Monthly Archives: March 2015

StrictlyVC: March 31, 2015

Hi, all, happy Tuesday! (Web visitors, here’s an easer-to-read version of today’s email.)

—–

Top News in the A.M.

Charter Communications, the fourth-largest cable provider in the U.S., has just agreed to purchase the sixth-largest U.S. provider, Bright House Networks, for $10.4 billion. If approved, says Charter, the deal will create the second biggest cable operator by customer volume.

Two federal agents were charged yesterday for diverting valuable bitcoin into their personal accounts during their investigation of the black-market site Silk Road. As shocking, one is accused of acting as as a paid informant for Silk Road’s recently convicted administrator, Ross Ulbricht.

—–

Andreessen Horowitz Bets Big on Tanium — Again

Tanium, an eight-year-old, Emeryville, Ca.-based company founded by father and son David and Orion Hindawi, has landed $52 million from Andreessen Horowitz less than a year after raising $90 million from the Sand Hill Road firm.

Somewhat amazingly, it hasn’t touched a penny of it, either, says Orion Hindawi, the company’s CTO.

In fact, Tanium — whose security and systems management software can deliver all kinds of information about every machine and device running on a corporate network within seconds – has been profitable since 2012, says Hindawi, and it’s growing fast. Last year, it increased its total billings by 400 percent and grew its employee base from 25 to 175. (It plans to employ between 500 and 600 people by year end.)

So why raise so much? Two reasons, says Hindawi. The company is seeing an “immense amount of opportunity” that it wants to “even more aggressively” pursue — particularly in international markets like Japan, England, and Australia, where its business has begun to take off.

Tanium has also mapped out how much it needs to survive for three years without revenue in the case of a “black swan” event. “I like real cushions,” says Hindawi, who cofounded an earlier company with his father called BigFix that launched in 1999. BigFix survived the dot com boom and bust, eventually selling to IBM in 2010 for a reported $400 million. But the downturn also made Hindawi acutely aware of how challenging it is to survive lousy market conditions.

Not that he needs to worry this time around, seemingly.

Andreessen Horowitz is so taken by Tanium’s technology that despite its enormous investment in the company, it owns “substantially less than 25 percent,” says Hindawi.

Perhaps it’s no wonder that Hindawi thinks highly of Andreessen Horowitz, too. He points to the expertise of of Andreessen partner and former Microsoft executive Steven Sinofksy, who sits on Tanium’s board. (“Usually, I’ve dealt with VCs who didn’t have direct knowledge of our space,” Hindawi says.)

He also cites Andreessen Horowitz’s “executive briefing center,” a low-flying, 50-person unit that focuses narrowly on bringing in customers to the firm’s enterprise portfolio companies.

It’s “one of the most amazing things I’ve ever seen,” says Hindawi, who says that half of Tanium’s customers have come from its own pipeline. The other half, he says, have come through Andreessen Horowitz.

—–

New Fundings

Augure, a 13-year-old, Paris-based company whose marketing software helps its clients better connect with so-called influencers, has raised $16.1 million in Series E funding from previous backers Serena CapitalVentech, OTC Agregator, and Amundi private equity funds, along with two new investors: Seventure Partners and Bpifrance International. Rude Baguette has more here.

Drifty, a three-year-old, Madison, Wi.-based company that helps web developers build native mobile applications that can then be published to the major app stores, has raised $2.6 million in new funding led by Lightbank, with participation from Founder Collective and earlier backer Arthur Ventures, which provided Drifty with $1 million in seed funding last year. TechCrunch has the story here.

DroneDeploy, a two-year-old, San Francisco-based smart drone management system, has raised $9 million in Series A funding led by Emergence Capital, with participation from earlier backers SoftTech VCData Collective and AngelPad. The company has now raised $11 million altogether. More here.

Enbala Power Networks, a 12-year-old, Vancouver, B.C. -based developer of distributed energy resource management software, has raised $11 million in new funding led by GE Ventures and Edison Energy, a subsidiary of Edison International. Earlier investors also joined the round, including Export Development Canada, EnerTech Capital Partners, Sorfina Capital and Chrysalix EVC. The company has now raised roughly $27 million to date, shows Crunchbase.

GlassesUSA, a six-year-old, New York-based online retailer specializing in prescription eyewear, has raised $12.5 million in new funding led by Viola Private Equity. Geektime has more here.

GoFormz, a three-year-old, San Diego-based company that turns paper forms into “smart” mobile forms, has raised $3 million in Series A funding from Cloud Apps Capital Partners and Floodgate. More here.

KeepTrax, a 1.5-year-old, Dallas-based company that leverages GPS and mobile device sensors to convert physical location visits into digital “pins” for a variety of use cases, has raised $1 million in seed funding led by Naya Ventures.

Laundrapp, a year-old, London-based on-demand laundry startup, has raised $5.9 million in new funding from a group of investors including Michael Spencer, founder of interdealer broker ICAP. More here.

Novan, a seven-year-old, Raleigh, N.C.-based company that’s developing deliverable nitric oxide for dermatological purposes, has raised $50 million from the publicly traded company Malin Corporation, with participation from Novan’s existing private investors through the Research Triangle area of North Carolina. The company has now raised roughly $85 million altogether, shows Crunchbase.

PlayVox, a three-year-old, San Francisco-based company whose engagement software aims to make it more fun for call center workers to achieve their goals, has raised $1.5 million from a corporate venture investor in Colombia called FCP Innovacion. (PlayVox founder, Oscar Giraldo, is a systems engineer from Colombia.) The company has now raised $2.2 million to date. Venture Capital Dispatch has more here.

ProsperWorks, a four-year-old, San Mateo, Ca.-based company that sells its customer relationship management software to companies that use Google Apps, has raised $7.5 million in Series A funding led by True Ventures, with participation from earlier backers Bloomberg Beta and Crunchfund. The company has now raised $10 million altogether. Silicon Angle has more here.

Raptr, an eight-year-old, Mountain View, Ca.-based social platform that automatically updates a person’s gaming status in real-time, has raised $14 million in Series D funding led by earlier backer Accel Partners, with participation from AMD Ventures and other previous investors DAG Ventures and Tenaya Capital. The company has now raised $41 million altogether. This latest round values it at $170 million, VentureWire reports.More here.

SmartNews, a 2.5-year-old, Tokyo-based news recommendation and reading app, has raised $10 million in funding from earlier backers, including the games company GREE, Globis Capital Partners, Atomico,Mixi and Social Venture Partners. To date, SmartNews has raised $50 million. More here.

Sprinklr, a 5.5-year-old, New York-based maker of social media management software, has raised $46 million in Series E funding from earlier backers Intel Capital, Battery Ventures, and Iconiq Capital. The company has now raised $123.5 million altogether, shows Crunchbase.

Spruce, a two-year-old, San Francisco-based telemedicine company that’s focused on connecting people with board-certified dermatologists whenever they need them, has raised $15 million in Series A funding from earlier backers Kleiner Perkins Caufield & Byers, Google VenturesBaseline Ventures and Cowboy Ventures. The company has now raised $17 million altogether. StrictlyVC talked with Spruce last year.

Thrasos Therapeutics, a 13-year-old, Montreal-based biotech startup focused on kidney disease, has raised $16.5 million in Series D funding co-led by BDC Capital and SR One, with participation from earlier backersAdvanced Technology Ventures, Fonds de solidarite FTQ, Lumira Capital, MP Healthcare Venture Management, Pappas Ventures, and SW Co.

—–

IPOs

CoLucid Pharmaceuticals, a 10-year-old, Durham, N.C.-based company focusing on therapies for central nervous system disorders, has filed plans to raise up to $86.25 million in an IPO. The company has raised roughly $56 million in funding across four rounds, including from Novo VenturesAuriga Partners, Pappas Ventures, Domain Associates, Care CapitalTriathlon Medical Venture Partners, and Pearl Street Venture Funds.

Renaissance Capital just released its IPO review of the first quarter. In a nutshell, the market “slowed dramatically” owing to a variety of factors. You can download the specifics here.

—–

Exits

ReadyForZero, a nearly five-year-old, San Francisco-based Y Combinator-backed company that helps consumers better manage their personal debit and credit using online financial software, has been acquired by the online lending platform Avant, itself a Y Combinator alum. Financial terms are not being disclosed. Avant, a 2.5-year-old, Chicago-based company has raised roughly $333 million in equity and another billion dollars in debt, says TechCrunch. According to Crunchbase, ReadyForZero had raised $4.8 million in funding from Citi VenturesPolaris Ventures, 500 Startups, and others.

