Institutional Venture Partners

App Annie Rakes in $55 Million as It Races Away from the Pack

According to Comscore, activity on smartphones and tablets now absorbs 60 percent of our digital media time, driven predominately by apps. Yet, for the most part, anyone hungry to know how — and how often — those apps are used has been left in the dark.

Onavo, an app analytics company, was widely seen as providing better insights into app usage than most analytics startups. But when it was acquired by Facebook last year, its insights were moved behind a curtain.

Now, App Annie, the five-year-old, San Francisco-based mobile analytics company, says it has developed everything Onavo featured and much more.

To an extent, it’s following Onavo’s playbook.

Onavo’s mobile measurement product evolved out of a couple of applications designed to do something very different – help users reduce their expensive data consumption. Once the company gathered enough user data, it shifted gears, turning itself into a market intelligence product.

Similarly, App Annie is rolling out a tool today called Usage Intelligence that provides customers with detailed analytics about individual app usage and engagement – information that largely comes from its free, five-month-old VPN Defender app, which offers encrypted and secure access to a user’s favorite sites and apps.

Conveniently, VPN Defender also gives App Annie a window into its users’ app usage.

The development is a big deal for app developers and investors who’ve been unable to accurately gauge how apps fare on the open market, as well as how people use them after they’ve been downloaded.

It’s a huge boon, too, for App Annie, which makes money by selling yearly contracts for its analytics and says its broader tool sets are already being used by most top mobile app developers, giving it insights into 675,000 apps as a result.

The company — whose average contract is $80,000 per year — isn’t yet profitable, says cofounder and CEO Bertrand Schmitt. “I’d be sad if we were,” he says. “It would mean we don’t know where to invest next.”

App Annie is clearly an IPO candidate, though. In fact, the 300-person company has just raised $55 million in Series D funding led by Institutional Venture Partners, a late-stage investment firm that just saw its 101st portfolio company go public in December. “Among the reasons we chose to work with IVP was their extensive experience with IPOs,” says Schmitt, who says an offering isn’t in the cards for 2015 but suggests it’s not too far off either.

In the meantime, App Annie — which has now raised $94 million altogether — remains focused on growing its business as fast and as wide as possible. The company already has 10 offices around the world. And it expects its headcount to reach 450 by year end as it pursues several new markets more aggressively, including India and South America.

Schmitt says App Annie intends to create more of a social network around the business that makes it easier for developers to share and collaborate on App Annie.

Unsurprisingly, the company also plans to release many more apps like VPN Defender from which it can continue to wring valuable and lucrative insights for its customers — and break further away from competitors in the process.

“If we keep improving as we have done, how do you fight?” says Schmitt. “There’s no other company with the same ability to execute.”

Eric Liaw Means Business

Eric Liaw of Institutional Venture Partners has been at the center of two of this week’s biggest deals, both of which happen to be in L.A. On behalf of IVP, Liaw led a $63 million investment in the jobs aggregation platform ZipRecruiter. Liaw is also on the board of The Honest Company, the maker of eco-friendly baby products, which just closed on $70 million in Series C funding.

Given that Liaw is still a principal and not a partner, we thought his involvement in both deals was interesting, so we chatted with him yesterday about how things work at IVP and how interested the firm has become in Southern California specifically.

You joined IVP from Technology Crossover Ventures in 2011 but you’re not yet a partner. Is it typical for a principal at the firm to lead deals?

At our firm, it’s something we’ve been doing for a while. When [general partner] Jules Maltz was a principal, he was leading deals. For [current principal] Somesh [Dash], it’s the same. Our firm is fairly small so it’s something we decided to do and we think it’s working.

Honest just raised a huge round of funding in preparation for an eventual IPO. When, exactly, did you get involved with the company?

Lightspeed [Venture Partners] had funded the company in September 2011 and we came in for a little bit, then General Catalyst Partners led a Series A-1 in the company in March 2012 and we participated. [Honest raised $27 million across those fundings.] We then led the company’s [$25 million] Series B round in October 2012. Finding Honest was a team effort. [General partner] Dennis Phelps and I have been spending a lot of time in L.A.; we’d gotten to know Honest cofounder Brian Lee at LegalZoom [which Lee also cofounded and is another IVP investment]. It was a little unorthodox for us to invest in something that didn’t even have a site yet, but we knew early on that it was a good thing to get involved with and it’s grown by leaps and bounds since. Brian and [cofounder] Jessica [Alba] have said publicly that they passed the $100 million run rate back in January, and it’s safe to say that the business has only accelerated from there.

