StrictlyVC: June 11, 2015

Hi, everyone, good morning! The countdown to Game 4 begins, woot!


Top News in the A.M.

Jawbone is really putting the screws to its biggest rival in the wearable fitness device market, Fitbit. For the second time in two weeks, its parent company, AliphCom, has lodged a lawsuit again Fitbit, reports the WSJ. Its newest complaint: that Fitbit infringed on a patent for “a wellness application using data from a data-capable band” after Jawbone spent more than $100 million on R&D toward that end. Fitbit said in a statement, “We are unaware of any confidential or proprietary information of Jawbone in our possession and we intend to vigorously defend against these allegations.” In late May, Jawbone filed its first lawsuit against Fitbit, saying it hired away Jawbone employees who nabbed its intellectual property on their way out. Eight-year-old Fitbit unveiled plans to go public in early May.

Google is launching a new company tasked with developing technologies that improve urban life, reports the New York Times. Called Sidewalk Labs, the company will be headed by Daniel Doctoroff, former deputy mayor of New York City for economic development and former chief executive of Bloomberg. Among other technologies the company is expected to pursue are those thatreduce pollution, curb energy use, and lessen the cost of city living. In September 2013, Google similarly launched another company, Calico, that aims to extend human life.


Amid Unicorn Talk, High-Potential, Low-Glamour PayNearMe Slogs Along

PayNearMe doesn’t get a lot of attention from the press. Partly, that’s because the five-year-old, Sunnyvale, Ca., company doesn’t seek it out. But PayNearMe is also in a business that’s not nearly so relatable to many in Silicon Valley as enterprise messaging or high-end black-car services. It’s focused on the roughly 25 percent of people in the U.S. who don’t have bank accounts but buy things — like the rest of us — that would be hard to pay for in cash, like rent, healthcare, and online goods.It’s a huge market, one that’s remarkably underserved excepting older players like MoneyGram and Western Union. It’s also a lot of work to build, making it a fairly long-term bet, one into which investors like True Ventures, August Capital, and Khosla Ventures have already sunk $71 million, including a $14 million inside round earlier this year.

How does it work? Say a person needs to pay their rent or buy a bus ticket. PayNearMe has relationships with both brick-and-mortar stores –including, crucially, 7 Eleven, Ace Cash Express and Family Dollar — as well as businesses like property management software companies. Together, the companies make it possible for anyone to walk into one of more than 17,000 locations with cash, and walk out with a receipt for payment.

This week, we talked with PayNearMe founder and CEO Danny Shader – previously a CEO of Good Technology, an EIR at both Kleiner Perkins and Benchmark, and cofounder of, an online consumer-to-consumer payments service that sold to Amazon for $175 million in stock in 1999 – to learn more about the gritty, complex business he’s been building.

PayNearMe doesn’t give out a lot of numbers, but you say that overall payment volume has more than tripled from this time last year. 

Our business is growing five to 10 percent a month, which keeps compounding, so it’s getting to be a pretty sizable business. It’s extremely hard to build up an entirely new payment network, but we’ve done it, it’s working, it’s growing, and it’s incredibly defensive. But it’s not for the faint of heart.

You could boil the ocean, trying to go after everyone who’s unbanked. What’s your process like?

We pursue things vertical by vertical. So the biggest vertical is lending, then rent and municipal government payments, and now healthcare is driving a lot of new people into the insured ranks and they need to pay their premiums. Within a vertical, there’s a handful of software companies that are systems of record, whether it be for property management companies or government agencies, and we integrate into those software systems. For rents, for example, we integrate with AppFolio and ManageAmerica, a property management system for manufactured housing, meaning mobile homes.

We try to go after very large accounts directly or go downstream.

Going downstream [to smaller players] sounds like a lot of work. How do you do it? How many employees do you have altogether?

We have more than 50, roughly half of whom are in Sunnyvale, with the rest scattered [around the U.S.]. And it does take time to get going on a new vertical. Say we want to do something in health, in medical records. We’ll go to a trade show and call on [some of the vendors] , and they’ll typically say, “Go away, my customers aren’t asking for you.” So we’ll go to end customers and invest heavily in getting them to work with us, and they do, and they talk about it, and a year later, the software providers say, “We want to integrate with you.”

