• Venture Heavyweights Sit Back as Deal Sizes Soar

    Hanging Boxing GlovesIt’s been a banner week for a number of Internet companies.

    Last Wednesday, social network Pinterest acknowledged closing on a $225 million round that valued the company at $3.8 billion. Shortly thereafter, AllThingsD reported that Snapchat, the messaging app, is now weighing a $200 million investment round that would value the company at $3.5 billion. And just yesterday, NextDoor, a social network for neighbors, raised $60 million in fresh capital.

    But the reality is that some of today’s biggest venture heavyweights have pulled back dramatically on late-stage deals.

    Two weeks ago, during a visit to Andreessen Horowitz, Marc Andreessen told me his firm has “done almost no growth investments in the last year and a half.”

    Yesterday, Ravi Viswanathan, who co-heads New Enterprise Associates’ Technology Venture Growth Equity effort, told me much the same. “If you chart our growth equity investing over the last few years, it’s been very lumpy,” said Viswanathan. “Last year, I think we did four or five growth deals. This year, I don’t think we did any.”

    That’s saying something for a firm that is right now investing a $2.6 billion fund that it raised just a year ago.

    Andreessen attributes his firm’s reluctance to chase big deals to an influx of “hot money.” The partnership is “way behind on growth [as an allocation of our third fund],” Andreessen told me, “and that’s after being way ahead on growth in 2010 and 2011, because so many investors have come in crossed over into late stage and a lot of hedge funds have crossed over, which is traditionally a sign of hot times, hot money.” He added, “What we’re trying to do is be patient. We have plenty of firepower. We’re just going to let the hot money do the high valuation things while it’s in the market. We’ll effectively sell into that.”

    That’s not to say later-stage deals don’t have their champions right now. At this week’s TechCrunch Disrupt conference, venture capitalist Bill Gurley of Benchmark told the outlet that “a global reality is that some of these companies have systems, they have networks in them, that cause early leads to always play out with really huge platforms.” People “laugh or write silly articles about the notion of a pre-revenue company having a very high valuation,” added Gurley.  But “if you talk to some of the smartest investors on Wall Street, or go talk to guys like Lee Fixel or Scott Shleifer at Tiger, they’re looking for these types of things. They’re looking for things that can become really, really big.”

    Still, Viswanathan’s concerns sound very similar to Andreessen’s when I ask him why NEA has pulled back so markedly from later stage investments.

    “It’s an amazing tech IPO market, and that drives growth,” Viswanathan observed. “But I’d say the growth deals we saw last year [were] elite companies getting high valuations. There are still great opportunities out there. But right now, it feels like there are high valuations even for the lesser-quality companies.”

    Photo courtesy of Corbis.

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  • Singapore Sling: Entrepreneurs Head In – and Out – of Tiny Island Nation

    Singapore_Skyline_Panorama

    Murli Ravi is the head of South Asia investments for JAFCO Asia, and from his perch in Singapore, he’s never seen so much cross-border activity as in the last 12 months. Ravi joined JAFCO in 2008, after studying the regional venture community as a senior analyst with INSEAD. “Let’s just say I’ve made three trips the U.S. in 2013. I made zero trips to the U.S. in the four years prior,” he observes.

    Late yesterday, we Skyped with Ravi to learn more.

    Globalization is an ongoing trend. What are you seeing?

    I cover a lot of territory – Southeast Asia, India, Australia – and I’m seeing a preponderance of people not just coming to Singapore and staying here, including U.S. companies, but I’m seeing startups in Singapore whose attitude is to quickly expand. I see many more of them looking to enter China and India, which are both about five hours away [from Singapore] by plane, and even sometimes Japan and Europe and the U.S.

    What’s changed in the last 12 months?

    I think Southeast Asia as a whole just has a much larger pool of talent coming online now for startups to harness. Also, historically, broadband penetration wasn’t high. Incomes were low. The smart guys would typically leave. All of those patterns are reversing.

