Happy Tuesday, everyone.
Hey, that time change wasn’t so bad after all, was it? (We kid! Whose wretched idea was Daylight Savings anyway?)
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Top News in the A.M.
It’s a contagion. Whisper, the 18-month-old anonymous sharing app, is raising “just shy” of $30 million at a post-money valuation of $200 million, reports Re/code. The deal comes just six months after the company raised $21 million from investors and brings its total funding to $54 million. (Notably, it also comes hot on the heels of a $10 million round for its younger competitor Secret, whose newest round was leaked to the media on Friday.)
Re/code reports that the new round is being led by Shasta Ventures, with Thrive Capital and China’s Tencent (which may reportedly chip another $15 million into the round) participating. Whisper’s earlier investors — they include Sequoia Capital, Lightspeed Venture Partners and Trinity Ventures — also joined the round.
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Metamorphic Ventures Closes on $70 Million to Back Post-Seed Deals
New York’s Metamorphic Ventures isn’t one of best-known brands outside the city. That’s by design, says cofounder David Hirsch, who was Google’s second employee in New York and stayed eight years before diving into venture capital in 2009. After raising $20 million from well-connected individual investors to get started, Metamorphic needed time to start proving itself, he suggests.
Fast forward to today, and things appear to be clicking along. The firm, which invests in digital media, commerce, payments, ad tech, software infrastructure and other Internet-enabled startups, has already enjoyed seven minor exits, and its portfolio includes promising companies like the popular crowd-funding platform Indiegogo and the retail analytics company RetailNext. More, Metamorphic has cultivated what Hirsch calls a “distributed human engine” made up of both powerful advisors (including Square’s head of product and engineering, Gokul Rajaram), individual investors (HSN Chairman and CEO Mindy Grossman), and deep-pocketed strategic investors (Advance Publications) that have collectively given Metamorphic another $50 million to “add to the cover” of that earlier, $20 million fund, says Hirsch.
The capital will be used to invest in many more startups, but Metamorphic also raised the funds to maintain more ownership of its breakout portfolio companies, which the firm hasn’t been able to do to date. Hirsch talked with StrictlyVC about it yesterday.
You’re looking to fund startups that have raised some money but not Series A money. Is that still an underserved segment in New York?
We think so. The market has really shifted to where the large private equity firms like Coatue Management and Tiger Global are [making big bets on later-stage companies] and big VCs like Kleiner Perkins are moving downstream to do more A and B. But there’s still a hole in the market right now in seed. It’s the opposite of the Series A crunch; we’re seeing amazing, angel-funded companies that are hitting their growth stages that don’t want to raise these mega A rounds just yet.
You say you made some mistakes early on. What was the biggest?
A lot of the companies grew bigger more quickly than we anticipated, so we ended up farming out our winners to Silicon Valley. We built a great portfolio, but [our fund] was too small to have meaningful ownership. So right now, the goal is 10 percent ownership – that’s what we strive for. We raised the money in order to have that optionality that we’ve been losing.
What size checks will you be writing now that you have more to invest?
They’ll be anywhere from $500,000 to $1 million for that first bite.
You have investments on both coasts. How would you characterize valuations in New York right now, compared with Silicon Valley?
It seems more specific to the team than [rooted in geography], though it sometimes feels like the capital on the West Coast is less price sensitive than in New York. That could be a function of a lot of things. I think New York is more monetization and revenue focused. [Investors here] like more data to back into a [high] price.
Is Metamorphic a typical New York firm in that sense?
We’re not value investors, but we’re disciplined as far as price is concerned, and we want to make sure we’re careful. We’ll pay up for the right teams. And we do believe we’re at the next generation of Internet businesses where maybe the price increase is justified. But sometimes it’s not. Sometimes you’re dealing with bigger investors who are [offering term sheets] as a call option, and that can price up opportunities for the wrong reasons.
Anything else you can share that you’ve learned thus far as a VC?
Google always had this [hiring] thing called the “airport test.” Someone could be an all star, super smart, capable of helping you solve pain points. But if you missed your flight and were trapped at the airport [together], would you be excited to hang out with this person?
Working relationships are long-term relationships; that’s true of [colleagues] as well as with investors and founders. There are always reasons to say no to deals. A lot of the business is just trusting your gut.
New Fundings
Drifty, a two-year-old, Madison, Wi.-based maker of tools to help mobile developers build their apps and sites, has raised $1 million in seed funding from Arthur Ventures, reports TechCrunch. The company was a participant in the TechStars Cloud 2013 incubator.
GroundMetrics, a four-year-old, San Diego-based startup that’s working with oil, gas, mining, geothermal companies and the U.S. Department of Energy to commercialize a new class of sensor-based survey and monitoring services, has raised $2.4 million in new funding, according to an SEC filing that shows a $3 million target. The company has raised at least $3.7 million in the past, shows Crunchbase, including fromTechCoast Angels and La Costa Investment Group.
OwnCloud, a three-year-old, Lexington, Ma.-based company that offers a commercial version of the open-source file sync and share community project of the same name, has raised $6.3 million in Series A funding led in part by earlier investor General Catalyst Partners, reports Boston Business Journal. The company has raised roughly $10 million to date, including from the Boston-based angel fund CommonAngels.
Quill, a four-year-old, London-based content marketing company, has raised $8.3 million in funding led by Smedvig Capital, with participation from Dan’l Hewitt, formerly of Demand Media and Vice Media. The company has raised roughly $10 million to date.
