Monthly Archives: August 2016

VC Charlie O’Donnell on Building Up Community, Cheaply

Screen Shot 2016-08-29 at 10.05.05 PMBrooklyn Bridge Ventures, a nearly four-year-old, seed-stage venture firm that’s solely run by founder and general partner, Charlie O’Donnell, just closed its second fund with $15 million, up from an $8.3 million debut fund in early 2014.

Yesterday, we talked  with O’Donnell about what the process was like, whether the New York venture scene will be impacted by the $3 billion sale of e-commerce company Jet.com to Walmart, and how a small operation like Brooklyn Bridge Ventures can make an outsize impact on a shoestring budget.

TC: We sat down last November and you’d mentioned that you’d circled $13 million or so for this new fund.

CO: I estimated that I had about $13 million in estimated commitments, and we didn’t go into detail on what that meant. For me, it’s a spreadsheet that has a [potential investor] in the fund, a number, and a percent chance of closing, much like a sales pipeline.

Comparatively, my first fund took 9 months from announcement to first close, and 15 months from first close to last close. This fund took 6 months from first close to last close, with 70 percent of the capital commitments coming in the first two closes.That all seemed super fast to me.

TC: We were wondering if you ran into trouble this year with investors; some of the institutions that fund venture firms say they were mobbed earlier this year by firms that raised funds a couple of years ago and that didn’t want to be the last in line for their new fund.

CO: Most of my [investors] aren’t in any other funds. An endowment that wrote me a $1 million check certainly is. And I think my lead investor is in one or two other funds, along with maybe a handful of individuals [who wrote me checks]. But they’re definitely in the minority. At my size, I’m not talking to many traditional [investors]. I have no idea why they keep writing checks every two years for funds that haven’t proved themselves out yet. I came from the fund side. I thought VCs raised every three to four years.

TC: You’ve funded a lot of very promising companies. In your past life as a principal with First Round Capital, you also backed a number of companies that have sold. Do you have any “exits” yet at Brooklyn Bridge?

CO: One exit returned its capital, but given that most of these companies average about two years old or less (it was a three-year investment period fund), it would be pretty early to start seeing exits at this stage. Also, standouts like [the smart home security company]Canary are ramping up revenues and releasing new and improved products and not looking to take an early exit anytime soon.

TC: People have long said that New York needed a giant exit, especially after certain companies that looked to become big wins saw their fortunes change, including Gilt Groupe and Fab. Was Jet that exit? 

CO: Jet was certainly a large exit and a testament to the great team the company assembled. Three billion dollars is a lot of money, but given how much they raised right out of the gate, I don’t know what multiples its investors got given what one would assume were the entry prices. So, do the aggregate dollars count or the return multiple? I’m not sure, but I’m also not someone who believes in the “giant exit” theory.

What’s supposed to happen when we get a giant exit? We get more angels?

More here.


StrictlyVC: August 19, 2016

Oh, sweet Friday, is it really you at long last? [Collapses.]

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Top News in the A.M.

Vevo, the online music video service owned by the world’s largest record labels, has hired Goldman Sachs to raise up to $500 million from new investors, says the Financial Times. More here.

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Quero Education Looks to Educate U.S. VCs

Much has been written about Brazil during the Rio Olympics. But one facet of the country that’s relatively unknown to foreigners is how 9 percent of the population – or the roughly 17 million Brazilians between the ages of 15 through 19 – can get a decent, affordable college education.

If U.S. investors were to take an interest, says Quero Education, they might be rewarded for it.

We chatted with Quero’s co-founder and CEO Bernardo de Pádua about his six-year-old, online college marketplace and the opportunity it’s chasing.

TC: You say the education industry is very different in Brazil versus the U.S. What are some of the biggest differentiators?

BDP: About 20 years ago, for-profit colleges took over the market, and now almost 85 percent of students are attending them. A company called Kroton this year acquired the second-largest college on the stock market in Brazil and it’s now the world’s largest school corporation, with 1.6 million students and more than $3 billion in annual revenues. And they only own a small share of the market — around 10 percent.

TC: Quero is helping match students with these for-profit schools. Is that correct?

BDP: Yes. These [for-profit] colleges have been fighting for new students and partnering with companies that have large databases and giving them discounts in exchange. Or, for example, if you have a church or soccer team, you can partner with a college and [because you’re sending multiple people to the school], you’ll get a 10 to 50 percent discount on tuition. But there’s a great mismatch of information that exists for the students.

TC: So you’re saying these colleges suffer from oversupply?

BDP: That’s right. There are six million seats open every year, and three million people enroll, so something like 50 percent of the seats are available. Some schools get oversubscribed. Public colleges are a very different story. They’re free to attend but have a limited number of seats [so it’s very competitive to attend them] and just 10 percent of people who take a national exam are really eligible for those slots. Medical schools are very heavily regulated. But there’s an oversupply in most other fields of study.

More here.

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New Fundings

CellSavers, a year-old, Bay Area-based on-demand mobile repair platform, has raised $15 million in Series A funding led by Carmel Ventures, with participation from earlier backer Sequoia Capital. Reuters has more here.

DevMynd Software, a five-year-old, Chicago-based digital strategy firm, as raised an undisclosed amount of Series A funding from Motorola Solutions Venture Capital. More here.

Dexter, a year-old, New York-based bot-building platform, has raised $2.3 million in seed funding led by Rakuten Ventures, with participation from Social Starts and Betaworks. TechCrunch has more here.

Ecobee, a nine-year-old, Toronto, Ontario-based smart thermostat maker, has raised $35 million in funding from the Amazon Alexa Fund, Thomvest, and Relay Ventures. The company has now raised more than $51 million altogether. VentureBeat has more here.

Histogen, a nine-year-old, San Diego-based regenerative medicine company, has raised $6 million in Series D funding led by Pineworld Capital, an affiliate of Huapont Life Sciences. More here.

KRY, a two-year-old, Stockholm, Sweden-based health startup that connects patients with healthcare professionals for consultations via video, has raised €6.1 million ($6.9 million) in seed funding  led by Index Ventures and Creandum, with participation from Berlin-based Project A. TechCrunch has more here.

NVBots, a three-year-old, Boston-based company whose 3D printing technology that can print multiple metals in the same build, has raised an undisclosed amount of Series A funding led by Woodman Asset Management. BostInno has more here.

