lamented that companies have taken their burn rates to levels not seen since 1999 and noted that “more humans in Silicon Valley are working for money-losing companies than [they] have been in 15 years. . .”

Fred Wilson of Union Square Ventures weighed in the following day, writing at his popular blog: “The thing I like so much about Bill’s point of view is that he does not focus on valuations as a measure of risk. He focuses on burn rates instead. That’s very smart and from my experience, very accurate.”

Roughly a week later, Marc Andreessen decided to explain on Twitter why he agrees with both Wilson and Gurley. Using even more vivid language than his peers, Andreessen wrote that “when the market turns, and it will turn, we will find out who has been swimming without trunks on: many high burn rate co’s will VAPORIZE.”

The truth is that none of the VCs needed to broadcast their thoughts so pointedly. Gurley has been saying for years that there’s a problem with later-stage investing. It’s largely because his firm believes so strongly that there’s an inverse correlation between how much money an outfit accepts and the returns it produces that Benchmark continues to raise funds in the neighborhood of $425 million instead of raising more capital, which it could easily do.

It isn’t the first time that Andreessen has voiced concern over burn rates, either. Back in July, he warned entrepreneurs against “[p]ouring huge money into overly glorious new headquarters” and of “[a]ssuming more cash is always available at higher and higher valuations, forever. This one will actually kill your company outright.”

So why clang the alarm bell more forcefully now? Well, burn rates really are rising at later-stage companies, as Pitchbook data underscores. But it’s also worth remembering that while VCs might be friendly and respect one another, when it comes to business, they do what it takes to burnish their own brands. Surely Wilson, Gurley, and Andreessen are genuinely astonished by some wild spending on the part of startups, but they’re also competing with each other – in this case, about who first noticed that startup spending is out of control and who is the most disgusted by it.

The warnings are also – and perhaps primarily — a defensive move. A flood of late-stage money has poured into the venture industry. While that’s been good for VCs in some cases – Tiger Global and T.Rowe Price are among other newer entrants to mark up investors’ earlier deals – that capital isn’t as welcome as it might have been a year ago, given that it just keeps coming. (As Fortune reported last week, Tiger Global is raising another $1.5 billion fund, just five months after raising its last $1.5 billion fund. It’s hard for anyone to compete with that kind of money, even Andreessen Horowitz, which has raised roughly $4 billion since launching five years ago.)

Gurley and Andreessen have grown increasingly transparent about their disdain for some newer funding sources, in fact. In April, in one of Andreessen’s famous series of tweets, he warned founders to be “highly skeptical” of growth-stage investors outside Silicon Valley, saying they offer founders “breathtaking high-valuation term sheet[s],” then convince the teams to “go exclusive and shut off other talks,” which limits founders’ options going forward.

On Saturday, presented on Twitter with a year-old chart that suggests rising burn rates don’t necessarily point to a bubble, Gurley tweeted: “[C]hart also doesn’t include 2014 (major uptick) and new sources late stage $$ (which is the majority of funding).” He then added, “I never said there was a valuation bubble — I just said burn rates and ‘risks’ are quite high.”

You can’t blame Andreessen, Gurley or Wilson for commenting on the market. These are frothy times, and if trouble is just up ahead, it’s better to be on record for acknowledging some of the risky behavior they’re seeing.

If in the meantime their warnings prompt more companies to eschew these “new sources of late stage money” zeroing in on them, well, that’s probably okay, too.

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




StrictlyVC: September 26, 2014

And it is Friday, party people. Have a terrific weekend! No column today, but we’ll see you back here next week with some good stuff. (Web visitors, click here for an easier-to-read version of today’s email.)

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Top News in the A.M.

Another day, another threatened crackdown on car services Uber and Lyft, this time from L.A. and San Francisco prosecutors.

FBI Director James Comey criticized Apple and Google yesterday for developing smartphone encryption so secure that law enforcement officials have trouble gaining information stored on devices, even when they have valid search warrants.

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New Fundings

BioMotiv, a two-year-old, Cleveland, Oh.-based therapeutic accelerator, has raised $25 million from the Japan-based pharmaceutical company Takeda Pharmaceutical in exchange for exclusive access to many of BioMotiv’s drugs. The financing constitutes a “significant minority investment,” says BioMotiv.

Coinify, a four-year-old Copenhagen-based bitcoin payment services company, has raised an undisclosed amount of funding from SEED Capital, a Danish venture firm. According to the outlet Unquote, the investment marks just the second bitcoin-related investment for a Nordic firm, the other being Creandum’s recent Series A investment in KnCMiner, a Stockholm-based maker of bitcoin mining hardware.

Context Relevant, a two-year-old, Seattle-based company that sells prepackaged applications intended to solve specific, data-related business problems, has raised $13.5 million in Series B-1 funding from Goldman Sachs, Bank of America Merrill Lynch, Formation 8, New York Life, and Bloomberg Beta. In late May, the company announced $21 million in Series B funding led by Formation 8. The newest round brings the company’s total funding to $42 million.

CureLauncher, a two-year-old, Bloomfield Hills, Mi.-based startup that helps users find medical treatments (including via clinical trials) based on their conditions, has raised $500,000 in Series B funding, a year after raising $500,000 in Series A funding. The new round was led by the early-stage venture capital firm InkWell.

Exo, a 1.5-year-old, Brooklyn, N.Y.-based producer of protein bars made from crickets (really), has raised $1.2 million in new seed funding fromCollaborative Fund, Start Garden and author and angel investor Tim Ferriss. The company had previously raised $100,000 via the New York-based packaged food and beverage accelerator, AccelFoods.

Fundrise, a four-year-old, Washington, D.C.-based real estate crowdfunding platform, has added $3.6 million to its Series A funding round, bringing its total funding to $38 million. New investors in the round — which remains open — include the Chinese social networking company Renren; Guggenheim Partners; Rockrose President Justin Elghanayan; and James Ratner, the chairman and chief executive of Forest City Commercial Group. Venture Capital Dispatch has the story along with a longer look at the crowded, crowdfunding sector in which Fundrise now finds itself.

Hootsuite, the six-year-old, Vancouver-based startup known for its social media management dashboards, has raised $60 million in new venture funding, it told Re/code yesterday morning. The latest funding was led by a new Boston-based investor that Hootsuite hasn’t revealed, as well as earlier investors Insight Venture Partners, Accel Partners and OMERS Ventures. The company has now raised a total of $250 million.

MiaoPai, a three-year-old, Beijing-based short-video mobile app maker, has raised $50 million in Series C funding led by Kleiner Perkins Caufield & Byers China, according to China Money Network. Sina Corp.Redpoint Ventures and StarVC also participated. The company had raised at least $25 million in priof funding, says the report.

Nubank, a year-old, São Paulo-based financial services start-up whose first product is a MasterCard Platinum credit card that users can manage through an Android or iOS app, has raised $13.8 million led by Sequoia Capital, with participation from new investor Berggruen Holdings and earlier investor Kaszek Ventures, a Buenos Aires-based venture capital firm. Dealbook has more here.

Skillz, a two-year-old, Boston-based cash tournament platform for mobile games that allows players to win rights, cash and other prizes, has raised $3 million in equity funding and $3 million in venture debt led by Atlas Venture, with NextView Ventures and individual investors participating. The new tranche brings the startup’s total equity funding raised to $10.3 million, reports Venture Capital Dispatch.

Zeptor, a five-year-old, Menlo Park, Ca.-based company whose silicon anode enables battery makers to produce high-powered lithium ion batteries, has raised $5.2 million in fresh funding, shows an SEC filing. The company has raised at least $8.4 million to date.

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New Funds

The Small Business Administration is expanding its venture capital program for “impact investments,” reports the Austin Business Journal.More here.

UpWest Labs, a two-year-old, Palo Alto, Ca.-based accelerator program for Israeli entrepreneurs, has raised $4 million for its second fund, according to an SEC filing that shows a $15 million target. UpWest mentors founders for four months and provides them with $20,000 in exchange for an 8 percent stake in their business. Some of the outfit’s many investments include Honeybook, a 1.5-year-old, San Francisco-based invite-only planning platform that helps creative businesses and their clients collaborate and that earlier this week announced $10 million in new funding led by Aleph. The company has also backed Sentinel Labs, a year-old, Palo Alto, Ca.-based cybersecurity startup that raised $12 million in Series A funding led by Tiger Global Management back in April.

