CB Insights

In Venture Database Race, a Kerfuffle

Anand Sanwal, founder of the New York-based venture database company CB Insights, made an unpleasant discovery yesterday after his subscribers pointed him to a TechCrunch piece about Techlist, a new venture database business.

Techlist made the news because the outfit — a subsidiary of the Singapore-based media company Tech In Asia — was just admitted to the winter class of the prestigious accelerator program Y Combinator. The problem spied by Sanwal and his customers: Techlist has borrowed heavily from CB Insights’s design and user interface. The company clearly “crossed over from inspiration into plagiarism,” says Sanwal.

Whether Y Combinator agrees remains to be seen. But Sanwal – whose bootstrapped, 27-person company is competing against a growing number of new investor database companies — isn’t imagining things, seemingly. In recent months, 12 Techlist employees have seized on a 30-day trial period that CB Insights offers, including Tech In Asia’s CEO, Willis Wee, his head of product, and numerous product managers and developers.

Indeed, on Twitter yesterday, Wee acknowledged using CB Insights “as a reference to launch fast,” writing to Sanwal specifically, “Credits to you and we will be improving as we go along.”

Wee — whose company has previously raised venture funding from East Ventures and Simile Venture Partners — quickly added that Techlist is “very very different from any other venture database out there.”

StrictlyVC chatted with Sanwal yesterday about what happens next.

You just wrote a jokey post about “arriving” now that you have a “copycat.” Are you thinking of taking further action?

We’ve talked to our lawyers and are awaiting their guidance. Since Willis admitted on [Hacker News] and via Twitter [that] they copied, a lot of the gray area has been removed. But ultimately, this is a distraction, so [I’m] not sure what we’ll do. Plus, I love our lawyers, but they ain’t cheap.

Techlist plans to zero in on the Asian market. How big an area of focus is that for you?

We cover financing and exit data globally, including Asia, as our institutional clients expect that we’re comprehensive. Also, Asia is our second fastest-growing market in terms of clients, so we’re putting a lot of effort on the area.

Have you asked Y Combinator for comment?

We haven’t. For the record, we don’t think this is YC’s fault. They have a lot of companies and cannot audit the UI/UX of their portfolio companies. I also don’t think [President] Sam [Altman] and the team condone this type of thing or think great companies are built by copying other companies. That said, I am curious to see what YC does.

Just yesterday, the WSJ published a piece about the advantages that venture-backed companies have over those that choose to bootstrap, including investor connections. How big a concern is this company and its investor ties?

It’s annoying, mainly because our team works hard, and I feel this is sort of crappy for them. But beyond that, we’re not concerned. Money buys you time, not the ability to execute. And we’ve seen lots of well-funded companies come into our space and all flame out.

You seem to be maintaining a sense of humor about this.

We’re a heads-down, low-drama group, so this made things interesting for us today. I realized that some drama from time to time is fun.

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

A Quick Reminder that Big Rounds Don’t Mean Big Exits

The startup industry is endlessly fascinated with big financing rounds, but they do not always translate into the biggest returns, as illustrated by data assembled for StrictlyVC today by CB Insights.

The list below features the largest financings of 2010, 2011, 2012, 2013 and, to date, of 2014, though you could easily mistake it for a list of companies that have suffered the highest-profile implosions in recent years.

Better Place, a start-up that hoped to create vast networks of charge spots to power electric cars, raised $350 million in 2010. In 2013, it filed for bankruptcy.

LivingSocial, the daily deals site, raised $183 million in 2010 and another $400 million in 2011. The troubled company has yet to reach profitability.

Fisker Automotive, the electric car company, raised $392.1 million in 2012. It declared bankruptcy in 2013.

The solar power company BrightSource, which raised $176 million in 2010, also appears to be struggling financially. As the WSJ reported in September, its Ivanpah solar thermal electricity project, which is the world’s largest of its kind, had to apply for a federal grant in September — to pay off its federal loan.

Whether or not you consider the deals service Groupon (which raised $950 million in 2012) or game maker Zynga ($480 million in 2012) a success or failure likely depends on when you happened to invest in them. But both companies have also failed to live up to expectations.

(Click chart to enlarge.)

With Little Notice, Seed-Stage Valuations Begin Falling

A widely held belief in Silicon Valley is that valuations are still on a one-way trajectory toward the sky, with founders firmly in the driver’s seat.

But the reality for seed-stage companies may be a bit more dire than that — and getting worse by the month.

According to the research firm CB Insights, both average and median seed-stage valuations have fallen since last year, with the average valuation dropping from $2.2 million to $1.7 million and median valuation falling even more precipitously, from $1.7 million to just .6 million.

Data from AngelList, a matchmaking service for investors and seed-stage entrepreneurs, also shows declining valuations. According to AngelList, which tracks thousands of startups in its system, the average seed-funded company’s valuation dropped from $3.9 million in the third quarter of 2012 to $3.6 million in the third quarter of this year. That isn’t a massive dip, but AngelList founder Naval Ravikant tells me that “by the time [a shift in one direction] shows up in the averages, it’s pretty pronounced.”

A recent quarterly venture capital report out of Pitchbook, which operates a subscription-only database of private equity and VC deals paints a rosier picture. Pitchbook found that median pre-money valuations for seed-stage, VC-funded companies have nearly doubled over the last three years — from $3.2 million in 2010 to $5.2 million through the first three quarters of 2013.

Still, this same report observed that lofty valuations are only making it harder for companies to raise Series A rounds. Pitchbook further noted that the rise of valuations can’t go on endlessly, suggesting there will likely be more flat and down rounds in coming years.

Ravikant — noting that “everyone’s dataset is incomplete” — suggests the future is now. Though he can’t pinpoint exactly when things began trending downward, he thinks valuations “kind of peaked around the Facebook IPO, when it turned out to be less than people thought it would be.”

According to Ravikant, there “hasn’t been a mass exodus out” out of the seed-stage investing market, mainly because “people still believe some percentage of your portfolio should be early-stage. But there’s increased recognition” that it’s a tough racket, with many angels suffering from investor fatigue and suddenly becoming more realistic about the chances of their portfolio companies receiving follow-on investments.

There will always be a market for the most promising seed-stage startups, in other words. But evidence from CB Insights and AngelList suggests that for entrepreneurs just setting out, the road ahead looks bumpy.

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