• Brit + Co Raises $20 Million, Shifting Gears in the Process

    Brit MorinBrit + Co, a nearly four-year-old, San Francisco-based lifestyle site dedicated to all things D.I.Y., has often been likened to a next-generation Martha Stewart Living Omnimedia.

    It’s looking like Udemy, an online educational marketplace taught by experts who are not university professors, may be as apt a comparison.

    Indeed, fueled with $20 million in new Series B funding – from Intel Capital, Liberty Media, and retail veteran Ron Johnson, among others — the company is now planning to shower almost as much effort on educating visitors as it does on entertaining them. We caught up with founder (and former Googler) Brit Morin yesterday to learn more about the company’s evolution. Our chat has been edited for length.

    People think of Brit + Co as a media company. What’s changing?

    For more than three years, we’ve really focused on building out the media arm for a couple of reasons. First, we wanted to do one thing at a time. We also really wanted to build the foundation of the brand and understand from our audience what type of commerce they’d want from us. Although women were into it from an aspirational and inspiration standpoint, they said, ‘I have no idea how to do this,’ and it opened our eyes. So we launched into online education last year and we’ve since sold 15,000 classes and kits [required as part of the classes].

    How many classes versus kits is that?

    We don’t break that out but we have 15 different classes right now, and we’ll have more like 60 to 70 by year end. Our community of makers are the ones teaching the classes. [Editor’s note: classes range from 20 minutes to 60 minutes in length and from $9.99 to $19.99 in price, not including the required kits.]

    How big is the media side of the company at this point?

    On the media side, we now have 12 million visitors every month. We have roughly 100 advertisers, with a 74 percent retention rate. And we’re doing millions in revenue, 99 percent of which is native advertising, meaning our content and videos somehow include the products of our sponsors, though our readers know it’s advertising. We’ll partner with Starbucks for example, and teach you how to make your own coffee ice cream.

    You also just acquired Snapguide, a free iOS app that lets users create and share step-by-step guides. Snapguide had raised $10 million from investors. Are you breaking out how much you paid? As important, what drove the deal?

    We aren’t disclosing price, but there are a number of cool things about Snapguide, including [the ways it helps a third aspect of the business, a year-old, Etsy-like marketplace where people can sell their homemade goods]. If you [as a participant of that marketplace] are creating your own step-by-step guide, you can use a photo or a video or a hybrid [thanks to Snapguide].

    You recently raised $20 million from investors, bringing your total funding to $27.6 million. Will you be in the market again any time soon?

    The way I approach is it: it’s great to be in a position where you don’t have to raise money, but we’re very opportunistic whether it be a great investor or [something else that provides] great option value for the company. We’re not opposed to raising money earlier.

    Connie

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  • Erin Glenn, Alphaworks’s New CEO, on Waiting for the SEC

    Erin-GlennAny new CEO has a lot to contend with, like getting to know employees and clarifying the business’s strategy. Erin Glenn, who recently joined the New York-based crowdfunding platform Alphaworks, has to worry about something else, too: the SEC.

    Launched by Betaworks in February of this year, Alphaworks is a white label platform that obtains stakes in companies via seven venture “sponsors” that leave open between $100,000 and $250,000 of certain startups’ rounds. The companies then sell the equity directly to their own “communities,” in turn making those customers even more loyal.

    Glenn — who spent the previous four years as CFO of the gaming company Kixeye — sees a day when the model is used across numerous industries, though Alphaworks’s clients so far have been consumer-facing Internet companies with impassioned members.

    Gimlet Media, a New York-based podcasting company, is a prime example. Earlier this fall, when the company was looking to top off roughly $1 million in venture funding, it agreed to crowdsource some of the round to its listeners. Alphaworks’s nine employees sprang into action, posting a deal page for Gimlet, reformatting its pitch deck, helping gather audio testimonials and, not last, helping coordinate media coverage to drive interest in the campaign.

    The plan worked. Gimlet’s $200,000 crowdfunding campaign was fully subscribed within three hours. (In fact, the company wound up accepting $275,000.) Alphaworks is now represented on Gimlet’s cap table as a special purpose vehicle whose investors have delegated their voting, follow-on, and information rights to Alphaworks.

