StrictlyVC: October 3, 2017

Hi! Thanks so much to the many of you who wrote in yesterday, trying to help us out with this new format. We fixed up a few things (the email header, the unsubscribe link). Unfortunately, we don’t yet have a fix for those of you who use Outlook but we’re working on it!

Top News in the A.M.

Put away the popcorn and candy bars. Judge William Alsup just ruled that the Waymo versus Uber trial would be delayed until December 4.

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What SoftBank Really Wants

Some in Silicon Valley aren’t quite sure what to make of SoftBank and its massive, roughly $100 billion Vision Fund. At times, they say privately, it looks like a drunken gunslinger, firing off massive checks in quick succession.

But sources close to SoftBank say there is a method to its madness. In fact, these same sources say SoftBank’s investors believe they’ll see at least a 20 percent internal rate of return (IRR) over time from Vision Fund as it funds whole sectors being disrupted by artificial intelligence and machine learning — from pharma, to utilities, to ridesharing — and whose data SoftBank can leverage into an endless stream of opportunities.

The idea, these people say, is not to produce venture-like returns. The idea is instead to return more money to investors than private equity firms like KKR, whose first 18 private equity funds wound up delivering more than two times total capital invested on a gross basis, and produced a net IRR of 18.9 percent. Says one source close to SoftBank, “If someone is investing in [Vision Fund], he’s expecting to get better returns than with KKR and Blackstone.”

Indeed, 20 percent IRR over seven years — the time SoftBank estimates it will take most of Vision Fund’s bets to play out — is the “worst-case scenario” says one source. “Best case,” adds this person, is “investors get close to what Masa has done in the past.”

It’s a reference to the 44 percent IRR on investments that SoftBank can boast over its 18-year history, though more than one critic has noted that much of this number is rooted in SoftBank founder Masayoshi Son’s early bet on Alibaba, beginning in 2000. Son would eventually pour $58 million into the company; those holdings, which SoftBank maintains, save for a $10 billion chunk it sold to finance another purchase, are currently worth $130 billion.

Higher and higher

Doing back-of-the-napkin math on this 20 percent IRR — whether over seven years or a more traditional 10-year time frame — would translate into between $130 billion and $430 billion for SoftBank’s investors — minus its initial investments, management fees and the debt that makes up roughly $44 billion of Vision Fund’s total holdings.

That’s a whole lot of capital to generate for limited partners, so how does it do it? SoftBank thinks it can get there largely through ridesharing, say sources familiar with its thinking. More specifically, SoftBank is counting on the smooth evolution of today’s rideshare companies into vast networks of self-driving taxis.

It has already made an array of bets that underscore this theme, including on the China-based ride-hail giant Didi Chuxingin Grab, the dominant ride-hail startup in Southeast Asia; and in Ola, India’s leading ride-hailing company, which reportedly closed on $2 billion just yesterday, including from SoftBank.

Helping grow a U.S. player is also crucial to its strategy, and SoftBank has been openly unsentimental about whether that means funding Uber or Lyft, though Uber would seem to be its strong preference. Says one source close of a meeting that’s slated to take place today, wherein Uber’s directors will vote on whether to go forward with a $10 billion stock sale to SoftBank: “Uber should be scared of SoftBank funding Lyft. They better take [the money].”

We’ll see soon enough how scared or not Uber may be of scorning SoftBank. Certainly, though, concern about the companies that SoftBank doesn’t fund is growing in Silicon Valley.

More here.

New Fundings

Angaza, a seven-year-old, San Francisco-based pay-as-you-go platform company, has raised $10.5 million in Series B funding led by Emerson Collective, with participation from Rethink Impact,Salesforce VenturesSocial Capital, and the Stanford StartX fund. TechCrunch has more here.

AtScale, a four-year-old, San Mateo, Ca.-based business intelligence platform, has raised $25 million in Series C funding led by Atlantic Bridge. TechCrunch has more here.

CathWorks, a four-year-old, Israel-based developer of non-invasive FFR measurements for guiding coronary interventions, has raised $15.8 million in Series B funding co-led by Quark Ventures and Triventures. Other investors in the round included Planven InvestmentsPontifaxCorundum Open Innovation andBioStar Ventures. Mass Device has more here.

Cullinan Oncology, a new, Cambridge, Mass.-based cancer drug development company led by former Intarcia Therapeutics execOwen Hughes, has raised $150 million in funding from MPM Capital and F2 Ventures. Xconomy has more here.

EnvoyGlobal, a 19-year-old, Chicago-based maker of compliance management software for immigrant employees, has raised $21 million in Series C funding led by Catalyst Investors, with participation from General Catalyst Partners. TechCrunch has more here.

Forensic Logic, a 14-year-old, Walnut Creek, Ca.-based company that sells network search technology and cloud-based information services to law enforcement, has raised $20 million in growth equity funding from Mainsail PartnersMore here.

Frame.io, a two-year-old, New York-based collaboration platform for the video industry, has raised $20 million in Series B funding led byFirstMark Capital, with participation from earlier investors including Accel PartnersSignalFire and Shasta Ventures. TechCrunch has more here.

