StrictlyVC: December 30, 2014

Good Tuesday morning, dear readers!

Some notes: StrictlyVC’s inaugural “Insider” series event takes place Thursday, February 12th, at Next World Capital in San Francisco. The evening program will feature AngelList cofounder Naval Ravikant, Khosla Ventures partner Keith Rabois, and Strava CEO and cofounder Mark Gainey, among others. Space is limited. Get your tickets here.

Also, a reminder that your next issue of StrictlyVC will arrive on Monday, January 5. Happy New Year, everyone!:)

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Top News in the A.M.

Instacart, the 2.5-year-old, San Francisco-based grocery delivery startup, has closed on $210 million in new funding that a Recode source says will balloon to $220 million before the round is closed. The investment will value the company at around $2 billion, says Re/code.

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Top Investor Michael Dearing on the Startup Ecosystem Now

By Semil Shah

Nearly five years ago, reporter Kara Swisher labeled Michael Dearing the “hottest angel investor you’ve never heard of.”

Things haven’t changed much. Dearing, a former senior VP at eBay who joined Stanford’s faculty in 2006 as a consulting associate professor (he also teaches off campus), has quietly backed a long string of highly successful companies. Think AdMob, the mobile advertising start-up acquired by Google for $750 million in late 2009. Or Aardvark, the social search engine, also acquired by Google, for $50 million 2010. Dearing had another big win just this month when Acompli, a 1.5-year-old maker of a mobile email application, sold to Microsoft for $200 million in cash. It had raised just $7.3 million from investors, including Dearing’s investment vehicle, Harrison Metal.

Despite keeping a low profile, Dearing nicely agreed to chat with us recently about a few things, including who he thinks is the best early-stage tech investor in the business today. From that interview:

There’s been increasing chatter in the Valley about diversity in startups and investing, as well as the moral actions of companies. What strikes you most about the ecosystem in 2015? What’s healthy and what’s unhealthy in your opinion?

On the “healthy” list: continued inbound immigration — international and domestic — of exceptional people; circulation of talent from company to company; and bio-diversity of products being created. The “unhealthy” list for Silicon Valley is the same as for Earth. Sometimes people treat each other terribly. Sometimes fear and status anxiety creates a zero-sum thinking. But it’s a self-cleaning oven. What I mean is that the stuff on our “healthy” list eventually, inevitably overcomes the stuff on our “unhealthy” list. [It happens] slower than I’d like, but I’m an optimist, I guess. This is the world capital of our Industrial Revolution, so of course good will win!

As a long-time seed investor, what have been the biggest changes you’ve seen in how companies get off the ground?

Today, there’s an ample supply of money, ideas and talent. I think we’re short on great general management. Gears grind when people struggle to make a business work. Get everyone working on the right stuff. Make sure we set goals and hit them. All the stuff Andy Grove talks about in High Output Management. But it’s an old issue. The scarcest input in our system right now has been in short supply for 200-plus years of industrial capitalism — exceptional general management. That means stuff is harder than it needs to be, things take longer, the runway gets eaten up faster than it should. If we fix that, we can massively amplify the power of our talent, good ideas, and money. That’s why great general managers are so important. That’s where I am steering Harrison Metal.

What’s your view on hot, high-growth companies staying private longer?

I think it’s a good thing when founders have options. Obviously there’s risk on pricing. Will the companies grow into the valuations? I hope so. Where you get into trouble is in the high-flying private deals where the leadership takes out a ton of money in secondary sales. Especially if those companies face a shortage of great general management. Stuff goes sideways really quick when the business is run poorly and the leadership is prematurely rich.

You’ve been in Palo Alto for years, but the center of gravity for many consumer and some B2B startups is now in San Francisco. How has Palo Alto changed for you, and have you ever thought about moving to the city?

I love Palo Alto. We have Stanford, the sun, things like that. I spent eight years teaching at Stanford and my home is here. I don’t think of it as an “or” — PA versus SF. They are each part of the whole, and I spend a lot of time in both places. PA has changed a ton, though. When I started Harrison Metal, I used to be able to walk around PA and see a good chunk of the portfolio. But today it’s not that way. Maybe it will be again someday. Until then I, for one, affirm loyalty to my Palantir overlords.

You’re not one to appear often publicly or promote yourself, so I’m curious: Who is one early-stage investor who founders should get to know, and what have you learned by working and co-investing with this person?

