StrictlyVC: June 2, 2015

Happy Tuesday, dear readers!


Top News in the A.M.

All United Airlines flights in the U.S. were grounded this morning for nearly an hour over “dispatching information.” Wired has more here.


Bessemer’s Byron Deeter on the Future of Cloud Companies

Like many venture firms, Bessemer Venture Partners provides all manner of perks for its CEOs, including a day of race-car driving and wine tasting.

Today, in San Francisco, the firm will be providing its CEOs with a different kind of perk. Together with Salesforce Ventures, Bessemer is hosting a day-long “cloud” summit that brings together CEOs backed by the two outfits to share best practices, let them learn from each other, and to dazzle them with speakers like quarterback-turned-investor Steve Young and the futurist Ray Kurzweil.

Yesterday, we caught up with longtime Bessemer partner Byron Deeter, who organized the event, and who has led deals in numerous high-flying cloud companies — including the online storage service Box, the app-building software service Twilio, and the digital signatures specialist DocuSign – to learn more.

What are you hoping these CEOs will learn today?

Part of the event is just understanding where we are. Analysts are now predicting that midway through next year, the majority of application revenue in [customer relationship management] will be cloud-based, which is a tipping point we’ve long been predicting. More broadly, we’ve beentracking public cloud companies for a while now, and based on our data analysis, we’ve come to believe this group will have a combined market cap of half a trillion dollars by 2020, up from $180 billion today — which is itself up from $40 billion three years ago.

As an investor looking to make two bets per year, roughly, where are you spending your time? What sub themes do you think are most interesting right now?

I’ve personally been most active in industry cloud and enterprise mobile, which is finally coming of age.

Industry cloud?

Industry cloud is really this notion of the “verticalization” of software and the opportunity for a large vendor like Veeva [which makes cloud-based software for the life sciences industry] or Athena Health [which provides its customers with electronic health records, revenue cycle management, and more] or Shopify [which juggles all kinds of store management issues for its retailer customers] to create dedicated [cloud-based] software for a dedicated industry group. And these models can have massive success.

And enterprise mobile? We have to admit that long-suffering Good Technology [among the first startups to provide email access via mobile devices] still springs to mind whenever we hear those words.

We founded Visto [which acquired Good in 2009 and took its name] at Bessemer [in 1996]. Early investors lost money, but out of the wreckage has emerged a valuable business. It represents some of the challenges of entering a market before it’s ready. Being early is the same as being wrong if you’re just too aggressive and run out of money before the market comes to you. Now, with the penetration of smart phones, internet usage is tipping to mobile and empowering a workforce of people who have smart phones but don’t sit in front of a PC all day. And this is just the early days of that opportunity.

How are valuations?

Privately held cloud companies are trading at multiples well above their public market counterparts. It’s about double the public company multiples for the hottest late-stage private companies, which is unusual in that private companies used to trade at a discount to public comps because they were illiquid.

Does this now years-long trend concern you?

Well, it’s very hard to lead new investments in late-stage cloud companies because many are priced to perfection. You have all these groups – late stage investors, private equity investors, crossover public investors – that want exposure to hypergrowth and that are being aggressive about it, and they’re combining to drive up valuations. In many cases, they’ve been rewarded for their actions, too, with very positive, profitable returns.

But companies are also staying private longer as a result.

I think you need to disconnect the two. Investors can invest at any stage and, within reason, still have very positive results. That’s separate from when the company chooses to go public.

Does it make sense to wait [on an IPO]? I do think companies are overthinking it and waiting too long. When they have strong businesses with proven business models, waiting to grow from $2 billion to $10 billion in market cap makes less sense. Many are staying private for the right reasons, though, [such as] to work through business model and strategic issues.

Bessemer is the largest shareholder in Pinterest. Does it make sense for Pinterest to go public any time soon?

It doesn’t. Pinterest is still refining its business model, and that’s best done as a private company, where you can take a lot of risk and not have to report on every action in a public setting.


New Fundings

Aspire Health, a four-year-old, Nashville-based palliative care start-up co-founded by former Senator Bill Frist, has raised $15 million in Series C funding led by Oak HC/FT. More here.

Batuta, a 2.5-year-old, Ramallah, Palestine-based Arabic online travel site, has raised $2.5 million in Series A funding led by Siraj Palestine Fund I. More here.

Beabloo, a seven-year-old, Barcelona, Spain-based digital marketing and digital signage specialist, has raised €10 million ($11.1 million) in funding led bySoftbank, with participation from Baozun Commerce and an unnamed individual investor. More here.

