• StrictlyVC: October 27, 2014

    Hi, and good morning, everyone! Hope you had a terrific weekend. Go Giants! (Hey, web visitors, here’s an easier-to-read version of today’s email.)

    —–

    Top News in the A.M.

    The FCC “leapt into data security litigation” on Friday, levying a $10 million fine against two telecom companies that “allegedly stored personally identifiable customer data online without firewalls, encryption or password protection,” reports the Washington Post.

    E-commerce sites are offering consumers different prices based on their operating system, browser history and device, shows new research.

    —–

    Gil Penchina Is Coming for You

    Gil Penchina is a former eBay and Wikia executive. He’s also a longtime angel investor who has enjoyed cash-on-cash returns of 6x over the last 15 years, he says.

    But the latest feather in Penchina’s cap is his place within AngelList’s universe of so-called Syndicates, which are essentially pop-up funds that allow angel investors to syndicate their investments in exchange for 15 percent of any upside. (AngelList collects another 5 percent. There are no management fees.)

    Since the program was rolled out by AngelList roughly a year ago, Penchina has attracted 1,300 accredited investors who’ve committed to collectively plug up to $4.6 million into each deal he wants to make. Those numbers make his the largest Syndicate on the platform. They also give him the firepower, theoretically, of a mid-size venture fund.

    Penchina, who has already invested “between $5 million and $10 million” in startups through his syndicate, says he’s just getting started, too. We caught up yesterday. Our chat has been edited for length.

    You don’t have an office. You have no institutional investors. And yet you have a stunning amount of capital at your disposal suddenly.

    Yes. We only started nine months ago, and [our commitments are up] to $4.6 million per deal, which is slightly frightening when you’re used to writing $25,000 checks [from your personal bank account]. We’ve now led two A rounds, for [the sales prospecting company] Datanyze and Contactually [a relationship marketing platform], and we’re trying to do more [lead investing].

    We’ve also launched a SaaS syndicate, a bitcoin syndicate, an [Internet of Things] syndicate, and we’re launching a [financial technology] syndicate. And we’ve launched a late-stage syndicate for B and C rounds and we’re in the registration and comment period with regulatory authorities for a venture debt syndicate, which will be interesting once that’s up and running. Notionally, we want to [represent] every vertical, and every asset class – from bridge rounds to A and B and C rounds — so if investors want a more narrow thesis, they can invest in it. If they want a broader thesis, they can in invest in my main syndicate and get a more diversified pool of investments.

    Wow. How much have investors committed to these vertical syndicates?

    The SaaS syndicate has [commitments of] $1.8 million, the late-stage syndicate has $1.1 million, bitcoin has $700,000. All of these ideas are getting some traction. Ultimately, I’m trying to build Fidelity, with fund managers who specialize in certain sectors.

    Who are all these investors?

    We get a mix. When you democratize and reduce friction, everyone shows up. CEOs, dentists, young guys who are making their first investment. Six months ago, we had 200 investors. Today we have 1,300. If things continue [apace], we’ll have 10,000 investors in a year’s time.

    And who’s the “we” when you refer to your syndicates?

    There are two managers per syndicate. They aren’t full time but rather executives in each particular vertical. One is a chief revenue officer, another is a product executive, another is the CEO of a bitcoin company.

    We also have 30 volunteers, from associates at venture firms, to executives who think these syndicates are a great way to learn about other industries, to people who want to work in venture and think [helping us] is a great training ground.

    These managers and volunteers are essentially scouts? Do you promise them a percentage of your carry if they bring you something you eventually decide to fund?

    It isn’t that structured. We aren’t making management fees, though, so I [will] share the carry with [everyone who helps me]. We want everyone’s interests aligned, so that if there’s a mediocre deal, we don’t do it.

    By the way, we’re always looking for new recruits, if you can let your readers know.

    How would you describe your pacing, and what size checks are you writing right now?

    We did smaller deals at first, a couple hundred thousand dollars here and there to see how it works. Then we moved from $200,000 to $500,000 and now we’re writing checks of $1 million. Six months ago, we’d do a deal every two months and in October, we’ve already done three deals, two of which were $1 million, so the pace seems to be getting faster every month.

    The public market has been been volatile. Meanwhile, unlike a traditional fund’s investors, Syndicate investors can opt out of deals or opt out entirely. You must be seeing some kind of pullback.

    I’m not. The market was up last week; it was down the week before. You have to remember that AngelList is growing at a rapid rate itself, so every day, new people are joining the crowd, and a rising tide raises all boats. Even if my boat is a little leaky, I don’t notice it because I’m [moving up] and not down.

    You’ve said before that the beauty of AngelList for an investor like yourself is not having to deal with attorneys and LPs. AngelList sets up the funds; it handles customer accounting. But AngelList has a lot of out-of-pocket fees as a result, something like $12,000 per fund, cofounder Naval Ravikant told me last year. Do you worry that it’s not sustainable, given that AngelList is not yet producing revenue?

    No. Putting together an LLC is a bunch of legal docs. Costs are higher now because there are probably 75 different permutations of deal structures or term sheets, but at some point, they’ll have a template for every one of the damn things and it will be cheap. More and more of this will get automated – reporting, tax [considerations]. I’m really not sure why anyone would start a micro fund in 2014 when they could start a Syndicate for zero dollars instead and not spend a lot of time doing the annual accounting or figuring out the legal structure of this stuff.

    —-

    New Fundings

    Capshare, a three-year-old, Sandy, Ut.-based online cap table management system, has raised $1 million in funding led by Draper Associates, with participation from Kickstart Seed Fund and individual investors, including Skullcandy CEO Jeremy Andrus.

