Monthly Archives: February 2015

StrictlyVC: February 27, 2015

Happy Friday, everyone! Hope you have terrific weekend, and we’ll see you back here bright and early on Monday.:)

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Top News in the A.M.

This morning, Ericsson filed seven new lawsuits in a U.S. court and is asking the U.S. International Trade Commission to block Apple products from the U.S. market.

In what we’d guess is unrelated news, Apple has announced a surprise media event to be held March 9. So. Excited. Can’t. Breathe. [Faints.]

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In a Heated Market, a Secondaries Player Casts a Wide Net

When Manhattan Venture Partners publicly launched last month, the merchant bank joined a growing number of players who are matching investors with startups that are in no apparent rush to go public.

Talking recently with StrictlyVC, plugged-in investor and AngelList cofounder Naval Ravikant opined that it’s “possible that the amount of secondary trading going on in Silicon Valley under the covers is going to match the amount of primary financing soon” as household names like Uber and Airbnb and Dropbox move more slowly than expected toward IPOs.

Perhaps it’s no wonder then that Manhattan Venture Partners is casting its net far beyond the Bay Area. Last week, we talked with the firm’s cofounder, Jared Carmel, and its chief economist, Max Wolff, about which markets, exactly, the new outfit is chasing.

Most of the so-called unicorns are headquartered — broadly speaking – in Silicon Valley. But you’re also looking elsewhere. Why?

JC: We’ve expanded overseas because we’re starting to see demand for what we do from [India-based] Flipkart and [China-based] Xiaomi and the like. Those companies aren’t current customers, but [the China-based e-commerce giant] Alibaba was one of the big positions we took last year. We had a significant amount of shares that came from an executive last April, prior to its [September] IPO.

MW: We see the center of gravity in pre-IPO tech companies beginning to drift both south and east from the U.S., which is pretty consistent in terms of the global economy as it drifts more toward the global south away from the U.S. and Europe. It’s much more advanced in the global macro sense than in the private company sense. Today and in the foreseeable future, Northern California will remain at the center of a lot of this activity. But right now, as large and aggressive as Uber’s [$40 billion] valuation is, it’s still $5 billion less than the valuation of Xiaomi, a handset maker that no one in the U.S. has really heard of outside of the business press. We’re at a moment historically where we’re living in the long shadow of the largest tech IPO ever – Alibaba, which, by the way, when we first began talking with people about it [long ago], they thought was a [brand of] hummus.

Culturally, are secondaries seen as an acceptable practice in China and elsewhere? Obviously, in the U.S., they were long stigmatized as a last resort for troubled companies.

MW: There’s more acceptance of secondaries and more acceptance of high, late-stage valuations than at any time in the recent past. We’ve seen large [foreign] institutional investments in secondary shares really since Facebook, and given that many of those investors – who’ve also backed LinkedIn and Tesla and Twitter – made money, we’re seeing them come home and really start to introduce [secondary investments] to the whole market.

JC: It’s still pretty new in the U.S., so it’s even newer in many countries, and I don’t think it’s as well-understood or accepted as in the U.S. But as we’re starting to see companies get into seven-plus years in their lifespan, and they’re seeing their best employees heading off to other projects and companies, they’re beginning to understand that a secondary or liquidity program can also act as a retention tool.

You’re also talking with U.S. companies and investors. What are you seeing? What’s hot and what’s not?

JC: Games [companies] have really been in the doldrums, owing to private and public investments that didn’t necessary end well in recent years. Social is definitely deeply out of favor. Another sector that people are much less excited about are flash deal sites. Red hot: privacy, private messaging, and driver logistics companies.

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New Fundings

Accela, a 16-year-old, San Ramon, Ca.-based company that makes cloud-based civic-engagement software, has raised $143.5 million in new financing led Abry Partners, with participation from Landmark PartnersJ.P. Morgan Private Equity, and Karlani Capital. The company had raised at least $50 million across two previous rounds, shows Crunchbase.

Citymaps, a 4.5-year-old, New York-based mobile app company whose visual maps help users discover and mark favorite places, has raised $6 million from new investors Nokia Growth Partners, Coatue Management and Acadia Woods, with participation from earlier investors. The company has now raised $11 million altogether, shows Crunchbase.

Emailage, a nearly three-year-old, Chandler, Az.-based company that makes a fraud-detection system that relies on email addresses to produce a fraud risk score, has raised $3.8 million in funding led by Felicis Ventures.

FreshWorld, a year-old, Bangalore-based startup that delivers fresh fruits and vegetables straight from farmers to homes using GPS-enabled smart carts, has secured an undisclosed amount in funding from Indian Angel Network and Infosys cofounder Kris Gopalakrishnan.

Grofers, a 14-month-old, Gurgaon, India-based company that helps facilitate on-demand delivery for local store owners, has raised $10 million in Series A funding led by Tiger Global Management and earlier backer Sequoia Capital. The company has now raised $10.5 million altogether. TechCrunch has more here.

InMoji, a year-old, San Francisco-based mobile marketing startup, has raised $1.25 million in seed funding led by former PayPal Media COO David Chang, with participation from PayPal’s StartTank and Atlas Venture through its Boston Syndicates. Boston Business Journal has more here.

JRNL, a new, Las Vegas-based company whose private journaling application is designed for Web and mobile use, has raised an undisclosed amount of seed financing from Varkain, a Las Vegas-based venture capital firm.

Kobalt, a 15-year-old, New York company whose computer system scours payment systems around the world to make sure royalty money ends up where it belongs, has raised $60 million in new funding from Google Ventures and Michael Dell. The company has now raised $116 million altogether, shows Crunchbase. The L.A. Times has the story here.

LeadDesk, a five-year-old, Helsinki, Finland-based cloud call center software company, has raised $6.2 million in Series A funding led by Dawn Capital, with participation from the public fund Finnish Industry Investment.

LoveCrafts, a 2.5-year-old, London-based builder of social marketplaces for crafts communities, has raised $7.5 million in funding from Balderton Capital. More here.

PlayFab, a year-old, Seattle-based company that provides back-end support for game studios (it spun out from the gaming company Uber Entertainment last year), has raised $7.4 million in funding led by Benchmark Capital, with participation from Madrona Venture GroupStartup Capital Ventures, and individual investors, including Orbitz CEO Barney Harford. The company has now raised $9.9 million to date, shows Crunchbase.

PracticeGigs, a seven-month-old, Boston-based peer-to-peer learning marketplace designed to help people improve their skills at tennis — and eventually, other sports and activities — is raising a seed round of funding that so far includes Andy Miller of Constant Contact and Jeff Fagnan at FKA (the tech venture capital firm Formerly Known as Atlas) and others. BetaBoston has more here.

Skully, a two-year-old, San Francisco-based company whose $1,500 augmented reality motorcycle helmets are schedules to ship to its first customers this summer, has raised $11 million in Series A funding led by Walden Riverwood Ventures and Intel Capital, with participation from Formation 8, Eastlink Capital, Techstars, and Western Technology Investment, which had earlier contributed $500,000 in venture debt. Skully had previously raised $2 million in seed funding and more than $3.4 million in a crowdfunding campaign on Indiegogo. Venture Capital Dispatch has more here.

SOLS, a two-year-old, New York-based 3D-printing company that prints custom shoe insoles, has raised $11.1 million in funding from Tenaya Capital, Melo7 Tech Partners and earlier backers Founders Fund and Lux Capital. The company has now raised $19.3 million altogether, shows Crunchbase. TechCrunch has more here.

Twenty20, a 3.5-year-old, Marina Del Ray, Ca.-based photography marketplace connecting stock photo buyers with everyday smartphone photographers, has raised $8 million in Series A funding led by Canaan Partners, with First Round Capital, Bullpen Capital, and VersionOne Ventures participating. The company has now raised $9.7 million altogether, shows Crunchbase.

Trov, a 2.5-year-old, Danville, Ca.-based company whose app helps users easily organize and value the things they own, has raised $6.5 million in new Series B funding led by Anthemis Group of Geneva. The company has now raised $13.3 million altogether. PandoDaily has much more here.

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New Funds

AXA Equitable Financial Services, the 200-year-old, Paris-based multinational investment banking firm, has formed a venture unit with a 200 million euro ($224.3 million) fund that it intends to invest in insurance, asset management, financial technology and health-care services startups.

GGV Capital, a 15-year-old, Menlo Park, Ca.-based company whose newest bet is the home-buying business Opendoor (profiled here yesterday), is raising a $450 million growth fund to invest in startups that it has backed with its last two funds, reports VentureWire. In May of last year, the firm, which focuses on the U.S. and China, raised $620 million for its fifth venture fund. It typically plugs between $5 million and $25 million into its portfolio companies.

Illumina, the San Diego-based genetic analysis and sequencing company, has raised a new, $40 million fund to match investments raised by companies that pass through an accelerator program it’s been running in San Francisco for roughly a year. Funding for the investment vehicle, called Accelerator Boost Capital, was provided by Viking Global Investors, Illumina tells VentureWire.

