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Top News in the A.M.

Uber executive Emil Michael just announced his resignation internally. More on the latest twists and turns at the beleaguered ride-hailing company below.

Uber’s Board is Discussing a Leave of Absence for Travis Kalanick; Will Garrett Camp Replace Him?

According to a variety of media reports, Uber’s board met yesterday in Los Angeles for what may have been the most critical sit-down in the company’s eight-year history.

The biggest item on the agenda, according to the New York Times, was whether or not cofounder and embattled CEO Travis Kalanick should take a leave of absence. How strongly the board pushed for this will likely depend on the findings of a months-long investigation spearheaded by former U.S. attorney general Eric Holder.

In recent months, on Uber’s dime, Holder’s current employer, the white-shoe firm Covington and Burling, has interviewed hundreds of employees to obtain a picture of Uber’s culture; they were hired after the publication of a widely read account by former Uber engineer Susan Fowler Rigetti, who blogged in February about the company’s rampant sexual discrimination and harassment issues.

According to Recode, the findings, which are being presented to the company tomorrow, depict “a landscape of trouble.”

Uber didn’t respond to our requests for comment yesterday, but according to Recode, Uber’s chief business officer, Emil Michael, just announced his resignation internally.

More here.

New Fundings

Alto, a two-year-old, San Francisco-based digital pharmacy startup previously known as ScriptDash, has raised $23 million in Series B financing. Greenoaks Capital led the round, with participation from Jackson Square Ventures, Rahul Mehta of DST, Craig Sherman from Meritech Capital, Justin Kan from Y Combinator and Twitch, and Cruise Automation COO Daniel Kan (who happens to be Justin’s brother). TechCrunch has more here.

CloudCare, a Shanghai-based cloud computing company, has raised $14 million in Series C funding led by Fosun Group, with participation from earlier backer Sequoia Capital China. China Money Network has more here.

Compliance.ai, a 2.5-year-old, San Francisco-based regulatory and compliance management platform, has raised $4 million in funding from Cota Capital. More here.

Happy Friday, everyone! Hope you have a terrific weekend. See you soon.:)

StrictlyVC is being brought to you this week by Rosebud Communications. It’s Friday, and we all deserve to take it down a notch for a couple of days. We’ll be here next week; in the meantime, remember the media never sleeps, nor do we. Send us an email. Operators are always standing by: info@rosebudpr.io.

Top News in the A.M.

Alphabet has agreed to sell renowned robotics firms Boston Dynamics, and the lesser known robotics firm Schaft, to SoftBank, potentially ending its flirtation with the world of humanoid and industrial robots. TechCrunch has more here.

Pandora, the publicly traded, perenially struggling streaming music company, has sold a 16 percent stake in its business to the satellite radio company SiriusXM for $480 million in cash. TechCrunch has more here.

Tesla this morning zoomed past BMW to become the fourth-most valuable automaker in the world, behind Toyota, Daimler and Volkswagen. Bloomberg has more here.

Uber’s Former Employees are Gunning for Management

Earlier this week, at a staff meeting in San Francisco, Uber executives revealed to the company’s 12,000 employees that 20 of their colleagues had been fired and that 57 are still being probed over harassment, discrimination and inappropriate behavior, following a string of accusations that Uber had created a toxic workplace and allowed complaints to go unaddressed for years.

Those complaints had pushed Uber into crisis mode earlier this year. But the calamity may be just beginning.

Indeed, if Uber executives were hesitant to part ways with particular employees for fear of recrimination, it’s suddenly easy to see why. Since announcing those firings on Monday, which reportedly included senior executives, Uber —  which has long operated like an impenetrable fortress — has begun springing leaks right and left.

The question is whether the stories coming to light now are the most damning of the bunch, or leakers are starting in reverse and building toward a kind of crescendo that could finally lead to the ousting of CEO and cofounder Travis Kalanick.

Certainly, he’s having an especially challenging week.

More here.

New Fundings

AvidXchange, a 17-year-old, Charlotte, N.C.-based company that makes accounts payable and on-demand invoice management software, has raised $300 million in funding from MasterCard, Caisse de dépôt et placement du Québec, Temasek and Peter Thiel. Finextra has more here.

Houzz, an eight-year-old, Palo Alto, Ca.-based online platform for home remodeling and design services, is close to finalizing a new $400 million round of funding that values the company at around $4 billion, according to a company spokesperson. Recode says the round is being led by Iconiq Capital, the low-flying investment firm that has managed money for Facebook execs Mark Zuckerberg and Sheryl Sandberg. Earlier investors GGV Capital and Sequoia Capital are also reportedly participating. Fortune has more here.

Packagd, a months-old, Menlo Park, Ca.-based startup whose app curates “unboxing” and product review videos that have been uploaded to YouTube in way that’s reminiscent of QVC video programming, has raised $6 million in Series A funding. Forerunner Ventures and GV co-led the round, which follows on the heels of a $1.5 million injection from Kleiner Perkins Caufield & Byers. (Packagd was founded by KPCB general partner Eric Feng.) More here.

Platelet BioGenesis, a three-year-old, Boston, Ma.-based biotech startup developing a process to produce human platelets from stem cells for therapeutic applications, has raised $10 million in Series A financing led by Qiming U.S. Healthcare Fund. Other participants in the round include Vivo Capital, VI Ventures, Adena Partners, eCoast Angels, and others. FinSMEs has more here.

Shedul, a two-year-old, Dubai- and Warsaw-based maker of free scheduling software for the salon and spa industry, has raised $6 million in funding led by Dubai’s Middle East Venture Partners, with participation from BECO Capital and Lumia Capital. TechCrunch has more here.

Spektral, a three-year-old, Copenhagen-based visual effects company that applies machine learning to image and video editing, has raised $2.8 million in funding from Litecap and Amp Ventures. TechCrunch has more here.

Supr Daily, a 1.5-year-old, Mumbai-based daily milk delivery service that’s now active in 15 neighborhoods in Mumbai, has raised $1.5 million from a range of investors to expand its service, including Soma Capital, Great Oaks Ventures, 122 West Ventures, and numerous angel investors, including Y Combinator partner Paul Buchheit. TechCrunch has more here.

New Funds

The Geekdom Fund, a three-year-old, San Antonio, Tex.-based venture firm that invests locally and closed its debut fund with just $3.4 million in 2015, has closed its second fund with $20 million, reports Xconomy. More here.

Also Sponsored By . . .

StrictlyVC is also being brought to you this week courtesy of Dreamit UrbanTech. Its message to readers (and founders of breakthrough startups, particularly):

The Dreamit UrbanTech Accelerator Program is officially accepting applications for their Fall 2017 cycle through June 23rd. Participating startups will benefit from unprecedented access to Dreamit’s national customer and investor network, including a chance to interface with the $3 billion Tampa Bay Urban Redevelopment Initiative being led by Strategic Property Partners, a joint venture between Jeff Vinik and Bill Gates’ Cascade Investments. The Dreamit UrbanTech accelerator seeks startups that use digital solutions to make urban areas more livable, sustainable, connected and efficient. We’re looking for startups working in real estate tech, construction tech, IoT, smart cities, clean energy, agriculture, transportation, and AI to join our 14-week growth-focused program. Apply before June 23!

IPOs

DocuSign‘s CEO is prepping for a CEO. It’s been a long time coming, notes Bloomberg.