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IPOs

Coherus BioSciences, a four-year-old, Redwood City, Ca.-based company that’s developing similar versions of widely used biotechnology drugs, has filed to go public, with a maximum offering amount of $86.2 million. The company’s principal shareholders are Daiichi Sankyo Company, which owns 11.13 percent; Lilly Ventures (the venture arm of Eli Lilly), which owns 11.17 percent; KKR, which owns 9.7 percent; MX II Associates, which owns 9.67 percent; Sofinnova Ventures, which owns 8.28 percent; and Venrock, which owns 7.65 percent.

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People

Investor Marc Andreessen decided yesterday was the day to send the startup world into panic mode, tweeting that the many “cash-incinerating” startups up and running will be vaporized when the market turns. For good measure, he elaborated on the point, noting that venture-backed startups that have raised a bunch of cash and rented fancy offices and hired a lot of people (which describes a good number of companies at this point) should “worry.”

Andreessen Horowitz has brought on Stanford University professor Vijay Pande to be its first Andreessen Horowitz Distinguished Visiting Professor of Computer Science. Pande, who teaches chemistry, computer science and structural biology at Stanford, will essentially act as a liaison between the firm and the university, so that computer science and other students will know where to turn when they’re considering commercializing their research.

Deric Emry has left Baltimore, Md.-based ABS Capital after 15 years, saying in an email to his contacts that he has “decided to pursue my passion for venture capital in a different format” as a venture partner at Greenspring Associates in Owings Mills, Md. Before joining ABS Capital in 1999, Emry was an associate at the bank Alex.Brown & Sons.

Sam Waksal is back in a big way, seemingly. Having quietly raised $500 million in debt and equity for his newest drug company, Kadmon, whose products aim to treat and manage hepatitis C, he’s now planning to take it public, he tells CNBC. More here. As many readers know, Waksal founded the biotech company ImClone Systems; he was later jailed for five years following insider-trading charges. Three months after his release, Eli Lilly bought ImClone for $6.5 billion.

It’s a worldwide contagion. In an open letter addressed to his portfolio companies, Matrix Partners China co-founder David Zhang warns that the investment market is about to cool off, a direct reaction to public warnings by venture capitalist Bill Gurley about the current climate. The letter, which quotes Gurley, has since gone viral on Chinese social media, reports Tech in Asia.

Facebook CEO Mark Zuckerberg personally set up the Facebook account of comic Andy Samberg because Zuckerberg was horrified to discover that Samberg was not on Facebook. So Samberg tells “Tonight Show” host Jimmy Fallon.

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Job Listings

Dawn Capital, an early-stage firm in London, in looking for an analyst. (Senior associate Teddie Wardi tells us this person will be wearing two hats, as an investor and as someone who can help with the firm’s marketing efforts.)

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Data

Some top reasons that startups fail, in the words of founders and investors who’ve seen these craters up close.

Why the Winklevoss twins are so bullish about bitcoin, in 33 slides.

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Essential Reads

Inside the building where Apple tortures the iPhone 6.

WWYD? (What will Yahoo do?)

How to start a startup: Lectures by Y Combinator president Sam Altman (here’s one; here’s two).

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Detours

To see every swing of the bat that Derek Jeter has made in his professional career, you would need to watch this motion nonstop for more than 4 days.

People feeling insecure about their relationships post about them more on Facebook, according to a new study that has misanthropes high-fiving.

A yacht-shaped hospital and spa that, if made, will kind of make every other hospital in the world look like prison.

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Retail Therapy

This seems like a bad idea.




StrictlyVC: September 25, 2014

It is Thursday! Hope you have a wonderful morning, everyone, and if you’re celebrating Rosh Hashanah right now, Shana Tova.

For web visitors interested in a more readable version of today’s newsletter, click here.

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Top News in the A.M.

Software giant Adobe is closing down its China-based R&D facility, as tensions between China and a growing number of Western tech companies grow.

Apple is sorry and embarrassed about what it did to your phones yesterday. A fix is coming in the next few days.

A new security bug, Bash, is reportedly worse than the Heartbleed bug that surfaced last spring.

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A Young VC Resurfaces with His Year-Old Startup: Spruce

Every month, a few startups that enable patients to consult with doctors without visiting their offices seem to emerge from nowhere. It’s no wonder. According to the research firm IHS, revenue from these so-called telemedicine companies could hit $1.9 billion in 2018, up from $240 million last year. That shift owes largely to the Affordable Care Act, which is pressuring doctors to help drive down costs, but it’s also easy to imagine that a growing number of doctors likes the prospect of practicing medicine from anywhere, at any time.

Some companies, like Teladoc — which just raised $100 million from investors — have begun partnering with insurance companies like Aetna and Blue Shield of California to offer subscribers telemedicine services as an added benefit in their coverage. Others like venture-backed HealthTap and Doctor on Demand, which offer live videoconferences with doctors, are going straight to consumers.

A year-old company, Spruce — founded by former Kleiner Perkins Caufield & Byers partner Ray Bradford and launching publicly today — has a slight twist on the latter model. The 11-person, San Francisco-based company is debuting a mobile app that enables patients to pay $40 to consult with doctor but doesn’t give them instant care. Instead, users log on to the app, provide details about their specific condition, and receive a response from a board-certified physician within a day. (If a prescription is required, that information gets forwarded on to the pharmacy of the user’s choice.)

It doesn’t sound terribly revolutionary, but as Bradford explains it, the market opportunity makes up for a lot. “The majority of healthcare will be tech enabled and delivered via mobile devices. If you think about size of market and volume of doctors, you start to appreciate what a massive shift this will be, and we think the trend is just getting started.”

Earlier this week, we chatted briefly about Spruce, which is first targeting patients with acne problems but plans to expand into other ailments once it nails down its act.

Why acne first?

Fifty million Americans have acne. It’s not just a teenage problem. Most doctors visits are by adults. Meanwhile, the average wait time to see a dermatologist in the U.S. is 30 days, so the majority of people settle for over-the-counter solutions.

Why not employ videoconferencing, as are many other telemedicine startups?

It’s more convenient. Both the patient and doctor are doing things on their own time. If you’re on the clock with a doctor [Doctor on Demand customers pay $40 for 10 minutes or so with a physician, for example], maybe I can’t share everything I want to share. Likewise, the [offline] doctor is answering my questions, rather than going through the motions of collecting information in a rote way.

You left Kleiner to start this company in August of 2013. How much have you raised and will you be in the market again soon?

We raised $2 million in seed funding from Kleiner, with participation from Baseline Ventures and Cowboy Ventures. We raised it later last year [so we’re not raising again just yet].

You spent a couple of years with Kleiner and you worked previously in product development at Amazon Web Services. How do those experiences inform what you’re doing now?

The biggest way is seeing the importance of picking a big market, and you don’t get a much bigger market than healthcare.

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New Fundings

Adaptimmune, a six-year-old, University of Oxford spin-out that focuses on the white blood cells called T-cells to treat several types of cancer, has raised $104 million in funding led by New Enterprise Associates. Other new investors in the round include OrbiMed Advisors, Wellington Management Company, and Fidelity Biosciences. Dealbook has morehere.

Apptentive, a three-year-old, Seattle-based company whose software acts as a communication layer between mobile app users and developers, has raised $5.3 million in Series A funding led by the online-survey company SurveyMonkey and Origin Ventures. Earlier investors Founders Co-op and Golden Venture Partners also participated in the round.

Array Health, an eight-year-old, Seattle-based company that builds software that health insurers like Blue Cross and Blue Shield use to offer a private health exchange, has raised a first institutional funding round of $13 million led by Noro-Moseley Partners, with participation from Vocap Investment Partners. GeekWire has more here.

Catawiki, a six-year-old, Netherlands-based online auction house that sells rare items, has raised $12.7 million in Series B funding led by Accel Partners. The Berlin-based investor and company builder Project A Ventures, Booking.com’s former CMO Arthur Kosten, and Dutch media and Internet entrepreneur Willem Sijthoff, who was an earlier investor, also participated. TechCrunch has more here.

Centage Corp., a 12-year-old, Natick, Ma.-based company that makes budgeting and forecasting software for small and mid-size businesses, has raised $9.5 million in Series A funding led by TVC Capital, with Northgate Capital joining the round.

CommonFloor.com, a seven-year-old, Bangalore, India-based online real estate and apartment management portal owned by MaxHeap Technologies, has raised $30 million in Series E funding from earlier investor Tiger Global Management. Early this year, CommonFloor had raises Rs 64 crore ($10.4 million) in Series D round of funding from Tiger Global and Accel Partners. VCCircle has more here.

