StrictlyVC: January 22, 2015

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Top News in the A.M.

Amazon is reportedly in talks to buy the stealth-mode Israeli startupAnnapurna Labs in order to give its data centers a boost. Sources quoted in the Israeli media place the value of the deal at about $350 million.


China’s Economy is In the Dumps; Why Haven’t Internet Investors Noticed?

China’s economic growth has slowed to a quarter-century low of 7.4 percent. You wouldn’t know it, though, looking at the gigantic rounds that China-based Internet companies are raising.

Just this week, Apus Group, a six-month-old, Beijing-based Android app development firm, raised a whopping $100 million;, a nine-month-old, mother and baby-focused e-commerce site in Hangzhou, raised $100 million; and Meituan, a four-year-old group discount platform that’s headquartered in Beijing, pulled in $700 million. There was also that little announcement by the Chinese government late last week about the venture capital fund it’s establishing with $6.5 billion to support start-ups in emerging industries.

The word “bubble” invariably comes to mind. But there’s something far different going on, insist those bullish about Chinese tech companies.

Take Glenn Solomon, a managing director at the cross-border investment firm GGV Capital and a frequent visitor to China. Though he acknowledges that “China’s economic growth will inevitably slow as the law of large numbers takes effect,” he says two very different economies in China — old and new — explain the seeming disconnect between that slowing growth and all the money sloshing into tech startups.

In China’s retail industry, for example, overexpansion has hurt large, established brick-and mortar-retailers who are seeing flat or slowing growth and retrenching. Meanwhile, Alibaba and other new e-commerce players are growing extremely rapidly, says Solomon, noting that “on the ground [in China], there are delivery trucks lining the streets.”

That divergence is “pronounced and growing” across other industries, too, says Solomon. “Companies in the Xiaomi ecosystem focused on home automation are rapidly going direct to consumer, while traditional players in this area are seeing a slowdown.”

Travel, mobile commerce, and companies whose apps aim to improve their users’ offline experience — among them the GGV-backed companies, a site similar to Airbnb that raised $100 million last June, and Didi Dache, a taxi app that closed on $700 million in December — are also trouncing weaker, traditional offline players, he says.

There are yet other reasons to rationalize those big investment rounds, suggests Michael Feldman, an independent consultant based in Hong Kong who advises on cross-border technology investments from China to Israel.

Feldman notes that unlike, say, Facebook, which only recently began reaching into new businesses, the “tentacles” of China Internet giants like Tencent Holdings and Alibaba stretch into everything from car service apps to their own mobile payment services, including Tencent’s Tenpay, and Alibaba’s Alipay.

That growing reach is a scary prospect to startups and would-be entrepreneurs. “In almost anything you do online, you could potentially be competing with them,” notes Feldman.

But in their race to compete with one another, such behemoths have also grown more acquisitive than they used to be — creating new and better M&A opportunities. “It used to be that they’d either copy your product or pay a team to join their company, then they’d destroy the competing company,” explains Feldman. “Now that they’re kind of globalizing, they’re beginning to behave differently.”

China is also seeing its first generation of battle-tested tech entrepreneurs launch companies, which is emboldening investors to back them with big checks, notes Feldman. “Everyone knows the PayPal Mafia and Google Mafia and Facebook Mafia. China now has its own mafias,” including those to spin out of Alibaba, Tencent, Baidu and Xiaomi.

If that development is leading to some froth, Feldman, like Solomon, doesn’t seem terribly concerned. As elsewhere, he suggests, China’s tech economy isn’t as closely tethered to the country’s broader economy as one might imagine.

“Ultimately, it’s all about the adoption of mobile,” Feldman says. “It’s just totally changing society. It’s an unstoppable force at this point.”


New Fundings

Air, a 2.5-year-old, San Francisco-based startup that was formerly known as Yevvo and is building a live broadcasting service for mobile users, has raised nearly $4 million in Series A funding from undisclosed investors. TechCrunch has the story here.

