500 Startups

The Next New Thing: Women VCs

The venture landscape changes fast. Ten years ago, few would have predicted the ubiquity of micro funds or the rise of Andreessen Horowitz or the very existence of a platform like AngelList that enables people with enough connections to become pop-up VCs.

Few — though not most — see what’s coming next, too, and that’s women VCs, taking their place alongside men, in equal, or nearly equal, numbers. In fact, we’d argue that the shift will represent the biggest opportunity over the next decade.

It may be hard to believe, given the wealth of attention paid to the low numbers of women in the industry and the obstacles they’re having to overcome. But the signs of change are everywhere if you’re paying close enough attention.

Women now make up 60 percent of college graduates, and many more of them are graduating with tech-friendly degrees. (Women are exceeding at elite institutions particularly, and now account for one-third of Stanford’s undergraduate engineering students, as well as one-third of Stanford’s graduate engineering students.)

Though women are making slow inroads at venture firms — according to CrunchBase data published last week, just 7 percent of the partners are women at the top 100 venture firms — women are increasingly finding paths around today’s guard.

They represent 12 percent of investing partners at corporate venture firms — a percentage likely to grow because of heightened interest in how tech companies fare when it comes to diversity. “We believe it’s a missed opportunity if we aren’t an active participant” in funding women- and minority-led companies and funds,” says Janey Hoe, VP of Cisco’s 40-person investments unit.

More, over the last three years, 16 percent of newly launched venture and micro-venture firms had at least one female founder, shows CrunchBase data.

Ch-ch-ch-ch-changes

So what’s happening? As VC Jon Callaghan of True Ventures noted during a panel discussion in San Francisco last week, Moore’s law has played a starring role. As costs have fallen and made entrepreneurship accessible globally, more people are coming into venture capital.

Monique Woodard, a longtime entrepreneur and more newly a venture partner at 500 Startups, credits her own path to the democratization of information brought about by social media platforms, as well as the many public insights into the industry that VCs like Fred Wilson and Brad Feld have contributed over time. “You suddenly have this library around venture capital and thought leadership that didn’t exist before,” said Woodard, speaking on the same panel.

It’s also the case that women — an expanding number of whom are founding startups, as well as rising through the ranks of other companies — have more role models in VC than they did a decade ago.

Of course, none of these trends is brand-spanking new. So why, you may be wondering, is now suddenly the tipping point? Because the ethical, business and financial reasons for change are finally poised to overtake the industry’s inertia.

More here.

(Image: Bryce Durbin)

A Slick New 401(k) Platform, From TaskRabbit Cofounder Kevin Busque

In recent years, Kevin Busque began to notice something at TaskRabbit, the outsourced jobs marketplace that he co-founded seven years ago with his wife, and TaskRabbit’s CEO, Leah.

The company employs a lot of younger employees, and according to Busque (who was long the company’s VP of Technology but also tackled HR for some time), they weren’t taking advantage of TaskRabbit’s 401(k) program.

In fact, the participation rate was somewhere in the range of 30 to 40 percent — on par with other U.S. businesses, where 401(k) participation is around just 36 percent, Busque says.

According to Government Accountability Office testimony from 2013, numerous reasons explain such low figures. Sometimes, the employer plans of small businesses are too expensive. Sometimes, employees worry they aren’t making enough money to contribute to retirement savings. Often, too, retirement plans are so confusing that employees – younger staffers especially — decide they’re not worth the hassle.

Enter Guideline Technologies, Busque’s four-month-old, San Francisco-based company, which has just raised $2 million in seed funding from New Enterprise Associates, Lerer Hippeau Ventures, SV Angel, Red Swan Ventures, BoxGroup, Xfund and 500 Startups.

Its big idea: To work with small and mid-size employers in making 401(k) plans affordable for employees — as well as dead simple to set up.

More here.

How Stanford Management Co. Sees the World (Brace Yourself, Israel)

Last week, at the PreMoney Conference in San Francisco, veteran venture capitalist Heidi Roizen moderated a panel that asked institutional limited partners for their view of the world.

The speakers each had unique insights, but the audience may have been particularly attuned to one – John Powers, who served as president and CEO of Stanford Management Company for nine years. (He left his post last year and remains “unpotted,” as he put it.) As Roizen noted in introducing Powers, Stanford is among the world’s most sought-after investors given the power of its imprimatur — not to mention the $25 billion it has to manage, roughly 5 percent of which it invests in venture capital.

