StrictlyVC: February 11, 2014

110611_2084620_176987_imageHi, everyone, StrictlyVC has the mother of all head colds so please excuse any and all typos, which are probably legion today. And happy Tuesday!


Top News in the A.M.

Foxconn has long been associated as the Taiwanese manufacturing partner of Apple. But few people know that it has also been quietly working with Google.


Bullpen Capital on Its New Fund, Post-Seed Deals, and Changing LP Sentiment

A few years ago, when three prominent operators came together to create a venture fund, Bullpen Capital, they figured they’d line up capital easily. Paul Martino has founded four companies, including the ad optimization platform Aggregate Knowledge; Richard Melmon cofounded Electronic Arts; and Duncan Davidson cofounded Covad Communications and SkyPilot Networks.

LPs couldn’t care less. “We had meetings where we were hollered at for an hour,” Martino tells me of their lives in late 2010, when industry returns had sunk to a 10-year low. “Even though we were each running companies [through the late ‘90s and the 2000s], “it was like we’d wronged [LPs] by proxy. One guy even said to me, ‘Venture capital isn’t an asset appreciation class; it’s an asset destruction class.’”

Fortunately for Bullpen – and LPs – times have changed. In a few weeks, says Martino, the Menlo Park, Ca., firm will hold a first close on a second fund that will ultimately be “between $50 million and $75 million,” up from its first, $25 million fund (about one-third of which came from Martino, Melmon, and Davidson). We talked yesterday about that new fund, and how Bullpen separates itself from the pack. Our conversation has been edited for length.

You say you’re positioned to double, if not triple, your first fund. How have you won over LPs?

Well, for one thing, we’ve made 33 investments, and four of them could [return] the whole fund [based on their IRR]. Also, LPs want to know how you’re going to differentiate yourself from the many other small funds they’re seeing, and we have a stage focus that only two or three other funds out there share.

LPs also want to catch the next Mike Maples; they want to buy an option to get into your later funds. Instead of writing a $25 million check to one firm, they’ll write five $5 million checks with the hope that they might be able to give [the best of those small funds] $50 million the next time. There’s a fear of missing out, that they don’t have exposure to the best managers of the future.

It seems like more firms are making follow-on investments in seed-funded startups. Venture51 is doing something similar, right?

And they’re our best friends and most common co-investors. I’d hate if there were 23 firms doing what we’re doing, but we need partners and there just aren’t a lot of us doing this. When we’d learned Ronny Conway might be raising a fund to back seed-funded startups, I wrote him a note saying, “Welcome, please go do this.” Companies bumble and stumble, and we’re big believers in the power of strong syndicates. A few more of us would be a good thing.

What’s your criteria? Does your interest extend to good teams that need to come up with a new idea?

Investing in pivots would be like seed investing again. Instead, we invest in post-product market fit companies where big VCs say, “Come back in six to 12 months when you have a million users instead of 100,000.” We’re like an accelerator that gets the companies to the milestone that guarantees them the big round.

What do you get in return for your check? Are you aiming for 10 percent?

We’re like Greycroft Partners in that we have no ownership requirements – and that has helped us win 87 percent of the deals we’ve tried to get into. Sometimes, we [own] 3 or 4 percent; sometimes it’s 7 or 8 percent.

You’ve told me you don’t take board seats, either. Does that concern LPs?

LPs don’t like it but GPs do. Duncan and I have started 14 companies so we’re viewed as trusted advisors, rather than as a firm that’s going to potentially force the CEO’s hand. It puts us in a better position. We just led a round in an ad tech company and the week before one of its board meetings, I was asked, “What do you think the board is going to think of this presentation?” It’s a better situation to be in than the person who’s getting a distilled view of the company.


New Fundings

ArborMetrix, a three-year-old, Ann Arbor, Mi.-based healthcare analytics company, has received $1.3 million in Series B funding from Renaissance Venture Capital Fund and Detroit Innovate Fund. The company has raised $8.3 million over the last year, according to Crunchbase.

DeviceAuthority, a year-old, Fremont, Ca.-based company that’s focused on the advanced authentication and security of connected devices, has raised an undisclosed amount of Series A funding from Alsop Louie Partners.

iSocket, a 4.5-year-old, San Francisco-based direct sales platform for online ads, has raised $5 million in new funding led by Time Warner Investments, with Condé NastR&R Venture Partners, and Vivi Nevo participating. iSocket has raised just more than $15 million to date., a three-year-old, Beijing-based mobile game portal operator, has reportedly raised $21.5 million in Series B funding led by Fosun Venture Capital Investment. Earlier investor BlueRun Ventures also participated in the round.