Exits

In addition to raising fresh funds from Sirius XM, Pandora is selling Ticketfly — the ticketing service that it acquired for $450 million in October 2015 for $450 million — to Eventbrite for $200 million. More here.

Legal research company LexisNexis has acquired Ravel Law, a five-year-old, San Francisco-based  legal search, analytics, and visualization platform, for undisclosed terms. Ravel had raised $14 million in funding from X Fund, New Enterprise Associates, North Bridge Venture Partners, Work-Bench and Ulu Ventures. More here.

Uber is reportedly in late-stage talks to acquire some technology and team members from Luxe, the on-demand car valet service. More here.

People

Erica Baker, an engineer and outspoken advocate for diversity and inclusion in tech, is leaving her job at Slack in San Francisco and moving East to join Kickstarter.

The jockeying for top roles has begun at Oath, the newly combined entity of AOL and Yahoo, with Yahoo’s chief information security, Bob Lord, among the first executives to leave.

Thursday! We’re still in a deep depression this morning, one triggered by the last three minutes of last night’s basketball game, when everything abruptly fell apart for the Cavs. As Slate noted last night, “If Game 3 were Bambi, that’s the moment your parents would turn off the VCR and send you to bed.”

StrictlyVC is being brought to you this week by Rosebud Communications. You bring the steak, we’ll bring the sizzle.  Our retainer fees are $5,500 per month, versus $10K+ for the other guys, and while we don’t make the news, we can ensure that yours gets heard. Send us an email; operators are standing by: info@rosebudpr.io

Top News in the A.M.

Isaac Choi, the founder of WrkRiot — written about extensively last summer for burning through $700,000 in 10 months, then lying about back pay — was just charged with five counts of wire fraud. More here.

Essential, the new smartphone startup run by Android creator Andy Rubin, has raised $300 million in new funding from undisclosed investors, reports Bloomberg. The company had last year raised $30 million from Rubin’s Playground Global and Redpoint Ventures. Others of the company’s investors include Altimeter Capital, Tencent Holding and Foxconn Technology Group. As the WSJ reported in March, Softbank was set to invest $100 million in the company but backed out at the eleventh hour, ostensibly because of Softbank’s increasingly close relationship with rival Apple.

The Gamer Chat Tool Discord Recently Raised Around $50 Million, as Insiders Cashed Out

It’s been a rocky road to glory for Discord, a startup whose iPad battle arena game, “Fates Forever,” earned it a top spot at the 2013 TechCrunch Disrupt show, but wound up flopping with users.

What a difference a few years makes. After pivoting to a voice and text chat tool for video game teams and trash talkers in 2015, Discord’s current trajectory makes it one of few consumer-facing companies that’s now reaching “escape velocity,” as one of its early investors gushes.

In fact, San Francisco-based Discord has 45 million registered users on its platform, quadrupling from a year ago, with 9 million daily actives. Now Discord is aiming to become the communication layer for gaming, recently closing a competitive financing round toward that end.

Index Ventures is said to have led the roughly $50 million funding round, which quietly took place in January at a pre-money valuation of $725 million, according to our sources. Institutional Venture Partners also chipped in a significant amount. And earlier backers — including Spark Capital, Greylock Partners and Benchmark — participated.

A source close to the company says Discord will likely raise more money soon, too, given outside interest. (There “isn’t much else going on in consumer land right now,” observes this person.)

More here.

(Other) New Fundings

Addepar, an eight-year-old, Mountain View, Ca.-based startup that helps wealth management firms get a more comprehensive view of their clients’ assets, has raised $140 million in a round led by Valor Equity Partners, 8VC and investment manager Harald McPike. TechCrunch has more here.

Algolia, a five-year-old, San Francisco-based company that provides businesses with the infrastructure, engine, and tools needed to create intuitive searches for their customers, has raised $53 million in Series B funding led by Accel Partners, which had previously led the company’s $18.3 million Series A round. Other participants in the funding include the SaaStr Fund, AppDynamics founder Jyoti Bansal,  and previous backers Alven Capital, Point Nine Capital and Storm Ventures, among others. TechCrunch has more here.

Automat, a year-old, Montreal-based conversational marketing startup, has raised $8.3 million in funding led by You & Mr Jones, with participation from Comcast Ventures and Omidyar Technology Ventures. VentureBeat has more here.

AxeTrading, an eight-year-old, London-based maker of fixed income trading technology, has raised $2.6 million in funding led by Illuminate Financial Management. More here.

Wednesday! Also, game three of the NBA Finals(!) Warriors fans, we live in San Francisco; we love them, too, in the regular season. Tonight, our allegiance is to King James. (Can. Not. Wait!)

StrictlyVC is being brought to you this week by Rosebud Communications. We’re small, scrappy, and get the job done. Our retainer is $5,500 per month, and we love going up against the bigger guys who charge $10K or more. Reach us at info@rosebudpr.io; operators are standing by.

Top News in the A.M.

Coursera, a five-year-old, Mountain View, Ca.-based online education company, is apparently prancing toward unicorn status. It just raised $64 million in Series D funding at a post-money valuation of $800 million, reports TechCrunch. Investors include earlier backers GSV Asset Management, New Enterprise Associates, Kleiner Perkins Caufield Byers, and Learn Capital, along with new investor The Lampert Foundation. The company has now raised $210 million altogether. More here.

Variety has reviewed Apple‘s first TV offering, “Planet of the Apps,” and its review is not kind. Writer Maureen Ryan likens the show to “something that was developed at a cocktail party, and not given much more rigorous thought or attention after the pitcher of mojitos was drained.”

Cadre Collects $65 million in Series C Funding

Cadre, a three-year-old, New York-based real estate startup, has raised $65 million in Series C funding led by Andreessen Horowitz.

Famed VC Jim Breyer of Breyer Capital also joined the round, along with the Ford Foundation, General Catalyst Partners, Goldman Sachs, Khosla Ventures, and Thrive Capital.

Ryan Williams, a Goldman Sachs and Blackstone alum, cofounded Cadre along with Joshua Kushner and Jared Kushner. The brothers are part of a renowned New York real estate family; Joshua is now a full-time venture capitalist and Jared is now better-known as the son-in-law of, and White House senior advisor to, President Trump.

Cadre, which aims to make it easier for family offices, endowments and other moneyed investors to invest in real estate using technology, had closed its Series B round with $50 million in January of 2016. It had raised $18.3 million in Series A funding in 2015.

Williams appeared on stage at TechCrunch’s New York Disrupt event several weeks ago.

More here.

(Other) New Fundings

Autopilot, a five-year-old, San Francisco-based marketing automation startup, has raised $12 million in new funding from investors, including Blackbird Ventures, Salesforce Ventures and earlier investor Rembrandt Venture Partners. The company has now raised $32 million altogether. TechCrunch has more here.

Chewse, a six-year-old, San Francisco-based office catering company that serves both restaurants and business managers, has raised $7.3 million in Series B funding led by Foundry Group, with participation from Telegraph Hill Capital, Rocketship VC and Galvanize. The company has raised $15 million altogether so far. TechCrunch has more here.

Coocaa, an 11-year-old, Shenzhen, China-based smart TV unit of Chinese TV maker Skyworth Digital Holdings, has sold a 7.7 percent stake in its business to Tencent Holdings for $44 million. DealStreetAsia has more here.

Digital Pharmacist, a 6.5-year-old, Austin, Tex.-based company that helps pharmacies engage with their patients over their mobile devices, has raised $6.5 million in Series B funding led by Activate Venture Partners and LiveOak Venture Partners. More here.