Luckily for attendees, Powers didn’t disappoint. In fact, he spoke candidly about a wide range of issues that may help capital-seeking venture firms better understand Stanford’s point of view, even while it’s likely to disappoint many of them. Here’s some of what he had to say:

On whether or not Stanford is likely to reinvest in a firm it has backed previously:

We’re looking at track record over time, and sticking pretty close to a roster of people who’ve been great VCs over a long period, because . . . there is a huge amount of persistence. It’s a brand business. It’s a business where the brand of the VC attracts the opportunity set. It’s sort of the only form of capital that I can think of that’s driven by brand attractiveness as opposed to price.

On when and whether Stanford will invest in a new venture fund:

We didn’t fund a lot of new venture funds over the course of my time there, but we did [invest] pretty steadily, every couple of years, in one or two new funds, [and] brandedness was the key. So what about this fund would lead us to think it can establish brandedness? That could come in the form of notorious founders. Andreessen Horowitz was branded day one because of the pedigrees of both Marc [Andreessen] and Ben [Horowitz]. The guys at Emergence Capital had a niche strategy that happened to be a large niche but was identifiable and you could see, okay, they can build a story around their early participation in and ownership of this view of the world. [We like that] as opposed to a general purpose, “We’re going to do a little software, a little semis and hardware, and a little consumer” venture fund. It was much harder for us to see [how the latter types of funds could] get escape trajectory.

On what Stanford worries about:

The one thing you have to remember in venture is that a few outcomes can totally transform a fund. So whatever you do analytically to think, ‘These guys are going to get branded’ or whatever, stumbling into the right deal can transform a fund.

That’s true, too, when you fire someone. If this guy’s long in the tooth, they’re not cutting it anymore, we’d like to fire them, you do that, [then] they come in with one home-run deal in the next fund and you look foolish in front of your board.

On why Stanford isn’t keen on investing internationally:

You’d invest internationally if you felt you were going to get better returns than domestically or if you felt that you were going to get something that diversified the stream of cash flows to you. So you go country by country.

In very large measure, the Israeli venture community is the 51^st state of the U.S. venture community; I think you don’t get superior returns over time or haven’t in general, and you don’t get diversification away from investing in a cybersecurity company in the U.S. So you’d go to Israel if you felt like you couldn’t gain access to the best stuff in the U.S. Therefore you were sub-optimizing but doing the best you could by investing in a very vibrant entrepreneurial community over there – just recognizing that it’s probably [not] going to match up over time with what Sequoia can do for you over here.

China is very different. There are huge indigenous sources of demand, a massive reinvention of the economy; the streams of opportunity that you see there . . . may be emulative of, but not derivative of, what you get in the U.S. from a returns standpoint.

India has been a bit of a confusing hybrid, with not the same level of indigenous demand [as China], though that appears to be changing to some degree.

On being “cold-blooded”:

Speaking from my former seat at Stanford, you have to be pretty cold-blooded. Are we better off spending time trying to get a little better allocation out of Sequoia in the next fund than we are flying around the Far East or something? [The answer, thinks Stanford, is yes.]

StrictlyVC: May 8, 2014

Happy Thursday morning, everyone! We’re still working on getting the newsletter to each of you, which is a giant pain in the arse or else we just have terrible email juju. In the meantime, here’s yesterday’s edition, featuring a very personable Mike Abbott of Kleiner Perkins, in case you missed it.

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Top News in the A.M.

Some big names in tech — including retailing giant Amazon — have gathered together to sign a letter protesting the proposed net neutrality rules the FCC is considering ahead of its May 15 meeting.

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In Accelerator Wars, the Teacher Becomes the Student

Dave McClure once followed Y Combinator’s moves closely, looking to emulate parts of its structure. Now, the famed, nine-year-old tech accelerator looks to be playing catch-up with Dave McClure.

This week, for example, Y Combinator announced it would start running its Startup School, a one-day networking event, in New York and London. Y Combinator, which will continue to run its three-month sessions from its headquarters in Mountain View, Ca., is casting a wider net because “if we focus on the U.S., we miss maybe 95 percent of the best founders,” said the outfit’s new president, Sam Altman, at a TechCrunch conference in New York.

Y Combinator also announced its intentions this year to “get bigger,” with Altman handed the reins by cofounder Paul Graham to grow it. Toward that end, the incubator has recently added six people to its roster of partners, and Altman says Y Combinator’s upcoming class could have upwards of 95 companies, making it the biggest in the program’s history.

