StrictlyVC: February 27, 2014

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Top News in the A.M.

Eeek. Britain’s surveillance agency GCHQ, with aid from the NSA, reportedly intercepted and stored webcam images of millions of internet users not suspected of wrongdoing, secret documents reveal.


Jeff Clavier on “When to Push and When to Pull”

This week, StrictlyVC sat down with investor Jeff Clavier of SoftTech VC to talk shop. Yesterday, we featured part of that chat, with Clavier discussing the less glamorous aspects of his work, from expensive mistakes to entrepreneurs who don’t exactly hang on their investors’ every word.

In this second installment, Clavier shares his insights into what’s happening in seed-stage investing, where SoftTech has been playing since its 2004 founding.

You aim to own five to 10 percent of each startup that you back. Why is that the right range? Why not invest in fewer companies for slightly more ownership?

It works because if you try to own 20 percent of a startup, there’s no room for syndication, and we believe fundamentally that the core proposition of the seed stage world is to own enough that any outcome is meaningful, without using any sharp elbows.

But you have to partner with other investors who are adding value. There’s always a lot of work to do in seed deals, and it often goes on for a year to a year-and-a-half (before the company raises more funding or starts to wind down). And it screams at you, what investors haven’t done because a startup is one of 100 other startups they’ve backed.

Are you finding that Series A investors are being any more or less accommodating of seed investors in today’s market?

If there’s one term sheet, then you have to face reality [and take their terms]. If it’s a multiple term sheet situation, then you have a negotiation. If you come in with a convertible note, then you’re stuffed, because there’s no pro rata right, and the VCs will basically tell you to go f off. At least, some of the best and most aggressive will.

What’s been your experience specifically?

We’ve done well recently. In the last four months, we’ve [seen 10 of our portfolio companies close] Series A rounds and five [of them close] Series B rounds. A top-tier firm did three of our Series A [deals] and we could only get pro rata in one. But I don’t think that’s a new development; it’s happened all along. Everything is a negotiation. [Larger funds have to weigh] how big a spot they want to leave you in the cap table versus their own ownership requirements. But it’s not like we won’t deal with those guys again. If you have a reputation, people don’t want to f__k with you. You just have to know when to push and when to pull.

These days, seed investors often own 20 percent of a startup by the time it meets with more traditional VCs. Is that becoming a problem?

It’s true that when companies come to traditional VCs, the cap table has a chunk of 20 percent [up] from 5 percent. But it is what it is. The companies that come to them have been de-risked. Seed is the new A, and A is the new B. We’ve seen this [directly]. We’ve [participated in] traditional Series A [rounds], between $4.5 million and $6 million; we’ve also done Series A [rounds that are] between $8 million and $10 million. We’ve had a $15 million Series A round.

How big a check will you write to maintain your stake in a startup?

Well, we’re always trying to… generate 10x on a seed, Series A or Series B investment … One of the biggest checks we’ve written was $1.6 million in Vungle [a mobile ad startup that makes 15-second in-app videos]. Vungle just announced a $17 million Series B at a pretty hefty valuation [led by ThomVest Ventures], and we participated in full.

Do you feel like things are working in the industry, structurally?

There is so much institutional money that the funds being raised have to be put to work somewhere, so a lot of entrepreneurs are being funded who shouldn’t be. But it’s always hard to know who [should receive follow-on funding]. Somebody’s piece of junk is someone else’s Pinterest.

Is there bifurcation happening in seed investing? We’re hearing more about early seed and seed prime and seed extension deals…

No. You have incubators, which is a sh_t show now, there are so many of them. You also have early-stage funds like [K9 Ventures, whose founder, Manu Kumar] is almost like a quasi-founder.

We really value the fact that Manu is working with entrepreneurs at that ideation phase. But we don’t typically do it. For example, when we invested in Coin [a card-shaped connected device that contains users’ credit, debit, gift, loyalty and membership card information], we saw a big, bulky piece of plastic. But at least we saw plastic. When Manu got involved, there was nothing but a vision.


New Fundings

ClearSlide, a four-year-old, San Francisco-based SaaS company whose platform is designed for sales teams, has raised $50 million in Series C funding led by The Social+Capital PartnershipGreylock Partners,Bessemer Venture PartnersFelicis VenturesComcast Ventures andSilicon Valley Bank also participated in the round, which brings ClearSlide’s total funding to $90 million.