    What types of companies are coming to Singapore from the U.S.?

    Broadly, you have a lot of small U.S companies and Australian companies and even Japanese companies that are realizing that Southeast Asia is an interesting market. If you just look at the English-speaking countries across the region – India, Australia, Singapore, Malaysia, the Philippines, and almost all the others have some English in a business context – that’s close to two billion people, or roughly 30 percent of humanity.

    You also see companies move here because [their product is better suited to the market in Asia]. I sit on the board of a company called Bubbly , formerly Bubble Motion, that was founded in the Valley but moved to Singapore.

    I remember reading about that move and thinking that it boiled down to lower costs for the company.

    Well, Bubbly is a social messaging service like Twitter, except that instead of read and tweet, you speak and listen, which also appeals to the markets here. Unlike on Twitter, where you’re talking to the world and hoping someone will talk back, with Bubbly, it feels like someone is talking to you because you hear them in your ear, whether it’s a friend or a celebrity who has recorded a message about picking up her kids or an upcoming show. Unlike on Twitter, by the way, consumers here are also willing to pay to listen to celebrities. Right now, the biggest markets for Bubbly are India, Japan, Indonesia, Philippines – all of which have their own celebrities.

    Do other recent transplants jump to mind?

    A couple of other companies that have taken the same route are Vuclip — which hasn’t quite moved its headquarters to Asia, but does focus mostly on Asian and especially Indian audiences — and Mig33 — which did move and has seen success in Indonesia in particular.

    You also have companies like Line and Kakaotalk that didn’t originate in Southeast Asia but now have a huge user base in this region. Coincidentally or otherwise, these messaging companies have a lot of similarities with Bubbly.

    What about enterprise companies?

    It’s so far been a little less common for enterprise companies to move here, and I see that as a major untapped opportunity. There are lots of inefficiencies in the way big business is done in some of the countries here, which gives more competitive firms from elsewhere a potential advantage if they choose to come here. Equally, some startups from this region who are able to thrive here have shown that they are quite capable of stepping onto the world stage, because the historical lack of resources available to small companies is a sort of trial by fire.

    Corrections: The original version of this story featured news of a particular celebrity on Bubbly; while the celebrity is expected on the platform soon, he isn’t yet “live” on the network, we were told after this piece was published.

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  • Michael Chasen’s New “Billion-Dollar Idea”

    SocialRadarMichael Chasen speaks a mile a minute, and maybe there’s a reason why. He’s a serial entrepreneur who has discovered his next calling – providing location-based connections for young, mobile users. It’s a well-worn story at this point, but Chasen may just be the one to make money in this space.

    If Chasen’s name sounds familiar, it’s likely because of Blackboard, an education software company that he cofounded with his college roommate in 1997. Blackboard went public in 2004 before it was acquired in 2011 by Providence Equity Partners for $1.64 billion.

    Needless to say, Chasen never has to work again. But while visiting colleges during his Blackboard days, he realized his latest idea – connecting people who are in close proximity to each other through their phones – might be an even bigger opportunity than Blackboard. As a result, he quickly put together a 20-person company and, in June, closed on $12.5 million from NEA, Grotech Ventures, and a long line of celebrity entrepreneur-investors, including Steve Case, Ted Leonsis, and Dave Morin. He could have raised more. (“We actually had over $20 million in interest for the $12 million round,” Chasen tells me at at a San Francisco coffee shop. “We had investors we said no to, and we had to scale people back.”)

    Investors were presumably taken with Chasen’s track record. But Chasen also argues that his company, SocialRadar, which is based in Washington, D.C., is a billion-dollar idea. Its objective: to cross-reference the location beacons in our pockets – our smartphones – with the now two billion social profiles online, to create real-time information about the people around us, whether they’re 300 feet or 50 miles away.