Do you divide your time between San Francisco and L.A.? Is that how you came to know of ZipRecruiter?

I went to high school in L.A. and my parents still live down there, but the firm is based up here. Half our deals are in the Valley; the rest are outside, including L.A., New York, Austin, Scandinavia … ZipRecruiter we met a couple of years ago but they hadn’t wanted to seek outside funding. When the opportunity came up in the earlier part of this year, they talked with a handful of firms. It was very competitive. But our success in building subscription businesses at the growth stage [won over the company].

So it largely comes down to product experience?

There has to be a lot of comfort around the table, too. One piece of advice I gave [ZipRecruiter CEO Ian Siegel] was that [founders] should be super comfortable with whoever they’re going to work with, because it’s a lot easier to get into a deal than get out of it when things go sideways. Also, in this case, the founders retain significant majority of company, so I had to be comfortable with [the team] and I certainly am.

As a late-stage investor, how are you feeling about valuations?

You can look at valuations as indicators of broader trends and excitement. People are definitely feeling more comfortable in investing in [late-stage venture] where the perception of risk has been diminished — accurately or inaccurately — because the market is perceived to be much larger.

We look at valuations on a company-by-company and deal-by-deal basis. It’s like public stocks. The “market” is a basket of individual stocks. Some do well even when most do not.

This Four-Year-Old Internet Startup Just Landed $63 Million in Series A Funding

You probably haven’t heard yet of four-year-old ZipRecruiter, a profitable, L.A.-based online hiring platform for small and medium-size businesses. In recent months, though, plenty of growth-stage equity firms were kicking its tires and hoping the company might bring them aboard as investors. In the end, its four cofounders agreed to a $63 million round led by Institutional Venture Partners, with participation from Industry Ventures and the brand-new L.A. firm Basepoint. I talked with one of those cofounders, ZipRecruiter CEO Ian Siegel, last week about the company’s low-flying trajectory so far.

You spent 20 years working for L.A.-based startups. Why start ZipRecruiter when you did?

My experience and my cofounders’ experience was the same. Because the companies were so small where we were working, there was no HR department, no one to do hiring for you but you. So I was the only one posting jobs. I was the one vetting candidates and making decisions about who and when to hire. Part of the reason those companies stayed small was it was so painful to bring another person on board. We weren’t HR professionals. We just thought, Let’s build something that would be useful for us. And it took off. We’ve been profitable since our first month.

What’s so special about your technology?

What ZipRecruiter does is take a set of services that have been used by Fortune 500 companies, from an applicant job tracking system to easy-to-search databases, and [offers these technologies] to small and medium-size businesses. The value for our customers is they can post a job to many job boards at once — Monster, Twitter, Glassdoor; more than 50 at once — then we present them with candidates from all of those places in one, easy-to-review [interface] so they can screen and track candidates.

This is a SaaS business. How much do you charge users?

We charge $129 [per month] and scale up depending on how many jobs a company has to post. Some customers post [a lot of] jobs, and it’s more than $1,000 per month.

You say you’ve been growing like a weed. Give us some metrics.

At the beginning, it was pretty much four founders who were rotating between each other’s kitchens. I took every customer support email and phone call. A dog would be going crazy in the background, and I’d say, “I don’t hear a dog, do you hear a dog?” Now, we’re moving into a 40,000-square-foot space in Santa Monica. We have 150 employees, tens of millions of dollars in annual revenue and we’ll have more new subscribers this year than in all previous years combined. We’ll have 100,000 customers in the relatively new future.

You’re already very profitable, by your own account. How will you use the money you’ve just raised?

More than 7,000 new businesses create an account on ZipRecruiter each month and the primary person [who signs up] is the person who manages HR. And that person is responsible for hiring, but also, potentially, for payroll, insurance, vacation tracking, and for on-boarding. So we’ll do a bit of development into new areas and see what the reaction is. When you’re bootstrapping, everything has to come back to bottom line. Taking investment really frees us as to how much more can we do to make the job of HR managers easier.

How are you reaching all of these far-flung customers?