EdSurge, a three-year-old, Burlingame, Ca.-based site that covers and analyzes education technology, has raised $1.5 million in funding from a list of investors that includes GSV CapitalNewSchools Venture Fund,LearnCapital, and numerous individual investors, including renowned serial entrepreneur Judy Estrin. EdSurge was co-founded by CEO Betsy Corcoran, a former executive at Forbes.

Kairos, a two-year-old, Miami, Fla.-based facial recognition startup, has raised $1.2 million in Series A funding from New World AngelsFlorida Angel NexusvenVeloInnovision VenturesTrue Venture Innovations, and Lyonsden Investments. Kairos has raised $1.7 million altogether, according to Crunchbase.

Little Borrowed Dress, a two-year-old, New York City-based online bridesmaid-dress rental company, has raised $1.25 million in seed funding from Index VenturesAndreessen HorowitzLaunch CapitalNeu Venture CapitalNYC Seed, and numerous individual investors, including David Tisch and Joanne Wilson. The company rents bridesmaid dresses that it manufactures itself and rents for prices beginning at $50.

NuoDB, a four-year-old, Cambridge, Ma.-based cloud-based database management system, has raised $14.2 million in new funding led by French software developer Dassault Systèmes. Earlier investors Canvas Venture FundHummer Winblad Venture Partners and Longworth Venture Partners, also participated in the round, which brings the company’s total funding to $26.2 million.

Respiratory Motion, a three-year-old, Waltham, Mass.-based medical device company that makes a respiration monitoring system, has raised $5.8 million in Series B financing led by Easton Capital, a life sciences venture firm. The company expects to raise an additional $3 million to the round, it said in a statement.

Spire Technologies and Solutions, a 6.5-year-old, Bangalore-based company that sells supply chain management, customer relationship management, and fraud intelligence software, has raised $8 million in Series A funding from an unnamed strategic investor. The deal was reportedly completed at a post-money valuation of $23 million.

XipLink, a 6.5-year-old, Montreal, Canada-based maker of wireless bandwidth optimization appliances and software modules, has raised $1.5 million from Best Funds, an investment firm in Ontario.

Zefr, a 4.5-year-old, Venice, Ca.-based software platform for brand and content management on YouTube (it was formerly known as Movieclips), has raised $30 million in funding led by Institutional Venture Partners. Previous backers, including U.S. Venture PartnersShasta Ventures,First Round Capital and Richmond Park Partners, also participated.


New Funds

A former chief of the Atlanta-based tech business incubator ATDC (for Advanced Technology Development Center) has launched a venture firm.Tech Square Ventures, founded by Blake Patton, will focus on seed-stage and early stage companies. The Atlanta Business Chronicle has more on the new fund and the venture boom that Atlanta is experiencing.

Collaborative Fund, a three-year-old, New York-based venture fund focused on collaborative-consumption models, has raised $33 million for a new fund, the firm announced in a blog post yesterday. It has also brought on as a venture partner Jay Kim, who co-founded the video game developer Nexon Corp. in 1994. Investors in Collaborative’s second fund include former Sequoia Capital general partner Tom McMurray and artist Shepard Fairey. The outfit invested its first, $10 million, fund across roughly 30 companies, notes TechCrunch, including TaskRabbit, Lyft, and Kickstarter. Collaborative Fund was founded by Craig Shapiro, who was most recently president of the media company GOOD and before that, the head of content and strategy acquisition at Virgin Mobile USA.

RRE Ventures, the 20-year-old, New York-based early-stage venture fund, is raising a sixth fund with a $250 million target, shows an SEC filing. The firm raised its fifth fund, a $230 million vehicle, in 2011. According to Fortune, RRE may increase the fund by up to $50 million if there’s enough to demand — but it’s unlikely to go much higher than that. StrictlyVC interviewed firm cofounder Jim Robinson a few months ago and he’d said then that “fund sizes go in an out of vogue, but you go bigger either to do bigger deals or hire more people. Bigger deals have never been our business model.” Meanwhile, he’d added, “When you have 10 VCs standing in a field, they’ll argue about the weather.”



Bookfresh, a 6.5-year-old, San Francisco-based online scheduling service for small business owners, has been acquired by the mobile payment company Square. Terms of the deal were not disclosed. Bookfresh had raised $500,000 from investors Baseline VenturesHatch VenturesNBC Universal, and SV Angel.