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Exits

Aereo, the digital video service that threatened to disrupt the television industry and filed for bankruptcy in November, attracted less than $2 million for its assets at a bankruptcy auction, reports Bloomberg. TiVo won its trademark, customer list and certain other assets; RPX, a patent risk-management company, bought its patent portfolio; and Alliance Technologies, a computer consulting company in Des Moines, Ia., acquired some of its equipment.

Pluck, a 12-year-old, Austin, Tx.-based company that sells social media software to companies that want to create communities around their existing web properties, has been acquired for undisclosed terms by Sprinklr, a subsidiary of publicly traded Demand Media. Terms aren’t being disclosed. According to Crunchbase, Pluck had raised at least $17 million from investors, including Reuters, Mayfield Fund, and Austin Ventures.

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People

Amazon has hired Jay Carney, former press secretary for President Obama, as senior vice president for global corporate affairs — which is a new position, says the company. Politico has more here.

Sue Biglieri, the longtime CFO of Kleiner Perkins Caufield & Byers, took the stand yesterday in Ellen Pao’s gender discrimination suit and revealed that in 2011, at least one general partner earned up to five times more than a junior partner at the firm, owing to the profits they receive from Kleiner’s investments, plus their management fees. (Junior employees instead receive salaries and bonuses.) Kleiner attorney Lynn Hermle said that as a junior partner, Pao’s total compensation in 2011 was $516,000. That’s not so shabby, though Pao has argued she’d be making far more today had she been promoted. Business Insider has the story.

Former Kleiner Perkins Caufield & Byers investor Ajit Nazre, who former partner Ellen Pao says pressured her into having an affair then retaliated against her when she ended their relationship — contributed to her 2011 performance review, even though he wasn’t listed as a contributor. Venture Capital Dispatch has the story here.

Ted Schlein, a Kleiner Perkins Caufield & Byers managing partner who, like Kleiner CFO Sue Biglieri, took the stand yesterday in Ellen Pao’s gender discrimination suit, said repeatedly he couldn’t remember relevant details about performance reviews he’d helped write about Pao or email exchanges he’d had about her and with her. Fortune has the story here.

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Jobs

Siemens Venture Capital is looking to add a vice president to its team. The job is in Boston.

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Essential Reads

Google just made “mobile friendliness” a ranking signal.

Google also just paid $25 million for exclusive rights to the “.app” top-level web domain.

Talk about a bad sport.

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Detours

A 14,000-square-foot, five-bedroom, five-bath duplex penthouse in San Francisco has come on the market for a whopping $49 million.

Awe-inspiring satellite photos from around the world.

R/C drifting in Yokohama, Japan.

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Retail Therapy

Now that’s a set of speakers.




In a Heated Market, a Secondaries Player Casts a Wide Net

world_600wWhen Manhattan Venture Partners publicly launched last month, the merchant bank joined a growing number of players who are matching investors with startups that are in no apparent rush to go public.

Talking recently with StrictlyVC, plugged-in investor and AngelList cofounder Naval Ravikant opined that it’s “possible that the amount of secondary trading going on in Silicon Valley under the covers is going to match the amount of primary financing soon” as household names like Uber and Airbnb and Dropbox move more slowly than expected toward IPOs.

Perhaps it’s no wonder then that Manhattan Venture Partners is casting its net far beyond the Bay Area. Last week, we talked with the firm’s cofounder, Jared Carmel, and its chief economist, Max Wolff, about which markets, exactly, the new outfit is chasing.

Most of the so-called unicorns are headquartered — broadly speaking – in Silicon Valley. But you’re also looking elsewhere. Why?

JC: We’ve expanded overseas because we’re starting to see demand for what we do from [India-based] Flipkart and [China-based] Xiaomi and the like. Those companies aren’t current customers, but [the China-based e-commerce giant] Alibaba was one of the big positions we took last year. We had a significant amount of shares that came from an executive last April, prior to its [September] IPO.

MW: We see the center of gravity in pre-IPO tech companies beginning to drift both south and east from the U.S., which is pretty consistent in terms of the global economy as it drifts more toward the global south away from the U.S. and Europe. It’s much more advanced in the global macro sense than in the private company sense. Today and in the foreseeable future, Northern California will remain at the center of a lot of this activity. But right now, as large and aggressive as Uber’s [$40 billion] valuation is, it’s still $5 billion less than the valuation of Xiaomi, a handset maker that no one in the U.S. has really heard of outside of the business press. We’re at a moment historically where we’re living in the long shadow of the largest tech IPO ever – Alibaba, which, by the way, when we first began talking with people about it long ago, they thought was a [brand of] hummus.

Culturally, are secondaries seen as an acceptable practice in China and elsewhere? Obviously, in the U.S., they were long stigmatized as a last resort for troubled companies.

MW: There’s more acceptance of secondaries and more acceptance of high, late-stage valuations than at any time in the recent past. We’ve seen large [foreign] institutional investments into secondary shares really since Facebook, and given that many of those investors – who’ve also backed LinkedIn and Tesla and Twitter – made money, we’re seeing them come home and really start to introduce [secondary investments] to the whole market.

JC: It’s still pretty new in the U.S., so it’s even newer in many countries, and I don’t think it’s as well-understood or accepted as in the U.S. But as we’re starting to see companies get into seven-plus years in their lifespan, they’re seeing that their best employees are heading off to other projects and companies and they’re beginning to understand that a secondary or liquidity program can also act as a retention tool.

You’re also talking with U.S. companies. What are you seeing? What’s hot? What’s not in terms of institutional demand for secondary shares?

JC: Games [companies] have really been in the doldrums, owing to private and public investments that didn’t necessary end well in recent years. Social is definitely deeply out of favor. Another sector that people are much less excited about are flash deal sites. Red hot: privacy and private messaging and driver logistics companies.




StrictlyVC: February 26, 2015

Happy Thursday, everyone! (Web visitors, here’s an easier-to-read version of today’s email.)

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Top News in the A.M.

The Washington Post, on today’s net neutrality vote: “It’s easy to point to the coming FCC’s vote as another indication Silicon Valley’s time has come in Washington. But here’s the reality: The industry has already arrived.”

Susan Biglieri, who has served as the CFO of Kleiner Perkins Caufield & Byers since 2001, is set to testify to this morning in the Ellen Pao case. Topics she’s sure to touch on: partner compensation.

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Opendoor Raises $20 Million for Its Audacious Home-Buying Business

Opendoor, a year-old, San Francisco-based company, is on a mission to make residential real estate liquid by making it simple to buy and sell it online.

Investors are buying what it’s selling. This morning, the company is announcing $20 million in fresh funding led by GGV Capital, a round that brings the company’s total outside funding to $30 million.

Consumers are buying Opendoor’s pitch, too. The 20-person company is now buying one house per day – sight unseen — in its test market of Phoenix. Home owners need merely give it their address and some basic details, and using public market information about historical home sales and OpenDoor’s own proprietary data about market conditions, the company arrives at an offer price that’s just one to three points below what the seller might fetch on the open market roughly three months into the future. (That’s the average time, it says, required to sell a home in the U.S.)

The big question now is whether the whole operation is sustainable. Certainly, the risk and reward associated with what it’s trying to pull off is enormous.

Consider: After Opendoor acquires each home, it must ensure the home is up to code in order to resell it. The repairs alone can likely get complicated, as any homeowner can attest. But each home is also given numerous cosmetic upgrades that will give it so-called curb appeal. Think everything from new kitchen cabinets to light landscaping.

Opendoor can (and surely intends) to sell its homes at a premium, based on those upgrades. But it’s a lot of work, the kind that involves contractors and lawn maintenance workers, in addition to Opendoor’s growing team of developers. More, hanging on to that inventory in the meantime is a huge risk. Though the company’s equity certainly helps, as does a partnership with a bank that gives it debt to use, the housing market is highly sensitive to interest rates and other macroeconomic factors. In Phoenix, for example, where Opendoor has been testing out its service for the last several months, up to a quarter of the homes that are listed for sale are eventually taken back off the market.

CEO Eric Wu — a serial entrepreneur who cofounded Opendoor last year with investor-operator Keith Rabois — acknowledges the challenges, but he seems convinced that none are insurmountable. Partly, that owes to the progress Opendoor has made as a software company, whose platform can now (Wu says) seamlessly address everything from property assessments to quickly presenting offers to potential customers to handling the payment of the house to overseeing the infrastructure involved with holding and reselling it.

Wu also knows that there’s tremendous pain associated with home buying today, and where there is pain, there is opportunity.

In fact, Wu is already envisioning the day that Opendoor both buys homes, then resells others it owns to those same customers, creating one of those virtuous cycles that the digerati like to talk about.

“Longer term,” says Wu, “we’d love to have a path where we transact 5 to 35 percent of all homes. Once that occurs, this business really starts to evolve into us solving pain points for homeowners, from [allowing them to easily sell their homes] to helping them [purchase] another with high-quality renovations. We definitely think we can touch both buyers and sellers.”

The company could even get into the financing business eventually, Wu suggests. There’s “lot of headache and stress in securing mortgages today,” he notes. OpenDoor has enough work ahead of it right now, but it’s “something we’ll look at down the road,” he says.