    “With SocialRadar,” says Chasen, “you can walk into a room, and we’ll tell you there are 10 people here who you know: five coworkers, three people you went to college with, and two people who live on your street. Beyond that, we’ll tell you that your one college friend recently got his MBA and another was recently married.” Adds Chasen, “Right now, people might think, Why do I need to know who’s around? But it’s about having that information at your fingertips. You might not act on it, but maybe you will. It all depends on the context.”

    SocialRadar is still in beta, with plans to launch by year end. (Chasen says the team is still working on all kinds of features, including around privacy, so that if you want to see who is around you but don’t want to be seen, you can list yourself as “anonymous” or use the app completely invisibly.)

    Once it scales, SocialRadar intends to make money through directed commerce, by presenting location-aware offers and the like. But Chasen says the focus is very much on growing the business first  — something he thinks he can do quickly by leveraging location information from Facebook, Instagram, Twitter, LinkedIn, and Google to show users who’s around, regardless of whether those acquaintances already have the SocialRadar app.

    The strategy isn’t without huge risks. The location-based landscape is filled with the bones of entrepreneurs who’ve tried to make money off seemingly useful services and failed. More, some of these services might object to SocialRadar monitoring their users’ data. If Facebook, in particular – the veritable 900-pound gorilla in this space – decides that it doesn’t want to play nice, SocialRadar could find itself in a very tight position.

    Then again, Chasen has proven that he can make money in a tough space. The number of investors who’ve made money in education is minuscule, and yet he succeeded twice, first in taking the company public, then in selling it to a major private equity firm. Chasen also seems realistic, the product of his many years as an entrepreneur, no doubt. As he puts it: “Just like mapping software has fundamentally influenced the way that people use technology and get around, this technology has the same potential. Five to 10 years from now, everyone will have this technology and use it on a daily basis — whether or not it’s SocialRadar.”

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  • Marc Andreessen: Stories About Silicon Valley “Crack Me Up”

    006_mark_andreessenSilicon Valley has been receiving a lot of unfavorable media attention in recent months, from Valleywag to New York Magazine to The New Yorker. Last week, during a sit-down with Marc Andreessen at the Sand Hill Road offices of his firm, Andreessen Horowitz, we discussed some of that coverage, and what he makes of it. Part of our conversation, lightly edited for length, follows. 

    There’s a lot of hand-wringing in the media lately over whether or not Silicon Valley takes into mind the broader economy. Do you think some of those criticisms are valid?

    The stories crack me up. There’s sort of two criticisms. One is that Silicon Valley is the new elite, the new one percent, the new oligarchy, and that all the billionaires don’t give a shit about society and [welcome a] Mad Max dystopian wasteland of no jobs [as] technology takes everything over.

    The other argument is that technology produces nothing of value; it’s all just Snapchat apps so 14-year-old girls can send selfies to each other. I have a hard time reconciling the two arguments.

    What of the argument that the Valley is building technologies that are primarily of value to a subset of people who can afford to use them?

    That I don’t agree with. I think that’s almost just Uber, or the early-delivery services.

    If you’re a journalist and come to Silicon Valley and you want to find three startups [whose services] only 25-year-olds and single people with discretionary income are ever going to use, you can do that, congratulations. If you want to come to Silicon Valley and find companies that are really going to open up access to transportation or education or financial services to people who haven’t had access to those things before, you can also do that.

    These stories are very well-written and they’re entertaining, but they’re typically written by someone outside the Valley who wants to reach a certain conclusion to make them and their readers – in my view – feel better. I think it’s very reassuring, especially to people in New York right now, to think the Valley is just a bunch of kids farting around. But it’s only one slice.

    Another widespread criticism is that tech entrepreneurs don’t give back enough. As a philanthropist, what do you think?

