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A New Way to Fund Unicorns Starts to Look Less Magical

If you haven’t heard of a fairly new twist on investing called special purpose vehicles (SPVs), you probably aren’t an institutional investor or a wealthy individual with direct ties to either a venture firm or a high-flying startup like Pinterest or Postmates.

But don’t worry if you’ve missed the opportunity to invest in one. Investors may find they weren’t worth the risk if valuations of so-called unicorns — some given “haircuts” recently by their mutual fund investors — start to slip more broadly.

The vehicles – essentially pop-up venture firms that come together quickly to make an investment in a single company – began surfacing around 2011, leading up to Facebook’s IPO, and they’ve been on the rise since. In April, the Wall Street Journal reported on several low-flying SPVs that have been used to connect investors with high-profile, still-private companies like the data analytics company Palantir Technologies and the grocery -delivery outfit Instacart.

Another company that has raised money via numerous SPVs is the digital scrapbooking company Pinterest. When it set out to raise more than $500 million earlier this year, the venture firm FirstMark Capital raised a $200 million for a SPV to help fund it. In 2014, Pinterest separately raised $131.1 million through two SPVs organized as Palma Investments by SV Angel, the seed-stage fund founded by renowned investor Ron Conway.

It’s no wonder that investors are drawn to the vehicles. In the case of Facebook, early access to the company produced big dividends for investors. Investor Chris Sacca similarly amassed an outsize stake in Twitter for investors Rizvi Traverse and J.P. Morgan by creating SPVs that paid off. (How richly depends on when they began cashing out. As of late September, Rizvi Traverse had sold more than 10 percent of the 15.6 percent of Twitter it owned at the time of its November 2013 IPO. Twitter’s shares peaked in January of 2014 at $69 per share; they’re now trading at roughly $26 apiece.)

Whether investors in newer SPVs will see such rewards remains a question mark – and there a lot of investors in newer SPVs.

More here.

Joya Raises $5 Million to Make Messaging More Fun

Three years ago, Michal and Vlada Bortnik, former Microsoft employees who met on a soccer field in Seattle, had a host of problems every time they gathered up their two young daughters and tried communicating online with far-flung family members.

The couple decided to do something about it, founding Joya, a mobile video communications company whose two newest messaging apps allow users to record playful messages of up to 30 seconds in length. One app, FlipLip, allows users to play with their voice and insert their face in a variety of county-fair-like cut-outs, including a princess, ninja and bear; the other, Cleo, invites people to make video selfies using filters designed to make them appear more attractive.

Whether the apps take off remains to be seen, but Facebook certainly thinks they’re promising. The couple was among 39 other developers to work with the company in advance of the rollout last month of its Messenger Platform, for which it hopes developers will build apps that integrate with Facebook Messenger.

Facebook’s apparent endorsement could prove especially meaningful as it attempts to turn Messenger into its own ecosystem. (Yesterday, as you likely read, Facebook launched a standalone Messenger app for the web with the hope that people will use Messenger both inside and outside of the social network.)

Certainly, Joya’s traction caught the attention of Battery Ventures and Altos Ventures, which have just provided the now seven-person company with $5 million in Series A funding.

As for what’s next, the pair — now based in Palo Alto, Ca. — say to expect more apps this year that will continue their focus on making quick, online messaging easier and more enjoyable.

They add that for now, they plan to make their existing (free) apps better and more tightly integrated with Messenger.

“It’s very rare that platforms like this come out with such large audience,” says Michal Bortnik, noting that according to Facebook, Facebook Messenger now has more than 600 million monthly active users.

“We’ve developed many concepts that never saw the light of day,” he says, “but we now have a clear product and a clear story: How can we make communications more personal and fun . . . We have something that’s growing.”

Tyler Winklevoss on the Positive Impact of “The Social Network”

By Semil Shah

Cameron and Tyler Winklevoss, the twins who remain best known for their legal fight with Facebook CEO Mark Zuckerberg — and the ensuing depiction of that battle in “The Social Network” — have moved on from those days. Still, speaking for both men, Tyler Winklevoss recently agreed to share some thoughts about life in the public spotlight and how it has impacted the brothers.

