StrictlyVC: September 8, 2014

Good Monday morning, everyone, hope you had a wonderful weekend! We’re almost comically exhausted from ours. (You probably know the feeling.)


Top News in the A.M.

Twitter is testing a way for users to discover and buy products on the platform.

Reddit, the nine-year-old social news site, is reportedly in the midst of raising a big funding round. Recode has the story here.


Investing Internationally? You Might ‘Friend’ Nazar Yasim

Investor Nazar Yasin has been traveling the world since he was a child. Born in Greece to a real estate and tech investor who moved his family to Cyprus, then London, then Los Gatos, Ca., it isn’t surprising that Yasin’s interest in global tech investing was kindled early on.

After nabbing an engineering degree, then dual JD/MBA, his first jobs were short-lived analyst and consulting gigs. In 2006, it was on to Goldman Sachs, where he eventually co-headed the firm’s European Internet coverage. Yasin then left in 2009 to become CEO of Forticom, a Latvia-based social networking business. “Everyone thought I was crazy,” he laughs. But Forticom was soon acquired by Russia’s, and Yasin was recruited by Tiger Global Management, where he led numerous deals, including in YY, a Chinese video-based social network that now has a $5.3 billion market cap.

Today, Yasin is still at it, except these days, he’s running his own investment firm, Rise Capital, which scouts out Series B-stage Internet deals in emerging markets and held a first close of $100 million on its debut fund in March. Last week, I met Yasin at his offices in San Francisco’s Ferry Building to learn more. Our conversation has been edited for length.

You had a plum job at Tiger. Why leave?

Over time, we’d raised a lot of money on the private side and started making later-stage investments. I wanted to stay in the same [earlier-stage spot where we’d started], so I left to start Rise.

Rise is writing checks of between $3 million and $7 million to startups in eight distinct emerging markets. Why base your operations in San Francisco? Are you interested in bringing your portfolio companies to the U.S.?

No, we have zero interest in that. Being a good tech investor often just boils down to being on the right side of change. And if there’s one place where change is happening faster than other places, it’s here. Just having friends, LPs, and colleagues out here who are working with some of the great tech firms helps us understand what the future is going to look like.

Alibaba represents the opportunity you’re chasing. Can you elaborate?

Once Alibaba goes public in a couple off weeks, there will have been half a trillion dollars of publicly traded market cap created by Internet companies in emerging markets. I’m not talking about private market valuations. I’m talking about stock that you and I can buy on exchanges like the NYSE. That’s half a trillion dollars of value that’s come out of thin air in the last five years, created by Internet companies located in emerging markets whose businesses cater to consumers in those markets. Most of Alibaba’s business is focused on Chinese consumers buying stuff in China. There’s so much opportunity for startups in India or Indonesia or Mexico or Brazil or Russia [to do the same].

Rise has invested in five startups, though it has disclosed just two: the Chilean insurance comparison site ComparaOnline and iROKO Partners, a Nigeria-based entertainment media distribution company. How do they fit into your thesis?

Alibaba accounts for 7.5 percent of retail — offline or online — in China. That’s the same market share as Walmart, though it’s taken Walmart 50 years and took Alibaba a decade. The reason is that in China and these other emerging markets, there isn’t as much offline retail. There aren’t as many things that look like Walmart or Target or Best Buy. There aren’t things like HBO. There aren’t as many banks. But whereas people’s ways to shop offline are limited, [online is a different story].

Of the markets you’re targeting, which are the most attractive and which are the least attractive right now?

India is happening in a very big way right now. Lot of young companies are seeing a lot of traction right now. The same is true of startups in Brazil, Mexico, Indonesia, Nigeria and the broader Middle East. I’d say Russia and China are low priority.

China is lower priority primarily for valuation reasons. Valuations have grown very punchy over the last two years. In other markets we invest in, it isn’t uncommon to see companies doing $20 million in revenue that you can invest in at a sub $50 million valuation. In China, that company would be worth hundreds of millions of dollars.

Russia is a challenging market because its economy is dependent on oil and so more volatile than other emerging market economies. Its demographics aren’t as appealing as other emerging markets, either; you don’t have that tremendous combination of population growth and GDP per capita growth. In fact, it’s shrinking. And that’s important because there’s a lack of foreign strategics with an interest in Russia as a result, and if you’re an investor in a privately held company, you’re going to realize your investment through an IPO or M&A.

What would you consider to be significant scale for an emerging market company?

At $5 million in revenue, an emerging market startup is processing a lot of widgets. It has a lot of consumers. It’s typically in a market-leading position.

That’s when you try and step in.

