Happy Valentine’s Day, readers. Hope you have a sweet weekend.
Also, StrictlyVC is taking off President’s Day to manage a highly unsophisticated lemonade-making operation (school fundraiser). But we have some good stories and profiles coming your way, so see you soon!
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Top News in the A.M.
Japan’s biggest online retailer, Rakuten, said it’s paying $900 million for Cyprus-based Viber, a maker of messaging and calling applications. “This is a no-brainer,” Rakuten’s CEO, Hiroshi Mikitani, tells Re/code.
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Almaz Capital: From Russia With Love
It’s easy to poke fun at Russia as the land of graft, corruption and side-by-side toilets. But you quickly get the impression that six-year-old Almaz Capital — an early-stage venture firm that has offices in Menlo Park and Moscow and is focused on bridging the two worlds – has been laughing all the way to the bank.
I talked with Almaz general partner Geoff Baehr yesterday afternoon to learn more about Almaz and how it handles not entirely flattering perceptions about doing business with Russia. Our conversation has been edited for length.
You were a chief network officer at Sun Microsystems, then spent a decade or so with U.S. Venture Partners. How did you wind up at Almaz?
At Sun, in 1990, we decided to go [abroad] at the fall of the Soviet Union to find the best engineers we could find. And the first guy we met was [Almaz founder] Sasha Galitsky, who was the chief engineer overseeing 1,500 engineers at the Soviet Space Agency. He eventually left to start a 20-person company and that was [Sun’s] first investment outside of the U.S. Sasha and I have known each other since.
What makes it work is the fact that Sasha is a very well-connected guy who’s very visible in Russia and was one of the first VCs there.
Almaz was an early investor in Yandex, the now-public Russian Internet company. Do all of the firm’s investments have to have ties to Russia? And what percentage of your deals have originated in Russia versus the U.S.?
Many do have engineering [hubs] in Russian and build out sales and marketing here, or we fund companies here that are building for the Russian market. Some of our LPs require that there be a Russian angle — that’s why they gave us the money. But we don’t try to [orchestrate] unnatural acts. If it’s a really good company here in the U.S., we’ll do it [regardless].
About 75 percent of the [dozen or so] companies from our first fund originated in Russia, but by and large the focus has been to go global.
What are some of the advantages of knowing Russia so well?
For one thing, the educational system in Russia during Soviet times was exceptional; there would be an entire institute focused on statistics or higher mathematics, kind of like single-subject graduate schools. And there are still pools of talented people with specialized knowledge that you can avail yourself of.
Most American people also have no idea how tightly you can draw a belt around your waist. In terms of lean, you haven’t seen lean until [you’ve seen Russian entrepreneurs]; they’d eat their own shoe leather. They worry this might be the only shot they’ll get, so they watch where every dollar goes.
Yet there’s always concern over who controls what in Russia. Do you have to overcome those worries?
We always deal with the “those Russians” question. Sure, there’s a perception that there’s problems with graft and corruption. But entrepreneurs manage to survive and do well and things are always evolving. I was at a massive conference in Moscow and the Premier was there taking questions and this one guy put up his hand and said, “I’d like to point out that all the entrepreneurial [tech] successes out of Russia have done their flotations outside of Russia and kept their intellectual property outside of Russia.” A whole bunch of people moved away from this person as he was talking, by the way. [Laughs.] But the Premier said, “We’ve only been doing this for 25 years. We’re working on it but it evolves at the pace that it evolves.”
At Almaz, we don’t do business with oligarchs. We have very professional LPs include Eric Schmidt, the World Bank, and Cisco, and we operate a very straightforward model using only top-tier financial to legal firms. If someone says “those Russians” and our name in the same sentence, we’re toast. Our reputation is everything to us.
I understand you’ve almost closed a second fund that’s much bigger than your first, $79 million fund. Can you comment? Also, any lessons learned at Almaz that were new to you, even as a longtime VC?
I can’t comment on the new fund, I’m afraid. As for lessons: We had a saying at Sun that you should work with people you like, have fun, and maybe make some money. And it’s true. There’s a lot to be said for working with someone for whom you have infinite respect and who you consider a lifelong friend. There are worse jobs.
New Fundings
Campanja, a 3.5-year-old, Stockholm, Sweden-based online ad campaign optimization startup, has raised $5 million in Series A funding led by Hoxton Ventures and DFJ Esprit. Google backer and angel investor Ram Shriram also participated in the round, along with David Axmark, co-founder of MySQL.
DocuSign, the 10-year-old, Seattle-based electronic signature company, is raising $100 million in fresh funding in a deal that could value the company as high as $1.5 billion, according to WSJ sources. DocuSign raised its last round in 2012; to date, the company has raised $125 million. Its investors include Frazier Technology Partners, Ignition Partners, and Sigma Partners.