RupeePower, a four-year-old, Gurgaon, India-based marketplace for loans, credit card and other personal finance product offers, has been acquired for undisclosed terms by India’s Snapdeal, the e-commerce giant. Snapdeal plans to use the acquisition to launch a financial services marketplace. TechCrunch has more here.

—–

People

Move over Tiger Global Management. Legendary hedge fund manager Steve Cohen is getting into the venture business. According to Bloomberg, Point72 Asset Management, the firm that manages his fortune, has started a venture capital unit called Honeycomb Ventures and it aims to back still-private growth-stage technology companies.

A first look at Facebook‘s new mothership, into which 2,800 employees will soon move.

Lynn Hermle, a star partner with Orrick, Herringto & Sutcliffe, talks with the Recorder about the Kleiner Perkins trial and what was going through her mind at various times. “I thought there was a universe between what happened in the courtroom and what the media said happened,” says Hermle of the case’s media coverage. “Like one of those Venn diagrams that don’t connect in any way.”

Yesterday, Tesla CEO Elon Musk tweeted that his company will unveil a new product — “not a car” —on April 30. Most bets are on a Tesla home battery that would be for use in people’s houses and which Musk said last month is coming “fairly soon.” Company watchers are meanwhile having fun speculating about other possibilities.

—–

Essential Reads

Introducing Amazondash.”

Microsoft’s brand-new tablet could be a MacBook Air killer. It hopes.

—–

Detours

The 25 most expensive homes for sale in San Francisco right now.

The Passover menu is getting a foodie update.

Popular chicken recipes.

—–

Retail Therapy

Balloon lamps.

Yellow submarines.


Andreessen Horowitz Bets Big on Tanium — Again

Orion HindawiTanium, an eight-year-old, Emeryville, Ca.-based company founded by father and son David and Orion Hindawi, has landed $52 million from Andreessen Horowitz less than a year after raising $90 million from the Sand Hill Road firm.

Somewhat amazingly, it hasn’t touched a penny of it, either, says Orion Hindawi, the company’s CTO.

In fact, Tanium — whose security and systems management software can deliver all kinds of information about every machine and device running on a corporate network within seconds – has been profitable since 2012, and it’s growing fast, says Hindawi. Last year, it increased its total billings by 400 percent and grew its employee base from 25 to 175. It plans to employ between 500 and 600 people by year end.

So why raise quite so much? Two reasons, says Hindawi. The company is seeing an “immense amount of opportunity” that it wants to “even more aggressively” pursue — particularly in international markets like Japan, England, and Australia, where its business has begun to take off.

Tanium has also mapped out how much it needs to survive for three years without revenue in the case of a “black swan” event. “I like real cushions,” says Hindawi, who cofounded an earlier company with his father called BigFix that launched in 1999. BigFix survived the dot com boom and bust, eventually selling to IBM in 2010 for a reported $400 million. But the downturn also made Hindawi acutely aware of how challenging it is to survive lousy market conditions.

Not that he needs to worry this time around, seemingly.

Andreessen Horowitz is so taken by Tanium’s technology that despite its enormous investment in the company, it owns “substantially less than 25 percent,” says Hindawi.

Perhaps it’s no wonder that Hindawi thinks highly of Andreessen Horowitz, too. He points to the expertise of of Andreessen partner and former Microsoft executive Steven Sinofksy, who sits on Tanium’s board. (“Usually, I’ve dealt with VCs who didn’t have direct knowledge of our space,” Hindawi says.)

He also cites Andreessen Horowitz’s “executive briefing center,” a low-flying, 50-person unit that focuses narrowly on bringing in customers to the firm’s enterprise portfolio companies.

It’s “one of the most amazing things I’ve ever seen,” says Hindawi, who says that half of Tanium’s customers have come from its own pipeline. The other half, he says, have come through Andreessen Horowitz.


StrictlyVC: March 30, 2015

Hi, everyone, welcome back — hope you had a stellar weekend!

(Web visitors, you can find an easier-to-read version of this morning’s email right here. You can sign up to receive StrictlyVC here.)

—–

Top News in the A.M.

According to leaked documents, Apple won’t be selling its Apple Watch to walk-in customers at launch.

Interest in bitcoin is growing on Wall Street.

—–

The Ellen Pao Case: A Postmortem

On Friday, jurors concluded that Ellen Pao, a former junior partner at Kleiner Perkins Caufield & Byers, was neither discriminated nor retaliated against by the famed venture capital firm when she was passed over for promotions and ultimately fired.

It was a dramatic conclusion to the five-week trial of Pao, who is today the interim CEO of the site Reddit. It’s also the beginning of more discrimination lawsuits in Silicon Valley, say employment attorneys who’ve seen the same patterns across the securities, legal, and medical industries over the years and who believe the smaller, more insular, male-dominated venture industry has just been set on the same path by Pao’s high-profile case.

In fact, they say, both junior employees and their firms can learn a few things from what just happened.

Most importantly, it will never be easy, winning a discrimination claim in court. According to longtime employment attorney Gary Phelan of the East Coast firm Mitchell & Sheahan, cases today tend to feature much more subtle types of discrimination than they did 10 or 20 years ago, meaning there are “no smoking guns” typically but rather “a series of pieces that, put together, may or may not equal discrimination.”

In Pao’s case, the jury concluded that the pieces didn’t add up to a judgment against Kleiner, but that doesn’t mean discrimination based on gender didn’t play any role. “In many trials,” says Phelan, “part of it may be gender, age, race, disability, personality, performance – it’s never clearly one thing or another.” (If it were, it would likely settle before reaching a courtroom.)

Saving up material for a court battle can prove a double-edged sword, too, says Phelan, referring to the 700,000 pages of documents that Kleiner’s defense team accused Pao of having amassed over the years.

While junior partners might be inclined to record even more of their contributions in the wake of the Pao verdict, Phelan warns that clients with “lots of documentation” are “encouraging and scary at the same time. If you have a client who perceives every negative as discrimination and writes down everything, that’s not necessarily a good sign. It’s often someone who may be paranoid or someone who, by documenting everything, is perceived as trying to build a case that otherwise isn’t there.”

That doesn’t mean firms should sit back and relax for now.

Many have probably already taken a harder look at the way their partnership and employee agreements are written and whether, if they are sued, they can send a case to arbitration, where the proceedings are private and legally binding. (The arbitration agreements that Pao had signed related to Kleiner’s agreements with its limited partners, not an employment agreement with the firm. That’s why Pao was able to land the court case she wanted.)

Firms need also think more about their HR practices. “You have people in this industry who say they’re changing the world, and in many ways they are,” says Phelan. But “thinking that you’re dealing with much bigger things than unconscious biases and HR practices — viewing them as a nuisance — tends to work to the disadvantage of females.” (Kleiner’s lack of well-defined HR policies didn’t hurt it in the end; the next firm might not be so lucky.)

Not last, more firms will need to hire more women into their ranks, even if it takes longer than many women might like. “Kleiner won, but it hurt them, and venture firms shouldn’t conclude that they don’t have to worry about this,” says Phelan.

“Change is always incremental” but lawsuits have slowly begun to transform numerous industries over the years, including Phelan’s own. (According to the research organization Catalyst, women accounted for 22 percent of law firm partners in 2013, up from roughly 13 percent in 1995.) He says “there will be more” lawsuits that target venture firms, as well. “Once something like this case gets so much attention, people start to wake up and pursue their rights.”

Longtime employment attorney Cliff Palefsky of McGuinn, Hillsman & Palefsky in San Francisco agrees. The Pao lawsuit “has had unfortunate effect on a lot of people, including on Ellen and on Kleiner’s privacy and dignity,” he says. “But in terms of the debate it has created and its focus on the subtle forms of discriminations that absolutely go a long way in explaining the dearth of women in technology and venture capital, a social purpose has been served by it.”

One public lawsuit “will do more to change the environment than 100 cases that land in arbitration,” Palefsky adds.

—–

New Fundings

Arborlight, a 4.5-year-old, Ann Arbor, Mi.-based company whose skylights emulate outdoor conditions as experienced in real time, has raised $1.7 million in funding led by the Michigan Angel Fund, with participation from Michigan Pre-Seed Capital Fund. MLive has more here.

Auctionata, a three-year-old, Berlin startup that broadcasts online live auctions for fine art and collectibles, has raised $45 million in Series C funding led by MCI Management. Other participants in the round include Hearst Ventures, Kreos Capital, Yuan Capital and previous backers Earlybird Ventures, e.ventures, Kite Ventures, Raffay Group, TA Ventures, Bright Capital, REN Invest and Holtzbrinck Ventures. The company has now raised $95.7 million altogether, shows Crunchbase. TechCrunch has more here.

