StrictlyVC: January 7, 2015

Good morning, everyone!

StrictlyVC’s inaugural INSIDER event is coming up on February 12. Woot! Featured speakers include Naval Ravikant of AngelList, Keith Rabois of Khosla Ventures, and Strava CEO and cofounder Mark Gainey. As an added bonus (that, full disclosure, is just dumb luck), attendees will enjoy a private viewing of a Banksy piece that’s headed to the gallery of San Francisco’s Next World Capital, which is hosting the early evening program.

Tickets are going fast and space is limited. If you’d like to come, you can purchase your tickets here.


Top News in the A.M.

Apple‘s next major Mac revealed!

Uber was ordered yesterday to suspend operations in five of its six dispatch bases in New York after failing to fork over data demanded of it by the New York Taxi and Limousine Commission.


Todd Chaffee of IVP: Uber “Wins This,” Could Be “Googlesque”

Todd Chaffee has spent the last fourteen years as a managing director at Institutional Venture Partners, a Sand Hill firm that has evolved into a powerful late-stage investor over that period. (It celebrated its 101th IPO last month when the small business lender OnDeck went public.) Given the market zigs and zags that he has witnessed, we asked Chaffee — famous for his investments in Twitter and HomeAway – to share what he’s seeing in the late-stage market right now. We chatted yesterday in a conversation that has been edited for length.

Just how bad are late-stage valuations right now?

They’re high. They’re extraordinarily high. At the same time, the companies we’re seeing are more interesting, with more attractive business models and stronger and faster revenue growth than we’ve seen before. So it’s a little like, prices are high, but these are amazing companies. It’s a bit of a high-wire act.

Have you been passing on deals you like?

We’re very selective. We see several thousand deals a year, evaluate several hundred, and last year we made 14 investments. It’s a funny time because prices are so high, but these companies are so cool. When you have great management, a big market, and numbers [moving] up and to the right, you have to pay a high price.

IVP hasn’t backed one of the most highly valued private companies in the U.S.: Uber. Why?

Uber is in our “anti portfolio.” It’s a phenomenal company, with probably more potential than any other private company that’s out there right now. It could be Googlesque.

Why not jump into one of its many, ongoing rounds then? Is it too richly priced at this point?

We don’t have current numbers, but I know it’s beating its numbers all the time. . . That said, its valuation is way, way ahead of the fundamentals in every round. We usually don’t have to stretch too far; we don’t have to pay crazy prices to access top companies.

Would you make another bet on this trend of people driving less?

I think Uber wins this and will be the dominant player with the largest market share by a long shot. You can be the number two or three player, but it’s tough. Generally, we’ve found that if you back the market leader, it will drive the greater returns.

What about the so-called connected home? It’s all anyone can talk about this week because of CES.

We invested in Dropcam [acquired last summer by Nest Labs] and we were looking at Nest before Google acquired it [a year ago]. Those were the best two companies in that space as far as we could tell.

I do think there’s opportunity there, but I also think [the connected home is] part of the hype cycle and that we haven’t reached the “trough of disillusionment” yet. We’re still in the “this is going to be amazing” phase.

You came to IVP long ago from American Express and Visa. What do you make of today’s payment technologies?

Payments are a funny thing. They migrate very slowly. We’ve been using paper and coins for thousands of years. Also, the thing about payments systems that people forget is that it isn’t a technology problem; it’s a system of guarantees. That’s what makes a payment system work – not whether the wireless NFC [reader] or the magnetic strip on the credit card will work.

It’s the chicken-or-egg problem, too. We used to see this at Visa, where we wanted to roll out smart cards globally. You have to equip merchants with readers, which is really expensive. Meanwhile, you aren’t going to get a smart card if you can’t use it anywhere. It’s tricky.

How do you feel about Bitcoin?

I don’t know what to make of Bitcoin. I’ve looked at it. I saw the wave of payment systems back in the [dot com] era: CyberCash and DigiCash and all those players and passed on them, which was the right thing to do. Bitcoin seems to have more momentum. I’m just not sure. The payment system works pretty well right now.

What interests you more?

I’m very interested in security companies right now. There are huge issues underway. There are fires in the building – right now – in enterprise.

We think the media world is fascinating, with big incumbent players just kind of losing it while companies like Vice and Buzzfeed and Business Insider – one of our portfolio companies – are showing up and saying, “We know how to work mobile and social.”

We also think — to [riff] on Marc Andreessen’s [2011 observation] that software is eating the world — that mobile is eating software. Mobile is eating the web.

