StrictlyVC: March 7, 2014

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Top News in the A.M.

Bitcoin trading platforms can, for now, operate freely under Japanese law, the government said today in a note that signaled a hands-off approach to the virtual currency.


A Bitcoin Bear in Silicon Valley, It’s True

Well, yesterday was crazy.

Newsweek published a story saying it had finally found the elusive original creator behind the digital currency bitcoin. People on Reddit then went nuts, arguing that the world should leave the guy alone. On Twitter, journalists then weighed in on whether Newsweek had put his life at risk, before a gaggle of them in L.A. (where the man lives) converged on his home, then chased him around town by car until he denied to reporters that he has anything to do with bitcoin.

Plenty of investors appeared to be following the action, too. At Andreessen Horowitz, for example, at least three partners who follow bitcoin tweeted of their skepticism that Newsweek had the story right, with Balaji Srinivasan observing that bitcoin connoisseurs know that “there are vastly more credible candidates” than the 64-year-old California man that Newsweek turned up.

So much of the day revolved around the story that you might think that everyone in the tech world is convinced that bitcoin will be as big as the Internet itself.

You would be wrong, though.

While venture capitalists often seem in league on Next Big Things, Josh Stein, a managing director at the storied venture firm DFJ, says that when it comes to bitcoin, he isn’t convinced of anything — even calling himself a “bitcoin bear” in an interview early yesterday (that I’ll run more of next week).

Stein is a savvy investor who is known, among other things, for writing the first check to the online data storage company Box. It isn’t surprising that he doesn’t like advertising his position on bitcoin, which he says is personal and not a reflection of the firm’s interest. (He says others at DFJ are “looking at it.”)

As he explains it, “I’m at a huge disadvantage to the bulls. Bulls have huge incentives to make elaborate arguments for why bitcoin is going to work. But I’m not going to short it, so I have zero upside [in discussing at length why it may fail].”

Still, given that the “bulls” have had the floor for much of 2014 (Marc Andreessen in particular has been actively promoting the currency since the company placed its first big bet on a bitcoin company, investing $25 million in Coinbase in mid-December), I pushed Stein for more.

Noting that if Andreessen is right, he’ll “make a billion dollars,” and that if Stein is right, “I don’t make any money — so who do you think will spend more time refining their argument?” – he continued.

“Look, why does everyone think bitcoin is going to work? Well, you say, it [offers] a lower transaction cost between existing systems. But anyone can [enjoy low to no costs] with ACH,” for Automated Clearing House, a widely used electronic network that allows financial institutions to process transactions in batches, transactions that are often free for customers.

“People also say bitcoin is a hedge against inflation. And why? Because they say it’s like gold. But gold actually has value. People want gold, aside from its value, and that’s been true for thousands of years. Bitcoin has no intrinsic value. It’s electrons; it doesn’t exist.”

Here, Stein stopped talking, noting that publicly stating his position on bitcoin would only serve to “cue the trolls.”

I hope he’s mistaken. Forgive the pun, but there are two sides to every coin, and skepticism is a good thing; it strengthens the development of new technologies. Silicon Valley is often an echosphere. In just a few months, the tech cognoscenti have seemingly anointed bitcoin as the currency of the future. It’s refreshing to hear a VC challenge this new conventional wisdom and express a little doubt once in a while.

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New Fundings

DigitalOcean, a 2.5-year-old, New York-based cloud hosting company, has raised a $37.2 million Series A round at a $153 valuation led byAndreessen Horowitz. Earlier investors IA Ventures and CrunchFund also participated, says TechCrunch. The company had raised roughly $40 million to date.

Emotient, a two-year-old, San Diego-based developer of automated facial expression recognition and analysis technologies, has raised $6 million in Series B funding led by Handbag, a new venture capital firm founded by former Crosspoint Venture Partners general partner Seth Neiman. Earlier investors Intel Capital also participated in the round, which brings Emotient’s total funding to $8 million.

General Assembly, a three-year-old, New York-based digital trade school, has closed $35 million in Series C funding led by Institutional Venture Partners. Other participants in the round included GSV CapitalRethink Education and Western Technology InvestmentThe New York Times reports that since opening its doors, the companyhas grown to more than 100,000 students, about 6,000 of whom have finished from coursework taught at eight locations.