HYPR Corp, a three-year-old, New York-based company whose authentication technology secures traditional passwords and also biometrics like fingerprints, faces and voices, has raised $8 million in Series A funding led RRE Ventures, with participation from earlier backers RTP VenturesBoldstart Ventures, and Mesh Ventures participated. TechCrunch has more here.

Latitude Geographics Group, an 18-year-old, Victoria, B.C.-based maker of web-based mapping software and related geographic information system (GIS), capabilities has raised an undisclosed amount of funding from Battery VenturesMore here.

Level Ex, a two-year-old, Chicago-based virtual surgery mobile app maker, has raised $11 million in Series A funding led by 4490 Ventures, with participation from JAZZ Venture Partners and Pritzker Group Venture CapitalMore here.

Nanotronics, a seven-year-old, Brooklyn, N.Y.-based developer of an advanced automated microscope, has raised $30 million in Series D funding led by Investment Corporation of Dubai, with participation from earlier investor Founders Fund. The company has now raised $71 million altogether. More here.

MessageBird, a six-year-old, Amsterdam-based cloud communications company, just raised $60 million in Series A funding from Accel Partners and Atomico, after founder and CEO Robert Vis bootstrapped it for six years. Fortune has more here.

Ola, a seven-year-old, Bengalaru, India-based ride-hail company, has raised $2 billion in fresh funding from new investors, includingSoftBank and Tencent Holdings. Bloomberg has more here.

OpsRamp, a three-year-old, San Jose, Ca.-based enterprise IT management platform for hybrid environments, has raised $20 million in funding from Sapphire Ventures. VentureBeat has more here.

Recursion Pharmaceuticals, a four-year-old, Salt Lake City, Ut.-based drug discovery startup that leverages AI, has raised $60 million in Series B funding led by Data Collective. Other investors in the round include MubadalaMenlo VenturesCRVTwo Sigma and earlier backers Lux Capital, Obvious VenturesAdvantage CapitalFelicisEpi and AME. TechCrunch has more here.

STARC Systems, a three-year-old, Brunswick, Me-based maker of easy-to-install, reusable safety barriers for construction sites, has raised $3.5 million in funding led by Blue Heron CapitalMore here.

TrademarkNow, a five-year-old, New York-based trademark management platform, has raised €3 million from Karma Ventures,Balderton Capital and Montiko GmbH. It also has landed a €2 million loan from Finnvera. Tech.eu has more here.

Truphone, an 11-year-old, London-based mobile telecommunications company, has raised a whopping $339 million in funding, including from Minden and Vollin Holdings. TechCrunch has more here.

New Funds

Salesforce just launched a $50 million impact investing fund that will focus on companies doing innovative impact work, using Salesforce’s software in the fields of workplace development, equality, sustainability, and the social sector. Fast Company has more here.

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IPOs

ForeScout Technologies, a 17-year-old, San Jose, Ca.-based cybersecurity company, has filed for an $100 million IPO. The company’s biggest outside shareholders include Accel Partners,Amadeus CapitalMeritech Capital PartnersPitango, and Wellington ManagementMore here.

Exits

Body Labs, a company with a stated aim of creating true-to-life 3D body models to support various business-to-business software applications — such as virtually trying on clothes or photorealistic avatars for gaming. TechCrunch sources say the price was roughly $70 million. It has the scoop here.

Microsoft announced today that it has acquired the social VR app AltspaceVR, whose app allows users across headset and web platforms to join 3D chat rooms to play games, watch videos and attend events. In July, the company said it was shutting down, after a funding round failed to materialize. Weeks later, it suggested that a “third party” had come to its rescue. More here.

ServiceNow, best known for helping large organizations organize field service and help desk activity, has acquired a 16-year-old, San Diego-based design firm called Telepathy for undisclosed terms. TechCrunch has more here.

StackCommerce, a company that sells articles sponsored by brands and published on sites, has acquired Joyus, a San Francisco-based online video marketing company. Terms aren’t being disclosed. According to Crunchbase, Joyus had raised $67.4 million in funding from investors, including Marker CapitalInterWest Partners,Accel Partners and Time Warner Investments. TechCrunch has more here.

Walmart has acquired Parcel, a New York-based delivery startup. Financial terms weren’t disclosed, but the purchase price was less than $10 million, according to Recode. Parcel had raised $2 million from investors, including Galvanize VenturesGreat Oaks Venture CapitalLiberty City Ventures, and Interplay Ventures.

People

A startup led by former Facebook and Google employees is launching a cryptocurrency index fund backed by AngelList founder Naval RavikantMore here.

Former Equifax CEO Richard Smith just blamed the company’s giant data breach on a single person who failed to deploy patch. More here.

Jobs

Albion Capital, the 21-year-old, early-stage, U.K.-based venture firm, is looking to hire an investment associate. The job is in London.

Essential Reads

Here’s the top-secret report of what Uber knew before it acquired a controversial trucking startup.

Does even Mark Zuckerberg know what Facebook is?

Detours

The graphic designer behind the Papyrus font: “If I can take this time to apologize to my brother and sister graphic designers . . .”

Retail Therapy

VC Alan Saltzman is selling his Atherton estate for $40 million. (It’s been on the market since March, so if you want to wheel and deal . . .)



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