StrictlyVC: November 6, 2014

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Top News in the A.M.

Government officials are trying to expand their authority to hack into computers by changing an arcane federal rule governing how judges can approve search warrants, reports the National Journal.


The Industry Gets a New, $50 Million Micro VC Fund of Funds

Today, Venture Investment Associates, a 21-year-old fund of funds group that commits capital to venture capital, growth capital, and private equity groups, is announcing that it has closed on an oversubscribed $50 million seed fund of funds that counts some pretty tony institutions as LPs. Managing director Chris Douvos — who joined the firm in 2011, having worked previously for TIFF (The Investment Fund for Foundations) and Princeton University’s endowment — won’t let StrictlyVC name those investors. But we talked recently about numerous other facets of the new fund, and who it’s liable to back. Our chat has been edited for length.

This is your second formal micro-VC fund of funds, and half of it is already committed. Is that right?

Yes, we’ve been investing in [micro-VC] since 2004; we were part of First Round Capital’s friends-and-family round. But we closed on an oversubscribed $25 million fund of funds in 2012, 80 percent of which went to four managers: True Ventures, First Round Capital, Data Collective and [O’Reilly AlphaTech Ventures]. And half of this oversubscribed $50 million fund is deployed among First Round, True, and Data Collective. We’re also likely to do OATV again when it comes back in the market.

That’s concentrated.

I believe investing is about conviction. I would give [First Round founder] Josh Kopelman the last dollar in my kids’ college funds.

What kind of ownership percentage do you target?

When we’re a major institutional backer of a new entity, we like at least 10 percent of the fund. In the case of OATV, back in 2006, we did 15 percent of the fund. At Data Collective, we [bought] 10 percent of fund in 2012. We have a group of [institutional] investors who are super sophisticated and we’re sort of bird-dogging ideas for them.

What new idea are you spying? What other types of funds are you looking to back right now?

We’re looking to find another group or two where we can really make an impact and put them in business. Having invested in the space for more than a decade now, it’s easy to tell who the tourists are and who the long-term players are. I focus on groups that somehow punch above their weight, that offer a platform dynamic where their companies will materially benefit from interaction with the VC but where the VC doesn’t end up being a bottleneck.

I’m not looking for sharpshooters that are the next really smart ex-entrepreneur, because I’ve seen that model rise and fall several times.
There are a plethora of these people raising funds; I think we’ll have a Cambrian explosion and the species will kind of die off during the next financial crash. It’ll be like a meteor hitting.

Are you seeing many newer firms emerge with platform approaches? I take it you’re looking for another True or First Round – firms that do a lot to facilitate interactions between the founders of their portfolio companies.

Firms that demonstrate platform dynamics are really special, but they’re few and far between. There’s no one on my radar screen right now.

Do you care where a firm is based? Would you fund a firm that’s not in the U.S.?

This is an information business, and when you’re investing far afield, you start outrunning your supply lines of information. You’re investing in people and you need to understand their motivations and their fears and their contexts, and it’s hard to know those when they’re thousands of miles away.

Do you favor VCs who spin out on their own to entrepreneurs?

I think operating experience is overrated and that people undervalue the investing experience of people who’ve written checks of institutional size. When I’m looking at an entrepreneur, I’m asking myself: How do they think about investing as a fiduciary, because it’s a very different skill set and thought process.

There’s a bias in the Valley that [investing experience] is a secondary consideration and that finding a cool technology or exciting team will make everything work out. But we’re starting to see with late-stage deals that are heavily structured and sapping the returns of earlier investors that [those ties] aren’t sufficient to the end goal of making money for investors.

What do you make of AngelList? Do you think more entrepreneurs should or will begin using it to form their own micro VC outfits?

I think AngelList Syndicates and [the accredited investor platform] FundersClub could really reshuffle the landscape. We don’t know yet how those stories play out. We made a small investment in AngelList’s Maiden Lane [a fund that backs investors on AngelList] partially to have a front row seat as things unfold.

But part of me wonders about a lot of people who are raising these small funds. Traditional fund structure is deeply flawed. The average fund lasts twice as long as the average American marriage. It often outlasts their LP’s tenure at an institution. They’ve got to be thinking: Why not raise money via AngelList instead?


New Fundings

Agorize, a three-year-old, Paris-based company that relies on open innovation and community crowdsourcing to let companies gather data on new ideas and ventures, has raised $2.6 million from Iris Capital and Capnamic Ventures with Ader Finance participating. TechCrunch has more here.

C3Nano, a four-year-old, Hayward, Ca.-based company develops hybrid carbon nanotube-based transparent electrode inks and films for display devices, has raised $12 million in Series C financing led by Nagase America Corp. and another, undisclosed company. The company has now raised roughly $21.9 million to date, shows Crunchbase; others of its backers include Phoenix Venture Partners, and GSR Ventures.

Cloud9 IDE, a four-year-old, San Francisco-based online development platform technology that enables web and mobile developers to collaborate from anywhere, has raised an undisclosed amount of Series B funding led by Balderton Capital. The company had previously raised $5.6 million in Series A funding from Accel Partners and Atlassian.

Creditera, a two-year-old, South Jordan, Ut.-based service that gives small-business owners free access to their personal and business credit data, has raised $6.5 million in Series A funding from Kleiner Perkins Caufield & Byers, along with Peak Ventures and other, undisclosed backers. The company had previously raised an undisclosed amount of funding led by Kickstart Seed Fund. TechCrunch has more here.