CarVue, a year-old, U.K.-based company that has developed service and sales management tools for automative workshops, has raised an undisclosed amount of money from Castrol innoVentures, the venture arm of the motor oil company Castrol.

Handy, the three-year-old, New York-based on-demand house cleaning service, has raised $15 million in funding led by TPG Growth, with participation from Sound Ventures and other, earlier backers. The company has now raised $60 million altogether.

Jama Software, a 7.5-year-old, Portland, Or.-based maker of collaboration software aimed at solving delivery problems, has raised $20 million from Updata Partners, along with earlier investors Trinity Ventures, Madrona Venture Group and the Oregon Angel Fund. The company has now raised $33 million altogether.

LimeRoad, a three-year-old, New Delhi, India-based site that lets users create and share collages of fashion products, has raised $30 million in Series C funding led by Tiger Global Management, with participation from Lightspeed Venture Partners and Matrix Partners India. The company has now raised $60 million to date. TechCrunch has more here.

MyCheck, a four-year-old, Tel Aviv-Israel startup whose technology allows users to view, split, and pay their bill in real-time from their smartphones, has raised $5 million in Series B funding from the Spanish bank Santander via its recently launched venture arm, Santander Innoventures Fund. According to Crunchbase, MyCheck had previously raised $6.1 million from investors, including France’s Wertheimer family (they have a controlling interest in Chanel). TechCrunch has more here.

—–

New Funds

Redpoint Ventures, the 16-year-old, Sand Hill Road venture firm, is raising its next early-stage fund, reports Venturewire. Its sources expect the fund to be around $400 million, the size of its fifth fund, which closed in 2013. Redpoint also raised a $400 million growth fund in 2011.

—–

Exits

LiveLoop, a five-year-old, San Francisco startup whose plugin and hosted service enables real-time cloud-based collaboration for PowerPoint users, has been acquired by Microsoft for undisclosed terms. The company had raised two rounds of undisclosed amounts from Webb Investment Network, shows Crunchbase.

—–

People

Apple CEO Tim Cook has published an op-ed, denouncing the “religious freedom” law enacted in Indiana last week that allows people to cite their personal religious beliefs to refuse service to customers. The law and 100 similar bills introduced in more than two dozen states “rationalize injustice by pretending to defend something many of us hold dear. They go against the very principles our nation was founded on, and they have the potential to undo decades of progress toward greater equality.” More here.

Former Hewlett-Packard CEO Carly Fiorina said yesterday that her chances of running for U.S. presidency were “higher than 90 percent” and that she will announce her plans in late April or early May.

More than a year after deciding to replace the traditional management structure at Zappos with a self-organization approach called Holacracy, CEO Tony Hsieh is telling reluctant employees to either opt in or opt out of the company altogether — and soon. Quartz has more here. (StrictlyVC wrote about Holacracy and how it works last year.)

Mina Mutafchieva has joined Palamon Capital Partners, a London-based pan-European growth investor, has an associate principal. She spent the last five years at McKinsey & Co.

Lynn Tilton, the “diva of distressed,” who runs the private equity firm Patriarch Partners, has just been charged with fraud by the SEC. More here.

Entertainer Jay Z is already re-launching Aspiro, that Swedish streaming service he acquired for a reported $56 million just a couple of weeks ago. Its new name: Tidal.

—–

Happenings

StrictlyVC’s second INSIDER series event is coming up, May 13, a Wednesday night, at the new, contemporary space Galvanize in San Francisco’s South of Market district. Speakers include Zenefits cofounder and CEO Parker Conrad; Lightspeed Venture Partners managing director Jeremy Liew; Thumbtack CEO Marco Zappacosta; Sequoia Capital partner Bryan Shreier; Pantera Capital founder Dan Morehead; and investor and venture advisor Semil Shah of Haystack. Space is limited. Tickets are available here. Thanks to Amazon Web Services and Personal Capital for partnering with us on what we expect will be a fun night for readers.

—–

Essential Reads

More — and more questionable — Wall Street middlemen are helping Silicon Valley employees cash out early. The WSJ has the story here.

For hardware makers, sharing their secrets is now part of the business plan.

Amazon wants to be your home services middleman, too.

—–

Detours

One of the most creative photos of the recent eclipse.

Why we buy what we do.

South African comic Trevor Noah is replacing Jon Stewart at “The Daily Show.” Here’s Noah in action.

—–

Retail Therapy

Coup D’Etat. (For after the stock run-up.)


The Ellen Pao Trial: A Postmortem

Ellen Pao.4jpgOn Friday, jurors concluded that Ellen Pao, a former junior partner at Kleiner Perkins Caufield & Byers, was neither discriminated nor retaliated against by the famed venture capital firm when she was passed over for promotions and ultimately fired.

It was a dramatic conclusion to the five-week trial of Pao, who is today the interim CEO of the site Reddit. It’s also the beginning of more discrimination lawsuits in Silicon Valley, say employment attorneys who’ve seen the same patterns across the securities, legal, and medical industries over the years and who believe the smaller, more insular, male-dominated venture industry has just been set on the same path by Pao’s high-profile case.

In fact, they say, both junior employees and their firms can learn a few things from what just happened.

Most importantly, it will never be easy, winning a discrimination claim in court. According to longtime employment attorney Gary Phelan of the East Coast firm Mitchell & Sheahan, cases today tend to feature much more subtle types of discrimination than they did 10 or 20 years ago, meaning there are “no smoking guns” typically but rather “a series of pieces that, put together, may or may not equal discrimination.”

In Pao’s case, the jury concluded that the pieces didn’t add up to a judgment against Kleiner, but that doesn’t mean discrimination based on gender didn’t play any role. “In many trials,” says Phelan, “part of it may be gender, age, race, disability, personality, performance – it’s never clearly one thing or another.” (If it were, it would likely settle before reaching a courtroom.)

Saving up material for a court battle can prove a double-edged sword, too, says Phelan, referring to the 700,000 pages of documents that Kleiner’s defense team accused Pao of having amassed over the years.

While junior partners might be inclined to record even more of their contributions in the wake of the Pao verdict, Phelan warns that clients with “lots of documentation” are “encouraging and scary at the same time. If you have a client who perceives every negative as discrimination and writes down everything, that’s not necessarily a good sign. It’s often someone who may be paranoid or someone who, by documenting everything, is perceived as trying to build a case that otherwise isn’t there.”

That doesn’t mean firms should sit back and relax for now.

Many have probably already taken a harder look at the way their partnership and employee agreements are written and whether, if they are sued, they can send a case to arbitration, where the proceedings are private and legally binding. (The arbitration agreements that Pao had signed related to Kleiner’s agreements with its limited partners, not an employment agreement with the firm. That’s why Pao was able to land the court case she wanted.)

Firms need also think more about their HR practices. “You have people in this industry who say they’re changing the world, and in many ways they are,” says Phelan. But “thinking that you’re dealing with much bigger things than unconscious biases and HR practices — viewing them as a nuisance — tends to work to the disadvantage of females.” (Kleiner’s lack of well-defined HR policies didn’t hurt it in the end; the next firm might not be so lucky.)

Not last, more firms will need to hire more women into their ranks, even if it takes longer than many women might like. “Kleiner won, but it hurt them, and venture firms shouldn’t conclude that they don’t have to worry about this,” says Phelan.

“Change is always incremental” but lawsuits have slowly begun to transform numerous industries over the years, including Phelan’s own. (According to the research organization Catalyst, women accounted for 22 percent of law firm partners in 2013, up from roughly 13 percent in 1995.) He says “there will be more” lawsuits that target venture firms, as well. “Once something like this case gets so much attention, people start to wake up and pursue their rights.”

Longtime employment attorney Cliff Palefsky of McGuinn, Hillsman & Palefsky in San Francisco agrees. The Pao lawsuit “has had unfortunate effect on a lot of people, including Ellen and Kleiner’s privacy and dignity,” he says. “But in terms of the debate it has created and its focus on the subtle forms of discriminations that absolutely go a long way in explaining the dearth of women in technology and venture capital, a social purpose has been served by it.”

One public lawsuit “will do more to change the environment than 100 cases that land in arbitration,” Palefsky adds.


StrictlyVC: March 27, 2016

Oh, how we love Fridays! Have a great weekend, everyone. See you Monday morning.

—–

Top News in the A.M.