Many people in tech and startups know your name but may have an impression of you based on movies and press stories. What’s one thing you wish people knew about you that you feel is misunderstood?

I think most people in tech and startups today actually know us through the investments we’ve made, the projects we’re working on, or their own first-hand experience in meeting or working with us. Over the past two years we’ve met with hundreds of entrepreneurs, attended many demo days, and keynoted at TechCrunch Disrupt, the Bitcoin 2013 Conference, and Money20/20, to name a few. We’ve co-invested with many top valley investors, built what we believe to be a strong portfolio, and have worked very hard to bring value beyond capital to entrepreneurs we’ve partnered with. Chances are, if you are a part of the tech ecosystem in either Silicon Valley, Los Angeles or New York, you know us or know someone who really does knows us, and this informs your impression of us, not a Hollywood movie.

That being said, “The Social Network” was a fantastic film and it was a lot of fun to watch its success. It was certainly an interesting time back then, but we never got too caught up in it. We couldn’t. Our focus was on training for the Olympics. Today, we’ve traded athletics for Bitcoin and angel investing. The fact that we were portrayed in a film that won some Oscars and almost won for Best Picture is a cool piece of history, but it’s not really relevant to our daily lives. I feel the same way about graduating from Harvard and Oxford and competing in the Olympic Games. I’m proud of these accomplishments, but I don’t spend a lot of time thinking about them. They’re in the past and just not directly related to what I’m trying to accomplish these days.

As for what the crowd understands or misunderstands, your guess is as good as mine. At the end of the day, impressions drawn from a movie or a movie portrayal, either right or wrong, live in a parallel universe of pop-culture. This is not a universe that I live in so I don’t spend much time analyzing it.

What was your largest takeaway from the whole experience?

My largest takeaway is just how powerful films can be. When we graduated from Harvard in 2004, computer science was the least popular major. When we went back to Harvard to speak to students in 2012, computer science was the tied for the most popular major on campus and it seemed like every student was involved in some sort of startup or had plans to be down the road. “The Social Network” has driven a lot of this cultural interest and shift towards technology and entrepreneurship and has had a profoundly positive impact on young people around the world. I’m very happy for this.

As you grow as investors, do you see yourselves moving into traditional VC, or being more entrepreneurial and taking investing in a new direction?

Right now, we’re really enjoying the freedom and agility that comes with running our own book, and this freedom has turned out to be a great asset so far. If we were operating a traditional VC fund, there’s a good chance we never would have been able to buy Bitcoin back in 2012, because Bitcoin is not a C-corp, and VC funds are, by and large, restricted to investing in corporations. I can only imagine what the conversations might have been like trying to explain what Bitcoin was to our LPs, let alone defend a direct investment in the asset itself. Being a fiduciary to outside parties also makes it a lot more complicated to put on the entrepreneur hat, which we have done with the Bitcoin ETF and the WinkDex bitcoin price index.

Bitcoin aside, we’ve been able to place bets in a wide-range of sectors that I think has been crucial to our overall learning. While focus is important, there’s a lot of promising deals in our portfolio that wouldn’t be living side-by-side if we had a stricter mandate.

Have you totally ruled out a traditional venture fund?

We haven’t, but we’ve never really been traditional guys in that sense, and traditions don’t necessarily last forever. I do believe that venture crowdfunding will replace a significant portion of the venture capital stack in the future. This just has to be the case. Right now we see the majority of syndicate activity at the seed level, but it’s conceivable that later rounds could be filled out by syndicates down the road. By increasing liquidity, access and flexibility on both sides of the ledger, the crowdfunding model has the potential to greatly improve the power of the venture capital marketplace.

We’re more interested in exploring this new path before walking down the existing one.

Semil Shah is a guest contributor to StrictlyVC. Shah is currently working as a venture advisor to two funds, Bullpen Capital (which focuses on post-seed rounds) and GGV Capital (a cross-border U.S.-Asia fund).

StrictlyVC: October 21, 2014

Hi, happy Tuesday, everyone! (Web visitors, you can click here for an easier-to-read version of today’s email newsletter.)

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Top News in the A.M.

