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StrictlyVC: July 17, 2017

Hi, happy Monday, everyone! We’re on the beautiful campus of MIT today, in between a few on-stage interviews. We’ll be traveling for much of tomorrow, so you might be receiving the low-calorie version of StrictlyVC, but we’ll be back in full swing by Wednesday.:)

Top News in the A.M.

It’s time for bitcoin traders to batten down the hatches.

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This 32-Year-Old Senator is Trying to Get Patent Trolls Out of Massachusetts

When the internet security company Cloudflare decided to engage in all-out warwith what it views as a “dangerous new breed of patent troll,” it found a receptive audience with Eric Lesser, who became the youngest state senator in Massachusetts when elected to office in 2014.

Senator Lesser, now a 32-year-old in his second two-year-term, was in the same Harvard fraternity as Facebook CEO Mark Zuckerberg, but says he didn’t really think much about tech until after working on President Obama’s first presidential election campaign in 2007. “I was traveling around with him and carrying suitcases and handling logistics for his traveling team,” he explains.

When the campaign was over, he joined then-senior advisor David Axelrod at the White House as a special assistant; he also became involved with the Council of Economic Advisors and more specifically with the agency’s chairman at the time, economist Austan Goolsbee. “That’s really when I started to get exposure to a lot of tech policy and some of the issues,” he says.

Fast-forward and today, among the issues Senator Lesser has become most focused on — because he sees it as among the bigger threats to Massachusetts’s economy — is patent trolling. Indeed, while he’s not sure how much he can do to help Cloudflare, which has a Boston office, a bill that Senator Lesser helped craft will be heard in committee tomorrow, and it would put a serious crimp in what he calls “shakedown operations” more broadly.

More from a conversation we had Friday morning, edited for length:

You’re on the young side to be a state senator.

I’d gone to Harvard, then Harvard Law School, and in my third year, I decided to jump into a race in the community where I grew up, and I won. It was a five-way primary, and very close. I think I won by 192 votes out of around 17,000. [Laughs.]

When did you zero in on this patent problem?

In Massachusetts, you serve two-year terms, and after I was reelected to my second term, a friend who I was friendly with in college was at HBS and he sort of said, “There’s this thing that’s starting to create real issues,” and it was patent trolling. I’d had a very atmospheric knowledge of it from law school and IP classes, but I began realizing this was a very big deal.

More here.

New Fundings

AdQuick, a year-old, L.A.-based startup that’s looking to make billboard advertising easier and more transparent, has raised $1.1 million in seed funding from Initialized CapitalVTF Capital (founded by Tony Hsieh of Zappos), and Haystack. TechCrunch has more here.

Bright.md, a three-year-old, Roseville, Ca.-based company whose software acts as a virtual physician’s assistant, has raised $8 million in Series B led by B Capital Group, with early-stage investor Seven Peaks Ventures joining the round. More here.

Butternut Box, a year-old, London-based startup that delivers fresh meals specially tailored for its customers’ dogs, has raised $1.3 million in dseed funding from Passion CapitalMore here.

Desktop Metal, a 1.5-year-old, Burlington, Ma.-based metal 3D printing company, has raised $115 million in Series D funding, including from New Enterprise AssociatesGVGE VenturesFuture FundTechtronic IndustriesLowe’sLux CapitalVertex VenturesMoonrise Venture PartnersDCVC OpportunityTycheKleiner Perkins Caufield & ByersShenzhen Capital Group and Saudi Aramco. The company has now raised $212 million altogether. More here.

Learnerbly, a year-old, London-based startup whose software tries to help companies better develop their employees, has raised $2 million in seed financing led by Frontline Ventures, with participation from Playfair Capital, the Mayor of London’s London Co-Investment FundFuture Planet Capital and regional tech angels. TechCrunch has more here.

Leap Motion, a nearly seven-year-old, San Francisco-based software and hardware company developing 3D motion-control technology for virtual reality and additional platforms, has raised $50 million in Series C funding led by J.P. Morgan Asset Management, with participation from Andreessen HorowitzFounders FundHighland Capital Partners and SOSventuresMore here.

Rapid Medical, an eight-year-old, Yokneam, Israel-based company that makes stroke prevention and treatment products, has raised $9 million in Series B funding led by BRM Group and Shanghai-Israel Investment Fund, with the participation of Winnovation and Gefen Capital. Globes has more here.

Sensome, a three-year-old, Paris-based company developing a micro-sensor technology for smart medical devices, has raised $5.4 million in seed funding led by Kurma Diagnostics, with participation from Paris-Saclay Seed Fund and ID Invest, as well as a group of business angels. More here.

