StrictlyVC: December 1, 2014

Welcome back, everyone! We hope you had a terrific break.

(Psst, web visitors, this version of today’s email is easier to read.)


Top News in the A.M.

It’s Cyber Monday, if you didn’t notice from the dozens of emails clogging your inbox and Twitter stream today. Amazon gives Wired a peek at the robots driving its “epic” Cyper Monday operation.

At least five new movies from Sony Pictures are being downloaded in high volume via copyright-infringing file-sharing hubs in the biggest piracy incident since July. Variety has more here.


How Many Tech Companies Break Out Each Year? And Where?

In recent years, it’s become the conventional wisdom that roughly 15 companies each year go on to produce all the returns in venture capital. Marc Andreessen was the first to make a very public case for the approach, citing the research of Andy Rachleff, who cofounded the venture firm Benchmark and who today teaches at Stanford and is the executive chairman of the investment firm Wealthfront.

“Basically, between roughly the mid-‘80s and the mid-2000s—a good cross-section of time across a couple of different cycles—what [Rachleff] found is that there are about 15 companies a year that are founded in the tech industry that will eventually get to $100 million in annual revenue,” Andreessen told me when Andreessen Horowitz was closing its first fund in 2009. “His data show that they [account for] 97 percent of all public returns, which is a good proxy for all returns. So those are the companies that matter.”

Rachleff’s reasoning explains much about how Andreessen Horowitz has operated from the start. Persuaded by the rise of Andreessen Horowitz, Rachleff’s research has also found its way into the thinking of every other top and second-tier venture firm (not to mention many hedge funds and mutual funds).

Interestingly, it’s hard to prove whether or not Rachleff’s findings still apply to today’s market. He never published the research, which he’d prepared for a speech. And he lost all of the data when his computer’s hard disk crashed in 2006, he once told me. When earlier this month, I asked him if he thinks today’s winner’s circle has changed in size, given falling startup costs and more ubiquitous broadband penetration (among other factors), Rachleff politely offered that he didn’t have time to explore the topic.

There is, of course, the oft-cited research of Aileen Lee of Cowboy Ventures, who looked at breakout companies last year and concluded that just four “unicorns” — or tech companies that go on to be valued at $1 billion or more — are founded each year. But Lee’s much newer dataset centered on U.S.-based tech companies that were launched in January 2003 and afterward. And comparing “unicorns” to tech companies that produce at least $100 million in revenue isn’t necessarily an apples-to-apples comparison.

Unfortunately, Lee didn’t respond to a recent request to discuss whether her findings and those of Rachleff are complementary or at odds.

More recent research suggests that Rachleff’s research holds up, though. In an 11-page paper written last year, economist Paul Kedrosky found “there are there are, on average, fifteen to twenty technology companies founded per year in the United States that one day get to $100 million in revenues.” He added that the “pace at which the United States produces $100-million companies has been surprisingly stable over time, despite changes in the nature of the U.S. economy.” (It’s highly remarkable, in our opinion.)

Kedrosky added that the biggest “hidden changes” in the way U.S. tech giants are created is where they are founded, suggesting that if investors with big funds are going to chase after breakout companies, they’d be smart to cast a net far beyond Silicon Valley. Indeed, according to him, of the 15 to 20 tech companies to break out each year, just four, or 20 percent, are now founded in California, “usually.” In the 1990s, meanwhile, California’s share of $100-million technology companies was roughly 35 percent.


New Fundings

Bowery, a 1.5-year-old, New York-based company whose cloud service enables programmers to quickly create developer environments, then upgrade and share them with co-workers in real time, has raised $1.5 million in a convertible note. Investors include Betaworks, Bloomberg Beta, BOLDstart Ventures, Deep Fork Capital, Google VenturesHomebrew, Magnet Agency, RRE Ventures and SV Angel. General Catalyst Partners’s Rough Draft Ventures and First Round Capital’s Dorm Room Fund, which both previously invested $50,000 in February, also contributed along with private investors Naveen Selvadurai and Ryan Holmes. Venture Capital Dispatch has more here.

Carousell, a two-year-old, Singapore, China-based mobile marketplace that helps facilitate the sale of goods between people, has raised $6 million in funding led by Sequoia Capital. Earlier backers Rakuten VenturesGolden Gate Ventures, 500 Startups and serial entrepreneur Darius Cheung also participated in the round. The Economic Times has more here.