SmartFile, a seven-year-old, Indianapolis, In.-based secure enterprise file management and sharing platform, has raised $1.1 million led by VisionTech Angels, with participation from Elevate Ventures. More here.

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New Funds

Darwin Ventures, a 12-year-old, San Francisco-based venturee fund of funds, is looking to raise $100 million for its fourth fund, shows an SEC filing. Darwin closed its last fund with roughly $60 million in early 2014.

London’s Octopus Ventures just launched a new accelerator — Octopus Labs — to capitalize on the financial tech boom. Details here.

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Exits

Foodpanda, the food delivery startup backed by Rocket Internet, is selling its operations in Indonesia and evaluating its presence in the rest of Southeast Asia as part of a push towards profitability. TechCrunch has more here.

Rakuten has acquired the assets of Bitnet, a 2.5-year-old, San Francisco-based bitcoin wallet startup that was reportedly struggling. Terms of the deal aren’t being disclosed, but according to CrunchBase, Bitnet had raised $14.5 million, including from Rakuten, ARTIS Ventures, Commerce VenturesWebb Investment Network, and Highland Capital Partners. More here.

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People

Uber CEO Travis Kalanick talks with Business Insider about his vision of our self-driving future, where “a million fewer people are going to die a year. Traffic in all cities will be gone. Significantly reduced pollution and trillions of hours will be given back to people . . .”

Remember Eric Martin, who won a Jet.com contest whose prize was 100,000 shares? Media outlets seemed to think he was in line for up to $20 million following Jet’s sale to Walmart. Turns out it’s closer to $900,00 — pre tax, says Fortune. (We’d take it!) More here.

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Essential Reads

A legal battle is escalating between the venture-backed software startup Domo and one of its former managers who’s fighting the company for financial information. The WSJ has more here.

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Detours

They’re calling this the most lavish dorm room in America.

The strange brain of the world’s greatest solo climber.

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Retail Therapy

Extreme Series Roof Top Tent. (Extremely sweet.)


StrictlyVC: August 18, 2016

Hi, everyone — we didn’t forget about you. We were working on a story about the current struggles of an unusually ambitious young venture firm. In fact, we don’t have much more for you today, but there’s always tomorrow(!).

Happy Thursday.:)

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Top News in the A.M.

Uber‘s first self-driving fleet arrives in Pittsburgh this month. Bloomberg has the story here.

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At Rothenberg Ventures, the Rise and Fall of a Virtual Gatsby

Rothenberg Ventures, the four-year-old, San Francisco-based seed-stage venture firm, may be on the brink of implosion, say several sources close to the firm.

We reported yesterday that several high-level employees had parted ways with Rothenberg, including its director of finance and the head of its SF office, who happen to be father and son (Tom and Tommy Leep). We’ve subsequently learned that firm departures run far more widely. Other top executives who’ve left include the company’s chief revenue officer, who quit yesterday; the company’s chief financial officer, who left in June; general manager James Taylor, who left very recently; and Fran Hauser, a former president of digital at Time Inc. Hauser was brought in with some fanfare as a venture partner in May 2014. Yesterday she updated her LinkedIn profile to reflect that she left Rothenberg in July.

Messages to Rothenberg have not been returned. According to one source, Rothenberg Ventures founder Mike Rothenberg has told those remaining that “very few people will be left.” In what appears to be a related development, the firm’s site has been down since last night.

Why the mass exodus? According to one source, Rothenberg Ventures is answering questions from the SEC after a lower-level employee alerted the agency to what this person reported as wire fraud and breach of fiduciary duty. This same source says the employee was subsequently fired and is now suing the firm for retaliation.

All SEC investigations are conducted privately. An investigation does not mean that the agency will file a case in federal court or bring an administrative action.

Either way, a much thornier issue for Rothenberg Ventures, say numerous former employees, is founder Rothenberg himself, who has sometimes seemed to live more like a billionaire than the manager of a modest venture fund — spending lavishly to attract moneyed individuals as investors and, over time, growing increasingly focused on becoming as famous as some of them.

Making a millionaire

It all began as a minor but inspirational story, proof that the American Dream can still come true.

Rothenberg, an Austin native who says he comes from humble means — “no one in my family has any money,” he once told us — was smart enough to nab undergraduate and graduate degrees from Stanford, then bootstrap a real estate fund with his brother before moving on to Harvard to secure an MBA.

Soon afterward, inspired by business leaders he had met while at Stanford, Rothenberg planted himself in San Francisco and got down to the business of trying to shake up the stodgy venture industry. Step one involved raising a $5 million fund from “friends, family, and former roommates,” as reported in a Bloomberg story about Rothenberg last year.

His timing was ideal as these things go. In 2012, the market was in the middle of a three-year upswing, following the financial crisis of late 2008. Some newer faces were also beginning to gain prominence in the venture industry, along with the trust of so-called limited partners — the individuals and institutions that fund venture firms.

Rothenberg is also a natural salesperson, and, as such, quickly evolved his pitch for Rothenberg from yet another seed-stage fund to a thought-leading outfit willing to make big bets on virtual reality before most people in Silicon Valley saw it as a major opportunity.

More here.

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New Fundings

DriveTribe, an eight-month-old London-based digital media platform, has raised $5.5 million in Series A funding led by Breyer Capital, with participation from Atomico and individual angels. More here.

Heap, a three-year-old, San Francisco, Ca.-based analytics infrastructure company, has raised $11 million in Series A funding led by New Enterprise Associates, with participation from Menlo Ventures and seed-stage investors SV Angel, Initialized Capital and Pear (formerly known as Pejman Mar Ventures). The company has now raised $13.2 million altogether. More here.

ID Experts, a 13-year-old, Portland, Ore.-based company that makes software and services for cyber breach and identity fraud protection, has raised $27.5 million in funding including from Peloton Equity, Trident Capital Cybersecurity, BlueCross BlueShield Venture Partners and the Sandbox Advantage Fund. More here.

Instavest, a two-year-old, Mountain View, Ca.-based social investing site, has raised $1.7 million in seed funding from Y Combinator, Skype co-founder Jaan Tallinn, Cherubic Ventures and others. TechCrunch has more here.