Processing rent payments is one of your biggest businesses, but we understand that Family Dollar will no longer be accepting rent payments, that it grew worried about safety issues around people walking in with large sums of cash. We’ve asked the company about it but they haven’t responded.

I can’t speak for Family Dollar, but rent is a big vertical and we’re processing rent at a ton of other locations. Other folks will be joining our network, too.

PayNearMe shares its economics with stores like Family Dollar and 7 Eleven. Do you discuss that split? Is it 50/50?

I can’t comment on [the percentage of transaction fees we pay out], but it’s [a good deal for them]. Imagine: Hey, our sales force will sign up big entities like municipalities that will include your logo [so people know where to pay their bills], and we’ll pay you a commission, and by the way, we’re sending you valuable foot traffic.

PayNearMe has a lot of stuff coming. Can you give readers a curtain raiser?

I can say that we now have a complete set of money transmitting licenses in the U.S. and Puerto Rico that we spent the last three years and millions of dollars [to obtain]. The licenses allow us to act as an agent of a consumer, taking their money and delivering it to some other location. It lets us enter adjacent markets. [But that’s all I can say.]

Do you anticipate these adjacent businesses will be larger than what you’ve already built?

I think we could build a big public company doing what we’re doing. It’s a massive market hidden in plain sight. Most people in the Valley are asking if cash is going away. Actually, the cash market is increasing, and the bifurcation between the 1 percent and everyone else is contributing to that.


New Fundings

AbilTo, a seven-year-old, New York-based online video conferencing platform that delivers targeted health-changing programming, has raised $12 million in Series C funding led by HLM Venture Partners, with participation from earlier backers BlueCross BlueShield Venture Partners, .406 Ventures and Sandbox Industries. The company has now raised $21 million altogether, shows Crunchbase.

Bright Funds, a three-year-old, San Francisco, Ca.-based platform for individual and workplace giving, has raised $1.8 million in funding led byAspiration Growth, with participation from Bloomberg Beta, 10K Investments, Wellspring Growth Partners, Mission & Market, and individual investors. Per Crunchbase, the company has now raised roughly $3 million altogether.

Dojo Madness, a seven-month-old, Berlin, Germany-­based startup that makes a digital coaching app for a popular e-sports game called “League of Legends,” (and has broader plans up its sleeve), has raised $2.25 million in seed funding from DN Capital, London Venture Partners, March Capital Partners, 500 Startups, The HIVE, and numerous angel investors. VentureBeat has more here.

Kolibree, a two-year-old, Paris, France-based company whose “connected” electric toothbrushes enable parents to follow their kids’ brushing on their mobile devices with real-time feedback, has raised an undisclosed amount of Series A funding from SEB Alliance, Innovacom, Cap Horn Invest and the Dental Investment Group for Health.

Local ID, a nine-month-old, Venice, Ca.-based intelligence platform designed to maximize brands’ local marketing efforts, has raised $1.9 million in seed funding led by Crosscut Ventures, with participation from TechnicolorTenOneTen, Baroda Ventures, Double M Partners, Tallwave, Wavemaker Partners and Queens Bridge Venture Partners. TechCrunch has more here.

Locent, a year-old, Santa Monica, Ca.-based company that’s aiming to help merchants sell products and services using two-way text messaging, has raised an undisclosed amount of funding from Chaac Ventures, a seed-stage firm focused on Princeton University’s alumni tech founders. (Locent founder Matt Joseph, who previously worked in investments and operations at LaunchPad LA, graduated in 2010.) More here.

Luqa Pharmaceuticals, a five-year-old, Hong Kong-based pharma company focused on dermatology, has raised $15 million in new funding led byMorningside Ventures.

QualMetrix, a three-year-old, Miami, Fla.-based company whose cloud-based healthcare analytics platform that provides reporting to payers, providers and employers, has raised $5 milion in Series B funding led by VSS Monitoring founder Terence Breslin. (His company was acquired for an undisclosed amount in 2012.) QualMetrix has now raised $9.3 million altogether.

