StrictlyVC: November 11, 2013

110611_2084620_176987_imageGood morning! Hope you had a fine weekend. If you happen to be a veteran or have an active service member in your family, thank you — today and always.


Top News in the A.M.

With no hands-on technology experience and a tight deadline, entrepreneur Jeffrey Zients, who is leading the effort to fix, has his work cut out for him. “To try to come in, in six weeks, and sort something like this out – I just have a lot of sympathy for him,” said Joshua Bolten, a friend of Zients and a chief of staff to President George W. Bush.

AppNexus on Ad Tech IPOs, and Why It’s Not Yet Public

New York-based AppNexus has been having a very good run. The six-year-old ad platform, which oversees the real-time buying and selling of online display advertising, has grown to 600 employees. The company, which had nine offices at the start of the year, has since opened two others. And so many billions of ads are being processed on AppNexus’s platform each day that it’s now the “largest [ad tech] company outside of Google,” says AppNexus President Michael Rubenstein. 

So when is AppNexus going to follow in the footsteps of other ad tech companies to go public? On Friday, I asked Rubenstein, who was director of Google Ad Exchange before joining AppNexus in 2009 (and who spent a decade at DoubleClick before that). Our conversation has been edited for length. 

When we last talked much earlier this year, you’d just closed on $75 million in funding. What are some of the highlights since?

It’s been an amazing growth year. We’ve just about doubled our revenue [since 2012]. We decided to accelerate our international expansion and just recently opened offices and a data center in Sydney and Singapore. The other major investment we’ve made this year was mobile. Because it’s such an explosive trend in the digital media industry, we dedicated a team of dozens of people inside the company to building the best mobile ad technology in the world based on our existing capabilities.

You recently partnered with the mobile ad network Millennial Media. Why do you think its stock hasn’t performed better?

They went public at a very high valuation and the stock has come down a lot since then, but I’m not an expert on [why]. What’s clear is that Millennial is building a leading business in what’s likely to be the fastest-growing and most exciting area of the ad market for a long time to come.

Any thoughts on why another ad tech company, the automated ad buying startup Rocket Fuel, has received a warmer reception by public investors? 

Rocket Fuel is doing a really great job of serving its customers and building a very strong ad business. Whether that means its stock price is justified or over- or undervalued, it’s hard to say with valuations all over the place.

Why are ad tech valuations so seemingly schizophrenic?

I don’t know if the market really knows how to value these businesses. It could be the market is trying to sort out which are the great companies and which aren’t.

Can you share anything about your revenue and whether or not you’ve ever been profitable? The standard for going public still seems to be revenue of more than $100 million.

We’ll do significantly more than that [in 2013]. We’re not profitable because we continue to invest very heavily in the long term. We’ve invested massively in mobile advertising and had very little revenue from [it], for example, but that will change next year. And by 2017, the [Internet Advertising Bureau] is forecasting that mobile advertising will [represent a slight majority of U.S. online ad spending].

It is safe to say you’re thinking about an IPO?

We had some thoughts about it and decided to do that big round at the beginning of the year instead because we felt like we’d be best off building value rather than going public. An IPO is something that we’d like to do in the future, but it would be more of a financing event than anything else.

Will we see AppNexus make an acquisition any time soon?

We always look. But acquisitions are a big deal, and, having been involved in a number at DoubleClick and Google, I can tell you that an acquisition can be a terrific catalyst for growth if done right. But often, they are not done right. So you have to pick your pitch.


New Fundings

DesignCrowd, a five-year-old, Sydney, Australia-based crowdsourcing marketplace for freelance designers, has raised $3 million in new funding from investors led by Starfish Ventures. The round brings the company’s total funding to date to $6.3 million. (In a related story, Starfish cofounder John Dyson told The Australian this weekend that he welcomes the entry of U.S. venture firms into the Australian market, including Peter Thiel’s Valar Ventures, Sequoia Capital, and Accel Partners. “Bring it,” Dyson did not say.)

The Honest Company, a two-year-old, Santa Monica, Calif.-based company that was co-founded by actress Jessica Alba and sells baby diapers, wipes, bath and body care products and non-toxic cleaning products, just raised $25 million in fresh capital. The round was led by Institutional Venture Partners, which was joined by ICONIQ Capital. Previous investors Lightspeed Venture Partners and General Catalyst Partners also participated. The company has now raised $52 million.

SkyFuel, a six-year-old, Arvada, Colo.-based company that makes thermal concentrating solar power (CSP) equipment, is raising a $2 million debt round and is a quarter of the way there, shows an SEC filing. The company announced that it raised $17 million in Series B funding in 2008, led by publicly traded Leaf Clean Energy Company. Filings show it raised another $3.5 million in equity in 2010, and that it has subsequently raised about $20 million in debt.

