StrictlyVC: November 14, 2013

110611_2084620_176987_imageGood morning and happy Thursday!


Top News in the A.M.

Google’s latest transparency report is out and it shows, unsurprisingly, that local, state, and federal governments have been asking for far more information. In the second half of 2009, U.S.-based data requests numbered 3,580. By the first half of this year, that number had risen to 10,918, a 205 percent increase.
So Snapchat is Worth More than $3 Billion. Got It.

Yesterday, there was lots of back and forth about Snapchat, the fast-growing messaging service, and the $3 billion all-cash offer from Facebook that it recently spurned, according to the Wall Street Journal’s sources. (Apparently, three sources also confirmed this account to the New York Times.)

As the Journal reported, the “rebuff” came as Snapchat is “being wooed by other investors and potential acquirers. Chinese e-commerce giant Tencent Holdings had offered to lead an investment that would value two-year-old Snapchat at $4 billion.”

It isn’t that Snapchat’s young founders — Evan Spiegel, 23, and Bobby Murphy, 25 – are strictly opposed to being acquired, suggested the Journal.  But they think if they wait until the next year, they’ll fetch an even richer valuation.

If they do, they can thank the media for its help.

I’ve read the numerous reasons why this deal makes sense: Facebook is losing steam with the younger demographic. Its Snapchat competitor, Poke, fell flat. Snapchat’s users access the service via their mobile phones, where Facebook wants to reach more of its own users.

But there seem to be at least as many reasons why this Facebook deal doesn’t add up.

For starters, Facebook’s modus operandi is to create a social operating system for the masses. Snapchat’s stated purpose is to prevent sharing. Facebook grows squeamish at the prospect of lactating mothers. One of Snapchat’s more prominent use cases is sexting.

There’s also the size of the reported offer. With the exception of Facebook’s then $1 billion cash-and-stock acquisition of the photo-sharing service Instagram last spring – a deal that helped Facebook quash a growing threat on the verge of its IPO — Facebook isn’t in the habit of splashing out much on acquisitions.

Maybe it’s been waiting for a growth opportunity exactly like the one that Snapchat presents, but Facebook knows as well as any that it’s very hard to buy or create a “category killer.” Instagram has grown from 30 million monthly active users to 150 million monthly active users under Facebook, but it’s no YouTube; there are still plenty of competitors out there. The same is true of messaging services. SnapChat may be processing 350 million “snaps” per day, but it doesn’t own its space.

Which raises yet another point: This deal is expensive.  As far we know, Snapchat has no revenue or business model. We’re not even sure how many users it has. (It last reported 5 million users in April; according to the Guardian’s calculations, it probably has around 26 million U.S. users today.)

Even if Snapchat is worth top dollar, Facebook has current assets of $10.5 billion in cash. Paying $3 billion in cash would significantly deplete its balance sheet. Observers have likened the offer to Google’s reported bid to buy Groupon. But with Google’s many tens of billions of dollars in cash, Google could have easily afforded to gamble on Groupon; not so with Facebook and Snapchat.

As a reporter, I love acquisitions: they’re exciting, and they often involve very personal stories. Where the rubber meets the road, though, most acquisitions fail. This deal may have been in the cards at one point. But if I were Facebook, I might be happy it didn’t go through.


New Fundings

BBOXX, a three-year-old, London-based company that sells solar-powered battery boxes to people in developing countries, has raised $1.9 million in funding from the personal fund of venture capitalist Vinod Khosla — Khosla Impact — and Synergy Growth. The company aims to bring electricity to 20 million people by 2020.

docBeat, a three-year-old, Las Vegas- based company whose messaging app helps healthcare teams communicate efficiently in real time, has raised $1.1 million in funding. The money comes from unnamed accredited investors, says a release about the round.

CreativeLIVE, a three-year-old, online education platform whose operations are split between Seattle and San Francisco, has raised $21.5 million in Series B funding led by Social+Capital PartnershipGreylock Partners, an existing investor, also participated in the funding, which brings the company’s total funding to just less than $30 million. CreativeLIVE allows teachers to broadcast their classes live in HD video and to interact with thousands of students who are logged on to watch.

Ezoic, a three-year-old, Carlsbad, Calif.-based company that optimizes the layout of its customers’ websites to maximize their ad revenue, has raised $5.6 million in Series A funding. Balderton Capital led the round and was joined by New Amsterdam CapitalSilicon Valley Bank and private investors.

HDmessaging, a two-year-old, Burlingame, Calif.-based company that builds and powers white-label messaging systems for mobile operators, has closed $3 million in funding led by GrandBanks CapitalIDG VenturesNexit Ventures and Lighthouse Capital Partners also participated in the round.

Househappy, a 2.5-year-old, Portland, Ore.-based real estate platform that invites users to post and search for properties around the world, has secured $1.5 million in seed funding from angel investors.

MdotLabs, a months-old, Madison, Wi.-based platform whose software monitors advertising impressions and click fraud, has raised $1.25 million in funding led by Chicago Ventures and Great Oaks Venture Capital.

Mustbin, a two-year-old, Waban, Mass.-based app for organizing, storing, and sharing personal information, has raised $4.5 million in Series A funding led by DAG VenturesGeneral Catalyst PartnersMohr Davidow VenturesNorthgate Capital, and individual investors, including Hubspot co-founder Dharmesh Shah, also participated.

Quirky, a 4.5-year-old, New York-based app developer that makes it easier for its customers to access a range of connected devices from mobile devices, has raised $79 million in Series D financing. Much of the round — $30 million of it — comes from GE, which is taking a minority equity stake in Quirky. Filling out the round are Quirky’s previous investors: Andreessen HorowitzNorwest Venture PartnersRRE and Kleiner Perkins Caufield & Byers.