Tsunami VR, a three-year-old, L.A.-based company that develops immersive software applications using augmented reality and virtual reality for enterprise customers, has raised $7.5 million in second round funding, shows an SEC filing.

Venus Concept, an eight-year-old, Toronto-based maker of non-invasive devices devices for the medical aesthetics market, has raised $38 million in funding led by EW Healthcare Partners, with participation from HealthQuest Capital and Madryn Asset ManagementMore here.

WaveOptics, a three-year-old, UK startup that builds waveguide-based optics — technology based on hologram physics and photonic crystals — for augmented reality hardware, has raised $16 million in Series B round of funding from previous investors Octopus VenturesTouchstone Innovations and Robert Bosch Venture Capital, along with new investor Gobi Ventures. TechCrunch has more here.

Yimidida, a two-year-old, Shanghai-based logistics services platform for small cities in China (it focuses on last-mile delivery services), has raised $44 million in Series B funding led by CDH Investments, with participation from Global Logistic PropertiesSource Code CapitalK2VC and Tuofeng Investment. China Money Network has more here.

New Funds

Evolution Equity Partners, a New York-based investment firm, has raised $125 million for a new cybersecurity-focused fund. The Prague-based outfit was founded by a group of former executives and investors from antivirus software maker AVG Technologies. Dealbook has more here.

Also Sponsored By . . .

With StrictlyVC in Boston this week for TC Sessions: Robotics, we’re also coming to you courtesy of Boston HQ’d Beantown Media Ventures. When venture-backed AI startups like TellusLabs and publicly traded machine learning companies such as Mattersight look to build compelling media narratives and scale content marketing they turn to BMV.

BMV’s growth approach to PR has helped 100’s of startups with services designed to drive inbound leads and valuations. In fact, it has supported several successful exits to date, including SinglePlatform ($100M), Runkeeper ($85M) and ByteLight. Looking like this ¯\_(ツ)_/¯ when it comes to your own startup’s digital PR & content strategy? Get in touch with BMV today here!

IPOs

Blue Apron‘s shares dropped as much as 12 percent again today after Amazon filed a trademark application for prepared food kits. More here.

Sienna Biopharmaceuticals, a Westlake Village, Ca.-based biopharmaceutical company at work on topical products for medical dermatology and aesthetics, has sets terms for its IPO, revealing plans this morning to raise up to $69.3 million. More here.

Exits

Uber has acqui-hired Swipe Labs, a three-year-old,San Francisco-based social product studio. Swipe Labs had raised $8.2 million in funding from Binary CapitalFirst Round CapitalGreylock PartnersKhosla VenturesLowercase CapitalSherpa Ventures, and SV Angels. TechCrunch has more here.

The Financial Times reported yesterday that Wells Fargo will be spinning off a number of its products “worth hundreds of millions of dollars,” according to CFO John Shrewsberry, though he didn’t specify what products those would be. More here.

People

Performance management software company BetterWorks and its CEO, Kris Duggan, regional VP Matt Hart and VP of People Operations, Tamara Cooksey, have been sued by a former employee for assault, harassment, and discrimination.

Longtime VC Fred Destin is facing challenges in raising his new fund, owing to allegations by a female founder who says he behaved inappropriately after she pitched him on her startup at a technology conference. Bloomberg has more here.

Two of the best-known pioneers in private equity, Henry Kravis and George Roberts, named their potential successors earlier this morning, naming Joseph Bae and Scott  Nuttall, as its co-presidents and co-chief operating officers.

SoundCloud’s CEO Alex Ljung has said the company is “here to stay” in a post intended to quash rumors of a shutdown.

Yasmin Razavi has joined Spark Capital’s growth team. She was most recently a product manager at Snapchat and worked previously with Index Ventures.

Essential, the new smartphone startup headed up by Android founder Andy Rubin, has lost its top marketer before the phone has even launched. Vice president of marketing Brian Wallace left to become CMO of Will.i.am’s i.am+ lifestyle brand.

Jobs

Siemens is hiring a venture capital associate. The job is in Boston.

Data

Companies with at least one female founder grew from 9 percent in 2009 to 17 percent since 2012 — a stat that has not changed for five years.

Ad spending on mobile video will reach $18 billion next year, surpassing desktop for the first time.

Essential Reads

There are signs that we could see Amazon enter the messaging fray, alongside more established services from Facebook, Snapchat, WeChat and more. TechCrunch has more here.