    With tech — and you see this with a lot of these new entrepreneurs — they’re 25, 30, 35 years old, and they’re working to the limit of their physical capability. And from the outside, these companies look like they’re huge successes. On the inside, when you’re running one of these things, it always feels like you’re on the verge of failure; it always feels like it’s so close to slipping away. And people are quitting and competitors are attacking and the press is writing all these nasty articles about you, and you’re kind of on the ragged edge all the time. So to try and figure out how to find the time to intelligently allocate philanthropic capital, like, it just does not compute. It’s a timing issue.

    Many founders I know, including a lot of really young founders, fully plan to give the vast majority away. They just plan to do it when they have time to do it properly. You could make the reasonable argument that the world would be better off if they gave the money away faster; it just begs the question of how, which is a harder question to answer. Even Warren Buffett couldn’t figure out how to do it without just giving it to Bill Gates. Maybe the answer is just give all the money to Bill Gates!

    Photo courtesy of BusinessWeek.

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  • Marc Andreessen: We’ve “Kicked Around” Doing a Hedge Fund, Too

    marc-andreessenThis week, I headed to Sand Hill Road to sit down with venture capitalist Marc Andreessen of Andreessen Horowitz, who is expert in keeping the media on its toes. His willingness to engage with the press – which has probably generated more public interest in venture capital than ever existed previously – is meant to crush the competition. As he told me years ago in a separate sit-down, “We like counter-programming. If there are three networks showing cop drama shows on Thursday at 9 pm, then what you want to do is put on a comedy.”

    Next week, I’ll feature excerpts from our hour-long chat in which Andreessen touched on other ways Andreessen Horowitz is trying to out-innovate its venture peers, so be sure to tune in. In the meantime, here are two quick snippets from our conversation. In the first, Andreessen and I chat briefly about Twitter, a company that will make Andreessen money both personally and professionally. (Andreessen was among Twitter’s earliest individual investors, participating in the company’s $5 million Series A. As a firm, Andreessen Horowitz elbowed its way into Twitter in early 2011 by purchasing $80 million worth of secondary shares; Twitter was valued at roughly $3.7 billion at the time.)

    Andreessen Horowitz prides itself on being fairly transparent. Yet you’ve tweeted twice – once, more than six years ago, to write “Twittering,” and about three years later to add, “I’m back – did anything happen while I was gone?” Why don’t you use it?

    [Laughs.] I don’t know that I even have a good reason for it. I was a very active blogger at one point. I’m actually very active on Hacker News. I was very active on Quora for a while. So I just kind of bounce around, do different things.

    At this point, at this firm, it’s more interesting for the other people to become more well-known, rather than me becoming more well-known. So it’s not a big priority for me to elevate my own brand. Plus, I’ve always thought it’s kind of funny.

    Funny in what way?

    [Laughs.] I don’t know. It’s just really funny. I was one of the first investors. And then I tweeted. And then I didn’t tweet. [And 900 days later], I tweeted again.

    You have something like 18,000 people following you, waiting for your next tweet.

    18,000 people. Two tweets. [Laughs again.] It’s just kind of funny.

    In this next snippet, Andreessen shares that his firm has more recently contemplated starting a hedge fund.

    You’re managing $2.7 billion at this point, but it’s been a couple of years since you raised your last fund. Will we see a new fund in 2014, and might we see a $2 billion or $3 billion fund?

    [We’ll probably raise a new fund] next year. [As for that range], I don’t think so. We’ve kicked around a couple of ideas. We’ve kicked around doing something on the public side like a hedge fund, but we’re not going to do it.

    Why contemplate it?

    First of all, there are public companies we greatly admire…that we feel are undervalued or misunderstood. Also, in the venture fund, we’re trying to go long in the future, and so the other side of that would be to go short in the past, or to short the people who are not long in the future. So if we’re doing e-commerce in a category and think there’s a retailer that will suffer as a consequence of e-commerce becoming bigger, there’s another trade you could do on the hedge fund side if you’re private.

