StrictlyVC: December 8, 2014

Happy Monday, everyone! Hope you had a terrific weekend. (Web visitors, you can check out an easier-to-read version of this email right here.)


Top News in the A.M.

The Delhi government has banned Uber India following a violent assault involving a 25-year-old woman on Friday. Any taxi using Uber’s services in Delhi can now attract fines and even be impounded. Police in Delhi began looking to take action against Uber immediately after the attack, with local officials blaming the company for not checking the driver’s background or ensuring that he had a satellite location device in his car.

North Korea has denied hacking Sony Pictures’ computer systems in retaliation for its movie “The Interview,” which revolves around a plot to assassinate North Korea’s leader, Kim Jong Un. It called the cyberattack a “righteous deed,” though. (The film’s actors, James Franco and Seth Rogen, are meanwile having fun with the whole thing.)

India-based e-tailing giant Snapdeal could see some of its shares trade hands soon, reports the Times of India. It says the Bengaluru-based venture fund Kalaari Capital may be in the process of executing a secondary sale of shares worth $100 million.


Weathergage Capital: Our Peers Thought We Were “Half Crazy” to Back Micro VC

Judith Elsea, a cofounder of the Palo Alto, Ca.-based venture fund-of-funds Weathergage Capital, has been a proponent of micro-VC funds since long before the term came into fashion.

We caught up last week to talk shop, during which time Elsea was fairly candid — except about whether eight-year-old Weathergage has sealed up a third, $200 million fund that the firm set out to raise 10 months ago. (Weathergage closed its first, $250 million vehicle, in 2007. It closed a second fund with $182 million in 2011.)

Weathergage invests in growth equity funds and venture capital, including micro VCs. On a percentage basis, much do you allocate to the last?

Micro VC is part of a larger practice. I couldn’t share how big a part, but we’re one of the pioneering investors in micro VC and we’ve increased our exposure over time. We saw that it was much easier and cheaper to start a company and that you could do a heck of a lot more at the product-market fit level with a lot less money. We saw the opportunity, but we didn’t know if we’d see investors set up much smaller size funds to capture entrepreneurs at that point in their companies’ development. But it happened that we did and we were fortunate to invest in some really talented investors.

I remember when Mike Maples — who you’ve backed — was starting out in 2006 with $15 million from 10 individual investors.

Many institutional investors and our peers in our general ecosystem thought we were half crazy for allocating some our capital to this area. But as time has gone on and returns have rolled in and been quite good and competitive, it’s attracted more investor interest and become a lot less of an oddity.

Still, no one knows yet quite how they’ll do.

The primarily characteristic of the performance so far is a large number of M&A and early exits. So you might say that’s an artifact of the current market. But that doesn’t meant they haven’t achieved exits fairly quickly and at fairly attractive multiples in aggregate.

I don’t know how much time it takes to prove a model – probably longer than we’ve seen in micro VC. But for the best-in-class managers, they seem to have found a nice niche in the VC ecosystem. We certainly see their companies getting sponsored by the best venture funds with great regularity. We see them getting attractive exits. To the extent that the funds aren’t fully liquidated yet, you could say they’re unproven. But you could say the same of any VC firm in last five years.

Some LPs prefer new managers who have operating experience. Others prefer investing experience. Does Weathergage favor one or the other?

Some [of our top managers] have recent operating experience that resonates with entrepreneurs who matter. Some, because of the body of their investment work, resonate with the entrepreneurs who matter. So we don’t have a bias in that regard.

Do you care how much of the fund GPs contribute from their own pockets?

We’re looking for GPs to be committed in every way to the success of their endeavor. Sometimes that takes the form of capital commitment; in all cases, it’s the time and attention that they spend on their companies’ behalf. Especially in micro VC, where people have probably had some success in their previous lives but are raising very small funds, we don’t have a tendency to be dogmatic [about how much they kick in themselves].

As more funds compete for the attention of LPs, they’ve become increasingly specialized. Is that an effective strategy? Do you invest thematically?

We do, but we don’t express it by sectors. We have views on life sciences, for instance, so because we’ve been quite bullish on that area, we have sought out exposure to best-in-class life sciences managers. But we haven’t really gotten down to the level of saying, We need more Internet-focused managers. The investment opportunity is too dynamic.


New Fundings, the seven-year-old, San Francisco-based online petition site, has raised $25 million in its third round of outside funding, reports Fortune. The round included earlier investor Omidyar Network, with participation from an array of high-profile individuals, including Bill Gates, Richard Branson, Reid Hoffman, Ev Williams, Jerry Yang, Gideon Yu, Arianna Huffington, Ashton Kutcher and Guy Oseary. The company, which boasts 80 million users, has now raised $42 million altogether, shows Crunchbase.

Congenica, a year-old, Cambridge, England-based genome discovery and diagnostics company, has raised £1 million ($1.6 million) from Cambridge Innovation Capital.

