StrictlyVC: September 30, 2013

110611_2084620_176987_imageGood morning, readers! Hope you had a great weekend.

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Top News in the A.M.

Sorry, Coca-Cola. Apple is now the most valuable brand in the world.


Will Alibaba Draw VCs Back to China?

Although the American financial press seems preoccupied with Twitter’s impending IPO, Alibaba’s IPO could be an even bigger story. The China-based e-commerce juggernaut, which could go public as early as the first quarter of 2014, racked up revenues of $1.38 billion for the quarter ended in March, and analysts estimate that the company could be worth anywhere from $120 billion to $200 billion. (Facebook’s market cap as of this writing is $125 billion.)

As the Alibaba offering approaches, one can’t help wondering why U.S. investors have had so much trouble capitalizing on Chinese tech IPOs.

Although Yahoo remains among one of Alibaba’s biggest shareholders – with a 24 percent stake, half of which it plans to sell at the IPO – Alibaba has few U.S. investors other than GGV Capital, an expansion-stage firm on Sand Hill Road that invested in Alibaba in 2003; and Silver Lake, the private equity firm, which reportedly invested $300 million in Alibaba in 2011. (Japan’s Softbank owns 35 percent of the company; Alibaba’s founders and senior executives own another 13 percent.)

American tech types have tried repeatedly to capitalize on the country, but factors like partner defectionsaccounting scandals committed by China-based companies, and a slowdown in the country’s GDP growth rate have yielded disappointing returns.

Still, success will only come if a firm is willing to stick it out and take the time to forge relationships within China’s close-knit entrepreneurial community, says David Chao, co-founder and general partner of DCM, the early-stage venture firm.

Since 1999, DCM has backed more than 200 companies across the U.S. and China, and three of its most recent IPOs are China-based companies, including  Renren, Dandang, and Vipshop. (DCM owned 20 percent of Vipshop went it went public last year with a market cap of $600 million; today it’s valued at $3.2 billion.)

Last week, DCM scored another China-based investment win when Kanbox, a personal cloud storage service that is often likened to Dropbox, was acquired by Alibaba for an undisclosed amount.

Pointing to a separate, recent deal – the Beijing-based search engine Baidu’s agreement to pay $1.9 billion for China’s popular smartphone app store 91 Wireless – Chao says that it’s actually becoming easier for savvy investors to generate returns. “Five years ago,” he observes, “almost all successful Internet companies were destined to go public. Now that you have a second generation of successful Internet companies going public — large cash companies,” Internet investors can expect exits through M&A, too.

Other shifts Chao has witnessed include an “angel investor boom in the last year that will probably continue for a while,” and less copycat tech and more innovation, particularly when it comes to smartphones and mobile social networks. (Chao characterizes several companies as “way ahead” of anything we’ve seen in the U.S.) “What we’re seeing isn’t a 180-degree shift,” he adds, “but 10 years ago, 99 of 100 business plans were largely focused on being analogous counterparts to successful U.S. or Japanese Internet companies; today, that number is maybe 80 out of 100.”

I ask Chao if it’s too late for firms that still haven’t made a foray into China — as well as whether he thinks U.S. investors have the intestinal fortitude to stick it out. Will Alibaba be the company that refocuses their attention?

“It’s more difficult than it was 10 years ago” to enter the market, Chao notes. But plenty of venture brands are still being established in China, he says. Succeeding in China is all about the long game, he suggests, but “a firm can make its name in very quick order.”



New Fundings

Azimo, a two-year-old, London-based payment processing startup, has raised $1 million in seed funding from eVentures, a global venture fund with offices in San Francisco and Hamburg, Germany among other spots.

Enmetric Systems, a five-year-old, Belmont, Calif.-based company whose software helps companies monitor, control and reduce their energy use and cost, has raised $1.5 million in follow-on financing led by Navitas Capital, with participation from new investors including Azure International, Belgravia Group, and several angel investors. The company  has raised $3.74 million to date.

Love Home Swap, a four-year-old, U.K.-based home swap holiday service, has raised follow-on funding from MMC Ventures of $1.6 million. The company has raised slight more than $4 million altogether, mostly from MMC.

