StrictlyVC: October 13, 2014

Happy Monday/Columbus Day/Indigenous Peoples’ Day, everyone. Hope it’s off to a great start.:) (Web visitors, here’s an easier-to-read version of today’s email.)


Top News in the A.M.

The launch of Apple Pay is upon us.

A production company is trying to make a reality show about venture capitalists. We’ll be waiting on tenterhooks for this one.


Hiten Shah: Mr. Tough Love

I’m sitting at a cafe in San Francisco’s North Beach neighborhood with Hiten Shah, and he’s telling me what’s right and wrong with StrictlyVC. The good news: it appears to have so-called product-market fit. The bad: its site is far too basic, though Shah puts it much more charitably. “It’s not like a criticism, but let’s make the design better. We can fix it with just some little tweaks.”

In all likelihood, I’m one of at least five new people who will, over the course of the week, sit down with Shah, a three-time entrepreneur and occasional angel investor who has gained renowned in the Bay Area as an active startup advisor, and who is often sought out as a “growth hacker.” (Shah’s two most recent companies, bootstrapped Crazy Egg and venture-backed KISSmetrics, both help businesses measure and optimize their sites, their social and mobile applications, and their revenue.)

I’ve sought him out for a latte and some light conversation. Our conversation has been edited for length.

You spend a lot of time with entrepreneurs, many of whom are thinking about growth. When is it the right time to start obsessing over it?

Well, first, I think growth hacking and all these tactics that people are sharing are good, but there isn’t enough conversation around the work that you have to do first. People tend not to spend a lot of time on foundational stuff before they start trying all kinds of random things. As for when to start thinking about growth, the common adage around here is that you want to think about it after you’ve hit product-market fit, meaning that enough of your customers already love what you’re doing that lots of other people in the world would probably benefit from your product.

Is there a percentage of customers who have to really love a product? What’s the tipping point?

There’s all kinds of market research around this. One stat suggests that if 12 out of 30 people really love your product – meaning they’d be very disappointed if it disappeared – you have what resembles product market fit. A small group can be very impactful in helping you understand [your product].

You make occasional angel investments, including in the shared inbox app Front, which just raised $3.1 million in seed funding. Are bigger seed rounds the way to go? Any thoughts on this newish trend of serial seed rounds?

The advice I always give people is to hold off on trying to raise money until they’ve removed as much risk as possible from their product. The startups they’re competing with today are much farther along than they were seven to 10 years ago.

On the debate over whether companies should do seed rounds and [whether two rounds dilutes founders too much], it’s entrepreneurs’ fault. Maybe they received bad advice, but it’s more likely that they’ve overspent.

Overspent on rent? Employees?

Sometimes they spend money on marketing before they have product-market fit, or they hire too many people too fast, or they pay too much in rent.

I’d think the latter would be particularly tricky, given the steep price of office space in San Francisco specifically, where so many startups want to be.

I do think rent is an issue, but the talent pool here – from executives to [lower level staffers] — is higher than anywhere else right now, so if you’re not here, you have to offer all kinds of crazy things or else be the number one company in your area, which is hard. In San Francisco, you can be a [mid-tier] company and still hire a lot of great people. Luckily, there are lots of shared workspace options for startups, like Heavybit Industries.

I think a bigger issue is a lack of education around operating an early-stage business.

Why don’t you write a handbook?

I don’t like writing. I’m doing a 30-day blogging challenge. I’m on day four and I’m still dreading what I’m going to write about.


New Fundings

BizEquity, a four-year-old, Wayne, Pa.-based company that provides business valuation services, has raised $5.1 million in funding from Frost Brooks, a new London-based private equity firm.

Gainsight, a five-year-old, Mountain View, Ca.-based company that helps businesses manage customer accounts in the cloud, has raised $25 million in Series C funding led by Bessemer Venture Partners and Lightspeed Venture Partners. The company has raised $54.1 million altogether, shows Crunchbase, including from Salesforce Ventures, Summit Partners, Bain Capital Ventures, and Battery Ventures.

Jukin Media, a five-year-old, L.A.-based multiplatform media company, has raised $1.2 million from investors including Bertelsmann Digital Media and Mandalay Entertainment CEO Peter Guber. Earlier this year, Jukin raised $1 million from a group that included Disney’s Maker Studios.