    But…

    There are two really big issues with a firm like ours doing anything public. One, we think the insider trading risk is just off the charts. I saw that Mark Cuban just got off for the Mamma.com trade, and I’m very happy for him, but it’s a good illustration of how dangerous an environment it is for people who are kind of in the middle of things to take stock positions right now. There are just tons of prosecutions – the whole SEC thing – there’s just tons of scrutiny.

    The other issue is we have this whole corporate briefing program, where you have 1,200 management teams from big companies coming through here every year and we run these big conferences. We just held our big CIO/CMO conference last week, with 150 top CIOs [and] CMOs, and it’s an amazing program and they’re really open with us about what their challenges are and what they’re working on and trying to do, and so, if we started to short their stocks…[laughs]…right? We’d basically blow that program up. So we decided we can’t do a hedge fund.

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  • Can an ‘Airbnb’ of Outdoor Gear Take Off?

    spinlister (1)Everyone wants to be the Airbnb of something. Spinlister is among them. Launched with much fanfare last year as a bike-sharing marketplace, the platform failed to gain traction, its owners ultimately deciding to sell the business to one of their earliest investors, Brazilian businessman Marcelo Loureiro. Despite Spinlister’s lack of momentum, Loureiro isn’t fundamentally altering the business. Instead, he shut it down and relaunched it with an eye towards renting many more types of outdoor equipment. And he recently raised a $1.65 million seed round from friends and family to help the process along.

    The question remains whether enough people want to rent their outdoor goods. Yesterday, I chatted briefly with Loureiro about why they should, and what he hopes to do about it.

    Your business seems very hard to scale. Is that fair?

    We need to connect with the right audiences first. Originally, we were just connecting with the tech community, and a lot of bikes got listed, but not a lot of users joined. Now, we’re targeting more hard-core cyclists, and while we’re not seeing exponential growth, it’s solid and constant.

    When are you broadening out Spinlister’s offerings?

    In mid-December, when we have enough inventory, we’re planning on opening up the platform for other sports equipment, starting with skis and snowboards. Afterwards, we’ll add skateboards and surfboards and camping gear and kayaks — anything you have in your garage that you aren’t using. A lot of cyclists have snowboards or skis, and a lot of snowboarders have bikes, but we weren’t talking to them. There’s a whole community that’s just sitting on gear and we’re now very focused on creating awareness [within that community].

    People rent their bikes for $20 a day on average. How much of that fee do you collect?

    I take 30 percent: 12.5 percent on the renter’s side as a service fee as 17.5 percent as a lister’s fee. It sounds like a lot, but it’s what we need right now to keep the lights on. We do have people making [real] money renting bikes. If you have a good bike or bikes in a good location, you’re going to get the business.

    Where are you seeing the most traction? 

    We have bikes listed all over the world. But right now, we have the most inventory in San Francisco and New York, with 350 bikes in New York and 500 bikes in SF.

    Is that more or fewer bikes than people are trying to rent in those cities?

    We have more demand than supply. My fulfillment [rate] is around 35 to 40 percent of requests because I don’t have the inventory, or sometimes the bike’s owner isn’t available in time or the bike is broken.

    Other complicating factors must include drop-off and pick-up, along with theft, despite that you cover damages. Why are you so convinced of this model?

    Access trumps ownership; it’s where things are headed. You used to own CDs; now you access Spotify whenever you want. I think similarly, people will access, versus own, their gear. I talked recently with [big wave surfer] Laird Hamilton, and he [suggested that with Spinlister] everyone who lives by the beach who has a few boards can have a business without having a shop. It’s the same with people who own multiple bikes.

    Down the road, there are lots of opportunities to [capitalize] on the knowledge we’re amassing about what kind of equipment people like to use. That kind of data could be very valuable to brands, for example, who could also test new gear within the platform.

    It’s early. This year has been about building and fixing a lot of stuff; in 2014, we go after the users.