High Brew Coffee, a three-year-old, Austin, Tex.-based company that makes cold brew coffee products (including in “dark chocolate mocha” and “creamy cappuccino” flavors), has raised $17 million in fresh Series B funding. Colorado-based Boulder Investment Group Reprise led the round, with participation from the firm CAVU Venture Partners, which had led the company’s $4 million Series A round last year. Daily Coffee News has more here.

Illumio, a four-year-old, Sunnyvale, Ca.-based company that provides protection for data centers and cloud services, has raised $125 million in Series D funding led by J.P. Morgan Asset Management. Earlier investors Andreessen Horowitz, General Catalyst Partners, 8VC, Accel Partners and Data Collective all participated, alongside other unnamed new and earlier investors. The round brings the company’s total funding to $267 million. More here.

Klarna, a 12-year-old, Stockholm, Sweden-based payments company that’s valued at upwards of $2.25 billion, has sold roughly 10 percent of its business to Brightfolk, controlled by fashion tycoon Anders Holch Povlsen. This is a secondary deal, says TechCrunch; specifically, Povlsen is buying shares from earlier backers General Atlantic, DST Global and co-founder Niklas Adalberth, all of whom still retain stakes as Klarna shareholders. More here.

Lung Therapeutics, a nearly four-year-old, Austin, Tex.-based clinical-stage pharmaceutical company that’s developing therapeutics for orphan drug indications in fibrosis, lung injury and disease, has raised $14.3 million in Series B funding. Bios Partners, a life-sciences private equity firm based in Dallas, led the round, with participation by earlier investor, the UT Horizon Fund. The company has now raised $17 million altogether. More here.

Mercadoni, a two-year-old, Colombia-based grocery delivery app and service that also operates in Argentina and Mexico, has raised $6.2 million in Series A funding. Axon Partners Group and Grupo Pegasus led the round, with participation from numerous unnamed individual investors. TechCrunch has more here.

Minerva Labs, a three-year-old, Petah Tikva, Israel-based company that makes advanced malware protection software, has raised $7.5 million in Series A funding round led by Amplify Partners, with participation from StageOne Ventures and Webb Investment Network. More here.

Misterb&b, a four-year-old, San Francisco-based startup that’s building an apartment-renting platform focused on the LGBTQ community, has raised $8.5 million in funding from Project A and Ventech. More here.

neoSurgical, a 10-year-old, Newton, Ma.-based medical technology company focused on advancing surgical wound healing, has raised $5.5 million in Series B funding from earlier (undisclosed) investors, with participation from the San Antonio, Tex.-based outfit Targeted Technology Fund. The company expects to raise another $1.75 million before closing the round. More here.

Neuronetics, a 14-year-old, Malvern, Pa.-based medical device company focused on transcranial magnetic stimulation therapy, has raised $15 million in Series G funding round from its existing investor base, along with new investor Ascension Ventures. More here.

Pinterest, the seven-year-old, San Francisco-based social pinning site, has raised $150 million in venture funding from a group of existing investors at the same share price as two years ago, with Bloomberg citing the company’s inability to keep pace with internet rivals as the reason. The last fundraising round was in April 2015, valuing the business at about $11 billion; because the number of shares in the company has grown over time, its new valuation is $12.3 billion. More here.

Plynk, a two-year-old, Dublin, Ireland-based money messaging app founded by a former Facebook manager and a former Wonga engineer, has raised $28 million from a Swiss investment trust. The team claims it’s the biggest ever Series A round for an Irish software startup. Business Insider has more here.

Quantifi, a year-old, Indianapolis, In.-based company whose software helps marketers perform digital ad experiments at scale, has raised $2.3 million in seed funding from High Alpha Capital, Router Ventures and numerous early customers, including The Indianapolis Motor Speedway. More here.

Scout RFP, a three-year-old, San Francisco-based startup that helps companies streamline their supplier selection, centralize their data, and ostensibly make more informed purchasing decisions, has closed on $15.5 million in Series B funding led by Menlo Ventures, with participation from New Enterprise Associates, which had led the company’s Series A round. The round brings its total funding to $27.25 million. More here.

Shortlist, a two-year-old, San Francisco- and New York-based talent management platform, has raised $1.5 million in seed funding, including from Impulse VC, FundersClub, and Alchemist Accelerator. TechCrunch has more here.

Stem, a two-year-old, L.A.-based financial platform that aims to simplify payments for musicians and content creators, has raised $8 million in Series A funding co-led by Evolution Media and Aspect Ventures, with participation from earlier backer Upfront Ventures. A long string of individual investors, including numerous music managers, also joined the round. More here.

Tractable, a three-year-old, London-based insurtech start-up that specializes in computer vision, has raised $8 million in Series A funding, led by Ignition Partners, and earlier investor Zetta Venture Partners, among others. U.K. Startups has more here.

Upbeat, a 1.5-year-old, San Francisco-based startup whose cloud-based PR platform aims to automate how companies handle their public relations, has raised $1.5 million in funding from a long list of investors that includes Draper Associates, Maverick Capital, Kleiner Perkins Caufield Byers, FirstRock Capital, UpHonest Capital, Quest Venture Partners, SV Angel, 500 Startups, Stanford-StartX Fund, and Y Combinator. More here.

Wavecell, a seven-year-old, Singapore-based cloud communications platform, has raised $8.2 million in Series B funding co-led by venture firm Qualgro and MDI Ventures, the venture unit of Telkom Indonesia. Earlier backer Wavemaker Partners and other, unnamed new investors also joined the round. DealStreetAsia has more here.

Yubico, a 10-year-old, Palo Alto, Ca.-based company that sells authentication and encryption hardware, has raised $30 million through the sale of primary and secondary shares, including from New Enterprise Associates; the Valley Fund, a Menlo Park-based venture capital firm; and Bure, a Swedish growth equity firm. More here.

New Funds

Chinese venture capital firm Legend Capital has raised $448 million for its seventh China-focused venture capital fund, a vehicle that hit the road to raise funds more than a year ago. Legend Capital, the investment arm of Chinese technology company and Lenovo’s owner Legend Holdings, had raised $500 million in May 2014 for its previous vehicle. DealStreetAsia has more here.

A Richmond, Va.-based venture capital firm, NRV (formerly known as New Richmond Ventures), has raised $33 million to invest in early-stage businesses in the Richmond region and throughout Virginia. More here.

Also Sponsored By . . .

StrictlyVC is also being brought to you this week courtesy of Dreamit UrbanTech. Its message to readers (and founders of breakthrough startups, particularly):

The Dreamit UrbanTech Accelerator Program is officially accepting applications for their Fall 2017 cycle through June 23rd. Participating startups will benefit from unprecedented access to Dreamit’s national customer and investor network, including a chance to interface with the $3 billion Tampa Bay Urban Redevelopment Initiative being led by Strategic Property Partners, a joint venture between Jeff Vinik and Bill Gates’ Cascade Investments. The Dreamit UrbanTech accelerator seeks startups that use digital solutions to make urban areas more livable, sustainable, connected and efficient. We’re looking for startups working in real estate tech, construction tech, IoT, smart cities, clean energy, agriculture, transportation, and AI to join our 14-week growth-focused program. Apply before June 23!

IPOs

ShotSpotter, whose gunshot detection is used in law enforcement, has raised $30.8 million in an IPO that, ahem, hit its target. Silicon Valley Business Journal has more here.

