StrictlyVC: April 4, 2014

Happy Friday!


Top News in the A.M.

Despite the torrid pace of IPOs, some signs of investor wariness are beginning to appear, reports Dealbook. Renaissance Capital’s IPO exchange-traded fund, which tracks the stock performance of recent offerings, has lagged behind the Standard & Poor’s 500-stock index for most of the last month, in part because of poor performers.


Orphaned Entrepreneurs

When the news broke that Jonathan Teo and Justin Caldbeck were leaving their respective venture firms to create a new firm called Binary, their peers cheered them on, maybe wondering if they might also spin off on their own someday. After all, Teo and Caldbeck are just the latest in a growing string of investors — Tim Connors, Aileen Lee and Kent Goldman among them — to fly the coop.

For Siqi Chen, though, the development presented worrying questions. Chen is a serial entrepreneur who sold his company Serious Games to Zynga in 2010 and today runs Heyday, a two-year-old startup that puts out a personal journal iPhone app. To date, Heyday has attracted $5.5 million from top funds, among them General Catalyst Partners. The concern for Chen was that Teo — Heyday’s board member — was now leaving General Catalyst. Who would be Heyday’s advocate at the firm?

Chen soon learned he needn’t fret: Teo could remain on his board, General Catalyst told him. But Chen knows that plenty of entrepreneurs lose cherished board members in such transitions and that for them, a venture industry in flux isn’t always good news. We chatted about these orphaned entrepreneurs yesterday afternoon. Our conversation has been edited for length.

How did you meet Jonathan Teo?

I met him through an introduction. [After Serious Games was acquired by Zynga], I worked with Andy Tian, who was GM of Zynga’s China business, for about a year. After I left, Jonathan asked Andy to introduce him to interesting ex-Zynga people and Andy gave him my name. He tried our demo in 2012 and continued to use it and give us really useful feedback, and he finally made us an offer we couldn’t refuse.

So he was one of your earliest champions.

Definitely. A firm like Andreessen Horowitz can double down on traction. Then there are VCs who can smell something at the most nascent stages, before they gain traction. Jonathan has a really intuitive consumer nose. He sourced Twitter and Instagram [while a principal earlier in his career] at Benchmark. He also sourced Snapchat [for General Catalyst] and made a personal investment in the company. If you look at his track record, he’s made very few investments, and they’ve been spot on. He identifies opportunities early and [pursues them] aggressively, which is increasingly rare in institutional VC.

Has he been as active on your board as he was before leaving General Catalyst?

Yes. He’s still affiliated with General Catalyst in the role of venture advisor … and though he’s been gone for a few months now, and he still comes to every board meeting and is just as involved as before.

What happens if they eventually transition him away from the company? It is General Catalyst’s board seat.

We’ve received reassurances on both sides, so for the foreseeable future, he’ll be on our board. But it’s never easy; I can’t imagine any entrepreneur saying [that having a board member replaced] is a good thing. When entrepreneurs pitch VCs, part of [the allure] is the brand. But a large part of your decision is around the partner you’ll be working with. If that person leaves, it’s a big blow. I think any employee who has had a manager be fired or leave knows that feeling, and it’s an even bigger issue if you’re working with investors. You’re losing your biggest fan.

Do you think there can be repercussions beyond personal disappointment?

All things being equal, I think it can be a little harder for a venture firm to follow on [and invest more in a company whose lead investor has left], which can create signaling issues. It all depends on a company’s traction.

What kind of courtesy would you expect a venture firm to give an entrepreneur who will be losing his or her board member? How much notice is fair, and should the entrepreneur have a say in who their new director will be?

I’d expect at least two quarters of notice. [A change like that] could affect your fundraising plans or your timing.

As for other expectations, I’m not sure there are any norms or expectations that a founder can interview the rest of the partners. But I’d want a say in it. I’d want it to be a conversation, at a minimum.


New Fundings

AirXpanders, a 7.5-year-old, Palo Alto, Ca.-based company focused on tissue expansion technologies (like saline-filled implants) for use after reconstructive surgeries, has raised a $7 million credit facility from GE Capital. The company has raised $45 million in venture funding to date, including from Vivo VenturesGBS Venture PartnersProlog VenturesHeron Capital and Shalon Ventures.