Kantox, a 2.5-year-old, London-based, peer-to-peer foreign currency exchange for businesses, has raised $10.6 million in Series A funding led by Partech Ventures and Idinvest Partners, with participation from existing investor Cabiedes & Partners.

MassRoots, an 8-month-old, Denver, Co.-based social network for the medical cannabis community, has raised $150,000 in seed funding, including from ArcView Group.

Melinta Therapeutics, a 14-year-old, New Haven, Cn.-based antibiotics-focused company, has raised $70 million in fresh funding from earlier investor Vatera Healthcare Partners, along with other existing investors. The company has now raised nearly $190 million, including from Warburg PincusABS Ventures, and Axiom Ventures.

nCino, a two-year-old, Wilmington, N.C.-based company behind a new kind of operating system for bankers, has raised $10 million fromWellington Management Company to accelerate nCino’s growth into the community bank and credit union markets. The company has raised $19 million altogether.

PlaceIQ, a 3.5-year-old, New York-based startup that uses location data for mobile advertising, has raised $15 million in Series C financing led byHarmony Partners led the round. Iris Capital and previous backers from the company’s Series B round, participated. The company has raised roughly $28 million to date.

Primary Data, a year-old, Salt Lake City, Ut.-based startup whose software aims to help enterprises manage their unstructured data, has raised $60 million in new funding from new investor Mercato Partners, which was joined by earlier backers Accel PartnersBattery VenturesLightspeed Venture Partners and Pelion Venture Partners. The company has raised $60 million to date, according to Crunchbase., a nine-year-old, London-based online marketplace that connects homeowners with recommended local tradesmen, has raised $9 million in “pre-IPO” funding from earlier investor Frog Capital, along with $1.6 million in venture debt from Western Technology Investment (WTI). The company has raised at least $15 million to date.

Rocketrip, a year-old, New York-based travel management platform that helps its customers save money on travel expenses, has raised $2.6 million in Series A funding led by Canaan Partners, with Genacast Ventures and various unnamed investors participating in the round.

Splice Machine, a 1.5-year-old, San Francisco-based SQL-on-Hadoop database for real-time big data applications, has raised $15 million in funding led by Interwest Partners. Previous investor Mohr Davidow Ventures also participated. The company has raised $19 million to date.


New Funds

Austin Ventures, the 35-year-old private equity firm focused on venture capital and growth equity investments, is talking with LPs about a new $400 million to $650 million fund, reports Buyouts magazine. The firm closed its tenth pool with $900 million in capital commitments in 2008. Bloomberg had reported last May that Austin would reduce the size of its next fund by half to target younger companies. At $450 million, noted Bloomberg, the new fund would be the firm’s smallest since it raised $320 million in 1998.

Another Turkish venture fund looks to enter the Middle East.



Castlight Health, the 6.5-year-old, San Francisco-based company that provides employees with personalized shopping tools for healthcare benefits, filed yesterday with the SEC to raise up to $100 million in an IPO. The company booked $13 million in sales for the 12 months ended December 31, 2013. The company has raised $160 million, including from Morgan StanleyWellcome Trust (it owns 8.7 percent), U.S. Venture PartnersMaverick Capital (10.2 percent), Oak Investment Partners(15.8 percent), Venrock (20.6 percent), Fidelity Investments (9.8 percent), T. Rowe Price, and the Cleveland Clinic.

Gilt Groupe, the 6.5-year-old, New York-based online retailer of discounted luxury goods, has picked Goldman Sachs to manage its IPO, people with knowledge of the deal tell Bloomberg. Timing for the IPO hasn’t been decided, add these people. Gilt has raised more than $220 million over the years, including from Matrix PartnersGeneral AtlanticNew Enterprise AssociatesDFJ Growth, and, oh, hey, Goldman Sachs.

MobileIron, a 6.5-year-old, Mountain View, Ca. company whose software helps companies protect data that employees access on smartphones, is working with banks including Goldman Sachs Group as it prepares for an IPO, sources tell Bloomberg. Reportedly, the company is seeking up a valuation of up to $2 billion. MobileIron has raised $145 million, shows Crunchbase. Its investors include Institutional Venture Partners,Foundation CapitalNorwest Venture PartnersSequoia Capital, and Storm Ventures.