Between the Series A — where you might see some local angel investors and VCs — and Series D rounds, where everybody and their mother knows about a company and the competition becomes quite fierce, there just isn’t a lot of capital. The companies aren’t quite as visible; it’s harder to identify the winners from the losers, and that’s where we feel like we have an edge. We’ve got a lot of relationships and a lot of data on these markets that we can leverage.


New Fundings

Adjust, a two-year-old, Berlin-based app analytics startup, has raised $7.6 million in Series C funding from Active Venture Partners, with earlier investors Target Partners, Iris Capital and Capnamic Ventures participating, reports TechCrunch. The company, formerly known as Adeven, has raised $11.9 million altogether, shows Crunchbase.

Authy, a 1.5-year-old, San Francisco-based Y Combinator alum that specializes in two-factor authentication, has raised $2.3 million in seed funding from numerous investors, including Box CEO Aaron Levie, CEO Sam Yagan, CrunchFund, Winklevoss Capital, Digital Garage, Data Collective, and AngelList through its MaidenLane fund.

BitGo, a 1.5-year-old, San Francisco-based bitcoin security startup that operates a “multi-sig” digital wallet designed to protect users’ digital coins, has raised an undisclosed amount of funding from BitFury Capital, a bitcoin mining infrastructure company. Coindesk has more here. BitGo had raised $12 million in funding in June from Redpoint Ventures, Radar Partners, Founders Fund, Barry Silbert’s Bitcoin Opportunity Corp., and Ashton Kutcher’s A-Grade Investments, among others.

BoomTown, an eight-year-old, Charleston, S.C.-based company that makes online marketing software for real estate professionals, has raised $20.1 million in funding from Adams Street Partners and Susquehanna Growth Equity.

Electrozyme, a two-year-old, San Diego-based company whose temporary-tattoo-like sensors can gauge the chemicals secreted in sweat — measuring electrolyte balance, hydration level, and more – is raising a Series A round, reports MedCity News. The company previously raised $1.25 million in seed funding, including $250,000 in backing from investor Mark Cuban.

Flywheel, a two-year-old, Omaha, Ne.-based company that provides managed WordPress hosting, has raised $1.2 million in seed funding, reports VentureWire. Linseed Capital led the round, which included Hyde Park Venture Partners, Lightbank, Ludlow Ventures, Nebraska Angels and Rose Paul Ventures.

Focal Therapeutics, a seven-year-old, Aliso Viejo, Ca.-based company that makes a 3D tissue marker designed to help surgeons spot the precise site for tumor removal and delivery of radiation treatment, has raised $7.8 million in funding, shows an SEC filing.

Lob, a year-old, San Francisco-based on-demand printing company, has raised $7 million in Series A funding led by Polaris Partners, with First Round Capital, Floodgate, and other individual investors participating. The company had raised now raised $9.4 million altogether, shows Crunchbase.

PlusN, a two-year-old, Elmsford, N.Y.-based company that develops carrier aggregation software solutions to increase the capacity of mobile data networks, has raised $600,000 in seed funding, including from Franklin “Pitch” Johnson, founder of Asset Management Ventures, Vantage Venture Partners chairman Chris Brody, and PlusN executive chairman John Levy. Crunchbase shows the company has raised $1.2 million in seed funding altogether.

Sonendo, an eight-year-old, Laguna Hills, Ca.-based maker of sonic tooth cleaners, has raised more than $35 million in new funding, according to an SEC filing that states the capital has come from eight investors. According to Crunchbase, the company has now raised roughly $80 million to date, including from OrbiMed Advisors, Neomed Management, and Fjord Ventures.

Wearality, a two-year-old, Cary, N.C.-based maker of virtual reality head-mounted displays, has raised $925,000 in convertible notes as part of a $3 million round, shows an SEC filing that lists six investors. Among the firm’s board members is Joichi Ito, the director of the MIT Media Lab.

Wellframe, a three-year-old, Boston-based company that combines mobile technology and artificial intelligence to engage patients in personalized care plans, has raised $8.5 million in Series A funding led by DFJ, with participation from Formation 8, Waterline Ventures and Queensbridge Venture Partners. Wellframe closed a $1.5 seed round earlier this year, including from Athenahealth CEO Jonathan Bush and DFJ cofounder Tim Draper.

ZIRX, a months-old, San Francisco-based on-demand valet parking service, has raised $6.4 million in Series A funding led by Norwest Venture Partners and Trinity Ventures.


New Funds

Atlas Peak Capital, a three-year-old, San Francisco-based secondary investment firm, is raising a $40 million second fund, shows an SEC filing that shows a first sale as yet to occur. The filing lists the firm’s two cofounders, Josh Blachman and Brian DiLaura, who were formerly a VP and a director, respectively, at the secondary firm Saints Capital. The duo had raised $28.9 million for their debut fund, show SEC filings.