IVP has backed Snapchat and Dropbox, which are riding that trend. What about startups that are turning smartphones into remote controls for the physical world. Are you interested in delivery service startups, for example?

Not many have broken out and gotten to our stage yet in terms of scale. Also, when you have a physical aspect [to your business], you have to watch the margins. They get tough. If you’re going to deliver things, the operational intensity is high. Just because you can do something doesn’t mean you should do it.

Did you look at the grocery delivery company Instacart, which just raised $220 million at a $2 billion valuation?

We did. I know Instacart has a great team and great model and attracted some marquee investors at a staggering valuation. The jury is still out.

Instacart’s newest round was led by Kleiner Perkins, but many deals now involve public market investors who’ve moved into private market investing. How are you getting on with them?

It’s good when they pay a higher price than we do. It’s troubling when they become undisciplined. Most are pretty good. We’re not seeing too many drunken sailors yet. I’ve been doing this for 20 years, though, and you always get one or two [firms] that you’re like, What are those guys doing?


New Fundings

23andMe, the 8.5-year-old, Mountain View, Ca.-based personal genetics company, has struck a deal with Genentech that will see the company receiving up to $65 million from the biotech giant in exchange for a look at the health and genetic data that 23andMe collects from its customers on an anonymous but individual basis. Forbes has the story here.

Blend Therapeutics, a 2.5-year-old, Watertown, Ma.-based biopharmaceutical company at work on antibody drug conjugates to treat cancer, has raised $21 million in Series B funding from one new, unnamed investor, and all of Blend’s earlier backers, which include Eminent Venture Capital, Flagship Ventures, NanoDimension, and New Enterprise Associates. The company has now raised $45.8 million altogether, shows Crunchbase.

BigTeams, a 14-year-old, Warrenton, Va.-based company that sells software systems to high school athletics programs, has raised $5 million in Series B funding from SWaN & Legend Venture Partners and Capital Sports Ventures. BigTeams also has acquired for undisclosed terms Schedule Star, a Wheeling, W.V.-based maker of high school scheduling software that was backed by Gannett & Co.

Device42, a four-year-old, New Haven, Ct.-based maker of data center management software, has raised $3.5 million from investors, including Connecticut Innovations, Alpine Meridian, Angel Investor Forum, Elm Street Ventures, Long River Ventures and New York Angels.

SiteSpect, an 11-year-old, Boston-based optimization platform aimed at helping web and mobile marketers improve their conversion rates, has raised $13 million from NewSpring Capital in its first outside funding.


New Funds

Greylock IL, an international affiliate of U.S.-based Greylock Partners, is rebranding as 83North and announcing a new $200 million fund. Venture Capital Dispatch has much more here.



Tracy Hogan has joined Institutional Venture Partners as CFO. Hogan had previously been the CFO and chief compliance officer of Elevation Partners for more than 10 years.

Noel Lee, CEO of the audio tech company Monster, is suing the Apple subsidiary Beats, saying its founders, Jimmy Iovine and Andre Young (Dr. Dre), squeezed Monster out of its interest in the company after it co-designed Beats’s popular headphones. USA Today has more here.

Scott Requadt has been named a managing director at Clarus Ventures, the 10-year-old, Cambridge, Ma.-based life sciences venture firm. Requadt had joined the firm a decade ago and was promoted to partner in 2010. Clarus is currently raising a new fund. As of last June, the firm had raised $234.2 million toward that effort.

Lior Susan has joined the 3.5-year-old, San Francisco-based venture capital firm Formation 8, which recently closed on a new, $500 million fund. Susan previously founded Lab IX, a hardware-focused startup accelerator affiliated with Flextronics. He will be based in the U.S. but will work with startups in the U.S., Israel, and Asia, reports Venture Capital Dispatch.


Job Listings

HarbourVest Partners is looking for a business analyst. The job is in Boston.



Algorithms will only get you so far, apparently. At least, according to CB Insights, Google Ventures is “average” when it comes to the number of its seed-funded portfolio companies that continue on to raise additional funding.


Essential Reads

This charger boosts batteries in seconds.

This company turns human waste into drinking water.

This CEO says to expect a year of “boutique” acquisitions.



A look at how much men and women cry in one sitting and why.

An Honest Letter from Your I.T. Department.


Retail Therapy

You can now pre-order a Mophie for your new iPhone 6 and iPhone 6 Plus.

Oh, come on.

Filed Under:

Don’t Miss Out!

Sign up today to receive a free daily email with everything you need to start your day. Plus, keep track of the companies and personalities that will shape the industry in the months and years to come. Let StrictlyVC be your very own venture capital concierge.

StrictlyVC on Twitter