Happy Tuesday, dear readers!
Top News in the A.M.
The Obama administration is establishing a new agency to combat the deepening threat from cyberattacks. The Washington Post has the story here.
At Venture Firms, Balancing Brands Within Brands
There was a time in venture capital when it was almost unthinkable for investing professionals to make personal bets on startups outside their firms. That seemingly began to change about a decade ago. For example, after Accel Partners made an early bet on Facebook that would prove among the most lucrative in venture history, the high-profile partner who’d taken a seat on Facebook’s board, Jim Breyer, began backing a variety of companies through a personal fund, Breyer Capital. Tim Draper, a cofounder of DFJ, similarly began making investments unrelated to DFJ long before leaving an active investing role at the firm in late 2013.
Whether VCs are doing more angel investing today is an open question; no one yet tracks their collective personal investments. But it’s a rare week when at least some funding announcements don’t feature VCs who are backing startups with their own checks.
It’s easy to appreciate why. Sometimes, the investments being made are too small for a fund, or they fall outside a firm’s wheelhouse. In a crowded landscape, the brand of an individual VC can also help a firm win competitive deals; allowing the VC’s involvement in as many promising companies as possible is a means toward that end.
But there are pitfalls. For one thing, conflicts can arise. If a VC has a personal stake in a new productivity app, what happens if another partner brings a different, competing productivity app into the firm? An employee’s headspace can be taken up by a company that’s not part of the firm’s portfolio. You could probably also argue that every side deal a VC makes undermines the decision-making process of his or her partners — especially in cases where those angel investments turn into home runs.
The last is a particularly thorny issue for a firm’s LPs. Says one San Francisco-based institutional investor: “If an investor funds a company that hits it big, and the firm isn’t in it, the LPs are going to be mad. They’re going to ask why the hell wasn’t the fund in that deal.”
Still, done right, the trend can be a win for everyone involved. First, side deals can become portfolio companies. Bill Pescatello, a partner at Lightbank in Chicago, has made three angel investments outside his firm, all startups where he “had a direct connection with the founders and/or a very specific connection to the business through my own interests.”
Pescatello adds that in each case, he ran the investment opportunity by Lightbank, which passed on two of the startups but has funded the third.
Niko Bonatsos, a principal at General Catalyst Partners in Palo Alto, Ca., has similarly made two “unique” investments that he first ran past his partners. One of of his checks went to Raise, a Chicago-based gift card marketplace that has since attracted $81.2 million from investors, including $56 million that the company announced just last month. New Enterprise Associates led the deal.
Bonatsos also personally invested in the 2.5-year-old, Atlanta, Ga.-based anonymous messaging startup Yik Yak. When Bonatsos wrote a check to Yik Yak – he was its first angel investor — it was barely a speck on anyone’s radar. Last November, the company announced $62 million in funding led by Sequoia Capital. (The company has raised $73 million altogether.)
Bonatsos — who scans roughly 30 newsletters and outlets before he starts his day each morning – notes that both were risks, particularly given that principals don’t necessarily have the same bank balance as more established VCs.
He is also quick to add that his firm’s “interests always come first. I’m first and foremost a General Catalyst team member.” Sometimes, he explains, “a founder doesn’t want to raise capital from a venture capital firm right away, and in order for the firm to maintain a relationship with that entrepreneur, it makes sense for someone at the firm to write a personal check.”
In fact, says Bonatsos, if General Catalyst opts to invest in either company down the road, he’ll sell the firm his stake at cost, per a standard arrangement with the firm.
General Catalyst could also pass again. Yik Yak was the sixth most popular social networking app in the world three months ago, according to the analytics firm App Annie. Right now, it’s the 24th most popular social networking app.
“If the VC firm doesn’t [acquire an employee’s stake later], you’re stuck with the angel investment,” says Bonatsos, acknowledging the possibility.
“If things work out, it’s great for you. But there’s also a good chance you’ll lose your money.”
Aventura, an eight-year-old, Denver-based medical workflow-automation software company, has raised $14 million in Series C funding co-led by Safeguard Scientifics and Merck Global Health Innovation Fund. Earlier backers Excel Venture Management, HLM Venture Partners and Memorial Care Innovation Fund also joined the round, which brings the company’s total funding to $36.3 million, shows Crunchbase.
BitPesa, a 1.5-year-old, Nairobi, Kenya-based remittance platform that uses bitcoin to as a more reliable way to send money to East Africa, has raised $1.1 million in a second round of funding led by Pantera Capital.Other investors included Crypto Currency Partners, Stephens Investment Management, Bitcoin Opportunity Corp., and FuturePerfect Ventures. The company has raised $1.7 million to date.