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New Fundings

3D Robotics, the six-year-old, San Diego-based personal drone manufacturer co-founded by former Wired magazine editor Chris Anderson, has raised $50 million led by Qualcomm, reports VentureWire. The company has now raised $85 million in funding to date, including from Ooga Labs, True Ventures, Foundry Group, SK Ventures, O’Reilly AlphaTech Ventures, and Mayfield Fund.

Airtable, a two-year-old, San Francisco-based company that makes complex databases usable on users’ mobile phones, has raised $3 million in funding, including from Box Group, Caffeinated Capital, CrunchFundData Collective, Freestyle Capital, and numerous individual investors, including Bebo cofounder Michael Birch. TechCrunch has more here.

Ardusat, a young, Salt Lake City, Ut.-based education company focused on enhancing student engagement through hands-on experimentation, has raised $1 million in seed funding from Space Florida, Fresco CapitalSpire and other investors. The outlet edSurge has more here.

Branch Metrics, a nearly year-old, Palo Alto, Ca.-based software company focused on mobile deep linking (where pages inside of mobile apps are accessible immediately with the click of a link), has raised $15 million in Series A funding co-led by earlier investors New Enterprise Associates and Ben Narasin of TriplePoint Capital, with participation from Pejman Mar Ventures, Zach Coelius, and Cowboy Ventures. The company had previously raised $2.75 million from many of those same investors.

Chefs Feed, a three-year-old, San Francisco-based content platform that offers food suggestions from top chefs, has raised $4 million in Series A funding led by Artis Ventures, with participation from Haas PortmanStructure Capital, Subtraction Capital and individual investors. The company has now raised $8.2 million to date.

Comet Biorefining, a nearly six-year-old, Ontario-based maker of cellulosic glucose technology, has raised an undisclosed amount of funding led by Sofinnova Partners.

Coolan, a nearly two-year-old, San Mateo, Ca.-based company that employs analytics and artificial intelligence to predict server failure and avert data center outages, has raised an undisclosed amount of seed funding from investors, including Keshif Ventures, North Bridge Venture Partners, and The Social+Capital Partnership. More here.

Dtex Systems, a 15-year-old, San Jose, Ca.-based company whose software prevents cyber security breaches originating within an organization, has raised $15 million Series A funding co-led by Norwest Venture Partners and Wing Ventures.

Exablox, a 4.5-year-old, Mountain View, Ca.-based cloud storage provider, has raised $16 million in Series C funding from Dell Ventures. The company has now raised $38.5 million altogether, including from DCM, Norwest Venture Partners, and U.S. Venture Partners.

Getable, a five-year-old, San Francisco-based company whose mobile tools are used for ordering and tracking construction equipment, has raised $5 million in Series A funding led by The Social+Capital Partnership. The company has now raised $8.2 million altogether, shows Crunchbase.

IronSource, a 5.5-year-old Tel Aviv-based ad tech company, has raised $20 million roughly six months after raising an $85 million round from a syndicate of U.S. and China-based investors that the company describes as among the largest strategic partners in mainland China. The company is expected to go public later this year or early next year, says Forbes.

LocoMotive Labs, a 2.5-year-old company that makes play-based apps for children with special needs, has raised $4 million in Series A funding led by Softbank Ventures Korea and TAL Education Group, with participation from earlier backers K9 Ventures, Kapor CapitalNewSchools Venture Fund, D3Jubilee, and individual investors. The company has now raised $5.15 million altogether.

Luxe Valet, a nearly two-year-old, San Francisco-based on-demand valet startup, has raised $20 million in Series A funding co-led by Redpoint Ventures and Venrock Partners. The company has now raised $25.5 million to date, shows Crunchbase.

Lytro, a four-year-old, Mountain View, Ca.-based company whose cameras capture the entire light field around a picture, has reportedly raised $50 million in new funding led by GSV Capital, with participation from all of its earlier investors, which include Allen & Co., Greylock Partners, Andreessen Horowitz, New Enterprise Associates, and K9 Ventures. Unfortunately for between 25 and 50 of its 130 employees, Lytro is also about to “make some cuts in some areas so we can staff up in some new ones,” CEO Jason Rosenthal tells Recode. “Fifty million dollars is a nice big number,” he adds, “but it is not unlimited. We had to make some pretty tough decisions.”

Klipfolio, a 14-year-old, Ottawa, Ontario-based business intelligence company, has raised $6.2 million in Series A round led by Omers Ventures, with participation from the company’s seed investors, including BDC Capital, Mistral Venture Partners, Acadia Woods, BOLDstart Ventures, CommonAngels Ventures, and Fundfire. The company has now raised $7.7 million to date.

Orca Pharmaceuticals, a 2.5-year-old, Abingdon, England-based startup at work on developing oral drugs for chronic inflammatory diseases, has struck an agreement with the much larger British drug developer AstraZeneca to receive up to $122.5 million if it hits various milestones. The deal also gives AstraZeneca the option to buy Orca’s compounds at the end of the collaboration.

Pivot3, a 12-year-old, Austin-based vendor of hyper-converged infrastructure, has raised $45 million in funding from Argonaut Private Equity, S3 Ventures, InterWest Partners, and Wilson Sonsini Goodrich & Rosati. The company has now raised $184.8 million altogether, shows Crunchbase. Forbes has more here.

TopOPPS, a year-old, St. Louis, Missouri-based company that makes predictive analytics software for sales teams, has raised $2 million in funding led by Cultivation Capital. The company has now raised roughly $4 million, it says. More here.

SecureKey Technologies, a seven-year-old, Toronto-based maker of identity and authentication software, has raised $19 million in Series C funding led by Blue Sky Capital and earlier backer Rogers Venture Partners. The company has now raised $75.7 million altogether, shows Crunchbase.

Shark Punch, a four-year-old, game development studio with offices in San Francisco and Helsinki, has raised $1.2 million in seed funding led by London Venture Partners, with participation DN Capital, Reaktor Polte, and other investors.

Unify Square, a seven-year-old Bellevue, Wa.-based company that sells software, services and support for Microsoft Lync/Skype for Business (it was started by Microsoft veterans), has raised $8.2 million in Series B funding from individual investors with backgrounds at Yahoo, IBM and Ariba. The company has now raised $22.2 million altogether. GeekWire has more here.

Zimperium, a 4.5-year-old, San Francisco-based mobile security company that protects smartphones against advanced cyber attacks, has raised $12 million in new funding led by Australia’s Telstra, with participation from Japan’s TOYO Corp. and earlier backers Sierra Ventures, Lazarus Israel Opportunities Fund, and Samsung. The company has now raised $20 million altogether, shows Crunchbase.

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New Funds

MicroVentures, a 5.5-year-old, Austin, Tx.-based equity crowdfunding platform, is now enabling its investors to fund startups in the portfolio of the accelerator and seed-stage venture firm 500 Startups. Crowdfund Insider has more here.

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People

Chi-Hua Chien, who until last October served as an investing partner at Kleiner Perkins Caufield & Byers, took the stand yesterday in the gender discrimination and retaliation case of former Kleiner partner Ellen Pao, who has said she was systematically excluded from opportunities that were provided to men at the firm, including a ski trip to Vail and an all-male dinner party at the apartment of former Vice President Al Gore. Pao has stated in court papers that Chien didn’t invite women to the dinner because they “kill the buzz.” Said Chien yesterday, “I never said that or anything like that . . . The quotes in the lawsuit, the things she claimed I had said, the events she claimed I organized—it was very, very hurtful.” Some of the emails brought into testimony seemed to bolster Pao’s argument, however, including a note from Chien to Path CEO Dave Morin, in response to Morin’s request to add a woman to the Vail trip. “Why don’t we punt on her and find 2 guys who are awesome. We can add 4-8 women next year.” (There were no more ski trips after that.) More here and here.

Twitter CEO Dick Costolo talks with the New York Times about how he decides what’s abuse on the platform, and what he thinks constitutes free speech. Says Costolo: “One way of thinking about it is: I may have a right to say something, but I don’t have a right to stand in your living room and scream it into your ear five times in a row.”

Bob Grady has been appointed a partner at the San Francisco-based private equity firm Gryphon Investors. Grady previously spent five years at the Wyoming-based investment firm Cheyenne Capital, where he served as a general partner and managing director; he was also formerly a managing director and global head of venture and growth capital at The Carlyle Group. Grady is also a longtime Republican operative.

Venture capitalist Bill Gurley of Benchmark isn’t done warning the industry about its reckless behavior. Yesterday, he published half a dozen reasons that today’s late-stage private rounds are very different from an IPO — and why investors would be wise to curb their enthusiasm for them.

Yahoo CEO Marissa Mayer is upholding a long tradition at Yahoo of overpaying people to keep them from leaving, reports Business Insider. One of the outlet’s sources says a prized employee in the company’s ad sales group makes a stunning $2.5 million a year — up from the $450,000 he was making before Mayer arrived. Meanwhile, Jeff Bonforte, the senior vice president in charge of Yahoo’s communication products, is “rumored” to be making roughly $5 million a year, says BI.

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Jobs

Illumina Ventures, a corporate venture unit of the bioinformatics giant Illumina that’s focused on life sciences, is looking for a global head. The job is in San Diego.