Apple reported blow-out fourth-quarter results yesterday.

Verizon, meanwhile, posted its third-quarter results, narrowly missing earnings expectations but showing strong customer growth.

Yahoo is set to reports its third-quarter results today.

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Oh No You Didn’t, Facebook

Yesterday, Facebook sued DLA Piper along with three other firms and nine lawyers who represented Paul Ceglia, a New York man who emerged in 2010 with claims that he was entitled to at least 50 percent of Facebook.

Given that it’s nearly 2015, Facebook’s move comes as something of a surprise. Ceglia’s suit against Facebook was dismissed back in March by a federal judge amid clear evidence that his claims to Facebook were based on a “recently created fabrication.” More, two years ago, Ceglia was arrested and charged with mail and wire fraud for allegedly falsifying the contract and creating bogus emails to support his case. (His criminal trial is now scheduled for May.)

Facebook’s festering ire at the firms that represented Ceglia is understandable to a point. Ceglia’s lawsuit and the questions it raised were a huge distraction before Facebook went public in 2012.

Industry observers are probably cheering on Facebook, too, partly in hopes that law firms will think harder about bringing frivolous lawsuits.

Still, Facebook’s rationale for pursuing these firms at this late date sounds a little vengeful. “We said from the beginning that Paul Ceglia’s claim was a fraud and that we would seek to hold those responsible accountable,” Facebook General Counsel Colin Stretch said in a statement given to reporters yesterday. “DLA Piper and the other named law firms knew the case was based on forged documents, yet they pursued it anyway, and they should be held to account.”

Stretch might just as well have said, “DLA Piper and the other named law firms deserve an atomic wedgie, and we’re going to give them one to remember.”

DLA Piper sent StrictlyVC a comment about the suit today. Written by Peter Pantaleo, DLA Piper’s general counsel, the firm calls the lawsuit “entirely baseless” and “filed as a tactic to intimidate lawyers from bringing litigation against Facebook. DLA Piper, which was not part of this case at its outset or its conclusion, was involved for 78 days. Facebook and Mr. Zuckerberg claim that they were damaged in those 78 days, yet a mere 10 months after DLA Piper withdrew from the case and while the litigation was still pending, Facebook went to market with an initial public offering that valued the company at $100 billion. Today, Facebook is worth $200 billion and Mr. Zuckerberg is among the richest people in the world. We will defend this meritless litigation aggressively and we will prevail.”

Either way, a 2011 conversation we had with a corporate litigation attorney about Ceglia suggests that Facebook’s case against DLA Piper and the others probably isn’t a slam dunk.

Generally speaking, this attorney explained, lawyers have to “ensure that there’s a good faith basis for the claims that they file on behalf of their clients. That doesn’t mean that they have to think that they necessarily will prevail, but there has to be some kind of factual basis, in their view, to provide some support for the allegations.”

Presumably, DLA Piper didn’t know when it took the case that Ceglia fabricated the evidence to support his claims.

We’re also guessing it will be hard to argue that Ceglia’s lawyers used uniquely reckless judgment in taking on the Ceglia case. In 2010, for example, DLA Piper decided to represent CNet founder Halsey Minor in a Chapter 11 proceeding despite Minor’s long history of stiffing service providers.

DLA Piper subsequently dropped Minor eight months after engaging with him, but you see the point: if it were so easy to sue a law firm over its ne’er-do-well customers, we wouldn’t have lawyers.

Facebook says its lawsuit is a matter of principle. We think it sounds heavy-handed. It also seems very much like another distraction that the company doesn’t need.

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New Fundings

Bitnet Technologies, a 10-month-old, San Francisco-based digital commerce platform provider for bitcoin payments, has raised $14.5 million in Series A funding led by Highland Capital Partners. Other investors include Rakuten, Webb Investment Network, Bitcoin Opportunity Corp., Stephens Investment Management, Commerce Ventures and Buchanan Capital Management. Bitnet’s team is largely from the payment gateway company CyberSource and from Visa, which acquired CyberSource in 2010 for $2 billion.