    D3 Banking, a seven-year-old, an Omaha, Neb.-based company that makes financial management software for regional and community financial institutions, has raised $7 million in funding from Route 66 Ventures.

    Enjoy, a new, Menlo Park Ca.-based e-commerce startup from Apple’s ex-retail chief Ron Johnson, has raised $30 million in funding led by Oak Investment Partners and Kleiner Perkins Caufield & Byers, with participation from Andreessen Horowitz. The company, operating in stealth mode, aims to help shoppers develop a connection with new products, Johnson told the WSJ last week. More here.

    LedgerX, an 11-month-old, New York-based company that says it’s building the “the first regulated, compliant derivatives exchange” for cryptocurrencies, has raised an undisclosed amount of funding from Google Ventures and Lightspeed Venture Partners, reports VentureWire. The company had previously raised at least $1.5 million in seed funding from Crypto Currency Partners and entrepreneur Eric Kagen, shows Crunchbase.

    GovX, a three-year-old, La Jolla, Ca.-based e-commerce platform for active duty, reserve and retired members of the U.S. Armed Forces and related government agencies, has raised $7.9 million from investors, according to an SEC filing that shows a $10 million target.

    Moka5, a nine-year-old, Redwood City, Ca.-based company that develops and markets virtual computer technology, has raised $16.3 million in new funding, according to an SEC filing that shows a $23.4 million target. The company had previously raised at least $43 million in equity and debt, including from Khosla Ventures and Highland Capital Partners.

    Payoff, a five-year-old, Costa Mesa, Ca.-based startup that makes loans to people looking to pay off credit card debt, has raised $12 million in new funding, shows an SEC filing that lists Mohamed El-Erian, the former CEO and co-CIO of PIMCO, as a director. The company had previously raised $16.9 million, show earlier fundings. Its backers include Great Oaks Venture Capital, FirstMark Capital, and Anthemis Group.

    Syros Pharmaceuticals, a 1.5-year-old, Watertown, Ma.-based company looking to develop gene control therapies in cancer and other diseases, has raised $53 million in Series B funding led by a large, Boston-based public investment firm, with participation from Polaris Partners, Aisling Capital, and Redmile Group. Earlier investors Flagship Ventures, ARCH Venture Partners, WuXi PharmaTech Corporate Venture Fund, and Alexandria Venture Investments also joined the round, which brings the company’s total funding to $83 million.

    Wysada, a 1.5-year-old, Amman, Jordan-based online home furnishings store, has raised $5 million in Series A funding by Badia Impact Fund, a venture capital fund owned by Silicon Badia. Strategic investors from the Kingdom of Saudi Arabia and the Gulf Cooperation Council (GCC) also participated alongside earlier investors. TechCrunch has more here.

    —–

    New Funds

    Pantera Capital, the 11-year-old, San Francisco-based firm founded by Tiger Management veteran Dan Morehead, is raising an “indefinite” amount for a venture capital fund, shows a new SEC filing that shows Pantera has already raised $10.4 million for the effort. Until 2011, Pantera was a macro hedge fund but in recent years, the firm has narrowed its focused around bitcoin and now advertises itself as an “investment firm focused exclusively on bitcoin, other digital currencies and companies in the space.” Its investors include Ribbit Capital, Benchmark, and Fortress Investment Group.

    —–

    IPOs

    Roku, the 12-year-old, Saratoga, Ca.-based streaming TV startup, is working on plans to confidentially file for an IPO, the WSJ reported late last week. Roku has raised at least $128 million over the years, shows Crunchbase. Its investors include Luminari Capital, BSkyB, Menlo Ventures, Globespan Capital Partners, News Corp and Hearst Ventures.

    —–

    Exits

    Revolv, a two-year-old, Boulder, Co.-based smart-home automation device maker, has been acquired by Google-owned Nest Labs for undisclosed terms. Nest co-founder and VP of engineering Matt Rogers told Recode of the deal: “We are not fans of yet another hub that people should have to worry about. It’s a great team, an unbelievable team. There’s a certain amount of expertise in home wireless communications that doesn’t exist outside of these 10 people in the world.”

    Stitcher, a six-year-old, San Francisco-based online radio service, was acquired by Paris-based Deezer for undisclosed terms. According to Crunchbase, Stitcher had raised $18.7 million from investors, including Great Oaks Venture Capital, New Enterprise Associates, Benchmark, New Atlantic Ventures, and SV Angel. TechCrunch has more here.

    —–

    People

    Alan Eustace, 57, a senior vice president of Google, parachuted from a balloon near the top of the stratosphere on Friday, falling faster than the speed of sound and breaking the world altitude record set just two years ago. The New York Times has his story here. “It was amazing,” Eustace tells the outlet. “It was beautiful. You could see the darkness of space and you could see the layers of atmosphere, which I had never seen before.”

    Google CEO Larry Page is transferring leadership of core Google products to Sundar Pichai, reports Recode. Pichai will now have purview over research, search, maps, Google+, commerce and ads and infrastructure and maintain responsibility for Android, Chrome and Google Apps.

    —–

    Job Listings

    Noosphere Ventures is looking for an analyst. The job is in Menlo Park, Ca.

    —–

    Essential Reads

    Rite Aid and CVS have moved to disable what are called NFC (near field communications) terminals in their stores, meaning they will no longer support either Apple Pay or Google Wallet. The reason: They’re participating instead in Merchant Customer Exchange (MCX), a retailer group that’s thumbing its nose at the tech giants and developing its own mobile payments system known as CurrentC. (TechCrunch has a nice piece on that “clunky attempt” here.)

    Machine-learning maestro Michael Jordan on the delusions of big data.