Last week, French police reportedly raided Uber‘s offices in Paris. Yesterday, it was Dutch authorities barreling their way into the Amsterdam offices of the mobile car-booking company. More here.

BlackBerry just reported a surprise profit for the fourth quarter, but its revenue continues to crater.

—–

A Startup Takes on Rakuten

Industry watchers are well-aware that Rakuten, the Japanese e-commerce giant, has made a wave of investments in U.S. startups in recent years as it looks to enhance its portfolio of technologies, acquiring Buy.com, Slice and eBates and making big bets on Pinterest and Lyft, among other companies.

According to Ryan Koonce, the founder and CEO of San Francisco-based Superpoints, Rakuten is also making a name for itself as a company that willfully disregards trademarks and intellectual property. Koonce’s bootstrapped, six-year-old online loyalty rewards company filed a lawsuit yesterday against the $23 billion conglomerate, accusing it of trademark infringement, unfair competition, and unfair business practices.

At issue, says Koonce, is Rakuten’s use of “Super Points” in the marketing of its own, newer loyalty rewards program, despite a ruling by the U.S. Patent and Trademark Office that denied Rakuten’s attempts to trademark the language on the grounds that there was likely to be confusion with Superpoints’s trademark. Koonce only learned of the undertaking after being served documents that Rakuten was trying to have Superpoints’s registration canceled.

Koonce says he reached out to Rakuten numerous times afterward, including providing someone in Rakuten’s marketing department with Superpoints’s deck to show that Superpoints would be willing to work with Rakuten. “We wanted to see if there was interest in talking about how we could turn lemons into lemonade,” he says.

The New York-based representative said the deck would be sent to Japan, says Koonce, adding, “We never heard back.”

Rakuten did not respond to a request for comment yesterday.

For Koonce, his dispute with Rakuten isn’t a trivial matter. Koonce says he has spent “many long nights and time away from my wife and kids trying to build the best site I can. I also have a significant percentage of my net worth tied up in the company.”

Competing with a web giant over his trademark was something that never occurred to Koonce, who has founded a number of startups over the years, including the social media marketing company Popular Media, which was funded by Sequoia Capital and acquired in 2010.

That’s partly because it doesn’t happen very often in Silicon Valley, where people tend to play nice to preserve their relationships. But a trademark attorney at one of Silicon Valley’s largest and most-respected law firms also calls it “unusual for a big, sophisticated company to take on a little guy” because it doesn’t make good business sense. “The likelihood of confusion would be a deterrent for most honorable companies, because you don’t want to expose your shareholders to a liability.”

Adds the attorney, who asked not to be named but doesn’t know or represent Koonce: “This sounds like an exceptional situation to me . . . Even though [Koonce] may just be one guy, he has legal rights, and he can [sue] a second comer who takes [his brand].”

If there’s a silver lining for Koonce, it’s that he looks well-positioned to win his case — or at least a settlement. Because he has been using his brand since 2009 and further received trademark approval for it back in 2011, he should “have a presumption of national rights” in the U.S., says the attorney. (Though generally, trademark rights are territorial, meaning companies in different countries can have the same trademark, those national borders mean less in the Internet age, he says.)

Companies of all sizes generally have an incentive to negotiate a resolution sooner than later, too. “Even a company with trillions of dollars has budgets and has to rationalize economic decisions,” says the attorney. “No one wants to throw money and time and resources into litigation.”

In the meantime, Koonce is thinking about crowd-funding his legal fees if it becomes necessary. “The thought of fighting with a $20 billion conglomerate like Rakuten is not something I’d wish on my worst enemy. But I have no choice,” he writes in an email.

“It wears on you,” he adds. “The only way to make it is through sheer grit and tenacity.”

Fortunately, he says, “I have that in spades.”

—–

New Fundings

Amplience, a seven-year-old, New York-based content marketing startup, has raised $10.5 million in Series B funding led by earlier backer Octopus Investments, with participation from Northstar Ventures and Silicon Valley Bank.

Artsy, a six-year-old, New York-based online resource for art collecting and education, has raised $25 million in Series C funding led by the private equity firm Catterton, with participation from earlier backers Thrive Capital, IDG Capital Partners and the Rockefeller family. The company has raised roughly $51 million to date.

Aryaka, a 6.5-year-old, Milpitas, Ca.-based company that sells its cloud-based WAN optimization and application-acceleration platform as a service, has raised $16 million in funding led by Nexus Venture Partners, with participation from earlier backers, including InterWest PartnersMohr Davidow Ventures, Presidio Ventures and Trinity Ventures. The company has now raised roughly $100 million altogether, shows Crunchbase. Venture Capital Dispatch has more here.

ChowNow, a three-year-old, Venice, Ca.-based food ordering startup that provides restaurants with custom online ordering tools and white label restaurant apps, has raised $10 million in new funding led by Upfront Ventures, with participation from Steadfast Venture Capital, Daher Capital, and Karlin Ventures. The company has raised $17.7 million altogether, shows Crunchbase.

Dream Payments, a year-old, Toronto, Ontario-based mobile-payments startup, has raised $6 million in funding from Blue Sky Capital, Real Ventures and Rouge River Capital.

Gelesis, an eight-year-old, Boston-based company that’s developing orally administered capsules that expand in the stomach when taken with water to induce weight loss, has raised $22 million financing from unnamed new and previous investors. The company has now raised $56.2 million altogether, shows Crunchbase.

Magic, a month-old, Mountain View, Ca.-based delivery service, is raising $12 million in Series A funding at a $40 million pre-money valuation led by Sequoia Capital, reports TechCrunch. Magic lets users text a single number to have things delivered on demand; it operates atop other delivery services, such as Postmates and Instacart.

NGM Biopharmaceuticals, an eight-year-old, South San Francisco-based drug discovery company developing biotherapeutics for the gastrointestinal endocrine system, has raised $57.5 million in Series D funding led by new and earlier backers, including The Column GroupProspect Ventures, Tichenor Ventures and Topspin Partners.

PhishMe, a four-year-old, Leesburg, Va.-based anti-phishing startup, has raised $13 million in new funding led by earlier backer Paladin Capital Group, with participation from new investor Aldrich Capital Partners. The company has now raised just north of $15 million, it says.

Pleek, a months-old, Paris-based picture messaging app that allows users to communicate via images, has raised $600,000 in seed funding led by Partech Ventures, with participation from angel investors, including rap star Sean Combs (“Diddy”). TechCrunch has more here.

Quickplay Media, a 12-year-old, Toronto, Ontario-based online video services company, has raised $45.7 million in growth funding from Madison Dearborn Partners, Difference Capital Financial, and Orix Ventures.

Slack, the San Francisco-based real-time messaging company, is raising $160 million in new funding that values the company at $2.76 billion, reports the Wall Street Journal. The round, which will include new investors Institutional Venture Partners, Horizons Ventures, Index Ventures and DST Global, is expected to close in the next few weeks, says the report. Slack had previously raised $180 million from investors, including Accel Partners, Andreessen Horowitz, Google VenturesKleiner Perkins Caufield & Byers and Social+Capital Partnership.

View, an eight-year-old, Milpitas, Ca.-based maker of electronically tinting window glass, is raising as much as $100 million in new funding at “about $750 million pre-money” valuation, reports Venture Capital Dispatch.

Waygum, a two-year-old, Dublin, Ca.-based end-to-end mobile app platform for industrial connected devices, has raised $1.5 million from Navitas Capital and the corporate venture arm of Tyco International.

—–

New Funds

AKT IP Ventures, a months-old, Washington, D.C.-based incubator, said it has launched a fund to turn patents into businesses and it’s targeting $20 million for the effort. More here.

—–

Exits

DoublePositive, an 11-year-old, Tempe, Az.-based online marketing company, has been acquired by the billing outsourcing and customer-communications company Output Services Group for undisclosed terms. According to Crunchbase, DoublePositive had raised $7.3 million from investors over the years, including Hamilton Investment PartnersSouthern Capitol Ventures, Outcome Capital, and The Grosvenor Funds.

—–

People

Salesforce CEO Marc Benioff has canceled all his company’s events in Indiana after its governor signed into law a bill that makes it legal for individuals to use religious grounds as a defense when they are sued by people who are lesbian, gay, bisexual or transgender. Recode has the story here.

Apple CEO Tim Cook says he plans to donate his estimated $785 million fortune to charity – after paying for his 10-year-old nephew’s college education. More here.