Bee Cave Games, a three-year-old Austin, Tex.-based social casino and mobile game developer, has raised $5.5 million in Series A funding from earlier investor Matrix Partners. The company has now raised more than $10 million altogether, including from Dragonrise Capital.

Canary, a three-year-old, New York-based “smart” home security company, has raised $30 million in Series B funding led by Walden Riverwood Ventures, with participation from Cota Capital, Khosla VenturesFlextronics, Two Sigma Ventures and Western Technology Investment. TechCrunch has more here.

Coupa Software, a nine-year-old, San Mateo, Ca.-based suite of financial cloud-based spend-management applications for companies, has raised $80 million at a reported $1 billion valuation led by T. Rowe Price AssociatesIconiq Capital and Premji Invest. Earlier backers Battery VenturesCrosslink Capital and El Dorado Ventures also joined the round. Recode has more here.

Cyphort, a four-year-old, Santa Clara, Ca.-based threat protection platform, has raised $30 million in Series C funding led by Sapphire Ventures, with participation from earlier backers Trinity Ventures, Foundation Capital, and Matrix Partners. The company has now raised more than $53 million altogether.

HireVue, an 11-year-old, Salt Lake City, Ut.-based online hiring platform that employs predictive analytics and video, has raised $45 million in new funding led by Technology Crossover Ventures, with participation from earlier backers Sequoia Capital, Granite Ventures, Investor Growth CapitalPeterson Ventures and Rose Park Advisors. The company has now raised around $92 million altogether, shows Crunchbase. VentureBeat has more here.

KURE Corp., a year-old, Charlotte, N.C.-based vape and e-cigarette company, has raised $4.7 million in funding from unnamed investors. More here.

Lully, a year-old, San Francisco-based Y Combinator-backed startup that spun out of Stanford Biodesign and whose first product aims to prevent children’s night terrors, has raised $2.1 million in seed funding from unnamed investors.More here.

Lvmama, a seven-year-old, Shanghai, China-based tourism and travel booking and service company, has raised $80 million in funding from Jinjiang International, one of the largest state-owned hotel operators in China. The company had previously raised at least $65 million from investors, including Sequoia Capital, South River Capital, and CDH Investments. China Money Network has the story.

Nanosys, a 14-year-old, Milpitas, Ca.-based company that builds nanotechnology materials to improve LCD display color performance and battery storage, has raised an undisclosed amount of funding from Samsung Ventures, which had made an earlier investment in the company. More here.

Payfirma, a four-year-old, Vancouver, Canada-based multi-channel payment platform (think mobile phone app, iPad point-of-sale, web-based terminals, etc.) for small and mid-size companies, has raised $13 million in Series A funding led by Dundee Capital Markets. The company has now raised $23.5 million to date, shows Crunchbase.

Propel(x), a two-year-old, Redwood City, Ca.-based online investment platform connecting accredited investors with tech startups needing capital, has raised $1.5 million in seed funding from Capital Partners, Zhen Fund, TEEC Angels, TBN Network, CLI Group, and unnamed senior executives at Lending Club. More here.

Qunar, a 10-year-old, Beijing-based company that’s become one of China’s largest online travel booking platforms, has raised $500 million in new funding led by Silver Lake in the form of $330 million in convertible bond purchases. The rest of the capital comes from an undisclosed investor. Qunar, which went public in 2013, also counts the Chinese search giant Baidu as a major stakeholder. (As of March’s end, Baidu owned 51.4 percent of its outstanding shares.) The WSJ has more here.

Saama Technologies, an 18-year-old big data company, has raised $35 million from Carrick Capital Partners in its first institutional funding. Venture Capital Dispatch has more here.

Sublime Skinz, a 2.5-year-old, Paris, France-based ad tech company specializing in digital skin-based advertising, has raised $5 million in funding from ISAI, the French entrepreneurs’ fund. More here.

Udemy, the five-year-old, New York-based online course marketplace, has raised $65 million in new funding led by the New York City-based investment firm Stripes Group, with participation from earlier investors Norwest Venture Partners and Insight Venture Partners. The company has now raised $113 million altogether, including from MHS Capital, Lightbank, and other investors. Fortune has more here.