    “The Uber experience is just so much easier for African-Americans . . . When I need a car, it comes. It takes me to my destination. It’s amazing that I have to pay a premium for that experience, but it’s worth it.”

    —–

    Detours

    The “advanced” seven-minute workout.

    Jim Carrey does his best Matthew McConaughey.

    —–

    Retail Therapy

    Ejection seats.

    Chic pet beds.

    Connie

  • Gil Penchina is Coming for You

    Gil+Penchina+TechCrunch+Disrupt+SF+2014+Day+L4UGljNri2BlGil Penchina is a former eBay and Wikia executive. He’s also a longtime angel investor who has enjoyed cash-on-cash returns of 6x over the last 15 years, he says.

    But the latest feather in Penchina’s cap is his place within AngelList’s universe of so-called Syndicates, which are essentially pop-up funds that allow angel investors to syndicate their investments in exchange for 15 percent of any upside. (AngelList collects another 5 percent. There are no management fees.)

    Since the program was rolled out by AngelList roughly a year ago, Penchina has attracted 1,300 accredited investors who’ve committed to collectively plug up to $4.6 million into each deal he wants to make. Those numbers make his the largest Syndicate on the platform. They also give him the firepower, theoretically, of a mid-size venture fund.

    Penchina, who has already invested “between $5 million and $10 million” in startups through his syndicate, says he’s just getting started. We caught up yesterday. Our chat has been edited for length.

    You don’t have an office. You have no institutional investors. And yet you have a stunning amount of capital at your disposal suddenly.

    Yes. We only started nine months ago, and [our commitments are up] to $4.6 million per deal, which is slightly frightening when you’re used to writing $25,000 checks [from your personal bank account]. We’ve now led two A rounds, for [the sales prospecting company] Datanyze and *Contactually [a relationship marketing platform], and we’re trying to do more [lead investing].

    We’ve also launched a SaaS syndicate, a bitcoin syndicate, an [Internet of Things] syndicate, and we’re launching a [financial technology] syndicate. And we’ve launched a late-stage syndicate for B and C rounds and we’re in the registration and comment period with regulatory authorities for a venture debt syndicate, which will be interesting once that’s up and running. Notionally, we want to [represent] every vertical, and every asset class – from bridge rounds to A and B and C rounds — so if investors want a more narrow thesis, they can invest in it. If they want a broader thesis, they can in invest in my main syndicate and get a more diversified pool of investments.

    Wow. How much have investors committed to these vertical syndicates?

    The SaaS syndicate has [commitments of] $1.8 million, the late-stage syndicate has $1.1 million, bitcoin has $700,000. All of these ideas are getting some traction. Ultimately, I’m trying to build Fidelity, with fund managers who specialize in certain sectors.

    Who are all these investors?

    We get a mix. When you democratize and reduce friction, everyone shows up. CEOs, dentists, young guys who are making their first investment. Six months ago, we had 200 investors. Today we have 1,300. If things continue [apace], we’ll have 10,000 investors in a year’s time.

    And who’s the “we” when you refer to your syndicates?

    There are two managers per syndicate. They aren’t full time but rather executives in each particular vertical. One is a chief revenue officer, another is a product executive, another is the CEO of a bitcoin company.

    We also have 30 volunteers, from associates at venture firms, to executives who think these syndicates are a great way to learn about other industries, to people who want to work in venture and think [helping us] is a great training ground.

    These managers and volunteers are essentially scouts? Do you promise them a percentage of your carry if they bring you something you eventually decide to fund?

    It isn’t that structured. We aren’t making management fees, though, so I [will] share the carry with [everyone who helps me]. We want everyone’s interests aligned, so that if there’s a mediocre deal, we don’t do it.

    By the way, we’re always looking for new recruits, if you can let your readers know.

    How would you describe your pacing, and what size checks are you writing right now?

    We did smaller deals at first, a couple hundred thousand dollars here and there to see how it works. Then we moved from $200,000 to $500,000 and now we’re writing checks of $1 million. Six months ago, we’d do a deal every two months and in October, we’ve already done three deals, two of which were $1 million, so the pace seems to be getting faster every month.

    The public market has been been volatile. Meanwhile, unlike a traditional fund’s investors, Syndicate investors can opt out of deals or opt out entirely. You must be seeing some kind of pullback.

    I’m not. The market was up last week; it was down the week before. You have to remember that AngelList is growing at a rapid rate itself, so every day, new people are joining the crowd, and a rising tide raises all boats. Even if my boat is a little leaky, I don’t notice it because I’m [moving up] and not down.

    You’ve said before that the beauty of AngelList for an investor like yourself is not having to deal with attorneys and LPs. AngelList sets up the funds; it handles customer accounting. But AngelList has a lot of out-of-pocket fees as a result, something like $12,000 per fund, cofounder Naval Ravikant told me last year. Do you worry that it’s not sustainable, given that AngelList is not yet producing revenue?

    No. Putting together an LLC is a bunch of legal docs. Costs are higher now because there are probably 75 different permutations of deal structures or term sheets, but at some point, they’ll have a template for every one of the damn things and it will be cheap. More and more of this will get automated – reporting, tax [considerations]. I’m really not sure why anyone would start a micro fund in 2014 when they could start a Syndicate for zero dollars instead and not spend a lot of time doing the annual accounting or figuring out the legal structure of this stuff.

    *The original version of this story misidentified Penchina’s investment as in Contractually, a different startup.

    Sign up for our morning missive, StrictlyVC, featuring all the venture-related news you need to start you day.