The very best early-stage investor in the business is Steve Anderson [of Baseline Ventures]. His track record is exceptional, obviously — and he’s well known for it — but I mean “best” in the broadest sense. Tells the truth. Focuses on making the pie big first. Crazy supportive of his founders in good and bad times. He’s honest and hard-working. He’s the very first person I would go see if I were raising money. There are some truly exceptional people in the early-stage business, but he’s at the top of my list.

Semil Shah is a guest holiday contributor to StrictlyVC. Shah is currently working as a venture advisor to two funds, Bullpen Capital (which focuses on post-seed rounds) and GGV Capital (a cross-border U.S.-Asia fund). You can follow him on Twitter at @semil.

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New Fundings

Blu Homes, a 6.5-year-old, Waltham, Ma.-based company that assembles eco-friendly homes and then ships them to customers, has raised $21.7 million of a planned $35 million funding round, according to an SEC filing. To date, shows Crunchbase, the company has raised $184.2 million, including from Skagen Group and Brightpath Capital Partners.

EHang, a year-old, San Francisco-based company that makes drones for recreational use, has raised $10 million in Series A funding led by GGV Capital, with participation from entrepreneurs Xiaoping Xu and Nick Yang, as well as PreAngel, a fund focused on early-stage startups. (The WSJ has more on the company here.)

FXiaoKe, a three-year-old, Beijing-based social cloud-based service provider that’s also known as Facishare, has raised $50 million in Series C funding led by DCM, with participation from earlier backers IDG Capital and Northern Light Venture Capital. The outlet e27 has the story. The company has now raised $63 million altogether, shows Crunchbase.

Neurotrack Technologies, a 2.5-year-old, Palo Alto, Ca.-based company that’s developing a predictive test for Alzheimer’s disease that would enable its detection up to six years before the first symptoms appear, has raised $1 million in debt, shows an SEC filing that was first flagged by MedCity News. Neurotrack had previously raised $2 million in Series A funding from Rock Health, Founders Fund, and The Social+Capital Partnership.

TaxiForSure, a 3.5-year-old, Bangalore, India-based app-based taxi and car rental aggregator, is planning to raise close to $60 million from a new investor, reports Deal Curry. Earlier this year, the company had raised $30 million in funding led by earlier backer Accel Partners, with participation from Bessemer Venture Partners and Helion Venture Partners. This would be the fourth round of funding for the company.

VideoDesk, a 2.5-year-old, New York-based cloud-based video-chat services company whose service is designed to ease online consumer purchases, has raised $4.8 million from unnamed investors. More here.

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New Funds

Cowboy Ventures, the seed-stage investment firm led by former Kleiner Perkins Caufield & Byers partner Aileen Lee, has officially closed on $57 million for its second fund, reports Venture Capital Dispatch, which says the firm has yet to make an investment from that fund. An SEC form processed in September had shown Cowboy was targeting $55 million. The firm’s debut fund had closed with $40 million in 2012.

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IPOs

Flex Pharma, a year-old, Boston-based biotech company that’s developing treatments for leg cramps and spasms associated with severe neuromuscular conditions, has filed to go public (already!). The company has raised $40 million from investors, shows Crunchbase. According to its S-1, its biggest outside shareholders are Longwood Founders Fund, which owns 19.23 percent of the business, and Bessemer Venture Partners, which owns 9.82 percent.

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People

Media magnate John Malone and his wife, Leslie, are giving $42.5 million to Colorado State University to develop stem cell and other treatments for animals and people, the biggest donation in the school’s history.

Former WSJ reporter Cari Tuna and Facebook cofounder Dustin Moskovitz were in their mid-20s in 2010 when they became the youngest couple ever to sign on to the Giving Pledge, and they quickly decided to focus on research-driven “effective altruism,” rather than any personal causes. Indeed, reports the Washington Post, after “three years, several hundred interviews and trips that took them from Washington think tanks . . . to rural villages in Kenya,” the couple — who fly coach and share a used car — has narrowed their interests to four overarching buckets and they plan to announce their first major gifts early this coming year.

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Data

In the first three quarters of 2014, 35 debut early-stage funds closed at less than $100 million, the highest number recorded by Dow Jones VentureSource.

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Essential Reads

Hacked emails reveal China’s elaborate and absurd Internet propaganda machine.

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Detours

The building that strands lawmakers, lobbyists and journalists on their way to meetings—and sometimes to their own offices.

The weird connections between hearing and taste.

Building the Golden Gate Bridge.

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Retail Therapy

Minivans for budding oligarchs.

The ultimate (four-foot-long) electric sports car.



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