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Essential Reads

One billion viewers and no profit; the WSJ takes a hard look at YouTube.

Google has created a computer that can teach itself dozens of games —and wins.

Gartner, the research firm, has predicted a third of all jobs will be lost to automation within a decade. Academics who used to dismiss such findings are starting to worry they’re true, too.

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Detours

Downhill biking through the Himalayas.

Examining pricey museum sleepovers.

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Retail Therapy

Mugs for mustachioed men.

Outlet snouts.




Opendoor Raises $20M for Its Audacious Home-Buying Business

Eric WuOpendoor, a year-old, San Francisco-based company, is on a mission to make residential real estate liquid by making it simple to buy and sell it online.

Investors are buying what it’s selling. This morning, the company is announcing $20 million in fresh funding led by GGV Capital, a round that brings the company’s total outside funding to $30 million.

Consumers are also buying Opendoor’s pitch. The 20-person company is now buying one house per day – sight unseen — in its test market of Phoenix. Home owners need merely give it their address and some basic details, and using public market information about historical home sales and Opendoor’s own proprietary data about market conditions, the company arrives at an offer price that’s just one to three points below what the seller might fetch on the open market roughly three months into the future. (That’s the average time, it says, required to sell a home in the U.S.)

The big question now is whether the whole operation is sustainable. Certainly, the risk and reward associated with what it’s trying to pull off is enormous.

Consider: After Opendoor acquires each home, it must ensure the home is up to code in order to resell it. The repairs alone can likely get complicated, as any homeowner can attest. But each home is also given numerous cosmetic upgrades that will give it so-called curb appeal. Think everything from new kitchen cabinets to light landscaping.

Opendoor can (and surely intends) to sell its homes at a premium, based on those upgrades. But it’s a lot of work, the kind that involves contractors and lawn maintenance workers, in addition to Opendoor’s growing team of developers. More, hanging on to that inventory in the meantime is a huge risk. Though the company’s equity certainly helps, as does a partnership with a bank that gives it debt to use, the housing market is highly sensitive to interest rates and other macroeconomic factors. In Phoenix, for example, where Opendoor has been testing out its service for the last several months, up to a quarter of the homes that are listed for sale are eventually taken back off the market.

CEO Eric Wu — a serial entrepreneur who cofounded Opendoor last year with investor-operator Keith Rabois — acknowledges the challenges, but he seems convinced that none are insurmountable. Partly, that owes to the progress Opendoor has made as a software company, whose platform can now (Wu says) seamlessly address everything from property assessments to quickly presenting offers to potential customers to handling the payment of the house to overseeing the infrastructure involved with holding and reselling it.

Wu also knows that there’s tremendous pain associated with home buying today, and where there is pain, there is opportunity.

In fact, Wu is already envisioning the day that Opendoor both buys homes, then resells others it owns to those same customers, creating one of those virtuous cycles that the digerati like to talk about.

“Longer term,” says Wu, “we’d love to have a path where we transact 5 to 35 percent of all homes. Once that occurs, this business really starts to evolve into us solving pain points for homeowners, from [allowing them to easily sell their homes] to helping them [purchase] another with high-quality renovations. We definitely think we can touch both buyers and sellers.”

The company could even get into the financing business eventually, Wu suggests. There’s “lot of headache and stress in securing mortgages today,” he notes. Opendoor has enough work ahead of it right now, but it’s “something we’ll look at down the road,” he says.




StrictlyVC: February 25, 2015

Hi, everyone, hope your Wednesday is off to a great start! (Psst, web visitors, this version of today’s email is easier to read than what you see below.)

—–

Top News in the A.M.

Tomorrow, the FCC is expected to approve regulating Internet service like a public utility.

China has been dropping some of the world’s leading tech brands from its approved state purchase lists in an apparent response to revelations about widespread Western cybersurveillance.

—–

The Real Reveal in the Kleiner Case

“Pao didn’t have the necessary skills for the job. She didn’t even come close.”

So said employment attorney Lynne Hermle yesterday in her opening comments about Ellen Pao, the CEO of Reddit and a former partner of Kleiner Perkins Caufield & Byers, the storied venture firm that Pao is suing for gender discrimination and retaliation.

We don’t want to underestimate Hermle, who is notoriously tough and is presumably just getting warmed up. (The trial is expected to last four weeks.)

Still, her strategy seems risky, given how unclear it is what skills are “necessary” to becoming a great venture capitalist.

Certainly, Pao’s educational background is textbook, with degrees from Harvard’s business and law schools, not to mention an undergraduate degree in electrical engineering from Princeton. Pao also logged time at Microsoft, TellMe, and BEA Systems, giving her the kind of operating experience that is often (but not always) a prerequisite for the job.

We’ll spare you the laundry list, but we could probably come up with hundreds of general partners with similar backgrounds. Among them: famed VC Jim Breyer of Accel Partners, who had part-time jobs at Hewlett-Packard and Apple, as well as a stint as a McKinsey consultant, before nabbing his MBA at Harvard and heading straight into Accel.

Still, Hermle might argue, there’s much more to venture capital than education. In fact, she is already beginning to paint Pao as highly political, citing performance reviews that state Pao “seems to have a sense of entitlement rather than earning her position” and is “not viewed as a good team member” and “not 100 percent reliable” in supporting her colleagues. (Indeed, one detail that surfaced yesterday was that Pao suggested Kleiner fire Trae Vassallo, a former Kleiner colleague who helped to lead deals in Nest Labs and Dropcam, among others.)

The implication seems to be that trust and respect within a venture firm are key. And in theory, it’s easy to see why. No one wants to work with a backbiter.

Unfortunately, backbiters are sometimes also rainmakers, and in venture capital, returns are the name of the game.

Yes, it’s nice if you can find team members who are both supportive and know how to produce fat returns, but that’s not always the case. Because of the typical pay structure within a firm — with certain partners receiving far better economics than others — it’s often not so easy to be diplomatic, either.

The truth is that what goes on inside most venture firms isn’t nearly so collegial as GPs would have their LPs believe. They may talk about chemistry; they may applaud each other publicly. But when it comes down to it, venture capital is as cutthroat a business as you’ll find. You make money for investors or you get kicked out — and anyone who has been around long enough can tell you that everything else is a façade.

Much has already been written about Ellen Pao and whether and what her case against Kleiner tells us about gender discrimination inside venture firms.

What’s more likely to be revealed in this very public case is that partnerships are far more fragile than the industry would have us believe.

Ballou PR

New Fundings

CENX, a six-year-old, Hoboken, N.J.-based company whose software helps wireless carriers manage their data networks, has raised an undisclosed amount of growth financing from its previous backers, including Cross Creek Advisors, DCM, Ericsson, Highland Capital Partners, Mesirow Financial Private Equity, and Verizon Ventures.

FundThrough, a year-old, Toronto-based online business lending startup, has raised $2.2 million led by Real Ventures, with participation from Origin Merchant Partners, Five Elements Ventures, Barlow Lane Holdings and individual investors.

Iotera, a four-year-old, Bay Area-based-company that produces GPS devices with what it says are months of battery life, has raised $1 million in seed funding led by earlier backer ZenShin Capital Partners, with participation from Crunchfund, Startup Capital Ventures, String Ventures, EarlyMarket and Rubicon Venture Capital. TechCrunch has the story here.

Mavenlink, a 6.5-year-old, Irvine, Ca.-based company whose cloud-based software helps distributed teams manage and scale the projects, has raised $15 million in equity and a $4 million credit facility from Carrick Capital Partners and Silicon Valley Bank.

NCino, a three-year-old, Wilmington, N.C.-based company behind a web-based operating technology for banks and financial-services companies, has raised $29 million in Series B funding led by Insight Venture Partners. Earlier backers, including Wellington Management, former Morgan Stanley Chairman and Chief Executive John Mack, and Promontory Financial Group founder and CEO Gene Ludwig, also joined the round. The company has now raised $49 million to date. Forbes has more here.

Q4 Web Systems, an 8.5-year-old, Toronto-based company whose services cater to investors relations professionals (including making investor websites), has raised $5 million led by Plaza Ventures, with participation from Atlas Venture and Silicon Valley Bank.

RtTech Software, a four-year-old, New Brunswick, Canada-based company whose data software aims to help manufacturing companies improve their asset availability, asset utilization and utilities consumption, has raised $3 million in Series A funding led by McRock Capital, with participation from earlier backer New Brunswick Innovation Foundation.

Telltale Games, a 10-year-old, San Rafael, Ca.-based digital publisher that releases interactive episodic content on a monthly schedule, has raised an undisclosed but “significant” amount of strategic funding from Lions Gate Entertainment Corp. that VentureBeat hears is $40 million. The company had raised roughly $14.5 million previously, including from Granite Ventures and IDG Ventures.

Wigo, a 13-month-old, Boston-based startup whose mobile application enables college students to find out where people they know are going out, has raised $1.5 million in seed funding led by Great Oaks Venture Capital, with participation from the startup foundry Blade, GGV CapitalGreylock Partners, KEC Ventures, and individual investors. The company has raised $2.2 million altogether. Business Insider takes a look at it here.

