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Top News in the A.M.
It’s official. Comcast announced this morning that it will spend $3.8 billion to acquire DreamWorks Animation.
Facebook hosted an earnings call yesterday, revealing surging revenue as its increasingly popular mobile app and push into live video continued to attract new advertisers.
This Silicon Valley VC Says Chinese Investors are Joining Series A Deals, and They’re Playing “Hardball”
As a venture investor for the last 20 years, George Zachary has witnessed plenty of trends develop and fizzle. Yesterday, we talked with him about what he’s seeing right now. One of the newest wrinkles he noted is a growing number of Chinese investors who’ve grown aggressive about getting into Series A deals, and who seem to be playing by their own rules.
Our chat with Zachary — a general partner atCRV who has led the venture firm into bets on Twitter, Yammer and Udacity, among others — has been edited for length.
You’re investing in seed and Series A deals. Are you not concerning yourself with what’s happening in the later-stage and public markets? That seems to be a common refrain for early-stage investors.
You definitely have to worry about whether your company can be financed later on, no matter what everyone says. In fact, a lot of Series A companies that have to do an extension of the Series A are raising at lower valuations. One of our founders has done two startups before, but valuations in the space where he’s operating all went down 50 percent, so he’s just accepting that he’ll have to raise his (extension) round with a lot more dilution than he wanted. It is what it is.
How much have valuations come down, and where are you seeing them hit the hardest?
Well, for celebrity founders, they are staying high.We’re doing a celebrity-founder deal now that has a high price tag, and everyone wants into it. For repeat founders with a good exit the last time, the price is always going to be high, plus or minus 10 percent. This particular team is at concept stage. We’re basically handing them a near-blank check.
But valuations are down elsewhere. The average thing coming out of Y Combinator is probably a half to three-quarters of what it was [in terms of valuation in recent years]. The average seed-stage deal is half.
I should mention that for celebrity founders, research supports that if they’re operating in the same space [as their last company], they have a higher rate of success [than other people]. If they move from databases to clean tech or from cell towers to social networks, they usually don’t do super well.
According to CrunchBase, CRV was involved in at least 27 financings last year. Its data shows just four deals in 2016. Is the firm waiting for the market to sort itself out?
Not explicitly. We’ve committed to three things in the last month that are in the docs stage.
Docs are taking longer because there are new investors coming in, and they want more stuff in their terms. These are newer investors, often foreign investors, who are basically saying: “I want senior preference to [a company’s earlier] investors,” and that’s adding two or three weeks as they usually ask right as the docs are closing.
Wait, what’s happening? Who are these new investors, and how prevalent is this? When you say foreign, do you mean mostly from China? Obviously, a lot of Chinese investors are looking to invest more money in the U.S.
They’re almost all from China, and they want all of their preferences to be senior to everyone else’s. What’s happening is, since they know the startup’s financials, they just wait it out. By that point, we’ve already signed a term sheet and turned off a lot of other people who wanted to invest. These things never come up in the term sheet phase but later in the docs. They’ll say, “We did our diligence, and we need XYZ to invest.”
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Levyx, a three-year-old, Irvine, Ca.-based high-speed data processing technology company, has raised $5.4 million in Series A funding led by the Chicago-based venture firm OCA Ventures. Other backers include Amino Capital, Sumavision USA Corp., and individual investors. More here.
Poncho, a three-year-old, New York-based personalized weather-forecasting service, has raised $2 million in seed funding led by Lerer Hippeau Ventures. Other participants in the round include Greycroft Partners, Comcast Ventures, Venture51 Capital Partners, RRE Ventures, Broadway Video Ventures, Ore Ventures, and Betaworks, the New York start-up studio where Poncho was incubated. Numerous former Wall Street Journal executives also joined the financing, including Gordon Crovitz. More here.
SpaceVR, a year-old, San Jose, Ca.-based platform for creating cinematic, live, virtual space tourism, has raised $1.25 million in seed funding led by Shanda Group, with participation from Skywood Capital. More here.
Xola, a five-year-old, San Francisco-based software platform that manages booking and marketing for tour providers, has raised $5 million in Series A funding led by Rakuten Travel, which is Japan’s largest online travel agency. TechCrunch has more here.
Menlo Ventures, the 40-year-old, Sand Hill Road venture firm, has raised a new, $250 million “special opportunities fund,” says a spokeswoman. (The SEC filing is here.) The idea: to address a comparative dearth of capital for startups that are looking for Series B and C funding, now that non-traditional players like Fidelity and BlackRock are investing less actively in privately held startups. Menlo closed its most recent early-stage fund in 2015 with $400 million in commitments. More here.
Abbott agreed today to acquire St. Jude Medical for $25 billion, bringing together two manufacturers of devices for cardiovascular disease. Dealbook has more here.
Stemcentrx, an eight-year-old, South San Francisco-based company developing disease-specific cancer treatments, is being acquired by cancer drugmaker AbbVie in a transaction that values the company at up to $10.2 billion. The deal is a part stock, part cash transaction that includes $4 billion in milestone-based payouts over the next several years. It represents a huge win for Peter Thiel’s Founders Fund, which had invested $300 million in the company (more than than it has poured into any other portfolio company). The firm is calling it its largest exit to date.
Textura, a company that makes cloud-based contract and payment management software for the construction industry and which went public in 2013, is being acquired by Oracle for $663 million in cash, net of Textura’s existing cash. TechCrunch has more here.
Jake Chapman, previously a partner at Sazze Partners, a young, early-stage firm in Campbell, Ca., has left to launch a new, seed-stage firm, Gelt Venture Capital. More here.
Online travel giant Priceline Group just announced that CEO Darren Huston is resigning after an investigation found he had a personal relationship with an employee that violated the company’s code of conduct. More here.
London’s Balderton Capital has promoted long-standing general partnerBernard Liautaud, who joined the firm in mid-2008, to the newly created role of managing partner. More here.
Facebook is adding a new class of stock that will help keep cofounder and CEOMark Zuckerberg in control. More here.
According to a new McKinsey study, the “forces that have driven exceptional investment returns over the past 30 years are weakening, and even reversing. It may be time for investors to lower their expectations.” More here.
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A Snapchat filter that invites users show off their speed while taking a selfie is being blamed for a serious car accident that left a man with traumatic brain injuries after being struck by someone going over 100 miles per hour. More here.
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