Hi, good morning, everyone! (Web visitors, here’s an easier-to-read version of today’s email here.)
Top News in the A.M.
Instagram now has 300 million users. As Recode’s Kurt Wagner astutely notes, that makes it Facebook’s fourth product with more users than Twitter, including Facebook, with 1.35 billion users; WhatsApp, with 600 million users; and Facebook Messenger, with 500 million users. (Adding insult to injury, Twitter — ranked second on Glassdoor’s list of best places to work last year — didn’t crack the top 50 this year.)
Sony tries of a hack of its own to disrupt downloads of its stolen files.
VC Michael Eisenberg: More VCs Are Staying in Israel
If you’ve ever done an Internet or software venture deal in Israel, you probably know Michael Eisenberg. He started off in the industry 20 years ago, working first as a general partner at Israel Seed Partners, then spending nearly a decade with Benchmark, which he left last year to launch Aleph, an early-stage firm he cofounded with operator-turned-investor, Eden Shochat.
Eisenberg also spends plenty of time in the U.S., to visit Israeli founders who’ve relocated here, as well as to help recruit for those of his portfolio companies that are staying put back home. In fact, the busy father of eight happened to be in New York yesterday; in between meetings, we chatted by phone about Israel’s current startup scene and what he’s seeing there.
You invest exclusively in Israeli startups, though you’re in the U.S. fairly often. What percentage of your management teams have moved here?
Probably half, with the other half still in Israel.
Has that number changed much in recent years?
If anything, we’re seeing more Israeli entrepreneurs decide to stay in Israel. With the development of the web and the ability it affords founders to market their products from anywhere, entrepreneurs no longer need the same degree of in-market presence.
You closed a debut fund of $140 million last year, with a side fund of $14 million. How much have you invested so far, and what size checks are you writing?
We’ve invested about 25 percent of the fund. We’re writing Series A checks of $2 million to $5 million. Half the deals are syndicated; the other half, we’ve done ourselves.
According to IVC-Online, the pace of investment in Israeli startups was up in the third quarter — this despite the Gaza conflict.
I’m not sure there’s any rhyme or reason for it, but the pace of innovation in Israel exists outside of the regional economy and regional politics. At the end of the day, innovation is very scarce. You can find it in pockets of New York and Shanghai and London, but it’s mostly in Silicon Valley and Tel Aviv, and as more industries are subject to innovation, investment is Israel is inevitably going up.
We hear that local firms are getting sidelined, that multinational firms like Bessemer and Benchmark have a major and growing competitive advantage right now.
There’s definitely brand value to international firms like Benchmark, as I experienced. And most of the Israel firms haven’t built their brand over time. But reputation is earned. It’s not bought. What entrepreneurs learn is that an individual is more important than the firm.
Eden and I have spent a collective 40 years building relationships. We both travel every third or fourth week. I’ve logged more miles than any VC in Israel. Just because you’re the Israeli partner of a U.S firm doesn’t mean you have the relationships needed to help a company.
Are you seeing more Chinese investors in Israel? Baidu just made its first investment in an Israeli startup called Pixellot, which seems notable.
Over the last 12 months, we’ve seen many more Chinese investors come to Israel, which is a good thing. Chinese investors have [backed] Israeli venture firms, including Pitango [Venture Capital] and Carmel [Ventures], but they’re starting to invest directly in technology as well because the East is such a big market.
Of course, you hope it doesn’t presage the top of the market. I remember a huge infusion of Italian money at the top of the market [in the late ‘90s], and that didn’t end well.
Credit Suisse is reportedly interested in investing in Israeli startups for clients of its wealth management business. Is that a worrisome indicator?
There’s generally been a big move by financial institutions in the U.S. and Europe into Israel. Citigroup and Barclays and others have set up tech centers and innovation labs. Especially around financial technology and security, Israel is a great place to go. I’m just not sure there’s enough engineering talent for everyone who wants to move into the market.
What’s happening with valuations?