People

The leader of the U.S. government’s leading patent agency, Michelle Lee, has unexpectedly resigned from her post, according to Recode. Lee, a former lawyer for Google, took over the U.S. Patent and Trademark Office during the Obama administration, and many in the tech industry expected Trump to renominate her to the post. More here.

Michael Segal, who joined Bessemer Venture Partners’ New York office in 2009, has been promoted to vice president. Segal took time away from the firm from 2011 until 2015 to launch and run a company, Skylight, a consumer IOT platform.

Uber informed employees yesterday that it has fired 20 people, following a company-wide investigation into harassment claims. More here.

Jobs

Sanofi, a French multinational pharmaceutical company, is looking to bring a director of investments (a junior position) into its corporate venture unit. The job is in Cambridge, Ma.

Essential Reads

Amazon is going after Walmart with a 45 percent discount on Prime for lower-income shoppers.

It’ll take a few more years before Tesla officially launches the Model Y, but we now kinda, sorta know what it could look like.

The newest Fortune 500 list is out.

Detours

The “insane” private island resort where Miranda Kerr and Evan Spiegel honeymooned.

How Russian propoganda spread from a parody website to Fox News.

What elite athletes can teach you about time management.

Retail Therapy

The big trend in sunglasses this summer is right above your nose.

Hi, everyone, happy Tuesday!

StrictlyVC is being brought to you this week by Rosebud Communications. Smart, on-message media coverage = higher valuations. We’re the hardest-working PR firm in the business. Send us an email; operators are standing by: info@rosebudpr.io

Top News in the A.M.

Everything that Apple announced yesterday at its Worldwide Developers Conference.

Uber is expected to share some findings of its harassment probe today.

The RealReal Ropes in $50 Million in Funding

The RealReal, a six-year-old, San Francisco-based company focused on authenticated, high-end resale items for women, men, and the home, has landed $50 million in growth funding from the private equity firm Great Hill Partners.

The round, which brings the company’s total funding to $173 million, did not include previous backers; a spokeswoman for the company says Great Hill “wanted all of the investment.”

The cash infusion comes at an important juncture for The RealReal, which now employs more than 800 people and has pushed out the time by which it will turn profitable, setting its sights instead on spreading brand awareness by expanding its physical footprint.

Already, the company has opened six valuation offices in the last 18 months, including in San Francisco, New York, L.A., Chicago, and Washington, D.C. The spaces enable consignors to consult directly with valuation experts about their fine jewelry and watches.

Last month, in a sit-down with this editor in San Francisco, CEO Julie Wainwright said that The RealReal is also weighing a strategy of opening a series of brick-and-mortar stores, starting first with one New York location that a RealReal spokeswoman says is still being locked down and should be open for business in late fall or early winter this year.

More here.

New Fundings

Armis, a 1.5-year-old, Palo Alto, Ca.-based enterprise IoT security company, has emerged from stealth mode with $17 million in funding, including from Sequoia Capital and Tenaya Capital. More here.

BookNook, a year-old, Oakland, Ca.-based reading instruction technology that promotes small group learning for kids, just closed a $1.2 million seed round led by Reach Capital, with participation from Urban Innovation Fund, Better Ventures, and Impact Engine. More here.

Carsome, a 2.5-year-old, Malaysia-based consumer-to-business used-car platform, has raised $6 million in funding led by Gobi Partners, with participation from earlier backers 500 Startups, Spiral Ventures, as well as new investors Lumia Capital and Innoven. Digital News Asia has more here.

Coinbase, a five-year-old, San Francisco-based bitcoin wallet and platform, is in talks with investors about $100 million or more in new funding, at a valuation of more than $1 billion, says the WSJ. To date, Coinbase has raised $116.5 million from investors, including Andreessen Horowitz, Union Square Ventures, DFJ, Ribbit Capital and NTT DoComo, as well as half a dozen banks. More here.

Clustree, a four-year-old, Paris-based SaaS business that aims to turn external and internal data into actionable insights for HR departments, has raised $7.9 million in Series A funding from Creandum, with participation from Idinvest Partners and Alven Capital. TechCrunch has more here.

DOC+, a nearly two-year-old, Moscow-based digital health company centered around on-demand medical services and medical data management, has raised $5 million in Series B funding, including from Yandex and Baring Vostok. More here.

Earlens Corporation, a 12-year-old, Menlo Park, Ca.-based hearing aid maker, has raised a whopping $73 million in Series C funding led by Vertex Healthcare, with participation from Windham Venture Partners, Sightline Partners, New Enterprise Associates, Aisling Capital, Lightstone Ventures and Medtronic. More here.

Freight Farms, a seven-year-old, Boston-based company that’s been steadily growing its network of distributed hydroponic farms (made from used shipping containers), has raised $7.3 million in Series B funding, led by Spark Capital. Spark had also led the company’s $3.7 million Series A round in late 2014. More here.

MediaMath, a 10-year-old, New York-based company offering tools and data for automated ad-buying, has secured a $175 million credit facility led by Goldman Sachs, with participation from Santander Bank.The company says the financing will fund its growth, as well as allow it to refinance existing debt. TechCrunch has more here.

Netskope, a five-year-old, Los Altos, Ca.-based cloud-access security broker that has developed a platform to monitor a company’s disparate apps and devices, has raised $100 million in new funding. The Series E was led by previous investors Lightspeed Venture Partners and Accel Partners, with participation from other, earlier backers Social Capital and Iconiq Capital. The round also includes two new backers: Sapphire Ventures and Geodesic Capital. TechCrunch has more here.

PhiSkin, a five-year-old, Shanghai-based aesthetic medical products and beauty services company, has raised $17 million in Series B funding led by Legend Capital, with participation from Ares Management. China Money Network has more here.

Plume Design, a three-year-old, Palo Alto, Ca.-based company that has developed a WiFi network extender, has raised $37.5 million funding from Comcast Cable, Samsung Venture Investment Corporation, and Presidio Ventures. Earlier backers Liberty Global Ventures, Shaw Ventures, and Jackson Square Ventures also joined the round, which brings the company’s total funding to more than $63 million. More here.

The Relish, a 1.5-year-old, San Francisco-based sports media company that creates content geared toward female fans, has raised an undisclosed amount, including from Precursor Ventures, Halogen Ventures and Slow Ventures. More here.

Riversand Technologies, a 16-year-old, Houston, Tex.-based maker of data management software, has raised $35 million in funding led by Crestline Investors. More here.

Savonix, a two-year-old, San Francisco-based startup that helps gauge cognitive function via a 30-minute assessment that can be accessed from any iOS or Android device, has raise $5.1 million in Series A funding led by DigiTx Partners, with participation from Rethink Impact. The company has now raised $6.6 million altogether. More here.

Shipt, a three-year-old, Birmingham, Ala.-based online grocery delivery company that employs an annual membership model, has raised another $40 million from the company’s previous backers: Greycroft Partners, e.ventures, and Harbert Venture Partners, which had provided the company with $20 million a little less than a year ago. TechCrunch has more here.

STRIVR Labs, a 2.5-year-old, Palo Alto, Calif.-based virtual reality training software company, has raised an undisclosed amount of funding from the National Football League, according to WSJ. More here.

Trilogy Education Services, a 1.5-year-old, New York-based continuing education program manager that creates and manages skills-based training programs for 21 universities around the world, has raised $30 million in Series A funding from Highland Capital Partners, with participation from Rethink Education, City Light Capital, and other, individual investors. More here.