E la Carte, a six-year-old, Palo Alto, Ca.-based startup whose technology lets restaurant-goers order food and pay their bills from the table using a tablet and cloud-based software, has raised $35 million in new venture capital and debt financing. Investors included Intel Capital, Romulus Capital, TriplePoint Capital and individual angel investors including Y Combinator president Sam Altman. The company has raised $52.5 million altogether.

Favor, a two-year-old, Austin, Texas-based delivery service for local stores and restaurants, has raised $2 million in seed funding from backers like Silverton Partners and Tim Draper.

FiveStars, a three-year-old, San Francisco-based “consumer identity platform” whose technology helps small businesses offer loyalty rewards to their customers, has raised $26 million in Series B funding led by Menlo Ventures. Earlier backers Lightspeed Venture Partners, DCM and Rogers Communications also joined the round, which brings the company’s total funding to $42.7 million.

InstaMed, a 10-year-old, Philadelphia-based heathcare payments network, has raised $15 million funding of new capital from new and existing (and unnamed) investors. The round brings the company’s total funding to $77.2 million.

Lodgeo, a 1.5-year-old, London-based price comparison and booking app for hotel stays, has raised $2.5 million in funding from Javest Investment Fund, along with numerous, unnamed angel investors. TechCrunch hasmore here.

Magnitude Software Corp., a new, Austin-based company that was created by the merger of companies Noetix and Kalido Co. and that produces enterprise information management software, has raised $100 million in funding, including from Audax Group. Austin Business Journal has more here.

Massdrop, a two-year-old, San Francisco-based company whose platform invites customers to join together to purchase a product from manufacturers at a discount, has raised $6.5 million in Series A funding led by Mayfield Fund. Earlier backers Kleiner Perkins Caufield & ByersFirst Round Capital, and Cowboy Ventures, also participated in the round, which brings the company’s total funding to $8 million.

MasteryConnect, a five-year-old, Sandy, Ut.-based maker of evaluation software that helps teachers assess their students’ performances, has raised $15.2 million in Series B funding led by Trinity Ventures, with participation from Pelion Ventures and Catamount Ventures. The funding brings the company’s total capital raised to about $24 million

Numerify, a two-year-old, Cupertino, Calif.-based cloud-based business IT analytics company, has raised $15 million in Series B funding led by Sequoia Capital, with earlier investor Lightspeed Venture Partners participating. The company has raised $23 million to date, shows Crunchbase.

POW, a 12-year-old, Seattle-based company that makes winter sports apparel that it sells in more than 35 countries, has raised $2.5 million from Columbia Pacific Advisors. It appears to be the company’s first institutional round.

Pro.com, a 1.5-year-old, Seattle-based company whose pricing engine promises to estimate the cost of any home project in real time, has raised $14 million in Series A funding co-led by Maveron and Madrona Venture Group, with participation from earlier investors. The company has now raised $17.5 million altogether, including from Andreessen HorowitzRedpoint Ventures, Bezos Expeditions, Two Sigma Ventures and Sherpa Ventures.

Qzzr, a five-month-old, Lehi, Ut.-based company whose software allows anyone to create their own viral quizzes and embed in their own site, has raised $2 million in seed funding led by Kickstart Seed Fund, with participation from Pelion Venture Partners, Peterson Partners, RPM Ventures and various angel investors. TechCrunch has the story here.

Rithmio, a one-year-old, Champaign, Il.-based maker of gesture recognition software, has raised $650,000 in seed funding led by Marcin Kleczynski, CEO of Malwarebytes. Illinois Ventures, Techra Investments, Hyde Park Venture Partners, Serra VenturesBonaVentura, Fox Ventures, and numerous angel investors also participated in the round.

WaterHealth, a 19-year-old, Irvine, Ca.-based company whose water purification facilities offer sustainable, decentralized access to clean and affordable drinking water in underserved communities, has raised $10 million in funding from Vital Capital Fund, a vehicle that invests primarily in sub-Saharan Africa.

Wedding Spot, a 1.5-year-old, San Francisco–based online marketplace for booking wedding venues, has raised $3 million in seed funding co-led by Atlas Venture and KEC Ventures. Earlier investors Great Oaks Venture Capital, Maiden Lane, Canyon Creek Capital, and individual angels also joined the round. Crunchbase shows the company had previously raised $225,000 in seed funding, including from Eric Liaw and Erik Blachford.

WiserTogether, a six-year-old, Washington, D.C.-based company that makes healthcare treatment comparison software, has raised $9 million in Series B funding co-led by Martin Ventures and Merck Global Health Innovation Fund. Earlier investors Grotech Ventures, Harbert Venture Partners, 7Wire Ventures and Blue Heron Capital also joined the round, which brings the company’s total funding to $19.5 million.

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New Funds

Two executives with network experience in next-generation media and social TV have formed BRaVe Ventures, a New York-based outfit that will advise on and invest in companies and invest in digital technologies, reports Broacasting & Cable. David Beck, former senior VP and general manager of social media at Univision, and Jesse Redniss, who had been senior VP of digital for USA Network, are teaming with Vayner Media CEO and seed capital investor Gary Vaynerchuk in the new venture.

Commonfund Capital, the 26-year-old, Wilton, Ct.-based fund of funds firm, is looking to raise up to $500 million for its 11th vehicle, shows an SEC filing first flagged by VentureWire. The first sale has yet to occur.

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IPOs

The stock of CyberArk Software, a 15-year-old, Newton, Ma.-based cybersecurity software company, soared 87 percent yesterday, its first day of trading. CyberArk sold 5.36 million shares at a price of $16 per share.

Evernote — the six-year-old, Redwood City, Ca.-based company known for its note-taking apps — is considering an IPO in the next few years, its CEO, Phil Libin, tells the WSJ, adding: “We’ve been approached by lots of companies as an acquisition target and I would never rule anything out.” Evernote has raised more than $250 million from investors, including Sequoia Capital, Morgenthaler Ventures, Valiant Capital Partners and T. Rowe Price.

Shares of camera maker GoPro hit an all time high yesterday, notes the WSJ. At above $78, the stock has more than tripled from its initial public offering price of $24 in late June, likely on rumors that GoPro will release a new camera in mid October.

Vitae Pharmaceuticals, a 13-year-old, Fort Washington, Pa.-based clinical stage biotechnology company with multiple product candidates to treat various autoimmune diseases, saw its shares drop nearly 5 percent on its IPO debut yesterday. The company had priced its 6.9 million shares at $8, down from earlier plans to sell five million shares at $11 to $13 apiece.

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Exits

Civitas Therapeutics, a five-year-old, Chelsea, Ma.-based biopharmaceutical company that’s developing an inhaled formulation of an existing drug for Parkinson’s Disease, is being acquired by Acorda Therapeutics, a commercial-stage biopharmaceutical company, for $525 million in cash. Civitas had confidentially filed to go public in May; its plans were made public last month and the company was expected to go public yesterday. Its biggest shareholders include Longitude Capital Partners, which owns 19.9 percent of the company; Canaan Partners, which owns 18.9 percent; Fountain Healthcare Partners, which owns 10.2 percent;Bay City Capital, which owns 10.5 percent; and Alkermes, which owns 7 percent.

Covario, an eight-year-old, San Diego-based digital marketing agency, is being acquired by Dentsu Aegis Network of London for an undisclosed price. Covario raised $21 million in venture capital, including from Dubilier & Co., FTV Capital and Voyager Capital. The San Diego Union-Tribune has more here.

—–

People

Bill Carr, Amazon‘s head of digital music and video, is leaving at the end of the year, he announced internally yesterday. Carr, who joined Amazon in 1999, has been “instrumental in Amazon’s push to compete with Netflix and Hulu in streaming online video, including reaching deals with Viacom and others for exclusive content,” says the WSJ. Carr also oversaw the creation of original programming. No word yet on his next career steps. Amazon tells the WSJ that Carr’s immediate plans involve spending more time with his family and traveling.

Oracle cofounder Larry Ellison owns the Hawaiian island of Lanai, and as the New York Times Magazine reports, he views it “less like an investment than like a classic car, up on blocks in the middle of the Pacific . . . He wants to transform it into a premier tourist destination and what he has called ‘the first economically viable, 100 percent green community’: an innovative, self-sufficient dreamscape of renewable energy, electric cars and sustainable agriculture.”