Google plans to pay its new CFO, Ruth Porat, more than $70 million in the next two years through a combination of restricted stock units and a biennial grant. The company hired Porat from Morgan Stanley earlier this week. Recode has more here.

—–

Jobs

The three-year-old Harvard Innovation Lab (i-lab) is looking to hire a new director of programming. The job is in Cambridge, Ma.

—–

Essential Reads

Facebook said yesterday that it plans to test a version of its solar-powered drone this summer, as part of its efforts to beam Internet access to billions of people without it today.

Zynga must face a lawsuit that accuses it of defrauding shareholders about its prospects before and after its December 2011 IPO. More here.

—–

Detours

Over the last year or so, auto racing has become Silicon Valley’s “it” hobby.

Why what your food “sounds” like affects how good it tastes.

New trailers: Entourage, Mission: Impossible, Silicon Valley, and more.

—–

Retail Therapy

Poor Blackberry. (At least it’s trying.)


A Startup Takes on Rakuten

SuperpointsIndustry watchers are well-aware that Rakuten, the Japanese e-commerce giant, has made a wave of investments in U.S. startups in recent years as it looks to enhance its portfolio of technologies, acquiring Buy.com, Slice and eBates and making big bets on Pinterest and Lyft, among other companies.

According to Ryan Koonce, the founder and CEO of San Francisco-based Superpoints, Rakuten is also making a name for itself as a company that willfully disregards trademarks and intellectual property. Koonce’s bootstrapped, six-year-old online loyalty rewards company filed a lawsuit yesterday against the $23 billion conglomerate, accusing it of trademark infringement, unfair competition, and unfair business practices.

At issue, says Koonce, is Rakuten’s use of “Super Points” in the marketing of its own, newer loyalty rewards program, despite a ruling by the U.S. Patent and Trademark Office that denied Rakuten’s attempts to trademark the language on the grounds that there was likely to be confusion with Superpoints’s trademark. Koonce only learned of the undertaking after being served documents that Rakuten was trying to have Superpoints’s registration canceled.

Koonce says he reached out to Rakuten numerous times afterward, including providing someone in Rakuten’s marketing department with Superpoints’s deck to show that Superpoints would be willing to work with Rakuten. “We wanted to see if there was interest in talking about how we could turn lemons into lemonade,” he says.

The New York-based representative said the deck would be sent to Japan, says Koonce, adding, “We never heard back.”

Rakuten did not respond to a request for comment yesterday.

For Koonce, his dispute with Rakuten isn’t a trivial matter. Koonce says he has spent “many long nights and time away from my wife and kids trying to build the best site I can. I also have a significant percentage of my net worth tied up in the company.”

Competing with a web giant over his trademark was something that never occurred to Koonce, who has founded a number of startups over the years, including the social media marketing company Popular Media, which was funded by Sequoia Capital and acquired in 2010.

That’s partly because it doesn’t happen very often in Silicon Valley, where people tend to play nice to preserve their relationships. But a trademark attorney at one of Silicon Valley’s largest and most-respected law firms also calls it “unusual for a big, sophisticated company to take on a little guy” because it doesn’t make good business sense. “The likelihood of confusion would be a deterrent for most honorable companies, because you don’t want to expose your shareholders to a liability.”

Adds the attorney, who asked not to be named but doesn’t know or represent Koonce: “This sounds like an exceptional situation to me . . . Even though [Koonce] may just be one guy, he has legal rights, and he can [sue] a second comer who takes [his brand].”

If there’s a silver lining for Koonce, it’s that he looks well-positioned to win his case — or at least a settlement. Because he has been using his brand since 2009 and further received trademark approval for it back in 2011, he should “have a presumption of national rights” in the U.S., says the attorney.

Companies of all sizes generally have an incentive to negotiate a resolution sooner than later, too. “Even a company with trillions of dollars has budgets and has to rationalize economic decisions,” says the attorney. “No one wants to throw money and time and resources into litigation.”

In the meantime, Koonce is thinking about crowd-funding his legal fees if it becomes necessary. “The thought of fighting with a $20 billion conglomerate like Rakuten is not something I’d wish on my worst enemy. But I have no choice,” he writes in an email.

“It wears on you,” he adds. “The only way to make it is through sheer grit and tenacity.”

Fortunately, he says, “I have that in spades.”


StrictlyVC: March 26, 2015

Hi, good morning, all! (Web visitors, here’s an easier-to-read copy of this morning’s newsletter, which follows.)

—–

Top News in the A.M.

Twitter is about to nab Yahoo’s spot as the third-largest seller of online display advertising in the U.S., according to eMarketer.

Facebook‘s annual developer event wraps up today. Here’s a quick recap of what happened yesterday.

—–

Jason Lemkin on the “Slack” Effect

There’s no shortage of talk lately about frothy private company valuations, particularly when it comes to enterprise companies. Slack Technologies, the company behind the increasingly popular enterprise messaging platform, is the current poster child. Less than six months ago, Slack raised $120 million at a billion-dollar-plus valuation that many found stunning. Now, Bloomberg says it’s talking with investors about a round that would value it at more than $2 billion.

Very notably, Slack is growing at a torrid pace. As of mid February, it reportedly had 500,000 users, a number that had grown by 35 percent in just the first six weeks of this year. In fact, Jason Lemkin, a managing director at the early-stage, enterprise investment firm Storm Ventures, seems to think Slack is probably worth every penny at a $2 billion-plus valuation.

“No one is dumb in Silicon Valley,” he argues. “Early-stage investors are rolling the dice on hypergrowth and betting companies like Slack will be decacorns” worth more than $10 billion one day. “These crazy valuations, generally in [business-to-business companies], are associated with crazy growth.”

Lemkin notes, for example, that Slack is growing faster than the enterprise social network Yammer — and that Yammer grew faster than the online file sharing company Box. Both are success stories. Yammer, founded in 2008, sold to Microsoft for $1.2 billion in 2012. Box, founded in 2005, went public in January and is currently valued at nearly $2 billion.

But in both cases, their rates of adoption can’t touch what newer startups are seeing, says Lemkin. “[Today’s crop of leading enterprise startups are] growing their month-over-month revenue by mid-teen percentages. And after they hit a million dollars in revenue, that’s a lot of compounding.”

A variety of factors explain such accelerated growth, says Lemkin, including that the adoption of new business-to-business technologies often trails business-to-consumer adoption by three to five years. “That means lot of verticals are just getting ‘webified’ today, including doctors’ offices, e-discovery for regular people,” along with lots of other small and mid-size companies that are realizing what they can gain from the power and low-maintenance needs of hosted systems.

Lemkin also points to the growing piece of CIOs’ budgets that are being spent on SaaS products rather than traditional on-premises technology. Instead of buying their own servers and storage systems, companies are now buying both as a service — along with enterprise analytics, security, and more.

“You only need a few more percent of that roughly trillion dollars in enterprise budgets to create, say, 40 more Workdays,” says Lemkin, referring to the cloud-based HR and finance technology company that went public in 2012 and is now valued at more than $16 billion.

It’s not an outrageous estimate. Global SaaS software revenue is reportedly expected to reach $106 billion by next year, an increase of 21 percent of projected spending levels this year.

Indeed, while industry observers fret over soaring valuations, Lemkin says it’s those enterprise startups with monthly revenue growth in the single digits that should be doing some hand-wringing. While “you’d have gotten funded in days a couple of years ago, today, no one is going to take a meeting with you.”

Slack is “sort of [the standard that] everyone wants now,” he says.

—–

New Fundings

91App, a three-year-old Taipei, Taiwan-based startup that builds customized apps for brands and retailers, has raised $9 million in Series A funding led by AppWorks with participation by CID Group, NineYi Capital, and individual investors. Tech in Asia has more here.

BetterCloud, a three-year-old, New York-based company that makes a cloud-based directory management and enterprise security application, has raised $25 million in Series D funding led by Accel Partners, with participation from earlier backers FlyBridGe, Greycroft Partners, Tribeca Venture Partners, New Amsterdam Capital, and Millennium Technology Value Partners. The company has now raised roughly $47 million altogether, shows Crunchbase. TechCrunch has more here.

Beyond Pricing, a 15-month-old, San Francisco-based company whose revenue management tool optimizes and posts prices to Airbnb to help hosts maximize their revenue, has raised $1.5 million in seed funding led by Resolute Ventures.

FinancialForce, a 4.5-year-old, San Francisco-based company that builds cloud back-office applications for Salesforce’s Force.com platform, has raised $110 million in funding led by Technology Crossover Ventures, with participation from Salesforce Ventures. The company has now raised $220 million altogether. Forbes has much more here.