Salesforce has established a $100 million fund called Salesforce1 Fund to invest in mobile enterprise startups, the San Francisco-based company is announcing this morning. John Somorjai, EVP of corporate development and strategy, is heading up the effort via the company’s Salesforce Ventures unit. Salesforce is already an active startup investor, with stakes in more than 100 companies, including Box, Dropbox,Evernote, Layer, and MuleSoft. In fact, according to TechCrunch, as of July’s end, had invested $215 million in private companies over the last five years. Salesforce1 Fund represents the company’s first dedicated fund.



Perhaps you’ve heard. On Friday, Alibaba finally filed its paperwork to go public. The China-based e-commerce giant expects to raise $24 billion, at a valuation of roughly $163 billion. The WSJ breaks down who is poised to make the most from the offering.

EndoStim, a five-year-old, St. Louis, Mo.-based medical device company whose neurostimulation system was created to treat severe gastroesophageal reflux disease, has filed to go public. The company has raised at least $42.5 million from private investors, shows Crunchbase. The company, now looking to raise another $40 million on the public market, is principally owned by Santé Health Ventures, which holds a 35.4 percent stake; Prolog Capital III, which owns a 5.7 stake; and 1998 Co-Investing, which owns a 5.8 percent stake.



Ebates is in talks to be acquired by Rakuten, the owner of Japan’s largest online mall, reports Bloomberg, which says Tokyo-based Rakuten may pay about 100 billion yen ($950 million) for Ebates and is nearing a final agreement that could be announced as soon as this week.

Luminate, a six-year-old, Mountain View, Ca.-based company that makes digital images interactive, has been acquired for undisclosed terms by Yahoo, which is shutting down the service. Luminate, formerly called Pixazza, had raised $28.5 million from investors, including August Capital, CMEA Capital, Google Ventures, Shasta Ventures, Nokia Growth Partners, and Webb Investment Network.

Rackspace, the 16-year-old, San Antonio, Tx.-based web hosting company that went public in 2011, is in talks to be acquired byCenturyLink, a Louisiana-based landline phone service provider, according to Bloomberg sources. Rackspace is currently valued at $5.33 billion.

Ultravisual, a two-year-old, Brooklyn, N.Y.-based app maker that offers photo and video creation and collaboration software for Apple’s iPhone iOs, has been acquired by privately held Flipboard for undisclosed terms, reports Recode.



Laura Arrillaga-Andreessen is profiled in the WSJ for her efforts to teach effective philanthropy to academia, to startups, and, starting next month, to everyone else through a six-week online program. (It’s free, of course.) In a light aside, the piece notes that Arrillaga-Andreessen mandates that everyone in her foundation’s office dance once a day. It’s “one of the great parts of running an organization,” she says.

Alex Bard, a Salesforce EVP, has left the company to become CEO of Campaign Monitor, a 10-year-old, Sydney, Australia-based email marketer that raised $250 million in funding from Insight Venture Partners in April. Forbes has much more here.

Michel de Lempdes has been appointed as head of venture capital at Paris-based Omnes Capital, where he has been co-head since 2012. He began his career at Credit Agricole CIB in New York, working in its funds-of-funds and LBO funding operations. In 2001, he co-launched Credit Lyonnais Venture Capital, which later became part of Omnes. More here.

Alan Rosling, co-founder of Kiran Energy and former executive director of Tata Sons Limited, has joined the Kolkata, India-based venture firm Navam Capital as a senior advisor and operating partner. Navam Capital focuses on seed and early-stage investments in the energy, technology and health care sectors.

Marc Stoll has joined the eight-year-old, San Francisco-based business planning platform Anaplan as CFO. Stoll was previously VP of worldwide sales finance for Apple and, before that, SVP and corporate controller for CA Technologies. Anaplan has raised roughly $144 million from investors, including Granite Ventures, DFJ, Shasta Ventures, and Meritech Capital Partners.

Peter Thiel‘s new book comes out next week. Here’s an excerpt.


Job Listings

Funding Circle, the well-funded, small business lending marketplace online, is looking for a corporate development manager. The job is in San Francisco.



In advance of Apple‘s big event tomorrow, when the company is expected to unveil numerous long-awaited products, CB Insights has assembled a report on the wearables market. Among its findings: more than $1.4 billion has been funneled into wearables over the last five years, much of it in 2014; and True Ventures, Andreessen Horowitz and Khosla Ventures are the most active wearables investors. Here is the full report.

The complete Y Combinator database, care of Silk.


Essential Reads

Why Amazon has no profits (and why it works).



The 30 most expensive homes in tech.

The iPhone 6 is “unlike any experience you’ve ever experienced.”

New York’s once and future mansions.

A dog dressed as a giant spider, then sent out to scare the sh_t out of people.


Retail Therapy

If you want to show a startup you mean business, bring one of these.

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