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  • SilverRide Bets On Offline Social Networking, for the Older Set

    silverride2Last month, the California Public Utilities Commission (CPUC) unanimously approved new regulations condoning ride-sharing services like Lyft and Sidecar. But the new legal framework could also breathe new life into lesser-known companies such a SilverRide, a six-year-old company whose name may be its biggest liability.

    At first glance, SilverRide sounds like an Uber for seniors, but its focus actually extends well beyond transporting the elderly. “Transportation is 20 percent of what we do,” says founder Jeff Maltz over coffee near SilverRide’s San Francisco offices. The company’s primary focus is “championing socialization for seniors.”

    It’s a big market. The senior population is growing steadily. By 2030, roughly 20 percent of Americans will be 65 years or older, up from 12.5 percent today.

    More important, scientists are increasingly discovering how important socialization is for the elderly. Just last month, University of Missouri researchers published findings around what happens when seniors stop driving. Among their conclusions was that seniors’ health and happiness meaningfully declined. Social connectedness also helps the immune system to work better, lowers stress hormones, and can delay memory loss, according to the Harvard School of Public Health.

    SilverRide offers seniors the chance to get outside the home and interact with others. For $85 an hour, the company’s drivers will escort the elderly to shop at the grocery store, to see a movie, or to pick up grandchildren for an ice cream outing, among other things. (Seventy percent of the time, drivers join riders in their activities.) In its six-year history, it has orchestrated 150,000 rides for more than 3,500 clients.

    The question is whether SilverRide – which is looking to raise $3 million to expand nationally – is a big business.

    From all outward appearances, the numbers sound good.

    According to Maltz, SilverRide is profitable. Currently, the company pays $1000 to acquire a customer, and customers pay $450 a month on average for 24 months.

    SilverRide’s expenses also just went down significantly. Up until now, SilverRide has used its own fleet of cars. (The company has a staff of 22 full and part-time employees to pick up seniors and take them out.) But the most recent CPUC regulations change all that. Now, SilverRide’s employees can use their own, commercially insured cars, vastly expanding the potential size of the company’s transportation fleet.

    The biggest impediment to SilverRide’s growth may be convincing seniors to pay for something as intangible as an experience. SilverRide is a fairly expensive service, and there may not be a large population of elderly people who understand the service or can justify spending $450 a month on their social lives. (One-third of SilverRides’ customers call the company themselves. The other two thirds of its customers come by way of their children or other senior caregivers.) In fact, Maltz says his biggest competition is a customer’s friends and family.

    SilverRide could benefit from the marketing leverage and distribution that a larger health care partner could provide. Maltz says that the company has attracted the attention of “several large health care companies” that are “engaging in pilots” with SilverRide, but he declines to be more specific.

    In the meantime, VC-league help with advertising, as well as to build up an executive team, would also go a long way, suggests Maltz. “We have 400 people around the country interested in opening up regional SilverRides,” he says. “This company is ready to blast off and get out there.”

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  • Does Jeff Bezos Need a Wingman?

    jeff_bezos_headshot1Yesterday, Bloomberg published an excerpt from a new book on Jeff Bezos that portrays the billionaire CEO of Amazon as a brilliant but ruthless dictator, one who treats workers “like expendable resources.”

    Michael Maccoby, a psychoanalyst who writes about business executives and teaches leadership at Oxford’s Saïd Business School, doesn’t view Bezos’s tendencies to mistreat employees as his biggest liability, though. Rather, it’s his lack of a strong number two.

    Amazon’s success has certainly been stunning. As the book points out, 20-year-old Amazon now has roughly $75 billion in annual revenue, a $140 billion market cap, and nearly 100,000 full-time and part-time employees, up 40 percent from last year. In late summer, Bezos personally acquired the Washington Post newspaper and some related properties for $250 million.

    Maccoby, who has worked closely with 40 CEOs over the years but has studied many more, thinks Bezos resembles “narcissistic visionaries” like Steve Jobs, Larry Ellison, and Bill Gates — with one major exception. All had a right-hand man; Bezos seemingly does not. And “that kind of personality needs to have strong partners who balance them and who complement their skills,” insists Maccoby.