Tulip, a three-year-old, Somerville, Ma.-based maker of smart manufacturing apps, has raised $13 million in Series A funding led by New Enterprise Associates, with participation from Pitango Venture Capital and numerous returning angel investors. More here.

Wahed, a 2.5-year-old, New York-based robo-advisory firm that serves religious Muslims who are looking to build a halal portfolio, has raised $5 million in seed funding from a mix of investors, including Afkar Holdings managing partner Khalid Al Jassim, former JPMorgan Chase managing eirector John Elkhair, and former McKinsey & Company partner Nasr-Eddine Benaissa. TechCrunch has more here.

Wiretap, a 3.5-year-old, Columbus, Oh.-based cloud security platform, has raised $4.85 million in funding co-led by Draper Triangle Ventures and Ohio Innovation Fund, with participation from JumpStart and Rev1 Ventures. More here.

Workey, a two-year-old, Tel Aviv-based career site that uses artificial intelligence to streamline the process of matching companies with potential candidates, has raised $8 million in Series A funding. The round was led by PICO Partners and Magma VC and brings the total Workey has raised so far to $9.6 million. TechCrunch has more here.

New Funds

Causeway Media Partners, a three-year-old, Boston-based investment firm founded by Highland Capital Partners cofounder Bob Higgins; Boston Celtics co-owner Wyc Grousbeck; and Mark Wan, co-founder of Three Arch Partners, has held a $207 million close on its second fund, shows an SEC filing first flagged by Axios.  We talked with Higgins when the firm first launched its $125 million debut fund, to get a handle on its mission.

An SEC filing for Softbank’s Vision Fund has materialized, showing that eight investors have provided the outfit with its $93.15 billion to date. (Softbank, Apple, Qualcomm, Mubadala Investment Company, Saudi Arabia’s PID public fund, Foxconn, and Foxconn-owned Sharp are investors, which, we think, leaves one mystery backer.)

Also Sponsored By . . .

StrictlyVC is also being brought to you this week courtesy of Dreamit UrbanTech. Its message to readers (and founders of breakthrough startups, particularly):

The Dreamit UrbanTech Accelerator Program is officially accepting applications for their Fall 2017 cycle through June 23rd. Participating startups will benefit from unprecedented access to Dreamit’s national customer and investor network, including a chance to interface with the $3 billion Tampa Bay Urban Redevelopment Initiative being led by Strategic Property Partners, a joint venture between Jeff Vinik and Bill Gates’ Cascade Investments. The Dreamit UrbanTech accelerator seeks startups that use digital solutions to make urban areas more livable, sustainable, connected and efficient. We’re looking for startups working in real estate tech, construction tech, IoT, smart cities, clean energy, agriculture, transportation, and AI to join our 14-week growth-focused program. Apply before June 23!

IPOs

Delivery Hero’s much-anticipated IPO is on. Today, the European food delivery company officially announced that it plans to raise as much as €450 million ($506 million) from a public listing on the Frankfurt Stock Exchange. More here.

Exits

Snap has acquired Placed, a Seattle-based location-based analytics and ad measurement startup that aims to demonstrate the extent to which ads are driving users to stores. The purchase price was not disclosed (though Bloomberg’s sources say the deal was sewn up for around $125 million). Placed had raised a little more than $13 million from investors, including a $10 million Series B led by Two Sigma Ventures in 2014. More here.

Professional services company EY has acquired the Melbourne-based identity and access management software company Open Windows; the latter’s tools will now help form the basis of a new centralized IAM advisory platform within EY, led by Open Window’s CEO, Simon Adler. Terms of the deal weren’t disclosed. More here.

People

Yesterday, we mentioned that Bozoma Saint John, the Apple executive who garnered significant attention for her demo at last year’s worldwide developer conference, is planning to leave the company. The reason, it turns out: she’s headed to Uber. TechCrunch has more here.

In a bid to heal its fractured company culture, Uber has also hired Harvard Business School professor Frances Frei as its new SVP of leadership and strategy. According to Uber, Frei will report to CEO Travis Kalanick, “work as a partner” with chief human resources officer Liane Hornsey, and serve as an executive coach for Uber’s leadership team. TechCrunch has more here.

Elon Musk measures everything in dog years (whether he means to or not).

Jobs

A new fintech-focused venture firm called Motive Partners — its founders are fintech entrepreneurs and investors and they’re reportedly out raising a $150 million debut fund — is looking to hire an associate. The job is in New York.

Essential Reads

After blocking Google users from reading free articles in February, the WSJ’s subscription business soared fourfold. But there was a trade-off.

Carvana, a Phoenix-based company that sells used cars through vending machines, us about to release its first earnings report since going public in April. In preparation, Bloomberg reports on the founder’s checkered past.

Did the Intercept bungle the NSA leak?

Detours

Why drug dealers are killing their customers: A kilo of heroin nets a dealer $60,000. A kilo of fentanyl is worth $1.2 million.

Apple is introducing a new feature called Do Not Disturb while Driving.

Retail Therapy

Museum Hotel.

Seersucker is back.

Hi, everyone, happy Monday! Hope you enjoyed last week’s various interviews with institutional investors. Thanks very much again to Semil Shah for holding down the fort while we stepped away from the computer for a week.:)

StrictlyVC is being brought to you this week by Rosebud Communications, Silicon Valley’s premier PR firm specializing in venture-backed startups. Their areas of expertise include enterprise SaaS solutions, martech, edtech, and fintech. Email them at info@rosebudpr.io.

Top News in the A.M.

Apple kicked off its Worldwide Developers Conference today in San Jose; you can check out TechCrunch’s live blog here for constant updates. Among other announcements coming out of the event: Amazon and Apple have finally come to an agreement to bring Amazon’s video app to the Apple TV streaming box. Apple also just introduced its newest mobile operating system.

Apple and Amazon are joining forces with Foxconn in its takeover bid for Toshiba’s semiconductor business. Reuters has more here.

WeWork’s Adam Neumann is Graduating from College Today — 15 Years After Enrolling

In recent years, there’s been plenty of debate about the merits of college and whether, given the escalating price of a higher education — and the time required — it’s worth it. Certainly, dropping out of college proved an auspicious decision for Bill Gates, Steve Jobs and Michael Dell. The same could be said of Mark Zuckerberg, Ev Williams and Travis Kalanick.

WeWork co-founder and CEO Adam Neumann feels rather differently about the value of a college diploma. In fact, today, 15 years after enrolling in Baruch College in New York, Neumann — whose company is currently valued by its investors at roughly $17 billion — is both delivering the commencement address at the school and graduating, having recently completed the independent study he needed to finally receive his bachelor’s degree.

We were in touch with him late yesterday to ask why he made the effort.

Did you know from the outset that you wanted to study business?

When I moved to New York City from Israel, I came here with the idea to get a great job, have tons of fun and make a lot of money. Growing up in Israel, I watched a lot of American TV and I thought it’s what the “cool” people did, and I wanted the same thing. I thought this was the American dream — a fast-paced pursuit, a joyride — and it drove my desire to pursue a career in business. After I met [my wife] Rebekah, I realized that this was wrong. She told me that if I brought passion and intention together, it would lead me in the right direction and I would become genuinely happy. And then, the money would follow.

Were you a good student? How would you describe your teenage self? 

When I started at Baruch in January 2002, I was almost 23 years old. I’d previously spent five years as an officer the Israeli Navy. I did what I thought you were supposed to do at that age — a little studying and a lot of trying to have fun.

