StrictlyVC: August 12, 2014

Good morning, everyone. Semil Shah here filling in for Connie until next Monday. If you’d like to chat about today’s column or anything else, you can always find me on Twitter at @semil.


Top News in the A.M.

New York Senator Chuck Schumer wants the FTC to investigate the data gathering and sharing practices of makers of personal fitness devices and applications. Without federal regulations restricting the companies from reselling the health data to third parties, users could be in for a “privacy nightmare,” says Schumer.


Nakul Mandan on His New Role at Lightspeed, and What He Was Recruited to Do

Nakul Mandan has spent most of the last five years as a VP at Battery Ventures. Earlier this summer, though, he quietly joined Lightspeed Venture Partners, where he’s focusing on early- and growth-stage software-as-a-service investments as a “principal partner.” We asked him about some of the considerations involved in switching from one powerful venture firm to another, and what he was recruited to do.

You recently moved from Battery Ventures to Lightspeed. What’s it like to switch firms on Sand Hill?

In a way, it’s more of the same in terms of the daily routine – figure out thesis areas you like, invest in teams attacking those areas, and then support them in every way possible. But each firm has its own DNA in terms of how they think of risk-reward, the nature of risks they’re comfortable taking, and how the investment team works together pre- and post-investment. Understanding that DNA and finding alignment is key.

The other aspect of the switch is to ensure a smooth transition for the entrepreneurs you’re working with, within the portfolio and outside. This is extremely important. You want to make sure that there is somebody to take over an ongoing relationship — board role, or otherwise — and represent the firm in the same way as you would have.

You were recruited to Lightspeed to help build the firm’s SaaS practice. Is SaaS still hot after the public SaaS companies were hurt in public markets in March? What has the industry learned from that slight correction?

I’m not sure I’d make a good investor if I invested in early-stage startups based on the current public market reaction to a particular category. Just a year or so ago, consumer was supposed to be out of vogue because the long-awaited Facebook IPO didn’t do well initially. But now Facebook, Twitter, Uber, and Airbnb are all kicking ass and so consumer is back.

I’m sure SaaS, or for that matter any other category, will see similar ups and downs. But if the business is fundamentally creating value for its customers, and customers are willing to pay a price for that value that eventually leads to strong profitability, then the business can see through those ups and downs in valuations.

What do you see as the key differences between web-based versus mobile-only SaaS opportunities today?

Similar to the consumer world, in mobile, less is more. For mobile apps to be useable, they need to be extremely easy to navigate and focused on a couple of core features that they’re great for. Sometimes that requires trimming the functionality down. For instance, collaboration software on mobile will look closer to Whatsapp than Facebook. For companies trying to redefine existing workflows like CRM or sales productivity or collaboration on mobile, that’s something to keep in mind.

The challenge is how do you deliver enough value while keeping it simple to use on mobile. To that extent, I think there’s more opportunity for mobile-first rather than mobile-only SaaS startups. A lot of enterprise use cases can benefit from the ease of use of a mobile app focused on one or two core features but also need a more comprehensive workflow that is better delivered via a web app to support the end-to-end needs of the business user.

We always hear about seed deals for consumer startups. How do you see the seed ecosystem working for enterprise-focused founders?

I think it’s a pretty robust ecosystem. There are lots of good angels and seed funds that are focused on enterprise startups. There’s also a lot of good talent coming out of all the recently acquired enterprise companies, like Eloqua, Yammer, ExactTarget, Successfactors, etc.

My sense is that enterprise will never be the area that gets written about the most in tech blogs, but it continues to be the area where most of the early-stage investment dollars go, and where a lot of innovation is happening.

What’s the biggest change you’ve seen in your five years on Sand Hill Road? And, why is this important for both investors and founders to understand?

The biggest change for me is how much more mature startups are, and are expected to be, by the time they pitch their Series A. With the cost of building a product going down, and a greater influx of seed-stage capital, I’m regularly seeing startups raise seed rounds that give them two-plus years of runway. This gives them more time to tweak their initial product, and get more feedback from customers before they hit the road for a Series A. Founders need to keep that in mind as they think about the timing of their Series A. And investors need to accordingly adjust their expectations on valuations and round size, given that startups are coming to them with more proven out.


New Fundings

CyberLightning, a four-year-old, Oula, Finland-based company whose software platform helps energy, infrastructure, and other companies analyze data being created through strategically placed sensors, has raised $4.2 million in funding from investors, including InventureTEKES (the tax payer-funded Finnish Funding Agency for Innovation), and other EU tax payer-sponsored funds. TechCrunch has much more here.