NextHealth, a three-year-old, Denver, Co.-based health IT startup that works with payers to reduce avoidable healthcare costs, has raised $8.5 million in Series A funding from Norwest Venture Partners. MedCity News has more here.

VUV Analytics, a seven-year-old, Austin, Tex.-based spectroscopy tech company, has raised $6.5 million in Series B funding led by New Science Ventures, with participation from S3 Ventures. AustinInno has more here.

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Exits

Uber has acquired Otto, a months-old, San Francisco-based startup that’s been working on a technology intended to automate parts of the drive on highways. Uber isn’t commenting on terms of the deal. But according to the New York Times, Uber will pay roughly 1 percent of its most current valuation — a sum worth about $680 million after the inclusion of its most recent fund-raising — if certain internal benchmarks are met by the Otto team. Much more here.

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People

PewDiePie, the biggest star on YouTube, wants people to stop coming to his house.

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Essential Reads

Twitter says it has suspended 235,000 accounts that promoted terrorism over the last six months. The New York Times has more here.

Venture-funded Yik Yak is trying to get its yak back. The Verge has more here.

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Detours

This Rio phenom would be a lock for a gold medal — if there were one for slacklining.

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Retail Therapy

Know that person who can always count on an intentionally terrible gift from you — even anticipates it? This is for that person.


At Rothenberg Ventures, the Rise and Fall of a Virtual Gatsby

Screen Shot 2016-08-29 at 9.40.19 PMRothenberg Ventures, the four-year-old, San Francisco-based seed-stage venture firm, may be on the brink of implosion, say several sources close to the firm.

We reported yesterday that several high-level employees had parted ways with Rothenberg, including its director of finance and the head of its SF office, who happen to be father and son (Tom and Tommy Leep). We’ve subsequently learned that firm departures run far more widely. Other top executives who’ve left include the company’s chief revenue officer, who quit yesterday; the company’s chief financial officer, who left in June; general manager James Taylor, who left very recently; and Fran Hauser, a former president of digital at Time Inc. Hauser was brought in with some fanfare as a venture partner in May 2014. Yesterday she updated her LinkedIn profile to reflect that she left Rothenberg in July.

Messages to Rothenberg have not been returned. According to one source, Rothenberg Ventures founder Mike Rothenberg has told those remaining that “very few people will be left.” In what appears to be a related development, the firm’s site has been down since last night.

Why the mass exodus? According to one source, Rothenberg Ventures is answering questions from the SEC after a lower-level employee alerted the agency to what this person reported as wire fraud and breach of fiduciary duty. This same source says the employee was subsequently fired and is now suing the firm for retaliation.

All SEC investigations are conducted privately. An investigation does not mean that the agency will file a case in federal court or bring an administrative action.

Either way, a much thornier issue for Rothenberg Ventures, say numerous former employees, is founder Rothenberg himself, who has sometimes seemed to live more like a billionaire than the manager of a modest venture fund — spending lavishly to attract moneyed individuals as investors and, over time, growing increasingly focused on becoming as famous as some of them.

Making a millionaire

It all began as a minor but inspirational story, proof that the American Dream can still come true.

Rothenberg, an Austin native who says he comes from humble means — “no one in my family has any money,” he once told us — was smart enough to nab undergraduate and graduate degrees from Stanford, then bootstrap a real estate fund with his brother before moving on to Harvard to secure an MBA.

Soon afterward, inspired by business leaders he had met while at Stanford, Rothenberg planted himself in San Francisco and got down to the business of trying to shake up the stodgy venture industry. Step one involved raising a $5 million fund from “friends, family, and former roommates,” as reported in a Bloomberg story about Rothenberg last year.

His timing was ideal as these things go. In 2012, the market was in the middle of a three-year upswing, following the financial crisis of late 2008. Some newer faces were also beginning to gain prominence in the venture industry, along with the trust of so-called limited partners — the individuals and institutions that fund venture firms.

Rothenberg is also a natural salesperson, and, as such, quickly evolved his pitch for Rothenberg from yet another seed-stage fund to a thought-leading outfit willing to make big bets on virtual reality before most people in Silicon Valley saw it as a major opportunity.

More here.


StrictlyVC: August 17, 2016

Wednesday! Hope you have a happy one, everyone.

Also, for those of you on the waitlist for our upcoming StrictlyVC INSIDER event next month, with VC Marc Andreessen, SurveyMonkey CEO Zander Lurie, “Radical Candor” author and former Google exec Kim Malone Scott, and Homebrew’s Hunter Walk: we can’t accommodate all of you (which stinks), but we hope to squeeze in at least five to 10 more readers. More on that soon. In the meantime, we’re getting excited about seeing everyone.:)

Thanks again to Bolt, Ballou PR, and Mattermark for partnering with us on this one; we very much appreciate their involvement.

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Top News in the A.M.

Oof. Cisco is about to lay off upwards of 14,000 employees, representing nearly 20 percent of the networking giant’s global workforce, according to the outlet CRN. More here.

Univision has won the auction to acquire Gawker Media’s websites and business. It’s reportedly paying $135 million. Recode has more here.

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Several Key Rothenberg Ventures’ Employees Have Left the Firm

Several high-level employees at the early-stage venture firm Rothenberg Ventures have recently left, we’ve learned. Among them is Tommy Leep, a partner and the head of Rothenberg’s San Francisco office, who left last month after spending two-and-a-half years with the firm. (A former product manager at Intuit, Leep spent the previous two years as “chief connector” at the venture firm Floodgate.)

Other recent departures include Tom Leep, father to Tommy, who’d spent more than three years as Rothenberg’s director of finance before leaving in June; Sophie Liao, who was recently hired with the title of Managing Director, Asia-Pacific Region and appears to have left this month; and Catherine Johnson, a former SVP of HR at BrightSource Energy who joined Rothenberg Ventures this spring, only to leave three months later, in June.

Neither Liao or Johnson has returned a request for comment. Leep referred all questions about the firm to a company spokesperson. Asked if his father’s departure and his own were connected or unrelated, Leep said he had “no comment at this time.”

A separate source suggests Leep left of his own accord, while a wide number of other employees were laid off. We don’t know if Michael Dempsey was among them, but the former CB Insights analyst, who joined Rothenberg Ventures in January as an investor, also left last week. Dempsey didn’t respond to a request for more information.

