StrictlyVC: May 28, 2014

Is it Friday yet? (Kidding!) Hope you have a great Wednesday, everyone.


Top News in the A.M.

Alibaba just made a huge investment in an overseas postal agency.

Federal Trade Communication report released yesterday is providing an unusual window into the system of commercial surveillance.


Cybersecurity VC David Cowan on Hackers, Valuations, and What’s Hot Now

When the news emerged last week that, a cloud service that defends data centers and applications from cyber attacks, was selling to publicly traded F5 Networks, some were surprised it was being swept up so soon. Its founder, Barrett Lyon, had started two other cyber security companies; it had been incubated at Bessemer Venture Partners just last year. Could it be that the market – spending for which is expected to hit $77 billion this year – is peaking right now?

Longtime cybersecurity investor David Cowan, a general partner at Bessemer’s Palo Alto, Ca., insists that’s far from the case. Rather, in a call yesterday, he said that’s business is “an expensive one to build. There’s a reason there aren’t a lot of companies out there that provide this kind of business. I would have been happy to keep going, but I can understand why the team found it attractive to take a strategic multiple when it was offered.”

Here’s some more from that conversation yesterday, edited for length:

A lot of businesses complain that it costs more to safeguard their systems than deal with a breach. What are you seeing?

I wouldn’t say that companies would rather spend to remedy the breach rather than prevent it, but [there’s now an] awareness that breaches are inevitable, so part of any cyber plan has to be preparations for dealing with a breach. There are startups out there today that all they do is sell breach-response services to help companies prepare for that inevitability, though those aren’t particularly interesting to me because [they] don’t use a lot of technology to do it.

As we connect more things to the Internet, more things become vulnerable to attack, including heart monitors and other medical devices. Is that an area that interests Bessemer? Do you have a vertical approach?

We generally don’t have a vertical approach, but having said that, I do think the medical device vertical is pretty interesting. There’s a vast sea of medical devices out there and hospitals that are running on old Windows machines, many of which are no longer even supported by Microsoft. And those connected machines are likely swamps for malware. And nobody has any visibility into them. Companies that are going after I that . . . it’s an interesting vertical.

What’s one thing you’re seeing in cybersecurity right now that wasn’t possible until recently?

I invested in this company, Internet Identity, because they enable companies to do what no one has done before, which is to collaborate on cyber defense.

There’s a lot of collusion by attackers in the form of exchanges, [including] people buying and selling [personally identifiable information]. As a result, it’s easy for someone to ramp up quickly as a cyberattacker. But until 18 months ago, no one ever talked openly about security infrastructure outside of their company or government agency. It was viewed as terribly private and intimate.

Since then, there’s been a really a big shift in people’s understanding that the private and the public sector all need to work together to share cyberintelligence, so that if an attacker is identified in one place, all doors [will be] closed [to that person] in buildings everywhere. That requires a lot of technology . . .and that’s what Internet Identity has developed and built. It now supports 30 federal agencies and at least three of the world’s six most valuable technology companies, and everyone who joins the exchange gets the benefit of all that intelligence in real time on their own network. It’s kind of like the social network of cyber; you share and you get back [a lot], and once someone joins the exchange, he or she naturally wants to invites lots of friends into the exchange as well.

You say’s sale wasn’t related to valuations. What’s happening out there, though?

There’s been a huge increase in the value and multiples for companies selling cloud services to enterprises [in recent years]. With a huge pullback this year in the public market, I think it’s fair to expect that the private markets will have to respond accordingly . . .generally, when the [public] market goes up, it’s a matter of weeks before the private market does the same. When it goes down, it’s a matter of months [before private markets follow suit].


New Fundings

Acquia, a seven-year-old, Burlington, Ma.-based startup whose software enables companies to build and maintain their Drupal-based websites, has raised $50 million in new funding, led by New Enterprise AssociatesSplit Rock Partners and existing investors North Bridge Venture PartnersSigma PartnersInvestor Growth Capital, and Tenaya Capital also participated in the round, which brings the company’s total funding to $118.6 million.