Artsy, a five-year-old, New York-based company puts high-quality images and information about art online in one website, has raised raised $18.5 million in Series B funding led by Thrive Capitalreports the WSJ. Other participants in the round included Peter ThielWendi Deng, art dealerLarry Gagosian, and Earthlink founder Sky Dayton. The company has raised around $26 million to date, shows Crunchbase.

Bloglovin, a 5.5-year-old, New York-based blog aggregator, has raised $7 million in Series A financing led by the European investor NorthzoneBetaworksLerer VenturesWhite Star Capital, and Bassett Investment Group also participated in the round, which brings the company’s total funding to $8 million.

Boundary, a three-year-old, Mountain View, Ca.-based cloud service that helps companies understand their applications so they can avoid downtime, has raised $22 million in Series C funding led by Adams Street Partners. Other participants in the round included new investor Triangle Peak Partners and earlier investors Lightspeed Venture Partners and Scale Venture Partners. Boundary has raised $41 million altogether so far.

Ceros, a 6.5-year-old, New York- and San Francisco-based SaaS company that provides brands with layout and animation tools and real-time analytics so they can create attractive interactive content, has raised $6.4 million in new funding from Sigma PrimeStarvest Partners, and Greycroft Partners. Fortune has much more here.

Clari, a two-year-old, Mountain View, Ca.-based customer relationship management software company, has raised $6 million in funding from Sequoia Capital. TechCrunch has much more on the company here.

GemShare, a year-old, San Francisco-based service recommendation application, has raised $1.2 million in seed funding from Greylock Partners and Second Avenue Partners. Numerous individual investors also joined the round, including Rich BartonJennifer FonstadLloyd FrinkEllen LevySonja PerkinsWilliam QuigleyMika Salmi.

Health Digital Systems SAPI de CV, an 11-year-old, Mexico-based electronic health records company, has received a $25 million investment from Northgate Capital.

Hike, a two-year-old, New Delhi, India-based cross-platform instant messaging app, has raised $14 million from BSB, a joint venture between Bharti and SoftBank Corp. The company has raised $21 million altogether.

Holaira, a 5.5-year-old, Plymouth, Mn.-based medical device company focused on treating obstructive lung diseases, has raised $42 million in Series D funding led by Vertex Venture Holdings. Other participants in the round included Windham Venture Partners, two strategic investors, and all of Holaira’s existing venture investors: Advanced Technology VenturesMorgenthaler VenturesSplit Rock Partners, and Versant Ventures. Holaira has raised roughly $70 million in funding altogether.

Jiuxian, a five-year-old, Beijing-based company that sells wine online, has raised RMB425 million ($68.5 million) in two rounds of financing, according to Chinese Money Network. Investors of the two rounds include earlier investors Rich Land CapitalOriental Fortune Capital and Sequoia Capital. Jiuxian previously received $20 million in Series A funding from a Guangzhou-based alcohol company, Yuekeung Winery, in April 2011. It also received “tens of millions” of dollars in Series B funding from Oriental Fortune Capital and Sequoia in late November 2011. In 2012, Rich Land Capital led an undisclosed Series C found for the company.

Levels Beyond, a 6.5-year-old, Denver, Co.-based company behind a content inventory platform, has added $2.5 million to its Series A funding led by TCV Capital, bringing its total to $7 million.

Otologic Pharmaceutics, a five-year-old, Oklahoma City, Ok.-based biopharmaceutical company focused on treating hearing disorders, has raised $4.1 million in Series A funding led by Accele Venture Partnersand i2E.

Plan B Funding, a 3.5-year-old, Bristol, England-based company that sells digital marketing services to banks and other financial institutions, has raised roughly $500,000 in seed funding from The North West Fund for Digital & Creative, managed by AXM Venture Capital.

Social Finance, a three-year-old, San Francisco-based peer-to-peer lending company, has raised $80 million in Series C financing led by Discovery Capital Management. Other participants in the round included Peter Thiel and Wicklow Capital. Silicon Valley Business Journal has much more on the company here.

Tango Card, a four-year-old, Seattle-based customer and employee loyalty rewards platform, has raised $3.3 million in new funding. Allegro Venture PartnersFloodgateSwan & Legend Venture Partners,Western Technology Investment and Innovation Endeavors participated in the round. The company has raised $9.7 million altogether.