Fuel3D Technologies, a year-old, Oxfordshire, England-based maker of 3D scanning solutions, has raised $2.6 million in early stage funding from a syndicate of private investors, led by Ben Gill of London-based Chimea Partners.
MD Revolution, a three-year-old, San Diego-based startup that has developed online technology to help people improve their health, has raised $7 million in Series B round of funding — all from individuals, says the company.
MyHealthTeams, a 3.5-year-old, San Francisco-based company that builds vertical social networks around people with particular chronic health conditions, has raised $3.36 million in Series A funding led by Westly Group. Adams Street Partners, 500 Startups, HealthTechCapital, Sand Hill Angels and TEEC, also participated in the funding.
Pronutria, a 3.5-year-old, Cambridge, Ma.-based company that’s developing medical foods and nutritional supplements, has raised $12.25 million in Series B financing led by Flagship Ventures, at whose innovation unit, Flagship Ventures, Pronutria was born. Private investors filled out the round; the company has raised $23 million to date.
RiseSmart, a 6.5-year-old, San Jose, Ca.-based company that makes enterprise career management software, has raised $11 million in growth equity financing led by Accel-KKR, with previous backer Norwest Venture Partners participating.
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New Funds
True Ventures, the eight-year-old, early-stage venture firm, with offices in San Francisco and Palo Alto, has raised $250 million for its newest fund, shows an SEC filing that was first spied by Venturebeat. True was cofounded by investors Jon Callaghan and Phil Black. StrictlyVC sat down with Callaghan a few months ago to discuss how True selects which teams to back and the Series B crunch that he has been seeing.
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IPOs
Aerohive Networks, a 7.5-year-old, Sunnyvale, Ca.-based wireless access point maker, has filed to raised up to $75 million in an IPO. Forbes, which flagged the S-1 yesterday, noted that the company isn’t profitable, with net losses of $25.4 million for the first three quarters of 2013 compared to $15.8 million for the same quarters the year before. Aerohive has raised roughly $100 million from investors over the years. Its principal shareholders include Northern Light Venture Capital, which owns 21.9 percent of the company; Lightspeed Venture Partners (20.4 percent);New Enterprise Associates (13 percent); Kleiner Perkins Caufield & Byers (11 percent); and DAG Ventures (8.4 percent). Institutional Venture Partners has also participated in two of Aerohive’s funding rounds, though it apparently owns less than 5 percent of the company as it doesn’t appear in the filing.
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Exits
Distill, a 1.5-year-old, San Francisco-based company that makes data-driven recruiting tools and was reportedly working on a way make to make it easier to recruit engineers specifically, has been acquired by Yahoo. Terms of the deal weren’t disclosed. Distill had raised $1.3 million in funding from Felicis Ventures, China’s Innovation Works and DN Capital, in addition to individual investors.
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People
Ray Rothrock, who retired after a 25-year-long career as a venture capitalist at Venrock, is back in action as the CEO of RedSeal Networks, a Santa Clara, Ca.-based network infrastructure security management company whose board he has chaired for the last decade. Rothrock succeeds Parveen Jain, who announced his retirement earlier this week after less than three years with the company.
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Happenings
The Launch festival is coming to the San Francisco Design Center Concourse, February 24 through February 26. More information here.
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Data
Venture capital investments into the healthcare sector gained momentum in 2013, totaling $6.4 billion across 550 deals. While those tallies fell 2 percent and 7 percent on a year-over-year basis, there was plenty for healthcare VCs to cheer. CB Insights has some more on last year’s healthcare financing trends right here.
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Job Listings
Novo Ventures, the life sciences venture firm, is looking for anassociate/principal in San Francisco.
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Essential Reads
Google is working on technology that will provide data transfer speeds over the Internet that are many times faster than its current Google Fiber service.
Crowdfunded HIV vaccine developer Immunity Project has gained traction over the past few months, with technology incubator Y Combinator‘s investment in it sparking mainstream media coverage. But some are concerned about what they view as an imbalance between marketing and scientific data. “The concept they’re selling is an old concept that has been shown not to work, and can’t work,” Oregon Health & Science University immunologist Louis Picker tells Nature.
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Detours
Students in single-gender schools or classrooms don’t do any better academically than those in co-ed ones, a new study says.
Asked what their parents said that made them feel great and brought them joy when they played sports, college athletes tell researchers the six-word answer is: “I love to watch you play.” (H/T: Roger Ehrenberg)
The strange history of women, sensuality, and chocolate.
An Open Letter to the Ugly Mug I Painted at Paint A Dream Last Weekend.
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Retail Therapy
This weekend, sit back and enjoy the Olympics in the warmth of your home while a robot plow clears the freshly fallen snow on your driveway for a change, for Pete’s sake.
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