StrictlyVC: August 14, 2015

It is Friday! Wunderbar! Major thanks to investor-writer Semil Shah, who has been an enormous help over the last three weeks while Connie spent a little quality time offline, finishing her kit car. If you want to talk with him about his column in today’s newsletter, you can find him here on Twitter.

Also, thanks very much to the many of you who’ve volunteered to help with next month’s event in San Francisco. This readership is the best, truly. We’re still trying to figure out exactly how many people we need, but we’ll let each of you know what’s up as soon as we get things sorted (either today or Monday).


Top News in the A.M.

Alphabet, the new parent company of Google, has a new company in its portfolio: Ingress, an internal unit that was just spun out on its own.

Apple customers waiting for the company to revolutionize live television will have to wait until next year.

Uber just won the dismissal of lawsuit by 15 Connecticut taxi and limousine companies seeking to stop it from doing business in the state.


To Atomize or to Grow?

By Semil Shah

The growth in micro VC funds is now well-documented. While there are many reasons to explain why this trend took hold, the more interesting question to ask is: What will happen to those funds which survive?

Grow the Team

A natural desire of any entrepreneurial endeavor — including starting a fund — is to keep growing it. In the context of small funds, traditional LPs will naturally hope this new crop of managers who emerge will grow a franchise, will add people to the team, and ultimately manage more money. Eventually, some of these franchises can grow to manage quite a bit of money per fund per GP and can, in effect, become a new type of Series A firm. This is the theory. It remains to be seen if more than just a few can make this transition, as the models at seed versus Series A are obviously quite different.

Stay the Course as Lone Wolf

While it may sound traditional to turn a good micro VC fund into a more traditional venture franchise, creating a strong general partnership is not a simple, check-the-box activity. Noting the difficulty, some micro VCs have opted to stay as solo operators longer than LPs had imagined. (See Manu Kumar.) Some, of course, continue to outperform and earn the right to manage more money per fund (if they choose to). In this instance, the LPs aren’t able to invest more and more of their funds into the GP. In the same way a large VC fund may look for opportunities to increase their ownership in a great company in their portfolio in order to make its own economics work, a large LP will often have a similar desire.

Differentiate and Evolve

Just as investors may have “app fatigue” or “food delivery service” fatigue, LPs pitched by micro VC funds have their own flavor of fatigue. As a way to cut through the noise, many of them drill into what differentiates a GP they’re considering an investment in. This can nudge micro VCs to differentiate on the basis of sector (hardware, Bitcoin, etc.), or geography (focusing in emergent areas outside the Valley especially), or stage (pre-seed vs seed, etc.), and more. And the success of Y Combinator and the potential for more steady budgets for an accelerator or incubator could encourage more to let go of the traditional fund model altogether.

I know these choices because I have been faced with them. The LPs rightly ask these questions and conduct references to determine which way the micro VC wants to go. But the truth is that, just like most at seed don’t know how well a company will do at the very early stages, most of them also don’t know what the optimal path to take is. This can lead to an awkward discussion, where LPs may want or need to hear certain things to “check the box” in their processes versus having the raw discussion about what is working and what doesn’t. The truth is that most people don’t know, and in this market, which is changing year to year, the main value in these smaller funds is that their inherent nimbleness by virtue of being small gives them the right level of flexibility to adapt to a dynamic, ever-changing environment.


New Fundings

ChatID, a four-year-old, New York-based startup that helps businesses instant message to communicate with their customers, has raised $11.2 million in Series B funding led by Costanoa Venture Capital. The company has now raised $19.2 million altogether, including from earlier investors FirstMark Capital and Mack Capital. More here.

EShares, a three-year-old, Mountain View, Ca.-based company that stores data about private companies’ ownership and value, has raised $17 million in Series B funding led by earlier investor Spark Capital, says VentureWire. Other participants in the round include Union Square Ventures, Subtraction Capital, and Industry Ventures.

GrabTaxi, the four-year-old, Singapore-based smartphone booking and dispatch platform that competes with Uber in Southeast Asia, is about to close a $400 million round of funding led by China Investment Corp (CIC), China’s sovereign wealth fund, reports the WSJ. The company has already held a first close on $200 million led by Coatue Management.

Intelex, a 23-year-old, Toronto-based maker of environmental, health, safety, and quality management software, has raised C$160 million ($122.9 million) in growth equity funding led by JMI Equity, with participation from HarbourVest.More here.

The Honest Company, a four-year-old, Santa Monica, Ca.-based company that sells eco-friendly baby and cleaning products, has raised $100 million in Series D funding led by new investor Glade Brook Capital Partners. Other participants in the round include AllianceBernstein and earlier backers Fidelity Management & Research Company, Wellington Management Company and Institutional Venture Partners.

Massdrop, a three-year-old, San Francisco-based online discussion platform for gatherings of particular enthusiasts (from audio to cooking), has raised $40 million in Series B funding led by August Capital, with participation from earlier backers Cowboy Ventures, First Round Capital, and Mayfield. The company has now raised $47.9 million altogether. TechCrunch has more here., a two-year-old, Burlington, Ma.-based company that aims to deliver scalable network virtualization to enterprises, has raised $16 million in Series A funding led by North Bridge Venture Partners, with participation from unnamed strategic investors. More here.


New Funds

Elephant Partners, a growth equity firm launched earlier this year by former Highland Capital Partners investors Jeremiah Daly and Andy Hunt — they also cofounded the eyeglasses company Warby Parker — is seeking up to $125 million for its debut fund. The WSJ has much more here.

Rocket Internet, the eight-year-old, Berlin, Germany-based publicly traded internet company founded by the Samwer brothers, is raising up to €1 billion ($1.1 billion) for a growth fund, according to the German business publication WirtschaftsWoche (WiWo). Reportedly, the vehicle will be named, simply, Rocket Internet Growth Fund. has more here.



Apple CEO Tim Cook on the company’s latest diversity numbers: “There’s a lot more work to be done.” TechCrunch has more here.

Zirtual founder Maren Kate Donovan blamed the company’s collapse, in part, on an outsourced CFO that she would not name. That individual now tells Fortune his side of the story here.

Bill Maris of Google Ventures says that having a new parent company, Alphabet, doesn’t change things for his group (if you were curious). More here.



RRE Ventures is looking to hire a director of platform. The job is in New York.


Essential Reads

VW has spent two years trying to hide a big security flaw. Bloomberg has the story here.

But when will they go public? A profile of the average company at IPO.



Inside the secret dating app for famous people.

Ten untranslatable words, beautifully illustrated.

Things that will happen if I don’t take my phone out right now.


Retail Therapy

Apple (pocket) Watch.

The world’s largest hard drive, courtesy of Samsung. (It can store up to two years of video.)

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