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.



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.)



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.



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.



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.”



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.)

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