FusionOps, a 10-year-old, Sunnyvale, Ca.-based company whose cloud-based analytics application helps supply chain business users deliver dashboards, reports and analytics, has raised $12 million in new funding led by New Enterprise Associates. The companies earlier investors — all individuals — also joined the round, which brings the company’s total funding to $19 million. Venture Capital Dispatch has much more here.

GreenRoad Technologies, a nine-year-old, San Jose, Ca.-based maker of real-time driver performance and safety management software for fleets and other organizations, has raised $26 million in funding led by Israel Growth Partners, with participation from earlier investors Amadeus Capital Partners, Benchmark, DAG Ventures, Generation Investment Management and Virgin Green Fund.

Helpling, a 15-month-old, Berlin, Germany-based on-demand home cleaning startup, has raised $45 million in Series B round led by Lakestar,Kite Ventures, Rocket Internet and the investor-entrepreneur Lukasz Gadowski. The company had announced $17 million in Series A funding just four months ago, including from Gadowski, Point Nine Capital,Phenomen Ventures, and Mangrove Capital Partners.

iAngels, a two-year-old, Tel Aviv, Israel-based equity crowdfunding platform, has raised $2.25 million in seed funding led by Millhouse Capital.

InAuth, a five-year-old, Las Vegas-based maker of mobile fraud prevention and mobile application security software, has raised $20 million in Series A funding led by Bain Capital Ventures. The company had previously raised $835,000 in seed funding last year.

Mango Man Consumer Electronics, a two-year-old, Bangalore, India -based startup that makes home entertainment hardware like HDMI dongles, has raised $1.75 million in seed funding from Sequoia Capital and India Quotient Fund. The company has now raised $2 million altogether. TechCrunch has more here.

Roposo, a 2.5-year-old, Gurgaon, India-based company that helps users discover and shop for trending fashion items across the Internet, has raised $5 million in Series A funding led by Tiger Global Management, with participation from earlier backers India Quotient and Flipkart cofounder Binny Bansal. The company has now raised $6 million altogether, according to Crunchbase.

Silk Therapeutics, a two-year-old, Medford, Ma.-based company that makes skin-care products that target wrinkles, has raised $2 million in Series A-1 funding led by Kraft Group.

Tales2Go, a five-year-old, Bethesda, Md.-based startup that sells a Netflix-like monthly service for children’s audio books, has raised $2.4 million in Series A funding from its seed investors, including NewSchools Venture Fund and Maryland Venture Fund. The company has now raised $3.9 million altogether, shows Crunchbase.

TTTech Computertechnik, a 17-year-old, Vienna, Austria-based company that makes electronics for the automotive, aerospace and other industries, has raised $55 million in growth funding from GE VenturesInfineon Technologies, and earlier backer Audi.

Tujia.com, a three-year-old, Beijing, China-based vacation-rental website similar to Airbnb, is reportedly in talks to raise more than $200 million from investors. In June of last year, the company raised $100 million from Lightspeed China Partners, GGV Capital and Qiming Venture Partners. To date, it has raised $164 million altogether.

Victor, a 4.5-year-old, London-based on-demand service that enables users to compare and book private jet travel via its site and iOS app, has raised $8 million from undisclosed investors. TechCrunch has more here.

—–

New Funds

Bespoke Management, a months-old, New York-based venture firm, is looking to raise up to $125 million for its first debut effort, shows an SEC filing. The firm is co-led by Docks Sutherland, a veteran of Morgan Stanley and Goldman Sachs and most recently a member of Blackstone Group’s M&A advisor group.

FLAG Capital Management, the 21-year-old, Stamford, Ct.-based fund of funds group, has raised $88 million toward its latest venture capital-focused fund, according to an SEC filing that shows fundraising began last year. The vehicle, FLAG Venture Partners IX, is targeting $175 million.

Ignition Partners, the 15-year-old, Bellevue, Wa.-based venture firm, is looking to raise a new, $200 million fund, shows an SEC filing that lists four partners: Frank Artale, John Connors, Robert Headley, and Nick Sturiale. (Longtime industry watchers will know Ignition was once far larger. It underwent a shake-up several years ago.)

Glynn Capital Management, a low-flying, 41-year-old, Menlo Park, Ca.-based investment firm that funds public and private technology growth companies, has raised $200 million for its fourth and newest fund, according to an SEC filing. As VentureWire notes, the fund is slightly larger than its predecessor, which closed at nearly $185 million, in 2012. (The fund before that closed with $111 million in 2010.)

Ribbit Capital, a two-year-old, Palo Alto, Ca.-based venture firm that invests solely in financial services companies, is looking to raise $220 million for its third fund, shows an SEC filing. The firm had closed its second fund with $125 million last year and its first fund with $100 million in 2013. StrictlyVC talked with founder Micky Malka about the firm and his credentials last summer.

—–

Exits

LearnVest, an eight-year-old, New York-based online financial-planning services company, has been acquired by the 160-year-old insurance company Northwestern Mutual Life Insurance Co. for undisclosed terms. According to Crunchbase, LearnVest had raised $69 million from investors, including Northwestern Mutual, Accel Partners, American Express Ventures, Conversion Capital, and Claritas Capital.

—–

People

The Benchmark “five” get a glowing profile in Forbes, where they discuss succession among other things. Says Bill Gurley, who has now been with the powerful venture firm the longest: Making way for fresh faces is “the biggest secret of Benchmark . . . When our founders were at the peak of their powers, they handed us the keys.”

Uber CEO Travis Kalanick and venture capitalist Chris Sacca — who owns 4 percent of Uber — are no longer on speaking terms, Sacca admits in an engaging Forbes profile about his rise to the top of the investing heap. Kalanick apparently grew frustrated over Sacca’s efforts to buy up secondary shares from other initial investors. Says Sacca, “I guess I wasn’t hearing what [Kalanick] was really saying, which was ‘Don’t f–king do it.’ ”

—–

Jobs

The NewSchools Venture Fund is looking for an associate partner to hire. The job is in Oakland, Ca.

PayNearMe, a venture-backed, cash-based payment platform for the underbanked, is looking for a director of business development. The job is in San Francisco.

—–

Essential Reads

Nextdoor, the social network for neighbors, is experiencing meteoric growth. It’s also reportedly becoming home to some racial profiling.

Twitter has launched its newly acquired, live-broadcasting app Periscope, a direct competitor to Meerkat. Its killer feature, says the Verge: replays.

—–

Detours

The 50 smartest private high schools in the U.S.

Hilariously honest ads, starring Ricky Gervais.

A Pacific Heights home in San Francisco has changed hands for nearly $24 million in the biggest sale of the year. (Now, to find out who bought it!)

—–

Retail Therapy

Clothes and boots and raincoats emblazoned with Big Macs. We’re lovin’ it(?).


Jason Lemkin on the “Slack” Effect

shutterstock_83855317There’s no shortage of talk lately about frothy private company valuations, particularly when it comes to enterprise companies. Slack Technologies, the company behind the increasingly popular enterprise messaging platform, is the current poster child. Less than six months ago, Slack raised $120 million at a billion-dollar-plus valuation that many found stunning. Now, Bloomberg says it’s talking with investors about a round that would value it at more than $2 billion.

Very notably, Slack is growing at a torrid pace. As of mid February, it reportedly had 500,000 users, a number that had grown by 35 percent in just the first six weeks of this year. In fact, Jason Lemkin, a managing director at the early-stage, enterprise investment firm Storm Ventures, seems to think Slack is probably worth every penny at a $2 billion-plus valuation.

“No one is dumb in Silicon Valley,” he argues. “Early-stage investors are rolling the dice on hypergrowth and betting companies like Slack will be decacorns” worth more than $10 billion one day. “These crazy valuations, generally in [business-to-business companies], are associated with crazy growth.”

Lemkin notes, for example, that Slack is growing faster than the enterprise social network Yammer — and that Yammer grew faster than the online file sharing company Box. Both are success stories. Yammer, founded in 2008, sold to Microsoft for $1.2 billion in 2012. Box, founded in 2005, went public in January and is currently valued at nearly $2 billion.

But in both cases, their rates of adoption can’t touch what newer startups are seeing, says Lemkin. “[Today’s crop of leading enterprise startups are] growing their month-over-month revenue by mid-teen percentages. And after they hit a million dollars in revenue, that’s a lot of compounding.”