Xero, an 8.5-year-old, Wellington, New Zealand-based publicly traded maker of online accounting software, has raised $100 million from Accel Partners, with its largest institutional investor, Matrix Capital Management, chipping in another $10.8 million. Financial Review has more here.

—–

New Funds

Notation Capital, a new, Brooklyn-based seed-stage firm founded by former Betaworks colleagues Nicholas Chirls and Alex Lines, has closed its debut fund with $8 million. Venture Capital Dispatch has much more here.

Institutional Venture Partners, the 35-year-old, Sand Hill Road firm is looking to raise a new fund, reports VentureWire. Its sources say the firm is targeting more than the $1 billion it raised in 2012 when it closed its fourteenth fund, too.

Pereg Ventures, an early-stage venture capital firm that operates in the U.S. and Israel and is backed by Nielsen NV, has completed initial fundraising for its debut fund with $25.1 million, it tells VentureWire. It was initially targeting $50 million and it’s still aiming to raise more capital, it says.

—–

IPOs

GoDaddy, the 18-year-old, Scottsdale, Az.-based online service that helps people and businesses set up web sites, took another step to becoming a publicly traded company yesterday, filing its sixth updated S-1 since filing to go public last June. The company is fast-growing but also a “big money loser,” notes USA Today, which continues to make its offering anything but certain. If the company does go public, it will be a long time in coming. GoDaddy tried going public in 2006, too, but it later pulled its offering. Former CEO Bob Parsons, who was replaced in 2012, said at the time that he yanked the offering because he found the quiet period that came along with it “suffocating” as it prevented him for doing radio, TV, or his-then weekly Internet radio show. (The company was also losing money, according to that earlier S-1.)

—–

Exits

Meritage Pharma, a seven-year-old, San Diego-based company that’s been developing prescription products to treat gastrointestinal and atopic diseases, has been acquired for $70 million and up to another $175 million in potential future payouts. The buyer: Shire, a Dublin, Ireland-based company that targets markets such as rare diseases, neuroscience and internal medicine. Meritage had raised $35 million from Domain Associates, Latterell Venture Partners and Vertical Group.

Toro, a 2.5-year-old, San Francisco-based startup that helps developers promote their apps on Facebook and was formerly known as Red Hot Labs, has been acquired by Google for undisclosed terms. Toro had raised $1.5 million in funding from investors, including Andreessen Horowitz, Greylock Partners, SV Angel, General Catalyst PartnersKeith Rabois, Chris Dixon, Bill Tai and Guitar Hero co-creators Charles Huang and Kai Huang. TechCrunch has the story here.

—–

People

Yesterday, in a San Francisco courtroom, venture capitalist Trae Vassallo testified that like Ellen Pao — the former Kleiner Perkins Caufield & Byers partner who is suing the firm for gender discrimination and retaliation — she endured several upsetting episodes with a then (married) senior partner at the firm, Ajit Nazre. To wit, she said he invited her for drinks one night to discuss strategy but that during the meeting, he started to make advances. Vassallo, who is herself married and has three children, also recounted being invited by Nazre to a business meeting in New York where the two were to meet DoubleClick CEO David Rosenblatt. Rosenblatt never arrived, and Nazre later showed up in the door of Vassallo’s hotel room wearing a bathrobe and slippers, asking to be let in. More here.

—–

Jobs

Citi Ventures is looking for an investing group head. The job is in New York.

—–

Essential Reads

Apple was told to pay $532.9 million after a federal jury said yesterday that its iTunes software used a Texas company’s patented inventions without permission. Apple is pledging to appeal. Said Apple spokeswoman Kristin Huguet to Bloomberg: “Smartflash makes no products, has no employees, creates no jobs, has no U.S. presence, and is exploiting our patent system to seek royalties for technology Apple invented. We refused to pay off this company for the ideas our employees spent years innovating and unfortunately we have been left with no choice but to take this fight up through the court system.”

—–

Detours

How an undocumented immigrant from Mexico became a star at Goldman Sachs.

You know it’s cold when . . .

—–

Retail Therapy

For all the DJs in the house. (Josh Felser, we’re looking at you.)




The Real Reveal in the Kleiner Case

400“Pao didn’t have the necessary skills for the job. She didn’t even come close.”

So said employment attorney Lynne Hermle yesterday in her opening comments about Ellen Pao, the CEO of Reddit and a former partner of Kleiner Perkins Caufield & Byers, the storied venture firm that Pao is suing for gender discrimination and retaliation.

We don’t want to underestimate Hermle, who is notoriously tough and is presumably just getting warmed up. (The trial is expected to last four weeks.)

Still, her strategy seems risky, given how unclear it is what skills are “necessary” to becoming a great venture capitalist.

Certainly, Pao’s educational background is textbook, with degrees from Harvard’s business and law schools, not to mention an undergraduate degree in electrical engineering from Princeton. Pao also logged time at Microsoft, TellMe, and BEA Systems, giving her the kind of operating experience that is often (but not always) a prerequisite for the job.

We’ll spare you the laundry list, but we could probably come up with hundreds of general partners with similar backgrounds. Among them: famed VC Jim Breyer of Accel Partners, who had part-time jobs at Hewlett-Packard and Apple, as well as a stint as a McKinsey consultant, before nabbing his MBA at Harvard and heading straight into Accel.

Still, Hermle might argue, there’s much more to venture capital than education. In fact, she is already beginning to paint Pao as highly political, citing performance reviews that state Pao “seems to have a sense of entitlement rather than earning her position” and is “not viewed as a good team member” and “not 100 percent reliable” in supporting her colleagues. (Indeed, one detail that surfaced yesterday was that Pao suggested that Kleiner fire Trae Vassallo, a former Kleiner colleague who helped to lead deals in Nest Labs and Dropcam, among others.)

The implication seems to be that trust and respect within a venture firm are key. And in theory, it’s easy to see why. No one wants to work with a backbiter.

Unfortunately, backbiters are sometimes also rainmakers, and in venture capital, returns are the name of the game.

Yes, it’s nice if you can find team members who are both supportive and know how to produce fat returns, but that’s not always the case. Because of the typical pay structure within a firm — with certain partners receiving far better economics than others — it’s often not so easy to be diplomatic, either.

The truth is that what goes on inside most venture firms isn’t nearly so collegial as GPs would have their LPs believe. They may talk about chemistry; they may applaud each other publicly. But when it comes down to it, venture capital is as cutthroat a business as you’ll find. You make money for investors or you get kicked out — and anyone who has been around long enough can tell you that everything else is a façade.

Much has already been written about Ellen Pao and whether and what her case against Kleiner tells us about gender discrimination inside venture firms.

What’s more likely to be revealed in this very public case is that partnerships are far more fragile than the industry would have us believe.




StrictlyVC: February 24, 2015

Hi, happy Tuesday, everyone!

—–

Top News in the A.M.

Apple is now more than double the size of Exxon — and everyone else.

—–

A Team Player Strikes Out on His Own

Like many venture capitalists, Ashmeet Sidana watched his firm, Foundation Capital, grow smaller during his nearly nine-year tenure, narrowing from a $750 million fund closed in 2008 to a $282 million fund closed in 2013.

In some ways, its downsizing was inevitable. As the costs of starting both consumer-facing and enterprise startups has shrunk, the industry has largely become split among very small funds that can nurture these efficiently run startups, and very large funds that can help get the survivors either sold or taken public.

It left Sidana, who parted ways with Foundation in 2013, thinking about a big opportunity that he could chase with fewer dollars. Specifically, he began obsessing about the huge gulf between the best data centers — built by the likes of Amazon and Google, where one system administrator can manage 10,000 servers — and traditional enterprise data centers, where one administrator still sometimes manages just 25 to 50 servers.

Because those traditional enterprise data centers will never go away entirely, owing to privacy and security and latency concerns, and “because you have this radical efficiency on the other side,” entirely new companies will be created between the two, says Sidana.

It’s that belief that has driven a number of Sidana’s angel investments over the last half year, including in startups Signal Fuse and Menlo Security (both of which remain in stealth mode).

That thesis, along with Sidana’s track record – his past board seats include FreeWheel, acquired by Comcast for $350 million and Altor Networks, acquired by Juniper for $95 million – has also attracted the attention of institutional investors.

Indeed, this morning, Sidana is officially taking the wraps off his new firm, Engineering Capital, as well as its debut, $32 million fund, whose LPs include Foundation Capital founder Kathyrn Gould, investor-academic Steve Blank, and the fund of funds firm Cendana Capital. (We made brief mention of the fund in yesterday’s newsletter.)

Sidana hasn’t made any investments out of the fund yet, but he says that Engineering Capital plans to build a concentrated portfolio of between 12 to 15 companies across such sectors as storage, networking, management, and security. “Any company leveraging this trend in IT” is fair game, he says.

Sidana will also be the first, anchor investor in them all if he has his way. “I’ll lead the round, price it, and take a board seat, which is different from a lot of other enterprise funds that are making small investments,” he says, calling his a“ rifle shot versus a shotgun approach.”

Asked how he settled on his new brand, Sidana — who once ran product management for one of VMWare’s flagship products, and who plans to run his firm single-handedly for now — says Engineering Capital aims to represent “venture capital for engineers.”