Benchmark has reportedly had discussions to sell part of its stake in Uber to Softbank or other potential investors.

Snapchat is shopping for ad tech companies to help bolster its appeal to marketers.

Here’s what Atari’s upcoming Ataribox console will look like.

Detours

Employees who stay in companies longer than two years get paid 50 percent less over their lifetimes.

An overdose, a young companion, drug-fueled parties: The secret life of a USC med school dean.

A study says that yes, artificial sweeteners can lead to weight gain. (Dammit!)

Retail Therapy

Vertical House.




Why Do We Even Care About Peter Thiel’s Politics?

peter-thielPeter Thiel is supporting Donald Trump, and it’s time to for Silicon Valley to take sides. Is it for Peter Thiel or against him? Relatedly, should Y Combinator president Sam Altman resign if he can’t bring himself to fire Thiel as a part-time partner?

These were actual questions posed publicly yesterday, I’m sorry to note.

It’s clear that Trump is about as popular as the Zika virus in Silicon Valley (and, seemingly, a growing number of other places). But it’s worth asking: Why does everyone care so much what Peter Thiel thinks about politics? Is he also running for office? Did somebody appoint him Silicon Valley’s official representative in Washington? Along the same vein, why spend so much time worrying about what Sam Altman says and whether Y Combinator will continue to work with Thiel?

The common wisdom seems to be that Trump poses a threat to the country, and because Thiel sits on the boards of some very powerful companies, including Facebook, we should be concerned by his support of Trump. Meanwhile, Y Combinator is an influential force in Silicon Valley, and if it continues to employ Thiel as a part-time partner, it’s sending the wrong message to the many entrepreneurs whose minds it is helping to shape and who may themselves be in positions of power at some point.

Aren’t we all smarter than this? Do we really think founders are that impressionable? Thiel is renowned, yes, but there are many successful people with varied perspectives in Silicon Valley. Those worried about a Trump presidency should be delighted that Thiel is seemingly alone in sticking his neck out here. It could be a lot worse.

I don’t know Thiel. I’ve interviewed him maybe a handful of times, and nearly a decade ago, he accepted an invitation I extended to meet a gaggle of reporters out for drinks at a dumpy pool hall, which I thought was nice, even if it was also self-serving.

But I’m a little astonished by how he tends to be depicted by the media.

More here.




The SEC Gets the Case It’s Been Waiting for in Silicon Valley

sec-beastieNot so long ago, Theranos was flying high, its claims that it was upending the medical diagnostics business largely accepted by the public. Behind the scenes, however, some employees were growing wary of those claims, with at least one eventually reaching out to regulators to report the company’s failure to report its questionable test results.

A stinging series of articles by the Wall Street Journal soon followed, and in recent months, the government agency that oversees U.S. labs has banned founder and CEO Elizabeth Holmes from operating a blood-testing laboratory for two years, and Theranos has shuttered its clinical labs and wellness centers. To make matters worse, the company was last week slapped with a lawsuit by one of its biggest investors, which claims that Theranos knowingly lied to it.

It’s a nearly ideal scenario for the SEC, which is investigating Theranos and widely expected to use a case against it to expand its mandate into Silicon Valley’s startup ecosystem. The truth is while the SEC has long been viewed as a force in the public markets, it also has the authority to chase after private companies that engage in any “act or omission resulting in fraud or deceit in connection with the purchase or sale of any security.” And lately, Wall Street’s top cop is finding Silicon Valley too high-profile a target to resist.

“If you’re only raising couple million bucks, everyone expects your huffing and puffing,” says one San Francisco-based securities attorney. “But if you’re raising hundreds of millions to billions of dollars, why would the SEC ignore that when they’re auditing the financials of some piddly company that’s raising $50 million in an IPO?”

More here.

Image credit: Bryce Durbin




In Supreme Court Rulings, Startups Win

Supreme CourtYesterday, the Supreme Court made life a lot better for venture-backed startups, whether they know it yet or not.

In a case called Octane, the justices ruled 9-0 that the U.S. Circuit Court for the Federal Circuit — where every patent appeal in the country eventually winds up — had imposed overly restrictive standards for companies looking to recoup legal fees in cases brought against them by patent holders.

In a second, related case, Highmark, the justices also limited the ability of an appeals court to overturn a lower court judge’s decision in such cases.

To learn more, StrictlyVC talked last night with intellectual property attorney Rudy Telscher, who argued on behalf of the petitioners in the Octane case.