Aver Informatics, a four-year-old, Green Bay, Wi.-based company whose data management tools help hospitals and other health care providers simplify the process of billing insurance companies, has raised $8.5 million from Drive Capital and GE Ventures. The company has raised $11 million to date, shows Crunchbase.

DemystData, a four-year-old, New York-based software company that sells predictive analytics to financial services clients, has raised $5 million in Series A funding from a string of investors, including Arbor VenturesSingTel Innov8Notion CapitalP2P Equity Partners and Wonga founder Errol Damelin.

Distil Networks, a three-year-old, Arlington, Va.-based com pay whose cloud-based service protects from scraping and malicious bots, has raised $10 million in Series A funding led by Foundry Group and Bullet Time Ventures. Other participants in the round included ff Venture CapitalIDEA Fund Partners and Militello Capital. The company has raised $14 million to date.

Ecwid, a 5.5-year-old, Ulyanovsk, Russia-based e-commerce platform that helps small businesses create online stores, has raised $5 million in Series B funding led by iTech Capital, with participation from earlier investor Runa Capital.

Fundrise, a two-year-old, Washington, D.C.-based company that helps any resident (and not just accredited investors) invest in properties in their local market, has raised more than $31 million in its first round of funding led by Renren, the China-based social networking company. Other investors in the round include Collaborative Fund; L.A. developer Rising Realty Partners; the Ackman-Ziff Real Estate Group; executives of Silverstein Properties; and Richard Boyle, former chief of Loopnet, an online commercial real estate listing service.

Fyusion, a year-old, San Francisco-based stealth startup developing advanced 3D image processing technologies, has raised $3.35 million in funding led by New Enterprise Associates and UTEC, with participation from angel investors including Sun Microsystems co-founder Andreas Bechtolsheim and James Joaquin, the former CEO of Ofoto & Xoom.

Infinit, a two-year-old, Paris-based company whose app uses peer-to-peer technology to boost unlimited-size file sharing between two users, has raised $1.8 million in funding from Alven Capital and 360 Capital Partners. The company has raised $2.2 million altogether.

Jobaline, a 1.5-year-old, Kirkland, Wa.-based bilingual, digital marketplace for hourly jobs, has raised $7 million in Series B funding led by Trilogy Equity PartnersFounders Co-opMadrona Venture Group and angel investors also participated in the round, which brings Jobaline’s total funding to roughly $11.3 million.

Lua Technologies, a three-year-old, New York-based mobile workplace collaboration software company, has raised a $7.5 million Series A funding round led by Abundance Partners. Individual investors Strauss Zelnick and Aaron Stone also participated in the round. The company has raised $10 million to date, shows Crunchbase.

Need, a 15-month-old, Dallas, Tex.-based online magazine and retailer for men “who hate to shop,” says TechCrunch, has raised $500,000 in seed funding from individual investors. The company has raised $615,000 altogether, shows Crunchbase.

Spark Therapeutics, a nine-month-old, Philadelphia, Pa.-based gene therapy company focused on helping people with rare, degenerative eye diseases, has raised $72.8 million in Series B funding led by Sofinnova VenturesBrookside CapitalDeerfieldRock Springs CapitalT. Rowe PriceWellington Management, and two undisclosed dedicated health-care funds. The company’s total funding to date is $122.8 million. (The Children’s Hospital of Philadelphia, which spun out Spark last fall, committed $50 million to the venture at the time.)

SunFunder, a two-year-old, San Francisco-based crowdfunding platform for financing solar energy projects in rural villages, has raised a Series A round of undisclosed size led personally by investor Vinod Khosal, though as VentureWire notes, it recently filed paperwork showing it had raised $2.2 million of a $2.7 million round.

Thatgamecompany, an eight-year-old, L.A.-based video game development studio that has created three games for the Playstation Network, including an award-winning game called “Journey,” has raised $7 million in funding led by the China-based private equity firm Capital Today. Other participants in the round, which brings the company’s total funding to $12.5 million, include Benchmark CapitalKleiner Perkins Caufield & Byers, and half a dozen other investors.

XCOR Aerospace, a 15-year-old, Mojave, Ca.-based maker of rocket-powered vehicles, propulsion systems and more, has raised $14.2 million in Series B funding led by Space Expedition Corporation of the Netherlands. The round also included many existing and new investors including board member Esther Dyson, Chicago Cubs co-owner Pete Ricketts, and numerous Silicon Valley entrepreneurs and early-stage investors.