Woowa Bros, a three-year-old, Seoul, South Korea-based app developer, has raised $12 million from investors including CyberAgent Ventures,Altos Ventures and IMM Investment, according to reports. Among the company’s most popular apps is the Korean food delivery app Baedalui Minjok.
Sanghvi, a four-year-old, Pune, India-based company that operates numerous wellness brands, has raised $10 million in funding from Tano Capital, says VCCircle. The funding represents Sanghvi’s first outside capital, according to the report.
Shazam, a 12-year-old, London-based music app developer, has raised $20 million from a consortium of unnamed investors, reports VentureBeat. As a result of the new investment, Shazam’s valuation has increased to approximately $500 million, says the company. Shazam has now raised $92 million altogether, including from Kleiner Perkins Caufield & Byers,Institutional Venture Partners, DN Capital, Acacia Capital Partners, and Latin America’s largest wireless company, América Móvil, which invested $40 million in Shazam last June.
Svelte Medical Systems, a 6.5-year-old, New Providence, N.J.-based maker of expandable coronary stents, has raised $5 million in funding from the West Health Investment Fund. The company has raised roughly $52 million in equity and $22 million in debt over the years, according to Crunchbase. Some of its other backers include CNF Investments and New Science Ventures.
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New Funds
Tylt Labs, a year-old, L.A.-based early-stage fund focused on seed to A round opportunities, has raised $20 million toward its initial fund closing, the firm announced yesterday. Tylt was founded by L.A. entrepreneurs Rami Rostami and Gerard Casale and looks to invest $500,000 to $2 million per funding round per company, including consumer products, mobile platforms and services, home automation products, transaction software, clean technology, digital health and entertainment startups. (Note: StrictlyVC reported last Monday that the firm had raised $2 million, based on its SEC filing, which wasn’t the complete picture as we now know.)
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IPOs
Globoforce, a 17-year-old, Dublin, Ireland-based company that sells its cloud-based social recognition software solutions to enterprises, announced terms for its IPO yesterday, as noted by Renaissance Capital. The company, which is majority owned by Atlas Venture and Balderton Capital, plans to raise $75 million by offering 4.4 million shares at a price range of $16 to $18. At the midpoint of the proposed range, Globoforce would be valued at $472 million.
Matomy Media Group, a 6.5-year-old, Tel Aviv, Israel-based digital ad firm, is looking to raise $100 million in an IPO on the London Stock Exchange, reports Reuters. The company intends to issue new shares, and some of its existing shareholders, including Viola Private Equity, plan to sell some of their holdings.
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Exits
Phoenix Age, a nearly five-year-old, San Francisco-based game studio, has been acquired by Kabam. Phoenix Age doesn’t appear to have raised outside funding. Kabam, a 6.5-year-old, San Francisco-based games company, has raised at least $125 million to date, including from Canaan Partners, Redpoint Ventures, Intel Capital, Google Ventures, andPinnacle Ventures.
SecureForce, an 11-year-old, Sterling. Va.-based company specializing in providing cyber security engineering and compliance services to state and federal government agencies largely, has been acquired by BRTRC Federal Solutions, a similar company based in Vienna, Va. Cofounder Jonathan Perrelli left the company in 2010 to launch the Washington, D.C.-based early-stage investment firm Fortify Ventures.
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People
Billionaire Internet investor Mark Cuban on bitcoin: “I think as an encryption technology, it’s great. I think as a transport mechanism that it’s unique and has a great opportunity in the future. I think it’s got no shot as a long-term digital currency.”
Michael Redd, a former NBA All-Star who long played for the Milwaukee Bucks and was a star basketball player at Ohio State University, has been named a partner at the Columbus, Oh.-based venture firm NCT Ventures, reports Columbus Business First. “This is a complete stretch for me,” Redd tells the outlet. “The whole focus of the past 20 years has been basketball. To pick up another passion can be challenging, but I accept the challenge.”
Former YouTube executive Baljeet Singh is a newly appointed product director at Twitter, where he has the major-league task of adding more video to the platform, making that video easier to find, then selling ads against it. The Verge, which reports on Singh’s new job, notes that while at YouTube, he developed those skippable pre-roll advertisements we’re all accustomed to seeing, among other projects. (He left Google last month after five years.)
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Job Listings
Pandora, the popular music-streaming service, is looking for a VP of corporate development and a head of corporate strategy. The newly posted jobs are in Oakland, Ca.
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Data
A new academic study finds that for venture funds, “performance persistence post-2000 remains as statistically and economically persistent as pre-2000. Partnerships whose previous VC funds are below the median for their vintage year subsequently tend to be below median and have returns below those of the public markets (S&P 500). Partnerships in the top two VC quartiles tend to stay above the median and their returns exceed those of the public markets.”
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Essential Reads
Investor adviser Institutional Shareholder Services is on the cusp of selling to Insight Venture Partners, sources tell the WSJ. People close to the sales process have said the company could fetch around $300 million.
The New Yorker’s James Suroweicki takes down the impending IPO of “Candy Crush” maker King Entertainment before public investors do the job.
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Detours
President Obama hilariously sits “between two ferns” with Zach Galifinakis.
This startup tased its intern to illustrate how its flying drone would handle unwanted houseguests. (And you thought your first job was lousy.)
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Retail Therapy
The already excellent Mophie iPhone battery case has just been improved on, with Mophie’s newest product not only promising users far more battery power but loads of storage, to boot.
This is like a poor man’s “Minority Report.” (We like it.)
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