Spartz, a four-year-old, Chicago-based startup that produces websites with “viral potential” every six weeks (among them is OMG Facts), has raised $2.4 million of a targeted $10 million round, shows an SEC filingInc. profiled the company this past spring.

uBid Holdings, a 16-year-old, Chicago-based online marketplace for closeout and overstocked items, is in the market for a new $6 million round, according to a new SEC filing that shows that uBid has so far raised $500,000. The company has raised at least $14.5 million in equity and debt since 2010, Crunchbase shows.

Uniplaces, a two-year-old, London-based marketplace that invites students to rent their homes (so a focused Airbnb, essentially), has raised $1.06 million in seed led by Octopus Investments and angel investors Alex Chesterman (founder of Zoopla) and William Reeve (chairman of Uniplaces launched in Lisbon last year, but expanded into London, where it moved its headquarters last summer.

Via Motors, a three-year-old, Orem, Utah-based company that specializes in extended-range electric trucks, vans and SUVs, has raised $5.7 million as part of a $10 million round, shows a new SEC filing. Silicon Valley real estate billionaire Carl Berg is listed as a non-executive director on the filing, as is automotive executive Bob Lutz, who has held senior management roles at GM, Ford, Chrysler and BMW over his career.


New Funds

Atomico, the U.K.-based venture firm that has expanded into numerous countries in recent years, has closed its third fund with $476.6 million, a new SEC filing shows. The firm began raising the capital in October 2012.

Seven-year-old Atomico was founded by Skype co-founder Niklas Zennstrom to (mostly) seek out investments in non U.S.-based startups. Among its portfolio companies is the three-year-old, Berlin-based task management app developer 6Wunderkinder, which just closed on $30 million in new funding led by Sequoia Capital. (The deal marked Sequoia’s first investment in Germany.)

In 2011, Atomico also participated in the $42 million Series A round of the 10-year-old Finnish game maker Rovio, of the Angry Birds franchise. It’s the only funding that Rovio has publicly disclosed to date.

Atomico presumably saw a very nice return last month, when the Climate Corporation was acquired by Monsanto for roughly $1 billion. Climate Corporation helped its agribusiness customers predict crop yields using big data to examine soil quality, historical rainfall and more. Altogether, Climate Corporation had raised $109 million, and Atomico was there from the beginning, leading its $4.3 million angel round in 2007 with Index Ventures.

Atomico has offices in São Paulo, Beijing and Istanbul, and  Tokyo. It closed its second, $165 million, fund in 2010.



Cara Therapeutics, a nine-year-old, Shelton, Conn.-based clinical-stage biopharmaceutical company at work on drugs to treat pain and inflammation, has filed an S-1 to raise around $60 million. Its principal stockholders include Esperante AB, which owns 9.2 percent of the company; Ascent Biomedical Ventures, which owns 9.9 percent; Alta BioPharma Partners, which owns 10.7 percent; MVM International Life Sciences, which owns 9.7 percent; Healthcare Private Equity Limited Partnership, which owns 5.3 percent; Devon Park Bioventures, which owns 9.4 percent; and Rho Ventures, which owns 14.5 percent.

Globoforce, a 16-year-old, Southborough, Mass.-based company that was incorporated in Ireland (where it still maintains one of its principal offices) filed an S-1 on Friday to raise about $75 million. The company’s software powers recognition and rewards programs for its enterprise customers. Its principal shareholders include Atlas Venture, which owns 31.4 percent of the company, and Balderton Capital, which owns 41.5 percent. (Balderton invested in 2002, when it was still affiliated with Benchmark Capital and known as Benchmark Europe.)

Ultragenyx Pharmaceuticals, a 3.5-year-old, Novato, Calif.-based clinical-stage biotech company that’s developing treatments for metabolic genetic diseases, filed an S-1 on Friday to raise up to $86 million. Its biggest shareholders include TPG, which owns 13.2 percent of the company; Beacon Bioventures, which owns 13.2 percent; HealthCap, which owns 11.8 percent; Adage Capital Partners, which owns 7.4 percent; and A.M. Pappas Life Science Ventures, which owns 5.9 percent.


Exits, a nine-year-old, New York-based media company with three Web publications –Curbed, Eater, and Racked — has been acquired by the 10-year-old online publisher Vox Media. The price isn’t being disclosed, but outlets have been reporting that went for between $20 million and $30 million. Vox Media has experienced hypergrowth since raising its first round of venture funding in 2008 from Accel PartnersAllen & Co., and former AOL exec Ted Leonsis. Vox, whose properties include SB Nation and The Verge, is run by Jim Bankoff, another former AOL executive. The company has raised nearly $80 million to date, including through a $34 million round (that is expected to reach $40 million) that was reported last month.