EverString, a two-year-old, San Mateo, Ca.-based company whose predictive analytics platform helps companies better leverage their sales data, has raised $12 million in Series A funding led by Lightspeed Venture Partners. Earlier investors Sequoia Capital and IDG Ventures also participated.

Hireology, a four-year-old, Chicago-based company whose technology platform helps companies organize their hiring processes, has raised $10 million in Series B funding from Bain Capital Ventures. The company has now raised $13 million altogether, including from earlier backers Lightbank and FireStarter Fund.

JoyTunes, a four-year-old, Tel Aviv-based company that develops music-related games and applications that aim to shorten the process for users learning to play music, has raised $5 million in Series A funding led by the venture firms Aleph and Formation 8, with participation from earlier investor Genesis Partners. The company has now raised $7 million to date.

Nasuni, a five-year-old, Natick, Ma.-based storage services provider, has raised $10 million in new funding from earlier backers Flybridge Capital PartnersNorth Bridge Venture PartnersSigma Partners, and a strategic investor. The new financing brings Nasuni’s total funding to $53 million.

Vyome Biosciences, a four-year-old, Delhi, India-based dermatology company focused on developing treatments for refractory skin conditions like persistent dandruff and skin fungal infections, has raised $ 8 million in Series B funding led by Sabre Partners, with earlier investors Kalaari Capital and Aarin Capital participating.



Benchmark returned roughly 5.3 million shares of Twitter stock to its limited partners on Friday, according to documents filed with SEC yesterday. Recode has the story here.

Bubbly, a once-popular, Singapore-based social network that had received $39 million from prominent venture firms, including Sequoia CapitalSingtel Innov8JAFCO Asia, and others, is being dismantled after a few acquisition deals failed to work out. Tech in Asia has the story here.

Ooyala, a seven-year-old, Mountain View, Ca.-based streaming video distribution and monetization platform, is being acquired by one of its earlier investors, Telstra, which will operate it as a wholly owned subsidiary. The Australian telecommunications company is investing $270 million, for a 98 percent ownership stake in the company, up from the 23 percent it owned through a previous investment round. TechCrunch has the story here. Ooyala had raised $122 million from backers, including Google VenturesCID GroupITOCHU CorporationSierra VenturesRembrandt Venture Partners, and angel investor Ron Conway.

Saatchi Online, a four-year-old, L.A.-based online gallery focused on connecting people with art and artists, has been acquired by publicly traded Demand Media for $17 million in cash and stock. Saatchi had raised $11.2 million from investors, including Balderton Capital and Project A Ventures, shows Crunchbase.

Twitter has disclosed in a quarterly filing that it paid $134.1 million in mostly cash for Gnip, a data partner it agreed to acquire in April. The WSJ has more here.



Greylock Partners‘s John Lilly talks app constellations — the good, the bad, and the ugly.

Buffalo Bills fans hoped venture capitalist Chris Sacca might buy the team and keep it from the clutches of Jon Bon Jovi, who’d like to move it to Toronto. It’s not going to happen, though. Writes Sacca to Fortune’s Dan Primack: “Not a buyer. The head injury fallout is going to get much worse. I don’t even enjoy watching knowing the trauma to those guys.”

The White House announced a new, “U.S. Digital Service” team yesterday to improve government websites and upgrade U.S. technology infrastructure. The team of seven to 10 will include Mikey Dickerson, a former Google website manager. Recode has more here.


Job Listings

Box, the pre-IPO storage company, is looking for a corporate strategy associate. The job is in Los Altos, Ca.



The return distribution of biopharmaceutical VC financings.


Essential Reads

A bill requiring smartphone makers to include antitheft software on devices sold in California is one step away from becoming law.

Uber rival Lyft says Uber employees have ordered, then canceled, roughly 5,500 Lyft rides over the last 10 months.

Forbes takes a long look at the “big data startup factory” created by Frost Data Capital.



Set up to fail: How bosses create their own poor performers. (This paper dates back to 1998, but it’s making the rounds again because of its timeless findings.)

Growing embryos are now being tracked with genetic precision that will change pregnancies forever.

RIP, Robin Williams.


Retail Therapy

It’s late to the party, but the Polaroid Cube is hoping to make up for lost time with cuteness. (H/T: Uncrate)

Cloud file solutions, brought to you by people with a good sense of humor.


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