Alchemist Accelerator, a 2.5-year-old, San Francisco-based enterprise-focused accelerator, has raised $2.1 million in new funding led by Mayfield, with participation from Tyco International and earlier investors Cisco Systems.

Beibei, a nine-month-old, Hangzhou City, China-based maternal and baby supplies e-commerce platform, has raised $100 million in Series C funding led by Capital Today and New Horizon Capital, with participation from Banyan Capital and IDG Capital. The round, which reportedly values the company at $1 billion, follows a $24.3 million Series A round raised by the company last summer.

Brandfolder, a 2.5-year-old, Denver-based online platform that allows users to easily organize, share and update brand assets, has raised $2 million in funding from earlier investor Jeffrey Covington, as part of his new investment fund, White Cedar Enterprises. To date, the company has raised $3 million, including from TechStars and a group of angel investors. TechCrunch has more here.

Button, a 1.5-year-old, New York-based company that enables smart connections between apps that drive installs, has raised $12 million in Series A funding led by Redpoint Ventures, with participation from Greycroft Partners, DCM, VaynerRSE, Slow Ventures, and former NBA Commissioner David Stern. VentureBeat has more here.

Choozle, a 2.5-year-old, Denver-based, cloud-based platform for marketers looking to analyze their customers’ behavior, has raised $4.1 million in Series A funding led by earlier backer Great Oaks Venture Capital. The company has raised $3.1 million to date.

Fastback Networks, a five-year-old, San Jose, Ca.-based mobile-network technology company, has raised $15 million in Series C funding led by Harmony Partners, with participation from Foundation Capital, Granite Ventures, Juniper Networks, and Matrix Partners. The company has now raised $30 million altogether.

Green Biologics, a 12-year-old, Abingdon, England-based company whose fermentation technologies convert biomass into renewable fuels and chemicals, has raised $76 million in new funding. Earlier investors, co-led by Swire Pacific and Sofinnova Partners, led a $42 million equity piece of the funding, with Tennenbaum Capital Partners supplying nearly $34 million in debt.

Handle, a three-year-old, Menlo Park, Ca.-based company whose productivity app combines emails and calendar functions with to-do lists, has raised $9.9 million from investors, says Venture Capital DispatchMenlo Ventures, where Handle founder Shawn Carolan is a managing director, provided $5.6 million; Silicon Valley Bank provided $2.5 million in debt; and a long list of angel investors, including Mitch Kapor, provided the company with another $1.8 million in seed funding.

Interana, a two-year-old, Menlo Park, Ca.-based data analytics company, has raised $20 million in Series B funding led by Index Ventures, with participation from new investors AME Cloud Ventures, Harris Barton and Cloudera’s chief strategy officer, Mike Olson. Earlier investors Battery Ventures, Data Collective and Fuel Capital also invested in the round, which brings the company’s total funding to $28.2 million.

Keaton Row, a four-year-od, New York-based fashion startup that pairs clients with stylists, has raised an undisclosed amount of funding led by Time Inc. Earlier backers Menlo Ventures, Rho Capital and Grape Arbor also joined the round. The company had previously raised $4.2 million across a couple of rounds.

Kitchen Stories, a year-old, Berlin-based mobile cooking app, has raised $1.8 million in seed funding, including from Point Nine Capital and Bertelsmann Digital Media Investments, with participation from Cherry Ventures and numerous angel nesters.

Kreditech, a three-year-old, Hamburg, Germany-based consumer finance startup that focuses on lending money to “unbanked” consumers with little or no credit rating, has landed a $200 million credit line from Victory Park Capital. The company is also preparing to raise a Series C round, reports TechCrunch. The company has raised $263 million to date, shows Crunchbase. Its investors include Point Nine Capital, Blumberg Capital, and Varde Partners.

Persado, a 2.5-year-old, New York-based company whose “smart” software specializes in creating automated messages around calls to action, has raised $21 million in Series B funding led by StarVest Partners, with participation from Citi Ventures, American Express Ventures, and earlier backer Bain Capital Ventures. The company has now raised $36 million altogether, shows Crunchbase.

