Hi, happy Thursday, everyone! Investor-writer is Semil Shah is still whipping up our columns while Connie is off playing infinity tag. To reach out to Semil, you can usually find him on Twitter.
Quick note: our upcoming event, on September 16 in San Francisco, is pretty much sold out at this point, though we can squeeze in a few more of you. Tickets are here. Giant thanks to our wonderful sponsors Bolt, GLG, and Ludlow Ventures, without which the night — at the lovely Autodesk Gallery — would not be possible. We’re very excited to see all of you next month.:)
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Quick Chat with Homebrew’s Satya Patel
By Semil Shah
Some people are operators, some are investors. Few have so effortlessly moved from one side of the table to the other — and back — as Satya Patel, who over the course of his career has held such roles as VP of products at Twitter, partner at Battery Ventures, senior product manager at Google, and senior associate at Impact Venture Partners.
Put another way, Patel — who in 2013 cofounded the venture firm Homebrew with former Google colleague Hunter Walk, an outfit that’s already on its second fund — knows a thing or two about Silicon Valley’s undulations. We talked with him about it recently.
With companies staying private longer and fewer M&A deals being done, how much of a liquidity crisis are early-stage investors facing?
Most early-stage investors have a long-term horizon for liquidity, so the fairly recent changes in the IPO and M&A markets haven’t had a major impact on their ability to raise new funds. Over the longer term, if the IPO and M&A trends hold, the combination of a lack of liquidity and expensive holdings is going to mean a real crisis for them.
Do LPs sense exits could be further out given the shifts we’re seeing in the private markets?
Yes, LPs definitely see that the time to achieve liquidity is longer for various structural reasons. But the bigger concern is the increase in cost basis for most investments, particularly at the later stage. They believe that when liquidity does come, returns will be depressed relative to historical norms for all except the very best funds.
What’s a deal at Homebrew you missed on and regret?
The honest answer is that we’re only two and a half years old, so it’s hard to say that we regret anything that we missed or passed on yet. Those companies are nowhere near liquidity, even though in a ton of cases they have gone on to raise huge amounts of capital at high valuations. That said, there was an investment in the commercial real estate software market that we lost six months after starting Homebrew that we consider a likely major loss. The company chose to work with investors that had been around much longer, with extensive track records in relevant markets. We would have made the same decision at that time as the founders, but we still consider it one of the ones that got away. In general, we have conviction about our strategy and believe that in many cases, we’ve passed up short-term write-ups to avoid long term pain.
There’s been a growing chorus of people saying that seed is the new Series A. Do you buy that?
I think the labels are meaningless. At which “stage” a fund invests and with what dollar size investment is largely a function of fund size. Our goal at Homebrew is to be first institutional capital supporting a company with an investment between $200,000 and $1 million. Often that is pre-product, and other times that’s with a beta or more developed product in the market. Because there are so many seed-stage companies, the bar for raising the next round of financing is that much higher; even more is required to stand out from the crowd. So maybe in the past, you only needed to build the product with seed dollars. Now, you have to build the product and establish product/market fit with seed capital. Does that mean seed is the new Series A? It doesn’t matter what you call it. It’s the new normal.
You’ve been in the Valley for a long time. What’s your sense of the health of the overall ecosystem right now?
The ecosystem seems to be as strong as it’s ever been. There are more startups, more sources of capital, more information resources, more places — accelerators, labs, schools — to learn and more job opportunities than I can remember. The countervailing forces of limited liquidity and frothy valuations may slow down the ecosystem’s momentum. But there doesn’t seem to be anything that will stop the ecosystem from continuing to grow in all of those areas if you take a long-term view.
AddtoApp, a year-old, L.A.-based programmatic mediation platform for in-app advertising, has raised $6 million in new VC funding from Run Capital Investment Fund.
Aihuishou, a four-year-old, Shanghai, China-based used electronics trading and recycling platform, has raised $60 million in Series C funding led by Tiantu Capital, with participation from JD.com and earlier backers Morningside Ventures and the International Finance Corporation. The company had reportedly raised at least $12 million previously.
Bastille, a year-old, Atlanta, Ga.-based cybersecurity company designed to detect and mitigate threats coming through connected devices, has raised $9 million in Series A funding led by Bessemer Venture Partners, with participation from cybersecurity entrepreneur Tom Noonan and Bastille founder and CEO Chris Rouland. The company has now raised $11.5 million altogether.
CashStar, an eight-year-old, Portland, Me.-based provider of prepaid mobile and web commerce solutions for retailers and restaurants, has raised $15 million in Series D funding led by FTV Capital, with participation from Mosaik Partners and return backers, including Passport Capital, Intel Capital and North Hill Ventures. The company has now raised a total of $50 million.