Y Combinator’s new initiatives have received a fair amount of attention. But they look oddly familiar to McClure, founder of the four-year-old venture fund and accelerator program, 500 Startups. Indeed, 500 Startups was premised on the idea that venture investing is far more scalable than widely believed, and that to really nab the best deals, an outfit has to go global.

Each year, 500 Startups backs roughly 300 startups. Half of them pass through the firm’s three-month-long accelerator program, where they’re hosted at 500 Startup’s offices in San Francisco or Mountain View. (The outfit accepts roughly 30 startups each quarter, alternating between the two places.) 500 Startups also invests in another 150 seed-stage firms outside its accelerator program each year. About 20 percent of all of those companies are international, says McClure; 80 percent are U.S.-based companies, with roughly half coming from the Bay Area.

Part of what makes 500 Startups work at its scale, seemingly, is that it’s investing in far more than ideas. Most of the startups it funds have a functional prototype. Most have customers at some scale. Some even have million-dollar-per-month revenue run rates

It also believes in “failing on a budget, and failing quickly,” says McClure. (500 Startups a net $75,000 in each company for a 7 percent stake.) And 500 Startups thinks investing is something that can be taught, quickly, to other people, who now represent the outfit’s interests around the world, including Brazil, India, Southeast Asia, China, and Mexico. “Some say it takes 10 years to become a great investor. We think it takes 20 decisions,” says McClure.

We’ll see what happens. 500 Startups has yet to land an Airbnb or Dropbox – companies that have pushed the value of Y Combinator-backed startups into the tens of billions of dollars, at least on paper.

Then again, 500 Startups is younger and has a promising portfolio, along with several big exits under its belt. Among them: the 3D printing company Makerbot (acquired for roughly $600 million), the social marketing company Wildfire (acquired by Google for $350 million), and the video site Viki (acquired by Japan’s Rakuten for $200 million).

500 Startups has closed two funds totaling $73 million so far and is now investing out of a third fund that’s targeting $100 million, shows an SEC filing.

I ask McClure what he thinks of Y Combinator’s newest moves, and he says, laughing: “Welcome to the party, Sam.” But he also notes that, “We’ll have to work harder. We were hoping to have the international stage to ourselves for five years and it now it looks like it might have been four.”

In the meantime, McClure takes some pleasure in noting that “we were the first out of the gate on a number of things that Y Combinator is just now paying attention to. I’m a huge fan of [Paul Graham] and Y Combinator itself,” he adds. “But I think we probably influenced their strategy.”

New Fundings

Beroomers, a 10-month-old, Valencia, Spain-based student accommodation marketplace, has raised $200,000 in seed funding from the Plug and Play accelerator program along with numbers angel investors.

Bulu Box, a 2.5-year-old, Lincoln, Neb.-based company that mails out monthly boxes of nutritional product samples from its headquarters, has raised $2 million led by Dundee Venture Capital. Other participants in the round included Midwest Venture Alliance, Mid-American Angels Investments and Two Bridges Capital.

Flatiron Health, a two-year-old, New York-based company that aggregates cancer-patient data from numerous sources to help doctors make more informed treatment decisions, has raised $130 million in Series B funding, most of it from Google Ventures. First Round Capital, Laboratory Corporation of America and angel investors also participated in the round, which brings the company’s total funding to $138 million. (Much more on the deal and what the funding is being used for here.)

Hassle, a two-year-old, London-based online marketplace centered around home clearning, has raised $6 million in Series A funding from Accel Partners. TechCrunch has much more here.

IHear Medical, a four-year-old, San Leandro, Ca.-based company that’s developing a Web-enabled hearing aid system, has raised $2.5 million in new funding led by Lighthouse Capital, a Shanghai-based venture capital firm focused on medical devices and IT. Other participants in the round include earlier backers Aphelion Capital and Highlight Capital. The company has raised $5.3 million to date, according to Crunchbase.

Igneous Systems, a year-old, Seattle-based data center infrastructure company, has raised $23.6 million in Series A funding led by New Enterprise Associates. Madrona Venture Group, Redpoint Ventures and Isilon Systems co-founder Sujal Patel also participated in the round.

Layer, a year-old, San Francisco-based company whose technology helps developers to easily integrate messaging, voice and video into apps, has raised $14.5 million in Series A funding from Homebrew, AME Cloud Ventures (the investment vehicle of Yahoo cofounder Jerry Yang), CrunchFund, Fuel Capital and other investors. TechCrunch’s sources say the outfit’s post-money valuation is in the “mid-$60 million range.” The company has raised $22 million to date, shows Crunchbase.