After years of legal fees and unflattering press, venture capitalist Vinod Khosla has lost his battle to prevent the public from accessing Martins Beach, a cove that runs alongside his property, through an access rode that he blocked in 2010. Reports Forbes, San Mateo County Superior Court Judge Barbara Mallach “specifically ruled that Khosla’s blocking of the beach was done illegally because he did not obtain a coastal development permit first. Her ruling is not final, but it’s unlikely to change before she issues a final ruling in a month.”

Sarah and Elizabeth Turner, who were Stanford students in 2011 along with Evan Spiegel, are now suing Spiegel, the cofounder and CEO  of Snapchat. The sisters say they allowed Spiegel to photograph them for use in marketing materials for Snapchat’s predecessor app, Picaboo, but that those photos are now tarnishing their reputations for reasons they couldn’t have foreseen. More here.

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Job Listings

In late August, we told you of some openings at Samsung in Mountain View, Ca. Now Samsung is looking for an investment associate for its Open Innovation Center in New York.

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Data

Corporate VCs put $4 billion to work across 187 deals in the second quarter of this year, says CB Insights. That’s more than double the amount of $1.73 billion in capital they invested during the same year-ago period. More here.

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Essential Reads

Amazon is definitely going long on hardware. According to a Reuters report yesterday, Amazon is spending $55 million and increasing head count by at least 27 percent at its low-flying Silicon Valley-based hardware unit as it tests “smart” home gadgets.

Fifty percent of Yahoo shares have changed hands over the past four days, reports Business Insider, which has some theories as to why.

—–

Detours

New York City Mayor Bill de Blasio has been implicated in the death of a Staten Island groundhog named Charlotte.

Michael Wolff writes of the “ever-downward glide” of Forbes Media in Town & Country.

We do love the Kloons.

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Retail Therapy

Maple bacon deluxe smoked coffee. We doubt Juan Valdez would approve.




A Young VC Resurfaces with His Year-Old Startup: Spruce

RayBradfordEvery month, a few startups that enable patients to consult with doctors without visiting their offices seem to emerge from nowhere. It’s no wonder. According to the research firm IHS, revenue from these so-called telemedicine companies could hit $1.9 billion in 2018, up from $240 million last year. That shift owes largely to the Affordable Care Act, which is pressuring doctors to help drive down costs, but it’s also easy to imagine that a growing number of doctors likes the prospect of practicing medicine from anywhere, at any time.

Some companies, like Teladoc — which just raised $100 million from investors — have begun partnering with insurance companies like Aetna and Blue Shield of California to offer subscribers telemedicine services as an added benefit in their coverage. Others like venture-backed HealthTap and Doctor on Demand, both of which offer live videoconferences with doctors, are going straight to consumers.

A year-old company, Spruce — founded by former Kleiner Perkins Caufield & Byers partner Ray Bradford and launching publicly today — has a slight twist on the latter model. The 11-person, San Francisco-based company is debuting a mobile app that enables patients to pay $40 to consult with doctor but doesn’t give them instant care. Instead, users log on to the app, provide details about their specific condition, and receive a response from a board-certified physician within a day. (If a prescription is required, that information gets forwarded on to the pharmacy of the user’s choice.)

It doesn’t sound terribly revolutionary, but as Bradford explains it, the market opportunity makes up for a lot. “The majority of healthcare will be tech enabled and delivered via mobile devices. If you think about size of market and volume of doctors, you start to appreciate what a massive shift this will be, and we think the trend is just getting started.”

Earlier this week, we chatted briefly about Spruce, which is first targeting patients with acne problems but plans to expand into other ailments once it nails down its act.

Why acne first?

Fifty million Americans have acne. It’s not just a teenage problem. Most doctors visits are by adults. Meanwhile, the average wait time to see a dermatologist in the U.S. is 30 days, so the majority of people settle for over-the-counter solutions.

Why not employ videoconferencing, as are many other telemedicine startups?

It’s more convenient. Both the patient and doctor are doing things on their own time. If you’re on the clock with a doctor [Doctor on Demand customers pay $40 for 10 minutes or so with a physician, for example], maybe I can’t share everything I want to share. Likewise, the [offline] doctor is answering my questions, rather than going through the motions of collecting information in a rote way.

You left Kleiner to start this company in August of 2013. How much have you raised and will you be in the market again soon?

We raised $2 million in seed funding from Kleiner, with participation from Baseline Ventures and Cowboy Ventures. We raised it later last year [so we’re not raising again just yet].

You spent a couple of years as a VC and you worked previously in product development at Amazon Web Services. How do those experiences inform what you’re doing now?

The biggest way is seeing the importance of picking a big market, and you don’t get a much bigger market than healthcare.




StrictlyVC: September 24, 2014

Good Wednesday morning, everyone! Web visitors, here’s an easy-t0-read version of today’s email.

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Top News in the A.M.

The FCC wants to police your Internet provider. But, erm, so does the FTC. This is getting awkward, reports the Washington Post.

They say you can never be too thin. Not true.

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Amplify.LA Turns the Accelerator Model Inside Out (Completely)

Since Y Combinator first swung open its doors nine years ago, hundreds of accelerator programs have sprung into existence, almost all modeled in similar fashion — holding classes at certain times of the year, accepting a pre-determined number of startup teams, and staging “demo days.”

Paul Bricault, a founder of the two-and-a-half-year-old accelerator Amplify.LA in Venice, Ca., thinks that’s a little, well, silly. In fact, Bricault and Amplify’s cofounder, Richard Wolpert, have basically ripped up that playbook and created a new one that in almost every way operates differently. Whether it works is another question that only time will answer.

We chatted with Bricault, who is also a venture partner with Greycroft Partners, yesterday.

You wear two hats. So does Richard, who’s a venture partner at Accel Partners. How do you divide your time?

Amplify takes the bulk of my time. On an average week, it’s probably 70/30. But there are no normal weeks. [Laughs.]

You’ve raised two small funds so far, a $4.5 million fund and an $8.1 million fund closed last November. Will you be in the market again soon?

We’re not even a third of the way through fund two yet. My guess is that we’ll start fundraising early next year.

How many companies have you funded?

We’ve done 36 altogether and 31 have gone on to raise capital. Twenty-seven have raised seed rounds; four have raised Series A rounds, the smallest of which was $6 million. It’s a higher percentage than your average [accelerator] by a significant margin.

You take pride in doing things — a lot of things — differently. Amplify.LA doesn’t do classes; you have a rolling start program instead. You don’t have set economics. You invest in follow-on rounds. Why take such a different approach, given the success of Y Combinator?

Yes, we’re an accelerator in name but we do things differently. We have a rolling start program because we interviewed entrepreneurs from a dozen accelerator programs and realized that classes benefit the accelerators but not entrepreneurs, who may have a different time frame than the accelerators. I don’t believe a class-based structure engenders cooperation, either; the founders feel like they’re in a Darwinian funnel leading up to their demo day. You see more collaboration between the SaaS company that has just raised a seed round and is working beside a younger company that needs help on its pricing model. Classes also create an artificial structure at most accelerators that have maybe 10 or 12 slots. We’ll go for a couple of months without admitting anyone, then admit four startups in a month.

As for the economics?

Not all companies are created equally. Some have traction and patents when they reach out; some have a brilliant idea and a PowerPoint. So it doesn’t make sense from an entrepreneur or investor standpoint to [present standard terms]. I will say that in general, we take between 5 and 10 percent and put in anywhere from $50,000 to $200,000, which is more than you typically see at accelerators.

And we do follow-on financing, but not in every company. We’re so small that it’s not a huge negative signal [if we don’t participate in a company’s next round]. It’s not always because we like a company better but because of the economics of how we set up each deal. If we take four percent in one company and it’s raising a seed round, there’s a higher chance of our wanting to put more money in, versus the company where we already own more.

Why have you dispensed with demo days?

For similar reasons. As an investor, I’ve always disliked them; they force you to listen to pitches that aren’t necessarily in your areas of interest and pushes entrepreneurs into a truncated pitch structure, which causes all of the pitches to sound the same. The whole thing is very impersonal. We do a showcase here instead, where investors who attend can preselect the companies they want to meet with and, rather than sit through a pitch, meet one on one with those teams to get a better sense of them, without 100 investors listening over their shoulder.

Seed funding doesn’t seem to be an issue in L.A. as was once the case.

There are a lot of seed funds here now: Crosscut Ventures, Double M Capital, Lowercase Capital, TenOneTen Ventures, Karlin Ventures, Wavemaker Partners, Baroda Ventures, A-Grade [Investments], QueensBridge [Venture Partners], TYLT Lab. There are probably 20 seed funds now, which is small by Silicon Valley measures but huge for L.A.