I think I’ve heard you say that you had the idea for WeWork while a college student, but a professor dissuaded you. If so, have you been in touch with that professor in subsequent years?

In college, I entered an entrepreneurship competition and I submitted a concept like our current product WeLive that was called “concept living.” There were five rounds. The first round was a written proposal and in the second round you got to present, and I didn’t even get to present. The professor didn’t think I’d be able to raise enough money to change the way people live.

I think there’s an important lesson in that, when you’re a teacher, when you’re in a position of power, when you’re a leader, be very careful what you tell people they can’t do. Because they might just listen to you. And you may just be crushing a dream that might be very, very meaningful — not just to that person but to the world.

However, what he said to me influenced me to start WeWork first, and I would not have been able to launch WeLive without the success of WeWork.

More here.

New Fundings

AI-Drive, a two-year-old, Beijing, China-based company that develops central decision-making systems for autonomous vehicles and drones, has raised $14 million in Series A funding led by Shunwei Capital. China Money Network has more here.

Arcadia Power, a three-year-old, Washington, D.C.-based renewable energy company, has $6 million in Series A funding led by Energy Impact Partners, with participation from earlier investors BoxGroup and Wonder Ventures. More here.

BrainCheck, a three-year-old, Houston, Tex.-based mobile brain health tracking platform, has raised $1.5 million in funding, including from True Wealth Ventures. Austin Business Journal has more here (sub required).

Carmera, a 2.5-year-old, New York-based 3D mapping startup, has raised $6.4 million in new funding led by Matrix Partners, with participation from Resolute Ventures, Notation Capital, Joe Montana, Bre Pettis, Semil Shah and others. More here.

DealCloud, a seven-year-old, Charlotte, N.C.-based maker of deal management and workflow software, has raised $4.5 million in funding co-led by Cultivation Capital FinTech and Hamilton Lane. The Charlotte Observer has more here.

Evolve Vacation Rental Network, a six-year-old, Denver-based vacation rental property management platform, has raised $11 million in fresh funding led by T. Rowe Price, with participation from Annox Capital, Allen & Co. and PAR Capital Ventures. Denver Business Journal has more here.

Knightscope, a four-year-old, Mountain View, Ca.-based company that’s building autonomous robots that are designed to monitor their surrounding environment and provide a physical and commanding presence in public places where security is needed, has raised $3 million in funding from Konica Minolta. More here.

Kyrpt.co, a 1.5-year-old, Boston-based mobile authentication startup, has raised $1.2 million in seed funding led by Rough Draft Ventures, with participation from Slow Ventures, SV Angel, and Akamai Labs. TechCrunch has more here.

Lob, a four-year-old, San Francisco-based automated mail-delivery infrastructure platform, has raised $20 million in Series B funding led by YC Continuity Fund, with participation from Polaris Partners, Floodgate, First Round Capital and Initialized Capital. VentureBeat has more here.

Lorem Technologies, a year-old, New York-based website development services startup, has raised $1.1 million in seed funding led by Flybridge Capital, with participation from Founder Collective, Randy Parker and Frederick Townes. More here.

Neigou.com, a four-year-old, Beijing-based platform that provides benefits from e-commerce sites to a company’s employees, has raised roughly $14 million in Series B funding led by China’s National Small and Medium-sized Enterprises Development Fund. Other investors in the round include Cheung Kong Graduate School of Business’ Chuang Fund and Focus Media Information Technology. China Money Network has more here.

Owl’s Brew, a four-year-old, New York-based tea cocktail mixer maker, has raised an undisclosed amount of Series A funding, including from Cambridge Companies SPG and ZX Ventures, which is new incubator and venture team backed by Anheuser-Busch InBev. More here.

Shansong Express, a three-year-old, Beijing-based inner-city logistics startup, has raised $50 million in additional Series C funding. Shunwei Capital and Beijing Hualian Group co-led the round, with participation from Hearst Communications and earlier backer Prometheus Capital. The new round brings Shansong’s total fundraising this year to $100 million. In February, the company closed on $50 million in Series C funding led by SIG Asia Investment and YI Capital. China Money Network has more here.

UNTUCKit, a six-year-old, Hoboken, N.J.-based men’s apparel brand, has raised $30 million in new funding from Kleiner Perkins Caufield & Byers. We find this company’s product — its shirts are specifically tailored to be worn outside of your pants, sort of an hilarious concept, though apparently, it’s clicking with shoppers. According to Reuters, the company is now valued at $200 million. More here.

YEAY, a two-year-old, Berlin-based video e-commerce experience for millennials that allows them to buy and sell their stuff using Snapchat-style video stories, has raised $4.9 million in seed funding co-led by the German venture firm Grazia Equity and the Swiss firm Mountain Partners, with participation from a raft of individual investors. TechCrunch has more here.

Yogome, a five-year-old, San Francisco-based e-learning company that makes a tablet and mobile games, has raised $6.6 million in Series A funding led by Seaya Ventures, with participation from Variv Capital and Endeavor Catalyst. More here.

Yuanfudao, a five-year-old, Beijing, China-based online tutoring firm, has raised $120 million in fresh funding led by a Warburg Pincus affiliate, with participation from earlier backer Tencent. The round is reportedly the largest in China’s online tutoring industry, though VIPKID came awfully close last summer. More here.

Zopa, a 12-year-old, London-based lending company that’s launching a bank, has raised £32 million ($41.3 million) in new funding, including from Wadhawan Global Capital and Northzone Ventures. CNBC has more here.

New Funds

Draper Esprit, an 11-year-old, London-based private equity and venture capital firm, says it has raised roughly $206 million in fresh funding to invest across Europe, and particularly Western Europe. Business Insider has more here.

Thursday!

Judging by your mystified emails, some of you missed our earlier mentions that SVC founder Connie Loizos is out the rest of this week. We promise we’ll have funding announcements and all the other sections that she cares about when she’s back on Monday. (We’re pretty certain she’ll be back, though after snorkeling for the first time yesterday off the coast of Maui, she’s now threatening to never return.)

In the meantime, StrictlyVC advisor and frequent guest editor Semil Shah is generously helping us with a rare series of short interviews with sophisticated institutional investors, meaning the people who write the checks to venture firms (so they can invest in your startups). Today’s interview is with an investor at the giant asset management firm Invesco, which remains very bullish on VC as an asset class, particularly smaller, earlier-stage funds. Read on to learn more.

Sponsored By . . .

Today’s StrictlyVC is brought to you by CSFI, (aka the Center for Financial Services Innovation), hosts of the 2017 EMERGE Financial Health Forum in Austin, Texas,  June 14 through June 16. This year, they’ll be announcing the next class of the Financial Solutions Lab on stage, looking at business strategies that work, and talking about the future of financial health. Plus innovation, innovation, innovation. StrictlyVC readers save $150 off registration rates, so get thee to Austin!

LP Conversation No. 4: Amit Tiwari of Invesco

By Semil Shah

Amit Tiwari is a San Francisco-based partner at Invesco Private Capital (IPC), one of the industry’s oldest and most active private equity fund of funds. Tiwari helped establish IPC’s West Coast presence, and he currently co-leads the management of IPC’s Emerging Manager mandate with CalSTRS. He also manages all of IPC’s sourcing and evaluation of emerging private equity opportunities in Latin America. He recently answered some of our questions concerning the current state of the venture investing ecosystem.

Some investors think the Bay Area is now home to too many venture firms. Agree or disagree? 