It was all driven through [search engine marketing] initially. As we grew, we began to benefit from word of mouth — a substantial double digit percentage of our new users come without a marketing source attached to them. But because the product sells so well, we’ve been able to branch into direct mail, TV commercials, and radio. The challenge of going after a disaggregated market is finding [all your customers]. You can’t just buy ads on Google.

Photo of Ian Siegel courtesy of ZipRecruiter

That’s It?

Almost a week ago, some odious years-old emails written by Snapchat CEO Evan Spiegel were leaked to the media, and it’s a wonder how quickly their content seems to be have been swept under the rug.

It’s understandable, to a point. Spiegel’s emails were written when he was a college student trying to impress his fraternity brothers, not the CEO of Snapchat. Emails are also private communications that, very arguably, should remain private.

Besides, it isn’t like Spiegel holds public office. He never signed up to be a role model. He certainly shouldn’t be held accountable for a culture in which objectifying women not only remains socially acceptable but, for some, seems to border on a competitive sport.

Still, Spiegel’s lone public apology, in which he said he was “mortified and embarrassed,” didn’t go far enough. How about some response from others close to the company, the same people who blog and tweet and talk so openly with reporters about how Silicon Valley is changing the world?

On Friday, Stanford Provost John Etchemendy emailed the university’s student body to say the school is “positively ashamed” that the emails were sent by a Stanford student.

If Snapchat’s influential investors are also ashamed of the noxious attitudes toward women that were conveyed in those emails, they should also say something. It’s easy enough to condemn their content without hanging Spiegel out to dry. And frankly, not doing anything seems like an implicit endorsement, as if what Spiegel wrote isn’t that bad. (It is.)

“We can choose to turn a blind eye to such statements and chalk them up to youthful indiscretion,” wrote Etchemendy to Stanford’s undergraduates. “Or we can be more courageous, and affirmatively reject such behavior whenever and wherever we see it, even — no especially — if it comes from a friend, a classmate, or a colleague.”

Nobody’s going to change Silicon Valley’s attitude towards women overnight, but here’s hoping Etchemendy’s message resonates not only with the men and women of Stanford but with Snapchat’s board, as well. A few choice words could help send the message that objectifying women isn’t okay, no matter how “hot” your company might happen to be.

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Dropcam, the $50M Startup That Should Keep ADT Awake at Night

Dropcam is watching you.

To date, the four-year-old startup has raised $47.8 million for its HD wireless home-monitoring cameras that allow consumers to watch the kids from the office, glimpse which neighbor isn’t picking up after his dog, or catch break-ins.

Greg Duffy, Dropcam’s 26-year-old cofounder and CEO, won’t disclose how many of the company’s $150 cameras the company has sold, but he will say that the company is enjoying “5x” year-over-year revenue growth from a “significant sample of users” that “cut across nearly every demographic.”

That’s a lot of video. The company claims that it uploads more video each day than YouTube.

What Dropcam plans to do with all that video is where things get interesting. At Dropcam’s San Francisco offices, where 45 people are now employed, Duffy hints that Dropcam will soon dip its toe into the lucrative realm of home security.

It makes perfect sense. It also puts the company’s funding into perspective.

Right now, 40 percent of Dropcam’s customers pay $9.99 or $99 per year to save up to seven days of video footage, partly for home security purposes.

Duffy believes Dropcam can capture a much larger piece of the home security pie because, in his view, it’s a market that’s just waiting to be disrupted Not only are the “ADTs of the world” “generally stuck in past eras of technology,” but “they charge you insanely high prices for a very simple service,” he notes.

ADT’s most basic plan — which includes a motion detector, two wireless door or window sensors, and a wireless key fob that enables users to control the system – costs $42.99 per month, a $300 installation fee and requires a three-year commitment. More “advanced” services — including stored video footage and email alerts — cost $57.99 a month, with a $500 installation fee and a three-year contract.

That’s big business: ADT has a market cap of $8.7 billion dollars.

Companies like ADT “make you think that to keep your family safe, you need to pay for something that’s essentially as expensive as a cell phone and requires [an even longer] contract,” Duffy says. “But it costs them nothing to deliver the service, and using today’s technology, you could deliver [the same service] for a fraction of the price.”

Dropcam’s investors — Institutional Venture Partners, Accel Partners, and Kleiner Perkins, among others — evidently think so, too.

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