    Maccoby points to Microsoft co-founder Bill Gates, who, in the company’s earlier days, could dream about the future while sidekick Steve Ballmer obsessed about Microsoft’s day-to-day operations. Maccoby also cites Steve Jobs’ relationships, first with his Apple cofounder Steve Wozniak and much later with Apple executives Tim Cook and Jony Ive. And there is Oracle’s Larry Ellison, who has brought in a string of executives over the years, only to chew them up and spit them out. (Ellison’s current number two is co-president Mark Hurd.)

    Asked whether Bezos might be an exception to the rule, Maccoby says, “So far, so good.” Still, he thinks Amazon’s decision to forego profits in favor of reinvestment are reminiscent of numerous endeavors throughout history, including those of, gulp, Napoleon.

    It’s not necessarily an unfavorable comparison. Both enjoyed success at a young age, both rejected the established wisdom, and both took on seemingly invincible enemies and defeated them. If historians are to be believed, Napoleon – like Bezos – also had unrivaled intellectual powers and an astonishing capacity to integrate information from different disciplines.

    Of course, as brilliant as Napoleon was, he eventually pushed his luck, ignoring repeated advice not to invade Russia. Says Maccoby: “Napoleon was very successful as long as he had Talleyrand as his foreign minister.” When he lost Talleyrand, he spun out of control.

    “The danger with someone like Bezos is the same danger that Napoleon had,” Maccoby adds. Without enough pushback, “you can go too far.”

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  • A Global VC on Outsiders’ View of the U.S. Right Now: “Speechless”

    027-20120712-KS026-Edit-2-324x324Mathias Schilling is the cofounder and managing partner of e.ventures, an early-stage venture firm that invests out of dedicated funds in five geographies: the U.S., Russia, Germany, Asia, and Brazil. The vantage point gives Schilling a unique perspective on how the world sees the U.S. debt crisis. During a quick chat yesterday, he told me his partners are, in a word, “confused.” We also talked about what he’s seeing around the globe.

    You have these dedicated funds where you share carry. Do you sign off on deals as individual firms?

    We look at every region very locally, but we [employ] different structures for different deals. Sometimes, we’ll have an investment committee where I’ll participate in the decision-making. Sometimes, we don’t get involved at all. Our mantra is to keep local teams to two to three partners so we can make decisions quickly.

    Last year, you and Redpoint Ventures joined forces for your Brazil-focused venture fund, raising $130 million. What are you seeing there in late 2013?

    Brazil has had many lost decades, including after 2000. So many basic [online] categories still haven’t been created and funded. There’s also a lack of capital, and entrepreneurship culture, and there’s a difficult regulatory environment. But I’m very positive on Brazil. We’re not only seeing copycats, which obviously makes sense, as large categories need to be created; we’re also seeing a lot of very high quality entrepreneurs. We’ve [backed]10 companies in the last 18 months or so, in e-commerce, financial services, advertising, travel.

    Right now, it’s cooled off on a macro level, in terms of investors going there, because if you aren’t local and make a commitment to stay, it’s very difficult. It puts us in a good position there.

    What can you share about the other markets you’ve entered?

    Japan is an interesting market. It’s traditionally been a tough venture market – people are very hierarchical and risk averse, which is also true of Brazil and, to some extent, Germany. But on the mobile side, we’re seeing a lot of advanced things happening. Half of Android’s revenue is coming from apps being made in Japan and South Korea.

    Berlin is building great critical mass; it’s cheap, exciting, and innovative. Russia is more technology driven, with a lot of very strong engineering. But it lacks general management skills.

    Each is distinct, but I believe you have to go into these markets and build a commitment there and stay for the long run, because I don’t think you can stop the trend. We are globalizing.

    Is entrepreneurship as widely celebrated in other parts of the world?