    Connie

    , ,

  • StrictlyVC: October 24, 2014

    Good Friday morning, readers! We hope you’re in for a terrific weekend. Also, if you missed StrictlyVC yesterday (a few of you told us it landed in your spam boxes), you can check it out here.

    —–

    Top News in the A.M.

    Airbnb is discussing a new round that could total more than $50 million and value the company at $13 billion, reports the WSJ, which says the company wouldn’t use the cash for itself but rather to allow investors to buy employee shares. The round hasn’t yet closed and the funding amount and valuation could still change, says the report.

    The last legal hope of television streaming service Aereo was dashed yesterday.

    Amazon‘s quarterly earnings report yesterday has Wall Street spooked. Bloomberg BusinessWeek has more here.

    —–

    Bill Gurley: Earlier Warnings are Making an Impact

    Venture capitalist Bill Gurley appeared on CNBC’s “Squawk Alley” show earlier this week to clarify some of the comments he’d made in mid-September to the Wall Street Journal – comments that Gurley thinks were misconstrued in follow-on reports that confused risk with valuations. “I was talking about risk and I didn’t say a word about valuations,” said Gurley. “I don’t see radically insane valuations.”

    Gurley went on to say that the pubic market is right now “more discerning” than the late-stage venture market, where investors are “cram[ming] almost unnecessary levels of capital into these private companies.” Gurley also told CNBC that he believes his earlier warning in the Journal is having a “positive” impact on the private market. Here’s Gurley, in his own words:

    “It’s a four or five-year trend . . . of late-stage companies raising rounds that are larger than historic IPO rounds, and because there’s no capital intensity – we’re not buying stores, we’re not building factories – when you take that amount of capital and try and put it to use, the only way to do that is to increase your burn rate.

    “The problem is this growth-at-all-costs mentality causes almost a subsidization of survival. It’s almost easier to execute unprofitably than profitably. So if I say, ‘Hey, go grow a company to $100 million,’ and one company is told they have to be profitable and the other is told they can lose $30 million, it’s much easier to do the latter. So I think we end up with more companies with higher revenue rates where their business models still may be open to question . . .

    “I think the public markets are being more discerning than the late-stage private markets in terms of trying to figure out whether a company has a potential long-term business model and has the ability to generate profitability over the long term.

    “[In fact,] I think having that conversation a couple of weeks ago has had two positive impacts. One, I’m starting to hear more and more people tell me at board meetings, ‘Hey, we’re talking about this; we’re thinking more about this. We’re going to be smarter going forward.’

    “Second, in the public markets, you’re seeing some discernment. In the same week, [you’ll see] two companies go public and two delay because of ‘market conditions.’”

    —–

    New Fundings

    51Talk, a three-year-old, Beijing-based online English language education service, has raised $55 million in Series C funding led by Sequoia Capital, says China Money Network. Other participants included earlier investorsDCM and Shunwei Capital founded by Lei Jun, founder of the smartphone maker Xiaomi.

    Blockstream, a 10-month-old, Quebec-based company at work on a new way of transferring assets across multiple block chains (which work like digital spreadsheets shared by everyone in a decentralized network), has raised $15.8 million in funding, shows an SEC filing that was flagged by Coindesk. The filing names Reid Hoffman of Greylock Partners as a director. Talking with Coindesk, Blockstream’s CEO Austin Hill said the round is still open and that the company will provide more details once it’s complete.

    Charlie, a 2.5-year-old, Chicago-based mobile app that promises to arm users with important information about their contacts right when they need it (like before a big meeting), has raised $1.75 million in seed funding led by Lightbank, with participation from Confluence Capital Partners, Hyde Park Venture Partners and several individuals.

    DormChat, an Hoboken, N.J.-based geolocal communication service for college students, has raised an undisclosed amount of seed funding from ff Venture Capital.

    Ello, the year-old, Burlington, Vt.-based social network that promises to keep advertising off its site, has raised $5.5 million in funding from Foundry Group, Bullet Time Ventures and FreshTracks Capital. Betabeat has more here.

    ExecOnline, a 2.5-year-old, New York-based company that partners with schools to develop online executive education programs, has raised $5 million in Series A funding led by Osage Venture Partners, with Kaplan Ventures, Militello Capital, New Atlantic Ventures and others participating. The company has now raised $6.9 million to date, shows Crunchbase.

    Fountain, a year-old, San Francisco-based company whose on-demand question-and-answer app addresses gardening and home-improvement questions (for now), has raised $4 million in Series A funding led by Shasta Ventures, with participation from First Round Capital. TechCrunch has more on the company — cofounded by Mint founder Aaron Patzer — here.

    KouDai, a Beijing-based mobile e-commerce platform that recommends targeted products to users, has raised a whopping $350 million in Series C funding led by the Internet giant Tencent Holdings, according to China Money Network. Other investors in the round include Tiger Global Management and DST Global. The three investors also previously backed the now-public Chinese e-commerce platform JD.com. KouDai, which means “pockets” in Chinese, counts Chengwei Venture Fund, Matrix Partners, and Warburg Pincus among its earlier investors.

    Luxe Valet, a year-old, San Francisco-based on-demand valet service, has raised $5.5 million in seed funding from Google Ventures, Sherpa Ventures, Redpoint Ventures, Lightspeed Venture Partners, Upfront Ventures, Foundation Capital, BoxGroup, Slow Ventures, Data Collective, Eniac Ventures, Rothenberg Ventures and others. VentureBeat has much more here.

    Mogl, a four-year-old, San Diego-based loyalty rewards app, has raised $11 million in funding from Austin Ventures, Avalon Ventures, Correlation Ventures and Sigma West. The company has now raised at least $21.7 million to date, shows Crunchbase.