Hello Curry, an Hyderabad, India-based fast-food chain serving Indian cuisine, has raised roughly $500,000 from Sri Capital, the seed-stage venture capital fund of Indian entrepreneur Sashi Reddi. “Hello Curry has the potential to become the McDonald’s and Dominos Pizza of Indian food,” Reddi told the outlet Live Mint. “It has the potential to change the way we think of Indian food.”

iRxReminder, a 4.5-year-old, Akron, Oh.-based patient management medical app developer, has raised $250,000 commitment in seed funding from an undisclosed Washington, D.C.-based angel investment group. The company has raised $458,000 to date.

Layer3 TV, a two-year-old, Boston-based still-stealth developer of technology for TV service providers, has raised $7.5 million, according to an SEC filing that shows the company is targeting roughly $25 million. Jeff Binder, a partner with the Groton, Ma.-based investment firm Genovation Capital, is also Layer3’s CEO, according to his LinkedIn profile.

Livestage, a two-year-old, New York-based still-in-beta digital venue for live music that will stream concerts live and on-demand, has raised $1.6 million, according to an SEC filing that shows the startup is targeting a $3 million fundraise. The company had previously raised $55,000 in seed funding.

Machinima, the 14-year-old, L.A.-based YouTube network for gamers, is raising $18 million in new funding led by movie studio Warner Bros., sources tell Re/code. Some of the company’s earlier investors, includingGoogleRedpoint Ventures and MK Capital, are reportedly planning to participate, too. Ahead of the round’s completion, Machinima will also lay off 42 employees as part of a restructuring of its sales organization.

Optio Labs, a two-year-old, Nashville, Tn.-based developer of security and productivity technologies for mobile and embedded systems, has raised $10 million in funding from its parent company, Allied Minds, as well as several private investors.

Polarion Software, an 8.5-year-old, San Francisco-based application lifecycle company that tries cutting the time-to-market of its customers, has raised $10 million in Series A funding from Siemens Venture Capital.

PrestaShop, a 6.5-year-old, Miami, Fla.-based company whose open source e-commerce software is used by small business owners looking to build and manage their online stores (it then sells them customized services), has raised $9.3 million in Series B funding from XAnge Private EquitySeventure Partners and Serena Capital.

Quipper, a three-year-old, London-based maker of quiz-based e-learning apps, has received $5.8 million in funding from AtomicoBenesse Holdings and Globis Capital Partners. The company has raised roughly $10 million altogether.

Redlen Technologies, a 15-year-old, British Columbia-based maker of high-resolution Cadmium Zinc Telluride (CZT) semiconductor radiation detectors, has raised $5.5 million in financing led by Pangaea Ventures.In-Q-Tel also participated in the round, which brings the company’s total funding to $13.3 million, according to Crunchbase.

Sailogy, a two-year-old, Chiasso, Switzerland-based marketplace that pairs those wanting to charter a yacht with companies that own them, has just closed a $1.15 million Series A funding round. The financing was led by the Swiss Government Foundation AGIRE and Fabio Cannavale, exec chairman of online travel group BravoFly Rumbo Group. The company previously raised $400,000 in seed funding.

SolarBridge Technologies, a 10-year-old, Austin, Tx.-based company that develops microinverters designed to increase solar panel efficiency, has $42 million in funding. Constellation Technology Ventures led the round, with participation from Shea VenturesRho Ventures and Prelude Ventures.

Trusper, a 2.5-year-old, San Jose, Ca.-based mobile app and social network that encourages users to share tips, has raised $6.17 million led by DCM and numerous individual investors, including Charles Schwab.

TVSmiles, a 15-month-old, Berlin-based mobile app that encourages people to watch TV ads in exchange for redeemable virtual currency, has raised $7 million in Series A funding led by earlier investor Ventech. Other investors to join the round included e.venturesGerman Startups Group;Brandenburg Ventures; and Magix.

ZS Pharma, a 5.5-year-old, Coppell, Tx.-based specialty pharmaceutical company focused on treating kidney, cardiovascular and liver disorders, has raised $55 million in Series D financing led by Novo A/S. Other investors in the round included RA CapitalAdage CapitalSofinnova VenturesAlta PartnersDevon Park Bioventures3×5 Special Opportunity FundSalem Partners and RiverVest.


