Good Tuesday morning, everyone!
Most of you know that the multi-talented Semil Shah covered for us in late December, drumming up a lot of stellar content, some of which we have yet to run. We’re publishing one of those interviews today, with the Winklevoss twins. Note: Because it’s a longer-than-usual interview and it’s worth reading in its entirety, we’re running more of it later this week.
(Psst, web visitors, this version of today’s email is easier on the eyes.)
Top News in the A.M.
Kickstarter just ditched Amazon payments for Stripe.
Investing the Winklevoss Way
By Semil Shah
Cameron and Tyler Winklevoss, the 6-foot-five-inch, Olympic-rowing twins who remain best known for their legal battles with Facebook CEO Mark Zuckerberg, could have taken the money they were eventually awarded in the case (a reported $65 million shared with partner Divya Narendra) and hit the beach. They decided to become full-time investors instead. In fact, since 2013, they’ve been assembling startup stakes across numerous industries. The brothers, who live both in L.A. and New York, have grown especially bullish on Bitcoin, creating among the single largest portfolios of the digital currency. To better understand why they’re so convinced that Bitcoin is here to stay — despite a rough 2014 — we asked Tyler to explain their thinking.
You are both well-known for a variety of things now. Briefly catch us up on all of your activities. What are you both focused on for 2015?
Sure. Over the last two years, Cameron and I have been focused on building Winklevoss Capital. Prior to this, we were elite athletes for close to 15 years. After retiring in 2012, we decided we wanted to get back into the startup game and investing seemed like a natural entry point. For the past two-plus years we been spending a lot of time building a strong network of fellow investors and promising entrepreneurs. We’ve been fine-tuning our filters to what we like and don’t like, and developing our overall investment thesis. Most importantly, we’ve been investing a lot. Ourportfolio now comprises more than 40 companies and is growing by the day.
Our main focus for the coming year will be in Bitcoin and growing our overall angel portfolio. In the Bitcoin world, we will continue or joint role as both investors and entrepreneurs. We believe there will be some great opportunities in the infrastructure company layer, as well as some promising application layer startups. We will be working on the Bitcoin ETF and improving the WinkDex, the Bitcoin price index we launched in February, which will be used to price the Bitcoin ETF.
In the non-Bitcoin world, we will continue to place bets on strong entrepreneurs. We’ve found a lot of great teams attacking compelling problems in the logistics, human operations, smart home, consumer packaged goods and security spaces. We’ll keep our ears to the ground in those spheres but also be on the lookout for other secular trends that start to emerge.
You’re both active on AngelList. How do you plan to use your own fund and AngelList to your advantage? Are you thinking of angles beyond just crowd-based syndication?
AngelList has been instrumental to our overall investing. We’ve found great investments on the platform and the platform has made it really easy to diligence companies. Being able to message a founder directly or see a company’s existing investors and reach out to them makes the research process much more efficient. When the opportunity to invest directly in AngelList presented itself, the decision was a quick and easy “yes.”
We recently launched the Winklevoss Capital Syndicate on AngelList and have already begun syndicating our first deal. We think the crowdfunding venture model has a lot of merit and we have been devoting significant time and effort towards getting behind it. When possible, our plan is to syndicate the deals that are appropriate and give accredited investors access to these deals. Our current portfolio demonstrates the types of deals we do, and investors who back our syndicate ahead of time will get priority. It’s important to note that backing does not obligate an investors to invest in any of our deals.
I still think there is ample room to improve crowd-based syndication before focusing on other alternatives. Currently, closing takes days waiting on every wire and ACH transfer to hit. Incorporating Bitcoin into the AngelList platform for instance, would allow settlement to happen immediately. In addition, there is a lot of territory to be explored with regard to smart contracts in this context. Investors could invest contingent on certain fundraising targets being met, and the real-time balance of a syndicate would be completely transparent if it lived on the blockchain. Investors worried about momentum could instead invest immediately, knowing that if certain goals weren’t met, their money would be sent back. This particular example could help mitigate a chicken-and-egg funding dilemma and tip some startups into getting funded that otherwise wouldn’t.
But the possibilities don’t end there. Any conceivable investment term could be baked into a syndicate smart contract and be triggered when certain milestones were met. Pro-rata pre-emptive rights, super pro-rata pre-emptive rights, sliding scale discount rates, information rights, etc., could be hard-wired, all the way to the election of a board member by vote of the syndicate investors. It is going to be fascinating to see this play out.