A variety of factors explain such accelerated growth, says Lemkin, including that the adoption of new business-to-business technologies often trails business-to-consumer adoption by three to five years. “That means lot of verticals are just getting ‘webified’ today, including doctors’ offices, e-discovery for regular people,” along with lots of other small and mid-size companies that are realizing what they can gain from the power and low-maintenance needs of hosted systems.

Lemkin also points to the growing piece of CIOs’ budgets that are being spent on SaaS products rather than traditional on-premises technology. Instead of buying their own servers and storage systems, companies are now buying both as a service — along with enterprise analytics, security, and more.

“You only need a few more percent of that roughly trillion dollars in enterprise budgets to create, say, 40 more Workdays,” says Lemkin, referring to the cloud-based HR and finance technology company that went public in 2012 and is now valued at more than $16 billion.

It’s not an outrageous estimate. Global SaaS software revenue is reportedly expected to reach $106 billion by next year, an increase of 21 percent of projected spending levels this year.

Indeed, while industry observers fret over soaring valuations, Lemkin says it’s those enterprise startups with monthly revenue growth in the single digits that should be doing some hand-wringing. While “you’d have gotten funded in days a couple of years ago, today, no one is going to take a meeting with you.”

Slack is “sort of [the standard that] everyone wants now,” he says.


StrictlyVC: March 25, 2015

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

—–

Top News in the A.M.

Here are 47 startups that launched at Y Combinator‘s second demo day yesterday.

Google has averaged one White House visit per week during President Obama’s presidency.

—–

The “Fuzzy” Logic of Venture Capital Partnerships

The gender discrimination and retaliation case of Ellen Pao versus Kleiner Perkins Caufield & Byers has enthralled Silicon Valley in recent weeks, with everyone now focusing on what a jury that’s set to begin deliberations will decide.

But one of the many, bigger questions the trial has raised is whether it will impact how venture capitalists nurture talent and groom junior people to become partners.

If it isn’t top of mind for many partnerships, it should be.

On the stand last week, Kleiner Perkins general partner Matt Murphy described the promotional path at the storied firm as “fuzzy,” explaining to jurors that when he’d come aboard in 1999, you “just weren’t going to become a partner. You stayed two years, then you went to an operating company.”

As Murphy and then-colleague Aileen Lee were promoted to more senior roles, a “fuzzy process” of promotion began to develop that led to less collegiality and more self-interested maneuvering at the firm, Murphy testified.

That murky process also played a starring role in Pao’s lawsuit, which is why Joseph Sellers, the head of the civil rights and employment practice group at Cohen Milstein in Washington, D.C., suggests partnerships adopt a more structured promotional path than many feature today.

Explains Sellers: “There are certain types of workplaces where the path to advancement isn’t as well defined as others, and in some people’s minds, that might look to provide some protection; with a poorly defined path, it’s harder to hold people accountable for decisions.” The reality, adds Sellers, is that “what might be legitimate grounds on which to deny somebody advancement could be perceived as being influenced by something impermissible.”

Asking venture firms to be more transparent about how they choose general partners is easier said than done, of course. When it comes to the promotional paths of most firms, it’s “part fraternity, part sorority rush,” notes Cliff Palefsky, a top employment and civil rights lawyer in San Francisco. “It’s always a question of: Who do you want to hang out with?”

Murphy told jurors last week that promotions at Kleiner depend on a “critical mass of partners within the firm who are saying, ‘We want this person to be promoted . . . There have to be enough people around the table who want this person to be a partner and to work with them for a long time.”

Given that partnerships typically last at least 10 years and involve shared economics, it’s understandable to a point, too. “There’s very much an are-you-like-me orientation that comes into play in a small partnership,” says Palefsky. “Who do you trust? Who do you go to battle with? Those are the kinds of things that sunk Ellen. No one trusted her.”

The irony is that Pao – as well as Trae Vassallo, another female partner who is no longer actively investing on behalf of the firm – have been revealed as big money makers for Kleiner, even if they didn’t quite fit in longer term.

If Pao had gotten her way, Kleiner would have backed Twitter years earlier than it did, and made a far richer return. She also lobbied to invest in RPX, a company that later enjoyed a successful offering, and Climate Corp., a company that was acquired seven years after is founding for roughly 10 times what investors poured into it. (Kleiner invested in RPX; it passed on Climate Corp.)

Vassallo, meanwhile, played a key role in Kleiner’s investment in Nest Labs, which sold to Google for $3 billion last year. She also led the firm’s investment in Dropcam, the camera company that sold to Nest Labs for $550 million last year. (According to two sources, Dropcam liked Vassallo so much that Kleiner’s investment in the company was contingent on securing her as a board member.)

Says Palefsky: “One thing this trial highlighted is how men and women can be held to a different standard without people realizing it, and how you can be a successful venture capitalist without being an identical twin to the person who came before you.”

Helping startups with strategic decisions and recruiting is great, but “you can be great on the board of a company that’s failing,” he says. Ultimately, he says, “What matters is whether the fund goes up or down because of how well you can analyze a business. And there’s zero reason a man would be better than a woman in doing that.”

—–

New Fundings

August, the 2.5-year-old, San Francisco-based technology company whose flagship product is a smart lock and access system, has raised $38 million in Series B funding led by Bessemer Venture Partners, with participation from Comcast Ventures and Qualcomm Ventures. Earlier backers Maveron, Cowboy Ventures, Industry Ventures, Rho Ventures, and SoftTech VC also participated in the round, which brings August’s total funding to $50 million.

Ayasdi, a seven-year-old, Menlo Park, Ca.-based data analytics software company, has raised $55 million in a funding round led by Kleiner Perkins Caufield & Byers. The round more than doubles the $51.3 million the company had previously raised, including from Floodgate, Khosla Ventures, Citi Ventures, GE Ventures, and IVP. More here.

Cohere Technologies, a 3.5-year-old, Santa Clara, Ca.-based mobile-infrastructure startup, has raised $35 million in new funding led by the Australian telecommunications giant Telstra, with participation from Macquarie Capital, AME Cloud Ventures, and earlier backers New Enterprise Associates and Lightspeed Ventures.

Cotopaxi, a 1.5-year-old, Salt Lake City, Ut.-based direct-to-consumer outdoor gear and apparel company, has raised $6.5 million in Series A funding led by Greycroft Partners, with participation from earlier backers New Enterprise Associates, Forerunner Ventures, Lerer Hippeau Ventures and individual angels. The company has raised $9.5 million to date, show Crunchbase.

Falcon Social, a four-year-old, Copenhagen, Denmark-based company whose SaaS platform allows marketing departments to create and measure social media campaigns in real time, has raised $16 million in Series B funding led by Prime Ventures, with participation from earlier backers Northcap and Target Partners.

FullContact, a five-year-old, Denver-based maker of cloud-based contact management software, has added $3 million in funding to a $7 million Series B round that the company had closed in January. The new capital comes from the venture group of Baird Capital. Foundry Group had led the earlier round, with the participation of Blue Note Ventures and 500 Startups. The company has raised roughly $19 million altogether.

Harvest.ai, an eight-month-year-old, San Diego-based cyber security company that tries to detect and stop breaches of cloud-based services before any data is stolen, has raised $2.3 million in funding led by Trinity Ventures.

Hedvig, a 2.5-year-old, Santa Clara, Ca.-based distributed storage platform, has raised $12.5 million in Series A funding led by Atlantic Bridge Capital, with participation from True Ventures and Redpoint Ventures.

InterVene, a 3.5-year-old, Mountain View, Ca.-based medical device start-up company working to create new vein valves for people who are unable to efficiently pump blood back to their heart, has raised a $5.9 million in Series A funding led by Boston Scientific, with participation from North Texas Angels Network, Green Park and Golf VenturesLaunchCapital, and a syndicate of angel investors.

Localytics, a 5.5-year-old, Boston-based analytics and marketing platform for mobile and web apps, has raised $35 million in Series D funding led by Sapphire Ventures, with participation from return backers Foundation Capital and Polaris Partners. The company has now raised roughly $60 million altogether, shows Crunchbase.

Logikcull, a nearly 11-year-old, Washington, D.C.-based file organization and discovery firm, has raised $4 million in seed funding led by Storm Ventures, with participation from angel investors Nick Mehta and Anshu Sharma. Forbes has more on the company’s decision to finally raise outside capital.

Nanigans, a five-year-old, Boston-based company that makes social and mobile advertising software for customers wanting to manage their digital advertising in-house, has raised $24 million in Series B funding led by the Chinese Internet company Cheetah Mobile. Wellington Management Company and earlier backer Avalon Ventures also joined the round. The company has now raised $32.9 million altogether.