Valuations in Israel aren’t as out of whack as they are in the U.S. It’s a much more disciplined market that seems to remember what downturns look like. At Aleph, we have a policy of straight-up flat term sheets, too. That’s something I learned at Benchmark.
Aleph also has an equal partnership model like Benchmark’s, with the carry split evenly. I often wonder why more firms don’t do the same.
It makes a lot of sense. It kills all the politics. Partners at Benchmark help each other tirelessly. But it’s inherently difficult to scale — to be able to find someone who provides as much value [as everyone else], and I think firms are daunted by that. You just have to rise to that challenge.
Area 1 Security, a year-old, Menlo Park, Calif.-based cyber-security startup founded by three former NSA analysts, has raised $8 million in a Series A financing led by earlier investor Kleiner Perkins Caufield & Byers. The company has now raised $10.5 million, including from Cowboy Ventures, Data Collective, First Round Capital, Allegis Capital, and others.
Connect, a 2.5-year-old, San Francisco-based company whose app merges contact information from Facebook, LinkedIn, Gmail, Instagram, and iPhone address books so users can message any of their contacts from inside the app, has raised $10 million, including from Fosun International and Salesforce CEO Marc Benioff. The company has now raised $13 million altogether. Venture Capital Dispatch has more here.
Grow, a year-old, Provo, Ut.-based company behind a business-intelligence dashboard service, has raised $1.5 million in seed funding from Kickstart Seed Fund, Pelion Ventures and individual investors. The company has now raised $2 million altogether.
Helium Systems, a year-old, San Francisco-based Internet-of-things startup, has raised $16 million in funding led by Khosla Ventures, with participation from FirstMark Capital, Digital Garage, Marc Benioff, SV Angel, and Slow Ventures among others. TechCrunch has more here.
Hinge, a 3.5-year-old, New York-based mobile app that helps people meet dates through their online social graphs, has raised $12 million in fresh funding led by Shasta Ventures, with participation from previous investorsLowercase Capital, Great Oaks Venture Capital, Eniac Ventures and CAA Ventures. Hinge had raised $4.5 million in summer. It has now raised $20.6 million altogether.
Huddle, a seven-year-old, London-based company whose enterprise collaboration software enables people to store and share video, messages and other items, has raised $51 million in Series D funding led by Zouk Capital, with participation from the Hermes GPE Environmental Innovation Fund and all of its earlier backers. The company has now raised $85 million altogether. Venture Capital Dispatch has more here.
Infer, a four-year-old, Palo Alto, Ca.-based company whose predictive SaaS platform aims to help companies identify prospective customers, has raised $25 million led by earlier backer Redpoint Ventures. The company has so far raised $35 million, shows Crunchbase. Others of its backers include The Social+Capital Partnership, Sutter Hill Ventures,Andreessen Horowitz, and Nexus Venture Partners.
IPerceptions, a 10-year-old, New York-based digital customer research company, has raised an undisclosed amount of growth capital from Wellington Financial.
Kamcord, a two-year-old, San Francisco-based company whose technology enables gamers to record parts of their game play and share key moments, has raised $15 million in new funding led by the Japanese gaming giant GungHo Online Entertainment, with participation from Tencent Holdings and TransLink Capital. Venture Capital Dispatch has more here.
Optomeditech, a 2.5-year-old, Espoo, Finland-based company that’s developing intravenous catheters and blood collection needles, has raised $2.5 million in funding led by Lifeline Ventures and The Finnish Innovation Fund Sitra.
OutboundEngine, a two-year-old, Austin, Tx.-based marketing technology company, has raised $11 million in Series B funding led by Silverton Partners, with participation from Harmony Partners, Altos Ventures and existing investors. The company has now raised $17.8 million altogether, shows Crunchbase.
Piccing, a 3.5-year-old, Palo Alto, Ca.-based social shopping platform, has raised $3.62 million in Series A funding from undisclosed investors.
Threat Stack, a two-year-old, Cambridge, Ma.-based cloud-security monitoring service, has raised $5 million in Series A1 financing from Atlas Venture and .406 Ventures. The company has raised $9 million altogether, shows Crunchbase.
