StrictlyVC: December 3, 2013

110611_2084620_176987_imageHappy Tuesday! StrictlyVC is feeling a little sickly this a.m, so please excuse any craziness below. Also, just a quick reminder that if you haven’t signed up for the newsletter yet, you can do that right over here.


Top News in the A.M.

The results are in. When it comes to American schools versus the rest of the world, our institutions are expensive, unequal, and pretty lousy at math.


With Little Notice, Seed-Stage Valuations Begin Falling

A widely held belief in Silicon Valley is that valuations are still on a one-way trajectory toward the sky, with founders firmly in the driver’s seat.

But the reality for seed-stage companies may be a bit more dire than that — and getting worse by the month.

According to the research firm CB Insights, both average and median seed-stage valuations have fallen since last year, with the average valuation dropping from $2.2 million to $1.7 million and median valuation falling even more precipitously, from $1.7 million to just .6 million.

Data from AngelList, a matchmaking service for investors and seed-stage entrepreneurs, also shows declining valuations. According to AngelList, which tracks thousands of startups in its system, the average seed-funded company’s valuation dropped from $3.9 million in the third quarter of 2012 to $3.6 million in the third quarter of this year. That isn’t a massive dip, but AngelList founder Naval Ravikant tells me that “by the time [a shift in one direction] shows up in the averages, it’s pretty pronounced.”

A recent quarterly venture capital report out of Pitchbook, which operates a subscription-only database of private equity and VC deals paints a rosier picture. Pitchbook found that median pre-money valuations for seed-stage, VC-funded companies have nearly doubled over the last three years — from $3.2 million in 2010 to $5.2 million through the first three quarters of 2013.

Still, this same report observed that lofty valuations are only making it harder for companies to raise Series A rounds. Pitchbook further noted that the rise of valuations can’t go on endlessly, suggesting there will likely be more flat and down rounds in coming years.

Ravikant — noting that “everyone’s dataset is incomplete” — suggests the future is now. Though he can’t pinpoint exactly when things began trending downward, he thinks valuations “kind of peaked around the Facebook IPO, when it turned out to be less than people thought it would be.”

According to Ravikant, there “hasn’t been a mass exodus out” out of the seed-stage investing market, mainly because “people still believe some percentage of your portfolio should be early-stage. But there’s increased recognition” that it’s a tough racket, with many angels suffering from investor fatigue and suddenly becoming more realistic about the chances of their portfolio companies receiving follow-on investments.

There will always be a market for the most promising seed-stage startups, in other words. But evidence from CB Insights and AngelList suggests that for entrepreneurs just setting out, the road ahead looks bumpy.


New Fundings

Biodesix, an eight-year-old, Boulder, Colo.-based molecular diagnostics company, has raised $8.3 million in funding. New funds accounted for $4.3 million of the financing round, while the remaining $4 million came from the conversion of a convertible note, the company said in a release yesterday. Existing shareholders provided all of the capital. (The company, which has raised more than $65 million over the years, has never disclosed its investors.)

Catalyze, a months-old, Madison, Wi.-based company that’s building healthcare apps, has raised roughly $2 million in Series A financing, led by Arthur VenturesBaird Venture Partners, and Chicago Ventures.

Green Biologics, a 10-year-old, Oxford, England-based industrial biotechnology company that’s largely focused on breaking down agricultural waste to create butanol fuel, has raised $23.3 million. Sofinnova Partners led the Series B round, joined by previous investors, including Swire PacificCapricorn Venture PartnersOxford Capital Partners, and Morningside Ventures.

Grokker, a nascent, San Francisco-based video network that pairs consumers with experts in a variety of verticals, from yoga to Pilates to French cooking, has raised $5.5 million, reports AllThingsDKhosla VenturesFirst Round Capital founder Josh Kopelman, and angel investor Ron Conway, are among Grokker’s investors, says the outlet., a three-year-old, Long Beach, Calif.-based company that aims to make personal finance social and “fun” through rewards and goal setting, has closed on $7 million in new funding, according to an SEC filing. Investors including FirstMark Capital and Great Oaks Venture Capital have previously provided the company with roughly $5.8 million, according to Crunchbase.

Portea Medical, a two-year-old, Bangalore-based provider of in-home healthcare and emergency medical services in India, has secured Rs 48 crore ($8 million) from Accel Partners and Ventureast. Reportedly, the company already employs 150 people, who provide services in Bangalore, Delhi, Chennai and Mumbai. The outfit is now looking to expand into Hyderabad and Pune, among other spots.

Quest Inspar, an 18-month-old, Kent, Washington-based company that robotically rehabilitates energy, water supply and other pipelines, has raised $4.2 million from Five Elms Capital.

Restorsea Holdings, a two-year-old, New York-based company behind a new skin care line, has raised $24.9 million as part of a $28 million round, according to an SEC filing. It isn’t clear from the Form D who the lead investor is, though Restorsea’s chairman, Muneer Satter, is listed. (Satter is credited with building the world’s largest family of mezzanine funds at Goldman Sachs before leaving the bank last year after a 24-year career.) Also included on the filing is Corinne Nevinny, who cofounded the L.A.-based, early-stage venture capital firm LMN Ventures in 2010.

Stem, a four-year-old, Millbrae, Calif.-based company that’s selling “intelligent” energy storage, has raised $15 million in Series B financing. The international utility Iberdrola and GE Ventures led the round, joined by previous investor Angeleno Group. In September 2011, Angeleno Group and Greener Capital provided Stem with $10.2 million in Series A funding.

Vertical Brands Media, the five-year-old, San Francisco-based parent company to, a site that aggregates rental listings from numerous sources, has raised $14.9 million in new funding, according to an SEC filing that shows a target of $19.9 million. The filing doesn’t disclose the startup’s investors.