Bowery, a year-old, New York-based enterprise startup focused on simplifying the process of setting up, managing, and sharing development environments, has raised $1.5 million in seed funding from Google Ventures, Bloomberg Beta, RRE Ventures, Homebrew, Betaworks, SV Angel, BOLDstart Ventures, Magnet Agency, Deep Fork Capital, and angel investors Naveen Selvadurai and Ryan Holmes. The company had earlier raised an undisclosed amount of seed funding from General Catalyst Partners and First Round Capital.

CAA, the 39-year-old, L.A.-based sports and talent agency, has agreed to a deal with the private equity firm TPG that sees the latter’s stake in CAA grow from 35 percent to 53 percent in exchange for roughly $225 million. Deadline Hollywood has more here.

CloudCannon, a two-year-old, San Francisco-based company behind an easy-to-use content management system designed to help web designers and their clients work together more easily, has raised $500,000 in seed funding from individual investors. TechCrunch has more here.

GoCatch, a three-year-old, Sydney, Australia-based taxi booking and payments app, has raised roughly $4 million (in U.S. dollars), from investors that include Square Peg, a venture firm backed by billionaire James Packer, along with numerous wealthy Australian families such as the Kahlbetzers, the Liberman family, and the Millner family. The Australian outlet BRW has more here.

GrabTaxi, a two-year-old, Malaysia-based mobile application that assigns available cabs to nearby commuters using mapping and location-sharing technology, has raised $65 million in new funding — its third round of 2014.Tiger Global Management led the round, with participation from new investor Hillhouse Capital and previous investors Vertex Ventures, GGV Capital, and the Chinese travel giant Qunar. The company has now raised “approximately $90 million,” says TechCrunch. (Here’s a Bloomberg piece from June that profiles GrabTaxi’s founder, former HBS student Anthony Tan.)

Intel Capital, the 23-year-old, Santa Clara, Ca.-based global corporate venture arm of Intel, announced last night that it has invested $28 million across five Chinese companies, including makers of wearables and Internet of things devices and components. They are: EyeSmart Technology, LeWa Technology, Shenzhen Fibocom Industrial Development, Shanghai Ailiao Information Technology, andGuangdong Appscomm Digital Technology. The outlet peHUB has more here.

La Belle Assiette, a 1.5-year-old, Paris-based online marketplace for customers seeking out private chefs, has raised $1.7 million in seed funding, including from BlaBlaCar cofounder Nicolas Brusson; three founders of l’Atelier des Chefs (Europe’s largest cooking classes company); and Kima Ventures. The company had previously raised $500,000 in seed funding.

Magic Leap, a three-year-old, Hollywood, Fla.-based still-stealth company that says its hardware and software will deliver “cinematic reality,” has officially closed on $542 million in Series B funding. (Recode had reportedlast week that the company was zeroing in on a $500 million round.) Investors include Google, Kleiner Perkins Caufield & Byers,Andreessen Horowitz, Obvious Ventures, Qualcomm and Legendary Entertainment.

Mirantis, a four-year-old, Mountain View, Ca.-based OpenStack cloud vendor, has raised $100 million in Series B funding led by Insight Venture Partners, with participation from August Capital and earlier investors Intel, WestSummit Capital, Ericsson and SAP. The company has now raised $120 million altogether. GigaOm has more here.

NuCurrent, a five-year-old, Chicago-based company that makes high-efficiency antennas for wireless power applications, has raised $3.48 million in Series A funding from Independence Equity, Hyde Park Angels, Harvard Business School Angels, and undisclosed corporate investor and earlier backers.

Sequenta, a six-year-old, San Francisco-based biotech company whose technology detects minimal residual diseases, has raised an undisclosed amount of funding from Celgene Corp. and other, undisclosed strategic investors. The company had previously raised at least $41.5 million, including from Index Ventures, Mohr Davidow Ventures, and Foresite Capital, shows Crunchbase.

Snowflake Computing, a two-year-old, San Mateo, Ca.-based cloud-based data warehousing company, has raised $26 million in Series B funding led by Redpoint Ventures, with participation from Wing Ventures and earlier investor Sutter Hill Ventures. The company has now raised roughly $50 million altogether. GigaOm has more here.