You’re both big Bitcoin believers, but 2014 was a tougher year. As early-stage investors and with only a few larger firms investing (or conflicted out), how do you help your seeded companies thrive during a time where the area isn’t as hot as it was in 2013?
2014 had its own set of challenges for Bitcoin, but as the saying goes, what doesn’t kill you makes you stronger. I think Bitcoin will finish the year more robust than ever. I say this taking into account a lot of metrics beyond just a surface measure of price. Price is just one indicator of strength, and there is evidence to show that the price highs at of the end of last year were more noise than signal (as a result of Mt. Gox trading bot manipulation), and should not be used as a benchmark. A more complete measure of strength should include the number of 10xers and tier-one venture capitalists who have moved into the space. It should also include growth in the number of Bitcoin startups, the amount of accelerators, incubators and hackathons that are Bitcoin-focused, and the sheer lines of Bitcoin-related code that have been written. All of these numbers have grown dramatically this year.
Bitcoin may have lost some of its novelty buzz, but today it lives in meaningful business and technology headlines more than ever. Let’s not forget that less than a year ago the majority of media stories were busy lampooning Bitcoin as a ponzi scheme and/or a safe haven for money laundering that was on the brink of being outlawed. Now, serious Bitcoin news and developments are reported by the minute in the most respected and well-read publications and blogs around the world. If some of the frenzy has ceded to a calmer, more earnest narrative, then I think that is a positive development.
The growth curve of venture capital Bitcoin investments over the last few years has been steep and up and to the right. Provided that there isn’t a major economic downturn, I believe the venture capital money flowing into the space will be plenty to fuel continued growth. Some have brought up a potential funding gap with respect to core development. I think that is a more relevant concern, but again, there are a lot of projects and non-profits tackling this.
This year, both federal and state lawmakers have time and again decided not to outlaw Bitcoin but rather embrace it as an extremely transformative and monumental technology. This sets the stage for some great possibilities for this year and beyond.
Blue Box, a 12-year-old, Seattle-based managed cloud-hosting provider, has raised $14 million in Series B funding led by an undisclosed strategic investor, with participation from Founders Collective and Voyager Capital. The company has now raised roughly $23 million altogether, shows Crunchbase.
CytomX Therapeutics, a seven-year-old, Santa Barbara, Ca.-based company that develops antibodies that are inert in healthy tissue but activated around a tumor, has raised $20 million in Series C funding led by Pfizer Venture Investments, with participation from earlier backers Third Rock Ventures, Canaan Partners, and Roche Venture Fund. The company has now raised $63.5 million to date.
EnGeneIC, a 14-year-old, Sydney, Australia-based biotechnology company whose cancer treatments work through the delivery of therapeutic agents to cancer cells, has raised $10 million in Series B financing led by new investor GRT Capital Partners, with participation from Foley Ventures and various partners of the law firm Foley & Lardner.
Glassdoor, the 7.5-year-old, Mill Valley, Ca.-based jobs and career marketplace, has raised $70 million in new funding led by Google Capital and earlier investor Tiger Global Management, with participation from earlier backers Battery Ventures and Sutter Hill Ventures. To date, the company — which says it now features 7 million pieces of user-generated content about more than 340,000 companies — has raised roughly $160 million altogether.
Global Blood Therapeutics, a two-year-old, San Francisco-based company that develops small-molecule treatments for blood disorders, including sickle cell disease, has raised $48 million in Series B funding from Wellington Management Company, RA Capital, Deerfield Management, Sabby Capital, Perceptive Life Sciences, an affiliate of Cowen Group, and one undisclosed public investment fund.
GlySens, a young, San Diego, Ca.-based company that’s developing an implantable glucose meter for diabetics, has raised $12 million in Series C funding from undisclosed investors. The company has raised at least $14 million to date, shows Crunchbase.
iSIGHT Partners, a seven-year-old, Dallas-based company that sells cyber threat intelligence, has raised $30 million in Series C funding from Bessemer Venture Partners. The company has raised $46.3 million to date, shows Crunchbase.
Iskn, a year-old, Grenoble, France-based company that makes a system that digitizes pen-and-paper writing or drawing, has raised $2 million in funding from CEA Investissement, Kima Ventures and Partech Ventures.
