Happy Wednesday, everyone! Investor-writer Semil Shah is in charge this week while Connie is offline, working on her comically bad golf swing. If you need anything or just want to compliment Semil’s investing acumen, he can find him on Twitter.
Top News in the A.M.
Yelp reported its second-quarter earnings yesterday and shareholders did not like what the company had to say.
Twitter also reported second quarter earnings yesterday. The good news: its revenue is up. The bad: user growth remains stagnant. More here.
The China-based hackers who stole data on tens of millions of U.S. insurance holders and government employees in recent months breached another big target at around the same time — United Airlines, Bloomberg is reporting this morning. The previously unreported breach raises the possibility that the hackers now have data on the movements of millions of Americans — and that the 10 companies and organizations the group has hacked aren’t some random assembly. Much more here.
Quick Chat with Jed Katz of Javelin Venture Partners
By Semil Shah
Javelin Venture Partners emerged on the scene roughly six years ago, with a $75 million fund. Led by Noah Doyle and Jed Katz, the entrepreneurs, investors, and business school friends haven’t veered far from their starting team or their original mandate, either. We recently caught up with Katz to talk about it. Our chat has been edited for length.
You started the firm with Noah and added a new general partner a few years ago without dramatically increasing your fund size. Was that your plan all along?
We were always open to a third partner but brought one on a bit quicker than we’d expected, mostly because Alex Gurevich turned out to be such a great addition to the team. Our funds have all remained in the $100 million to $125 million range, though we’re now on Fund III, so there’s more capital per partner to manage.
There seem to be two types of Series As right now — smaller ones and huge ones. For a smaller Series A — the types Javelin likes — what are you looking for broadly?
We believe in a smooth fundraising cadence for companies, where enough Series A capital is raised to make real progress, hit important milestones, expand the team with A players, and demonstrate the potential for explosive growth, but not so much capital that you have to get virtually everything right to grow into an already high valuation in order to raise that next round. Some of the very best companies took some time and made a few pivots to find their fast-growth path and could have easily died along the way if their early valuations were too high.
We typically invest between $3 million and $5 million in our Series A rounds in companies that we feel have great founders, highly scalable and capital efficient models, sustainable competitive advantages, an ability to get to $100 million in revenue in a reasonable amount of time and that are creating substantial strategic value beyond just their revenue stream. We also look for things where our operational backgrounds can lead to meaningful help in building the business.
Is there a temptation to dabble into seed while having a mid-sized fund?
Every day. There are so many great concepts being developed, it can be damn tempting to invest in a bunch of them. This has to be the greatest period ever for being an angel investor. We have a rule of thumb when it comes to our seed investments, though. We only do if it we’re very confident – even at this early stage – that we want to do the A round too, and we save reserves accordingly. We hate the signaling issue for entrepreneurs when their VC seed investors don’t do the A rounds, so we really try to avoid that. Also, even seed deals take a lot of our time since we tend to be very involved partners, so we end up only doing a few seed deals a year.
For your companies which raise follow-on rounds, are you finding it easy to invest with pro-rata or super pro-rata?
Yes, that’s never been a problem. Even in the later stage rounds, we will sometimes do an [special-purpose vehicle] to maintain our stake.
If you could change one thing about today’s seed ecosystem as a Series A investor, what would it be and why?
Some of the seed valuations, or the caps on the notes, are simply way too high, and they get the entrepreneurs — and their employees — into both a terrible mindset and a very dangerous fundraising cadence, turning off potential investors that may have been their perfect partner. A lot has been written about that problem, and we see it firsthand almost every week. With that said, I’m certainly glad that there’s so much seed financing right now. That creates great deal flow for us, and it helps get the companies further along so that we have much more signal when we dig in.
Acrobatiq, a two-year-old, Pittsburgh, Pa.-based maker of adaptive courseware and data analytics for personalized learning, has raised $9.75 million in Series A funding from Draper Triangle Ventures, Hearst Ventures, and the Bill & Melinda Gates Foundation, with participation from earlier backer Carnegie Innovations, a subsidiary of Carnegie Mellon.
AirMap, an eight-month-old, Santa Monica, Ca.-based company whose software and systems help drone operators fly only where they’re allowed, has raised $2.6 million in seed funding led by Lux Capital, with participation fromSocial+Capital Partnership, Bullpen Capital, TenOneTen Ventures,Legend Star, and Haystack. Venture Capital Dispatch has more here.
AltspaceVR, a two-year-old, Redwood City, Ca.-based virtual reality chat room and communication platform, has raised $10.3 million in Series A funding from Comcast Ventures, as well as returning investors Tencent Holdings, Dolby Family Ventures, The Raine Group, Lux Capital, Western Technology Investments, Maven Ventures, Promus Ventures, Streamlined Ventures, and Rothenberg Ventures. The company has now raised $15.7 million altogether. TechCrunch has more here.