MindTickle, a three-year-old, Mountain View, Ca.-based company whose gamification products are used to train employees, customers and partners, has raised $1.8 million in seed funding backed by Accel Partners and unnamed angel investors.

Monsieur, a 1.5-year-old, Atlanta-based company that makes a robotic bartender, has raised $2 million in seed funding from BIP Capital, with participation from Base Ventures, Paul Judge, TechSquare Labs, NFL linebacker Derrick Morgan, and Glen Davis of the L.A. Clippers.

Simplestream, a four-year-old, London-based provider of multi-platform live streaming and “catch-up” TV services has raised “substantial funding” from Beringea.

Smartzer, a nearly two-year-old, London-based startup whose interactive video platform allows users to make purchases by clicking on video content, has raised $400,000 in seed funding from serial entrepreneur Jamie True and other, undisclosed individual investors. TechCrunch hasmore here.

VoloMetrix, a three-year-old, Seattle-based business analytics company, has raised $12 million in Series B funding led by Split Rock Partners, with earlier investor Shasta Ventures participating. The company has raised $16.9 million to date, shows Crunchbase.

Wahanda, a six-year-old, New York-based online health and beauty marketplace that helps users book appointments, has raised $26 million in funding from Recruit Strategic Partners, Fidelity Growth Partners Europe and Lepe Partners. The company has now raised $37.6 million to date, shows Crunchbase. TechCrunch has more here.


New Funds

Sequoia China is raising its fifth fund, according to a newly filed Form D that states the fund has yet to begin fundraising and that the amount it intends to raise is “indefinite.” Sequoia China had raised $200 million for its first fund in 2005; $250 million for its second fund in 2007; and $350 million for its third fund in 2010. The firm has been investing out out of its fourth fund, closed with $350 million in 2012. As Forbes noted in a profile of Sequoia China earlier this year, the “franchise firm” of 42-year-old Sequoia Capital on Sand Hill Road is very much its own outfit stylistically, including using a “big staff a la Andreessen Horowitz in Silicon Valley versus the still largely partner-driven style at Sequoia in the U.S.” The reasons why: the firm’s founding managing partner, Neil Shen, “believes in grooming young talent, sometimes taking associates and analysts straight out of business school.” The firm’s staff of roughly 50 is also seen as “critical” as “China’s market is harder to gauge, the books trickier to study.”

SVB Capital has closed its seventh venture capital fund of funds at its $330 million hard cap, VentureWire reported on Friday.



Government Outreach, an 11-year-old, Pleasanton, Ca.-based company that eases communication between government agencies and citizens, including via iPhone apps, has been acquired by Accela, a 15-year-old, San Ramon, Ca.-based maker of civic engagement software. Government Outreach doesn’t appear to have raised outside funding. Accela has raised $50 million, most of it from the New York investment firm Bregal Sagemount.

Subdelivery, an online food delivery service based in Brazil, has been acquired by Delivery Hero, the three-year-old, Berlin-based company that now runs a worldwide network of online food ordering sites. TechCrunch has more here.



Ryan Hoover, the 27-year-old founder of Product Hunt, is having a moment.



Amazon is looking for a corporate development pro to add to its Amazon Web Services team. The job is in Seattle.

AppDynamics, a very well-funded, six-year-old startup that develops application performance management software, is looking for a senior financial analyst. The job is in San Francisco.



M&A activity for venture-backed startups hit $20.9 billion in the third quarter, the highest it’s been since the third quarter of 2000, according to VentureSource. Some other stats sure to thrill and terrify in equal parts: The number of third-quarter deals rose 9 percent from a year earlier while the amount raised increased by an astonishing 65 percent. Of the 139 deals sewn up in the third quarter, the median acquisition price was $75 million.

Of the 115 healthcare accelerators in the world, 87 are in the U.S., and most of them are geared to digital health and under two years old, says venture capital investor and healthcare business consultant Lisa Suennen. More here.


Essential Reads

Twitter is joining the growing number of tech giants rushing into mobile payments. In fact, Reuters reports that one of France’s largest banks is teaming up with the social network this week to enable customers to transfer money via tweets.

Venture capitalists return to backing science startups.

Demographic trends for every big social network.



What happens when second graders are treated to a seven-course, $220 tasting meal.

A celebrated bartender takes over The Mark Hotel in New York.


Retail Therapy

This isn’t your great, great, grandmother’s gramophone.

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