Visterra, a six-year-old, Cambridge, Mass.-based company building a pipeline of medicines to combat infectious diseases, has raised $8.1 million as the final tranche of a $34.2 million Series A round that the company began raising last year. Previous investors Polaris PartnersFlagship VenturesLux Capital, the Bill & Melinda Gates Foundation, and Omega Funds provided the newest funding, along with Visterra insiders.

Xagenic, a three-year-old, Toronto-based molecular diagnostics company, has raised $20 million in Series B financing led by Domain Associates. Previous investors CTI Life Sciences Fund and the Ontario Emerging Technologies Fund also participated in the found. Xagenic is developing a “lab-free” diagnostic platform that produces results within 20 minutes.

Xlumena, a five-year-old, Mountain View, Calif.-based company that makes a stent and medicine delivery system, has closed a $25 million Series C financing.  The round was led Third Point, and included existing investors Prism VentureWorksCharter Life SciencesAscent Biomedical Ventures and Aperture Venture Partners. The company had reported a $4.8 million round earlier this year, and another, $7 million round, in 2011.



Willis Ware, an electrical engineer helped build a machine that would become a blueprint for computer design in the 20th century, died last week at age 93. The New York Times elaborates on the important role Ware played in the computer industry.



Inogen, a 12-year-old, Goleta, Calif.-based maker of portable oxygen equipment, filed to go public late last week, with plans to raised up to $86.25 million. Inogen’s principal shareholders include Novo A/S (it owns 42.2 percent of the company), Versant Ventures (26.1 percent), Arboretum Ventures (15.1 percent), Avalon Ventures (6.5 percent), and AMV Partners (5.95 percent).

Kindred Biosciences, a two-year-old, Burlingame, Calif.-based veterinary drug developer plans to raise less during its IPO than originally planned, according to its amended S-1, which shows it hopes to raise $46 million, down from as much as $57.5 million. Kindred has raised $6.3 million in venture backing, according to Crunchbase. Though its filings don’t disclose how much investors own, they show the company’s biggest outside shareholders include Adage Capital Partners and EcoR1 Capital 1 Fund.

Nimble Storage, a five-year-old, San Jose, Calif.-based hybrid data storage company, amended its S-1 yesterday to reflect its plans to raise up to $165.6 million in an offering. The company has raised around $82 million over the years, according to Crunchbase. Its biggest VC shareholders are Sequoia Capital and Accel Partners (each owns 20.9 percent) and Lightspeed Venture Partners (which owns 15.8 percent).

Twitter is getting mixed reviews by its IPO underwriters. Reuters has more here.



Chalkable, a 3.5-year-old, New York-based ed-tech startup, has been acquired by STI, a private equity-backed data management company serving K-12 schools, reports PandoDaily. The deal value was not disclosed. Chalkable had raised $1.3 million in seed funding from 500 StartupsExpansion Venture Capital and Prolific Venture Capital.

Prolexic Technologies, a 10-year-old, Hollywood, Fla.-based Distributed Denial of Service (DDoS) mitigation company, is being acquired by publicly traded Akamai Technologiessays the WSJ. Akamai agreed to pay about $370 million in cash for Prolexic, which was reportedly talking with bankers about going public. Prolexic had raised roughly $52 million in recent years, including from Kennet PartnersTrident Capital, and Camden Partners.

SkyPhrase, a two-year-old, New York-based company that’s been building Natural Language Processing (NLP) technology, is now part of Yahoo, the companies announced yesterday. No financial terms were disclosed. SkyPhrase had raised just $250,000 in seed funding, including from the Thiel Foundation.

Topsy Labs, a six-year-old, San Francisco-based company whose tools analyze tweets to track news along with consumer sentiment, has been acquired by Apple for more than $200 million, according to WSJ sources. The company is one of a handful of Twitter’s partners that have access to the full stream of all tweets posted to the service. Topsy had raised north of $30 million, according to Crunchbase, which lists its earliest investor as IronPort Systems cofounder Scott Banister. Others of its investors include BlueRun VenturesFounders Fund, and Ignition Partners.



The 17th annual Credit Suisse Technology Conference rolls into day two in Scottsdale, Arizona. You can check out the agenda here. If you don’t happen to be on hand, you can check out some of the companies’ presentations here.


Job Listings

SAP Ventures is forming a new biz dev group to act as a liaison between SAP, the SAP ecosystem, and any other relevant business network, and it’s looking to add a director-level person to its ranks by January. Candidates need five to eight years of experience in business development, sales, or marketing. You can learn more here.


Essential Reads

Yesterday, a federal judge tossed an antitrust class action accusing Apple of illegally driving up the price of applications sold for use on iPhones.

GigaOm looks at how Netflix is balancing its streaming traffic.



Why our brains love lists.

“For most people, software programming’s social cachet falls somewhere between that of tax preparation and autism. But it’s catching fire among forward-thinking New York parents.”

While at a bar, “Don’t whistle, snap, yell, or wave money. Unless you want people to think you work at Morgan Stanley.” — The unofficial Goldman Sachs guide to bar etiquette.

FunnyorDie has created an hilariously funny “trailer” about legendary Deadline Hollywood founder Nikki Finke, who was recently pushed out of the company by its owner, Jay Penske. (Here’s some backstory, though you don’t need it to enjoy the clip.)


Retail Therapy

This handsome jetpack will set you back more than $100,000, but listen, you can use it to fly up to 800 feet and you can travel at nearly 50 miles per hour for up to 30 minutes. More to the point, you’ll be the only person you know with a jetpack.

The Venus of Cupertino iPad docking station. How can you not buy it for someone you know?


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