LimeRoad, a two-year-old, Gurgaon, India-based social commerce platform for women, has raised $15 million in new funding led by Tiger Global Management (which has also funded India e-commerce companies Flipkart and Myntra). Earlier investors Lightspeed Venture Partners and Matrix also participated in the round, which brings LimeRoad’s total funding to $20 million.

LiquidPlanner, a 6.5-year-old, Seattle, Wa.-based maker of priority-based, predictive project management software, has raised $8 million in Series B funding from TVC Capital, a San Diego-based growth equity firm. It’s the company’s first round of venture funding.

Maxta, a 4.5-year-old, Sunnyvale, Ca.-based enterprise storage platform developer, has raised $25 million in Series B funding led by new investors Tenaya Capital and Intel Capital. Earlier investorAndreessen Horowitz also participated in this round, which brings Maxta’s total funding to $35 million.

Motif Investing, a four-year-old, San Mateo, Ca.-based online broker, has raised $35 million in new funding from JPMorgan Chase, Wicklow Capital, and Balderton Capital, along with earlier investors Foundation Capital, Ignition Partners, and Norwest Venture Partners. Motif has raised $86 million to date. Dealbook has much more detail on the deal and the company here.

Perfecto Mobile, a 7.5-year-old, Woburn, Ma.-based hardware and software platform focused on remote access and automated testing for mobile devices, has raised $20 million in new funding from new investor FTV Capital. Earlier investors Carmel, Vertex, and Globespan Capital Partners also participated in the round, which brings Perfecto’s total funding to roughly $49 million.

Pinnacle Engines, a 6.5-year-old, San Carlos, Ca.-based maker of ultra-efficient engine designs, has raised an undisclosed amount of Series C funding from Mitsui Global Investment, VenturEast and an unnamed strategic partner along with its existing investors Bessemer Venture Partners, New Enterprise Associates and Infield Capital. The company has raised $30 million to date.

RevolutionCredit, a two-year-old, Irvine, Ca.-based provider of behavioral credit insights, has raised an undisclosed amount of funding from Accion‘s Venture Lab, a $10 million initiative that provides seed capital and management support to financial start-ups targeting disadvantaged and low-income segments of society.

Udemy, a four-year-old, San Francisco-based online marketplace for teaching and learning, has raised $32 million in new venture funding led by Norwest Venture Partners. Earlier backers Insight Venture Partners and MHS Capital also participated in the round, which brings the company’s total funding to $48 million.

Workshare, a 16-year-old, London-based maker of enterprise collaboration apps, has secured $8.4 million in the form of a revolving line of credit from the Technology Finance Division of Wells Fargo Capital Finance. The line of credit follows $33.8 million in funding the company raised in 2012. The company has raised $63.6 million altogether.

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Exits

Delicious, the social bookmarking service, is being acquired by Science Inc., the L.A.-based technology investment and advisory firm. Science is acquiring the tool from Avos Systems, a company formed by YouTubecofounders Chad Hurley and Steve Chen. Dealbook has much more here.

Stackdriver, a two-year-old, Boston-based company that sells monitoring services for cloud-powered applications, has been acquired by Google for an undisclosed amount of money. The company had raised $15 million from Flybridge Capital Partners and Bain Capital Ventures.

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People

A friend of Rocky Agrawal — the PayPal director of strategy whose bizarre tweets last weekend may have cost him his job — persuasively argues that Agrawal may have bi-polar disorder and that PayPal should have handled the situation differently.

Katie Cotton, the VP of worldwide corporate communications at Apple, is retiring after more than 18 years at the company to spend more time with her children, says the company. Cotton served as a gatekeeper to co-founder Steve Jobs and current CEO Tim Cook and will remain best remembered by journalists for those oft-spoken words: “We have no comment.”

Chang Dong-hoon, head of Samsung Electronics‘ mobile design team, offered to resign last week over criticism of the company’s latest Galaxy S smartphone. Samsung has evidently accepted that resignation, appointing Lee Min-hyouk, vice president for mobile design, to succeed Dong-hoon. Reuters has more here.

Shawn Price is no longer the head of SAP‘s cloud business unit, sources tell Re/code. More here on what’s happening inside the German business software giant.

The investors at Rembrandt Venture Partners have ditched Sand Hill Road for a full floor in San Francisco’s Transamerica Pyramid, the tallest building in San Francisco. “When we saw the 360-degree views and full-floor layout, we fell in love with it,” says general partner Scott Irwin. San Francisco has drawn a growing number of venture firms in recent years. Some, including True Ventures, Norwest Venture Partners, Kleiner Perkins Caufield & Byers and Founders Circle Capital, rent office space in the city’s funky South Park neighborhood, built around what in the 1850s was a private garden for high-end residences. Others, including Alsop Louie Partners, Maveron, Sigma West, and Next World Capital, are turning the city’s Jackson Square neighborhood into another venture hub. “We set out to find a creative brick [and] timber space in Jackson Square,” says Irwin, but like most property in San Francisco these days, “the options were very limited.”