    Oneflare, a 2.5-year-old, Sydney, Australia-based local services marketplace, has raised $1 million AUD (about $876,000), bringing its total funding so far to $1.5 million AUD (about $1.3 million). Investors include Equity Venture Partners, Sydney Seed Fund and The Strategy Group. TechCrunch has more here.

    Phreesia, a nine-year-old, New York-based healthcare point-of-service platform, has raised $30 million in new funding led by LLR Partners, with participation from HLM Venture Partners and Ascension Ventures. The company has raised $72.7 million altogether, shows Crunchbase.

    Portal Instruments, a new Cambridge, Ma.-based company that’s developing a computerized needle-free drug delivery system, has raised $11 million in Series A funding led by Sanofi, PBJ Capital, and a major, unnamed medical device company.

    Slack, the five-year-old, San Francisco-based enterprise collaboration platform, is reportedly raising a new round of funding at a valuation of between $800 million and $1 billion, just six months after raising nearly $43 million. (To date, the company has raised $60 million.) Sequoia Capital and Kleiner Perkins Caufield & Byers are involved in the newest funding, says one report from TechCrunch. The company’s earlier investors include Andreessen Horowitz, Accel Partners, and The Social+Capital Partnership. More here.

    Soft Machines, an eight-year-old, Santa Clara, Ca.-based semiconductor company, has raised $125 million in funding, including from two former senior Intel executives (Albert Yu and Richard Wirt); well-known chip entrepreneur and investor Gordon Campbell; Samsung Ventures; Advanced Micro Devices; and Mubadala, the Abu Dhabi investors backing chip manufacturer Globalfoundries. The WSJ has the story here.

    Spring.me, a 1.5-year-old, Sydney, Australia-based social network that was previously known as Formspring, has raised $5 million in debt and equity, including from Right Click Capital, Tank Stream Ventures, Nextec Strategic Capital, and Rubicon Project founder Craig Roah. TechCrunch has more on how and why the company is rebranding itself.

    TaskEasy, a three-year-old, Salt Lake City, Ut.-based company that provides on-demand exterior home services like leaf raking, said it has raised $7 million in Series A funding from Access Venture Partners, Grotech Ventures and KickStart Seed Fund. The company has raised $9.6 million to date, shows Crunchbase.

    Telcare, a six-year-old, Bethesda, Md.-based company that develops cellular-enabled glucose monitors and a cloud-based companion system, has raised $32.5 million in Series C funding led by Norwest Venture Partners, with Mosaic Health Solutions and earlier investors Sequoia Capital and Qualcomm participating. The company has now raised $63.5 million altogether, shows Crunchbase.

    Vestorly, a 2.5-year-old, New York-based content marketing platform for financial services professionals, has raised more than $2 million in seed funding from AlphaPrime Ventures, Formation 8, and Gaspar Global Ventures.

    Zignal Labs, a three-year-old, San Francisco-based real-time media monitoring and analytics company, has raised $10.7 million in Series B funding from earlier investors, including Figtree Partners, Ross Investment Associates and company co-founder Jim Hornthal. The company has now raised $14.9 million altogether, shows Crunchbase.

    —–

    New Funds

    Founders Circle Capital, a 2.5-year-old, San Francisco-based firm that buys back stock from founders, executives, employees and early backers, has raised $195 million across two funds, beating a target of $125 million, says the firm. More here.

    —–

    People

    Microsoft co-founder Paul Allen is pledging at least $100 million to help fight the spread of Ebola, reports USA Today. The funding will go to the State Department to develop medevac containment units to evacuate health professionals from West Africa and to offer training, medical workers and equipment in Liberia, one of the nations hardest hit by the Ebola epidemic. (This video about the epidemic in Liberia should win an award. H/T: Matt Mireles.)

    Nicolas Debock has joined Balderton Capital as a principal. He’ll focus largely on fintech, consumer-to-consumer marketplaces and SaaS. Prior to joining Balderton, Debock worked at XAnge, a Paris-based venture firm. He has also worked as the head of startup-relationships at La Poste, the French postal service, and at the IT and management consultancy Logica.

    —–

    Job Listings

    Google is newly looking for a corporate development strategy manager.

    —–

    Data

    Total funding to on-demand mobile services startups has hit $1.46 billion in the last four quarters, says CB Insights, which says nearly 20 deals per quarter in 2014 have been money invested into “Uber for X” type companies. More here.

    A New York venture capital and funding report, by AlleyWatch.

    —–

    Essential Reads

    Facebook introduces its first product that allows you to ditch your real name.

    —–

    Detours

    Inside the crazy, and big, business of pet body shaming.

    When introverts should avoid coffee.

    —–

    Retail Therapy

    Holy smokes.

    Connie

    , ,

  • Bill Gurley: Those Earlier Warnings are Making an Impact

    bill_gurleyVenture capitalist Bill Gurley appeared on CNBC’s “Squawk Alley” show earlier this week to clarify some of the comments he’d made in mid-September to the Wall Street Journal – comments that Gurley thinks were misconstrued in follow-on reports that confused risk with valuations. “I was talking about risk and I didn’t say a word about valuations,” said Gurley. “I don’t see radically insane valuations.”

    Gurley went on to say that the pubic market is right now “more discerning” than the late-stage venture market, where investors are “cram[ming] almost unnecessary levels of capital into these private companies.” Gurley also told CNBC that he believes his earlier warning in the Journal is having a “positive” impact on the private market. Here’s Gurley, in his own words:

    “It’s a four or five-year trend . . . of late-stage companies raising rounds that are larger than historic IPO rounds, and because there’s no capital intensity – we’re not buying stores, we’re not building factories – when you take that amount of capital and try and put it to use, the only way to do that is to increase your burn rate.

