Webb Investment Network

Tesla Motors skimps on overtime wages and denies meal and rest breaks to its California workers, according to a new, proposed employment class action. The suit is the third to be filed against Tesla in the last month.

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Yahoo Chairman Maynard Webb on His Giant, Low-Flying Investing Network

Silicon Valley veteran Maynard Webb has a knack for winding up at the center of things. The former COO of eBay and CEO of LiveOps is the chairman of Yahoo’s board, a director on the board of Salesforce.com, and just yesterday was nominated for election to the board of Visa.

Webb isn’t content to live in the world of public companies, however. On the contrary, since 2010, Webb has been quietly building one of the most sprawling, and lowest-profile, investment networks in Silicon Valley.  Called Webb Investment Network, the outfit, cofounded by Webb’s former LiveOps colleague Michael Neril, has now amassed a network of 90 “friends” who are invited into every deal that Webb is himself invited into — and he has personally backed 50 startups so far. 

Webb calls giving these opportunities to invest alongside him “gifts.” I chatted with Webb yesterday to learn more. Our conversation has been edited for length.

In 2010, you already had plenty going on. Why formalize your investments with this kind of firm?

After I “retired” [in 2006] from eBay – eBay’s word for it – I was out running [the cloud-based call center service] LiveOps within just a couple of months. My wife asked how long I was going to do this and I said five years, thinking that would be a long time. But that five years came and went pretty quickly, and since I’d promised her that I wouldn’t operate companies any more [after LiveOps], as we started to come to late 2010, I thought, “Uh oh. What am I going to spend my time on?” I decided that I wanted to spend it helping entrepreneurs. Once I figured that out, I started looking at how to craft things in a way that I could provide help and also stay in touch with people I care about.

How does the network function? A founder who is raising $1 million allocates $500,000 to you, and you then invite your friends to invest up to half that amount if they want to?

That’s right, and that’s about our sweet spot, too.  I knew there was no way I could adequately provide advice to all the companies I might want to invest in. So I just thought, I’ll give gifts to my friends. So every time we find a deal, we get twice as much as we want to invest, and I ask a few of my friends if they want to invest. They can opt in or out. But if they opt in, they have to [be helpful to the founders].

We thought we’d get 30 to 50 people [interested in the model] but we have 90, and there are usually a handful of people who invest, writing a check directly to the company. They’re like on-demand SWAT teams of executives [from every avenue of the startup world]. It’s been amazing.

It’s early days, I know, but how is your performance so far?

We’ve sold Rypple [a cloud-based social performance management company]; Saleforce bought that [in 2011] and that’s become Work.com. The [e-commerce startup] Fancy was also a very early deal for us and is one of our breakout companies. We have several companies in our portfolio that have raised four or five rounds, and more than half or our startups have raised additional rounds, so we’re feeling good.

Do you subscribe to the theory that just 15 to 20 companies born in any given year become “breakout” companies?

I think there are many more successful companies than just a few. [Companies like] Facebook – those are needle-in-the-haystack kinds of things. But a lot of companies that start with $3 million wind up getting sold for $50 million or even $500 million. It’s harder [to maintain a pro rata stake] in each of those tranches, but I’m very bullish about a wide number of entrepreneurs finding a way to make an impact.

You’re investing up to $30 million of your own in this endeavor. Will you eventually take outside funding?

We have a lot of people who want us to take their money – even affiliates who ask if they can just give us a bunch of cash. What I love about the way we’re doing it now is the only risk is my risk.

As we look forward, I have to figure if I continue to self-fund this and for how long. I’d say the feedback we get is split down the middle: Half [my friends] say, “Don’t be an idiot. Make this a fund [with outside investors]”; others say, “I’d be thrilled to do it on my own.”

As a member of the boards of both Yahoo and Saleforce, two very acquisitive companies, do you help them decide where to shop, or is that beyond the scope of the job?

We have firm policies at both companies that talk about investments and what you can invest in and when you need to notify them; we notify them every quarter of what we’re investing in.

And the companies drive most of the acquisition decisions, at least until they reach certain [financial thresholds], and then the board gets involved. Those thresholds [which are publicly available] are very different at both companies. I’d rather not say more about either company, though, or I’ll get some [angry] emails in the morning. [Laughs.]

New Fundings

Armo BioSciences, a year-old, Redwood City, Calif.-based company that’s working on a cancer treatment, has raised $20 million in a Series A venture round. Investors include Kleiner Perkins Caufield & Byers, OrbiMed Advisors, and DAG Ventures. Xconomy has much more on the company.

Flipboard, the three-year-old, Palo Alto, Calif.-based “social” magazine that lets people tag, assemble and share online stories, is raising another $50 million in venture funding, reports Fortune. The money is reportedly a extension to the $50 million that Flipboard announced in September at a reported $800 million valuation. Rizvi Traverse Management has led both efforts, says Fortune’s report. Other Flipboard investors include Goldman Sachs, Index Ventures, Insight Venture Partners and Kleiner Perkins Caufield & Byers, which have now given Flipboard a collective $160 million.

Revolv, an 18-month-old, Boulder-based company that makes remote-controlled home monitoring and control software, has raised $4 million in seed financing led by Foundry Group. American Family Insurance and other unnamed angel investors also participated in the round.