On Friday, Intel announced it was acquiring the four-year-old, Santa Clara, Calif.-based, education-software maker Kno, providing what appears like a soft landing for the company. Kno’s original focus was on making tablets, and it raised $55.4 million in equity and debt within its first year toward that end, including from Andreessen Horowitz, along with First Round Capital and SV Angel. The company switched gears in 2011 to focus on interactive textbooks for mobile devices; according to an SEC filing, it then raised an additional $37.2 million. Terms of Kno’s acquisition aren’t being disclosed.

Last week, when Facebook‘s shares reached a record high, Andreessen Horowitz sold a third of Facebook holdings, Bloomberg reports. According to a filing flagged by the outlet, the firm offloaded 2.28 million shares at $49 and $50 apiece for about $111 million. Andreessen Horowitz still owns 4.57 million shares. (A year ago, it reportedly distributed about 4.6 million shares of Facebook, most of which were acquired in Facebook’s purchase of Instagram.) Andreessen Horowitz had invested at least $80 million in Facebook shares in 2010 at what was then a $35 billion valuation.



Kerry Cooper is the new CEO of Choose Energy, a five-year-old, Plano, Tex.-based site that invites users to compare and shop for plans from energy suppliers. Cooper was previously the CMO and COO of clothing retailer ModCloth. Choose Energy has raised $11.5 million to date, including a newly raised $7.5 million round from Kleiner Perkins Caufield & ByersStephens Capital PartnersBlueScape ResourcesNGEN Partners, and Michael Polsky, the president and CEO of Invenergy, a Chicago-based renewable energy company.

Profiled over the weekend: Shana Fisher, one of New York’s “best angel” investors who you’ve likely never heard of before. (Fisher’s bets include VineRefinery29Makerbot and Pinterest.)

Evan Williams and Medium also get the long-form treatment. Says Williams of the type of journalism he aims to attract to the platform: “I want to give rationality a fighting chance.”



Business Insider‘s three-day Ignition conference gets underway in New York today, featuring Elon MuskArianna Huffington, and Russell Simmons among others. Here is the agenda.

O’Reilly kicks off its three-day Strata conference in London today. You can learn more here.

The three-day Techonomy 2013 conference also gets rolling this afternoon, in Tucson, Ariz. Among the panelists today is Samir Arora or Glam Media and Konrad Feldman of Quantcast.


Job Listings

Dropbox is looking to add someone to its corporate development team in San Francisco. This person will identify and recommend acquisition targets for Dropbox; support related deals through the acquisition process; and represent Dropbox at events. To apply, you need two to four years of experience in venture capital, investment banking, and, preferably, a B.A. from a “top tier” university.



In honor of Veteran’s Day, Pitchbook is publishing its findings on VC-backed startups that in some capacity serve the military. Over the last decade, says the firm: 280 such companies have raised about $3.27 billion. Most of that flowed to the IT industry (42%), followed by B2B (33%), B2C (9%), Energy (7%), Healthcare (5%) and Materials and Resources (3.5%). Military and defense-related companies have already landed 36 financings this year, including for CyPhy Works (which StrictlyVC wrote about on Friday) and RallyPoint, a social network for active-duty military members and veterans.


Essential Reads

Big Data is so yesterday. The real insights, say a growing number of startups, can be found through hyperdata.

Why is encrypted email so rare in the first place?

Lawyers for Apple and Samsung are reportedly ready for the second “Trial of the Century.”



Think you may work with a psychopath? The odds are higher if work in one of these professions.

Confronted with an unprecedentedly secular crop of young people, Jewish leaders work overtime to convince Millennials to just come on and “marry a nice Jewish boy.”

An ESPN columnist admits how hard it has become for him to watch NFL games. “I used to love football the way German shepherds love sirloin…I see too much sorrow and ugliness now…”

Aging liberals have far more sex than conservatives, according to a decades-long Harvard study. Says the Harvard professor who led the research, “I have consulted urologists about this, they have no idea why it might be so.”


Retail Therapy

Beautiful maps of national parks.

The $670 Bonneville Red Selvedge Denim Coverall. Who knew you could look so stylish while repainting/rebuilding/fixing stuff? Just don’t wear these anywhere near your auto body shop or, for that matter, around anyone who uses their hands for a living. You will be mocked mercilessly, and you will deserve it.


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