    “The problem is this growth-at-all-costs mentality causes almost a subsidization of survival. It’s almost easier to execute unprofitably than profitably. So if I say, ‘Hey, go grow a company to $100 million,’ and one company is told they have to be profitable and the other is told they can lose $30 million, it’s much easier to do the latter. So I think we end up with more companies with higher revenue rates where their business models still may be open to question . . .

    “I think the public markets are being more discerning than the late-stage private markets in terms of trying to figure out whether a company has a potential long-term business model and has the ability to generate profitability over the long term.

    “[In fact,] I think having that conversation a couple of weeks ago has had two positive impacts. One, I’m starting to hear more and more people tell me at board meetings, ‘Hey, we’re talking about this; we’re thinking more about this. We’re going to be smarter going forward.’

    “Second, in the public markets, you’re seeing some discernment. In the same week, [you’ll see] two companies go public and two delay because of ‘market conditions.’”

    Connie

    , , ,

  • StrictlyVC: October 23, 2014

    Happy Thursday, everyone! (Web visitors, here’s an easier-to-read version of this morning’s email here. You might also just go ahead and sign-up.)

    —–

    Top News in the A.M.

    Apple is more than doubling its stores in China, CEO Tim Cook announced this morning.

    —–

    Boris Wertz Raises a New, Much Bigger, Fund

    Version One Ventures, the Vancouver-based fund of entrepreneur-turned-investor Boris Wertz, is taking the wraps off a $35 million early-stage fund today. That’s nearly twice the size of Wertz’s $20 million debut fund, closed in early 2012. Northleaf Venture Catalyst Fund and BDC Capital are the new fund’s anchor investors.

    As you might imagine, the extra capital will allow Wertz to write bigger checks. In a call yesterday, he said he now plans to make initial investments of between $500,000 and $750,000, up from $250,000 to $300,000, a shift that should allow him to lead more deals. The bigger pool should also enable Wertz to pour more follow-on funding into Version One’s existing portfolio, which right now includes the online cosmetics company Julep; the business intelligence platform Mattermark; and Kinnek, an online platform that brings together small businesses with suppliers.

    All told, said Wertz, he plans to invest his second fund in 20 to 25 companies. I asked him what else he’s planning for, particularly amid what feel like big shifts in the market.

    Congratulations on the your new fund. That’s quite a jump up in size.

    Thank you. We set out to raise $30 million and probably could have raised $40 million but didn’t want to make it larger. I’m still the single investing partner, and we think a good benchmark is $30 million to $35 million per partner, which is what you see at comparable funds like Floodgate.

    You say the collective value of Version One’s portfolio is now $600 million. Recognizing it’s early days, have any companies exited yet?

    No, angel investments I made prior to [creating Version One] have [been acquired] like Flurry [sold to Yahoo], but one rocket ship in our portfolio – [a consumer marketplace] that has raised an A and B round – hasn’t even announced [itself publicly yet].

    More companies are waiting on their funding announcements. Why do you think that is?

    We have two companies in our portfolio that have raised [capital] and never announced. The entrepreneurs feel that they’re on to something and want to get solid traction and a head start before telling anybody else. It makes sense, especially if you have a product where you aren’t going to acquire users on StrictlyVC or TechCrunch and don’t need [the press] for branding purposes.

    You live in Vancouver but invest all around North America, including Silicon Valley. What are you seeing in terms of seed-stage valuations right now?

    Two-thirds to three-quarters of our deals are outside the Valley – in Seattle, Toronto, and New York. And those ecosystems have never gotten that crazy. But there’s definitely a little insecurity in the market, which is good, given that seed-stage valuations have continued to creep up over the last three or four years. I think we’re seeing a healthy correction of expectations on the part of both investors and entrepreneurs. Things can’t always go in one direction.

    When we last talked, in May, you were spending more time looking into digital healthcare, government “2.0” and bitcoin. Have you made any related bets yet?

    We have one digital healthcare investment, [Figure 1, a crowdsourced medical image library for health care professionals that VersionOne invested in last December], but the challenge in [backing another] is that it has blown up crazily in terms of valuations. Look at the on-demand doctor space. There are at least eight players, all of which were well-funded at crazy valuations. [The sector] ran away pretty quickly.

    As for bitcoin, we believe in the long-term potential, but we’re still forming an investing thesis around when is the right moment to invest.

    It must be challenging. I’m amazed by how many seriously smart people are divided over bitcoin.

    I’m in the middle. The technical platform is beautiful, and a decentralized system to record ownership makes a lot of sense for a lot of use cases. I think the real problem is that right now, there isn’t a killer use case. Payments in North America aren’t broken. I can use credit and debit cards or cash or PayPal. So people need to start focusing more on international payments and remittances, where bitcoin does make sense. The challenge is how to get into the markets that could use it the most – Brazil, Vietnam, Nigeria – and make it easy to spread. And there’s no clear path [to doing that], though we do believe some entrepreneurs will eventually figure it out.

    A prominent institutional LP recently said that right now could be an especially bad time to start investing a new fund based on traditional market cycles. Is that a concern of yours?

    Yes, there are cycles, but nobody can really predict them. You can only make your best investments given the environment and stay disciplined around valuations and your investment thesis and not get carried away by hype. The reality is that some vintages of funds will do better than others based on waves of new innovations or when valuations were really low. But it’s hard to predict beforehand and say 2014 or 2015 will be a terrible year for venture funds. Who knows? Timing and luck are involved in all of it, but if you focus on fundamentals and support your companies for the long term, you can hopefully smooth out your returns over time.