DigiSight Technologies, a three-year-old, Portola Valley, Ca.-based software company that integrates data from mobile tests into clinical settings, has raised $7.8 million in Series B financing from new investors Biosys Capital, GE Ventures, Lagunita and Waycross Ventures, along with earlier investors.
Grapevine Logic, an 11-month-old, Boston, Ma.-based startup that connects YouTube personalities with brands that hire them, has raised $1.1 million seed funding from Boston Seed, Atlas Ventures, and numerous angel investors.
Humanity, an 11-month-old, San Francisco-based cloud-hosted workforce management platform, has raised $9 million in Series B funding led by MHS Capital, with participation from Klever Internet Investments, Point Nine Capital, Team Builder Ventures and Boku CEO Mark Britto. The company never publicly disclosed the size of its Series A round.
Imagine Health, an 8.5-year-old, Midvale, Ut.-based startup that matches companies insuring their own large workforces with teams of health-care providers, has raised $21 million in Series A funding from Trident Capital and HLM Venture Partners.
NEXTracker, a two-year-old, Freemont, Ca.-based designer and builder of single-axis PV trackers, has raised $25 million in Series B funding led by new investor SJF Ventures, with participation from Tennenbaum Capital Partners and earlier backers Sigma Partners and DBL Investors. The company has now raised $30 million altogether, shows Crunchbase. GreenTechMedia has more here.
Parklet, a 2.5-year-old, San Francisco-based HR tech startup, has raised $1.5 million in seed financing from Greylock Partners, Storm Ventures, FundersClub, Winklevoss Capital, Western Technology Investment and numerous angel investors, including KISSMetrics cofounder Hiten Shah. VentureBeat has more here.
Rainforest, a 2.5-year-old, San Francisco-based company whose quality assurance platform marries product mangers with software that needs to be tested with people who can try it out, has raised $4 million in seed funding from Storm Ventures, Rincon Venture Partners, Andreessen Horowitz, Morado Venture Partners, and Crosslink Capital. TechCrunch has more here.
Vaxxas, a four-year-old, Sydney, Australia-based company whose patch delivers vaccines painlessly through the skin, has raised $20 million in Series B funding led by OneVentures. According to Crunchbase, the company has now raised $35 million altogether.
UrbanStems, a year-old, Washington, D.C.-based online flower delivery startup, has raised $1.5 million in seed financing led by Middleland Capital, with participation from Sagamore Ventures, NextGen Angels, and Great Oaks Venture Capital.
Ballast Point Ventures, a 14-year-old, St. Petersburg, Fl.-based growth capital firm, has raised $164 million for its third fund. Among the company’s newer bets is PowerDMS, an Orlando, Fl.-based compliance and content management software startup.
Eat24, a seven-year-old, San Bruno, Ca.-based food and delivery service, has been gobbled up by Yelp for $134 million in cash and stock. Eat24 had very proudly raised zero dollars. VentureBeat has more here.
WebPay, a four-year-old, Tokyo, Japan-based company whose Stripe-like service facilitates payment on e-commerce sites, mobile apps and other web-based services, has been acquired by the messaging app companyLine for undisclosed terms. WebPay had raised $1.5 million from undisclosed angel investors, according to Crunchbase. TechCrunch has more here.
Entrepreneurs Sergey Brin and Anne Wojcicki are worth billions of dollars. Inside Philanthropy takes a quick look at the organizations their family foundation is currently supporting.
Facebook CEO Mark Zuckerberg and his wife, Dr. Priscilla Chan, are donating $75 million to San Francisco General Hospital to help fund critical equipment and technology for the new public hospital, which is slated to open later this year.
Tech is stepping it up across the board. Giving by tech donors represented nearly half the $9.8 billion in donations made by the 50 people who made the largest charitable contributions last year. Among those individuals, according to the Chronicle of Philanthropy: Bill and Melinda Gates; WhatsApp founder Jan Koum; former Facebook president Sean Parker; and Nicholas and Jill Woodman, founders of the camera company GoPro. (Maybe it’s no wonder that San Francisco’s antitech movement has fizzled.)
Adtech M&A prices take a hit after their IPO troubles last year. Exitround breaks it down here.
On the 10th anniversary of Google Maps, Re/code speaks with the people who were there at the beginning. (Great piece.)
Right and Left Shark are back to work in a new ESPN commercial.
How secret Swiss bank accounts actually work.
Love matches: monogamy in the animal kingdom.
Handwriting robots. It has apparently come to this. (We love this option, tho’!)