StrictlyVC: October 10, 2014

Good Friday morning, everyone, hope you have an outstanding weekend! (Also, here’s an easier-to-read version of today’s newsletter.)


Top News in the A.M.

Google is planning to release a whale of a smartphone.

Twenty-year-old Amazon is opening its first bricks-and-mortar store, right across from the Empire State Building in New York.


L.A. has been receiving a lot of attention from investors lately, as local venture capitalist Mark Suster enthusiastically observed in a detailed overview of the market yesterday. Indeed, as Suster noted, SVAngel’s David Lee and early Twitter investor Chris Sacca are among a small but growing number of investors who’ve relocated to L.A. to capture its upside.

Erik Rannala certainly gets it. Rannala was a product manager at eBay who went on to spend nearly three years running the seed-stage firmHarrison Metal with his former eBay colleague Michael Dearing.
The gig, in Palo Alto, was great. But when another former eBay colleague, Will Hsu, proposed working together in L.A., where Rannala’s wife grew up, he leapt at the opportunity, forming the L.A-based accelerator MuckerLab with Hsu in 2011. (The two have since raised a $20 million seed fund called Mucker Capital.)

As far as Rannala is concerned, there’s a lot of love about the L.A. scene. For one thing, entrepreneurs are “more cautious with their burn because capital isn’t nearly as plentiful in L.A. as in the Bay Area, or even New York.” He likens their mindset to someone “growing up during the depression . . . even when you eventually have infinitely more capital, it’s harder to shake the frugality that was learned the hard way in leaner times.”

Many entrepreneurs in the Bay Area “haven’t experienced that,” he notes.

Valuations are also “more reasonable,” Rannala says, insisting that “dollar for dollar, you’re getting more for your money down here than in the Bay Area at the top of the cycle.”

Rannala thinks it’s a little easier for L.A. entrepreneurs to escape the groupthink of Silicon Valley, too. “We’re seeing a lot of entrepreneurs here who are looking at existing industries that are getting software enabled [and figuring out how to expedite their transition] rather than doing purely derivative things like social,” though there’s plenty of that, too.

Rannala points, for example, to Santa Monica-based Surf Air, a members-only, California-based airline that offers unlimited flights for a $1,750 a month. The venture-funded company started flying last year with three used single-engine turboprops that seat seven passengers. It recently ordered 15 new Pilatus PC-12 NG aircraft. (MuckerLabs wrote the company’s first check; it has gone on to raise $18.8 million altogether.)

Everything said, Rannala, who still travels regularly to the Bay Area, is trying to be pragmatic about L.A.’s boom times. Though he doesn’t think for a minute that “LA is a flash in the pan” – for a long list of familiar reasons, he argues that the tech ecosystems in both L.A. and New York “are not short-term phenomena” — he also notes that a “shortage of indigenous local capital up and down the stack,” could mean problems if the market turns.

Bay Area investors are “inclined to invest outside the Bay Area right now, particularly when it comes to companies that are further along,” Rannala observes. “It’s [to be determined] how this evolves when we’re at the bottom of the cycle.”


New Fundings

Agronomic Technology, a year-old, New York-based company that provides software and data to help growers improve their financial and environmental performance, has raised $2.2 million in seed funding from Armory Square Ventures, Arthur Ventures and Cayuga Venture Fund.

Alien Technology, the 20-year-old, Morgan Hill, Ca.-based maker of RFID chip tags, has raised $35 million in new funding led by Shanghai Ruizhang Investment Co., with some unnamed, earlier investors participating. The round brings the company’s total funding over the years to a $330 million. VentureBeat has more here.

BitFury, a three-year-old, San Francisco-based company that makes specialized chips for bitcoin mining, has raised $20 million in new funding, including from venture capitalist Bill Tai, former VeriFone CFO Bob Dykes, Google Maps co-founder Lars Rasmussen and earlier investor, the Georgian Co-Investment Fund. The company has now raised $40 million altogether.