Rothenberg Ventures was founded just four years ago by Mike Rothenberg, an Austin native who nabbed a master’s in management science and engineering from Stanford before getting his MBA from Harvard.

Despite its age, the firm has made something of an outsize impact on the local venture industry, including by organizing popular events, such as an annual Founders Field Day at AT&T Park, where the San Francisco Giants play, and by barreling into virtual reality investments before many investors were paying much attention to them.

Indeed, in late 2014, Rothenberg Ventures announced it would be launching a startup accelerator, River, which planned to provide $100,000 in seed funding to virtual reality companies expressly. Among those early bets was FOVE, which makes an eye-tracking head-mounted display. FOVE passed through Microsoft Ventures Accelerator in London before being selected for River’s inaugural class, but, notably, it went on to raise an $11 million Series A round in March.

By May of last year, Rothenberg Ventures had also created River Studios, a “creative house for VR production” that, according to the firm’s site, currently “consists of 30 passionate creators, artists and developers, committed to creating inspiring stories, and pushing the boundaries of this awesome medium.”

More here.

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New Fundings

EasyVista, an 18-year-old, New York-based service management company for IT organizations, has raised $8.4 million in funding from Isatis Capital, Alto Invest and Conversion Venture Capital. More here.

EventBoard, a four-year-old, Salt Lake City, Ut.-based maker of cloud-based meeting tools and analytics, has raised $13.5 million in Series B funding led by NGP, with participation from GE Ventures and earlier investors Greycroft Partners, Origin Ventures and Zetta Venture Partners. More here.

Pymetrics, a four-year-old, New York-based online job marketplace, has raised $6.1 million in Series A funding from BBG Ventures, Khosla Ventures,Mercer and Ranstad Innovation Fund. More here.

Rotation Medical, a seven-year-old, Plymouth, Mn.-based company that makes medical devices to treat rotator cuffs, has raised $8 million in Series B “extension funding” from earlier backers New Enterprise Associates, Life Sciences Partners and Pappas Ventures. As part of the round, a second tranche of $4 million is expected to close next year. More here.

Stash, a 1.5-year-old, New York-based investment platform for millennials, has raised $9.25 million in Series A funding led by Goodwater Capital, with participation from Valar Ventures and Entrée Capital. More here.
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New Funds

Susa Ventures, a San Francisco-based seed-stage venture firm, announced yesterday that it has closed its second fund with $50 million. We wrote about Susa a little earlier this year when we first spied its filing for the fund.

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IPOs

Why the NYSE says it’s leading the tech IPO race (such as it is).

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Exits

Ford Motor Company has acquired SAIPS, a three-year-old Israeli company focusing on machine learning and computer vision. TechCrunch has more here.

Ola, the company battling Uber in India, has shut down TaxiForSure, a rival it acquired for $200 million last year, after it integrated its services. TechCrunch has more here.

Live streaming video platform Twitch (a subsidiary of Amazon) is doubling down on video games with the acquisition of a significant player in the world of video game communities: 10-year-old Curse. TechCrunch has more here.

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People

Adam Selipsky, the executive in charge of sales, marketing, and business development at Amazon’s cloud computing juggernaut, is leaving the company.

A life sciences symposium taking place in Palo Alto next month will include an unusual guest: Martin Shkreli, the indicted pharmaceutical company CEO who gained notoriety last fall for massively increasing the price of a lifesaving AIDS drug. More here.

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Data

Not the most surprising news, but: nearly one-third of private tech companies in the U.S. that have achieved “unicorn” status will eventually be worth less than $1 billion, according to a report published yesterday. Reuters has more here.

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Essential Reads

Google is continuing a push to create a big business from its growing cloud-computing unit, announcing yesterday that it’s rolling out several new data features for small businesses.

Pinterest just began rolling out native video ads.

Here’s how Snapchat makes money from disappearing videos.

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Detours

How imperfections could bring down the world’s most perfect statue.

Hugh Hefner’s rent just went way, way up.

Don’t I know you?”

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Retail Therapy

One way to spruce up your outdoor summer dining.

Right now is also a really good time to buy a helicopter if you’re so inclined.


Several Key Rothenberg Ventures’ Employees Have Left the Firm

Screen Shot 2016-08-29 at 9.28.08 PMSeveral high-level employees at the early-stage venture firm Rothenberg Ventures have recently left, we’ve learned. Among them is Tommy Leep, a partner and the head of Rothenberg’s San Francisco office, who left last month after spending two-and-a-half years with the firm. (A former product manager at Intuit, Leep spent the previous two years as “chief connector” at the venture firm Floodgate.)

Other recent departures include Tom Leep, father to Tommy, who’d spent more than three years as Rothenberg’s director of finance before leaving in June; Sophie Liao, who was recently hired with the title of Managing Director, Asia-Pacific Region and appears to have left this month; and Catherine Johnson, a former SVP of HR at BrightSource Energy who joined Rothenberg Ventures this spring, only to leave three months later, in June.

Neither Liao or Johnson has returned a request for comment. Leep referred all questions about the firm to a company spokesperson. Asked if his father’s departure and his own were connected or unrelated, Leep said he had “no comment at this time.”

A separate source suggests Leep left of his own accord, while a wide number of other employees were laid off. We don’t know if Michael Dempsey was among them, but the former CB Insights analyst, who joined Rothenberg Ventures in January as an investor, also left last week. Dempsey didn’t respond to a request for more information.

Rothenberg Ventures was founded just four years ago by Mike Rothenberg, an Austin native who nabbed a master’s in management science and engineering from Stanford before getting his MBA from Harvard.

Despite its age, the firm has made something of an outsize impact on the local venture industry, including by organizing popular events, such as an annual Founders Field Day at AT&T Park, where the San Francisco Giants play, and by barreling into virtual reality investments before many investors were paying much attention to them.

Indeed, in late 2014, Rothenberg Ventures announced it would be launching a startup accelerator, River, which planned to provide $100,000 in seed funding to virtual reality companies expressly. Among those early bets was FOVE, which makes an eye-tracking head-mounted display. FOVE passed through Microsoft Ventures Accelerator in London before being selected for River’s inaugural class, but, notably, it went on to raise an $11 million Series A round in March.

