StrictlyVC: September 4, 2014

Good morning, dear readers, and happy Thursday! (Web visitors, here’s an easier-to-read version of today’s e-mail newsletter. To sign up for StrictlyVC, click here.)


Top News in the A.M.

New data gathered “from the cybercrime underground” suggests that the apparent credit and debit card breach at Home Depot involves nearly all of the company’s stores in the U.S., reports security expert Brian Krebs.


Mithril Leads $40 Million Diabetes Deal

Mithril Capital Management prides itself on funding unique “growth companies regardless of sector or geography,” says Ajay Royan, who founded the San Francisco-based venture firm with investor Peter Thiel in 2012. Last month, for example, it backed a Berlin-based, publicly traded company with an approved treatment for brain cancer.

Fractyl, a company aiming to better control type 2 diabetes, also fits the bill. In fact, Mithril — which has just led a $40 million financing for the three-year-old, Waltham, Ma., company – thinks Fractyl might become the “single most impactful company in our portfolio,” says Royan.

Certainly, the market opportunity Fractyl is chasing is enormous. More than 350 million people around the world suffer from type 2 diabetes, and as many as one in three U.S. adults could have diabetes by 2050 if current trends continue, according to the Centers for Disease Control and Prevention.

While the disease is usually managed through exercise regimens, oral medications, and insulin shots, in more extreme cases, bariatric (weight loss) surgery is recommended, and it’s here where things get interesting.

Bariatric surgery has been shown to return a person’s blood sugar levels to normal roughly six months after the procedure. Traditionally, it was believed the surgery is effective because the size of the stomach is reduced, but researchers and doctors have begun to believe it owes to a change in gut metabolism.

“The [first section of the small intestine] contains cells that function as chemical sensors,” explains Royan. “As you eat food, a portion of your small intestine anticipates the food’s composition and signals a hormonal response to start preparing insulin or whatever is appropriate for that food.” In diabetics, that portion of the gut is scarred, so the body’s response is off.

The big idea of Fractyl cofounder and CEO Harith Rajagopalan — a cardiologist and medical device entrepreneur — was to address the issue by altering the physiology of the gut. Specifically, Fractyl has created a device that’s inserted into the small intestine using an endoscope; after expanding and smoothing out the targeted part of the tract, it applies heat via a catheter balloon filled with hot water that kills the surrounding layer of skin. If all goes correctly, the old cells slough off and new cells with hormone receptors are generated in their place.

So far, the idea is looking spot on. Thirty-five patients have participated in trials, with the results validating the company’s approach. Still, it’s early days. The trials began just eight months ago, meaning no one yet knows how effective the treatment will be over a longer period of time.

There’s also competition to consider. Though Fractyl has some deep-pocketed venture firms, including earlier investors General Catalyst Partners, Bessemer Venture Partners and Domain Associates, the kind of skin ablation done by Fractyl’s device isn’t unique, even if no one is doing it precisely the same way.

Royan says he isn’t concerned about potential copycats, pointing to Fractyl’s “significant IP filings.” More, he insists, Fractyl’s design will be very hard to beat. Asks Royan,“Were there cell phones before and after the iPhone? Yes.” But the iPhone’s design has kept it at the fore. For his money, so will Fractyl’s specific approach to fighting diabetes.


New Fundings

Breather, a two-year-old, Montreal-based platform that provides on-demand work spaces in large urban areas, has raised $6 million in Series A funding led by RRE Ventures, with Vayner/RSESOS Ventures and earlier backer Real Ventures participating. The company has raised $7.5 million to date.

Delivery Hero, a four-year-old, Berlin-based food delivery service, has raised roughly $350 million in new funding from the Swedish investment firm Vostok Nafta along with earlier investors, including Insight Venture Partners and Kite Ventures. The company has now raised $635 million altogether. TechCrunch has more here.

Frank & Oak, a 2.5-year-old, Montreal-based online menswear retailer, has raised $15 million in Series B funding led by Goodwater Capital, the new firm of Chi-Hua Chen, long of Kleiner Perkins Caufield & Byers. Others in the round included new investors Greenoaks CapitalInvestissement Quebec, and Lululemon Athletica CFO John Currie, as well as earlier investors Rho Canada VenturesReal VenturesVersion One VenturesLightbank and Bertelsmann Digital Media Investments. Venture Capital Dispatch delves into the funding here.

Grid Ant Technologies, a two-year-old, Mumbai, India-based distributed computing company whose operating system, Cubeit, allows users to collaborate across multiple devices, has received just less than $3 million in seed funding from Accel Partners and Helion Venture Partners, reports

Immunophotonics, a six-year-old, St. Louis, Mo.-based company that’s developing a metastatic cancer treatment, has raised $1.8 million in Series A funding from Billiken AngelsBioGeneratorCultivation Capital, theMissouri Technology Corp .St. Louis Arch Angels and individual investors. The St. Louis Business Journal has more here.

iSpecimen, a five-year-old, Lexington, Ma.-based company that supplies human clinical specimens to the research, therapeutic, and diagnostic industries, has raised $8 million in Series B funding. The company, which raised $2 million in funding in 2012, didn’t disclose its backers.