New Funds

Benchmark Capital has raised $34 million for its latest Founders Funds, according to filings with the Securities and Exchange Commission. The filings show Benchmark raised $22.8 million for Benchmark Founders’ Fund VIII and $11.3 million for Benchmark Founders’ Fund VIII-B. (H/T: PE Hub)


IPOs, the 16-year-old, Mountain View, Ca.-based digital promotions company, raised $168 million in an IPO last night, selling 10.5 million shares — which is 500,000 more than originally offered — at $16 a share up from their original range of $12 to $14 a share. The shares are set to begin trading today on the NYSE. Its biggest shareholder is Passport Capital, which owns a 19 percent stake that was about $220 million as of last night.

Spotify, the 7.5-year-old, Stockholm-based music-streaming company, is speaking with banks about raising a credit facility, a type of business loan from banks that could signal a not-too-distant U.S. IPO, sources tell Bloomberg.



The Echo Nest, an 8.5-year-old, Somerville, Ma.-based “music intelligence company,” has been acquired by Spotify for $100 million, 90 percent of it in Spotify equity, reports TechCrunch. Echo Nest had raised roughly $25 million from investors over the years, including Commonwealth Capital Ventures, Matrix Partners, and Norwest Venture Partners.



Disney’s video game and Internet division laid off roughly 700 employees, or 26 percent of its staff, yesterday. “These are large-scale changes as we focus not just on getting to profitability but sustained profitability and scalability,” James Pitaro, the president of Disney Interactive, said in an interview with the New York Times. The layoffs come as Disney melds its mobile games business with its comparatively poorly performing social games business. The Times also reports that Disney is “significantly” scaling back its in-house development of games of all types.

John LeFevre, who authored the Twitter account GSElevator, has lost a book deal with Simon & Schuster roughly a week after it was revealed by Dealbook that Lefevre has never been employed by Goldman Sachs and is instead a former bond trader living in Texas. “In light of information that has recently come to our attention since acquiring John Lefevre’s Straight to Hell, Touchstone has decided to cancel its publication of this work,” Simon & Schuster said in a statement. “Guess elevators go up and down,”tweeted Goldman Sachs. Said LeFevre, through the GSElevator account: “I want to thank Simon & Schuster for supporting me…. until now…. The book Straight To Hell is still coming…..”

You kind of already knew this but now it’s official: serial entrepreneur Sean Parker is no longer making new investments on behalf of Founders Fundreports Fortune. The firm announced it had raised $1 billion for its sixth fund on Wednesday.

Former Apple CEO John Sculley is reportedly planning to launch a new smartphone brand in India that is backed by Inflexion Point, a Singapore-based supply-chain company cofounded by Sculley. The new company is expected to launch a series of smartphones as early as next month.

At the end of March, Sony Computer Entertainment America president and CEO Jack Tretton will be stepping down from his position after nearly two decades, after he and the company were unable to “renew their contractual relationship,” reports The Verge.



Northeastern University is hosting its second Collegiate Alternative Investments Summit, a student-run conference at its Boston campus on March 21st and 22nd. You can learn more here.


Job Listings

Yelp is looking for a senior manager of corporate development in San Francisco.



When it comes to new fundings, New York City is on track to see its best first quarter in history, says TechCrunch, with 98 companies raising nearly $1.3 billion to date. More here.


Essential Reads

Surveillance by algorithm.

Yahoo is shutting down innovative apps and services right and left as it snaps up startups—to no clear purpose, writes ReadWrite.



Very funny meme alert.

Possibly the most maddening teaser of all time.

Five ideas for future New York Times hipster trend pieces.

Twitter’s advertising rate keeps falling. The average cost to advertise on Twitter’s website and mobile apps fell 18% in the last three months of 2013.


Retail Therapy

This Chinese company will print a three-dimension, life-size copy of you for $28,000. Perfect for pitch meetings, LP meetings, and video-conferenced partner meetings with far-flung colleagues. (Why feign interest when you can literally be somewhere else?)


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