By May of last year, Rothenberg Ventures had also created River Studios, a “creative house for VR production” that, according to the firm’s site, currently “consists of 30 passionate creators, artists and developers, committed to creating inspiring stories, and pushing the boundaries of this awesome medium.”

More here.


StrictlyVC: August 16, 2016

Hi, all, we’re running around, crazed as usual, this a.m.; hope your Tuesday is off to a great start.:)

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Top News in the A.M.

Take note, Apple fanatics: The iPhone 7 could be released on September 23 (a week or two later than expected), says MacRumors. More here.

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Pejman Mar Raises $75 Million Second Fund, Rebrands as Pear

Likability, intuition, and a strong work ethic is a potent combination in any business, and many in Silicon Valley think seed-stage investors Pejman Nozad and Mar Hershenson have all three in spades. They “complement each other,” says investor Alfred Lin of Sequoia Capital, who invested in the Series A round of DoorDash, the restaurant delivery company, after they seeded it.

Indeed, the duo has already become somewhat for working closely with nascent teams — many of them in their backyard at Stanford — and vetting them for other VCs, who appear to have an open invitation to their modest offices. (This editor has spied many an investor milling about during different visits, including Bryan Schreier of Sequoia Capital, Mike Abbott of Kleiner Perkins Caufield & Byers, and Brian O’Malley of Accel.)

Nozad and Hershenson have admirers at much bigger institutions, too. In fact, today — almost exactly three years after the two launched a $50 million seed-stage fund under the eponymous moniker Pejman Mar Ventures —  they’re taking the wraps off a second, $75 million fund. They’re also scrapping their name and rebranding the firm as Pear.

Among Pear’s investors is New York Life Insurance, True Bridge Capital, and the University of Chicago, which also contributed capital to the firm’s debut fund. The school is back for more is that Hershenson and Nozad have “one of the most partnership-focused mindsets I’ve seen,” says Joanna Rupp, managing director of the University’s $1.1 billion private equity portfolio. “That extends to their limited partners [like us], general partners at other venture firms, and entrepreneurs.”

Certainly, Pear appears to think differently, which can perhaps be traced to its unusual roots. Nozad famously sold rugs to tech millionaires before becoming a full-time investor; one early bet was on the early smartphone company Danger, which sold to Microsoft in 2008 for $500 million. As it happens, it was through Danger that Nozad met Hershenson, a three-time entrepreneur whose husband cofounded the company.

Unlike other venture outfits that orchestrate expensive dinners with journalists, for example, Pear organizes events at its offices for cash-strapped founders and students that feature VCs and renowned CEOs as speakers. Past guests include John Doerr of Kleiner Perkins, Yahoo cofounder Jerry Yang, investor Chamath Palihapitiya of Social Capital, and Zynga founder Mark Pincus — though Nozad says a more popular attraction is a life coach who comes regularly to help founders with their personal problems.

More here.

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New Fundings

Appknox, a two-year-old, Singapore-based mobile security startup, has raised $640,000 in pre-Series A funding from SeedPlus, a new fund from Singapore’s Jungle Ventures. TechCrunch has more here.

Byte Academy, a two-year-old, New York-based coding bootcamp company, has raised $2.7 million in Series A funding led by Tri5 Ventures in Singapore. The outlet e27 News has more here.

Degreed, a 4.5-year-old, San Francisco-based platform for formal and informal learning, has raised $3.5 million in additional Series B funding from GSV Acceleration. The round, which also included Jump Capital, Signal Peak Ventures and Rethink Education, has now been closed with $25 million. More here.

FloSports, a 10-year-old, Austin, Tex.-based, subscription-based sports media company, has raised $21.2 million in funding co-led by DCM and Berlesmann Digital Media Investments, with participation from World Wrestling Entertainment, Discovery Communications and earlier investor Causeway Media Partners. Silicon Hills has more here.

Hike, a 3.5-year-old, New Delhi, India-based messaging app that enables users to communicate through texts and voice calls, has raised $175 million in Series D funding at a $1.4 billion valuation. Tencent led the deal; it was joined by earlier investors Tiger Global Management, Bharti and SoftBank. TechCrunch has more here.

ReviMedia, a six-year-old, New York-based online lead generation company, has raised $12.5 million in funding from NewSpring Growth Capital. More here.

Tioma Therapeutics, a 10-year-old, St. Louis, Mo.-based immuno-oncology company, has raised $86 million in Series A funding co-led by RiverVest Venture Partners, Novo Ventures, Roche Venture Fund and S.R. One. FierceBiotech has more here.

Tsinova, a two-year-old, Beijing, China-based smart bicycle manufacturer, has raised $23 million in Series B funding led by THG Ventures, a venture capital firm backed by state-owned Tsinghua Holdings. More here.

Velodyne, a nine-year-old, Morgan Hill, Ca.-based laser radar company, has raised $150 million in funding co-led by the Chinese search giant Baidu and automaker Ford. TechCrunch has more here.

Vettery, a three-year-old, New York-based online hiring marketplace, has raised $9 million in Series A funding led by Greycroft Partners and Raine Ventures. More here.

—–

IPOs

File-sharing giant Dropbox is talking with advisors about a 2017 IPO, says Bloomberg. More here.

Meanwhile, Nutanix, which makes software for data centers, aims to start its IPO roadshow as soon as next month, says Bloomberg. More here.

—–

Exits

BullGuard, a venture-backed, 14-year-old London-based maker of anti-virus software, has agreed to acquire Dojo Labs, a two-year-old, Palo Alto, Ca.-based startup that makes security and privacy software for IoT devices. Financial terms weren’t disclosed. Dojo Labs doesn’t appear to have reported outside funding. Meanwhile, CrunchBase turns up just $5 million in funding for BullGuard.

Paris-based lens maker Essilor International has acquired eight-year-old, London-based online glasses retailer MyOptique for roughly €140 million ($157.9 million). MyOptique had raised roughly £55 million over the years, including from Acton Capital Partners, Beringea, Cipio Partners, GP Bullhound, Highland Capital Partners and Index Ventures. TechCrunch has more here.