    LA_300x250_Billion

    New Fundings

    Boostable, a year-old, San Francisco-based company that makes advertising easier for sellers on marketplaces, has raised $3.2 million in Series A funding from Morado Ventures, Omidyar Network, and earlier investor SV Angel. The company, a Y Combinator alum, had previously raised $500,000. TechCrunch has more here.

    Flint, a three-year-old, Redwood City, Ca.-based mobile payment service, has raised $9.4 million in Series C funding led by Verizon Ventures, with participation from Peninsula Ventures and earlier backers Digicel, Storm Ventures and True Ventures. The company has now raised $20.4 million altogether, shows Crunchbase.

    Fortress Risk Management, a four-year-old, South Glastonbury, Ct.-based company that sells antifraud technology to community banks and credit unions, has raised $3.5 million from investors, including Advantage Capital Connecticut Partners, Black Dragon Capital and the Connecticut Department of Economic and Community Development.

    Gamma Medica, a 17-year-old, Salem, N.H.-based maker of an FDA-cleared dual-headed digital imaging system, has raised $6.5 million in growth capital financing from the specialty finance company Hercules Technology Growth Capital, along with $5 million from earlier investor Psilos Group. The company has raised at least $27.5 million to date, shows Crunchbase.

    Glamsquad, a 10-month-old, New York-based on-demand beauty services business, has raised $7 million in Series A funding led by SoftBank Capital, with AOL’s BBG Fund, Lerer Hippeau Ventures and Montage Ventures, participating. Business Insider has more here.

    HMicro, a six-year-old, Los Altos, Calif.-based semiconductor company that makes products for medical, industrial and connected home devices, has raised $5.5 million in Series B funding from investors, including Reddy Capital Partners and Seraph Group.

    iCapital Network, a 1.5-year-old, New York-based online marketplace that connects institutional investors with alternative investment fund managers, has raised $9.25 million in funding led by a consortium of partners led by Credit Suisse’s Private Fund Group.

    InSilixa, a 3.5-year-old, Sunnyvale, Calif.-based developer of a molecular diagnostics platform, has raised $13 million in funding from PointGuard Ventures and Morningside Group.

    Kespry, a year-old, Menlo Park, Ca.-based maker of drones for commercial applications, has raised $10 million in Series A financing led by Lightspeed Venture Partners. The company had previously raised an undisclosed amount of funding from Chmod Ventures.

    Moov, a year-old, Mountain View-based maker of a fitness tracker that can reconstruct users’ movements, helping them improve their form (theoretically), has raised $2 million in Series A funding led by the China-based venture firm Banyan Capital. Moov had earlier raised $1 million via a crowdfunding campaign. More here.

    Mozido, a nine-year-old, Austin, Tx.-based company aiming to provide mobile financial, retail and marketing services to the millions of people without established banking relationships, has raised a whopping $185 million as part of a planned $400 million Series B round. The funding comes from MasterCard, Wellington Management, H.R.H. Sheikh Nahyan of UAE, and Tiger Management chairman and CEO Julian Robertson. Mozido has raised roughly $265 million in capital over the last 12 months and $307 million altogether thus far, shows Crunchbase.

    Playstudios, a three-year-old, Las Vegas-based maker of casual games for social platforms, has raised $20 million in Series C funding led by Jafco Ventures. Other, unnamed earlier investors also participated. The company has raised at least $28.7 million to date, shows Crunchbase.

    Quartet Medicine, a year-old, Cambridge, Ma.-based company that aims to develop treatments for chronic pain and inflammation, has raised $17 million in Series A funding led by Atlas Venture, with Novartis Venture Funds, Pfizer Venture Investment and Partners Innovation Fund joining the round.

    Reputation Institute, a 17-year-old, New York-based research and advisory organization focused on corporate reputation, has raised an undisclosed amount of funding from earlier investor Catalyst Investors.

    Urban Airship, a five-year-old, Portland, Or.-based company that makes so-called mobile relationship management software that allows marketers to more easily delive messages to their connected customers, has raised $12.1 million in Series D funding from earlier investors True Ventures, Foundry Group, and August Capital. The company has now raised $58.7 million altogether.

    YieldMo, a two-year-old, New York-based mobile ad startup, has raised $10 million in funding led by Timer Warner Investments, with participation from earlier backers Google Ventures and Union Square Ventures. The company has raised $22.1 million altogether.

    YouAppi, a three-year-old, Ra’anana, Israel-based company that makes engagement, acquisition and retention software for publishers and mobile apps, has raised $3 million in Series A funding from Glilot Capital Partners, 2B Angels and Flint Capital. The company has now raised $5 million to date.

    —–

    New Funds

    Maverick Capital, the 21-year-old, New York-based hedge fund firm, plans to launch its first venture-capital fund on Jan. 1, according to WSJ. Maverick was founded by Lee Ainslie, one of numerous prominent “Tiger Cubs” who worked for Julian Robertson’s Tiger Management earlier in his career. Tiger, along with Coatue Management, are among a growing number of hedge funds to jump into active startup investing in recent years.

    —–

    People

    California’s privacy laws have saved Kleiner Perkins Caufield & Byers firm from having to release potentially embarrassing information about former partner Ajit Nazre, in a discrimination lawsuit by a former partner Ellen Pao, reports Reuters. A judge ruled KPCB will be able to keep private any other harassment complaints about Nazre, partly because producing such complaints would hurt the privacy rights of other Kleiner employees.

    Sean Jacobsohn has joined Norwest Venture Partners as a principal. Jacobsohn was previously a venture partner at Emergence Capital Partners and, earlier, a vice president at the cloud collaboration company Hightail. In related news, Norwest, on Sand Hill Road, is now opening a San Francisco office.

