StrictlyVC: October 21, 2014

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Top News in the A.M.

Apple reported blow-out fourth-quarter results yesterday.

Verizon, meanwhile, posted its third-quarter results, narrowly missing earnings expectations but showing strong customer growth.

Yahoo is set to reports its third-quarter results today.


Oh No You Didn’t, Facebook

Yesterday, Facebook sued DLA Piper along with three other firms and nine lawyers who represented Paul Ceglia, a New York man who emerged in 2010 with claims that he was entitled to at least 50 percent of Facebook.

Given that it’s nearly 2015, Facebook’s move comes as something of a surprise. Ceglia’s suit against Facebook was dismissed back in March by a federal judge amid clear evidence that his claims to Facebook were based on a “recently created fabrication.” More, two years ago, Ceglia was arrested and charged with mail and wire fraud for allegedly falsifying the contract and creating bogus emails to support his case. (His criminal trial is now scheduled for May.)

Facebook’s festering ire at the firms that represented Ceglia is understandable to a point. Ceglia’s lawsuit and the questions it raised were a huge distraction before Facebook went public in 2012.

Industry observers are probably cheering on Facebook, too, partly in hopes that law firms will think harder about bringing frivolous lawsuits.

Still, Facebook’s rationale for pursuing these firms at this late date sounds a little vengeful. “We said from the beginning that Paul Ceglia’s claim was a fraud and that we would seek to hold those responsible accountable,” Facebook General Counsel Colin Stretch said in a statement given to reporters yesterday. “DLA Piper and the other named law firms knew the case was based on forged documents, yet they pursued it anyway, and they should be held to account.”

Stretch might just as well have said, “DLA Piper and the other named law firms deserve an atomic wedgie, and we’re going to give them one to remember.”

DLA Piper sent StrictlyVC a comment about the suit today. Written by Peter Pantaleo, DLA Piper’s general counsel, the firm calls the lawsuit “entirely baseless” and “filed as a tactic to intimidate lawyers from bringing litigation against Facebook. DLA Piper, which was not part of this case at its outset or its conclusion, was involved for 78 days. Facebook and Mr. Zuckerberg claim that they were damaged in those 78 days, yet a mere 10 months after DLA Piper withdrew from the case and while the litigation was still pending, Facebook went to market with an initial public offering that valued the company at $100 billion. Today, Facebook is worth $200 billion and Mr. Zuckerberg is among the richest people in the world. We will defend this meritless litigation aggressively and we will prevail.”

Either way, a 2011 conversation we had with a corporate litigation attorney about Ceglia suggests that Facebook’s case against DLA Piper and the others probably isn’t a slam dunk.

Generally speaking, this attorney explained, lawyers have to “ensure that there’s a good faith basis for the claims that they file on behalf of their clients. That doesn’t mean that they have to think that they necessarily will prevail, but there has to be some kind of factual basis, in their view, to provide some support for the allegations.”

Presumably, DLA Piper didn’t know when it took the case that Ceglia fabricated the evidence to support his claims.

We’re also guessing it will be hard to argue that Ceglia’s lawyers used uniquely reckless judgment in taking on the Ceglia case. In 2010, for example, DLA Piper decided to represent CNet founder Halsey Minor in a Chapter 11 proceeding despite Minor’s long history of stiffing service providers.

DLA Piper subsequently dropped Minor eight months after engaging with him, but you see the point: if it were so easy to sue a law firm over its ne’er-do-well customers, we wouldn’t have lawyers.

Facebook says its lawsuit is a matter of principle. We think it sounds heavy-handed. It also seems very much like another distraction that the company doesn’t need.


New Fundings

Bitnet Technologies, a 10-month-old, San Francisco-based digital commerce platform provider for bitcoin payments, has raised $14.5 million in Series A funding led by Highland Capital Partners. Other investors include Rakuten, Webb Investment Network, Bitcoin Opportunity Corp., Stephens Investment Management, Commerce Ventures and Buchanan Capital Management. Bitnet’s team is largely from the payment gateway company CyberSource and from Visa, which acquired CyberSource in 2010 for $2 billion.

Bowery, a year-old, New York-based enterprise startup focused on simplifying the process of setting up, managing, and sharing development environments, has raised $1.5 million in seed funding from Google Ventures, Bloomberg Beta, RRE Ventures, Homebrew, Betaworks, SV Angel, BOLDstart Ventures, Magnet Agency, Deep Fork Capital, and angel investors Naveen Selvadurai and Ryan Holmes. The company had earlier raised an undisclosed amount of seed funding from General Catalyst Partners and First Round Capital.

CAA, the 39-year-old, L.A.-based sports and talent agency, has agreed to a deal with the private equity firm TPG that sees the latter’s stake in CAA grow from 35 percent to 53 percent in exchange for roughly $225 million. Deadline Hollywood has more here.