FilmTrack, an 18-year-old, Studio City, Calif.-based provider of rights and content management SaaS solutions for the film and television industries, has raised $10 million in Series B funding led by earlier investor Insight Venture Partners and SurveyMonkey CEO Dave Goldberg. The company has now raised $30 million to date, shows Crunchbase. In related news, FilmTrack has acquired the music licensing software platform Dashbox, which Goldberg co-founded, for undisclosed terms.

Gemr, a 1.5-year-old, Portsmouth, New Hampshire-based company whose app and website community aim to help people find and value collectibles, has raised $4.9 million in Series A funding from investors, including James Hawkes, the former chairman and CEO of Eaton Vance Corp., and co-founder Gary Sullivan, who is also an appraiser on PBS’s “Antique Roadshow.” TechCrunch has more here.

Intersec, a 10-year-old, Paris, France-based company that sells optimization software to mobile operators, has closed a $20 million Series B funding round from Highland Capital Partners Europe and existing investors.

MediaRadar, an eight-year-old, New York-based company whose competitive intelligence platform is designed for digital and magazine advertising sales executives, has raised $6.7 million in funding from Bain Capital Ventures, Mousse Partners and Founder Collective.

Shippable, a year-old, Seattle, Wa.-based company that continuously integrates, tests, packages and deploys developers’ software to any cloud, has raised $8 million in Series A funding led by Madrona Venture Group, with participation from earlier investors Vulcan Capital, Divergent Ventures and Founders Co-Op. The company has now raised $10.1 million altogether. TechCrunch has more here.

Spacehive, a 2.5-year-old, U.K.-based civic crowdfunding platform, has raised 1.3 million pounds ($2 million) in funding led by SI2 Fund, with participation from Big Society Capital and other, unnamed investors.

Tolero Pharmaceuticals, a three-year-old, Salt Lake City, Ut.-based biopharmaceutical company developing therapies to help cure diseases such as cancer and rheumatoid arthritis, has raised a second tranche of a Series B funding that brings the round total to $22.4 million. The round was led by Fred Alger Management and includes participation from unnamed institutional and individual investors.

Watchup, a two-year-old, Menlo Park, Ca.-based startup that delivers personalized newscasts, has raised $2.75 million in funding led by Tribune Media, with participation from the McClatchy Co. and earlier investors Knight Enterprise Fund, Stanford-StartX Fund and Ned Lamont. The company, founded at Stanford University’s Stanford-StartX accelerator, has now raised $4.25 million altogether.

ZergNet, a three-year-old, Indianpolis, Ia.-based content recommendation startup, has raised $3.2 million in Series A funding co-led by Greycroft Partners and Bertelsmann Digital Media Investments, with participation from Lerer Hippeau Ventures and Mark Cuban. Venture Capital Dispatch has more here.


New Funds

Arbor Ventures, a Hong Kong-based early-stage venture firm, has held a first close on $125 million for its debut fund, which is focused on the intersection of big data, financial services and digital commerce. The firm was founded by two senior female partners from Asia’s venture capital industry: Melissa Guzy, previously a managing director of VantagePoint Asia; and Citi Ventures’ former head of Asia, Wei Hopeman. The WSJ has much more here.


Inotek Pharmaceuticals, a 15-year-old, Lexington, Ma.-based biopharmaceutical company developing therapies for glaucoma, has filed the paperwork to raise up to $132.2 million in an IPO. The company has raised at least $30 million in equity and debt in recent years, shows Cruchbase. Some of its biggest shareholders including Devon Park Bioventures, which owns 25.7 of the company; Rho Ventures, which owns 20.4; Care Capital, which owns 17.8 percent; MedImmune Ventures, which owns 16 percent; and Pitango Venture Capital, which owns 11.6 percent.



Supernova is shutting down its iOS apps, including the once popular video-sharing app Viddy, reports App Advice.



The 100 best tech people on Twitter, per Business Insider.

The daily deals company LivingSocial has just announced 20 percent layoffs at the company, reports Valleywag. More here.

Travis VanderZanden, the former COO of Lyft, who left the company in August and joined ridesharing rival Uber in October, is being accused of taking secret documents with him in a new lawsuit filed by Lyft yesterday. The documents contained financial projections, product plans, customer lists and private personnel information, says Lyft.

Twitter has proposed constructing a sky bridge between its headquarters’ two buildings in San Francisco so Twitter employees won’t have to go downstairs and cross the street during the day. (One suspects this will not do wonders for local perceptions of Twitter as isolationist.)



In the past year, investors have contributed more than $300 million in 97 venture rounds for so-called Internet of Everything startups. TechCrunch has more here.

Venture capitalists are also investing in lots of tools to help programmers do their jobs better, reports Venture Capital Dispatch. Nineteen U.S. startups working on software-development tools raised $235.1 million in the third quarter, the most in any quarter since 2000.


Essential Reads

Nest is now giving away its smart thermostats, starting with a public utility in Ireland whose users will have to sign a two-year contract in exchange for the product.

In a major twist of its own, Microsoft will now give away the mobile version of its Office software.



“I work in San Francisco.”

Justine Bateman on pulling off a major mid-life career pivot.

Gone in an instant: How one NBA player lost $110 million.


Retail Therapy

Mogo Portable Seats. You will look ridiculous, but sometimes you need to take a load off.

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