BrightFunnel, a two-year-old, San Francisco-based predictive analytics software company that targets business-to-business marketers, has raised $2.5 million in seed funding led by Resolute Ventures, with Bloomberg Beta, Crosslink Capital and Tekton Ventures participating. The company has raised $3.2 million to date, shows Crunchbase.

CloudFactory, a four-year-old, Durham, N.C.-based distributed workforce company, has raised $3 million in Series A funding, including from Durham investor Sovereign’s Capital and VRBO founder David Clouse. The company had previously raised $700,000.

Devign Lab, a new, Korea-based company that’s building a peer-to-peer marketplace and merchant payment tools around bitcoin, has raised $200,000 in seed funding from K Cube Ventures, a Korean venture firm. Coindesk has the story here.

Digital Reasoning, a 14-year-old, Nashville, Tn.-based company whose machine learning algorithms are capable of analyzing human language data (to assess fraud and more), has raised $24 million in Series C funding led by Goldman Sachs and Credit Suisse NEXT Investors. The company has raised at least $29 million to date, shows Crunchbase.

mParticle, a two-year-old, New York-based mobile data startup, has raised $1.5 million in seed funding from Harbinger Capital, Battery Ventures and earlier investor Bowery Capital. mParticle has now raised $6 million altogether, including from Google Ventures and Greylock Partners.

Muufri, a months-old, San Francisco-based company making “animal free milk,” has raised $2.1 million from 10 investors, shows an SEC filing. More here.

PathSensors, a four-year-old, Baltimore, Md.-based company whose biological aerosol collector system detects and identifies biological threat agents, is looking to raise $2.1 million, shows an SEC filing. The company has previously raised $1.9 million, including from Maryland Venture Fund.

Peel, a five-year-old, Mountain View, Calif.-based company whose smartphone and tablet apps allow users to control their TVs, has raised $50 million in new funding from Alibaba Group. The company has now raised $86.7 million altogether, including from Lightspeed Venture Partners, Redpoint Ventures and Translink Capital.

Puralytics, a seven-year-old, Beaverton, Or.-based maker of water purification systems, has raised $1.1 million as part of a round that’s targeting $2.3 million, shows an SEC filing. The company had raised $4 million last year from Keiretsu Forum.

Ranovus, a 2.5-year-old, Ottawa, Ontario–based maker of multi-terabit interconnect solutions for datacenter and communications networks, has raised $24 million in Series B funding from Azure Capital PartnersDeutsche Telekom, BDC Venture Capital, OMERS Ventures and Export Development Corp. The company has raised at least $35 million to date, shows Crunchbase.

Shine Medical Technologies, a four-year-old, Madison, Wi.-based company that makes medical tracers and cancer treatment elements, has raised $125 million of debt and equity financing from Deerfield Management, a New York-based health-care investment firm.

Spensa Technologies, a five-year-old, West Lafayette, Ind.-based precision agricultural startup that operates an online pest management system, has received $1.3 million from investors, including Elevate Ventures, an Indiana-based nonprofit to help entrepreneurs and emerging startups; Foundry Investment Fund, a Purdue fund; mTerra VenturesZionsville Precision Ag Venture; and individual investors. The company has now raised $2.5 million to date.

Spin Transfer Technologies, a seven-year-old, Fremont, Ca.-based developer of magnetoresistive random access memory technology (to bring faster switching speeds to chips), has raised $70 million in new funding led by Woodford Investment Management, with Invesco Asset Management and the London private wealth management fund SandAire participating. The company had previously raised $36 million in a 2012 round, shows Crunchbase.

Totspot, a six-year-old, New York-based mobile marketplace for parents to buy and sell children’s clothing, has raised $1.8 million in seed funding led by GGV Capital. Other investors include 500 Startups, AME Cloud Ventures, and QueensBridge Venture Partners.

Voxa, a year-old, Atlanta-based email intelligence startup, has raised $1.5 million in seed funding co-led by Ethos Capital Partners and Information Security Systems founder Tom Noonan, with participation from Premiere Global Services and earlier investor Atlanta Ventures. PandoDaily has more here.