Salesforce has acquired BeyondCore, a 12-year-old, San Mateo, Ca.-based automated enterprise data analytics company that had raised $9 million in Series A funding led by Menlo Ventures in 2014. No financial terms were disclosed. TechCrunch has more here.

Snapchat has agreed to acquire Vurb, a five-year-old, San Francisco-based recommendation app, for more than $110 million, according to The Information. Vurb had raised around $15 million, including from Atlas VentureRedpoint Ventures, Max Levchin, Marc Benioff, Data Collective, and CrunchFundMore here.
—–

People

Alex Clayton is joining Spark Capital to focus on growth equity investments in the enterprise tech space, says Fortune. Clayton was previously a senior associate with Redpoint Ventures.

Investor Charles Hudson, who stepped in as interim CEO of the venture-backed marketing automation company Kahuna back in February, is handing over the reins to a new CEO Sameer Patel, who was most recently general manager/SVP at SAP Successfactors.

Industry Ventures has a new VP in Nate Leung, a former Bain Capital Ventures associate who most recently worked on partnerships for Optimizely (ex-Bain Capital Ventures). The San Francisco-based investment firm has also brought aboard as associate Justine Huang, who’d previously interned at Industry Ventures before joining Goldman Sachs as an analyst for a year.

Billionaire VC Peter Thiel published an op-ed in the New York Times yesterday, defending his financial involvement in the Gawker Media case by reiterating his belief that, “A story that violates privacy and serves no public interest should never be published.” More here.

—–

Data

Six percent of venture deals make up 60 percent of the industry’s returns, according to Horsley Bridge. Much more here.

New Enterprise Associates — in partnership with IDEO, O’Reilly, Uber, Casper, and Pocket, among others — is launching a survey today to obtain a better understanding of what makes a successful design-centric business. Toward that end, it’s gathering anonymized data from startups and would love your help. Click here to learn more and, if you’re so inclined, to contribute.

—–

Essential Reads

Google is taking on Skype and FaceTime with a new video calling app called Duo. More here.

—–

Detours

Asked and answered. “This country needs more spunk.”

Infinity pools with amazing, panoramic views.

Kegs, climbing, and kombucha: This is co-working now.

—–

Retail Therapy

Katch ’em if you can!


Pejman Mar Raises $75 Million for Second Fund, Rebrands as Pear

2team_pearLikability, intuition, and a strong work ethic is a potent combination in any business, and many in Silicon Valley think seed-stage investors Pejman Nozad and Mar Hershenson have all three in spades. They “complement each other,” says investor Alfred Lin of Sequoia Capital, who invested in the Series A round of DoorDash, the restaurant delivery company, after they seeded it.

Indeed, the duo has already become somewhat for working closely with nascent teams — many of them in their backyard at Stanford — and vetting them for other VCs, who appear to have an open invitation to their modest offices. (This editor has spied many an investor milling about during different visits, including Bryan Schreier of Sequoia Capital, Mike Abbott of Kleiner Perkins Caufield & Byers, and Brian O’Malley of Accel.)

Nozad and Hershenson have admirers at much bigger institutions, too. In fact, today — almost exactly three years after the two launched a $50 million seed-stage fund under the eponymous moniker Pejman Mar Ventures —  they’re taking the wraps off a second, $75 million fund. They’re also scrapping their name and rebranding the firm as Pear.

Among Pear’s investors is New York Life Insurance, True Bridge Capital, and the University of Chicago, which also contributed capital to the firm’s debut fund. The school is back for more is that Hershenson and Nozad have “one of the most partnership-focused mindsets I’ve seen,” says Joanna Rupp, managing director of the University’s $1.1 billion private equity portfolio. “That extends to their limited partners [like us], general partners at other venture firms, and entrepreneurs.”

Certainly, Pear appears to think differently, which can perhaps be traced to its unusual roots. Nozad famously sold rugs to tech millionaires before becoming a full-time investor; one early bet was on the early smartphone company Danger, which sold to Microsoft in 2008 for $500 million. As it happens, it was through Danger that Nozad met Hershenson, a three-time entrepreneur whose husband cofounded the company.

Unlike other venture outfits that orchestrate expensive dinners with journalists, for example, Pear organizes events at its offices for cash-strapped founders and students that feature VCs and renowned CEOs as speakers. Past guests include John Doerr of Kleiner Perkins, Yahoo cofounder Jerry Yang, investor Chamath Palihapitiya of Social Capital, and Zynga founder Mark Pincus — though Nozad says a more popular attraction is a life coach who comes regularly to help founders with their personal problems.

More here.


StrictlyVC: August 15, 2016

Happy Monday, everyone!

—–

Top News in the A.M.

Thought Apple’s iPad was on its way out? Guess again, suggests a new report that says three new models are coming out next year.

—–

Stop Listening to Your Bankers, Says Top Late Stage Firm

Technology Crossover Ventures has become a major investing powerhouse over its 22-year-old history by funding relatively undiscovered but mature companies; buying sizable stakes in later-stage, venture backed companies; and acquiring positions in publicly traded tech companies that TCV sees as undervalued.

The firm, which is headquartered in Palo Alto, has done so well that it just wrapped up its ninth fund with a cool $2.5 billion. It also now features offices in New York (opened in 2005) and in London (opened in 2011).

Late last week, over coffee at a San Francisco bistro, I sat down with TCV’s founding general partner, Jay Hoag, and general partner Woody Marshall, to talk about some of the firm’s latest hits, which include recently acquired Dollar Shave Club and LinkedIn, some of whose shares TCV acquired in February when they plummeted more than 40 percent.

We also talked about why mutual fund companies (with which TCV sometimes competes on deals) don’t make great private company shareholders, and what can be the bad advice of investment bankers, who are largely telling companies to wait until 2017 to go public. Our chat, edited for length, follows.

TC: You’ve invested roughly $700 million in Europe since opening an office in London, including deals in Spotify and World Remit. That’s a lot of capital.

JH: In London and Berlin and the Scandinavian countries, there was lots of activity we were seeing, and we thought it better to see it from quasi-local office.

WM: In Europe, [the investors on the ground are] very much early stage or buyouts or else guys who may call themselves growth equity investors but are really doing growth-buyout deals with a lot of debt. In terms of minority investments that startups can spend on product and sales and tech and marketing, we don’t have a lot of [competition].