New Funds

The Airbus Group, the European aerospace and defense giant, has established a $150 million corporate venture capital fund called Airbus Group Ventures; it’s also opening a technology and business innovation center in Silicon Valley. Leading the venture group as CEO: Tim Dombrowski, who spent the last four-and-a-half years as an enterprise-focused partner at Andreessen Horowitz and before that was a director of global business development at Hewlett-Packard. Leading the innovation center as CEO: Paul Eremenko, who joins the company from Google, where he was director of engineering in the company’s Advanced Technology and Projects group.

Harbert Management, a Birmingham, Alabama-based investment management firm focusing on alternative assets, has raised its first European private debt fund, closing it with €122 million ($135.9 million) in commitments. The fund’s strategy is to to invest €5‐25m in European small‐to medium‐size enterprises; it has already committed €86m in 23 loan facilities, it says.



Legend Holdings, the Hong Kong-based Chinese conglomerate that is the largest shareholder in Lenovo Group, is planning to seek approval for an IPO of as much as $2 billion from the Hong Kong stock exchange. (All companies wanting to list on the city’s exchange go through the same process.) If it gets the green-light, Legend will reportedly list by the end of this month, giving curious investors insights into one of China’s oldest state-linked conglomerates. The WSJ has the story here.

Natera, an 11-year-old, San Carlos, Ca.-based genetic testing company whose tests diagnose fetal disorders based on maternal blood samples (it’s also developing tests that detect breast, ovarian, and lung cancer), has filed for an IPO. The company has raised roughly $154 million from investors, shows Crunchbase; according to its S-1, its biggest outside shareholders include Sequoia Capital, which owns 20.2 percent of the company; Claremont Creek, which owns 19.3 percent; Lightspeed Venture Partners, which owns 10.4 percent; and Sofinnova Ventures, which owns 6.1 percent.



6Wunderkinder, a five-year-old, Berlin-based startup behind the Wunderlist to-do list app, has been acquired by Microsoft for between $100 million and $200 million, according to the WSJ. The purchase is reportedly part of Microsoft’s new effort to enhance its line of mobile apps.

Mixamo, a seven-year-old, San Francisco-based online platform that enables developers and artists to customize and create 3D character animations, has been acquired by Adobe for undisclosed terms. The company plans to integrate Mixamo’s 3D technology directly into Photoshop. According to Crunchbase, Mixamo had raised $11.8 million in debt and equity from backers, including Keynote Ventures and Granite Ventures. Gamasutra has the story here.



Cisco’s co-presidents plan to resign on July 25 as incoming CEO Chuck Robbins implements a flatter organizational structure. Network World has more here.

Tom Georgens is stepping down as chairman and CEO of the data storage company NetApp less than two weeks after the company said it would lay off 500 workers and issued a disappointing financial forecast, reports the WSJ.

Jawbone, the San Francisco-based maker of fitness trackers, has laid off 20 employees or about 4 percent of its workforce. A Jawbone spokesman tells The Information that the layoffs are part of an ongoing restructuring.

The head of Lenovo Group‘s mobile business — Liu Jun — is stepping down, though the company isn’t saying why. The WSJ has the story here.

Tesla CEO Elon Musk saidyesterday that an L.A. Times article claiming his companies received government subsidies “makes it seem as though my company is getting some huge check, which is fundamentally false,” he told CNBC. According to the article, Musk’s three companies, Tesla, SolarCity and SpaceX, have collectively received $4.9 billion in government subsidies. Musk says that none were “necessary  but they are all helpful.” Asked if he wanted to defend the story, the paper’s deputy business editor, Brian Thevenot, told CNBC: “I’m actually surprised that [Musk] had such a sensitive reaction to this story because, really at its core, it’s basically a business strategy story that’s merely factual.”

Ellen Pao is not giving up on her gender discrimination case against Kleiner Perkins Caufield & Byers. More here.

Business Insider has taken down numerous stories about a new biography about Elon Musk after author (and Bloomberg Businessweek tech reporter) Ashlee Vance repeatedly complained that the site was going overboard in mining the book for blog posts. More here.



Canaan Partners is looking to hire an investment analyst. The job is in Menlo Park, Ca.


Essential Reads

Facebook is bolstering its artificial-intelligence expertise. More here.

Medium, the publishing platform started by Twitter cofounder Ev Williams, is gutting some of its most popular sites.



The case for killing the performance review.

At lunch with the author who introduced the Upper East Side “wife bonus.”


Retail Therapy

The Ninebot self-balancing scooter. It doesn’t seem like the easiest thing to master, but we’d try!

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