Extole, a four-year-old, San Francisco-based referral marketing startup, has raised $14 million in Series C funding led by Scale Venture Partners, with participation from Norwest Venture Partners, Redpoint VenturesShasta Ventures, and Trident Capital. The company has now raised at least $19 million to date, shows Crunchbase.

Independa, a five-year-old, San Diego-based company whose cloud-based software is intended to help the elderly maintain their independence by providing regular reminders for medication, appointments, and other needs, has raised $4.3 million in Series B funding led by return investor City Hill Ventures, which was joined by other, undisclosed investors. The company, whose remote monitoring technology is built into LG Elecronics TV sets, among other things, has now raised $14.5 million altogether, shows Crunchbase.

Instacart, the two-year-old, San Francisco-based home grocery delivery service, is raising roughly $100 million in Series C funding that will value the startup at $2 billion, reports TechCrunch, which says it’s hearing that Kleiner Perkins Caufield & Byers is the lead investor. With this round, Instacart will have raised $154.8 million, including from Andreessen Horowitz, Sequoia Capital, Khosla Ventures, Canaan Partners, and individual investors, including Y Combinator president Sam Altman and Box founder Aaron Levie. As TechCrunch notes, at $2 billion, the company’s valuation will have more than quadrupled since June, when it raised its Series B round.

LanzaTech, a nine-year-old, Roselle, Il.-based biotechnology company involved in the bio-ethanol production, has raised $112.6 million in Series D funding, including from the sovereign wealth fund New Zealand Superannuation Fund. The company held a first close on the round (then $60 million) back in March led by Mitsui & Co., which had plugged $20 million into the company. Other investors in the round include Siemens Ventures, CICC Growth Capital and earlier backers Khosla VenturesQiming Venture Partners, K1W1, and the Malaysian Life Sciences Capital Fund. The company has now raised $186.3 million altogether, shows Crunchbase. Biofuels Digest has more here.

LockerDome, a six-year-old, St. Louis, Mo.-based interest-based social media platform, has raised $10 million in Series B funding led by Cultivation Capital, with numerous undisclosed angel investors participating.

Maxwell Health, a two-year- old, Cambridge, Ma.-based SaaS company that simplifies employee benefits for businesses, has raised $26.4 million in Series B funding led by Adams Street Partners. Other participants included Cambia Health Solutions, Schooner Capital, Brothers Brook, and Annox Capital, along with earlier backers Vaizra Investments,Tribeca Venture Partners, Catalyst Health Ventures, Serious Change, and Lerer Hippeau Ventures. To date, the company has raised roughly $35 million.

Mesosphere, a two-year-old, San Francisco-based company whose software aims to spur the adoption of big data applications like Hadoop and Spark by making them easier to manage and run, has raised $36 million in Series B funding led by new investor Khosla Ventures, with additional funding from Andreessen Horowitz, Fuel Capital, SV Angeland other unnamed investors. The company has now raised roughly $50 million altogether. Venture Capital Dispatch has more here.

Metamind, four-month-old, Palo Alto, Ca.-based deep learning startup that says it can process images and text faster than other widely used technologies, has raised $8 million in funding from Khosla Ventures and Salesforce founder Marc Benioff, VentureBeat has more here.

Spare5, a new, Seattle-based mobile-optimized, on-demand insights platform, has raised $3.25 million in seed financing from New Enterprise Associates, Foundry Group, Madrona Venture Group, and numerous angel investors. Spare5 is the first company to spin out of Madrona Venture Labs, a startup studio housed at Madrona that prototypes, builds and launches new software applications and services.

Virtu, a six-year-old, New York-based electronic trading firm, has a new minority owner, says Reuters. Reportedly, Singapore state investor Temasek Holdings acquired roughly a 10 percent stake in its business, valued at around $200 million, from the private equity firm Silver Lake Partners. Virtu is one of a number of privately held automated trading firms. Back in April, Virtu postponed an IPO after the late March publication of Michael Lewis’s “Flash Boys,” which offered a troubling look at the world of high-frequency trading.

Wedpics, a 3.5-year-old, Raleigh, N.C.-based online and mobile platform that encourages wedding participants to share photos, has raised $4.25 million in Series B funding led by Bullpen Capital, with OCA Ventures,Venture51, IDEA Fund Partners, Great Oaks Venture Capital, and numerous angel investors participating in the round. In March, Wedpics had raised $1.5 million in Series A funding. TechCrunch has more here.

WiWide, a seven-year-old, China-based startup that provides public WiFi networks to stores and restaurants, has raised $49 million in Series C funding led by the Internet provider Tencent and the Yelp-like company Dianping, reports Tech in Asia. Smart phone giant Xiaomi led WiWide’s undisclosed Series B round last year, while its Series A came from Greenwoods Investment in 2012.