UNIFi Software, a year-old, San Francisco-based company that sells data integration software, has raised $4.45 million in seed financing led by Canaan Partners, with participation from other investors, including Omaha Capital.
Milestone Venture Partners, a 15-year-old, New York-based early-stage venture capital fund, is hoping to raise a new, $150 million fund to back software and data services businesses. VentureWire has the details here.
Sequoia Capital, the 42-year-old, global venture firm, is raising its 15th U.S. venture fund, shows an SEC filing that doesn’t list a target.
Box has updated its S-1 paperwork. ZDNet breaks it down here, but among the highlights: Box reported a little more than $57 million in revenue, up from $33.6 million the previous year. Losses are down, too, to $45.4 million at the end of the third quarter, down from $51.4 million in Q3 2013.
LendingClub is now a public company.
AppArchitect, a two-year-old, Finnish company behind a drag-and-drop platform for creating mobile apps, has been acquired for undisclosed terms by AppGyver, a mobile app development company. AppArchitect had raised an undisclosed amount of funding rom DreamIt Ventures, shows Crunchbase. AppGyver has raised $3.5 million from investors, including Initial Capital and Open Ocean Capital.
Backupify, a six-year-old, Cambridge, Ma.-based cloud backup service, has been acquired by Datto, a backup and disaster recovery service in Norwalk, Ct. Terms weren’t disclosed, but Backupify cofounder and CEO Rob May tells TechCrunch the purchase price was “a lot more than we raised.” Backupify had collected $19.5 million from investors, including General Catalyst Partners, Lowercase Capital, Symantec, Avalon Ventures, First Round Capital and numerous angels, including Chris Sacca.
HockeyApp, a three-year-old, Stuttgart, Germany-based company whose platform collects live crash reports, gets feedback from users, distributes betas, recruits new testers, and analyzes its customers’ test coverage, has been acquired by Microsoft for undisclosed terms. More here.
Neohapsis, a 17-year-old, Chicago-based security advisory company that provides governance, risk, and compliance products and security services to enterprises and government agencies, has been acquired by Cisco. Terms of the deal weren’t disclosed. Neohapsis had raised at least $35 million over the years, shows Crunchbase, including from Paladin Capital Group, New Venture Partners, and Trident Capital.
HBO chief technology officer Otto Berkes is leaving the premium cable network following its decision to enlist Major League Baseball Advanced Media to build its streaming service instead of develop it in-house. Berkes, a co-creator of Microsoft’s Xbox, had joined HBO in 2011 as senior VP of digital products and was promoted to CTO in 2012.
Paul Camp, formerly a managing director and global head of J.P. Morgan’s transaction services business, is now the CFO of the bitcoin startup Circle Internet Financial, which provides a digital-currency wallet and account management services to consumers.
Associate Professor Ben Edelman of Harvard Business School has issued an apology for threatening a Chinese restaurant manager over a $4 overcharge. “Having reflected on my interaction with Ran,” and been chastised by nearly everyone on the Internet, “it’s clear that I was very much out of line.”
Early next year, Tony Perkins, founder of the media brand AlwaysOn, plans to open a members-only social club called the Cuckoo’s Nest that will accept just 1,200 members and cost $2,500 a year to join. (Members under age 30 will be asked to pay $1,000.) “The Valley does not have a place where entrepreneurs can find each other and hang out at,” says venture capitalist (and charter Cuckoo Nest member) Tim Draper in an email soliciting new members.
Vocap Investment Partners, a growth-stage investment firm, is looking for an analyst or associate. The job is in Atlanta.
Shivon Zilis, an investor at Bloomberg Beta, tries making sense of the exploding number “machine intelligence” companies. Here’s her analysis.
Facebook no longer likes the word “users.” You’re just a person who happens to use Facebook.
Why football will probably never die.
A portable garage toolbox refrigerator. [Grunt.] Hulk like.
Fifteen great gifts for the Apple addicts in your life.