Xiaoshouyi, a two-year-old, Beijing-based company that makes customer relationship management software, says it has raised “tens of millions of RMB” in Series A funding from Sequoia Capital. The company, whose name reportedly means “sales made easy,” received seed funding from Cloud Angel Fund last year. (According to Asian Venture Capital Journal, Cloud Angel is a $10 million seed-stage fund backed by China Broadband Capital, Sequoia, Northern Light Venture Capital and GSR Ventures; its focus is on early-stage cloud computing and big data companies in China.)

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New Funds

Cendana Investments, the San Francisco-based investment firm, has filed two Form Ds, for Cendana Capital II, LP and Cendana Investments, LP, with respective targets of $30 million and $25 million. (The forms are here and here.)

Four-year-old Cendana has made a name for itself by backing so-called micro funds, including Freestyle Capital, IA Ventures, K9 Ventures, Lerer Ventures, and SoftTech VC. According to a source familiar with the firm’s thinking, Cendana Capital II, the $30 million vehicle, will continue to make investments in seed-stage-focused venture funds —  adding to roughly $90 million that the firm is already managing toward that end.

Cendana’s first fund was a $28.5 million pool. It later raised a $60 million co-investment fund that Cendana manages with UTIMCO, called the Cendana Co-Investment Fund.

In a new twist, Cendana is moving away from being strictly a fund of funds. The second fund that Cendana is now raising — Cendana Investments, which is targeting $25 million — will make direct investments in startups.

Cendana has yet to raise money for either of its newest funds, according to the filings.

Cendana was founded by Michael Kim, who was among one of the original partners of Rustic Canyon Ventures, where he spent nearly a decade. Before joining Rustic Canyon, Kim spent about two-and-a-half years as an investment banker at Morgan Stanley.

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People

Melinda Gates on her family life and focus on making the world a safer place to live, including through AIDS-related grants: “When [the kids] were little, I sometimes wondered if I had gone overboard. When my oldest daughter was three, she said to her doll, ‘Lay down, you have Aids! I’m gonna give you a shot!’ I thought, ‘Oh my God, what have I done?”

Singer Kanye West interrupted a set over the weekend at Madison Square Garden to tell the audience that Google chairman Eric Schmidt was “in the house.” Reportedly, West proceeded to ask a dozen times, “Do y’all want Eric Schmidt to invest in Donda?” As Business Insider reported last week, West has been hitting up investors left and right to raise money for his fashion startup, saying it will become a “trillion-dollar company.” Before West’s hard sell to Schmidt during his concert, he spent 45 minutes last week at the Brooklyn-based e-commerce startup Fancy, talking about his vision and offering advice to those gathered.

Yahoo cofounder Jerry Yang has joined the board of the publicly traded HR giant Workday. Asked by PandoDaily if the move felt like a kind of redemption, Yang — who was called an “artifact” by one analyst as he parted ways with Yahoo’s board in early 2012 — laughed at the notion. Wall Street analysts can “have whatever memories they want,” he told the outlet. “If you look at the things we’ve done at Yahoo, we’ve made some pretty good moves. Even Marissa is championing some of the things we did back then. They are still around today. I have nothing but very proud and happy memories.”

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IPOs

Good Technology, the 17-year-old, Sunnyvale, Calif.-based mobile device management company, is still hoping to go public, according to a new report out this morning. Good raised $50 million last spring and the Wall Street Journal reported at the time that it had hired four investment banks to explore an offering. Good has raised at least $260 million over the years, according to Crunchbase. Its investors include Oak Investment Partners, Draper Fisher Jurvetson, Meritech Capital Partners, DFJ ePlanet Ventures, DFJ Growth Fund, Rustic Canyon Ventures, Allegis Capital, GKM and Blueprint Ventures.

Dubai and Abu Dhabi are finding that outperforming stocks markets aren’t enough to lure IPOs as restrictive regulations persuade local companies to list in London. Bloomberg has the full story.

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Job Listings

Salesforce.com is looking for a manager to join its corporate development group in San Francisco. The corp dev team is responsible for corporate strategy, M&A, and investments, and is tasked with identifying growth opportunities within new markets, evaluating acquisition candidates, and helping manage the deal execution and integration process. Applicants should have an undergrad degree from a “top institution,” an “understanding and demonstrated interest in cloud computing,” and at least three years of experience at an investment bank or venture capital firm.

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Essential Reads

Yesterday, the BBC produced a jaw-dropping report about what goes on inside an Amazon warehouse. Today, Amazon has tried batting down the report, pointing out the number of jobs it creates, among other things.

The FDA tells 23andMe to stop selling its DNA test service, saying the company hasn’t adequately responded to more than a dozen meetings and hundreds of emails over the years — and that it stopped communicating with the FDA entirely in May. Said a 23andMe spokeswoman yesterday in an email to Bloomberg: “We recognize that we have not met the FDA’s expectations regarding timeline and communication regarding our submission. Our relationship with the FDA is extremely important to us and we are committed to fully engaging with them to address their concerns.”

Law firms Orrick Herrington and Pillsbury Winthrop have ended their two-month-long merger talks, citing conflicts.

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Detours

Did you know? The medical community believes there is a definitive link between marijuana usage and gynecomastia, more commonly known as man boobs.

Esquire on what you’re not supposed to do with Google Glass.

Yesterday, actors Seth Rogan and James Franco released an exact recreation of the much buzzed-about music video “Bound 2.” A minute-long look at both has satisfied any shred of curiosity StrictlyVC might have had in watching MTV again.

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Retail Therapy

Neat. A skateboard with built-in storage for your iPad and more.

Beautiful colored tires, what took you so long!

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