Enjoy, a year-old, San Francisco-based company that sells high-end consumer electronics, as well as offers delivery and in-home set-up services, has raised $50 million in Series B funding led by Highland Capital Partners, with participation from earlier backers Kleiner Perkins Caufield & Byers and Oak Investment Partners. The round brings total funding for the company, founded by former Apple retail chief Ron Johnson, to $80 million.
Fastly, a four-year-old, San Francisco-based content delivery network that focuses on helping companies deliver dynamic content to their users faster, has raised $75 million in Series D funding led by ICONIQ Capital. Existing investors Amplify Partners, August Capital, Battery Ventures, IDG Ventures and O’Reilly AlphaTech Ventures also participated in the financing, which brings the company’s total funding to $130 million.
Jibo, a three-year-old, Cambridge, Ma.-based consumer electronics company that has developed a “family friendly robot” called Jibo, has raised $11 million in funding from Asia-based investors, including Acer, Dentsu Ventures, China’sNetPosa and operators KDDI (Japan) and LG Uplus (Korea). The capital follows a crowdfunding campaign that saw the company raise $3.7 million (it was targeting $100,000), and a $25.3 million round led by RRE Ventures in January of this year. TechCrunch has more here.
LifeBond, an eight-year-old Caesaria, Israel-based based company that makes surgical sealants, has raised $27 million in Series D funding from Adams Street Partners, Sino Biopharmaceutical and earlier investors Pitango Venture Capital, Glenrock Israel and Zitelman Group.
Payable, a two-year-old, Sunnyvale, Ca.-based company that lets contractors measure and bill their hours and help businesses manage their invoices in a single dashboard, has just raised $2.1 million from Freestyle Capital, Redpoint Ventures and SherpaVentures, Lerer Hippeau Ventures,Rothenberg Ventures, Haystack, Moment Ventures and other angel investors. TechCrunch has more here.
Practo Technologies, a seven-year-old, Bangalore-based maker of online practice management software for doctors, has raised $90 million in new funding led by the Chinese internet giant Tencent, with participation from Google Capital, investor Yuri Milner, the Belgium-based investment firm Sofina, Altimeter Capital Management, and earlier backers Sequoia Capital and Matrix Partners. The company has now raised about $125 million altogether.
SavingGlobal, a 1.5-year-old, Berlin, Germany-based retail deposit brokerage platform, has raised €20 million ($21.8 million) in Series B funding led by Ribbit Capital and Index Ventures. Investors Yuri Milner and Tom Stafford also participated in the round, which brings the company’s total funding to $32.7 million. TechCrunch has more here.
Arboretum Ventures, a 13-year-old, Ann Abor, Mi.-based venture firm, is looking to raise up to $215 million for its newest fund, according to an SEC filing. If successful, it will become the largest venture fund ever raised in Michigan. Crain’s Detroit Business has more here.
Affirm, the new lending startup from PayPal cofounder Max Levchin, has acquired LendLayer, a year-old, Mountain View, Ca.-based startup that provides lending for accelerated learning programs like Hackbright Academy. Terms of the deal weren’t disclosed, but TechCrunch describes the deal as a “talent transaction.” More here.
Adidas Group, the sports company, has acquired the six-year-old, Austria-based fitness app maker Runtastic for €220 million ($240 million). The largest shareholder in Runtastic was German media giant Axel Springer, via its investment subsidiary Axel Springer Digital Ventures, which owned 50.1 percent of the company. TechCrunch has more here.
SurveyMonkey, a Palo Alto, Calif.-based online survey software company, earlier this week acquired TechValidate, an eight-year-old, Emeryville, Ca..-based provider of marketing content automation software. No financial terms were disclosed. SurveyMonkey has raised more than $1 billion from investors; TechValidate doesn’t appear to have raised outside funding. Fortune has more here.
WeWork, the well-funded tech and real estate company, has acquired seven-year-old, New York-based Case, a building information modeling and consultancy firm that advises landlords, architects, contractors and engineers on how to efficiently design and manage buildings. Terms of the deal were not disclosed. The Real Deal has more here.
The organic food delivery startup Good Eggs is scaling back on things pretty dramatically. In a blog post yesterday, cofounder and CEO Rob Spiro said the company is shutting down its operations in Los Angeles, New York City and New Orleans and focusing alone on its remaining location, San Francisco, for now. The company is also shedding more than half its workforce, laying off nearly 140 employees and continuing to operate with “100+,” in his words. Good Eggs has raised $52 million in its four-year history, shows Crunchbase. Its investors include Baseline Ventures, Collaborative Fund, Correlation Ventures, Harrison Metal, Index Ventures, Sequoia Capital and The Westly Group. TechCrunch has more here.
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Reddit has shut down another group of offensive sections on its website as part of a revision to last month’s policy change. Bloomberg has more here.
Dating app Tinder is getting into the speed networking business. TechCrunch has more here.
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