StrictlyVC: October 20, 2014

Good morning, everyone! Hope your Monday is off to a brilliant start. (Web visitors, here’s an easier-to-read version of today’s newsletter.)


Top News in the A.M.

Yahoo CEO Marissa Mayer will detail her plans to turn around the company tomorrow when it shares its third-quarter earnings, says the WSJ.


David Pottruck on His New Book, His Bets, and Bitcoin

The first time I met David Pottruck, it was 1999 and he was co-CEO of the high-flying discount brokerage Charles Schwab, a title he’d share for five years with founder Charles Schwab before becoming the sole CEO of the company in January 2003.

Eighteen months later, the company — which Pottruck had pushed into the Internet age and that struggled after the dot com crash — ousted him in a decision that still stings, though Pottruck will tell you the company made the right decision.

A new book by Pottruck captures much of that experience. It also features interviews with a dozen others who’ve led organizations through periods of dramatic change, including Intel President Renée James; eBay CEO John Donahoe; JetBlue CEO David Barger; and San Francisco Giants CEO Larry Baer. I caught up with Pottruck last week to learn more about the book (which hits bookstores today), and where he’s focusing his energy now.

You spend a lot of time in New York these days. Have you moved there?

I’m still in San Francisco, but I have an apartment in New York and I’ve been spending more and more time there for personal and business reasons.

Tell us about your business interests. After leaving Schwab, you formed an investment firm called Red Eagle Ventures. How would you describe its mission?

After I left Schwab, I decided the smartest thing to do was work for myself and invest in early-stage companies and see if I could add value as a mentor, as a coach to CEOs.

Financial services CEOs?

For a long time, I stayed away from financial services. I wanted to do other things, learn about new industries. So I spent a couple of years working on a startup airline called Eos Airlines that ultimately didn’t make it. The idea was to fly [a high-end service] from New York to London, but while people loved it, the economics were challenging and when oil spiked to $150 per barrel for a few months [it killed the business].

Are you still interested in disrupting the airline industry?

No, I’d never invest in another airline. It’s a terrible industry. It’s like Warren Buffett says, if you want a small fortune, start with a large fortune and invest in an airline.

Where are you investing then?

I realized I should look for something that I knew about and would enjoy, and I became a founding investor in and chairman of Hightower, a fast-growing, very profitable, seven-year-old wealth management firm. It now has 30 different locations around the U.S., around 300 employees, and almost $100 million in revenue. I’m also the chairman and a large investor in CorpU, a leadership development business that launched a few years ago and whose revenue is getting into double digit millions now.

So you like making concentrated bets. Are you ever tempted to pick up the pace of your investing?

No, negotiating term sheets, trying to dig into whether or not a business is something to get involved with or not – I hate every aspect of it. I’m an operator. Strategic, tactical, and leadership issues are what fascinate me. That’s what I like to think and write about.

Your new book focuses on breakthrough change. How interested are you in the many changes happening in financial services? What do you make of bitcoin specifically?

If you look at it, it’s like gold, whose value is in the eye of the beholder. Gold has very little real tangible value. It’s a shiny metal. But it goes up and down because it’s considered a store of value. Bitcoins are like that that. They’re simply digits, and if the public believes them to be a store of value, then I think they are. But in my mind, it’s an extremely risky currency, if you even want to call it that.

People like the whole idea of a currency that’s not backed by a government, but governments play a key role in ensuring that currencies have a stable value. It doesn’t always work out that way, but bitcoin doesn’t have anybody doing that. I mean, who is accountable? The answer is nobody. Nobody has raised their hand to say, “I’m behind this.” I think it’s nuts.

You spent 20 years at Schwab. Are you still in touch with Charles Schwab?

I had an amazing career because Charles Schwab the man gave me that opportunity. He supported me and promoted me and got behind me when I made idiotic, adolescent mistakes. I wish my last days had ended differently, but the company needed different leadership at the time, and Chuck and I continue to have a very nice relationship.


New Fundings

Atavist, a four-year-old, Brooklyn-based digital startup and multiplatform book publishing company, has raised $2 million in debt, shows an SEC filing. The company had previously raised roughly $3.4 million in equity, show earlier filings.

Cazena, a months-old, Acton, Ma.-based big data company founded by former Netezza executives, has raised $8 million in funding from Andreessen Horowitz and Northbridge Venture Partners. TechCrunch has more here.