Pluribus Networks, a five-year-old, Palo Alto, Ca.-based software-defined networking (SDN) startup, has raised $50 million in new funding led by Temasek Holdings, with participation from Ericsson, Newtech, and earlier backers New Enterprise Associates, Menlo Ventures, Mohr Davidow Ventures and AME Cloud Ventures. GigaOm has more here.

Raise, a 1.5-year-old, Chicago-based offering a marketplace where consumers can buy and sell their unused gift cards, has raised $56 million in Series B funding led by New Enterprise Associates, with participation from earlier backers Bessemer Venture Partners, the Pritzker Organization, Listen Ventures and angel investors. The funding brings the company’s total outside investment to $81 million.

The parent company of StockRadars, a 3.5-year-old, Bangkok, Thailand-based company whose products aim to demystify investing in Asia’s stock markets, has raised roughly $800,000 in Series A funding from Japan’s CyberAgent Ventures and East Ventures, reports TechCrunch.

True Link Financial, a two-year-old, San Francisco-based startup whose prepaid Visa card promises to protect older adults from scams and fraud, has raised $3.4 million from a group of investors including earlier backer Cambia Health Solutions. The company had raised an undisclosed amount of funding prior, including from Y Combinator, whose accelerator program it passed through in 2013.

Uber, the six-year-old, car-booking company, has raised $1.6 billion in convertible debt from Goldman Sachs’s wealth management clients, Bloomberg reported yesterday. The new round of financing comes just months after the company raised $1.2 billion from investors, including New Enterprise Associates, Lone Pine Capital, Valiant Capital Partners, and Qatar Investment Authority. The company is now reportedly valued at $41.2 billion.

XOR Data Exchange, a year-old, Austin, Tx.-based company that facilitates cross-industry data sharing through permission-based controls and audits, has raised $1.8 million investment round led by Chicago Ventures and KGC Capital.


New Funds

University of North Carolina officials announced the formation of the Carolina Research Venture Fund yesterday, a seed-stage pool that will begin investing $5 million in non-state funds to start. “It takes a little money for that initial seed stage, so we wanted to go ahead and get this going,” board member Sallie Shuping-Russell, who’s also a managing director at BlackRock, told a local outlet yesterday. The fund reportedly aims to bridge the funding gap that local startups often face before attracting the attention of venture capital firms across the state and country.



Temasek Holdings, Singapore government’s global investment arm, is acquiring Mumbai-based venture lender SVB India Finance, an arm of Nasdaq-listed SVB Financial Group, for $46.4 million, reports the Economic Times. The deal creates the country’s second homegrown and independent venture debt player after Delhi-based Trifecta Capital, which recently started raising its debut fund.

ZeroPaper, a two-year-old, Brazilian startup that offers cloud-based accounting services to small businesses, has been acquired by the accounting software giant Intuit for undisclosed terms as the latter looks to raise its profile in international and emerging markets. ZeroPaper had raised just $200,000 from investors, including Brazil’s 21212 Digital Accelerator in Rio de Janeiro.



eBay is cutting 2,400 positions as it continues to lose marketshare to increasing competition from e-commerce upstarts. The Financial Post has more here.

Wilson Sonsini lawyer turned Y Combinator partner Carolynn Levy is helping to revolutionize startup investing. Here’s how. (H/T: Quibb)

Laurene Powell and Adrian Fenty took an island shopping trip during a Caribbean vacation, and the Daily Mail was on it!



Sapphire Ventures (f.k.a SAP Ventures) is looking for a pre-MBA associate. The job is in Palo Alto, Ca.


Essential Reads

Google’s next telecom move: Becoming a wireless carrier.

Satya Nadella’s plan to make you care about Microsoft.

Drones: the tech-savvy trafficker’s new drug mule.



Postcards from Cuba.

The strange science of Twitter and heart disease.

Seven surprising things that can help you stop worrying.


Retail Therapy

Wirelessly lock and unlock your Mac with this.

Leatherman laughs at your Fitbit activity and sleep tracker.

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