StrictlyVC: January 15, 2015

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Top News in the A.M.

Blackberry says it hasn’t talked to Samsung about a possible acquisition, despite a press report to the contrary.

RadioShack is preparing to file for bankruptcy protection as early as next month.

Xiaomi has introduced its very own premium phablet, and it’s “ever so slightly slimmer and lighter than Apple’s offering,” notes Engadget.


CircleUp Carves Out a Niche, as the AngelList of Private Equity

CircleUp isn’t a household name. But the three-year-old, San Francisco-based crowdfunding site has become well-known to consumer and retail companies that are too small to interest private equity firms yet growing too fast for a bank loan. So far, 70 businesses with yearly revenue of between $1 million and $10 million have raised an average of $1 million from CircleUp investors, all of whom are “accredited,” and who, on average, write checks in the neighborhood of $30,000.

Many of those backers — and there are more than 10,000 of them — are high-net-worth entrepreneurs or executives who’ve been in or around the consumer space, says CircleUp cofounder Rory Eakin. But the next largest group isn’t wealthy dentists looking to play venture capitalist, he says. It’s financial services pros. “We’re seeing hedge fund [investors], VCs, and other investment professionals who like making direct investments without the typical fund structure,” he says. “More family offices and [registered investment advisors] are coming on to the platform, too.”

It’s a little like AngelList — though less risky, suggests Eakin, citing Kauffman Foundation findings that smaller consumer and retail product companies return 3.5x within four-and-a-half years on average. Eakin, whose company now employs 40 people, told us more last week in a conversation that’s been edited for length.

You work with companies with at least $1 million in revenue. Why is that threshold meaningful?

It means these companies have an established product in the market, with suppliers, distribution and customers — data [that] can help put CircleUp’s investors in a position to succeed.

The companies offer investors equity in return for their capital. How much, typically?

A company typically sells 10 to 30 percent in a round on CircleUp. Investors can own all or a portion of that amount based on how much they invest.

How do you assess the companies that are applying for funding on your platform?

We [pore over] proprietary data about the more than 6,000 companies that have applied, as well as look at third party data, to score a company on how it has performed relative to its category. For example, if your natural shampoo is growing at 100 percent a year, that’s interesting, but if the category is growing at 200 percent per year, you’re losing market share.

If more than 6,000 companies have applied for funding on the platform, yet 70 have completed a round, you must be turning away most applicants. Why?

We’ll pass for two or three reasons. The first is valuation. Consumer goods tend to be valued off revenue multiples, so it’s a cleaner metric than you see in tech, and it gives us [information] to pass on to companies that aren’t priced appropriately based on risk. We also look at the experience and background of the management team, as well as the brand itself. Assessing the latter is more art than science, but we’re doing things with data now that helps us screen for it more efficiently.

Are you actively seeking out companies or is your deal flow mostly inbound?

A lot of great companies apply, but we’ve also done a lot of work to expand our partnerships. We get a lot of companies from PE firms with nowhere to send smaller companies. We’re also networking actively with bankers, brokers, and lawyers to ensure that we have quality companies.

We’ve also announced partnerships with General Mills, Proctor & Gamble, and Johnson & Johnson that are designed to help companies thrive after they raise money.

How so?

Largely, they meet with founders in an informal mentorship program where they talk about distribution and key functions of helping companies scale. It’s a win-win, because these strategics get to see what’s happening in the early stage of the market and they get exposure to these new products, while the [smaller] companies form relationships with [these potential investors, who might also acquire them].

CircleUp is a broker-dealer, meaning you accept a commission for facilitating the transactions on your platform. Do you share publicly what that percentage is?

It’s a small amount that’s competitively priced.

What about fundraising? CircleUp announced its last round nearly a year ago. Are you talking with investors again?

A [new round] isn’t on the roadmap. Our focus right now is on continuing to see opportunities and to reduce friction in the market. We knew the market wasn’t functioning as well as it could, but we didn’t appreciate just how painful things had been for these companies and investors.


New Fundings

Agrivida, a 12-year-old, Medford, Ma.-based tech company focused on animal nutrition, has raised $12 million in Series D funding led by Cultivian Sandbox Ventures. Other participants in the round include an affiliate of Maschhoff Family Foods, Middleland Capital, and the Sontag Family Trust, as well as earlier backers Kleiner Perkins Caufield & Byers, DAG Ventures, Bright Capital Partners, Gentry Venture Partners, Northgate Capital, and PrairieGold Venture Partners.

BlockCypher, a year-old, San Mateo, Ca.-based block chain web services startup, has raised $3.1 million in seed funding, including from Foundation Capital, New Enterprise Associates, AME Cloud Ventures, venture capitalist Tim Draper, Upside Partnership, Streamlined Ventures and Fenox Venture Capital.