STAQ, a two-year-old, New York-based ad tech firm that sells a collection, reporting, and integrations system that helps users view their campaigns, inventory, and audience data, has raised $2.5 million in Series A funding led by Genacast Ventures and Core Capital, with participation from earlier investors Kinetic Ventures, Revel Partners and The Hive. The company had previously raised $1.1 million in seed funding.

StackIQ, an eight-year-old, La Jolla-based supplier of IT-automation technology to large businesses, has raised $6 million in Series B funding from new investors Grayhawk Capital, Keshif Ventures, DLA Piper and OurCrowd, along with earlier investors Anthem Venture Partners andAvalon Ventures. The company has raised at least $7.8 million to date, shows Crunchbase.

Vomaris Innovations, a 10-year-old, Tempe, Az.-based regenerative medical device company that develops a microcurrent field generating wound dressing, has raised $5 million in new funding, shows an SEC filing. The company had previously raised $5 million in equity and $200,000 in debt, show earlier filings.

WeGoLook, a four-year-old, Oklahoma City-based company that dispatches in-person “lookers” to verify claims made by Internet sellers about their products (including cars), has raised $1.75 million in Series A funding led by i2E, which was joined by Seedstep Angels; the company’s founders; and other, undisclosed investors.

ZipLine Medical, a nearly eight-year-old, Campbell, Ca.-based medical device company that’s developing noninvasive surgical skin closure devices, has added $5.7 million to its Series C round, which initially closed in January of this year. China Materialia, a Shanghai-based venture firm, led the newest funding. The company’s earlier Series C investors includedRA Capital Management, XSeed Capital and Claremont Creek Ventures. The company has now raised $16 million to date, shows Crunchbase.

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New Funds

Google Ventures has upped the size of its inaugural European fund from $100 million to $125 million, its managing partner, Bill Maris, said yesterday. More here.

OneVentures, a 7.5-year-old, Sydney, Australia-based firm that makes early-stage bets on technology companies based in Australia, has raised more than $60 million for a $100 million fund it began raising back in March. The firm’s focus is wide-ranging, including healthcare, education, mobile, media, cloud computing and data, sensors and robotics, and “food security.” It looks for companies that are already making $5 million to $15 million in annual revenue.

PureTech, a 10-year-old, Boston-based operating company that specializes in seed and early-stage investment in novel therapeutics, medical devices, and research technologies, has raised $55 million in new funding led by the U.K. investment manager Invesco Perpetual. FierceBiotech has more here.

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IPOs

Connecture, a 15-year-old, Brookfield, Wi.-based company whose enterprise software is used to build health-insurance exchanges, has filedto raise up to $86.3 million in a public offering. Some of its biggest outside shareholders include Chrysalis Ventures, which owns 28.5 percent of the company; SSM Partners, which owns 20.2 percent; and LiveOak Equity Partners, which owns 10.6 percent.

Workiva, a six-year-old, Ames, Ia.-based cloud-based data analytics company that helps companies collect, manage, report and analyze critical business data in real time, has filed to go public. One of its biggest outside investors is Bluestem, a Midwest private equity firm.

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Exits

Crunchbase, the AOL-owned database of tech companies and people, could very well be spun off into its own standalone company, said AOL CEO Tim Armstrong yesterday at a TechCrunch conference, adding that while AOL would remain a majority stakeholder in the business, AOL would consider either funding a spin-off itself or taking outside capital.More here.

BrightRoll, the 8.5-year-old, San Francisco-based cross-platform digital video advertising service, is in talks to be acquired by Yahoo, reports TechCrunch, which says that “term sheets have been signed” and that the price will likely be in the neighborhood of $700 million. Brightroll has raised $40.2 million over the years, including from Adams Street Partners, Scale Venture Partners, Comerica Bank, True Ventures, Trident Capital, KPG Ventures, Michael Tanne, Fabrice Grinda, Auren Hoffman and Jeff Clavier.

Videoplaza, a London-based video supply-side platform, is being acquired or an undisclosed sum by the video distribution and analytics platform Ooyala (itself now owned by Australian telco Telstra). More here.