HubSpot, the eight-year-old, Cambridge, Ma.-based marketing software company, went public yesterday, raising $125 million in the process. Its shares opened at $32.99 — a 32 percent jump from their IPO price of $25. They closed at $30.10, giving the company a valuation of $914 million.



Equivio, a 10-year-old, Tel Aviv, Israel-based text analysis company, is being acquired by Microsoft for $200 million, reports the WSJ.

MedXT, a two-year-old, San Francisco-based startup that has developed technology to host and display medical images from the cloud, is being acquired by the storage company Box for undisclosed terms. The company appears to have raised just $140,000, including via Y Combinator. VentureBeat has more here.

Xyo, a four-year-old, Berlin-based app search engine and contextual advertising technology, has been acquired by publicly traded Mandalay Digital Group for undisclosed terms. The company had raised an undisclosed amount of funding in 2012 from Eric Wahlforss, Klaas Kersting, and Signia Venture Partners, shows Crunchbase. TechCrunch has more here.



Gregg Brockway has been named the chief executive of Maker Media, the publisher of Make magazine; producer of the Maker Faires events franchise; and operator of Maker Shed, an online retailer of DIY electronics, kits and books. A serial entrepreneur who previously cofounded Chairish, Tripit, and Hotwire, Brockway had spent the last six months as a venture partner at O’Reilly AlphaTech Ventures.

There’s no love lost between investors Carl Icahn and Marc Andreessen, who began battling publicly over the fate of PayPal earlier this year. Now, the two have taken comically pointed jabs at each other on television, with Andreessen characterizing Icahn as the “evil Captain Kirk,” and Icahn — throwing restraint completely out the window — saying Andreessen has “screwed more people than Casanova.” Icahn added that Andreessen’s “squeaky voice” is so high-pitched that “only a dog” can hear it. (Andreessen has since updated his Twitter bio to read: “The quintessential guy that is wrong with corporate America… Hard to hear, talks with a squeaky voice that only a dog can understand.”)

Brian McLoughlin has stepped down as a general partner at the L.A.-based venture firm Upfront Ventures, reports Fortune’s Dan Primack. He spent a dozen years with the firm; he’s becoming a venture partner atFintech Collective, a New York-based firm that focuses on seed and early-stage investments in the financial services industry. Last last year, Upfront promoted former HauteLook CMO Greg Bettinelli to partner.

Yesterday, Microsoft CEO Satya Nadella told an audience of mostly women at the Grace Hopper Celebration of Women in Computing that asking for a raise isn’t the best way to get one. “It’s not really about asking for a raise, but knowing and having faith that the system will give you the right raise,” he said, shocking attendees. Nadella later backtracked, writing a memo to Microsoft employees that said, “I answered that question completely wrong.”

George Reichenbach, who cofounded Braemar Energy Ventures, has passed away at age 85. More here.

Y Combinator founders Paul Graham and Jessica Livingston sit down with Bloomberg’s Emily Chang for what they say is their first joint interview.

Scenes and photos from this week’s Vanity Fair New Establishment Summit in San Francisco.



McKinsey & Company is still in the market for an M&A analyst in New York.

Nike is looking for a senior director of business development for its “innovation” unit to research and source partnership opportunities, including for its Converse brand. The job is in Portland, Or.


Essential Reads

Both Uber and Lyft get an “F” from the Better Business Bureau.

The “D,” meanwhile, gets an A+ from reporters.



The intelligent life of the city racoon.

Commercial break handshakes.

The world’s coolest offices.


Retail Therapy

Killer sugar cubes.

Filed Under:

Don’t Miss Out!

Sign up today to receive a free daily email with everything you need to start your day. Plus, keep track of the companies and personalities that will shape the industry in the months and years to come. Let StrictlyVC be your very own venture capital concierge.

StrictlyVC on Twitter