Boxed, a 1.5-year-old, New York-based company that delivers wholesale club-like purchases to consumers’ front doors, has raised $25 million in Series B funding led by GGV Capital and Digital Sky Technologies. Other participants in the round include Founders Fund, AME Cloud Ventures, Vaizra Investments, and earlier backers First Round Capital,Greycroft Partners and Signia Venture Partners. The company has now raised $32.6 million altogether, shows Crunchbase.

Bridj, a three-year-old, Cambridge, Ma.-based company that uses big data to predict traffic congestion, then deploys minibuses to more easily navigate around it, is raising a Series A round of $10 million to $15 million, according to BostInno, which reports that the round is expected to value Bridj at $60 million. To date, the startup has raised $5 million, including from Atlas Venture, NextView Ventures, Suffolk Equity, Freshtracks Capital, and angel investors.

Forward Health Group, a 5.5-year-old, Madison, Wi.-based data and analytics software provider, has raised $5.7 million of venture capital led by Triple Tree Capital Partners. Wisconsin Investment Partners and BrightStar Wisconsin Foundation also participated in the round. The company has now raised $6 million altogether.

Insite Software, a 12-year-old, Minneapolis, Mn.-based shipping platform used by manufacturers and distributors, has raised $15 million in growth equity from Volition Capital.

Neo Technology, a 7.5-year-old, San Mateo, Ca.-based company behind a popular graph database called the Neo4j, has raised $20 million in Series C funding led by Creandum, with participation from Dawn Capital and current investors Fidelity Growth Partners Europe, Sunstone Capital and Conor Venture Partners. The company has now raised $44 million altogether. TechCrunch has more here.

Obalon Therapeutics, a 6.5-year-old, San Diego-based company behind a gastric balloon technology for weight loss therapy, has received $20 million in Series D funding and a $10 million loan from Square 1 Bank. The Series D investors included Axon Ventures, Mirae Asset Venture Investment, Striker Asia Opportunities Fund, Domain AssociatesInterWest Partners and Okapi Venture Capital. The company has now raised roughly $69 million altogether, shows Crunchbase.

Skydio, a months-old, Menlo Park, Ca.-based drone technology startup whose computer vision and motion planning algorithms work in concert with mobile phones to help drones navigate their surroundings, has raised $3 million in seed funding led by Andreessen Horowitz, with participation from Accel Partners.

Treasure Data, a three-year-old, Mountain View, Ca.-based data processing cloud service, has secured $15 million in Series B funding led by Scale Venture Partners, with participation from AME Cloud Ventures and the company’s earlier backers. The company has now raised $23 million altogether. GigaOm has more here.



Wesley Chan, a Google veteran who joined Google Ventures in 2009 and stepped down a year ago to become an entrepreneur-in-residence, has left the company altogether to join San Francisco-based Felicis Ventures as a managing partner. Felicis, launched nearly a decade ago, was founded by Aydin Senkut, another former Google executive.

Serial entrepreneur Elon Musk has decided to donate $10 million to the Future of Life Institute, a Boston-based nonprofit that “works to mitigate existential risks facing humanity, particularly the risks from artificial intelligence,” as Wikipedia describes it. “Here are all these leading AI researchers saying that AI safety is important”, said Musk in a statement. “I agree with them.”

Entrepreneur-investor Kevin Rose has left Google Ventures to run his five-month-old startup lab North Technologies full time. Recode has more on his move, and his company’s new $5 million in funding, here.

Longtime VC Blaine Wesner is selling his 10,563 square-foot “floating box house,” in Austin, Tx. for “in the range of $20 million”, reports Curbed. Wesner joined Austin Ventures in 1990 and was a general partner for 15 years.

Neetzan Zimmerman, who served as editor-in-chief of the secret-sharing app Whisper, has left the company, he confirmed to Capital New York yesterday. Zimmerman and other staff members were suspended from the company in late October, following a series of Guardian stories that reported Whisper doesn’t provide the anonymity for users that it promises them. Zimmerman, who reacted very publicly to the allegations (to the chagrin of Whisper CEO Michael Heyward), joined Whisper a year ago from Gawker, where he was a prized editor.



SoftBank Internet & Media is looking to hire a strategy consultant. The job is in the Bay Area.


Essential Reads

Bitcoin may be down, but it isn’t doomed.

MySpace still reaches 50 million people each month.

A flattering behind-the-scenes look at Silicon Valley’s pay-it-forward culture.



Actor Tom Hanks on his two years at community college.

Wired is “no longer a pirate ship” where “disgusting,” “embarrassing” countertop stains will be tolerated.

How to make a crossbow out of office supplies. (Wired writers, this one is for you.)


Retail Therapy

The Porsche 911 Targa 4 GTS. We approve.

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