Tuhu Yangche, a four-year-old, Shanghai, China-based online car maintenance platform that invites customers to book car services appointments, as well as shop for products online, has reportedly raised roughly $100 million in Series C funding from Yuyue Capital, Far East Horizon, Legend Capital, and Qiming Venture Partners.

Unum Therapeutics, a year-old, Cambridge, Ma.-based biotechnology company developing an antibody-directed cellular immunotherapy, has raised $65 million in Series B funding led by New Leaf Venture Partners, with participation from Brace Pharma CapitalSeattle GeneticsCowen Private Investments, Jennison Associates (on behalf of certain clients), Novo A/S,Sabby Management,Sectoral Asset Management, and Wellington Management Company. Earlier backers Fidelity Biosciences, Atlas Venture and Sanofi-Genzyme BioVenture also joined the round. The company has now raised $77 milion altogether, shows Crunchbase. More here.

XTuit Pharmaceuticals, a four-year-old, Cambridge, Ma.-based biopharmaceutical company that’s developing products for use in the diagnosis and treatment of oncological, tumor, and inflammatory diseases, has raised $22 million in Series A funding led by New Enterprise Associates, with participation from Polaris PartnersCTI Life SciencesArcus Ventures and Omega Funds.

ZypMedia, a two-year-old, San Francisco, Ca.-based programmatic media-buying platform for local advertising, has raised $4.4 million in Series B funding led by publicly traded Sinclair Broadcast Group, with participation from earlier investor U.S. Venture Partners.



In April, Fortune reported that Ouya, the startup video game console maker, was on the auction block after tripping a debt convenant that it wasn’t able to restructure. Now, word is the company is talking with Razer, a computer and accessories maker popular with gamers. CNet has the story here.

Whitepages, the online people and phone number directory, has acquired San Francisco-based NumberCop to bolster its abilities to detect spam and scam calls within its Caller ID smartphone application. CrunchBase doesn’t list any investors for NumberCop. More from TechCrunch here.



Venture capitalist Matt Murphy, who left Kleiner Perkins Caufield & Byers earlier this year, didn’t travel far for his new job, joining another  Sand Hill Road firm — Menlo Ventures — as managing director. He becomes one of seven investing partners at the firm, including Mark Siegel, with whom Murphy attended business school at Stanford. Venture Capital Dispatch has more here.

For the year ended in April, Google CEO and cofounder Larry Page received a 97 percent approval rating from employees who submitted reviews to the career site Glassdoor. That makes him the most popular tech CEO, according to the site, which shows Facebook CEO Mark Zuckerberg isn’t doing too shabbily, either, with a 94 percent approval rating by employees. More here.

The CEO of Otter Media, the Web video joint venture between AT&T and The Chernin Group, is leaving after less than a year on the job, reports Recode.

In a letter to employees, Virasb Vahidi, formerly chief commercial officer at American Airlines, wrote that “it has become clear to [Chernin Group CEO Peter Chernin] and me that the role of the CEO is different than we had originally envisioned.”

“Unicorn” companies are increasingly hunting for talent at the Googleplex.



eBay is looking for a director of corporate development. The job is in San Jose, Ca.

Oracle is hiring a corporate development associate. The job is in Redwood Shores, Ca.


Essential Reads

After trading some public jabs earlier this week, payroll provider ADP has filed a defamation lawsuit against the high-flying human resources firm Zenefitsreports the WSJ. ADP’s complaint states that Zenefits and its CEO, Parker Conrad, launched a “manipulative and malicious public relations campaign, ignoring its own conduct, to defame ADP and drive away ADP’s clients.” ADP has since sent an email offering a competing product called Opum to Zenefits customers. TechCrunch has more on that last twist here.

Amazon may be launching daily live video shows to help sell stuff. More here in USA Today.



The Godfather of Clickbait.

The first official TV trailer for the new Bond movie.


Retail Therapy

Nest Cam.

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