    Still, not everyone who wanted to back Gimlet could — not even close, says Glenn, who estimates that just 25 percent of those who began the registration process were able to complete it. The others didn’t qualify as accredited investors. And until the SEC finalizes a key rule in the now two-year-old JOBS Act that was designed to let small businesses raise money from virtually anyone over the Internet, the non-accredited will remain locked out of the process. (As recently as last week, the agency’s chair, Mary Jo White, suggested it’s in no rush to make binding decisions about the rule, called Title III.)

    “It’s frustrating,” says Glenn of the continued delays. “There’s a concern about ‘frothiness’ in the market right now. But in a hot market or a down market, the timing is always going to be difficult.”

    Alphaworks has a uniquely challenging mandate, too. While other crowdfunding platforms cater to wealthy investors in search of investment opportunities, Alphaworks’s focus on turning a company’s fans into owners means it’s catering to very different end users. Not only do many of them lack the financial muscle required currently by the SEC, but some need to be educated on startup investing. (Indeed, Alphaworks, which is backed by $1.5 million from Betaworks, SV Angel, and Lerer Hippeau Ventures, has organized just four campaigns to date.)

    Glenn — who says that Alphaworks is sticking to its original mission — isn’t discouraged. As far as she’s concerned, its patience today will pay big dividends later.

    She notes that Gimlet saw nearly triple the demand for what it raised, taking into account the roughly 75 percent of registrants who were forced to abandon the process along the way. “That kind of demand is a strong signal for Gimlet to talk about,” says Glenn. “But it should also be a signal to the SEC. People want to participate in the growth of their favorite companies. They also want to be responsible for their own financial destiny.”

    And Alphaworks, she suggests, will be waiting to help them.

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

    Connie

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  • A Former Mercedes Exec Tries Bypassing the Auto Industry

    Large Image (optional)No one paid much attention when last week, a 15-person company called Apio Systems in Crystal City, Virginia, announced that it had raised $5 million in funding. Mercedes-Benz was probably watching, though.

    In fact, Apio’s founder, Sascha Simon, spent nearly a decade at the company, including as head of its Advanced Planning Group, the same unit that launched Mercedes’s connected car system. But in 2012, Simon began thinking the technologies he was developing could live outside of Mercedes and every other car maker, so he left. We talked yesterday about that decision and what he’s trying to accomplish at his new company. Our conversation has been edited for length.

    You had a big role at Mercedes. Why leave?

    I felt the benefits of the connected car shouldn’t [accrue] just to Mercedes drivers but to everyone. Everyone carries a smart phone, so the idea was: Let’s use smart phones to bring safety benefits to drivers worldwide. I also thought I could do this faster outside of the car industry.

    You’ve created a “situational awareness” technology that provides safety alerts and monitoring tools that help make drivers safer. How does it work, exactly?

    The technology utilizes all the sensors in the smart phone that are there already — the gyroscope, accelerometer, audio and video sensors, barometric pressure [sensors] — and uses them to enable your phone or tablet to sense everything around it. [The smart device then] communicates with our cloud to make a determination about what’s happening. It’s almost like having an extra driver or passenger looking out for you.

    So this is sort of tech for the here and now, until advanced car technologies are more ubiquitous.

    If we had fully autonomous cars, no one would need what I’m doing, but they won’t come that fast. I think if we wait until car companies get there, it will be another 15 years. In the meantime, I believe that we’re building something that can be incredibly helpful in [hastening] that day. If everyone experiences [the advantages of the connected car], then everyone will want it.

    How far along is your tech? And how – or to whom – are you selling it?

    We have a functioning prototype and customers who are waiting, including Transdev, an international, multimodal transportation company that’s both a customer and an investor. It runs everything from trains to trucks and basically, what it will be buying is features and functionalities that will be packaged in the smart phones or apps it already has. [The technology] will allow it to be in constant communication with its vehicles to sense what its drivers are doing, if a vehicle is in trouble, how well a vehicle is performing. It’s a complete feed management platform.