TC: What about other U.S firms? Doesn’t Insight Venture Partners do a lot of deals in Europe?

WM: Insight does everything globally out of one office in New York. We’re pretty active, so we don’t necessarily like to be a tourist. We like to be part of the local community, so we felt like it was important to plant our flag in the ground and hire local people.

TC: One of your more recent investments was in Believe Digital, a Paris-based next-generation music label. What does that deal tell us about your style?

WM: It’s a growing, profitable business that’s already achieved significant scale with hundreds of employees. Our co-investors are two little French funds, and we were the largest and only investor in the financing we did, which is pretty typical. Also, the company has been around long enough that some of the funds will be thinking about selling some of their stock going forward. Most of our deals are a mix of primary and secondary stakes.

TC: Five of your portfolio companies have been sold this year, including the data marketing firm Merkle, which just sold a majority stake to Dentsu. You also invested in LinkedIn, which turned out nicely for you. 

JH: We didn’t see that [Microsoft acquisition] coming; it was a nice surprise. But if you’re going to deploy a dollar, why wouldn’t you look at a public company as well as private companies and assess, “Well, this appears fully valued, but this other one is discounted by 70 percent,” as long as you have the right insight. And the public markets tend to overreact on a quarterly basis.

TC: Why aren’t more venture funds investing in discounted publicly traded companies, especially given that so many of them got socked earlier this year? My understanding is that most firms aren’t restricted from doing these deals here and there.

JH: Generally, it’s  because the [universities and endowments and other] sources of capital for all of us want to think of us as being in discrete [buckets]. Either it’s, “I’m in investing in a private manager” or “I’m investing in a public manager.” So it’s not an easy sell.

WM: It’s also hard. A lot of times you don’t have access to perfect information. It’s a different process. But your private activity informs your public activity and vice versa. Even when we aren’t looking to deploy money in the public market, we probably spend more time listening to quarterly conference calls than most private investors, because when you’re thinking about diligence, that’s some of the best information out there. You can spend a gazillion dollars for [repackaged intelligence] or just go online and look at whatever calls you want. All that great trend and customer data is there.

TC: You mentioned that you buy a mix of primary and secondary stakes. Can you talk about some of the discounts you’re seeing?

WM: Off of what? It depends on the last round and the structure of the last round. A lot of people have said, “Stay away from unicorns.” But there are a lot of great companies out there that are looking to raise money. Maybe [their last round was] lavish [so the price is now] maybe a little bit up or down, but in the meantime, the business has materially executed since that last round. So even though the [valuation is] similar, your multiple is half because the business has doubled. You have to look at these opportunities on a relative basis.

TC: Mutual funds have gotten into your business in recent years. I still see them popping up here and there in late-stage deals.

WM: Sometimes we don’t see anybody. Sometimes, if there’s a more formal process, we do. One deal we looked at earlier this year, we thought the discount was appropriate, and one of the T Rowes or Fidelitys did a flat round. But you’re generally seeing less aggressive behavior from the Baillie Giffords and the BlackRocks. You’re definitely seeing people pulling back and reevaluating the bets they’ve already made. 

TC: Reevaluating and literally re-valuing — and publicly — which I think has surprised some of the companies these managers have backed.

JH: If we hear a company is talking with T Rowe and Fidelity and BlackRock, I understand why. The company probably wants a high price and a quick process. But we [know we] should probably spend our time elsewhere. Full stop.

[Mutual funds] are buying [private stakes] so they can have lower costs at the IPO price, etc. But the moment [their portfolio companies] underperform their competitors, that activity stops. These private investments have to have a return associated with them. If they’re buying high and selling low, that’s not good.

TC: Could you see action being taken against any of these managers?

JH: Mutual fund and hedge fund guys have been sued in the past over valuations. Even if it’s just 5 percent of your activity, with [people on Main Street] going in and out of your fund, your [net asset value] is a very important measure. These investors are buying in, assuming the valuations [they are paying at any single moment in time] are correct.

WM: Some of these guys, they have deep pockets but they get those alligator arms sometimes. And management teams are starting to say, “I got it.”

Much more here.

—–

New Fundings

Firefly Games, a two-year-old,  L.A.-based startup that aims to distribute top-grossing Asian mobile games to Western markets, has raised $10 million in new funding led by China Construction Bank International Holdings, an arm of one of the big four banks in China. VentureBeat has more here.

Galvanize, a four-year-old, Denver-based network of urban work campuses, has raised $45 million in Series B funding led by ABS Capital Partners, with participation from Colorado Impact Fund, Haystack Partners, Greg MaffeiAspen Grove Capital and earlier backer University Ventures. More here.

HeavenHR, a 1.5-year-old, Berlin-based HR management platform for small and mid-sized enterprises, has raised €6 million ($6.7 million) in Series A funding co-led by Target Global and Open Ocean. TechCrunch has more here.

Onfido, a four-year-old, London- and San Francisco-based background checking startup, has raised an undisclosed amount of  funding from Salesforce Ventures, Talis Capital and individual angel investors. More here.

Outfittery, a four-year-old, Berlin-based online personal shopping service for men, has raised $22 million in new funding led by Octopus Ventures, with participation from earlier backers Northzone Capital, Highland EuropeHoltzbrink Ventures and Mangrove Capital Partners. TechCrunch has more here.
—–

New Funds

Expa Capital, the startup studio with offices in San Francisco and New York, is already looking to raise a second, $100 million fund, according to an SEC filing. Expa just announced the close of its first, $100 million, fund back in March.

BootUp Capital Partners, a months-old, Menlo Park, Ca.-based venture firm that’s hoping to invest in “new-to-valley” entrepreneurs and startups, is trying to get off the ground with a million-dollar fund, shows an SEC filing. More here.

—–

Exits

Livestreaming app Blab, which amassed 3.9 million users in just one year, shut down this weekend, its CEO Shaan Puri announced with a post on Medium late Friday. The app, which competed with Twitter’s Periscope, Facebook Live and other media companies in the livestreaming game, was created at Monkey Inferno, a tech incubator self-funded by the founders of Bebo. TechCrunch has more here.

Univision is reportedly among a short list of candidates that might buy Gawker Media, according to the New York Times. Here’s its full list.

—–

People

Interesting profile of Ustream cofounder Brad Hunstable, who has returned home to Texas for his next act.

