Good Tuesday morning, everyone! Hope you had a terrific Memorial Day weekend.
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Top News in the A.M.
Owners of Apple devices across Australia are having them digitally held for ransom by hackers demanding payment before they will relinquish control.
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The Ideas Guy: Jim Scheinman
Micro VC Jim Scheinman of Maven Ventures is usually noodling on a new business idea, he tells me over coffee at The Battery, a private social club in San Francisco where various tanned VCs are seated opposite pale entrepreneurs in spacious black leather booths.
One of these ideas was “a payment platform the social web” that Scheinman dreamed up in 2007, but because he doesn’t code, he “found two guys who were basically going to build it with me.” Scheinman says he became the company’s acting COO and first seed investor. That startup, Jambool, was acquired by Google in 2010 for a reported $70 million. (It had raised $6 million.)
Tango, a messaging company with more than 200 million users and roughly $367 million in venture backing, was also “in part, kind of my idea,” says Scheinman, an early investor in the company who says that, among other things, he came up with Tango’s name, its viral marketing strategy, and some of its early employees.
Scheinman’s newest notion is turning his current “sub $10 million fund” into a new $50 million to $100 million second fund in the next year or so with his same LPs plus an institutional investor or two. The question is whether Silicon Valley is ready for this particular idea.
A native New Yorker, Scheinman traces his investment background back the baseball cards he sold with his brother in high school. Within a few years, the two were running a multimillion-dollar business that employed 50 people, but Scheinman wanted more out of life, so not long after graduating from college at Duke University, he headed to UC Davis for a law degree, and afterward, to one startup and then another.
It was at his second startup — San Francisco-based Friendster, one of the earliest social networks — that he met married programmers Michael and Xochi Birch. As Scheinman tells it, he was looking for acquisition targets for Friendster, but he was so impressed with the Birches that he instead convinced them to make him their third employee — first at their startup BirthdayAlarm and then at Bebo.com, a social network that AOL acquired for $850 million in cash in 2008.
The sale made both Birches wealthy. (Indeed, they own and operate The Battery.) It also gave Scheinman the freedom to become an angel investor as well as raise a small fund once his angel investments began to pan out. “I’m happy to make people money and get a dinner or a thank you, but I thought, ‘Why not pool some of that money and take 20 percent?'”
Scheinman has plainly taken his role as a VC seriously. He currently backs about six companies each year, writing checks to nascent startups ranging between $100,000 and $150,000 and very occasionally investing in a Series A or B round, such as with the investing platform AngelList and Banjo, a real-time content discovery company.
Scheinman has also created a low-flying incubator that works with up to six startups that each receive a $250,000 convertible note, six to nine months of office space, ongoing help from Scheinman, and access to 20 mentors, including startup CEO coach Dave Kashen and Andy Johns, who has been a user growth manager at Quora, Twitter, Facebook and now Wealthfront. (Scheinman says the idea is to create or identify nascent consumer startups and help them scale massively. The mentors and Scheinman’s LPs receive a collective 3 percent in each startup; Scheinman gets another 3 percent.)
Scheinman claims his formula is working. On the VC side, he says he was able to take “70x” his original investment off the table earlier this year when Alibaba led a $280 million round in Tango. (He claims he still maintains most of his ownership in the company, too.)
Meanwhile, a company he incubated, Epic, a year-old, all-you-can-read e-book service for kids, has raised $1.4 million from investors, including TomorrowVentures, Webb Investment Network and Menlo Ventures.
Scheinman says the Epic concept was his, adding that he’s always happy to share his ideas, particularly if they can turn into high-growth businesses. “The way I work is I talk with everyone about an idea, because you never know who it will resonate with or who is doing something similar.”
(When I reach out to a couple of entrepreneurs who Scheinman has worked with in the past, one doesn’t respond to a Memorial Day email; another characterizes Scheinman as very helpful in the early days of his company and says Scheinman has a great consumer touch but differs with his portrayal of some of his specific contributions.)
I ask Scheinman how he would scale his operation to fit the demands of a bigger fund. In addition to bringing aboard a second GP and two associates, he says he’d lead more deals, rather than hand so many off to his network. “Most of the companies [Maven] has incubated have gone on to raise $1 million to $1.5 million. Maybe I do that check or do $1 million and bring in one other syndicate.”