ProtectWise, a two-year-old, Denver-based cloud-security software firm, has raised $17 million in funding from Arsenal Venture PartnersCrosslink Capital, Paladin Capital Group and Trinity Ventures.

Realm, a 3.5-year-old, San Francisco-based mobile database company that enables its users to develop applications faster, has raised $20 million in Series B funding led by earlier backer Khosla Ventures, which also led the San Francisco company’s Series A. Scale Venture Partners also participated in the financing. The company has now raised $30 million altogether, shows Crunchbase data.

Rsam, a 12-year-old, Secaucus, N.J.-based company that sells governance, risk and compliance software and services, has raised $32 million in growth equity funding from JMI Equity.

Schoolrunner, a three-year-old, Denver, Co.-based student data system that allows educators to track academics, attendance, behavior, and standards, has raised $1.5 million from Colorado Impact Fund.

Semma Therapeutics, a months-old, Cambridge, Mass.-based developer of a cell therapy for Type 1 diabetes, has raised $44 million in Series A funding led by MPM Capital, with participation from Fidelity BiosciencesARCH Venture Partners, and Medtronic. Xconomy has more on the young company here.

Skycure, a 2.5-year-old, Tel Aviv, Israel-based mobile security startup, has raised $8 million in Series A funding led by Shasta Ventures, with participation from New York Life Insurance Co. and earlier investors, including Pitango Venture Capital.

Socratic, a two-year-old, New York-based online community that allows teachers to upload video lessons and educational content for K-12, college, and graduate students, has raised $6 million in Series A funding led by Shasta Ventures, with participation from Spark Capital and Omidyar Network. The company had previously raised $1.5 million in seed funding, including from Betaworks and BoxGroup. EdSurge hasmore here.

Swan Global Investments, a 27-year-old, Durango, Co.-based independent advisory firm, has raised $23 million in growth equity from FTV Capital.

Teabox, a three-year-old, Bangalore, India-based e-commerce player in the tea packing and export space, has raised $6 million in Series A funding led by JAFCO Asia. Other participants in the round include Keystone Group, Dragoneer Investment Group, and Accel Partners, which seed funded Teabox with $1 million a year ago. Time of India has more here.

WP Engine, a 4.5-year-old, Austin, Tx.-based managed hosting service for websites and apps built with WordPress, has raised $20 million in fresh funding led by earlier investor North Bridge Venture Partners. The company has now raised $36.2 million altogether, shows Crunchbase.

—–

New Funds

New Enterprise Associates, the 38-year-old venture firm, has gathered $2.57 billion in commitments thus far for its fifteenth fund, reports Fortune. A final close has not yet occurred, says the report, which notes NEA closed its last fund — a $2.6 million pool — in 2012. NEA has also promoted longtime partner Scott Sandell to co-managing partner alongside Peter Barris.

—–

Exits

FoundationDB, a company that specializes in scalable NoSQL databases, has been acquired by Apple, reports TechCrunch. Terms of the deal aren’t known. FoundationDB had raised $22.7 million from SV Angel, Sutter Hill Ventures, and CrunchFund.

Playbook HR, a year-old, San Francisco-based startup that builds on-demand marketplaces to manage hiring, has been acquired by Intuit for an undisclosed amount. The company had participated in the StartX program last fall.

Rekindle, an eight-month-old, Boston-based company that gathers contact information from a user’s networks to make new connections or rekindle old ones, has been acquired by HubSpot, the sales software developer. Rekindle had raised an undisclosed amount of funding from Google Ventures and FKA Atlas, the tech-investment arm of Cambridge-based Atlas. Boston Business Journal has more here.

The assets of SugarSync, an 11-year-old, San Mateo, Ca.-based company that provided cloud file sharing, file sync and online backup services, have been acquired by the Internet services provider J2 Global for an undisclosed sum that J2 has characterized as “not expected to be material.” SugarSync had raised roughly $55 million across seven rounds, plus another $6.5 million in debt financing. Its venture backers include DFJ, Sigma Partners, Coral Group, and Selby Venture Partners.

—–

People

After pocketing millions and buying a Ferrari, Secret founder David Byttow may be pivoting his year-old startup yet again.

Famed VC Michael Moritz of Sequoia Capital is now publicly predicting “some sort of setback” in tech investing, too.

A look at India’s new one-man venture capital fund, Ratan Tata.

—–

Jobs

Industry Ventures, the San Francisco-based investment firm, is looking to add an associate to its secondary investments team. The job requires two to three years of experience in corporate development, investment banking, management consulting or venture capital. Email resumes to will@industryventures.com.

—–

Essential Reads

Google is working on letting you receive and pay bills directly inside Gmail.

YouTube is reportedly preparing to relaunch its livestreaming platform.

—–

Detours

France is letting 14-year-olds drive this tiny electric car.

Inside Google’s insanely popular emotional intelligence course.

Advanced card shuffling in slow motion.

—–

Retail Therapy

A 1956 Maserati 200 SI. It can be yours.


The “Fuzzy” Logic of Venture Partnerships

JOHN DOERR AND ELLEN PAO AT COURTHOUSEThe gender discrimination and retaliation case of Ellen Pao versus Kleiner Perkins Caufield & Byers has enthralled Silicon Valley in recent weeks, with everyone now focusing on what a jury that’s set to begin deliberations will decide.

But one of the many, bigger questions the trial has raised is whether it will impact how venture capitalists nurture talent and groom junior people to become partners.

If it isn’t top of mind for many partnerships, it should be.

On the stand last week, Kleiner Perkins general partner Matt Murphy described the promotional path at the storied firm as “fuzzy,” explaining to jurors that when he’d come aboard in 1999, you “just weren’t going to become a partner. You stayed two years, then you went to an operating company.”

As Murphy and then-colleague Aileen Lee were promoted to more senior roles, a “fuzzy process” of promotion began to develop that led to less collegiality and more self-interested maneuvering at the firm, Murphy testified.

That murky process also played a starring role in Pao’s lawsuit, which is why Joseph Sellers, the head of the civil rights and employment practice group at Cohen Milstein in Washington, D.C., suggests partnerships adopt a more structured promotional path than many feature today.

Explains Sellers: “There are certain types of workplaces where the path to advancement isn’t as well defined as others, and in some people’s minds, that might look to provide some protection; with a poorly defined path, it’s harder to hold people accountable for decisions.” The reality, adds Sellers, is that “what might be legitimate grounds on which to deny somebody advancement could be perceived as being influenced by something impermissible.”

Asking venture firms to be more transparent about how they choose general partners is easier said than done, of course. When it comes to the promotional paths of most firms, it’s “part fraternity, part sorority rush,” notes Cliff Palefsky, a top employment and civil rights lawyer in San Francisco. “It’s always a question of: Who do you want to hang out with?”

Murphy told jurors last week that promotions at Kleiner depend on a “critical mass of partners within the firm who are saying, ‘We want this person to be promoted . . . There have to be enough people around the table who want this person to be a partner and to work with them for a long time.”

Given that partnerships typically last at least 10 years and involve shared economics, it’s understandable to a point, too. “There’s very much an are-you-like-me orientation that comes into play in a small partnership,” says Palefsky. “Who do you trust? Who do you go to battle with? Those are the kinds of things that sunk Ellen. No one trusted her.”

The irony is that Pao – as well as Trae Vassallo, another female partner who is no longer actively investing on behalf of the firm – have been revealed as big money makers for Kleiner, even if they didn’t quite fit in longer term.

If Pao had gotten her way, Kleiner would have backed Twitter years earlier than it did and made a far richer return. She also lobbied to invest in RPX, a company that later enjoyed a successful offering, and Climate Corp., a company that was acquired seven years after its founding for roughly 10 times what investors poured into it. (Kleiner invested in RPX; it passed on Climate Corp.)

Vassallo, meanwhile, played a key role in Kleiner’s investment in Nest Labs, which sold to Google for $3 billion last year. She also led the firm’s investment in Dropcam, the camera company that sold to Nest Labs for $550 million last year. (According to two sources, Dropcam liked Vassallo so much that Kleiner’s investment in the company was contingent on securing her as a board member.)

Says Palefsky: “One thing this trial highlighted is how men and women can be held to a different standard without people realizing it, and how you can be a successful venture capitalist without being an identical twin to the person who came before you.”

Helping startups with strategic decisions and recruiting is great, but “you can be great on the board of a company that’s failing,” he says. Ultimately, he says, “What matters is whether the fund goes up or down because of how well you can analyze a business. And there’s zero reason a man would be better than a woman in doing that.”