What about early-stage VC?

If there’s anything I worry about, it would be the lack of Series A and B and C capital in LA. There are two or three funds — Anthem [Venture Partners], Greycroft and Upfront [Ventures] — and other than that, there aren’t a lot of firms in a position to lead Series A rounds, so we have to attract external capital. Amplify.LA’s Series A rounds have been led by Azure [Capital in San Francisco], Bessemer [Venture Partners, with offices in New York, Silicon Valley and Boston in the U.S.] and [Boston-based] Polaris Partners. But getting people to come down to L.A. or across the country is critical to the growth of the ecosystem right now.

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New Fundings

Akeneo, a 1.5-year-old, Rhone-Alpes, France-based open source Product Information Management (PIM) system designed for retailers, has raised $2.3 million in funding from Alven Capital. The company had previously raised a small amount of seed funding (roughly $132,000) from Kima Ventures, shows Crunchbase.

BetterWorks, a year-old, Palo Alto, Ca.-based cloud-based platform designed to help employees set and reach business goals, has raised $15.5 million led by Kleiner Perkins Caufield & Byers, with participation from Formation 8.

Bionym, a three-year-old, Toronto-based company that makes an authentication wristband that uses your heartbeat to communicate with technology, has raised $14 million in Series A funding led by Ignition Partners and earlier investor Relay Ventures. Other investors in the round include Export Development Canada, MasterCard and Salesforce Ventures. The company, which had previously raised $1.4 million in seed funding, had talked about its wearable with StrictlyVC back in May.

Content Analytics, a two-year-old, San Francisco-based e-commerce analytics platform that recommends optimization strategies to major retailers and brands, has raised $4 million in Series A funding led by Almaz Capital, with dunnhumby Ventures participating. The company had previously raised $1.5 million from founders, angels and seed funds including Visionnaire Ventures, Zetta Venture Partners, Western Technology Investment and others.

Finally Light Bulb, a three-year-old, Woburn, Ma.-based lighting startup, has raised about $15 million in Series B funding from undisclosed angel investors, bringing the company’s total funding to $23 million. Boston Business Journal has more here.

Inspirato, a three-year-old, Denver, Co.-based private club that provides its members exclusive access to luxury vacation homes and experiences, has raised $20 million in growth financing from new investor W Capital Partners, along with earlier investors Institutional Venture Partners and Millennium Technology Value Partners. The company has now raised about $70 million in equity altogether.

Invoice2go, a 12-year-old, Sydney, Australia-based mobile accounting startup, has raised $35 million in its first institutional round of funding fromAccel Partners and Ribbit Capital, a portion of which was used to provide liquidity to early employees. As part of the funding Greg Waldorf — previously a CEO-in-residence at Accel Partners and the CEO of eHarmony for the five years before — has joined the company as CEO. He’ll be working from Palo Alto, Ca., where Invoice2go is opening an office. TechCrunch has more here.

Ivantis, a seven-year-old, Irvine, Ca.-based company that’s developing new therapies for primary open angle glaucoma, has raised $25 million for its Series B financing, bringing the round total to $71 million. The latest close includes Foresite Capital. Earlier investors New Enterprise Associates, Delphi Ventures, Ascension Ventures, Vertex VenturesGBS Ventures, EDBI, and MemorialCare Innovation Fund also participated. The company has now raised $88.3 million altogether, shows Crunchbase.

Minerva Surgical, a six-year-old, Cupertino, Ca.-based medical device company whose ablation tool is used to treat heavy menstrual cycles and is eventually expected to treat women who don’t want more children, has raised $25.5 million in new funding, shows an SEC filing. The company has now raised $45 million to date, including from Versant Ventures, shows Crunchbase.

Qualtrics, a 12-year-old, Provo, Ut., and Dublin, Ireland-based software-as-a-service company that says its platform makes it fast and easy for companies to capture customer, employee, and market insights in one place, has raised $150 million in Series B funding by Insight Venture Partners. Sequoia Capital and Accel Partners, which had provided the company with $70 million in Series A funding in 2012, also participated in the round.

Relayr, a 2.5-year-old, Berlin-based company that makes an Internet of Things hardware developers kit that’s called the Wonder Bar and looks like a chocolate bar out of “Willie Wonka,” has raised $2.3 million in seed funding from undisclosed investors. The company had previously raised $320,000 in seed funding, as well as raised $111,000 through a crowdfunding campaign. TechCrunch has more here.

Robinhood, a two-year-old, Redwood City, Ca.-based retail brokerage platform that invites users to trade at no cost, has raised $13 million in Series A funding led by Index Ventures. Other participants in the round include Ribbit Capital; StockTwits cofounder Howard Lindzon; Box cofounder Aaron Levie; Path cofounder Dave Morin; entertainer Jared Leto; singer Snoop Dogg; and Nasir Jones of QueensBridge Venture Partners. The company has now raised $16 million altogether, including from seed investors Andreessen Horowitz and Google Ventures.

Sense.ly, a 1.5-year-old, San Francisco-based avatar-based chronic care platform that provides personalized patient monitoring and follow-up care, has raised $1.25 million in seed funding. Sense.ly was incubated within Orange SA, the France-based telecom and technology company, and launched independently in 2013. It had previously raised an undisclosed amount of seed funding from Alchemist Accelerator, shows Crunchbase.

SiteOne Therapeutics, a four-year-old, San Francisco-based company that’s developing therapies to treat acute and chronic pain, has raised $1.5 million in seed funding from Bay Capital, Sears Capital Management, and BioBrit. The company has also just received a $1.4 million grant from the National Institutes of Health.

SwipeToSpin, a three-year-old, New York-based company whose software makes it easier to create and publish photorealistic content with 360-degree images of products, has raised an undisclosed amount of funding from Stonehenge Growth Equity Partners. In February, the company had raised an undisclosed amount of funding from Cross Continent Capital and StartFast Venture Accelerator.

Tongbanjie, a two-year-old, Hangzhou, China-based mobile financial app, has raised nearly $50 million in Series B funding led by Legend Capitalreports China Money Network. Earlier investors China Growth Capital and IDG Capital Partners also participated in the latest round. Tonbanjie means “the street of copper coins” in Chinese.

Udacity, a three-year-old, Mountain View, Ca.-based e-learning startup that works with corporations like Google and Facebook to teach college grads online courses that will help them succeed at those companies, has raised $25 million in Series C funding. The round was led Drive Capital, the Columbus, Oh.-based, Midwest-focused firm founded by former Sequoia Capital investors Mark Kvamme and Chris Olsen (who evidently invest outside the Midwest sometimes, too). Other participants in the round include Bertelsmann Se & Co. KGaG in Germany, Recruit Co. in Japan and Valor Capital in Brazil. Cox Enterprises also participated alongside earlier investors Andreessen Horowitz and CRV and individuals Peter Levine and George Zachary. The company has now raised $63 million altogether. Venture Capital Dispatch has more here.

Zeef, a 1.5-year-old, Amsterdam-based content curation platform, has raised $1.55 million in Series A funding from undisclosed investors. The company had previously raised $830,000 in seed funding.

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New Funds

Crestlight, a Palo Alto, Ca.-based firm that invests in pre-series A startups, has begun marketing a Connected Industry Fund to explicitly target areas like supply chain management, inventory replenishment, transportation, security, big data, advanced analytics and machine learning. More here.

IvyCap Ventures, a Mumbai, India-based venture firm that targets early- to growth-stage startups, has has closed is debut fund with roughly $40 million reports the Economic Times. Vikram Gupta, founder and managing partner of IvyCap, said its strategy is to back companies founded or referred to by alumni of top colleges. “If you just look at the data of the [graduates of the Indian Institutes of Technology] 20 percent of them have been entrepreneurs once in their lifetime, and 500 IPOs have already happened,” said Gupta. IvyCap has already closed six investments, says the report, including the online women’s retailer E-Shakti.

Bubble schmubble. Tiger Global Management, the nine-year-old, New York-based investment firm, has begun raising a $1.5 billion fund, just five months after raising another $1.5 billion vehicle, according to Fortune’s Dan Primack. The company raised the same amount for its eighth fund, closed in April, and its seventh fund, closed in 2012.

Trifecta Capital Partners — the new Mumbai, India-based venture debt firm of Rahul Khanna, a longtime managing director at venture capital firm Canaan Partners — is looking to close on roughly $50 million for its debut fund. Khanna has teamed with Nilesh Kothari, a former M&A head at Accenture in India for the effort. LiveMint has more here.