Scheinman adds that he’s “not running these businesses. But I know the problems they’re going to face and I can help them avoid some of them.”
“My value proposition is simple,” he continues. “If you want to build a hyper-growth consumer business and you think I can be helpful to you, you should let me in.”
New Fundings
Crown Bioscience, a 7.5-year-old, Santa Clara, Ca.-based company that helps pharmaceutical companies improve the productivity of their drug development, has raised $26.6 million in Series D financing led byLilly Asia Ventures. The company has raised $55.4 million altogether in recent years, including from OrbiMed Advisors, QiMing Venture Partners, CID Group, and Argonaut Private Equity.
Flipkart, the nearly seven-year-old, Bangalore City, India-based e-commerce giant, has raised $210 million in new funding led by DST Global, with returning investors Tiger Global, Naspers, and Iconiq Capital also participating. The announcement comes on the heels of last week’s news that Flipkart will acquire online fashion retailer Myntra in a deal reportedly worth $300 million. Flipkart has now raised $750 million altogether.
Perfint Healthcare, a nine-year-old, Chennai, India-based maker of image-guided medical devices for oncology and pain care, is looking to raise $40 million to $50 million in Series E funding now that its oncology equipment has received FDA approval, says the Business Standard. So far, the company has raised $32.7 million across four rounds of venture funding, including from IDG Ventures, Accel India Ventures, and Norwest Venture Partners.
PolicyBazaar, a 5.5-year-old, Gurgaon-based online insurance policy aggregator, has raised roughly $20 million in Series C funding led by Tiger Global Management, says Techcircle.in. In April 2013, PolicyBazaar had raised $5 million in its third round of funding, led by Inventus Capital Partners. Intel Capital is also an investor.
Skycatch, a 1.5-year-old, San Francisco-based company whose aerial drones can be used in the mining, construction and agriculture industries, has raised $13.2 million in funding, including convertible debt, according to an SEC filing. The company’s investors include Avalon Ventures,Google Ventures, ffVC, and Sherpalo Ventures.
Toppr, a year-old, Mumbai, India-based online test preparation startup, has raised $2 million in seed funding from SAIF Partners and Helion Ventures. The Economic Times has more here.
Twist Bioscience, a 1.5-year-old, San Francisco-based company that focuses on synthetic DNA production to produce specialty chemical compounds and drugs, has raised $26 million led by Nick and Joby Pritzker, through their family’s firm Tao Invest. Other participants in the round included ARCH Venture Partners, Paladin Capital Group, Yuri Milner and additional strategic corporate and venture investors. The company has raised $35.1 million altogether.
Uber, the five-year-old, San Francisco-based on-demand car service, is now weighing investor bids that value the company near or above $17 billion, reports the WSJ. That’s too rich for some, adds the report, saying that General Atlantic passed after considering a deal at $14 billion.
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New Funds
Indonesian telecommunications firm Indosat is joining forces with the Japanese telecommunications giant SoftBank to create SB ISAT, a $50 million venture capital fund targeting Indonesian startups, reports TechinAsia. Indosat president and CEO Alexander Rusli said that the company, together with SoftBank, will provide commercial, infrastructure and strategic support to promising Indonesian technology startups.
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IPOs
Clarus Therapeutics, an 11-year-old, Northbrook, Il., based pharmaceutical company focused on men’s health (it makes an oral testosterone that the FDA is weighing), has filed paperwork to go public and raise up to $86 million. The company’s biggest shareholders are Thomas McNerney & Partners, the healthcare venture firm, which owns 58.8 percent of the company; H.I.G. BioVentures, which owns 24.5 percent; and ProQuest Investments, which owns 16.2 percent.
Datalogix Holdings, a 12-year-old, Westminster, Co.-based company that sells offline purchasing data to marketers, is plotting a possible IPO later this year, according to the WSJ. The company has raised $41.5 million in recent years, including from Jim Breyer’s Breyer Capital, Costanoa Venture Capital, Sequel Venture Partners, Institutional Venture Partners, and General Catalyst Partners.