Palantir, the nine-year-old, Palo Alto, Calif.-based data mining startup, has raised $196.5 million in funding, according to an SEC filing that was flagged by VentureBeat Friday afternoon. The funding brings the company’s funding to date to roughly $500 million, and sources tell the San Jose Mercury News that the company expects additional funding in the near future that could push the final round past $200 million. No investors are listed on the Form D, but Palantir’s existing investors include Founders FundGlynn Capital Management, and Ulu Ventures.

PowerbyProxi, a seven-year-old, Pleasanton, Calif.-based that makes chargers and power pads that allow users to power their smartphones wirelessly, has raised $4 million in funding from Samsung Ventures. The funding is part of a $9 million Series C round to which investors TE Connectivity and Movac, an expansion-stage investment firm in New Zealand, also participated earlier this year.

Sharecare, a three-year-old, Atlanta-based health information site launched by WebMD founder Jeff Arnold, has raised an undisclosed amount of funding from the healthcare-focused venture fund Heritage Group of Nashville that brings its total funding to $91 million. Some other Sharecare investors include Galen Partners and TomorrowVentures.

Swiftype, a 20-month-old, San Francisco-based startup that has developed what it claims is a smarter search engine for Websites, has raised a $7.5 million Series A round led by New Enterprise Associates, with individual investors participating. The company has also raised $1.7 million in seed funding to date, from a long line of investors that includes Kleiner Perkins Caufield & ByersCrunchFund, and Andreessen Horowitz.

Twitch, a two-year-old, San Francisco-based video platform for gamers, has raised $20 million in Series C funding led by Thrive Capital, with participation from WestSummit Capital and Take-Two Interactive Software. Previous investors in the company Alsop Louie Partners and Bessemer Venture Partners, also participated. The company has raised $35 million to date.


New Funds

Revolution Ventures, the venture capital arm of Revolution LLC, run by former AOL CEO Steve Case, has closed a new $200 million venture fund. Case, Tige Savage, and David Golden will lead the new fund, which was raised in just eight months, according to the firm.



Steve Ballmer calls Microsoft “like a fourth child to me in a raw, emotional goodbye to the company, set to the theme song of his “favorite movie of all time,” the 1987 film “Dirty Dancing.”

As Jeff Bezos prepares to take over, Don Graham leaves the Washington Post.



Bureau of Trade, a two-year-old, San Francisco-based startup that had created a men’s shopping marketplace, has sold to eBay for an undisclosed, all-cash amount. Investors including Foundation Capital and Founder Collective had provided the company with $1.2 million in seed funding.



Twitter‘s IPO filing — including details of how much Twitter intends to raise and what its shares will cost — will be made public this week, says Quartz.


Job Listings

CMEA Capital, the San Francisco-based venture firm, is looking to hire a full-time associate to support the partners in its life sciences practice. It’s a “pre-MBA” position and the firm is looking for someone who has already spent a few years within the health group of an investment bank or venture firm or  private equity firm. The ideal candidate will also have a bachelor’s degree in biology, chemistry, or another life science field.


Essential Reads

Venture capitalist Fred Wilson on the promise of AngelList’s Syndicates program: “It’s hard to be a great lead investor and a completely different thing than being a well sought after angel investor who can get into someone else’s deals.”

Chris Dixon of Andreessen Horowitz weighs in on crowdfunding.

Never mind what you’ve heard in recent years. There’s plenty of money in Europe for solid startups, say European VCs.

Meet Anthony Noto, the Goldman Sachs banker taking Twitter public.



More and more college aid is going to kids who less need it.

The U.N. Intergovernmental Panel on Climate Change’s latest report makes it official: If we don’t address climate change in the next 30 years, we’re in for some nasty business.

Atul Gawande on the centerpiece of the Affordable Care Act: It “resembles nothing more sinister than an eBay for insurance.”


Retail Therapy

Mugs to keep you motivated.

Nine things to do in St. Bart’s.

And: Do you have what it takes to survive for 24 whole hours in the wilderness of Surrey, England with no tent, water or food? (Well, you’d have limited food, and access to local streams and pools, but you’d have to forage for anything else!) Test your endurance at the new Survival Academy from British adventurer Bear Grylls, who has slept in a sheep’s carcass, quenched his thirst with his own urine, and now wants to share his extreme survival techniques with you, outdoor enthusiast. (Cost is $560. If you’d rather spend five days tramping around the Scottish Highlands with little more than a towel and head torch, the price is $3,000.)


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