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IPOs

Zalando, the six-year-old, Berlin-based online fashion retailer, is considering shortening the subscription period for its IPO because of strong demand, sources tell Reuters. The company’s shares are already trading in the gray market well above the 18 euros to 22.50 euros price range set last week, according to the report.

Speaking of the Samwer brothers (who launched Zalando): Rocket Internet AG set the price range for shares in its initial public offering, valuing the German technology incubator at up to $8 billion. The company, which focuses on copying successful e-commerce businesses, said it could raise as much as 1.48 billion euros by selling 24 percent of its shares.

—–

Exits

Nexage, an eight-year-old, Boston-based mobile ad platform, has been acquired by the publicly traded mobile ad company Millennial Media$107.5 million in cash and (mostly) stock. Nexage had raised $19.5 million from investors, including GrandBanks Capital, Relay Ventures, Hearst Ventures, and SingTel Innov8.

Playhaven, a five-year-old, San Francisco-based mobile ad network, has acquired been by the L.A.-based incubator Science Inc. VentureWire reports that the deal was done for more than $20 million in cash. Science CEO Mike Jones tells TechCrunch that while he expects PlayHaven to “show great returns and great growth” on its own, he’d also like to see it help other Science companies monetize their mobile apps.

Prss, a year-old, Netherlands-based platform that makes it easy to create iPad-compatible magazines using tools that don’t require any knowledge of code, has been acquired by Apple. TechCrunch has more here.

—–

People

Former Apple Retail SVP Ron Johnson, who went on to become the CEO of J.C. Penney (getting ousted after 17 months following grim results), is launching a high-end, on-demand delivery service for gadgets, according to The Information. According to the report, Johnson has already recruitedJerry McDougal, Apple’s vice president of retail, who worked under Johnson, to help.

Investor Peter Thiel talks with Business Insider about a range of things, including Apple Pay, which he does not view as a game-changer: “For a new payment product, you always have to ask, how much better is it than the current solution? . . . When you look at stores or physical worlds, places, a lot of these places are already set up to take cash or credit card. Apple Pay may be an incremental improvement, maybe a little bit better. But when you have something that’s pretty good and you go to something that’s perfect, sometimes it’s very hard to drive adoption because the delta is not that big.”

—–

Job Listings

Providence Health & Services, a not-for-profit Catholic health-care ministry that plans to invest $150 million in early- to mid-stage patient care companies, is looking to hire a senior venture capital associate. The job is in Renton, Wa.

—–

Essential Reads

Oh, Clinkle. Clinkle, clinkle, clinkle.

Why innovators hate MBAs.

How not to pitch a billionaire (in this case, Chris Sacca).

—–

Detours

Eight iOS 8 tricks you should know about.

Can you guess which neighborhood has the most expensive median home value in San Francisco? (If you’re from San Francisco, you probably can.) Paragon Real Estate breaks it down here.

—–

Retail Therapy

Still can’t decide which new iPhone to buy? Check out this guide for the regular guy. It didn’t help us, but we’re Libran. It could take us until sometime next year to figure it out.




Amplify.LA Turns the Accelerator Model Inside Out (Completely)

Paul BricaultSince Y Combinator first swung open its doors nine years ago, hundreds of accelerator programs have sprung into existence, almost all modeled in similar fashion — holding classes at certain times of the year, accepting a pre-determined number of startup teams, and staging “demo days.”

Paul Bricault, a founder the two-and-a-half-year-old accelerator Amplify.LA in Venice, Ca., thinks that’s a little, well, silly. In fact, Bricault and Amplify’s cofounder, Richard Wolpert, have basically ripped up that playbook and created a new one that in almost every way operates differently. Whether it works is another question that only time will answer.

We chatted with Bricault, who is also a venture partner with Greycroft Partners, yesterday.

You wear two hats. So does Richard, who’s a venture partner at Accel Partners. How do you divide your time?

Amplify takes the bulk of my time. On an average week, it’s probably 70/30. But there are no normal weeks. [Laughs.]

You’ve raised two small funds so far, a $4.5 million fund and an $8.1 million fund closed last November. Will you be in the market again soon?

We’re not even a third of the way through fund two yet. My guess is that we’ll start fundraising early next year.

How many companies have you funded?

We’ve done 36 altogether and 31 have gone on to raise capital. Twenty-seven have raised seed rounds; four have raised Series A rounds, the smallest of which was $6 million. It’s a higher percentage than your average [accelerator] by a significant margin.

You take pride in doing things — a lot of things — differently. Amplify.LA doesn’t do classes; you have a rolling start program instead. You don’t have set economics. You invest in follow-on rounds. Why take such a different approach, given the success of Y Combinator?

Yes, we’re an accelerator in name but we do things differently. We have a rolling start program because we interviewed entrepreneurs from a dozen accelerator programs in the U.S and Israel and Canada and realized that classes benefit the accelerators but not entrepreneurs, who may have a different time frame than the accelerators. I don’t believe a class-based structure engenders cooperation, either; the founders feel like they’re in a Darwinian funnel leading up to their demo day. You see more collaboration between the SaaS company that has just raised a seed round and is working beside a younger company that needs help on its pricing model. Not last, classes create an artificial structure at most accelerators that have maybe 10 or 12 slots. We’ll go for a couple of months without admitting anyone, then admit four startups in a month.

As for the economics?

Not all companies are created equally. Some have traction and patents when they reach out; some have a brilliant idea and a PowerPoint. So it doesn’t make sense from an entrepreneur or investor standpoint to [present standard terms]. I will say that in general, we take between 5 and 10 percent and put in anywhere from $50,000 to $200,000, which is more than you typically see at accelerators.

And we do follow-on financing, but not in every company. We’re so small that it’s not a huge negative signal [if we don’t participate in a company’s next round]. It’s not always because we like a company better but because of the economics of how we set up each deal. If we take four percent in one company and it’s raising a seed round, there’s a higher chance of our wanting to put more money in, versus the company where we already own more.

Why have you dispensed with demo days?

For similar reasons. As an investor, I’ve always disliked them; they force you to listen to pitches that aren’t necessarily in your areas of interest and pushes entrepreneurs into a truncated pitch structure, which causes all of the pitches to begin to sound the same. The whole thing is very impersonal. We do a showcase here instead, where investors who attend can preselect the companies they want to meet with and, rather than sit through pitch, they meet one on on with those teams to get a better sense of them, without 100 investors listening over their shoulder.

Seed funding doesn’t seem to be an issue in L.A. as was once the case.

There are a lot of seed funds here now: Crosscut Ventures, Double M Capital, Lowercase Capital, TenOneTen Ventures, Karlin Ventures, Wavemaker Partners, Baroda Ventures, A-Grade [Investments], QueensBridge [Venture Partners], TYLT Lab. There are probably 20 seed funds now, which is small by Silicon Valley measures but huge for L.A.

What about early-stage VC?

If there’s anything I worry about, it would be the lack of Series A and Series B and C capital in LA. There are two or three funds — Anthem [Venture Partners], Greycroft and Upfront [Ventures] — and other than that, there aren’t a lot of firms in a position to lead Series A rounds, so we have to attract external capital. Amplify.LA’s Series A rounds have been lead by Azure [Capital in San Francisco], Bessemer [Venture Partners, with offices in New York, Silicon Valley and Boston in the U.S.] and [Boston-based] Polaris Partners. Getting people to come down to L.A. or across the country is critical to the growth of ecosystem right now.

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




StrictlyVC: September 23, 2014

Good morning, everyone! (Psst, here‘s an easier-to-read version of today’s issue.)

—–

Top News in the A.M.

Apple has announced that iOS 8 adoption has already reached 46 percent.

Google has to improve its proposal to settle European Union concerns over its search practices or face formal antitrust charges, the EU’s competition chief said earlier today.

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Venture Debt Giant WTI on Good Times — and Dangers Ahead

The 34-year-old venture debt firm Western Technology Investment (WTI) has seen a few cycles, and its CEO, Maurice Werdegar, thinks investor Bill Gurley had a point when he talked publicly last week about the excessive risk that startups are taking on.

He doesn’t think Gurley scared anyone straight, though. “I think the [dot com bubble of the late ‘90s] is a distant memory to many participants in the ecosystem, so we’re not seeing anyone panic or ring the alarm bell,” says Werdegar. “We’re seeing burn rates increase across the board, and that’s emblematic of companies that think they’re supposed to accelerate into their opportunity without thinking about whether they can raise the next round.”

