StrictlyVC: May 22, 2015

Oh, Friday, how we love you so.

Hope you have a wonderful long weekend everyone! See you Tuesday.


Top News in the A.M.

The Pittsburgh Business Times give readers a first look at Uber’s self-driving test car. As you likely recall, in February, Uber announced plans to partner with Pittsburgh-based Carnegie Mellon to develop mapping, vehicle safety, and autonomous driving technologies. Since then, Uber has hired away 50 people from the school’s National Robotics Engineering Center (NREC) as it builds its own Advanced Technologies Center, a 53,000-square foot facility nearby. (Unsurprisingly, the arrangement is straining relations between Carnegie Mellon’s current and former employees.)


Thumbtack Takes Its Own Investor, Google, Head On

At a StrictlyVC event in San Francisco last week, Charles Hudson of SoftTech VC sat down with Sequoia Capital partner Bryan Schreier and Marco Zappacosta to discuss Thumbtack, an online marketplace for hiring workers that Zappacosta co-founded soon after graduating from Columbia University in 2007.

Thumbtack is interesting for numerous reasons, including the amount of funding it has raised — $148 million over three rounds, all within a 14-month period – and who its investors are. Sequoia is among them (Schreier sits on Thumbtack’s board). So is Google, which provided Thumbtack with $100 million last summer – and, the business world recently learned, is now entering into direct competition with Thumbtack.

Hudson, who spends much of his time studying marketplaces, asked Zappacosta and Schreier – a former Googler – about their “multifaceted” relationship with Google, among other things. That conversation, edited for length, follows:

CH: How did Sequoia and Thumbtack come together?

MZ: [Angel investor] Jason Calacanis introduced us to [Sequoia partner] Roelof Botha and another angel investor introduced us to Bryan. It was the fall of 2010. Unlike a lot of VCs, they were very explicit about what they thought was good and wasn’t yet good. When we [later] went back with numbers to show them [how we were growing], they did [write a check].

CH: Many marketplaces sit in between the buyer and seller, but you’ve taken the opposite stance. Why?

MZ: A lot of entrepreneurs and investors view the transactional model as a way to get a higher take rate. The problem in doing that is you’re solving your own problem; you’re not actually solving the customers’ problem at that point. There are times when you fundamentally [need to act as the facilitator]. Taking payment is key to making eBay work. It’s key to Uber, where speed is fundamental. But with Thumbtack, when a customer is spending $3,000 to repaint their house and you ask them what the hard part is, no one ever tells you it’s about paying the painter. It’s about finding the painter, and that’s the focus at Thumbtack. [Editor’s note: Thumbtack sends customer requests to service providers like plumbers, caterers, and painters. If the service provider thinks it’s a fit, they pay Thumbtack a fee to shoot a quote to the customer, who then chooses whether or not to work with that service provider.]

CH: Is leakage –people going off platform to have a direct relationship – something you’ve ever worried about?

MZ: If you haven’t created enough value for both sides to keep using your platform, that’s your problem.

CH: [Tell us about your fees.]

MZ: We’ve explicitly kept [them] very low — much lower than we think it could be. If you look at other marketplaces like Airbnb, it’s 10 to 12 percent. Uber is now 18 to 20 percent. eBay is like 13 percent. We’re below that and happily because our goal is to get market share. Today we move a billion dollars worth of commerce on the platform, which we feel good about, but that’s still nothing relative to the almost trillion dollars worth of commerce happening in the US. That’s the thousand x [opportunity] in front of us.

CH: You recently raised $100 million from Google Capital. Google has also made some reference that they have designs on the home services market. 

MZ: I have to give Bryan credit for board member words of encouragement when this happened, which is that if Google or Facebook or Amazon aren’t competing in your market, then you’re probably in a sh_tty market. And I think he’s exactly right.

>BS: You felt better for like three seconds, right?

MZ: [Laughs.] It’s indicative of the opportunity being enormous. I don’t perceive any sort of nefarious action on the part of Google Capital. I think it’s unfortunate. It’s a 50,000 to 60,000 person organization, but it’s why we’ve kept them at arm’s length. We’re excited to have them as investors, but we’ve been careful of that relationship accordingly.

BS: Thumbtack connects people to people; they don’t connect companies. They don’t connect ads to people. It’s a very different business, with people on both sides who have an intimate relationship. This is something that Google has never been very good at. [It isn’t] intrinsic to their DNA.

MZ: The opportunity and the challenge in this space is just how fragmented it is. There’s no natural point of aggregation as there is in retailing, where you can go to a distributor and instantly get access to 30 or 40 percent of the inventory in that category. So Google and Amazon — despite their money and brands and hard working employees — have to go out and recruit these plumbers and caterers one by one, and that’s a f_cking grind, one that we’re real good at, and one we’ve done without any salespeople and with a lot of technology and innovation.

CH: How do you think about Amazon given its reach and scale and financial resources?

BS: They still suffer from that corporate DNA issue, which is that they send packages to people, not people to people. And it’s very different. You have to get people on the phone when they’re fixing a toilet and really don’t want to be bothered.

CH: You raised two fairly large rounds back to back. Why? 

MZ: The truth, at the end of the day: it’s because you can. We didn’t need the money. The business is growing great and generating very real revenue. These rounds in happen in quick succession and in ever-growing numbers because companies . . . [in a big space and with a big vision] . . . can.


New Fundings

Biosyntia, a 3.5-year-old, Denmark-based synthetic biology and metabolic engineering company, has raised roughly $1.9 million in funding led by Novo Seeds. More here.