He adds with a laugh, “My joke is to ‘engineer’ the capital for them.”

——

New Fundings

Chewse, a four-year-old, L.A.-based platform that makes it easier for offices to order meals from certain restaurants at pre-determined times, has raised $1.7 million in seed funding, including from Telegraph HillInnoSpring, 500 Startups, Chris Sacca, Ben Ling, Richard Chen and other angel investors. TechCrunch has more here.

GuideSpark, a seven-year-old, Menlo Park, Ca.-based company that provides employers with customizable video templates for conveying human resources information in a more digestible way, has raised $22.2 million in Series C funding led by Meritech Capital Partners, with participation from earlier backers IDG Ventures, New Enterprise Associates and Storm Ventures. The company has now raised $42.4 million to date, shows Crunchbase.

HomeLane, a seven-month-old, Bangalore, India-based company that boasts of integrated interior design and manufacturing capabilities that allow its customers to customize their homes, has raised $4.5 million in Series A funding led by Sequoia Capital, with participation from Aarin Capital. YourStory has more here.

Knowmail, a year-old, Tel Aviv, Israel-based developer of email-management software for businesses, has raised $1.2 million in seed financing from Plus Ventures, 2B Angels, AfterDox and INE Ventures.

LocoMotive Labs, a 2.5-year-old, Berkeley, Ca.-based developer of play-based educational apps for children with special needs, has raised $4 million in Series A funding co-led by SoftBank Ventures Korea and TAL Education Group. Earlier backers, including D3Jubilee, K9 VenturesKapor Capital, and NewSchools Venture Fund, also participated in the round. The company has now raised $4.6 million altogether, shows Crunchbase.

Mack Weldon, a four-year-old, New York-based company that makes “high-tech” socks, underwear, and undershirts, has raised $4 million in Series A funding from RiverPark Ventures, Bridge Investments and Lyrical Partners. The company has now raised $5.9 million altogether.

Metamarkets Group, a nearly five-year-old, San Francisco-based analytics platform for buyers and sellers of programmatic advertising, has raised $15 million in Series C funding from City National Bank, Data Collective, IA Ventures, Khosla Ventures, True Ventures, Village Ventures and individual investors. The company has now raised $43.5 million altogether, shows Crunchbase.

Prexton Therapeutics, a three-year-old, Geneva, Switzerland-based company that’s developing therapeutic compounds to treat central nervous system conditions including Parkinson’s disease, has raised 8.7 million euros ($9.8 million) in Series A funding from Sunstone Capital and Ysios Capital, with participation from earlier investor MS Ventures.

Roadster Online, a year-old, San Francisco-based company that promises to find great prices on new cars for customers, then deliver the car to their doors, has raised $1.8 million in seed funding from undisclosed sources, reports VentureWire.

Sikka Software, an 11-year-old, Milpitas, Ca.-based software-as-a-service company with a practice-management platform for dentists, optometrists, veterinarians and the like, has raised $5.5 million in Series B funding led by new investor Sierra Ventures, with participation from earlier backer ATA Ventures.

Space Time Insight, an eight-year-old, San Mateo, Ca.-based company whose analytics software aims to help companies in asset-intensive industries (like utility companies) make faster, better decisions, has raised $8 million in funding from the energy supplier E.ON SE and NEC Corp. The company has now raised $50 million altogether, including from EnerTech Capital, Novus Energy Partners, and Zouk Capital, shows Crunchbase.

Vigilant Biosciences, a four-year-old, Miami, Fl.-based company whose point-of-care and lab-based products help healthcare practitioners to more easily assess the risk of oral cancer, has raised $5.5 million in Series B funding from White Owl Capital Partners, venVelo, the Florida Institute for the Commercialization of Public Research, and earlier, unnamed investors. The company has now raised $7.8 million to date.

—–

IPOs

MaxPoint Interactive, a nine-year-old, Morrisville, N.C.-based SaaS platform that runs targeted digital marketing campaigns to drive in-store sales, yesterday announced plans to raise $75 million in an IPO by offering 6.5 million shares at between $10.50 and $12.50 per share. The company, backed by $11 million from Trinity Ventures and Madrona Venture Group, will be entering a public market that’s hasn’t been kind to ad tech since early last year.

—–

Exits

Authy, a three-year-old, San Francisco-based startup with a two-factor authentication app, has been acquired by the cloud software service Twilio for undisclosed terms. The app will continue as a standalone service, but its capabilities will be added to Twilio’s API, reports Recode. Authy had raised $3.8 million from investors, including Y CombinatorCorazon Capital, Salesforce Ventures, StartCaps Ventures, and Data Collective.

Camel Audio, a 15-year-old, London-based company known for its range of plug-ins, synthesizers, effects, and sound libraries, appears to have been quietly acquired by Apple. MacRumors has the story here.

Heptares Therapeutics, an eight-year-old, Welwyn Garden, England-based clinical-stage biotechnology company that’s been developing treatments for Alzheimer’s and other diseases, has been acquired by Sosei Group, a Japanese biopharmaceutical company, for up to $400 million, if certain milestones are met. Heptares had raised at least $21 million from investors, including Takeda Ventures and Clarus Ventures, shows Crunchbase.

Kindermint, a two-year-old, Tampa, Fl.-based online resale store that specializes in gently used kids’ clothing, has been acquired by the six-year-old, San Francisco-based used-clothing retailer ThredUp for undisclosed terms. Kindermint appears to have raised a tiny seed round from an undisclosed source; ThredUp has meanwhile raised roughly $50 million from investors, including Upfront Ventures, Highland Capital Partners, Trinity Ventures, and Redpoint Ventures.

—–

People

The rapper (and, more recently, startup investor) Chamillionaire is the newest entrepreneur-in-residence at L.A.-based Upfront Ventures. Partner Mark Suster explains why here.

The high-profile showdown between Kleiner Perkins Caufield & Byers and former Ellen Pao — who is suing the firm for $16 million for gender discrimination and retaliation — kicks off at 9.am. PST this morning in San Francisco Superior Court. The San Jose Mercury News is promising readers a play-by-play here. Meanwhile, Fortune has posted both sides’ pre-trial briefs here.

James Proud, a 23-year-old entrepreneur with a new sleep tracking device called Sense, receives high praise in Wired, even if it’s “too soon to say whether Proud’s sleep monitor will develop into a credible success story.”

Troubled payday lender Wonga has just laid off 325 employees, sold off a unit of its business, and lost its chairman. More here.

—–

Job Listings

IDG Ventures is looking to hire an associate. The job is in San Francisco’s Presidio park.

—–

Data

A typical billionaire has $3.1 billion. Here’s where most of them live.

—–

Essential Reads

Digital natives still love books. “I can’t imagine reading Tocqueville or understanding him electronically,” says a junior at American University. “That would just be awful.”

Pebble thinks it can hold off the tech giants by going back to its Kickstarter roots with its new watch, called Time.

—–

Detours

Ranked: The salary bump you can expect from a graduate degree, by major.

Mad Magazine’s best spoof ads.

The Googlifier.

—–

Retail Therapy

AdVenture Capitalist.

Backpacks for photojournalists. (H/T: InsideHook)




A Team Player Strikes Out on His Own

Like many venture capitalists, Ashmeet Sidana watched his firm, Foundation Capital, grow smaller during his nearly nine-year tenure, narrowing from a $750 million fund closed in 2008 to a $282 million fund closed in 2013.

In some ways, its downsizing was inevitable. As the costs of starting both consumer-facing and enterprise startups has shrunk, the industry has largely become split among very small funds that can nurture these efficiently run startups, and very large funds that can help get the survivors either sold or taken public.

It left Sidana, who parted ways with Foundation in 2013, thinking about a big opportunity that he could chase with fewer dollars. Specifically, he began obsessing about the huge gulf between the best data centers — built by the likes of Amazon and Google, where one system administrator can manage 10,000 servers — and traditional enterprise data centers, where one administrator still sometimes manages just 25 to 50 servers.

Because those traditional enterprise data centers will never go away entirely, owing to privacy and security and latency concerns, and “because you have this radical efficiency on the other side,” entirely new companies will be created between the two, insists Sidana.

It’s that belief that has driven a number of Sidana’s angel investments over the last half year, including in startups Signal Fuse and Menlo Security (both of which remain in stealth mode).

Sidana’s thesis, along with his track record – his past board seats include FreeWheel, acquired by Comcast for $350 million and Altor Networks, acquired by Juniper for $95 million – has also attracted the attention of institutional investors.

Indeed, this morning, Sidana is officially taking the wraps off his new firm, Engineering Capital, as well as its debut, $32 million fund. The firm’s LPs include Foundation Capital founder Kathyrn Gould, investor-academic Steve Blank, and the fund of funds firm Cendana Capital. (We made brief mention of the fund in yesterday’s newsletter.)

Sidana hasn’t made any investments from his newly assembled pool of capital, but he says that Engineering Capital plans to build a concentrated portfolio of between 12 to 15 companies across such sectors as storage, networking, management, and security. “Any company leveraging this trend in IT” is fair game, he says.