Cylance, a three-year-old, Irvine, Ca.-based security startup rooted in artificial intelligence, has raised $42 million led by venture capital firm DFJ Growth, with participation from KKR, Dell Ventures, CapitalOne Ventures and TenEleven Ventures, among others. The round pushes the company’s total funding to $77 million, reports Fortune.
Flipkart, the eight-year-old, Bangalore, India-based e-commerce giant, has closed on $700 million in funding at a valuation of $15 billion from investors that include Tiger Global Management and existing backers, including Steadview Capital. The Economic Times has the story here.
Little, a new, Bangalore, India-based app-only marketplace that connects consumers with physical retailers via their smartphones, has raised $50 million in funding led by the Indian payment and commerce firm Paytm. SAIF Partners and Tiger Global Management also participated in the fundraising. TechCrunch has much more here.
Occipital, a seven-year-old, Boulder, Co.-based software startup that develops mobile computer vision applications, has raised $13 million in Series B funding from Intel Capital, Shea Ventures, and Grishin Robotics, along with earlier backer Foundry Group. The company has now raised roughly $21 million altogether, shows Crunchbase. More here.
PushSpring, a two-year-old, Seattle-based company that promises device-level ad targeting data for iOS and Android mobile app users, has raised $5 million in Series A funding led by Trilogy Equity Partners. The company has now raised $6.5 million altogether. The Seattle Times has more here.
Radius, a six-year-old, San Francisco-based predictive marketing company, has raised $50 million in new funding led by Founders Fund, with participation from Formation 8, Glynn Capital Management, AME Cloud Ventures, Salesforce Ventures, BlueRun Ventures, and Yuan Capital. The company has now raised $125 million altogether. Fortune has more here.
Tripping, a five-year-old, San Francisco-based search engine for long-term rental properties, has raised $16 million in Series B funding led by Steadfast Venture Capital, with participation from 7 Seas Venture Partners, Enspire Capital and Azure Capital, along with a handful of angels, including former Expedia CEO Erik Blachford. TechCrunch has more here.
Twilio, the seven-year-old, San Francisco-based cloud-based communication service provider, has raised a fresh $130 million in Series E funding led by Fidelity and T. Rowe Price, with participation from Altimeter Capital Management, Arrowpoint Partners, Amazon and Salesforce Ventures. Fortune has more here.
Golden Gate Ventures, a three-year-old, Singapore-based venture firm, just announced its second, $50 million fund to support startups in the region and international companies looking to move there. The firm’s LP’s include the Singaporean government fund Temasek; Monitor Capital Partners in Europe; Facebook co-founder Eduardo Saverin; and Naver, the Korean company behind messaging app Line. Much more here.
Non-VC or crossover investors are helping drive the rebound in IPOs among healthcare companies, and it’s proving to be a winning strategy.
Legacy Republic, which is building a freelance workforce to help families digitize their photos and videos, just acquired competitor Yarly, a three-year-old, New York-based startup. Terms of the deal were not disclosed. Yarly doesn’t appear to have raised institutional funding. Legacy Video is a subsidiary of 16-year-old YesVideo, a Santa Clara, Ca.-based company that has raised $31 million from undisclosed investors over the years, according to Crunchbase. TechCrunch has more here.
Hope Edward Snowden is enjoying Moscow. Yesterday, the White Housedismissed a nearly two-year-old petition asking for his pardon.
Two Twitter employees announced their departures right before the company’s second-quarter earnings announcement today. The first, Christian Oestlien, was a VP of product management focused on growth. Oestlien, who came from Google and spent roughly two years at Twitter, tweeted that he’s joining YouTube. Meanwhile, product director Todd Jackson, who has been focused on discovery and came to Twitter via the acqusition of his company, Cover, is also out the door, tweeting yesterday he’s joining Dropbox as its head of product. TechCrunch has more here.
Wedbush Securities is looking to hire an equity research associate. Looks like the job could be in L.A., San Francisco, or New York.
Square is looking to hire a new head of corporate communications. The job is in San Francisco.
Alibaba Group is pouring another $1 billion into Aliyun, its cloud computing unit. The idea is to expand Aliyun, which currently has data centers in China, Hong Kong, and Silicon Valley, into other international markets (and, presumably, to compete more directly with Amazon Web Services).
According to eMarketer, Instagram will surpass Google (and Twitter) in U.S. mobile display ad revenues by 2017.
Quiz time: How many times has your personal information been exposed to hackers?
Interplanetary travel could be closer than we think. Scientists just confirmed that an electromagnetic propulsion drive, which is fast enough to get to the moon in four hours, actually works.
Why your dog smells so foul when wet.
What you don’t know and might be interested to learn about the very funny 35-year-old movie “Airplane!”
A former church in London. Suggested donation: $15.6 million.