CloudCannon, a two-year-old, San Francisco-based company behind an easy-to-use content management system designed to help web designers and their clients work together more easily, has raised $500,000 in seed funding from individual investors. TechCrunch has more here.

GoCatch, a three-year-old, Sydney, Australia-based taxi booking and payments app, has raised roughly $4 million (in U.S. dollars), from investors that include Square Peg, a venture firm backed by billionaire James Packer, along with numerous wealthy Australian families such as the Kahlbetzers, the Liberman family, and the Millner family. The Australian outlet BRW has more here.

GrabTaxi, a two-year-old, Malaysia-based mobile application that assigns available cabs to nearby commuters using mapping and location-sharing technology, has raised $65 million in new funding — its third round of 2014.Tiger Global Management led the round, with participation from new investor Hillhouse Capital and previous investors Vertex Ventures, GGV Capital, and the Chinese travel giant Qunar. The company has now raised “approximately $90 million,” says TechCrunch. (Here’s a Bloomberg piece from June that profiles GrabTaxi’s founder, former HBS student Anthony Tan.)

Intel Capital, the 23-year-old, Santa Clara, Ca.-based global corporate venture arm of Intel, announced last night that it has invested $28 million across five Chinese companies, including makers of wearables and Internet of things devices and components. They are: EyeSmart Technology, LeWa Technology, Shenzhen Fibocom Industrial Development, Shanghai Ailiao Information Technology, andGuangdong Appscomm Digital Technology. The outlet peHUB has more here.

La Belle Assiette, a 1.5-year-old, Paris-based online marketplace for customers seeking out private chefs, has raised $1.7 million in seed funding, including from BlaBlaCar cofounder Nicolas Brusson; three founders of l’Atelier des Chefs (Europe’s largest cooking classes company); and Kima Ventures. The company had previously raised $500,000 in seed funding.

Magic Leap, a three-year-old, Hollywood, Fla.-based still-stealth company that says its hardware and software will deliver “cinematic reality,” has officially closed on $542 million in Series B funding. (Recode had reportedlast week that the company was zeroing in on a $500 million round.) Investors include Google, Kleiner Perkins Caufield & Byers,Andreessen Horowitz, Obvious Ventures, Qualcomm and Legendary Entertainment.

Mirantis, a four-year-old, Mountain View, Ca.-based OpenStack cloud vendor, has raised $100 million in Series B funding led by Insight Venture Partners, with participation from August Capital and earlier investors Intel, WestSummit Capital, Ericsson and SAP. The company has now raised $120 million altogether. GigaOm has more here.

NuCurrent, a five-year-old, Chicago-based company that makes high-efficiency antennas for wireless power applications, has raised $3.48 million in Series A funding from Independence Equity, Hyde Park Angels, Harvard Business School Angels, and undisclosed corporate investor and earlier backers.

Sequenta, a six-year-old, San Francisco-based biotech company whose technology detects minimal residual diseases, has raised an undisclosed amount of funding from Celgene Corp. and other, undisclosed strategic investors. The company had previously raised at least $41.5 million, including from Index Ventures, Mohr Davidow Ventures, and Foresite Capital, shows Crunchbase.

Snowflake Computing, a two-year-old, San Mateo, Ca.-based cloud-based data warehousing company, has raised $26 million in Series B funding led by Redpoint Ventures, with participation from Wing Ventures and earlier investor Sutter Hill Ventures. The company has now raised roughly $50 million altogether. GigaOm has more here.

STAQ, a two-year-old, New York-based ad tech firm that sells a collection, reporting, and integrations system that helps users view their campaigns, inventory, and audience data, has raised $2.5 million in Series A funding led by Genacast Ventures and Core Capital, with participation from earlier investors Kinetic Ventures, Revel Partners and The Hive. The company had previously raised $1.1 million in seed funding.

StackIQ, an eight-year-old, La Jolla-based supplier of IT-automation technology to large businesses, has raised $6 million in Series B funding from new investors Grayhawk Capital, Keshif Ventures, DLA Piper and OurCrowd, along with earlier investors Anthem Venture Partners andAvalon Ventures. The company has raised at least $7.8 million to date, shows Crunchbase.

Vomaris Innovations, a 10-year-old, Tempe, Az.-based regenerative medical device company that develops a microcurrent field generating wound dressing, has raised $5 million in new funding, shows an SEC filing. The company had previously raised $5 million in equity and $200,000 in debt, show earlier filings.

WeGoLook, a four-year-old, Oklahoma City-based company that dispatches in-person “lookers” to verify claims made by Internet sellers about their products (including cars), has raised $1.75 million in Series A funding led by i2E, which was joined by Seedstep Angels; the company’s founders; and other, undisclosed investors.