It can mean brisk business for venture debt companies like WTI, which is currently joining about 100 financing deals a year, but it’s also dangerous, notes Werdegar. We talked about the environment, and WTI’s role in it, yesterday morning. Our chat has been edited for length.

For readers who don’t completely understand venture debt, can you explain why a startup would turn to you?

There are a number of cases, including to finance equipment, like when it comes to Bitcoin mining. Venture debt is also used as money in between plans. When a startup is behind on its plan, venture debt can give it time to achieve the milestones it needs to obtain. It can also be used to provide more runway to a company that may be hiring and spending ahead of its original plans because it sees a product-market fit and doesn’t necessarily want to be forced into raising another [VC] round prematurely.

Another case is to get to profitability. Sometime companies close enough to achieving breakeven raise debt rather than raise capital again, which can change acquisition discussions. Some startups also turn to venture debt to take out a competitor. Maybe they didn’t contemplate an acquisition when they raised their last round; venture debt [enables them to acquire that competitor anyway].

What types of deals are you doing and what’s your minimum threshold?

Ninety percent are tech deals right now. Another 10 percent are life sciences. We’ve done deals right out of Y Combinator on the low end; many of the deals we’re doing are with seed syndicates. We’ve also done deals north of $30 million, with several greater than $10 million in size this year, including Jet.com [the new e-commerce company by Quidsi cofounder Marc Lore].

The seed stuff is interesting. You were actually involved with Facebook, as reported in David Kirkpatrick’s book, The Facebook Effect.

We were the first venture debt for both Google and Facebook. We supplied debt along with Google’s Series A. With Facebook, we supplied two consecutive venture debt rounds of $300,000; they were buying servers because the cloud didn’t exist yet. We were also a seed equity investor in Facebook, writing a $25,000 check alongside Peter Thiel’s $500,000 check and the $37,000 checks of [entrepreneurs] Reid Hoffman and Mark Pincus, and we did a $3 million venture debt deal when Accel [led Facebook’s] $12 million Series A round [to cover the cost of computers and other hard assets]. The debt, in addition to the equity the company raised early on, helped position it for that next round. They don’t all go that way, though. [Laughs.]

What kinds of convenants do you ask for?

We have none . . . so we’re taking true risk. Our industry is known for taking money back when it gets nervous. Our firm actually loses money. It’s easy to lend money to a famous company, but much harder to work through unforeseen difficulties to keep a company alive and we’ll work through that adversity.

What kind of return are you looking for when you get involved with a company?

We have to deliver reasonably consistent, positive returns, but I’d rather not quote a number. There are often competitors that offer money less expensively, but it will come with covenants. Ours is more expensive but more usable. It’s a bit of you-get-what-you-pay-for in this industry.

There are obvious upsides to venture debt, including that it reduces dilution to the founder. What are the biggest downsides?

If it’s overused or abused, it can kill you. In any application of debt, there’s an amount that’s too much and it can get in the way. Say you’re a Y Combinator company and you raise $10 million in debt; the next round of investors won’t be interested in coming in with that kind of debt load. No one wants to finance a company that’s overburdened with debt.

If debt can be called back, it can cause unforeseen calamity, too. If your bank account has been swept, legally, that’s scary for companies.

You haven’t seen any reaction outside of the media to Bill Gurley’s proclamations last week. Does that worry you?

We ourselves feel as if things can’t get a whole lot better than the current environment. A lot depends on Facebook and Google. If they trade down 20 percent, you can be sure the venture market will take a pause. It’s imperative that they keep feeding the pump from the M&A side.

Any thoughts on valuations?

Most valuations that you’re seeing are by no means the value of company if it were to try to sell itself today. It’s the Black-Scholes model – [pricing options] based on what a company might become worth, which could be very different than what it’s worth [currently]. That, I think, is dangerous.

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New Fundings

Agari, a five-year-old, San Mateo, Ca.-based company that develops data-driven security software to detect and prevent email cyberattacks, has raised $15 million in Series C funding led by Scale Venture Partners, with earlier investors Alloy Ventures, Battery Ventures, First Round Capital and others participating in the round. The company has now raised $22.7 million altogether.

AppNexus, the seven-year-old, New York-based ad tech firm, has raised $25 million in funding from the communications services firm WPP. If you’re thinking it’s a strange deal for a company that has now raised at least $225 billion and is reportedly valued at $1.2 billion, you aren’t alone. Business Insider gets to the bottom of things here.

Authorea, a two-year-old, New York-city based startup whose software tools are designed to help scientific researchers write and manage scholarly documents, has raised $610,000 in seed funding led by ff Venture Capital and NY Angels. Earlier, the company received a $33,000 grant from a Digital Science Catalyst competition. TechCrunch has morehere.

Branch Metrics, a 1.5-year-old, Palo Alto, Ca.-based mobile software company focused on deep linking technology, has raised $3 million in seed financing led by New Enterprise Associates, with participation from Pejman Mar Ventures, Ben Narasin and TriplePoint Capital.

Circle Pharma, a year-old, San Francisco-based early-stage biotechnology company, has an undisclosed amount of seed funding from Pfizer and QB3’s seed-stage venture fund, Mission Bay Capital. BioPortfolio has more here.

Duo Security, a 4.5-year-old, Ann Arbor, Mi.-based company that provides two-factor authentication services to organizations, has raised $12 million in Series B led by Benchmark. Google Ventures, Radar Partners and True Ventures also joined the round, which brings the company’s total funding to $20 million, shows Crunchbase.

Gametime, a 1.5-year-old, San Francisco-based mobile-first ticketing platform for last minute sports tickets, has raised $4 million in Series A funding led by Accel Partners. Other participants in the round include Jeff Mallett, the founding president and former COO of Yahoo (and now a principal partner of the San Francisco Giants), Tibco founder Vivek Ranadive (now owner of the Sacramento Kings); HotelTonight cofounders Sam Shank and Jared Simon; Box cofounder Aaron Levie; and Colin Evans, a founding executive at StubHub. The company has now raised $5 million to date.

IronSource, a five-year-old, Tel Aviv-based ad tech company, has raised $85 million from a syndicate of U.S. and China-based investors that the company describes as among the largest strategic partners in mainland China. TechCrunch has more here.

Jiff, a 3.5-year-old, Palo Alto, Ca.-based company whose digital health platform helps employers design and implement programs that motivate their employees to adopt healthy behaviors, has raised $18.3 million in Series B funding led Venrock, with earlier investors Aberdare Ventures and Aeris Capital participating. The company has now raised $26.8 million to date, shows Crunchbase.

Kinvey, a four-year-old, Boston-based backend-as-a-service platform that makes it easier for developers and enterprises to set up and operate a cloud backend for their mobile, tablet and web apps, has raised $10.8 million in Series B funding from new investors NTT DOCOMO Ventures and Verizon Ventures, along with earlier investors Avalon Ventures and Atlas Venture. The company has now raised $17.8 million to date.

Le Vision Pictures, a three-year-old, Beijing-based film production and distribution company, has raised $55.4 million in Series B funding fromCHT Capital and other unnamed investors, reports China Money Network. The company had previously raised $32.7 million in Series A funding by Shenzhen Capital Group, says the report.

NexSteppe, a four-year-old, South San Francisco, Ca.-based company that develops seeds for the production of sugars and biomass, has raised $22 million in Series C financing from new investors Total Energy Ventures and ELFH Holding GmbH and earlier backers Braemar Energy Ventures and DuPont Ventures. The company has now raised $36 million altogether, shows Crunchbase.

Ometria, the 1.5-year-old, London-based e-commerce intelligence startup that analyzes customer histories to provide personalized shopping experiences, has raised $500,000 in seed funding from 17 investors, adding to a $1.5 million seed round that the company raised in March from 16 investors. TechCrunch has more here.

Performance Horizon Group, a four-year-old, South Shields, U.K.-based online marketing technology company that sells a suite of performance marketing products and services, has raised $10 million in Series B funding led by Mithril Capital Management. Earlier investors DN Capital and Greycroft Partners also participated in the round, which brings the company’s funding to at least $13.1 million, shows Crunchbase.

Radius Intelligence, a five year-old, San Francisco-based marketing automation software company, has raised $54.7 million in fresh funding from Founders Fund, Glynn Capital Management, Slow Ventures,Western Technology Investment, Yuan Capital, Morgan Stanley Chairman John Mack, former Microsoft executive Charles Songhurst, entertainer Jared Leto and earlier investors BlueRun Ventures and Formation 8. The company has now raised $78.9 million altogether, shows Crunchbase. Venture Capital Dispatch has more here.