Kuaidi Dache, a 2.5-year-old, Hangzhou, China-based taxi-hailing app backed by e-commerce giant Alibaba, has closed a Series D round of financing worth more than $700 million, according to China Travel News, which reports that Alibaba and Tiger Global Management participated in the funding, among others. The company’s arch rival in China, Didi Dache, raised more than $700 million in its latest funding round in December. StrictlyVC recently talked with Kuaidi Dache cofounder Joe Lee about the race to compete with Didi Dache (and Uber) in China.
Moderna Therapeutics, a 4.5-year-old, Cambridge, Ma.-based company whose drugs stimulate the body’s ability to produce proteins and could eventually treat cancer, rare diseases, heart conditions and other illnesses, has closed the largest biotechnology venture capital financing on record: $450 million from RA Capital Management, Viking Global Investors and Wellington Management, along with earlier backers AstraZeneca and Alexion Pharmaceuticals. Venture Capital Dispatch has more here.
Reonomy, an 18-month-old, New York-based commercial real estate data and analytics company, has raised $13 million in Series B funding led by Bain Capital Ventures, with participation from earlier backers SoftBank Capital, Resolute Ventures, High Peaks Venture Partners, KEC Ventures and FinTech Collective. Solon Mack Capital, the family office of William Mack, Richard Mack and Stephen Mack, also joined the round. The company has now raised $17.9 million to date.
Ruby Receptionists, a 12-year-old, Portland, Or.-based company that hires receptionists to field calls for small businesses, has raised $38.8 million from Updata Partners in exchange for a majority stake in its business. The money is the first outside capital the company has taken.
Yett, a five-month-old, Oakland, Ca.-based startup whose first product is a mobile money management application called Even that targets low-income workers with interest-free credit, has raised $1.5 million in seed funding led by Khosla Ventures, with participation from Homebrew, Red Swan Ventures, Slow Ventures, and a long list of individual investors, including David Tisch and Sam Lessin. TechCrunch has more here.
Lok Capital, a Mumbai, India-based impact investor that’s backed by the Rockefeller Foundation, aims to raise $45 million by June as part of the initial close of its third India-focused fund, reports the Economic Times. It’s targeting $100 million altogether and expects to raise capital commitments from development financial institutions such as International Finance Corporation, Proparco, and CDC Group.
Four years after opening for business, a subsidiary of Nestlé specializing in nutritional therapy, Nestlé Health Science, is announcing a partnership with the Boston-based venture firm Flagship Ventures to help incubate start-ups in the nutritional therapy field, reports Dealbook. More here.
Of the companies that had the 10 biggest U.S. IPO “pops” in 2014, only three ended the year above the price at which they closed their first-day of trading. The WSJ looks at the IPOs that fizzled.
Facebook has acquired Wit.AI, a San Francisco-based startup that’s been building a speech-recognition platform for the so-called Internet of Things. The company launched early in 2014 raised a $3 million seed round in October from investors, including Andreessen Horowitz, Ignition Partners and New Enterprise Associates. GigaOm has more here.
There’s been a bit of a blood bath at Amazon’s Lab126, the Silicon Valley-based R&D group behind the Fire Phone and some of Amazon’s other consumer products. The “changes were long overdue, a response to an organizational structure that some contend had grown ‘bloated’ if not ‘inexplicable,'” as one former high-level employee describes it to Fast Company.
Investor Marc Andreessen tweeted up a storm about Bitcoin yesterday, including what he sees as “dumb,” “smart,” “smarter,” and “innocent” critiques of the virtual currency, whose value fell meaningfully in 2014. The whole thread is here.
SpaceX cofounder Elon Musk took time out for a Reddit AMA yesterday, fielding a range of questions before the expected launch of SpaceX’s Dragon spacecraft today. (That launch was scrubbed at the last minute this morning; they’ll try again on Friday.)
Piper Jaffray is looking to hire an investment banking associate to focus on technology, media, and telecommunications. The job is in San Francisco.
A lot of unprofitable companies are going public — the largest percentage since 2001, reports PandoDaily.
Verizon has approached AOL about a potential acquisition to expand its mobile-video offerings, reports Bloomberg, saying no formal proposal has been made and no agreement is imminent. According to Bloomberg, Verizon is mostly interested in AOL’s programmatic ad technology.
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