ZipLine Medical, a nearly eight-year-old, Campbell, Ca.-based medical device company that’s developing noninvasive surgical skin closure devices, has added $5.7 million to its Series C round, which initially closed in January of this year. China Materialia, a Shanghai-based venture firm, led the newest funding. The company’s earlier Series C investors includedRA Capital Management, XSeed Capital and Claremont Creek Ventures. The company has now raised $16 million to date, shows Crunchbase.


New Funds

Google Ventures has upped the size of its inaugural European fund from $100 million to $125 million, its managing partner, Bill Maris, said yesterday. More here.

OneVentures, a 7.5-year-old, Sydney, Australia-based firm that makes early-stage bets on technology companies based in Australia, has raised more than $60 million for a $100 million fund it began raising back in March. The firm’s focus is wide-ranging, including healthcare, education, mobile, media, cloud computing and data, sensors and robotics, and “food security.” It looks for companies that are already making $5 million to $15 million in annual revenue.

PureTech, a 10-year-old, Boston-based operating company that specializes in seed and early-stage investment in novel therapeutics, medical devices, and research technologies, has raised $55 million in new funding led by the U.K. investment manager Invesco Perpetual. FierceBiotech has more here.



Connecture, a 15-year-old, Brookfield, Wi.-based company whose enterprise software is used to build health-insurance exchanges, has filedto raise up to $86.3 million in a public offering. Some of its biggest outside shareholders include Chrysalis Ventures, which owns 28.5 percent of the company; SSM Partners, which owns 20.2 percent; and LiveOak Equity Partners, which owns 10.6 percent.

Workiva, a six-year-old, Ames, Ia.-based cloud-based data analytics company that helps companies collect, manage, report and analyze critical business data in real time, has filed to go public. One of its biggest outside investors is Bluestem, a Midwest private equity firm.



Crunchbase, the AOL-owned database of tech companies and people, could very well be spun off into its own standalone company, said AOL CEO Tim Armstrong yesterday at a TechCrunch conference, adding that while AOL would remain a majority stakeholder in the business, AOL would consider either funding a spin-off itself or taking outside capital.More here.

BrightRoll, the 8.5-year-old, San Francisco-based cross-platform digital video advertising service, is in talks to be acquired by Yahoo, reports TechCrunch, which says that “term sheets have been signed” and that the price will likely be in the neighborhood of $700 million. Brightroll has raised $40.2 million over the years, including from Adams Street PartnersScale Venture Partners, Comerica Bank, True Ventures, Trident Capital, KPG Ventures, Michael Tanne, Fabrice Grinda, Auren Hoffman and Jeff Clavier.

Videoplaza, a London-based video supply-side platform, is being acquired or an undisclosed sum by the video distribution and analytics platform Ooyala (itself now owned by Australian telco Telstra). More here.



At the London-based TechCrunch Disrupt conference yesterday, AOL CEO Tim Armstrong squelched recent rumors suggesting that Yahoo and AOL might merge, saying that of a 30- to 40-page presentation he’d just prepared for his board about AOL’s 2015 plans, “I don’t think Yahoo is mentioned once in that deck.”

Venture capitalist Jim Breyer says startup founders should raise money right now if they can, given the volatility of the public markets. As he tells Bloomberg: “I encourage our best companies, which believe they don’t need to raise cash, to do so opportunistically.” Breyer points to the media company Legendary Entertainment — which raised $250 million at a multibillion-dollar valuation this month led by SoftBank, Fidelity Investments, and Morgan Stanley — as one portfolio company that agreed with his thinking, adding: “A company is better off with 18 months of cash in the bank.”

Oracle billionaire Larry Ellison owns a $300 million Hawaiian paradise, and Business Insider takes readers on a tour of it.

Maha Ibrahim, a general partner at Canaan Partners, tells the Silicon Valley Business Journal she spent a decade trying to ignore the topic of gender in venture capital, but no longer. “At Canaan, we have two female general partners. We have six female investor professionals (including GPs), and the great thing is that 20 percent of the companies that we’ve invested in . . . were founded by females. So diversity is really important to us, and we believe that it starts by leading by example. We might as well start doing it ourselves.”



The Post.Seed Conference is coming up in San Francisco on December 2, and it will feature an impressive line-up of investors to speak on a wide range of early-stage financing issues, including Chris Dixon, Paul Martino, Keith Rabois, Naval Ravikant, Ryan Sarver, Semil ShahHunter Walk, Brandon Zeuner, and many others. (I’ll be there, too, moderating a panel.) You can sign up here.


Essential Reads

Humanity’s last great hope is venture capitalists, argues the WSJ.



Dating versus married: How text messages change over time.

Hoverboards? We’re not there yet.

A somewhat surprising look into a social network for doctors, where one popular post is “guess the diagnosis.” (Doctors: They’re funny and awful, just like us!)


Retail Therapy

James Bond’s Lotus Esprit Submarine. Elon Musk owns one. Now you can, too.

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