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Job Listings

SurveyMonkey (backed by Tiger Global and Google) is looking for a director of business development. The job is in San Francisco.

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Essential Reads

Strava, the mobile-fitness app that’s popular with competitive cyclists and runners is hoping it can lure a new type of customer: the government.

Meet gaming’s biggest rock star, Markus Persson, better known as “Notch.”

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Detours

The robot car of tomorrow might just be programmed to hit you.

Thirty-second tech trick: How to use disposable Gmail addresses.

Iconic romantic scenes remade with burritos.

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Retail Therapy

Horror Campout: A terrifying overnight camping experience that you can’t miss — unless you want to live. Mmwhahaha.

We’re buying new business cards just so we can trot this out as often as possible.

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In Accelerator Wars, the Teacher Becomes the Student

Dave McClure once followed Y Combinator’s moves closely, looking to emulate parts of its structure. Now, the famed, nine-year-old tech accelerator looks to be playing catch-up with Dave McClure.

It also believes in “failing on a budget, and failing quickly,” says McClure. (500 Startups invests a net $75,000 in each of its accelerator companies for a 7 percent stake.) And 500 Startups thinks investing is something that can be taught in little time to other people, who now represent the outfit’s interests around the world, including Brazil, India, Southeast Asia, China, and Mexico. “Some say it takes 10 years to become a great investor. We think it takes 20 decisions,” says McClure.

Then again, 500 Startups is younger and has a promising portfolio, along with several big exits under its belt. Among them: the 3D printing company Makerbot (acquired for roughly $~~600~~ $400 million), the social marketing company Wildfire (acquired by Google for $350 million), and the video site Viki (acquired by Japan’s Rakuten for $200 million).

500 Startups has closed two funds totaling $73 million so far and is now investing out of a third fund that’s targeting $100 million, shows an SEC filing.

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Trusted Insight, the Social Network For LPs, Looks to Next Round

Trusted Insight is a four-year-old, New York-based platform that has made itself valuable to institutional investors – 100,000 of them and counting – by giving them a place to research one another, scout out new deals and trends, and connect on due diligence — all with the help of advanced algorithms and semantic analysis.

Now the 16-person company is gearing up for its next phase, suggests cofounder Alex Bangash, who previously founded Rumson Group, an advisory firm that specialized in private equity and venture investments.

Most notably, the company will be unleashing some financial products of its own, though Bangash won’t be more specific than that today, citing competitors that are copying Trusted Insight down to “features we want to throw away.” He merely says to “think of us as the Netflix of investment management. Netflix can create ‘House of Cards.’ We can [create our own offerings] in this business, too.”

Trusted Insight is also preparing to open its doors a bit wider to “different tribes,” says Bangash, who cites fund managers, companies, and “high net worths” who are accredited but don’t necessarily have a billion dollars behind them. (The platform will “still retain its exclusivity,” he insists.)

Trusted Insight also has numerous new features up its sleeve, including “certifications” that help to highlight who is truly expert in what, regardless of their academic credentials.

As for how it achieves what’s on its road map, Bangash says the company has three options, including organic growth. To wit, Bangash says Trusted Insight is poised to double or even triple its user base in the next year, as well as to increase the data it’s managing by five times. Considering that a “small but meaningful portion” of its 100,000 members already pay for one of Trusted Insight’s varying tiers of service, which range in price from $99 to $499 per month, the platform could “be a very large business on [its software-as-a-service fees] alone,” he says.

A second option includes partnering with another outfit (Bangash says Trusted Insight is “talking with two or three players”) or raising a big fat round of funding, which seems like the most likely scenario. Already, Data Collective, Founders Fund, RRE Ventures, Morado Ventures, Real Ventures, and 500 Startups are among those that have invested an undisclosed amount of money in Trusted Insight. And Bangash says he’s been receiving “inbound interest from prestigious investors” anew.

Either way, Bangash sounds confident in the network effects that Trusted Insight now enjoys, noting that “someone could develop a nicer LinkedIn, too, but people probably wouldn’t use it.” The trick going forward is turning Trusted Insight from a “transformational company,” as he calls it, into a transactional one.

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