YumPrint, a three-year-old, Seattle-based recipe technology startup, has been acquired by Walmart for an undisclosed amount. The company, which never disclosed outside investors, will be folded into Walmart’s e-commerce division, WalmartLabs, reports the San Jose Mercury News.



Katie Bolin says she has joined Spark Capital as an associate in its Boston office. Bolin comes to the early-stage venture firm from Google, where she worked as an analytical lead, according to her LinkedIn bio. Before Google, Bolin spent a couple of years at the digital marketing giant Digitas.

Kris Bjornerud, previously an investment director at the L.A.-based startup accelerator Amplify, has been named executive director, while the organization’s cofounder and former executive director, Jeff Solomon, moves into an entrepreneur-in-residence role. Bjornerud nabbed his MBA at USC’s Marshall School of Business in 2012, working in finance both before and afterward. He joined Amplify as an investment director in early 2012.

Joe DearCalPERS‘ chief investment officer, has passed away, following a battle with prostate cancer. Dear, who was married with two children, was just 62. The pension released a statement last night calling Dear an “invaluable member of the CalPERS Executive Team, an incredible leader of the Investment Office and a good friend to all those who knew and worked closely with him.” Dear took over as CIO in 2009, just months before CalPERS assets hit a recession low of $164.7 billion. Under Dear, assets had grown to new heights of $283 billion, says the pension. Ted Eliopoulos, CalPERS’ senior investment officer for real estate, has been serving as acting CIO since last June; he’ll continue in the role until a search for a permanent replacement is announced.

In a move that should burnish its nerd cred, Lightspeed Venture Partners, is sponsoring the San Jose Spiders, a professional Ultimate Frisbee team that competes in the American Ultimate Disc League, through its 2014 season. “Ultimate is a sport filled with players that work in technology and startups,” said Spiders owner Andrew Zill in a statement. “For instance, Google co-founder Sergey Brin, WhatsApp co-founders Brian Acton and Jan Koum, Pebble founder Eric Migicovsky, and Quora co-founder Charlie Cheever are all Ultimate players.”



It’s your last chance to register for the 2014 Columbia Business School Private Equity & Venture Capital Conference in New York, which runs tomorrow from 8 a.m. to 6 p.m. EST. You can learn more here.

Also, a reminder that the Female Founders Conference takes place this Saturday at the Computer History Museum in Mountain View, Ca. Things kick off at 1:30 PST with a speaker line-up that includes VMware founderDiane GreeneEventbrite cofounder Julia HartzHomejoy founderAdora Cheung, and Mattermark founder Danielle Morill.



Pitchbook has taken a look at 2005 vintage U.S. funds-of-funds that raised pools of between $500 million and $1 billion to see how they’re faring. Turns out there are 13 funds that fit the bill, and according toPitchbook, their median IRR as of today is 6 percent (so, not too great compared to, say, the S&P 500, which is right now up 54 percent since early 2005). The top performers of the group: Adams Street Partnership Fund 2005 USMesirow Private Equity III, and Siguler Guff Distressed Opportunities Fund II.


Job Listings

Cisco is looking for a senior management in its corporate development group to help it execute on its always brisk M&A activity. The job is in San Jose. Apply here.


Essential Reads

Last year, Google employed 9.7 percent of Mountain View, California’s entire workforce and owned 10.7 percent of all its taxable property. That’s not as great for Mountain View as you might think, reports The Verge.

More states are moving to ban Google Glass while driving.

How much do startups pay for office space? Priceonomics takes a stab at the question.



A particular kind of genius: Remembering Harold Ramis.

This guy recreated famous movie romance scenes with his boss’s dog.

Oh, no. “Plastic surgeons are seeing increased interest in ‘facial hair transplants,’ which consist of the doctors ‘filling in a few gaps or doing a complete beard construction,’” reports Vanity Fair. “Patients are shelling out up to $7,000 for the procedure, with one New York City doctor assessing: ‘Whether you are talking about the Brooklyn hipster or the advertising executive, the look is definitely to have a bit of facial hair.’”



Retail Therapy

A very funny (and all too resonant) update on an old classic: Goodnight Nanny-Cam.

We though it was impossible, but we almost miss business cards now.


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