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People

At the London-based TechCrunch Disrupt conference yesterday, AOL CEO Tim Armstrong squelched recent rumors suggesting that Yahoo and AOL might merge, saying that of a 30- to 40-page presentation he’d just prepared for his board about AOL’s 2015 plans, “I don’t think Yahoo is mentioned once in that deck.”

Venture capitalist Jim Breyer says startup founders should raise money right now if they can, given the volatility of the public markets. As he tells Bloomberg: “I encourage our best companies, which believe they don’t need to raise cash, to do so opportunistically.” Breyer points to the media company Legendary Entertainment — which raised $250 million at a multibillion-dollar valuation this month led by SoftBank, Fidelity Investments, and Morgan Stanley — as one portfolio company that agreed with his thinking, adding: “A company is better off with 18 months of cash in the bank.”

Oracle billionaire Larry Ellison owns a $300 million Hawaiian paradise, and Business Insider takes readers on a tour of it.

Maha Ibrahim, a general partner at Canaan Partners, tells the Silicon Valley Business Journal she spent a decade trying to ignore the topic of gender in venture capital, but no longer. “At Canaan, we have two female general partners. We have six female investor professionals (including GPs), and the great thing is that 20 percent of the companies that we’ve invested in . . . were founded by females. So diversity is really important to us, and we believe that it starts by leading by example. We might as well start doing it ourselves.”

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Happenings

The Post.Seed Conference is coming up in San Francisco on December 2, and it will feature an impressive line-up of investors to speak on a wide range of early-stage financing issues, including Chris Dixon, Paul Martino, Keith Rabois, Naval Ravikant, Ryan Sarver, Semil Shah, Hunter Walk, Brandon Zeuner, and many others. (I’ll be there, too, moderating a panel.) You can sign up here.

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Essential Reads

Humanity’s last great hope is venture capitalists, argues the WSJ.

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Detours

Dating versus married: How text messages change over time.

Hoverboards? We’re not there yet.

A somewhat surprising look into a social network for doctors, where one popular post is “guess the diagnosis.” (Doctors: They’re funny and awful, just like us!)

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Retail Therapy

James Bond’s Lotus Esprit Submarine. Elon Musk owns one. Now you can, too.

Oh No You Didn’t, Facebook

Industry observers are probably cheering on Facebook, too, partly in hopes that law firms will think harder about bringing frivolous lawsuits.

Stretch might just as well have said, “DLA Piper and the other named law firms deserve an atomic wedgie, and we’re going to give them one to remember.”

Either way, a 2011 conversation we had with a corporate litigation attorney about Ceglia suggests that Facebook’s case against DLA Piper and the other firms probably isn’t a slam dunk.

Presumably, DLA Piper didn’t know when it took the case that Ceglia fabricated the evidence to support his claims.

DLA Piper subsequently dropped Minor eight months after engaging with him, but you see the point: if it were so easy to sue a law firm over its ne’er-do-well customers, we wouldn’t have lawyers.

Facebook says its lawsuit is a matter of principle. We think it sounds heavy-handed. It also seems very much like another distraction that the company doesn’t need.

Updated to include a statement from DLA Piper.

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After Onavo

Earlier this week, The Information published a piece about mobile software makers who are flying blind following Facebook’s acquisition last year of Onavo, an app analytics startup, even as consumers spend more time inside apps than ever before. In fact, according to a new Comscore report, activity on smartphones and tablets has grown to 60 percent of our digital media time, driven predominately by apps.

On the desktop, of course, Comscore, Nielsen and SEO companies can learn a lot about site referrals based on URL tracking, and for the most part, everyone has access to the same data. By contrast, the mobile ecosystem offers no such visibility. Aside from tracking how may times an app has been downloaded, says Keval Desai of Interwest Partners, “There’s no true visibility into the traffic of top sites, no visibility into app discovery.”

Desai compares the dearth of mobile analytics to the old days of the Internet, when there were “these closed islands, like AOL and CompuServe, before the web came along and opened everything up.” Today’s “islands” are Google and Apple and, increasingly, Facebook, which control most of the mobile app market and thus can see what others cannot, including how often particular apps are used.