Bitbar Technologies, a 20-year-old, Helsinki, Finland-based company behind a mobile development and testing service called Testdroid, has raised an undisclosed amount of new funding led by Inventure, with participation from earlier investors Qualcomm Ventures, DFJ Esprit, Creathor and AveraMore here.

Brit Media, a 3.5-year-old, San Francisco-based content and commerce platform centered around DIY projects for women and girls primarily, has raised $23 million, according to an SEC form that was flagged by Business Insider. Among its new investors: Intel Capital. The company had previously raised  $7.6 million in funding from Index Ventures, Cowboy Ventures, Lerer Ventures, Marissa Mayer, and Oak Investment Partners.

CyPhy Works, a 6.5-year-old, Danvers, Ma.-based maker of advanced unmanned aerial vehicles, has raised an undisclosed amount of funding from Draper Nexus. The company had previously raised $12.5 million in equity and debt, shows Crunchbase; its other backers include Lux Capital, General Catalyst Partners and Felicis Ventures.

Guildery, a 1.5-year-old, Los Altos, Ca.-based e-commerce company that offers digitally printed fabrics and other home accessories like pillows, drapes, and ottomans, has raised $2.1 million in seed funding from Forerunner Ventures, Cowboy Ventures, SoftTech VC and AOL’s BBG Ventures. TechCrunch has more here.

InRiver, an eight-year-old,  Malmoe, Sweden-based enterprise software company whose technology helps companies like Office Depot and BMW distribute their product information, has raised $10 million in Series A funding led by Verdane Capital Advisors. The company has now raised $13 million, shows Crunchbase.

Iris PR Software, a three-year-old, Phoenix, Az.-based company that makes software for PR professionals, has raised $1 million in seed funding from individual investors. More here.

MBio Diagnostics, a six-year-old, Boulder, Co.-based provider of clinical diagnostics and sample testing, has raised $6.3 million in Series B funding led by unnamed new and existing investors. The company had previously raised $2 million from unnamed investors.

Outset Medical, a San Jose, Ca.-based company that has created a simple, at-home device that treats kidney failure, is in the process of raising $60 million dollars, the company tells MedCity News. The funding was provided by earlier investors Warburg Pincus and Vertical Group, as well as newer, unnamed backers. The company had previously raised $9.5 million, suggest previous SEC filings.

Redbubble, an eight-year-old, Melbourne, Australia- and San Francisco-based online marketplace for artist-designed products, has raised $15.5 million in funding from Acorn Capital and Piton Capital, along with numerous individual investors, including Bebo cofounder Michael Birch and Ooga Labs founder (and now PayPay exec) Stan Chudnovsky.

Rightpoint, an eight-year-old, Chicago, Il.-based digital agency and technology consultancy, has raised $55 million in funding from Stella Point Capital. Crain’s Chicago Business has more here.

Softgarden, a 14-year-old, Berlin, Germany-based maker of recruiting software, has raised $3.3 million in funding from Cipio Partners and Neuhaus Partners.

Wave, a 13-year-old, Kirkland, Wa.-based gigabit fiber and broadband services company, has raised $130 million via a bond sale led by Deutsche Bank and supported also by Wells Fargo, Sun Trust, and RBC Daniels. TechCrunch has more here.


New Funds

Obvious Ventures, the nearly year-old, San Francisco-based venture capital firm started by Twitter co-founder and Medium CEO Ev Williams, has closed its debut fund with $123,456,789. “The number was absolutely intentional. We’ve got some math and computer science geeks — myself included — on the team and thought we’d have a little fun with our Form D filing,” Obvious Ventures co-founder James Joaquin tells Business Insider.



Shopify, the nine-year-old, Toronto-based company whose software helps retailers sell goods online, went public yesterday, and its shares soared 51 percent. Meanwhile, another tech company that went public yesterday, eight-year-old, China-based Baozun, ticked up just 4.6 percent. TechCrunch has more here.



Clarabridge, a Reston, Va.-based company that makes so-called customer experience management software, has acquired Engagor, a Ghent, Belgium-based platform for real-time social customer service and engagement. The amount of the transaction was not disclosed. Clarabridge had raised $80 million in growth funding in late 2013 and acquired survey software provider MarketMetrix in 2014. Engagor had raised $2.6 million from Strike4 and Hummingbird Ventures.

Zuora, an eight-year-old, Foster City, Ca.-based company that provides its customers with subscription billing, recurring revenue, payments, and billing software and services, has acquired two-year-old Frontleaf, a Oakland, Ca.-based customer usage analytics provider that had raised roughly $500,000, including an early check from Alchemist Accelerator. The financial terms of the transaction were not disclosed.



Scott McNealy, the longtime Sun Microsystems CEO and chairman, is back at the helm of a company. This time, it’s Denver-based Wayin, a startup that helps companies turn posts on social networks like Facebook into marketing messages. The WSJ has the story here.Oculus VR, the virtual reality company acquired by Facebook last year for $2 billion, is being sued by two men who say founder Palmer Luckey passed off work that he did for them as his own. The Recorder has the lowdown here.



MassMutual Ventures, the small venture arm of the financial services company, is looking to hire an associate. The job is in Boston.


Essential Reads

Uber is seeking a $1 billion credit line from banks, reports the WSJ, adding that the move could ” signal an eventual initial public offering.”

The 17 “hottest” startups in Germany, per Business Insider.



Ten U.S. ghost towns worth visiting.

Gimlet Media releases its newest podcast, Mystery Show.

Motorcycle surfing. (Gulp.)


Retail Therapy

We love these, though we’re also keen on obnoxious, old-fashioned arcade games. (They’re about half the price, too.)

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