TrackIf, a year-old, Minneapolis, Mn.-based technology that helps users create their own personalized web alerts based on their interests, has closed $3 million in debt funding. The investors included Chicago VenturesWisconsin Investment PartnersNew Capital Fund and Confluence Capital.


New Funds

Quadrivio, a 14-year-old, Milan, Italy based venture capital firm, has launched a €100m ($166 million) venture capital fund, according to reports. The fund, Fondo TT Venture Due, will invest in tech startups focusing on life sciences, med tech, new materials and clean tech. More here.



It’s a big day for tech IPOs. GrubHub, the 10-year-old, Chicago-based online platform for restaurant pick-up and delivery orders, hits the market today. So does IMS Health Holdings, a five-year-old, Danbury, Ct.-based healthcare information company; OPower, the 6.5-year-old, Arlington, Va. energy software company; and Five9, a 13-year-old, San Ramon, Ca. maker of cloud software for contact centers.



Datamonk, a three-year-old, Berlin-based mobile targeting and analytics platform, has been acquired by the Berlin-based incubator HitFox Group. (HitFox helps build game companies.) Terms of the deal weren’t disclosed.

EventSneaker, a 10-month-old, London-based company whose technology connects the ticketing, social, and email platforms used by event organizers to provide an integrated experience, has been acquired by the event publishing firm Evvnt for an undisclosed amount. EventSneaker had raised a small amount of funding from Searchcamp, a 12-week accelerator program in England.

Novauris Technologies, a 14-year-old, U.K.-based automatic speech recognition technology company, was quietly acquired by Apple some time last year for an undisclosed amount, TechCrunch reports.



Steve Case, the former chairman of America Online and cofounder of the investment firm Revolution, made an abrupt decision yesterday to invest $100,000 in each of 10 startups he’d seen describe their businesses at an event sponsored by Google on Wednesday in Mountain View, Ca. “I was so inspired by the consistent quality of each of the pitches that I made an on-the-spot decision to support each company,” Case said in a statement.

Brendan Eich resigned yesterday from his newly appointed post as CEO of the for-profit Mozilla and the nonprofit foundation that owns it. Eich had been pressured to step down from the moment he was given the job, including because of his support of California’s anti-gay marriage law, Proposition 8. Re/code has more here.

Josh Felser, a renowned Bay Area entrepreneur and investor, launched the newest of his projects yesterday: a nonprofit called #climate that connects online “influencers” with nonprofits whose profiles they can help raise. The invite-only app is already being used by Twitter CEO Dick Costolo, former Vice President Al Gore, and actor Mark Ruffalo, a clean energy advocate who used it to publish tweets yesterday about the Vote Solar Initiative, among other causes. “Not only does it drive traffic to the nonprofits, but it also injects climate change into a mass-market conversation,” Felser told Re/code. “We’re taking the message to where people already are, on Twitter and Facebook.”

Sujay Jaswa, a VP at Dropbox who joined the company is 2010, has been promoted to chief financial officer of the online-stage startup, ending a months-long search process.The WSJ has more here.

Elon Musk and other Sequoia Capital-backed founders talk about their first checks from the venture firm in this new video clip (that’s worth the five minutes it takes to watch).

Mark Spiering, long the product head of U.S. online photo-hosting site Flickr, has left for EyeEm Mobile of Berlin, which operates a free photo-sharing app.


Job Listings

Glocap, the boutique search firm, is looking for a director for its venture capital and growth equity practice. The role is the organization’s most senior position after the CEO.



Deal activity in the payments tech space hit a five-year high last year, as traditional and corporate VCs plugged $1.2 billion into 193 deals. CB Insights breaks down the deal activity here.

Fully 90 percent of companies that tapped the public markets for the first time last year used confidential registration, reports American Lawyer.


Essential Reads

More than 330 million new shares of Google hit the U.S. equity market yesterday, completing a two-year process through which Sergey Brin and Larry Page are cementing control of the world’s third-biggest company.

Facebook‘s Page reach is decreasing. TechCrunch looks at why.



The 10 least expensive properties for sale in San Francisco’s tony Pacific Heights neighborhood.

Don’t help your kids with their homework, and other insights from a ground-breaking study of how parents impact children’s academic achievement.

You and Your F__king Coffee,” co-starring “Silicon Valley” creator Mike Judge.

Tiny crocheted animal figures.


Retail Therapy

Good luck with this.


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