New Funds

San Francisco firm Mosaik Partners has held a $15 million close on its inaugural fund, reports VentureSource. Founding partner Miles Kilburn served as an EVP at Concord EFS, a payroll-processing company that merged with First Data in 2004. The firm’s other partner, Howard Mergelkamp, was a founding member of corporate ventures and advisory services at investment firm BlackRock. The firm’s LPs reportedly include investors from the payments and financial industries.



The IPO market is working as it should – for now, at least, argues PandoDaily.



AngioScore, an 11-year-old, Fremont, Ca.-based company that makes scoring balloon catheters to treat cardiovascular and peripheral artery diseases, is being acquired for $230 million in cash and stock by medical device maker Spectranetics Corp. AngioScore had raised at least $30 million from investors, including Telegraph Hill PartnersPsilos Group,QuestMark PartnersPelion Venture PartnersCalifornia Technology Ventures, and Innomed Ventures. In 2011, the company also raised $11 million from Saints Capital in San Francisco (though StrictlyVC doesn’t know if those were primary or secondary shares).

Asia Pacific Telecom, the Taiwanese mobile telecom operator, is selling itself to Apple’s supplier Foxconn Technology Group for a reported $390 million; the latter reportedly wants to expand its presence in Taiwan’s fledgling 4G telecoms market. Reuters has more here.

AtheroMed, a 7.5-year-old, Menlo Park, Ca.-based company that develops treatments for peripheral arterial disease, including an FDA-approved atherectomy catheter system, is being acquired for $115 million by Volcano Corp., a publicly traded company best known for its imaging technology. AtheroMed had raised at least $37.7 million from investors, shows Crunchbase, including US Venture PartnersCanaan PartnersThe Vertical Group, and Kaiser Permanente Ventures.

Graphicly, a 4.5-year-old, Palo Alto, Ca.-based company whose online platform automates the self-publishing process by helping authors and publishers distribute and promote their digital content across various e-book marketplaces, is being acquired by its peer, Blurb, an indie book and magazine publishing platform. The move, says TechCrunch, is an acqui-hire. Graphicly had raised $10 million from investors, includingVenture51500 StartupsDundee Venture CapitalMercury Fund,Ecosystem VenturesTechstars, and Northstar Ventures.



Investor Marc Andreessen talks with Fast Company about his love of Twitter (among other things). Says Andreessen: “I’m an introvert when it comes to face-to-face conversations. But something that lets you talk to 83,000 people while you’re wearing your boxer shorts and drinking a glass of Scotch? What could be better?”

Venture capitalist Brad Feld thinks VCs should recycle their management fees. He explains why here. founder Michael Fertik goes to astonishing lengths to burnish his online image in this mockumentary, which has some very funny moments. (Mike Judge, take note.)

Paul Hsiao has joined Canvas Venture Fund, the early-stage venture capital firm that spun out of Morgenthaler Ventures last year, as a general partner and founding managing member. Hsiao joins the firm from New Enterprise Associates, where he spent the last decade, focusing mostly on enterprise software and marketplace companies.


Job Listings

ORIX Corporate Capital is looking for someone at the principal level to lead its venture lending practice in Washington, D.C. The 13-year-old company provides senior and subordinated loans to mid-and-late stage venture-backed companies.



All kinds of interesting news is emerging from this week’s Re/code conference, and it’s barely gotten underway. (If you aren’t there, you can stay up to date on Twitter via the hashtag #codecon.)



CB Insights looks at which venture capital firms have the strongest mobile portfolio based on ITunes App Store rankings. Check out its findings here.


Essential Reads

Google has finally built its own car from scratch. And it looks like a gondola with wheels.



Is Thomas Piketty’s math wrong?

Manhattan’s Billionaires’ Row is spreading south.

Team building for the self-employed!


Retail Therapy

Thirty-seven things to do this summer in the Bay Area. (A great list worth bookmarking. Written for men, but notwithstanding some questionable advice about summer shoes and haircuts, useful for everyone.)

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