ItsOn, a six-year-old, Redwood City, Calif.-based company behind a cloud-based smart services platform for mobile device OEMs, device OS developers, service providers and others, has raised an undisclosed amount of Series C funding from Cisco Systems. The company has previously raised at least $40 million from investors, shows Crunchbase. Its investors include Silver Lake PartnersSV Angel, and Andreessen Horowitz.

Legend3D, a 13-year-old, Carlsbad, California-based 3D visual effects and conversion company, has raised $10 million in Series C funding led by earlier investors Northwater Capital Management and Augustus Ventures Limited. The company has raised $47.8 million altogether, shows Crunchbase.

One, Inc., a nine-year-old, Sacramento, Ca.-based cloud software company that caters to the property and casualty insurance markets, has raised $16.7 million in Series A funding led by H&Q Asia PacificCamp One Ventures and AGI Partners also participated in the round.

Sgrouples, a three-year-old, Mountain View, Ca.-based privacy-centric social networking service, has raised $1.2 million in seed funding from individual investors. The company has now raised $1.8 million altogether.

Vice Media, the nearly eight-year-old, Brooklyn, N.Y.-based news and entertainment company, has raised $250 million from Technology Crossover Ventures, on the heels of raising $250 million in funding from A&E Networks. The company has now raised $580 million altogether. Dealbook has much more here.

xAd, a five-year-old, New York-based mobile real-time bidding ad platform, has raised $50 million in equity and debt funding, including from investors Institutional Venture PartnersEmergence CapitalSoftbank Capital, and Silicon Valley Bank. The company has now raised $74 million altogether, shows Crunchbase.


New Funds

Frontline Ventures, a year-old, Dublin- and London-based venture capital firm that invests in software only, has closed its debut fund with €40m ($52.5 million). Frontline is run by partners Shay Garvey, formerly of Delta Partners; Will Prendergast, formerly of NCB Venture Capital; and Will McQuillan, who previously founded a short-lived e-commerce company called Osmoda. The firm, whose investments range in size from €250K to €2M, has already invested in eight startups from its new fund, includingCurrencyFair, an online peer-to-peer currency exchange, and Boxever, a big data platform for airlines and travel companies. The Irish Times has much more here.



According to a newly published report from Renaissance Capital, the number of IPOs anticipated this fall look to make 2014 the biggest year for IPOs since 2000.

Before the IPO, an interactive guide to Alibaba.

Tokai Pharmaceuticals, a 10-year-old, Cambridge, Ma.-based biotech company that makes a daily oral treatment for prostate cancer, announced terms for its IPO on Tuesday, revealing plans to raise $76 million by offering 5.4 million shares at a price range of $13 to $15. At $14 per share, the company would be valued at $310 million.

Viking Therapeutics, a two-year-old, San Diego-based biotech that’s developing treatments for diabetes and other metabolic and endocrine disorders, revealed plans yesterday to raise $55 million in its IPO by offering 5 million shares at a price range of $10 to $12.



Baseline, a 33-year-old, L.A.-based online database of film and television information, has been acquired by competitor Gracenote in a deal worth $50 million.

Moovel, a unit of Daimler AG, said yesterday that it will acquire two companies: three-year-old, Washington, D.C.-based RideScout, whose smartphone apps help people search and compare ground transportation options on demand and in real time; and Germany’s Intelligent Apps, which operates mytaxi, an app that connects users to taxi drivers. Terms for both deals were not disclosed.

ShopIgniter, a five-year-old, Portland, Or.-based marketing startup, has been acquired by the Seattle-based video advertising firm Mixpo. Terms of the deal were not disclosed. Both businesses are backed by Madrona Venture Group. Oregon Live has more here.



Billionaire entrepreneur Patrick Soon-Shiong is urging Culver City, Ca. officials to install fiber Internet at five business districts, including one where his company is located, reports L.A. Weekly. Culver City is emerging as a tech hot spot, notes the outlet, thanks in part to residents like Maker Studios, recently acquired by Disney, and Beats, sold to Apple. Soon-Shiong is arguing that a publicly sponsored fiber network could also make Culver City more competitive for tech startups with Santa Monica, which already has its own fiber network. Soon-Shiong’s newest company is Nantworks.


Job Listings, a San Francisco-based company that produces online video tutorials (and, ahem, raised a $103 million round last year), is looking for a VP of business development.


Essential Reads

Microsoft’s new Lumia 830 raises eyebrows in Berlin.

Etsy CEO to businesses: If net neutrality perishes, we will, too.



According to a new study out of NYU, tall men get the short end of the stick when it comes to marriage.

The simple technology that accidentally destroyed baseball.

very short interview with Bob Odenkirk about his collection of writings, A Load of Hooey.


Retail Therapy

“What are you wearing, darling?” “Why Intel, bien sûr.”

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