    It’s a subscription model?

    Yes.

    What does Mercedes think about what you’re doing?

    I have communications with former colleagues all the time. That’s about all I can say at this point.

    You just announced $5 million in funding. I don’t suppose you’re thinking about your next round?

    Certainly we’re not ready to announce new funding plans yet, but you can imagine it’s all planned out. Our job right now is to take the money we’ve raised, get product to our customers and take it from there. I can tell you smart devices will continue to take over more functionalities from cars, and I plan to be a part of it.

    Connie

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  • Eric Hippeau on His Firm’s New Fund and Where It’s Shopping Now

    Eric HippeauLerer Hippeau Ventures announced yesterday that it has closed its fourth seed-stage fund with $62 million, up from the $50 million it raised for its third fund. According to Eric Hippeau, one of the firm’s four managing directors, the firm plans to hire more support staff, and the initial checks it writes to startups will likely increase from between $300,000 and $600,000 to between $400,000 and $800,000. Little is changing structurally, though.

    What is shifting a bit is what interests the four-year-old, New York-based firm, whose bets include Warby Parker, Buzzfeed, and LiveIntent, among many others. Hippeau, a longtime venture capitalist and the former CEO of Huffington Post, told me more yesterday. Our chat has been edited for length.

    You’ve been out fundraising numerous times in your career. What’s it like out there right now?

    By design, we fundraise every 16 to 18 months, so it can’t be a long fundraising cycle. So it’s about a three-month-plus period [that we need to gather commitments]. We’re very fortunate in that we have very supportive existing [investors] who tend to reinvest with us. We do attract new LPs every time we raise a fund, so there’s a due diligence process with new LPs.

    What was important to the new LPs?

    Every fund has to have a point of view and a differentiated position to succeed; that’s what new LPs are looking for. In our case, a number of things differentiate us. We’re seed-first investors . . and 70 percent our investments are in New York, with the rest tending to be in Silicon Valley.

    I do think venture is increasingly intriguing to LPs; I think there’s recognition that something important is going on that’s more than just building technology for technology’s sake – that technology is, in fact, disrupting a huge number of sectors and touching people’s lives in a much broader way today than ever before and . . .creating new wealth. So if you have a unique proposition, it’s a good time to be talking with LPs.

    You’ve said that just two partners have to agree to move forward on a deal, partly because it would be more time-consuming otherwise. Are you having to make quick decisions right now? How would you characterize the pace of deal-making?

    Deal flow is the strongest I’ve seen since we started in 2010, both in terms of quantity and quality. In New York, things tend to slow down in the summer, which is fine; it gives us a chance to catch up on other things. But we’ve been seeing super-high-quality companies coming through.

    As seed investors, how much “there” should be there when you’re looking at a startup?

    It doesn’t have to have a finished product but we do need to see a product. There are always exceptions. If it’s a repeat entrepreneur, and someone we know well, [or] if it’s [a] [business-to-business] enterprise startup, the product doesn’t have to be as far along.

    Looking out six to 12 months, what might you be investing in that you’re less focused on today?

    I think we’ll look more at fin tech, because New York has a lot of relevant experience and because, for the most part, to this day, [fin tech] is built on proprietary technology, and our sense is that it will use the same consumer tech we use every day in our pockets.

    You have a lot of media investments as a firm. Can you share some general thoughts about the future of the news business? Do you think, like Marc Andreessen, that it will grow 10x or more from where it is today?

    We invested in content way before people on the West Coast did and [remain] very bullish on it. We believe, for example, that there’s a ton of new platforms that need native content. So if you look at Instagram or Snapchat or WhatApp or social mobile, all of these platforms are opportunities for people to consume more content, and those opportunities allow for new brands.

    We also start content companies ourselves, [among them the animal-themed site] TheDoDo and NowThis News, which are short-form videos on Instagram.

    Is content the dominant theme of your portfolio?

    People think it is because of the Huffington Post and investments like Buzzfeed. It actually represents less than 20 percent of our portfolio.

    Connie

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