ChainSync, a two-year-old, London-based scalable franchise management system, has raised $500,000 in seed funding from one, unnamed angel investor. The company says it has 500 franchise users.

Cirba, a 15-year-old, Toronto, Ontario-based company that sells infrastructure control software for private cloud, virtualization and software-defined environments, has raised $6.2 million from investors, shows anSEC filing. The company’s backers include the Washington, D.C.-based firm Updata Partners and Tandem Expansion Fund of Montreal.

Glide, a 1.5-year-old, New York-based company whose app combines video chat with texting, has raised $20 million in Series B funding led by Marker LLC, with participation from Two Sigma Ventures, Menlo Ventures and other, earlier investors. The company had raised two previous rounds of undisclosed amounts, shows Crunchbase.

Lazada, a 2.5-year-old, Kuala Lumpur-based online mall that was incubated by Rocket Internet, has raised roughly $250 million in new funding led by Singapore’s Temasek Holdings, with participation from earlier backers Rocket Internet, Kinnevik, and Verlinvest. The company, which has taken off in Southeast Asia, has now raised $436 million to date, shows Crunchbase.

Narrative Science, a nearly five-year-old, Chicago-based company whose software can sift through data to automatically create written internal reports and the like for its corporate clients, has raised $10 million in fresh funding, reports Recode. The round was led by one of the startup’s newest customers, the United Services Automobile Association. Earlier investors Sapphire Ventures, Jump Capital, and Battery Ventures also joined the round, which brings the company’s total funding to $32 million.

Pieris, a 13-year-old, Munich, Germany-based biotech, has raised €6.6m ($8.2 million) from numerous life sciences venture firms, including earlier backers Gilde Healthcare Fund, OrbiMed, Global Life Science Ventures, BioM Venture Capital, BayTech Venture Capital and Ally Bridge Group. Pieris had previously raised at least $45.9 million, according to Crunchbase.

QLL, a seven-year-old, Taipei-based company that makes educational mobile apps, has raised $450,000 in funding led by B Dash Ventures, with participation from Incubate Fund, Pinehurst Advisors, Viling, and Coent Venture Partners. TechCrunch has more here.

Socrata, a seven-year-old, Seattle-based cloud software company whose open-data platform is used at all levels of government to present information for the general public, has raised raised $30 million in new funding, shows an SEC filing. The company had previously raised $24.5 million, including from Morgenthaler Ventures, Frazier Technology Ventures, In-Q-Tel, and OpenView Venture Partners.

Vox Media, a four-year-old, New York-based publisher with a fast-growing portfolio of online lifestyle and news brands, including The Verge and Eater, has raised $46.5 million in new funding from General Atlantic in a deal that values the company at $380 million, reports Dealbook. The company has now raised $107.6 million altogether, shows Crunchbase. Its previous backers include Comcast Ventures, Khosla Ventures, Accel Partners, Ted Leonsis, and Allen & Co.


New Funds

You might not guess that Hasso Plattner Ventures had outside investors, but apparently, it did. Indeed, the nine-year-old firm, named after the billionaire cofounder of the software giant SAP, has just announced it won’t raise another fund with the help of limited partners but that it will instead rely solely on the funds of Plattner himself, whose fortune has been estimated at roughly $8 billion. The outlet Unquote has more here.

Middle East Venture Partners, a Beirut, Dubai, and Silicon Valley-based venture capital firm, has begun raising a $30 million pool to invest in between 10 and 15 companies from the United Arab Emirates in the next three years, reports Arabian Business. The firm, which is currently managing $75 million in assets, will be looking specifically for e-commerce, “edutainment,” and e-payment start-ups to add to its existing portfolio of 25 tech companies.

Tiger Global Management has closed on $2.5 billion in new funding, shows an SEC filing. The money comes just eight months after Tiger closed on a separate, $1.5 billion pool and will likely worry those who were already dismayed about the amount of money flooding into late-stage companies. The money is reportedly being split between a Global Internet Opportunities fund that will launch next month with $1.5 billion, and a $1 billion Global Long Opportunities fund.



LendingClub, the seven-year-old, San Francisco-based, online peer-to-peer financing company, has boosted the size of its planned IPO to $650 million, after initially looking to sell $500 million worth of stock, reports the Financial Times. The company will likely set a valuation range that starts at $3.8 billion, say the report. LendingClub’s biggest institutional shareholders are Norwest Venture Partners, which owns 16.5 percent of the company; Canaan Partners, which owns 15.9 percent; Foundation Capital, which owns 12.8 percent; and Morgenthaler Venture Partners, which owns 9.2 percent.