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Exits
Check, a seven-year-old, Palo Alto, Ca.-based app that lets users pay bills, as well as monitor their bills, is being acquired by Intuit for $360 million in cash and other considerations, the companies are announcing this morning. Check had raised $47 million from investors, including Morgenthaler Ventures, Pitango Venture Capital, and Menlo Ventures.
Defense.Net, a 15-month-old, Belmont, Ca.-based cloud service that defends data centers and applications from certain kinds of cyber attacks, has been acquired by publicly traded F5 Networks for an undisclosed sum. Defense.Net had raised $9.5 million in equity and debt led by Bessemer Ventures Partners. Other investors included Atel Ventures and Comerica. (Defense.net, cofounded by serial entrepreneur Barrett Lyon, was reportedly incubated in the Menlo Park, Ca., office of Bessemer.)
Dropcam, the connected camera startup that streams video footage to users’ phones and computers, is reportedly being sized up by Google, four months after Google’s $3.2 billion acquisition of Nest Labs. Dropcam’s CEO, Greg Duffy, hinted to StrictlyVC last fall that the company had eventual plans to compete in the home security market; in an apparent step in that direction, Dropcam revealed earlier this month that it will make people-detection software available to subscribers this summer.
Kakao, the company behind the hugely popular South Korean messaging service KakaoTalk, is buying Daum, a large, publicly traded South Korean Internet portal, in a reverse takeover that values Kakao at 3.1 trillion won ($3 billion), reports Bloomberg. Daum will be renamed Daum Kakao. The new company will be listed in October. You can learn more here.
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People
Former Microsoft CEO Steve Ballmer is reportedly interested in buying the L.A. Clippers, with TMZ Sports reporting that Ballmer was set to meet with Shelly Sterling (the estranged wife of Donald Sterling) on Sunday to discuss the NBA team.
Another billionaire tech mogul is being accused of trying to cut off public access to a beach for the sake of his own peace and privacy. This time, it’s Dave Duffield, co-founder of Workday and founder of PeopleSoft, and the beach is in Lake Tahoe. The Reno Gazette-Journal has more here.
Tony Fadell, cofounder of the connected home products company Nest, can’t stand the phrase “the Internet of things,” calling it meaningless and “just a term to get stock prices moving . . .’The Internet of things’ is a term made by the industry to try to get people buzzing about something that there’s no definition of.”
Rap Genius cofounder Mahbod Moghadam resigned from both the company and its board of directors over the weekend, after leaving misogynistic annotations on an online manifesto by 22-year-old Elliot Rodgers, who killed six people on Friday near the campus of University of California, Santa Barbara. Much more here.
The Google Ventures team is reportedly investigating London as the site of its first branch outside the U.S. The Sunday Times has more here.
On Friday, during the final day of Stanford University School of Medicine’s Big Data in Biomedicine Conference, venture capitalist Vinod Khosla delivered a keynote speech arguing that data will eventually replace 80 to 90 percent of the decisions doctors make. Unsurprisingly, it didn’t sit well with some physicians in the audience, reports the San Francisco Chronicle. “I don’t agree with 80 percent of your remarks,” one clinician told Khosla. His response: “Humans are not good when 500 variables affect a disease. We can handle three to five to seven, maybe,” he said. “We are guided too much by opinions, not by statistical science.”
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Job Listings
Commonfund Capital, the 26-year-old, Wilton, Ct.-based investment firm, is looking for an associate director to focus on venture capital and growth equity deals.
Maven Ventures in Los Gatos, Ca., is looking for a full-time associate.
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Happenings
The Code Conference kicks off today in Rancho Palo Verdes, Ca.
The Apple Worldwide Developers Conference comes to San Francisco next week.
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Essential Reads
Should investor and Rap Genius advocate Ben Horowitz have done something sooner about cofounder Mahbod Moghadam, who has a history of behaving badly?
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Detours
A new ad for iPad featuring the conductor and composer Esa-Pekka Salonen may come as a pleasant shock.
Amazing street art.
Dissecting the “Mad Men” mid-season finale. (So, what happened there in that last scene?)
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Retail Therapy
Boosted Boards, for people who want to look cool but don’t want to go to the trouble of actually skateboarding anymore.
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