Things don’t look to change any time soon, either, despite the growing number of companies attempting to make money off of mobile analytics. These companies range from four-year-old, San Francisco-based App Annie, which tracks downloads, to Singular.net, also in San Francisco, a new company in the broader mobile-usage-tracking space that was founded by ex-Onavo employees and raised $5 million in seed funding from General Catalyst Partners this summer.

Other analytics startups trying to figure out mobile analytics include Mobileaction, Sensor Tower, MixPanel, Amplitude, AppGenius, and Mobiledevhq, a Seattle-based company that was acquired earlier this month for undisclosed terms.

The question is whether the absence of a mobile analytics standard will stunt the development of new mobile apps. Desai, for one, isn’t ready to toss in the towel.

While a lack of transparency into the ecosystem may frustrate reporters and venture capitalists looking for the Next Mobile Trend, the rest of the world may wonder, “Who cares?” suggests Desai. Consumers can visit an app store to get an idea of what’s new and exciting, he notes. VCs employ people to write scripts to figure out what’s hot and what’s trending. Meanwhile, “If you’re a large advertiser and want to know what are the most frequently used apps by a particular demographic, you can get that data through your ad agencies or through the publishers themselves. App publishers have an incentive to voluntarily disclose that information – in private. It’s like with TV and radio and print, where you have publishers who, for the right reasons, aren’t interesting in [publicly] disclosing their viewership data.”

Desai — whose firm was an investor in the mobile analytics firm Flurry, which sold to Yahoo earlier this summer in a reported $200 million deal — adds that he “isn’t saying that [mobile analytics is] not important.” Better insight into how applications are performing would be great. “But people who really care about this stuff have a way of finding it out.”

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Bubba Murarka: “We’re Underinvested as an Industry in Android”

DFJ’s newest managing director, Bubba Murarka, knows a thing or two about mobile. He has numerous bets on mobile companies, both personal and professional; he blogs and closely follows the writings of top mobile analysts, including Horace Dediu; and, oh, yeah, he was the first product manager at Facebook to get behind Android. (StrictlyVC previously wrote about Murarka’s background, including his seven years at Microsoft, here.)

If you want to know about mobile trends, in short, you could do worse than talk with Murarka, which we did last week. Some outtakes from that conversation follow.

You’ve written that it’s no longer about iOS versus Android but which Android “versions” and “flavors” startups should get behind. Do you think the best days of the iOS are behind it?

There are two different ways to frame it – that it’s a zero sum game and only iOS or Android can win, or that both are important parts of the mobile ecosystem. I subscribe to the latter. But we’re underinvested as an industry in the Android portion of the ecosystem. Four out of five phones sold have Android on them. It’s an insanely big switch, and Android will be leaping to more and more types of devices. Google announced [last] week its new wearable platform. That means all wearables could conceivably run Android. Google announced at CES the Open Automotive Alliance, so they are porting the Android to the car. You can imagine over time that Android will be the defacto, default OS for everything. And in that world, you need to start — as a venture industry and startup community — making more bets on Android.

What’s the hold-up?

I think it’s harder in the Bay Area. I can count the number of Android phones I see carried in a day by entrepreneurs – it’s usually none. And I think it’s hard to imagine something that you don’t use every day. I do think there’s an underrepresented opportunity that startups are beginning to go after, but I’d say it’s still way less than 50 percent, which, to me, would seem reasonable.

You have a giant phone. Is this the future of smartphones? As importantly, where do you carry it?

I have a man purse. [Laughs]. No, it fits in my pocket. I have an Android phone and an iOS phone and got the [Samsung Galaxy] Note [to see how I’d use it]. And since getting it, I’m using my iPad a lot less because I don’t mind watching video on it.

If you look at where data consumption happens on mobile, more than 50 percent is video, so in that world, this bigger screen makes a lot of sense. [Taking into account] socioeconomic situations in other countries, where maybe they can’t afford to buy a phone and a tablet but one device, this also starts to make a lot more sense. You also get really crazy [good] battery life.

You’ve written about subscription opportunities over smart phones. What do you see coming?