Redfin, the nine-year-old, Seattle-based online real estate company, has raised $50 million led by Tiger Global Management. Tiger was joined by new investor T. Rowe Price and previous investors Greylock PartnersGlobespan Capital PartnersDraper Fisher JurvetsonVulcan Capital and The Hillman Company. The company, which is expected to go public, has now raised nearly $100 million.

TouchBistro, a three-year-old, Toronto-based company that makes a digital menu and restaurant management app, has raised $4.5 million in seed funding. The round was led by Relay Ventures and included the participation of numerous angel investors.

Yapta, a six-year-old, Seattle-based travel site that allows users to track price changes, has raised an additional $2 million as part of its Series D round. (It had closed on $4.22 million in July). The funding comes from two travel industry companies: Amadeus and Concur. Yapta, meanwhile, has now raised $22.4 million in equity and another $1.45 million in debt, according to Crunchbase.


New Funds

Founders Circle Management, an 18-month-old, Menlo Park, Calif.-based firm, has raised $38.9 million since March, according to an SEC filing that lists the fund’s total offering amount as “indefinite.” The firm, which describes itself as a technology growth-stage fund, invests in privately held companies by buying the shares of the companies’ founders, employees, and early investors. Two of Founders Circles’ cofounders — Mike Jung and Chris Albinson — worked at Panorama Capital prior; a third, Ken Loveless, was a longtime managing director at Silicon Valley Bank.



Chegg, the eight-year-old, Santa Clara, Calif.-based textbook rental company, went public yesterday and, well, things didn’t go quite as planned. The company’s shares, priced at $12.50, opened at $11 on the NYSE and proceeded to fall 23 percent. Chegg’s biggest venture shareholders include Foundation Capital (it owns 6.5 percent), Gabriel Ventures (it owns 10.3 percent), Insight Venture Partners (it owns 14.3 percent) and Kleiner Perkins Caufield & Byers (which owns 11.7 percent).

Zulily, the Seattle-based flash deals site for mothers, revealed in an SEC filing yesterday that it has increased its expected per-share price from $16-$18 to $18-$20. The company plans to go public on the Nasdaq on Friday. Among Zulily’s biggest shareholders are Maveron (it owns 23.5 percent of the company),  August Capital (it owns 7.4 percent), and Andreessen Horowitz (it owns 7.3 percent).



TouristEye, a two-year-old, Mountain View, Calif.-based mobile app for planning trips, has been acquired by Lonely Planetreports TechCrunch. TouristEye had raised $500,000 from 500 StartupsPlug and Play Innovation Center and angel investors. Terms of the deal weren’t disclosed.



Dev Ittycheria has joined the Boston-based venture capital firm OpenView Venture Partners as its third managing director. Ittycheria had joined Greylock Partners as a venture partner last year. Before coming to the firm, he was the president of BMC Software‘s enterprise service management division.

Marissa Mayer is spending too much time promoting herself and not enough time fixing Yahoo, argues Variety.

Alex Rainert, the 10th employee of Foursquare and its longtime product head, is leaving in the midst of a significant product rollout for the company, reports AllThingsD.

Three Tesla Motors employees were injured yesterday when a low-pressure aluminum casting press somehow failed. One employee was seriously hurt and two others suffered minor injuries when the machine (eek) spilled hot metal on them. Tesla Motors CEO Elon Musk said in an email to Inside Bay Area. “(I) am going to visit them in the hospital later today and will personally ensure that they receive the best possible care.”



The L.A. Tech Summit happens today in Santa Monica. The one-day conference features Mark Suster of Upfront Ventures, Factual founder Gil Elbaz, Tinder founder Sean Rad and L.A. Mayor Eric Garcetti. You can find out more here.

Going on in Las Vegas today and tomorrow: The Women 2.0 conference, featuring such heavy hitters as Google’s Megan SmithAileen Lee of Cowboy Ventures, and investor and Zivity CEO Cyan Banister. Learn more about the agenda here.



VCs heart e-commerce —  especially when it comes to clothing and accessories businesses. According to new Pitchbook data, investors have funded 80 U.S.-headquartered apparel and accessories companies since the beginning of 2008. From 2008 to 2010, an average of 9 to 10 deals were closed each year. But VCs doubled their activity in 2011, then doubled their activity again in 2012 (to around 40 deals a year). Meanwhile, 2013 has already seen more capital invested in related companies than in any of the five years prior.


Job Listings

KPMG is looking for an “account relationship director, venture capital,” in New York. The firm says the role develops and manages relationships with C-level execs, board members and alumni at assigned accounts (presumably to help KPMG sell its accounting services to VCs and their clients?) To apply, you need ten years of venture capital experience and a background with a Big 4 accounting firm.


Essential Reads

Quartz writes that Apple and Samsung‘s smartwatches are going to be way too cheap to be lucrative for either company.

The U.S. government has weaponized the Internet. Here’s how they did it, in Wired.



Video games, many of them military-themed, are becoming a way to keep young Iraqis indoors, and away from the chaos outside on their streets.

An Argentine car mechanic has created a device that could save a baby who gets stuck during birth.

The not-so-dark side of affluent Atherton, Calif., as seen through police blotter items.


Retail Therapy

The Hövding invisible bike helmet is available for purchase. [Happy twirls.]

The Baxter Base Camp X Straight Razor. Looking at its fine, artisan-crafted blade, we think, eh, maybe it’s best you just let the beard grow.


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