XOEye Technologies, a four-year-old, Ann Arbor, Mi.-based company that’s developing industrial-grade wearable technology, has raised $1.5 million in Series A funding led by Crestlight Ventures and the angel investment group Selous Venture Society.


New Funds

Mercury Fund, a nine-year-old, Houston-based seed and early stage fund that largely targets startups in the Midwest and Texas, has closed on $105 million for its third venture fund, it announced late last week. A recent SEC filing had shown a $125 million target. The firm closed its previous fund with $70 million in 2010.

Obvious Ventures, a new, San Francisco-based venture outfit backed byEv Williams, the star entrepreneur behind publishing platforms Blogger, Twitter, and Medium, is in the process of raising its first fund, reports Recode. In fact, it has already brought on several partners and together they’ve made 11 investments, “most of them in software with a smattering in packaged goods,” says Recode. (You can find nine of those companies here.) Focus areas include sustainability, the sharing economy and healthy living.

Richmond Global Ventures, a 15-year-old firm that was long operated as a family office and features small offices in New York, Silicon Valley, and Miami, is trying to raise between $80 million and $125 million to back early-stage companies around the world, reports the Miami Herald.

SherpaVentures, a nearly two-year-old, San Francisco-based venture firm, is already in the market for its second sizable venture firm, shows anSEC filing that indicates the firm is raising up to $250 million for a vehicle called SherpaEverest Fund. SherpaVentures was founded by Shervin Pishevar, a serial entrepreneur who later joined Menlo Ventures as a managing director, and Scott Stanford, a former managing director of Goldman Sachs. They met while making early investments in Uber and went on to close on $154 million for their first fund just six months ago. The firm specializes in “on-demand economy” services and commerce solutions that are quicker and adapted to the mobile consumer.



Ralph Baer, who invented and patented the first home video game system, died on Saturday at age 92. He had more than 150 U.S. and foreign patents around everything from talking doormats and greeting cards to submarine tracking systems, reports the New York Times.

Paul Devine, a former Apple global supply manager, was sentenced to a year in prison and to repay $4.5 million after being convicted of wire fraud, conspiracy and money laundering in relation to selling Apple iPhone and component secrets to Apple’s suppliers four years ago. More here.

Venture capitalist Tim Draper won nearly all of the 30,000 bitcoin during a U.S. Marshals Service auction last summer. Not so last Thursday, during a second bitcoin auction. In fact, on Friday, Draper told Dealbook that he’d won just one block of 2,000 bitcoin, a fraction of the 50,000 that were put up for sale this time around. (Interestingly, the Marshals Service told Dealbook that only 11 registered bidders took part in its second auction, compared with 45 bidders who participated in the first auction. It also received just 27 bids, compared with 63 bids last summer.)

Twitter’s former head of product Daniel Graf left the company on Friday, one month after he was demoted, reports Recode. Graf had joined the company in April after managing Google Maps; he was recruited by former Twitter COO Ali Rowghani, who was elbowed out of the company last summer.

Late last week, investor Vinod Khosla was ordered to immediately unlock a gate across from Martins Beach in Northern California that he’d reportedly locked when he bought a sizable chunk of beachfront property. “The gate across Martins Beach Road must be unlocked and open to the same extent that it was unlocked and open” when Khosla bought his 53-acre property, according to the order by California state judge Barbara Mallach. The beach is roughly 33 miles south of San Francisco.

Ryan Sarver, venture capitalist, former Twitter platform director, and now restaurant owner? It’s true, and his place, Alta, has become “something of a social center for San Francisco’s mid-Market Street tech community,” reports Recode. More here.

Kate Mitchell of Scale Venture Partners and Ashton Newhall of Greenspring Associates have signed on to lead a new Diversity Task Force on behalf of the National Venture Capital Association, says the trade organization. The idea: to “develop a clear and measurable path to increase opportunities for women and men of diverse backgrounds to thrive in venture capital and entrepreneurship.”

Anne Wojcicki, the billionaire cofounder of the genomics company 23andMe and estranged wife of Google cofounder Sergey Brin, is unapologetically stingy, she tells The Sunday Times, which reports: “She hates it when people order drinks in restaurants because they ‘make all the margins in drink and desserts.’” Wojciki also “once made herself ill by bingeing on free carrot juice at the office canteen: ‘Because it was expensive I felt I had to maximize the amount that I consumed, so I drank 32 ounces every day for a year and turned orange.’”


Job Listings

SK Telecom Ventures is looking for an analyst. The job is in Sunnyvale, Ca.


Essential Reads

Wireless in Gaza: the young entrepreneurs beating the blockades.



Some of the coolest libraries in the world.

An art project tells the stories of strangers, from behind.

Detroit by air.


Retail Therapy

Clever USB flash drives.

Air conditioning in a can. When you’re too hot to think about what’s in the can.

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