I was at a private equity conference recently where an LP said: “I need another $10 million – $25 million seed fund like I need another hole in my head.” While she was referring to the global seed space, from what we’ve seen this issue is more acute in the Valley than in other geographies.

It’s been great to see vibrant activity across fundraising and new company formation. The economics of starting a company have undergone a sea change and startups are popping up at unprecedented levels. This is good. But there’s definitely been a glut of small, sub-$25 million seed funds that have really muddied the water. Not only is there an increasing number of funds; there’s also very little differentiation between these groups. Fatigue is growing within the LP community from seeing one fund after another that looks the same. VCs need to have an edge; something rare — a different approach, perhaps, that sets them apart.

As an aside, there also appears to be a concentration of capital as the vast majority of LP commitments today are being parked at big funds around the Valley. Many of these funds will need to deploy that capital in big chunks at a time — and to do so, many will likely gravitate toward big rounds; possibly at the mid- to late stages, which we are less excited about from a returns standpoint. We don’t have conviction that you can underwrite consistently to 10x+ returns at those stages like you can in earlier stages. And when half to two-thirds of capital is concentrated around a segment of the market where returns are comparatively modest, we think it will dampen returns for venture as a whole. We’d prefer to see a broader distribution of capital.

More institutional investors are directly co-investing beside the venture funds in which they invest. Meanwhile, more venture funds are investing in other venture funds. What’s going on and do you approve?<

LP direct investments have been around for a while within private equity — think buyouts — so this strategy isn’t new for institutional investors. They’ve increasingly come into favor within venture over the last decade, gaining steam after the recent financial crisis as a way for LPs to shorten the long tail and juice returns.

Demand for these direct investments ebbs and flows based on market sentiment, but I think they are here to stay. When done prudently, direct investments can be a good thing. On one hand, commitments into good VCs can be difficult to scale, so direct deals allow LPs to add to their “exposure” when they’re co-investing together. It also garners a deeper partnership between the LP and VC. It may help LPs diligence funds as well because they get to see how a given GP or VC navigates a deal up close.

As for VCs formally investing in other funds, this is a relatively new phenomenon and I don’t know if we have enough data points to say whether this will become a long-lasting trend. It certainly changes the dynamics of how institutional LPs underwrite. Most LPs go into venture funds assuming a 10-year commitment, with the potential for one- or two-year extensions. When their VC funds are investing in other VC funds, LPs have to start thinking in 13, 14, 15+ year investment horizons, as each underlying fund investment will take on it’s own life. Those are portfolio construction issues that LPs would prefer to manage on their own.

Investing in funds is also a different skill than investing in companies, and from that standpoint, VCs need to make sure that they have the right people with the know-how and the networks within the fund manager community. The Foundry Group Next has taken a good approach in this regard by bringing in a seasoned LP dedicated to the effort. [Editor’s note: Foundry brought aboard Lindel Eakman, who’d previously spent 13 years with the University of Texas Investment Management Company, which was Foundry Group’s largest investor.] Otherwise it can become cumbersome for the VC to have to manage both company boards and LP advisory boards. They’re different beasts.

Are there new tools and methods for LPs to diligence their fund investments? If so, how does your team use them?

The methodology is largely the same but there are more tools now. The private equity industry is notoriously opaque and publicly available information — especially when it comes to performance and valuations — had been difficult to get in the past. There’s more data available to LPs now than ever before. The likes of Crunchbase, Mattermark, Pitchbook, and CB Insights coming onto the scene over the last few years has changed the game. For example, it used to be that we could compare and contrast where an investment is marked within a VC’s portfolio against other syndicate members where we have access as LPs.

Today, we can go deeper to evaluate a given investment at a different level; because of newer data tools, we can better understand the competitive landscape, market sizing, and do our own intelligence gathering rather than having to rely on the VCs’ assessments of a company’s valuation and prospects.

Will crowdfunding replace early-stage investing?

Crowdfunding has a place, but I do not see it displacing early stage venture investing. If you’re market-testing your idea and need validation or working capital for small initial run of manufacturing/development, then crowdfunding is a worthwhile alternative. It can be a one-turn game, so if you’re comfortable with a single injection of capital it may be viable. But if you’re thinking about scaling your business, downstream financing, team building, and a multi-path product roadmap, crowdfunding alone won’t cut it.

How closely do you track VCs on social media, if at all?

We see social media activity as just another data point, but it’s not something that would make or break a decision today. If a VC is active on social media, we’re most curious about the content itself and how much engagement she/he is getting. Thought leaders like Fred Wilson and Brad Feld have built a massive following over the years because of how they’ve been able to engage people in the industry through their writing, and this has had ancillary brand benefits to their respective venture firms, often translating into deal flow and reputation.

That said, venture is increasingly becoming a services business, which is why you see more and more VCs increasing their effort in content marketing as a way to differentiate themselves within the ecosystem. Going forward, I do think that social media will play a more important role for VCs; it may become a much more relevant data point for LPs in their evaluation.

(Editor’s note: Invesco is not an investor in Shah’s seed-stage fund, Haystack.)

Wednesday! Connie is out this week; we’re seeing a lot of you are still out on vacation this week, too. Hope you’re enjoying the down time.:)

In the meantime, StrictlyVC advisor and frequent guest editor Semil Shah is generously helping us with a series of short interviews with a variety of institutional investors, including, today, from Accolade Partners, a 17-year-old, Washington, D.C.-based fund of funds that invests in both venture firms and private equity outfits.

We won’t be running the other sections of the newsletter through Friday, but we’ll be back in full form this coming Monday.

Covfefe!

Sponsored By . . .

Today’s StrictlyVC is brought to you by our friends at the non-profit Center for Financial Services Innovation, which invites all you smart innovators to join them in Austin, Texas, June 14-16 for their annual EMERGE Financial Health Forum. StrictlyVC readers save $150 off registration, and there’s no better place to see the future of fintech innovation! Register today.

LP Conversation No. 3: Atul Rustgi of Accolade Partners

By Semil Shah

Atul Rustgi has spent the last decade as a partner with Accolade Partners, a venture capital and growth equity fund of funds that’s based in Washington, D.C. Rustgi, who previously worked at McKinsey & Co. and the venture philanthropy Robin Hood Foundation, recently shared some quick thoughts with us about what’s he’s seeing in the world of VC.

Do you feel that there are too many venture firms right in Silicon Valley? Not enough?

In terms of number of firms, it definitely feels more saturated than a few years ago. A few years ago, we’d see a new micro VC every couple weeks. Now we’re seeing two to three new micro VCs every week. They’re coming from many different directions — spinouts from established firms, operators, angel investors. We’re seeing more and more specialized funds, too.

While we believe the opportunity set for innovation is potentially greater than the past decade and that some great companies will be started disrupting large industries, the amount of activity and noise is at an all-time high. It’s exhausting to keep up with all the new fund formation. We don’t see the rate of new fund formation abating, either, as more institutional investors allocate to venture [as an asset class] both domestically and internationally because of where interest rates are today and return expectations in other asset classes. It’ll be interesting to see what happens when interest rates rise, if they rise materially.

San Francisco feels particularly saturated, with more balance in other cities such as New York, Los Angeles, and Chicago, but in those cities too, we’re seeing increased fund formation. Given the amount of dollars — and therefore efficiency — in San Francisco, you wonder if the incremental dollar has a better return potential in non San Francisco cities. You definitely see it with lower valuations in those cities. But you also need to consider the quality of companies and opportunities in those cities. Ther’s a lot of beta in the market. It’s harder and harder to find the alpha.