CinePapaya, a two-year-old, Lima, Peru-based movie ticketing company, has raised $2 million in funding from the Brazilian Internet conglomerate Movile. The company has raised at least $2.7 million to date, shows Crunchbase, which lists 500 Startups as one of its earlier investors. TechCrunch has more here.

MediaHound, a three-year-old, Culver City, Ca.-based online platform that helps users discover, compare, and share film and TV content, has raised $4.5 million in Series A funding from undisclosed investors.

Metail, a six-year-old, London-based online garment-fit visualization company, has raised $12 million in funding led by the garment manufacturer TAL Group. The company has raised $19.5 million altogether, shows Crunchbase, which lists New World Private Equity as an earlier backer.

Nousdecor, a two-year-old, San Mateo, Ca.-based home decorating startup, has raised $2.1 million in seed funding led by Kathy Clark, daughter of legendary entrepreneur-investor Jim Clark and former wife of YouTube cofounder Chad Hurley. Recode has more here.

Recurly, a four-year-old, San Francisco-based pay-as-you-go subscription billing platform, has raised $12 million in Series B funding led byDevonshire Investors (the private investment firm affiliated with Fidelity Investments), with participation from Greycroft Partners and earlier investors Polaris Partners and The company has now raised $19.6 million altogether., a year-old, Sterling, Va.-based company behind a roadside assistance app and service, has raised $1.2 million in seed funding led by Select Venture Partners, with earlier investors Blu Ventures and CIT Gap Funds participating. The company has raised $1.8 million to date. TECH Cocktail DC has more here.

Viableware, a four-year-old, Kirkland, Wa.-based company that makes software and hardware, including a digital bill folder that accepts credit or debit cards at diners’ tables, has raised $2 million in equity and debt in a round that’s targeting $10 million, shows an SEC filing. The company had previously raised $7.5 million, shows Crunchbase.

Xplenty, a 3.5-year-old, Tel Aviv, Israel-based big data cloud platform that promises to make data processing easier for a broader array of business professionals, has raised $3 million in Series A funding from Magma Ventures and the Russian venture capital firm Waarde Capital.



Neothetics, a seven-year-old, San Diego-based specialty pharmaceutical company, has filed to raise up to $63.3 million in an IPO. Its biggest outside shareholders include Alta Partners, Domain Associates, and RMI Investments.

Zayo Group Holdings, a seven-year-old, Denver-based dark fiber company, saw its shares, priced at $19 apiece, rise nearly 16 percent in their stock market debut Friday.



Investor Marc Andreessen announced on Twitter this morning that he’s stepping off the board of eBay in advance of its split from PayPal. Writes Andreessen: “After 6 years of service + completed decision to split, I’ve decided now is a good time to step off the eBay Board of Directors. It’s been an absolute privilege to serve with [CEO] John [Donahoe], [fellow board member] Pierre [Omidyar], and team, and I could not be more proud of what we’ve accomplished.”

In other Marc Andreessen news, New York magazine has just published a must-read interview with him, in which he’s asked his perspective on everything from diversity in Silicon Valley to global income inequality to whether, given his growing power, anyone ever dares tell him his ideas are dumb. Andreessen’s response: “Every morning, I wake up and several dozen people have explained to me in detail how I’m an idiot on Twitter, which is actually fairly helpful.”

Michael Arrington, Ron Conway, Ron Palmeri, Brian Pokorny, California’s Lieutenant Governor Gavin Newsom, and star quarterback-turned investor Joe Montana were among those spotted at a Bruno Mars concert last week to benefit UCSF Benioff Children’s Hospitals. You can check out some photos here, care of society photographer Drew Alitzer.

Last week, Stephen Colbert complained on his show that Google has his height wrong, telling CEO Larry Page, “Fix it, or I will fix you, Page.” Google was up for the challenge.



North Atlantic Capital, a venture firm focused on later-stage deals, is looking for an associate. The job is in Portland, Me.


Essential Reads

Inside Pinterest: The coming ad colossus that could dwarf Twitter and Facebook.

Is Google starting to wield too much power in Washington?

The first two industrial revolutions ultimately benefited everyone. The digital one may prove far more divisive, argues the Economist.



The fight over the Bahia 180,000-carat emerald.

Scientific evidence that self-promoters underestimate how annoying they can be.

Your definitive argument for a pet-friendly office.


Retail Therapy

real light meter, for your iPhone photos.

Laplock, the app that alerts you when someone unplugs your power cord.

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