Right now, people are pretty much subscribing to either storage or to music. I think communication apps are probably [going to become bigger and more capable of charging subscribers, too] like WhatsApp’s 99 cent [per year] model.

It wouldn’t surprise me to see others like game companies adopt that same kind of subscription model. So instead of offering in-app purchases, [they could] start to offer a dollar-per-month unlimited in-app purchasing. That creates a much more sustainable, predictable model. What happens if you just give everything to a user for 99 cents a month?

What about mobile multitasking? Do you see opportunities for startups to make that easier to do?

Android actually allows it. I can use two apps at the same time on my Note, though it’s a little clunky. There are rumors already about iOS 8 having some inner-app communication functionality, too, so I think there will be new ways to do it.

An opportunity I see specifically isn’t for a company to build an app themselves but rather to build their app to be embedded in other apps. Like, it would be interesting to me if Microsoft never shipped Office for iPad or iOS devices but rather shipped the Office Document Viewer; all of sudden, every app [would have] access to viewing and editing [in] a Microsoft Office doc, so now you [could] multitask within an application.

If you think about common problems that every app needs to solve, an interesting company is Layer [a communications platform that can be added to any mobile app by adding fewer than 10 lines of code]. It doesn’t have its own standalone messaging app; it’s messaging for other apps, all happening in the context of other apps. And that’s intensely powerful.

So Snapchat is Worth More than $3 Billion. Got It.

Yesterday, there was lots of back and forth about Snapchat, the fast-growing messaging service, and the $3 billion all-cash offer from Facebook that it recently spurned, according to the Wall Street Journal’s sources. (Apparently, three sources also confirmed this account to the New York Times.)

As the Journal reported, the “rebuff” came as Snapchat is “being wooed by other investors and potential acquirers. Chinese e-commerce giant Tencent Holdings had offered to lead an investment that would value two-year-old Snapchat at $4 billion.”

It isn’t that Snapchat’s young founders — Evan Spiegel, 23, and Bobby Murphy, 25 – are strictly opposed to being acquired, suggested the Journal. But they think if they wait until the next year, they’ll fetch an even richer valuation.

If they do, they can thank the media for its help.

I’ve read the numerous reasons why this deal makes sense: Facebook is losing steam with the younger demographic. Its Snapchat competitor, Poke, fell flat. Snapchat’s users access the service via their mobile phones, where Facebook wants to reach more of its own users.

But there seem to be at least as many reasons why this Facebook deal doesn’t add up.

For starters, Facebook’s modus operandi is to create a social operating system for the masses. Snapchat’s stated purpose is to prevent sharing. Facebook grows squeamish at the prospect of lactating mothers. One of Snapchat’s more prominent use cases is sexting.

There’s also the size of the reported offer. With the exception of Facebook’s then $1 billion cash-and-stock acquisition of the photo-sharing service Instagram last spring – a deal that helped Facebook quash a growing threat on the verge of its IPO — Facebook isn’t in the habit of splashing out much on acquisitions.

Maybe it’s been waiting for a growth opportunity exactly like the one that Snapchat presents, but Facebook knows as well as any that it’s very hard to buy or create a “category killer.” Instagram has grown from 30 million monthly active users to 150 million monthly active users under Facebook, but it’s no YouTube; there are still plenty of competitors out there. The same is true of messaging services. SnapChat may be processing 350 million “snaps” per day, but it doesn’t own its space.

Which raises yet another point: This deal is expensive. As far we know, Snapchat has no revenue or business model. We’re not even sure how many users it has. (It last reported 5 million users in April; according to the Guardian’s calculations, it probably has around 26 million U.S. users today.)

Even if Snapchat is worth top dollar right now, Facebook has current assets of $10.5 billion. Paying $3 billion in cash would significantly deplete its balance sheet. Observers have likened yesterday’s news to Google’s reported bid to buy Groupon. But with Google’s many tens of billions of dollars in cash, it could have easily afforded to gamble on Groupon; not so with Facebook and Snapchat.

As a reporter, I love acquisitions: they’re exciting, and they often involve very personal stories. Where the rubber meets the road, though, most acquisitions fail. This deal may have been in the cards at one point. But if I were Facebook, I might be happy it didn’t go through.

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