We’re seeing more fund of funds like yours wanting to invest directly in companies. At the same time, more VCs are investing in other venture funds. Think the fund of the future be a kind of hybrid fund? 

We see more and more entities — funds of funds, endowments, foundations — wanting to invest directly in companies for various reasons, such as minimizing fees and the J-curve, and shortening the timeline to liquidity, to name a few. We also see larger VC firms investing in smaller funds for the purpose of scout programs, where they can get a first look at promising companies that move from Seed to Series A.

While these trends aren’t new to the industry, they do seem to be accelerating. As an investor in larger VC funds, we would ideally like to see these firms access this deal flow through their relationships or the use of data, without financially investing in these underlying funds. By investing in smaller funds, it augments the number of portfolio companies in the main fund, potentially dilutes the main fund’s return, and extends the main fund’s liquidity profile. It also becomes an alternative source of capital for these new funds, therefore contributing to the number of new fund formations.

We understand why firms do it, but wish they invested in companies solely and not funds.

Are you using any new tools of tricks to aid in helping you research and track your fund investments? 

We do believe we have some tools and methodologies that are unique to us but we’ll chalk them up as trade secrets. We’re always trying to find new ways to evaluate managers. Beyond specific tools and methods, let’s not forget investing in funds is a partnership. This is a long cycled asset class where it takes 7 to 10 years for a portfolio company to mature, and funds last longer than that. At the end of the day, the relationship with the general partners matters a lot. It takes time to establish that level of trust prior to investing. Data and analysis helps in making an investment, but we’re ultimately betting on people.

Think crowdfunding will ever replace early-stage investing?

This debate started a few years ago when AngelList and sites like Kickstarter started. Despite the increasing prominence of these platforms, new fund formation is at an all-time high, so maybe they can and will co-exist. We believe there is a role for both. As an institutional allocator of capital, we still need somebody to “man the ship” and think about portfolio construction. If you’re a direct investor, the crowdfunding sites are great platforms. But if direct investing is not your primary expertise, then you need a steward of your capital, like a general partner.

Do you track VCs on social media?

We monitor the social media activity of all of our managers through Twitter, Medium, blogs, etc. Most post about topics like family, politics and sports, but also market news and industry dynamics. It helps us get to know them holistically, understand what they’re thinking, and engage with them.

To date we haven’t seen anything that would preclude us from investing in a fund, but we’re definitely on the lookout. Furthermore, a number of our managers maintain highly followed blogs, and they’ve proven to have positive benefits — increased deal flow and a strengthened brand among them.

(Editor’s note: Accolade Partners is not an investor in Shah’s seed-stage fund, Haystack.)

Happy Tuesday! Hope you had a terrific Memorial Day weekend.

For new readers or those who might have missed our mention last week, Connie is taking this week off to play some volleyball at the beach. StrictlyVC advisor and frequent guest editor Semil Shah is filling in and running a series of short interviews with a variety of institutional investors, including, today, from the University of Texas Management Company, which oversees a roughly $40 billion endowment, making it third largest U.S. university endowment behind Harvard and Yale.

We will *not* be running the other sections of the newsletter, but we’ll be back in full form this coming Monday.

Sponsored By . . .

StrictlyVC is being brought to you today by Parachute: Parachute’s cozy bathrobe is so soft that working from home will become mandatory.

LP Conversation No. 2: Susan Chen of UTIMCO

By Semil Shah

Susan Chen is a Managing Director at University of Texas Investment Management Company, otherwise known as UTIMCO. We recently asked her some of her thoughts about the current state of venture capital investing.

A question about the Bay Area ecosystem: Does it feel saturated to you? If so, why? If not, why?

I wouldn’t say it feels saturated; I would say it feels full. It feels full in the sense that there is a lot of capital pursuing investments at every stage. Saturation to me suggests a complete breakdown of capital discipline, or a situation where there is so much capital chasing deals that it is hard to see *any* way that a dollar in the system can earn an appropriate return. I don’t think we’re quite there yet.

I should note that UTIMCO pays attention to metrics such as number of active funds, total capital raised, average valuation and size of a given stage round, etc. to monitor the supply/demand dynamic in venture — just as we do in other asset classes; we ultimately seek to partner with the folks whom we think are the best VCs in the world. The average data in venture around capital raised, round size, and so forth, is useful, but doesn’t tell the whole story, just as headline valuation metrics in public markets are useful but don’t tell the whole story.

We are seeing more fund of funds wanting to invest directly in companies, and we see some VC firms now investing in funds. Will the fund of the future be a “hybrid” fund? 

VCs seek to invest just before revolution — in other words, where companies are disrupting an industry or providing a 10x or better solution to an important problem. So it seems very natural that VCs would also look inward and seek to change and evolve their models over time in a way that reflects market developments and where they believe the best opportunities to be.

I don’t think the fund of the future is necessarily a hybrid fund. There are some firms where that model makes a lot of sense. For example, we invested recently in a fund that invests both directly in companies and in other funds, and that model makes sense because the partners at that firm had long historical personal track records of investing in and advising funds, as well as investing in companies. If a fund-of-funds invests exclusively in small, early stage funds, it may make sense for that FoF to add a direct component because those smaller funds may have follow-on rights that they can’t fully deploy capital into.

But there are other firms — and I think it’s actually the majority of firms — where that model makes much less sense. Perhaps a VC firm’s partners have always invested only in their own funds and don’t have experience or interest in investing in and advising other VC funds. Or perhaps a FoF invests primarily in later-stage funds or larger multi-stage funds. In those cases, a hybrid structure isn’t really synergistic with the firm’s core activities.

Are there new tools and methods for LPs to diligence their fund investments? If so, how does your team use them?

In the last few years, various databases — such as Pitchbook, CB Insights, and Mattermark — have emerged that provide quite a bit of information about which VCs have invested in a company, at which round, who the lead partner was, board memberships, etc.

We use these resources to gather some information, but our ultimate firm and fund evaluation is still very customized. We focus on understanding a VC’s sourcing network, deal evaluation process, portfolio construction approach, perception and reputation with entrepreneurs, and the partnership dynamic within the GP. Good old phone calls and face-to-face meetings remain the best way to accomplish this.<

Will crowdfunding replace early-stage investing? If yes, when will things tip over? If not, why not?

For the types of companies and management teams that VCs look to invest in, crowdfunding can be an interesting, complementary source of funds,  but it’s unlikely to completely replace early-stage institutional funding. Companies and founders with big visions will continue to prefer a more concentrated and active set of investors that can help them build their businesses and that can add real value on product and strategy.

ESPN recently reported that NFL teams monitor and analyze the social media activity of players who enter the draft as part of the evaluation process. Do LPs do something similar when tracking VCs?

As an LP, we follow VCs and their portfolio companies on social media, and I know many fellow LPs do the same. I view social media primarily as a method to stay informed and as another channel we can use to engage in regular dialogue with our partners.

We don’t base investment decisions on a VC’s social media popularity. Social media presence can be indicative of a VC’s surface brand awareness among entrepreneurs, but it doesn’t capture investment judgment, portfolio construction approach, how that VC will behave when a company is struggling, or many other important things. Some of our partners are extremely active on social media, and others are much less active.

(Editor’s note: UTIMCO is not an investor in Shah’s seed-stage fund, Haystack.)