Momo, a three-year-old, Beijing, China-based company that makes a popular location-based services instant messaging application, expects to raise $256.6 million from a planned stock offering, according to an updatedSEC filing that shows it plans to price its American Depositary Shares between $12.50 and $14.50 per share. The company had registered to go public early last month.

Outbrain, an eight-year-old, New York-based provider of “native ads,” filed confidentially with the SEC earlier this month, according to VentureWire sources. Outbrain is expected to seek a valuation of around $1 billion,reports the the outlet. The company has raised roughly $100 million to date, including from Rhodium, GlenRock Israel, Lightspeed Venture Partners, Carmel Ventures, HarbourVest Partners, Gemini Israel Ventures, and Index Ventures.



Microsoft appears to have acquired Acompli, a mobile email application that helps customers quickly find emails in their inboxes, reports TechCrunch. The 1.5-year-old, San Francisco-based company has raised at least $7.3 million from investors, shows Crunchbase. Its investors include Felicis Ventures, Harrison Metal, and Redpoint Ventures.

NSynergy, an 11-year-old, Melbourne, Australia-based Microsoft-centric cloud business focusing on Office365 implementations, has been acquired by the 11-year-old, subscription software licensing firm Rhipe (also based in Melbourne) in a $23.5 million deal. More here.

PasswordBox, a two-year-old, Montreal-based maker of digital identity management software, has been acquired by Intel for undisclosed terms. The company had raised at least $6 million from investors, including Real Ventures, OMERS Ventures, and individuals Lee Linden, Mark Britto, and Greg Wolfond, shows Crunchbase. TechCrunch has more here.



Former Hewlett-Packard CEO Carly Fiorina is exploring a run for president and been talking privately with potential donors, recruiting campaign staffers, and courting grass-roots activists in early caucus and primary states. The Washington Post has the story here. Fiorina, a Republican, has never held office; she ran unsuccessfully for Senate in 2010.

Since his death in 2011, former Apple CEO Steve Jobs has won 141 patents. That’s more than most inventors win during their lifetimes, notes Technology Review. More here.

Billionaire Vinod Khosla’s big plans for biofuels have mostly failed to take off. The Washington Post lingers on some of the biggest misfires, including KiOR, a biofuel outfit that filed for bankruptcy early last month, leaving behind 2,067 creditors, including the state of Mississippi, which had given KiOR a $75 million, 20-year, no-interest loan after the company assured officials that it would invest $500 million in the plant and create 1,000 jobs by December 2015.

Uber has concluded an investigation of New York City general manager Josh Mohrer for alleged privacy violations and has “taken disciplinary actions” against him, reports Slate. Uber began looking into Mohrer after a BuzzFeed journalist reported that he’d accessed her Uber travel data without her permission multiple times. Uber has declined to comment on any specifics of the “disciplinary actions” but says Mohrer will retain his role.

Amit Srivastava has joined the Montreal-based firm Cycle Capital Management as a senior partner. Srivastava was formerly the managing Partner and CEO of Entrepia Ventures. Prior to joining Entrepia in 2001, he worked for seven years at JP Morgan Chase.



The Post.Seed Conference takes place tomorrow in San Francisco, where numerous high-profile investors are set to speak on a wide range of early-stage financing issues, including Chris Dixon, Paul Martino, Keith Rabois, Naval Ravikant, Ryan Sarver, Semil Shah and Hunter Walk. (I’ll be there, too, moderating a panel.) More information here.


Job Listings

GSV Capital, the publicly traded firm that invests in private venture-capital backed companies, is looking for a partner to “manage the firm’s capital raising initiatives.” More here.


Essential Reads

For younger Indians, buying a car is seen as a “total waste of money,” a local IT consultant tells Businessweek in an interesting piece about the rise of car-sharing services in the country, which has long been plagued by traffic congestion and poor public transportation options.

Intel will be “inside” your Google Glass beginning next year, reports the WSJ.



Power doodles.

Anamorphic installations made of random objects.

The science of politely ending a conversation.


Retail Therapy

Gravity-defying bookshelves.

Perfect bacon bowls. (A real product.)

A company boldly takes ugly Christmas sweaters to the next level.

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