Germany’s Deutsche Telekom says it is acquiring all remaining shares ofT-Mobile Czech Republic in a $1.1 billion deal. It’s buying the 39.23 percent stake in the company from a consortium of investors led by funds managed or advised by private equity group Mid Europa Partners. More here.

Independent eBook publisher Open Road Media has acquired E-Reads, an eBook publisher that has been around since 1999. Terms of the deal were not disclosed. GigaOm has a bit more here.



Diana Frazier, who cofounded Flag Capital Partners in 1994 and heads the firm’s U.S. venture capital program, is retiring. She tells Fortune’s Dan Primack that she is “past retirement age,” and wants to be able to spend more time with her family.

Bill Gates took to Reddit yesterday morning to answer commenters’ questions. Asked what his most expensive guilty pleasure his, he answered: “Owning a plane is a guilty pleasure. Warren Buffett called his the Indefensible. I do get to a lot of places for [Bill and Melina Gates] Foundation work I wouldn’t be able to go to without it.”

Paul Grossman has joined Telegraph Hill Partners as a venture partner. Previously, Grossman worked at the life sciences company Life Technologies, where he was head of global strategy and corporate development. Based in San Francisco and San Diego, Telegraph Hill is a 13-year-old venture capital and growth equity firm that invests in life science and healthcare companies.

Jordan Hoffner has been hired as CEO of Federated Media, the San Francisco content marketing company that was bought by publicly traded LIN Media a couple of weeks ago. Hoffner has “worked in both old and new media, including at Google, YouTube, NBCUniversal and IAC-owned Electus,” reports Re/code, which has more here.

Ray Ko has been named a growth partner at Social+Capital Partnership, the venture capital firm founded by former Facebook and AOL execChamath Palihapitiya. Ko spent more than four years at Facebook as a director focused on growth an analytics, and more than four years at Yahoo before that focused on search and business operations. TechCrunch has the story.

Speaking of Chamath Palihapitiya, he flew to Cambridge over the weekend to deliver what Dealbook calls a “sobering message” to HBS students who’ve studied entrepreneurship: “It’s really unfair to you guys, but I think you’re discriminated against now…I would bet a large amount of money that the overwhelming majority of us would not look favorably on a company started by one of you.”

Google Chairman Eric Schmidt has just bought a $22 million L.A estate that once belonged to Veronique Peck, the late wife of Hollywood legend Gregory Peck, sources tells the New York Post, which writes: “Conveniently for the tech ladies’ man, the estate in the exclusive enclave of Holmby Hills is right nearby Hugh Hefner’s Playboy Mansion. Schmidt’s 9,182-square-foot, seven-bedroom ‘French chateau’ was listed for $24.9 million.”



The Venture Summit Silicon Valley takes place this Thursday at Draper University in San Mateo, Ca. To register, click here.


Job Listings

Stripes Group is looking for a venture capital analyst to help the firm this coming summer. Apply here.


Essential Reads

A vulnerability in the Snapchat app allows attackers to flood the device with information, freezing and crashing the users iPhone, according to a security researcher who works for Telefonica. The researcher disclosed the vulnerability on Saturday and found that the company had banned his two testing accounts and blocked the IP he used to demonstrate the attack – but had not immediately fixed the actual problem.

The mysterious developer of the world’s most popular free app, who drew global attention this past weekend with his sudden decision to remove it, tells Forbes that Flappy Bird is dead. Permanently. “Flappy Bird was designed to play in a few minutes when you are relaxed,” says Dong Nguyen, in an exclusive interview, his first since he pulled the plug on the app. “But it happened to become an addictive product. I think it has become a problem. To solve that problem, it’s best to take down Flappy Bird. It’s gone forever.”



Married Kama Sutra.

Tightrope walking — between two hot air balloons.


Retail Therapy

Toot, toot, hey, beep Beep, check out this creation by former Google hardware engineers Daniel Conrad and Shawn Lewis. (PandoDaily has much more on their late-stage prototype device here.)

Want to impress entrepreneurs? Try using these gravity defying doors at the office.


To sign up for StrictlyVC, click here. To advertise, click here.

Filed Under:

Don’t Miss Out!

Sign up today to receive a free daily email with everything you need to start your day. Plus, keep track of the companies and personalities that will shape the industry in the months and years to come. Let StrictlyVC be your very own venture capital concierge.

StrictlyVC on Twitter