Sidana will also be the first, anchor investor in them all if he has his way. “I’ll lead the round, price it, and take a board seat, which is different from a lot of other enterprise funds that are making small investments,” he says, calling his a“ rifle shot versus a shotgun approach.”

Asked how he settled on his new brand, Sidana — who once ran product management for one of VMWare’s flagship products, and who plans to run his firm single-handedly for now — says Engineering Capital aims to represent “venture capital for engineers.”

He adds with a laugh, “My joke is to ‘engineer’ the capital for them.”

Pictured: Sidana, speaking at the Wharton School in San Francisco in 2012




StrictlyVC: February 23, 2015

Good morning, everyone! Hope you had a wonderful weekend. (Web visitors, this version of today’s morning email is easier to read than what you see below.)

—–

Top News in the A.M.

Google has just launched YouTube Kids.

Twitter gets behind the FCC’s “net neutrality” proposal.

To eliminate bugs within iOS, Apple is reportedly planning to launch the first-ever public beta program for it, beginning with the iOS 8.3 next month. What that means: any iPhone user will be able to give Apple’s unreleased iPhone software a test run before its final release (though the program will be restricted to 100,000 people).

—–

Kathryn Gould: The Kingmaker in the Background

Most venture capitalists don’t curse like sailors. Most can’t boast a 90 percent internal rate of return over the course of their investing careers, either. Kathyrn Gould — the inimitable founder of Foundation Capital, who today spends much of her time today on her vineyard in the foothills of California’s Sierra mountain range — is known for both.

In select circles, Gould, who got her start in VC in the late ’80s at the now-defunct firm Merrill, Pickard, Anderson & Eyre, is also known for mentoring up-and-coming investors. We talked recently about her views on the industry – and which VCs she’s betting on right now.

You used to make angel investments, including a $50,000 investment in the software business Demandforce that returned $2 million when the company was acquired by Intuit in 2012. Why stop?

I made three angel investments, and I wouldn’t say I won’t do more, but I’m a perfectionist and for me, making angel investments [requires as much time and effort] as running a firm. My lifetime IRR is 90 percent and I’m not going to mess with my numbers just to screw around.

[Early-stage Investor] Mike Maples and I put our personal money into Demandforce before we started Floodgate, but chance favors a prepared mind, and while I could still [make angel bets], I don’t want to.

When you say that “we” started Floodgate, what do you mean?

Mike [who logged time at Silicon Graphics and Trilogy Software, then cofounded a company, Motive, that went public in 2004] briefly floated through Foundation Capital [in the early 2000s] so I knew him, and we used to strategize about what was happening in venture business.

He’d started to dabble with his own money, including investing in Twitter, which wasn’t an obvious winner. I’d retired [from Foundation in 2006], but I said, “If I were to do [another fund], I’d raise a small amount of money” [because of the changing economics of startups]. And we said, “Sh_t, let’s put together a business plan and do this thing.” So we mapped out how we’d do it, I helped him with his slides, and I introduced him to my three best investors at Weathergage, Horsley Bridge Partners, and the University of Chicago, and there he was.

Are you an LP in Floodgate?

Yes, though I help these guys, then invest in their firms, but I don’t get any special treatment.

Who else have you helped get started?

We [at Foundation] were investors in [entrepreneur-investor] Mar Hershenson’s companies. We invested in her [analog circuit company Barcelona Design], and when she developed this consumer penchant and hooked up with [angel investor] Pejman Nozad to launch their venture fund, I said, “Let me help you; I know classy institutional investors that will invest.” Even though I loved what they were doing, their written business plan was a goddamned mess. It was very random. And your slides have to be credible to go raise money from decent investors. I still see [Nozad and Hershenson] all the time to talk about things that are happening and give them ideas, and I’m an investor [in their fund].

Most recently, I worked with Ashmeet Sidana, who was a GP at Foundation Capital for [nine years] and [left in September 2013] and started doing his own angel investing. We’d get together at a coffee shop in Portola Valley and I’d ask him what he was doing, and I was like, “This stuff is f_cking great, you should be doing this in a bigger way.” So we wrote his business plan, created his slides, I introduced him to several of his investors – he also has several Indian investors – and he just closed his first solo fund with $33 million. I think his firm, Engineering Capital, will be very successful.

People will read this and start reaching out to you for introductions.

I don’t want people calling me. I’m not going to help you raise your super sucky fund. I’ve know Mar for 20 years, Maples for 15. I’ve known Ashmeet for 15 years.

I feel like I’m in the best of the best [of these small funds]. I think all the good ones are getting started or have started.

For more of our interview with Gould, including the advice she always gives newer investors, click here.

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Ballou PR

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New Fundings

AlleyNYC, a two-year-old, New York-based co-working space, has raised $16 million in funding led by Vandewater Capital Holdings, with participation from Entrepreneur Media.

Brickell Biotech, a six-year-old, Miami, Fl.-based pharmaceutical company focused on acquiring, developing, and commercializing drug therapies for skin conditions, has raised $10 million in Series C financing from undisclosed investors. The company has now raised $25.4 million altogether, including from Palisade Capital Management and the South Korean beauty products company AmorePacific Ventures.

DriverUp, a newly launched, Dallas-based company that hopes to draw accredited investors into the business of auto lending, has raised $50 million in Series A funding led by Emerald Development Managers and RRE Ventures. You can check out its site here.

Grabble, a 1.5-year-old, London-based social fashion discovery and commerce platform, has raised £1.2 million ($1.9 million) in funding from a long list of mostly European angel investors.

M4JAM (Money For Jam), a 10-month-old, Cape Town, South Africa-based platform that breaks large projects into smaller jobs and enlists independent contractors to complete them, has raised an undisclosed amount of funding from Tencent Holdings and Naspers, via their joint WeChat Africa venture. TechCrunch has more on why the deal is strategically interesting here.

Main Street Hub, a 4.5-year-old, Austin, Tx.-based company that helps small, independently run businesses manage their social media marketing, has received $20 million in debt financing from Silicon Valley Bank. The company has now raised a total of $40 million, including from Harrison Metal and Bessemer Venture Partners. TechCrunch has more here.

NoBroker, a two-year-old, Bangalore, India-based peer-to-peer property listings startup that aims to squeeze brokers out of the rental process, has raised $3 million in Series A funding from SAIF Partners and Fulcrum Ventures. According to TechCrunch, the company had previously raised an undisclosed amount of seed funding. More here.

OrbitHCI, a five-month-old, Boston-based company that’s developing a watch and a tablet that aim to make it easier for the elderly to remotely see and communicate with loved ones, has raised $1 million in seed funding from Google Ventures and Atlas Venture. Venture Capital Dispatch has much more here.

Pepperfry, a four-year-old, Bangalore, India-based home and lifestyle e-commerce platform, is reportedly talking with new and earlier investors about a $70 million to $80 million Series D round. The company has so far raised $28 million across three rounds to date, including from Norwest Venture Partners and Bertelsmann. BusinessLine has the story here.

Philz Coffee, a 12-year-old, San Francisco-based chain of coffee shops, has raised $15 million in Series B funding led by earlier investor Summit Partners, with participation from Cowboy Ventures, Crunchfund and individual investors. The company has now raised $30 million altogether.

Postmates, a nearly four-year-old, on-demand delivery service, has raised $35 million in Series C funding from earlier backer Spark Capital, reports Techcrunch. Postmates is a service that lets users order anything from local stores and have it delivered directly to their home for a small delivery fee. The company has raised a total of $58 million, including from Matrix Partners, SoftTech VC, Crosslink Capital, Scott Banister, Naval Ravikant, Russell Simmons, Thomas Korte, Shervin Pishevar, Dave Morin and David Sacks.

Round.me, a year-old, Palo Alto, Ca.-based company that turns panoramic photos into virtual tours, has raised a $3 million in funding led by April Capital. TechCrunch has more here.

Tilson Technology Management, an 18-year-old, Portland, Me.-based company that builds telecommunications networks, has raised $2.2 million in funding from Rand Capital, a Buffalo-based venture firm, and CEI Ventures of Maine. The company has raised $2.9 million altogether, it says.

TrueFacet, a 14-month-old, New York-based platform that sells pre-owned jewelry, has raised $1.7 million in seed funding from Founders’ Co-Op,Maveron, Social Leverage, Trilogy Equity Partners and individual investors. The company had earlier raised $118,000 in funding from Techstars.

Urban Airship, a five-year-old, Portland, Ore.-based mobile marketing company, has raised $21 million in Series D funding, including from Franklin Park & Associates and QuestMark Partners. The company has now raised $67.6 million altogether, including from August CapitalFoundry Group, True Ventures and Verizon Ventures.

Viv Labs, a 2.5-year-old, TK-based artificial-intelligence startup whose three cofounders also cofounded the virtual personal assistant company Siri (famously acquired by Apple in 2010), has raised $12.5 million in Series B funding. The round was led by Iconiq Capital, with participation from earlier backer Horizon Venture and Pritzker Group Venture Capital. The company has now raised $22.5 million altogether, reports TechCrunch.