SeqLL, a 1.5-year-old Woburn, Ma.-based developer of single molecule sequencing technology, has raised $1 million in Series A funding led by Genomic Diagnostic Technologies.

Silvercar, a nearly two-year-old, Austin, Tx.-based high-touch car-rental service that exclusively owns Audi A4s that rent for roughly $90 per weekday, has raised $14 million in new funding led by Facebook co-founder Eduardo Saverin and Velos Partners. Austin Ventures and CrunchFund also participated in the round, which brings the company’s total funding to $31.5 million. Venture Capital Dispatch has a nice overview of Silvercar and its new round here.

Teladoc, a 12-year-old, Dallas-based telemedicine company, has raised $50 million in Series F funding, according to an SEC filing first flagged by VentureWire. This brings the company’s total funding to just more than $100 million, the company tells the outlet. Its investors include New Capital Partners, Trident Capital, HLM Venture Partners, and Kleiner Perkins Caufield & Byers.

Tiggly, a two-year-old, New York-based company whose physical toys interact with learning apps on iPads and other tablets, has raised an undisclosed amount of Series A funding led by Habermaass GmbH, a Germany-based early play and learning company and owners of the toy brand HABA, which is now entering the U.S. edtech market. The funding reportedly brings Tiggly’s funding to $5 million. TechCrunch has more here.

Tracon Pharmaceuticals, a nine-year-old, San Diego-based biopharmaceutical company whose product aims to complement existing cancer treatment drugs and vision disorders by inhibiting the creation of new blood vessels, has raised $27 million in Series B funding from New Enterprise Associates, BioMed Ventures and an unnamed institutional investor, with participation from new investors Nextech Invest and Brookline Investments and earlier investors Jafco and Arcus Ventures. The company has raised $42.5 million to date, shows Crunchbase.

Traxpay, a two-year-old, Frankfurt, Germany-based business-to-business payment platform company, has raised $15 million in new funding led by Commerzbank’s main incubator and Software AG, with participation from earlier investors Earlybird Venture Capital and Michael Phillips of Castik Capital. The company has now raised $19 million to date.

Verse Innovation, a seven-year-old, Bangalore-based owner of local-language mobile platform NewsHunt, has raised more than Rs 100 crore in its second round of funding led by Sequoia Capital India, which was joined by Matrix Partners India and Omidyar Network. The Economic Times has more here.

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New Funds

Mosaic Ventures, a new early-stage venture firm based in London, has officially launched a $140 million debut fund to invest in European startups, says the firm, whose founders are Mike Chalfen, formerly of Apax Partners and Advent Venture Partners; Simon Levene, who spent four years as a VP of corporate development at Yahoo, as well as worked as a VC with Accel London and Index Ventures; and Toby Coppel, long an EVP at Yahoo who later spent 4.5 years as a partner at Virgin Green Fund in London. They share what they’re aiming to do here.

Takwin Labs, a new, Haifa, Israel-based incubator for the Arab Israeli community, has raised $4.5 million in Series A funding to focus on mobile and internet technology startups, with the hope that it will be able to help Arab Israeli entrepreneurship grow. According to Haaretz, the outfit was founded by Erel Margalit, the founder of Jerusalem Venture Partners; Chemi Peres, founder and managing partner at Pitango Venture Capital; Al Bawader, an Israeli Arab venture capital firm; and Imad Telhami, founder of Babcom Centers, which supplies call center and software development services to Israeli companies. The incubator reportedly plans to raise a total of $20 million and to invest hundreds of thousands of dollars in four to six startup companies.

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IPOs

Following Alibaba‘s debut, this week could prove to be a “litmus test for the IPO market,” with 14 deals expected to raise $7 billion, says Renaissance Capital. More here.

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Exits

Apcera, a two-year-old, San Francisco-based startup behind an enterprise application platform, has sold a majority stake in its business to Ericsson in an all-cash deal whose price was not disclosed. Apcera will retain its name and operate as a standalone company, with CEO Derek Collision remaining in place. Apcera had previously raised $7.2 million from investors, including Data Collective, True Ventures, Kleiner Perkins Caufield & Byers, Andreessen Horowitz, and Rakuten. Data Center Knowledge has the story.

Aviary, a seven-year-old, New York-based photo editing platform, has been acquired by Adobe for undisclosed financial terms. Aviary had raised a total of $19 million in funding, including a recent $2 million debt round. The company’s investors include Spark Capital, Bezos ExpeditionsVision Ventures, Reid Hoffman, Joi Ito, Thomas Lehrman, and Payman Pouladdej. TechCrunch has more here.

Bookpad, a year-old, Bangalore, India-based digital content startup whose flagship product enables cloud-based document embedding, annotations and editing features on enterprise applications, has been acquired by Yahoo for undisclosed terms that sources of the Economic Times peg at $8.3 million. More here.

Engodo, a two-year-old, San Francisco-based social advertising startup, has been acquired in a cash-and-stock deal by the video monetization platform ZEFR, a five-year-old, Venice, Ca.-based company. Engodo doesn’t appear to have raised outside funding. ZEFR has raised $60 million from investors, including from SoftTech VC, MK Capital, Shasta Ventures, U.S. Venture Partners, and First Round Capital. TechCrunch has more here.

Fullscreen, a 3.5-year-old, Culver City, Ca.-based company that has grown into one of the biggest YouTube networks, has sold a controlling stake in its business to Otter Media, the Web video joint venture between AT&T and the Chernin Group. Fullscreen CEO George Strompolos will remain in charge of the company, in which he continues to hold a stake. The deal is likely to value Fullscreen, which says it has four billion monthly video views, between $200 million and $300 million, reports Recode. Fullscreen had previously raised $30 million from investors, including the Cherin Group, Comcast Ventures, WPP Digital and SV Angel.

Mopp, a 1.5-year-old, U.K.-based cleaning service, has been acquired by the New York-based on-demand home cleaning and repair service Handy. No financial terms were disclosed. Mopp never disclosed outside funding. Handy has raised at least $45.7 million from General Catalyst PartnersDavid Tisch, Highland Capital Partners, BoxGroup and Revolution Growth, shows Crunchbase.

Hitch, a young, San Francisco-based ride-sharing service based in San Francisco, has been acquired by its bigger, seven-year-old rival Lyft for undisclosed terms. Hitch had raised at least $150,000 from Kima Ventures, Winklevoss Capital, and Scott Banister. Bloomberg has more here.

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People

What has Ray Ozzie been focusing on since leaving his position as Microsoft’s chief software architect? Here’s the answer.

And it begins in earnest. “Signaling that he may be edging closer to a 2016 White House run, Republican Senator Rand Paul of Kentucky said Saturday he plans to open an office in the San Francisco Bay Area, one of the nation’s strongest Democratic bastions – and a convenient link to Silicon Valley,” reports the San Francisco Chronicle.

Neighbors are fed up over the large and loud construction zone outside the San Francisco home of Facebook cofounder Mark Zuckerberg, where 40 to 50 contraction workers have at work daily on a complete remodel since April of last year. The San Francisco Chronicle has the story here.

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Job Listings

Little John Ventures, a small, Baltimore-based venture capital fund investing in early-stage media and entertainment tech startups, is looking to hire a research analyst.

The Memorial Sloan-Kettering Cancer Center in New York is looking for an investment associate to help manage its $4 billion in assets.

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Data

The old and the new: a look at global install bases, c/o Benedict Evans.

Princeton University’s endowment is “probably the largest investor” in New York-based Thrive Capital, its president, Andrew Golden, tells the Daily Princetonian.

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Essential Reads

The Ivanpah solar power plant in the Mojave Desert, which took four years and thousands of workers to complete and officially opened in February, may already be in deep trouble. As VentureWire notes, the “world’s largest solar thermal electricity project is applying for a federal grant–to pay off its federal loan,” of hundreds of millions of dollars. Even as the plant opened — backed by BrightSource Energy, NRG Energy and Google — it faced doubts about its future, the New York Times had reported earlier. “Companies that are supplying these systems have questionable futures,” an analyst had told the outlet back in February. “There’s other prospects for renewables and for solar that look a lot better than this particular solution.”

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Detours

Look who was in line for new iPhones last weekend.

Six billionaires and their effing sons.

John Oliver’s very smart take on the spectacle that is “Miss America“: “They asked one of the contestants to solve ISIS. And she only had 20 seconds to do it!”

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Retail Therapy

little peace offering for Mark Zuckerberg’s furious neighbors, perhaps?