StrictlyVC: April 8, 2016

This work week is over. Cel-e-br-ate! Hol-i-day! Hope you have a wonderful weekend, everyone!

Btw, quick thanks again to Highway1 for having us over earlier this week for a discussion about how to build a great hardware company, even while giants like Amazon and its Echo are making it trickier than ever to pull off. Here’s video from that talk, which featured Semil Shah, Charles Hudson, Rob Coneybeer and Joshua Schachter. (The second half is more interesting than the first, for what it’s worth.) If we have time, we’ll also pull out some highlights in a post for you.


Top News in the A.M.

Apple‘s fight over privacy with the U.S. isn’t over yet. Now the FBI wants help accessing the phone of a drug dealer in Brooklyn.

Yahoo has moved the deadline for its bids out another week to April 18, according to Recode sources (“and the blabby bankers they talk to”).


Secondary Buyers Appear from Overseas to Snap Up Startup Stakes

We told you early last month that secondary businesses have been inundated with sellers in recent months, and that’s not expected to change anytime soon. Nary a tech company went public in the first quarter. There’s also the related issue of falling valuations, which has both institutional and individual shareholders nervously wondering whether to hang on to their holdings or get rid of them.

Helping to keep the whole flywheel going: secondary buyers who are coming from overseas to snap up startup stakes. So says Timothy Harris, a partner in the emerging companies and venture capital group of law firm Morrison Foerster who got us up to speed on the market yesterday afternoon.

Harris has his own agenda when it comes to secondaries — including helping startups decide whether to engage in transactions, how to structure them and to ensure companies have some degree of control over the process. But he spoke candidly about the good, the bad and the unexpected of what he’s seeing. Our chat has been edited for length.

The Financial Times wrote a piece recently proposing that some still-private companies have no plans to go public, ever, saying this was okay and even healthy.

That’s right. [The secondary market] is now one of the only ways that liquidity is provided to shareholders who don’t want to sit on their often highly appreciated shares. There were no IPOs in the first quarter. And some companies are still so highly valued, who can buy them? Meanwhile, you have people who joined these private companies thinking they’d go public and that [an IPO exit] was how they were going to pay their college tuition or for elder care or for the mortgage on their house.

The impulse to sell is understandable. But who’s buying? Isn’t it like catching a falling knife right now?

I don’t think that’s true. I’ve advised some VCs [about] what I perceive to be incredible deals based on what I’ve read about these companies and what they are worth. It’s like an art auction when the artists aren’t yet dead or they’re recently dead and it’s not clear how much their pieces will be worth in the future. People took a gamble on Facebook before it went public; they gambled on Square. Others who are buying into unicorns are similarly hoping the companies will go public someday or else that they can turn around and sell the shares for more later.

But again, who exactly is buying?

Many of them are tourist investors from overseas — both high net-worth individuals, funds, and public companies — who are thrilled to return home and say, “We just bought fill-in-the-blank-hot company.” They show up quite a bit and they appear relatively price insensitive, which makes them attractive to sellers. You also see investment bankers who represent someone who wants to buy or sell shares of certain companies. The angels and VC are also buying and selling to each other.

More here.


New Fundings

Ant Financial, the 12-year-old, China-based finance affiliate of Alibaba Group, has upped the amount of funding it is raising to $3.5 billion, in a deal that could value the company at $60 billion, says Bloomberg. China Investment Corp. and an investment vehicle of China Construction Bank Corp. are leading the funding. More here.

Globality, a year-old, Menlo Park, Ca.-based stealth-mode startup at work on a platform to facilitate cross-border trade, has raised $27.25 million in Series B funding. Investors include the company’s Series A investors, such as former Vice President Al Gore; Ron Johnson, CEO of Enjoy and a former Apple retail executive; John Joyce, CFO of Kony and former CFO of IBM; Michael Marks, a managing partner of Riverwood Capital and former CEO of Flextronics; and Yahoo CFO Ken Goldman. Globality was founded by Joel Hyatt, the former co-founder and head of Current TV and the founder of Hyatt Legal Services. TechCrunch has more here.

KiteDesk, a four-year-old, Tampa, Fla.-based company that makes sales prospecting software, has raised $6 million in funding led by Armada Investment and Imlay Investments. More here.

Luka, a 2.5-year-old, San Francisco-based free iOS messaging app that features intuitive AI-powered bots that help users make dinner reservations, get news updates and more, has raised $4.42 million in Series A funding. The round was led by Sherpa Capital; other participants include Y Combinator, Ludlow Ventures and Justin Waldron, a member of the founding team at Zynga. TechCrunch has more here.

MedDay, a five-year-old, Paris-based biotechnology company focused on treating nervous system disorders, has raised €34 million ($38.5 million) in Series B financing led by Edmond de Rothschild Investment Partners. Earlier backers Sofinnova Partners and InnoBio (Bpifrance) and Large Venture (Bpifrance) also joined the round. More here.

RideCell, an eight-year-old, San Francisco-based fleet-automation software company that helps customers from college campuses to car companies manage their mobility services, has raised $11.7 million in Series A funding led by BMWi Ventures, with the participation of Khosla Ventures and angel investors. More here., a 1.5-year-old, New York-based artificial intelligence company, has raised $23 million in new funding led by Two Sigma Ventures, with participation from DCM Ventures, Work-Bench Ventures, and earlier backers IA Ventures, FirstMark Capital, Softbank Capital, Lerer Hippeau VenturesCrunchFund, and Pritzker Group Venture Capital. VentureBeat has more here.


New Funds

An L.A. firm and a Bentonville, Arkansas-based firm have teamed up: Kayne Anderson Capital Advisors and NewRoad Capital Partners have formed a new fund to invest in early-stage, tech-enabled businesses in retail and other sectors. The fund is named Kayne NewRoad Ventures and it has $90 million in commitments from NewRoad Ventures Fund I, the Arkansas Venture Development Fund, and other investors. More here.



MGM Growth Properties, a real estate income trust, has priced its IPO at $18 to $21 a share. It’s not a tech company, but the offering could help tech companies waiting in the wings if all goes well.

A weekly reminder from our friends at Renaissance Capital: There have been 9 IPOs priced so far this year, 78 percent fewer than this time last year. The Renaissance IPO Index has returned -8.0 percent so far this year, compared to -0.1 percent for the S&P 500.



Amazon has given CEO titles to two division heads. Jeff Wilke, who runs the consumer business, and Andy Jassy, who manages the cloud services division, now share the CEO title with founder Jeff Bezos (who, do not be confused, is still top dog).

Crikey. An Uber driver in New Delhi was killed by two teenager passengers he’d served, the company confirmed this morning.

Thirteen women leading the life sciences movement in Silicon Valley.


Essential Reads

Uber has agreed to pay up to $25 million to California-based prosecutors to settle a case in which the ride sharing giant is accused of misleading consumers around the safety of its service. More here.

Why the next hot job in Silicon Valley is for poets.

Amazingly, Yale has made 93 percent a year on venture capital over the past two decades.



A comedian reads hilariously fake books on the subway.

Swim. Bike. Cheat?

The first big trailer for the newest “Game of Thrones” season (debuting April 24th; that’s just around the corner, people!).


Retail Therapy

The Atomic Trimmer. When you’re ready to get serious about personal grooming.

Squad bowls. For team building(?).

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