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New Funds

Homebrew, the nearly two-year-old, San Francisco-based early-stage venture firm cofounded by Hunter Walk and Satya Patel, has closed its second fund with $50 million, up from the $35 million it had raised for its inaugural fund. Walk, who says the firm has backed 17 startups to date, writes about the firm’s new fund here. Among Homebrew’s newest investments is Eero, a year-old, San Francisco-based company whose routers aim to blanket its customers’ homes in fast, reliable WiFi.

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IPOs

eASIC, a 16-year-old, Santa Clara, Ca.-based integrated-circuits company, has filed to raise up to $75 million in an IPO, despite an inhospitable environment for chip companies. One analyst tells the San Jose Mercury News that it has a “tough row to hoe.” Says another: “I’m not sure this IPO is going to go through, to be honest with you.” The company’s biggest backers include Seagate, which owns 14.6 percent of the company;Khosla Ventures, which owns 20.8 percent; Crescendo Ventures, which owns 15 percent; and Kleiner Perkins Caufield & Byers, which owns 8.8 percent. More here.

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Exits

Airpost, a two-year-old, Toronto-based startup that helps IT managers monitor their employees’ cloud applications, has been acquired by Box for undisclosed terms. More here.

Flexus Biosciences, a two-year-old, San Carlos, Ca.-based immune-oncology company, has been acquired by Bristol-Myers Squibb in a deal worth up to $1.25 billion, including an $800 million up-front payment and up to $450 million in future payments depending on various milestones. Flexus has raised just $38 million from investors, including the publicly traded drug maker Celgene, Kleiner Perkins Caulfield & Byers, and The Column Group. Xconomy has more here.

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People

Austin Ventures is closing shop.

Jon Bradford, the head of TechStars London, is leaving the network, reports TechCrunch. Bradford has been involved in accelerator programs for years, including as founder of a U.K.-based accelerator called Ignite and cofounder and CEO of Springboard Cambridge & London. No word yet on his next move.

Josh Miller, a product manager at Facebook, is among a growing number of privacy-minded “Tweet deleters,” reports Fusion. Explains Miller of why he wrote a piece of code that deletes his tweets after seven days, “My opinions aren’t permanent in my head (I often change my mind over time), and they’re not permanent when shared around the dinner table (nobody is recording our conversations) . . . So it just doesn’t make sense to me that they would be permanent online.”

Facebook CEO Mark Zuckerberg talks with Bloomberg about the company’s mission to get everyone in the world online: “The reality is just that a lot people can’t afford to pay for data access in some of these areas; then they probably aren’t ad markets, and it’s probably not going to be a place where it’s going to be particularly profitable [for Facebook] in the near term. In fact, we’ll probably lose a bunch of money—just because supporting Facebook as a service, and storing the photos and content that people want to share, costs money. We probably won’t offset it by making much.”

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Jobs

Twilio is looking for a new head of corporate and business development. The job is in San Francisco.

Zynga is looking for a director of corporate development. The job is in San Francisco.

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Essential Reads

Google’s Android Auto team built its own driver distraction lab to help determine which tasks people do frequently while driving, and which should be banned, reports the New York Times. According to its story: “Music is most definitely in. Streaming video? Most definitely not. Most social media will also be blocked, and texts can be sent only with voice commands.”

How Etsy alienated crafters and lost its soul.

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Detours

New, fascinating work by the digital artist Erik Johansson.

How we talk about our teachers.

Going commando takes on new meaning.

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Retail Therapy

You could buy a second home in Healdsburg. A castle outside of Paris would be more interesting, though.




The Kingmaker in the Background: Kathryn Gould

GouldMost venture capitalists don’t curse like sailors. Most can’t boast a 90 percent internal rate of return over the course of their investing careers, either. Kathryn Gould — the inimitable founder of Foundation Capital, who today spends much of her time today on her vineyard in the foothills of California’s Sierra mountain range — is known for both.

In select circles, Gould, who got her start in VC in the late ’80s at the now-defunct firm Merrill, Pickard, Anderson & Eyre, is also known for mentoring up-and-coming investors.

We talked recently about her views on the industry – and which VCs she’s betting on right now.

You used to make angel investments, including a $50,000 investment in Demandforce that returned $2 million when the company was acquired by Intuit in 2012. Why stop?

I made three angel investments, and I wouldn’t say I won’t do more, but I’m a perfectionist and for me, making angel investments [requires as much time and effort] as running a firm. My lifetime IRR is 90 percent and I’m not going to mess with my numbers just to screw around.

[Early-stage investor] Mike Maples and I put our personal money into Demandforce before we started Floodgate, but chance favors a prepared mind, and while I could still [make angel bets], I don’t want to.

When you say that “we” started Floodgate, what do you mean?

Mike [who logged time at Silicon Graphics and Trilogy Software, then cofounded a company, Motive, that went public in 2004] briefly floated through Foundation Capital [in the early 2000s] so I knew him, and we used to strategize about what was happening in venture business.

He’d started to dabble with his own money, including investing in Twitter, which wasn’t an obvious winner. I’d retired [from Foundation in 2006], but I said, “If I were to do [another fund], I’d raise a small amount of money” [because of the changing economics of startups]. And we said, “Sh_t, let’s put together a business plan and do this thing.” So we mapped out how we’d do it, I helped him with his slides, and I introduced him to my three best investors at Weathergage, Horsley Bridge Partners, and the University of Chicago, and there he was.

Are you an LP in Floodgate?

Yes, though I help these guys, then invest in their firms, but I don’t get any special treatment.

Who else have you helped get started?

We [at Foundation] were investors in [entrepreneur-investor] Mar Hershenson’s companies. We invested in her [analog circuit company Barcelona Design], and when she developed this consumer penchant and hooked up with [angel investor] Pejman Nozad to launch their venture fund, I said, “Let me help you; I know classy institutional investors that will invest.” Even though I loved what they were doing, their written business plan was a goddamned mess. It was very random. And your slides have to be credible to go raise money from decent investors. I still see [Nozad and Hershenson] all the time to talk about things that are happening and give them ideas, and I’m an investor [in their fund].

Most recently, I worked with Ashmeet Sidana, who was a GP at Foundation Capital for [nine years] and [left in September 2013] and started doing his own angel investing. We’d get together at a coffee shop in Portola Valley and I’d ask him what he was doing, and I was like, “This stuff is f_cking great, you should be doing this in a bigger way.” So we wrote his business plan, created his slides, I introduced him to several of his investors – he also has several Indian investors – and he just closed his first solo fund with $33 million. I think his firm, Engineering Capital, will be very successful.

People will read this and start reaching out to you for introductions.

I don’t want people calling me. I’m not going to help you raise your super sucky fund. I’ve known Mar for 20 years, Maples for 15. I’ve known Ashmeet for 15 years.

I feel like I’m in the best of the best [of these small funds]. I think all the good ones are getting started or have started.

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You also coach some of Foundation Capital’s younger investors.

There’s been solid turnover of people there and [there are] are bunch of guys who weren’t there [when I was] and who missed all my good stuff, so I’m giving some advice where I can.

What do you tell them?

That it’s not the calls you take. It’s the calls you make. Everyone is calling you with dumb startup ideas, and you can stay hugely busy sorting through that crap. My advice instead is to figure out who are the 10 to 20 smartest people you know and call them. One of them is always starting a company.

You also hear VCs talk about how one company in their portfolio will be a huge winner, two or three will be also-rans, and the rest will be write-offs. Well, that’s bullsh_t. I didn’t go into a deal unless I thought it was going to be a winner. All 10 had to win, that was my attitude. A lot of VCs run and hide, but I worked hard, I was a good fixer, and I earned my money.

I’m loath to ask, but you’re a very successful female VC. What do you make of the attention paid to the industry’s gender imbalance?

I think all the press about it has done women a disservice. People want to bring in a woman partner now, and I’m like, “You want to bring in a good partner.” If someone isn’t listening to you [as a woman], it’s because your argument in weak. If you think instead that they aren’t listening because you’re a woman, if you allow yourself that false luxury [of thinking you’re being discriminated against], you won’t grow.

You’ve never encountered a problem that you attribute to being a woman?

I have. Once. I was at Merrill, Pickard, Anderson & Eyre. Bruce [Dunlevie] and Andy [Rachleff] and I all started the same year, and when those guys went off [to cofound the venture firm Benchmark with several others in 1995], I had to decide what I was going to do. I was on a roll. The 90 percent IRR thing was well on its way, I had IPOs and acquisitions and good things happening, so I talked with firms. I was picky, but there were six or seven firms I would have joined. They were all d_cking around, though, and I could see it would take a year for me to get a job with these guys. Meanwhile, I know if I’d been a guy with my numbers, I would have been snapped up in a week.

I didn’t wait the year to see what would happen. Instead, after a couple of months, I thought, I’ll start a fund, and I had the money raised in three months. As it turns out, half or maybe more of the CIOs at [a lot of these institutional investors] are women. I’m really glad, too. I loved doing it my way.

To this day, very few women have broken into the all-male firms. But I think the problem will go away, not through those firms hiring women, but because other firms like [the woman-led firm] Cowboy Ventures will grow up around them. I do think that for the most part, the industry is a meritocracy.

Photo courtesy of Forbes.