First, congratulations. Was this your first time, arguing a case before the Supreme Court?

It was. I’ve been there a couple of times on unrelated matters, but it was my first time to argue, and it was a pretty amazing experience, from walking into the courtroom to opening [the] case in front of the justices to handling their barrage of very smart questions. I’m lucky to have been able to argue such an important issue before them.

What part of the experience was most surprising?

Well, a protester stood up during my rebuttal and was removed by Secret Service. That was a surprise. [Laughs.] I handle of lot of appellate arguments, but the experience was very different in that you have nine justices coming at you from different angles. You’re facing the brightest legal minds in the country, and you know that as one is asking a question, the others are thinking up eight more. Some [of their questions], I hadn’t thought up [during my preparation], but when you handle a case for eight years, you have a good sense of law.

Wow, eight years. For those just tuning in to the case, can you explain its importance, particularly to VCs and the founders they back?

An entrepreneur or smaller company builds a successful product and a larger competitor wants to come after them . . . And even though the larger competitor’s position is weak, it’s expensive to fight. [These suits] used to be an occasional thing, but now small and large companies alike are getting hit by patent trolls that buy up broadly worded patents from the ‘90s that have nothing to do with what’s going on today. And they call these companies and say, “It will cost you $2 million to $3 million to defend yourself. You might as well pay us $500,000 to settle.”

Now there will be more companies that stand up to these claims, because their odds of getting [repaid for their] their attorneys’ fees are pretty good.

How much has your client, Octane Fitness, spent on attorneys’ fees? And will those fees now be fully reimbursed by the opposing side?

They’ve spent $2.5 million, which might sound like a large sum but is probably about $3 million less than the national average. Now, the case goes back down to district court.

Is there any chance you’ll be ruled against there?

There are no guarantees, but I’d like to think the odds of that are low. The Supreme Court altered the standard a lot, saying it was rigid and very difficult to meet. It’s a big deal.




Can Jack Hidary Hack New York’s Mayoral Race?

Jack HidaryJack Hidary is a wealthy tech entrepreneur who wants to be mayor of New York City and is running as an independent. At first blush, he seems to have much in common with New York’s billionaire mayor Mike Bloomberg, a Democrat turned Republican turned independent.

But Bloomberg spent $73 million of his own money to get himself elected the first time around. Hidary has so far raised $450,000. Bloomberg began campaigning early. Hidary, 45, announcing he was running just two months ago. Bloomberg courted nearly everyone; Hidary has been doing more “targeted” campaigning. As told me in a phone call last week, “I have increased name recognition in the core communities that we need.”

In Hidary’s view, there’s an opportunity to hack the election by leveraging both his tech base and his background. Born in Brooklyn to a Spanish-speaking Columbian mother, Hidary went on to cofound two companies. The first, EarthWeb, an IT information and jobs site, went public in 1998, four years after opening for business. (It was taken private in 2000 and sold again in 2005 as Dice.com to private equity investors.) Hidary also cofounded the financial information company Vista Research, which sold to Standard & Poor in 2005.

Since entering the race in mid-July, Hidary has attracted support from many who like his biggest promise: to champion entrepreneurship and create jobs across all five of New York’s boroughs. Among those who’ve lent their support, says Hidary, are Albert Wenger of Union Square Ventures; investors Joanne and Fred Wilson (also of USV); Jim Robinson of RRE Ventures; and Charlie Kim, the founder and CEO Next Jump, a New York-based tech company that powers reward programs.

Still, it’s far from clear that Hidary’s concentrated tactics are working. His team is using CampaignGrid, a venture-backed, data-driven ad platform to deliver pre-roll online video to “specific target markets.” Hidary has also begun running Spanish-language TV ads on various cable channels, including Telemundo. Says Hidary, “We’re using a combination of channels in a more efficient way” than Republican nominee Joseph Lhota and Democratic front-runner Bill de Blasio.

But being efficient has its costs. Hidary is still being called “the New York mayoral candidate you probably haven’t heard of.” Even sources in New York’s tech community tell me they’re waiting for him to gather more traction outside of his insular tech circle before more publicly getting behind him.

Long shot as Hidary may seem, stranger things have happened, particularly in a race where the current leading candidate, de Blasio, is widely seen as part-time populist — and not a terribly tech friendly one at that.

As Charlie O’Donnell of Brooklyn Bridge Ventures puts it: “How friendly will Bill de Blasio be to companies like Uber and Halio when he’s taking money from the taxi lobby?  Will he support consumers who rent their rooms on Airbnb or side with the hotels?”