    I think it’s cool to be an entrepreneur in most countries at this point. Everyone knows some fantastic success story of some guy who really did it. And some of these people really had to pull through to be the first [success story], so they’re great role models.

    Culturally and psychologically, people don’t want to work for big companies anymore.

    I gather the rest of the world is very concerned by the U.S. government right now. What are you hearing from your far-flung partners about this mess?

    I think people are speechless. Honestly, they’re shrugging their shoulders. They don’t get what’s happening and why. And to some extent, it is a bigger deal elsewhere than it is here. They think it will be resolved. It has to be resolved.

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    Connie

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  • Flipkart Raises $160 Million, While Others in Bangalore Watch and Wait

    bangaloreA couple of years ago, venture capitalists began aggressively funding e-commerce sites in Bangalore, largely inspired by the success of Flipkart, the e-commerce Indian company that’s raking in rupees by delivering goods to villages and far-flung towns. Just today, the company revealed that it has raised $160 million in fresh capital, atop a $200 million capital injection it closed in July. (The six-year old has now raised $540 million altogether, according to Crunchbase.)

    Unfortunately, e-commerce riches have been hard to come by. While Flipkart has pulled ever further ahead, racking up 10 million registered users and over a million daily unique visitors, roughly 40 other venture-funded e-commerce startups have since bit the dust.

    Insiders say there’s a light at the end of the tunnel for a small number of companies that have benefited from government efforts to keep U.S. companies out. The question is, how long can these sanctions last?

    According to Subu S.V., a managing director with BVP India in Bangalore, the absence of a strong retail — and physical — infrastructure has significantly hampered the growth of  Indian e-commerce. While in the U.S., the online shopping revolution followed the rise of the giant shopping mall, in India, “offline never really happened,” he notes. “It’s still mom and pop stores ruling the country. So offline and online are happening simultaneously, and while the market size is huge, there are many bottlenecks” to overcome, he says.

    Nandu Madhava, a Harvard MBA and Texan who is CEO of mDhil.com, a WebMD for India based in Bangalore, lays the blame for so many busted e-commerce companies on a faulty investment premise.

    Pointing to India’s fast-growing base of 165 million Internet users, Madhava observes, “Give a man or woman access to the Internet for the first time in their life, and their natural inclination isn’t to go buy a pair of shoes, a polo shirt, or fancy watch.  It’s likely to go: porn, cricket, Facebook, politics, jobs, health, YouTube, news, pirated media. Unfortunately, most Indian VCs had never run a business, much less an online business. Most were former bankers or consultants from MBA schools trying to lift US models and place them into India.”

    Still, some companies will make it, say both men. Madhava points to startups in the mobile, consumer Internet, online video, Saas and payment transaction industries that are “incredible” but “need patient capital ready to take a 24- to 36-month view of the Indian opportunity.”

    As examples, S.V. points to the lifestyle goods e-tailer Jabong.com, which is gaining traction, and to the fast-growing e-commerce site SnapDeal, backed by Bessemer, which attracted a $50 million investment from eBay earlier this year. The 1,000-employee company is a marketplace for more than 10,000 small merchants and more than 20 million registered users.

    S.V. says that complicated and onerous government regulations have enabled Jabong and SnapDeal and FlipKart to get a jump on global giants like Amazon, which launched operations in India in June. For now, at least, Amazon and other foreign companies may host marketplaces that brings buyers and sellers together, but they can’t maintain inventory to sell directly to shoppers.

    Nevertheless, those rules may change, particularly after India’s general election next year. In fact, S.V. tells me the “general expectation is that [things] are going to change in another six to 12 months.” In the meantime, he says, the country’s most successful “home-grown companies are getting a four- to six-year head start.”

    It will be “interesting to see what happens,” he adds.

    Sign up for our morning missive, StrictlyVC, featuring all the venture-related news you need to start you day.

    Connie

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