The basically anonymous fund manager who oversees $800 billion dollars.

—–

Essential Reads

How millennials became spooked by credit cards.

Apple’s CEO Tim Cook talks with the Washington Post about iPhones, AI, privacy, civil rights, missteps, China, taxes, Steve Jobs — and steers (again) right past the car rumors. More here.

—–

Detours

Too much air-conditioning is warping our ability to handle heat.

—–

Retail Therapy

Tell robbers to “take a hike.”

 


TCV on the Market, the Competition, and Taking Bankers’ Advice with a Grain of Salt

Screen Shot 2016-08-20 at 4.52.59 PMTechnology Crossover Ventures has become a major investing powerhouse over its 22-year-old history by funding relatively undiscovered but mature companies; buying sizable stakes in later-stage, venture backed companies; and acquiring positions in publicly traded tech companies that TCV sees as undervalued.

The firm, which is headquartered in Palo Alto, has done so well that it just wrapped up its ninth fund with a cool $2.5 billion. It also now features offices in New York (opened in 2005) and in London (opened in 2011).

Late last week, over coffee at a San Francisco bistro, I sat down with TCV’s founding general partner, Jay Hoag, and general partner Woody Marshall, to talk about some of the firm’s latest hits, which include recently acquired Dollar Shave Club and LinkedIn, some of whose shares TCV acquired in February when they plummeted more than 40 percent.

We also talked about why mutual fund companies (with which TCV sometimes competes on deals) don’t make great private company shareholders, and what can be the bad advice of investment bankers, who are largely telling companies to wait until 2017 to go public. Our chat, edited for length, follows.

TC: You’ve invested roughly $700 million in Europe since opening an office in London, including deals in Spotify and World Remit. That’s a lot of capital.

JH: In London and Berlin and the Scandinavian countries, there was lots of activity we were seeing, and we thought it better to see it from quasi-local office.

WM: In Europe, [the investors on the ground are] very much early stage or buyouts or else guys who may call themselves growth equity investors but are really doing growth-buyout deals with a lot of debt. In terms of minority investments that startups can spend on product and sales and tech and marketing, we don’t have a lot of [competition].

TC: What about other U.S firms? Doesn’t Insight Venture Partners do a lot of deals in Europe?

WM: Insight does everything globally out of one office in New York. We’re pretty active, so we don’t necessarily like to be a tourist. We like to be part of the local community, so we felt like it was important to plant our flag in the ground and hire local people.

TC: One of your more recent investments was in Believe Digital, a Paris-based next-generation music label. What does that deal tell us about your style?

WM: It’s a growing, profitable business that’s already achieved significant scale with hundreds of employees. Our co-investors are two little French funds, and we were the largest and only investor in the financing we did, which is pretty typical. Also, the company has been around long enough that some of the funds will be thinking about selling some of their stock going forward. Most of our deals are a mix of primary and secondary stakes.

TC: Five of your portfolio companies have been sold this year, including the data marketing firm Merkle, which just sold a majority stake to Dentsu. You also invested in LinkedIn, which turned out nicely for you. 

JH: We didn’t see that [Microsoft acquisition] coming; it was a nice surprise. But if you’re going to deploy a dollar, why wouldn’t you look at a public company as well as private companies and assess, “Well, this appears fully valued, but this other one is discounted by 70 percent,” as long as you have the right insight. And the public markets tend to overreact on a quarterly basis.

TC: Why aren’t more venture funds investing in discounted publicly traded companies, especially given that so many of them got socked earlier this year? My understanding is that most firms aren’t restricted from doing these deals here and there.

JH: Generally, it’s  because the [universities and endowments and other] sources of capital for all of us want to think of us as being in discrete [buckets]. Either it’s, “I’m in investing in a private manager” or “I’m investing in a public manager.” So it’s not an easy sell.

WM: It’s also hard. A lot of times you don’t have access to perfect information. It’s a different process. But your private activity informs your public activity and vice versa. Even when we aren’t looking to deploy money in the public market, we probably spend more time listening to quarterly conference calls than most private investors, because when you’re thinking about diligence, that’s some of the best information out there. You can spend a gazillion dollars for [repackaged intelligence] or just go online and look at whatever calls you want. All that great trend and customer data is there.

 

TC: You mentioned that you buy a mix of primary and secondary stakes. Can you talk about some of the discounts you’re seeing?

WM: Off of what? It depends on the last round and the structure of the last round. A lot of people have said, “Stay away from unicorns.” But there are a lot of great companies out there that are looking to raise money. Maybe [their last round was] lavish [so the price is now] maybe a little bit up or down, but in the meantime, the business has materially executed since that last round. So even though the [valuation is] similar, your multiple is half because the business has doubled. You have to look at these opportunities on a relative basis.

TC: Mutual funds have gotten into your business in recent years. I still see them popping up here and there in late-stage deals.

WM: Sometimes we don’t see anybody. Sometimes, if there’s a more formal process, we do. One deal we looked at earlier this year, we thought the discount was appropriate, and one of the T Rowes or Fidelitys did a flat round. But you’re generally seeing less aggressive behavior from the Baillie Giffords and the BlackRocks. You’re definitely seeing people pulling back and reevaluating the bets they’ve already made. 

TC: Reevaluating and literally re-valuing — and publicly — which I think has surprised some of the companies these managers have backed.

JH: If we hear a company is talking with T Rowe and Fidelity and BlackRock, I understand why. The company probably wants a high price and a quick process. But we [know we] should probably spend our time elsewhere. Full stop.

[Mutual funds] are buying [private stakes] so they can have lower costs at the IPO price, etc. But the moment [their portfolio companies] underperform their competitors, that activity stops. These private investments have to have a return associated with them. If they’re buying high and selling low, that’s not good.

TC: Could you see action being taken against any of these managers?

JH: Mutual fund and hedge fund guys have been sued in the past over valuations. Even if it’s just 5 percent of your activity, with [people on Main Street] going in and out of your fund, your [net asset value] is a very important measure. These investors are buying in, assuming the valuations [they are paying at any single moment in time] are correct.

WM: Some of these guys, they have deep pockets but they get those alligator arms sometimes. And management teams are starting to say, “I got it.”

Much more here.