    Jon Sakoda, who joined New Enterprise Associates in 2006 and co-manages the firm’s seed investment program, has been promoted from partner to general partner at the firm. Before joining NEA, Sakoda had cofounded the enterprise instant messaging company IMlogic, acquired by Symantec Corporation. StrictlyVC had talked signaling risk with Sakoda over lunch last month.

    Facebook CEO Mark Zuckerberg famously assigns himself annual self-improvement goals. In 2010, it was to learn to Mandarin, and judging by a 30-minute question-and-answer session yesterday at Tsinghua University in Beijing — which Zuckerberg did entirely in Mandarin — that year paid off. (Unsurprisingly, there’s still room for improvement. The Asia editor ofForeign Policy later characterized Zuckerberg’s Mandarin as “roughly at the level of someone who studied for two years in college, which means he can communicate like an articulate seven year-old with a mouth full of marbles.)

    —–

    Job Listings

    Castlight Health, the six-year-old, newly public company whose online application provides employees with personalized shopping tools for healthcare benefits, is looking for a VP of corporate development in San Francisco. (It’s probably worth mentioning that the company’s shares have been dropping like a spent rocket since its March IPO, but think of the upside.)

    —–

    Essential Reads

    Have we reached peak Google?

    Wired delves into Twitter’s audacious plan to infiltrate all your apps.

    —–

    Detours

    The latest in luxury travel: Moving in.

    A 26-year-old woman from Sichuan Province in China spent an entire week at KFC lamenting her failed relationship. Said the woman, “I hadn’t planned on staying there long, I just wanted some chicken wings.”

    Don DeLillo, the author of “White Noise,” reviews Taylor Swift, the artist of “White Noise.”

    —–

    Retail Therapy

    Now you can be the most fashion-forward lumberjack in the forest.

    Hemingwrite. We will take two, please.

    Connie

    ,

  • Boris Wertz Raises a New, Much Bigger Fund

    Boris WertzVersion One Ventures, the Vancouver-based fund of entrepreneur-turned-investor Boris Wertz, is taking the wraps off a $35 million early-stage fund today. That’s nearly twice the size of Wertz’s $20 million debut fund, closed in early 2012. Northleaf Venture Catalyst Fund and BDC Capital are the new fund’s anchor investors.

    As you might imagine, the extra capital will allow Wertz to write bigger checks. In a call yesterday, he said he now plans to make initial investments of between $500,000 and $750,000, up from $250,000 to $300,000, a shift that should allow him to lead more deals. The bigger pool should also enable Wertz to pour more follow-on funding into Version One’s existing portfolio, which right now includes the online cosmetics company Julep; the business intelligence platform Mattermark; and Kinnek, an online platform that brings together small businesses with suppliers.

    All told, said Wertz, he plans to invest his second fund in 20 to 25 companies. I asked him what else he’s planning for, particularly amid what feel like big shifts in the market.

    Congratulations on the your new fund. That’s quite a jump up in size.

    Thank you. We set out to raise $30 million and probably could have raised $40 million but didn’t want to make it larger. I’m still the single investing partner, and we think a good benchmark is $30 million to $35 million per partner, which is what you see at comparable funds like Floodgate.

    You say the collective value of Version One’s portfolio is now $600 million. Recognizing it’s early days, have any companies exited yet?

    No, angel investments I made prior to [creating Version One] have [been acquired] like Flurry [sold to Yahoo], but one rocket ship in our portfolio – [a consumer marketplace] that has raised an A and B round – hasn’t even announced [its funding publicly].

    More companies are waiting on their funding announcements. Why do you think that is?

    We have two companies in our portfolio that have raised [capital] and never announced. The entrepreneurs feel that they’re on to something and want to get solid traction and a head start before telling anybody else. It makes sense, especially if you have a product where you aren’t going to acquire users on StrictlyVC or TechCrunch and don’t need [the press] for branding purposes.

    You live in Vancouver but invest all around North America, including Silicon Valley. What are you seeing in terms of seed-stage valuations right now?

    Two-thirds to three-quarters of our deals are outside the Valley – in Seattle, Toronto, and New York. And those ecosystems have never gotten that crazy. But there’s definitely a little insecurity in the market, which is good, given that seed-stage valuations have continued to creep up over the last three or four years. I think we’re seeing a healthy correction of expectations on the part of both investors and entrepreneurs. Things can’t always go in one direction.

    When we last talked, in May, you were spending more time looking into digital healthcare, government “2.0” and bitcoin. Have you made any related bets yet?

    We have one digital healthcare investment, [Figure 1, a crowdsourced medical image library for health care professionals that VersionOne invested in last December], but the challenge in [backing another] is that it has blown up crazily in terms of valuations. Look at the on-demand doctor space. There are at least eight players, all of which were well-funded at crazy valuations. [The sector] ran away pretty quickly.

    As for bitcoin, we believe in the long-term potential, but we’re still forming an investing thesis around when is the right moment to invest.

    It must be challenging. I’m amazed by how many seriously smart people are divided over bitcoin.

    I’m in the middle. The technical platform is beautiful, and a decentralized system to record ownership makes a lot of sense for a lot of use cases. I think the real problem is that right now, there isn’t a killer use case. Payments in North America aren’t broken. I can use credit and debit cards or cash or PayPal. So people need to start focusing more on international payments and remittances, where bitcoin does make sense. The challenge is how to get into the markets that could use it the most – Brazil, Vietnam, Nigeria – and make it easy to spread. And there’s no clear path [to doing that], though we do believe some entrepreneurs will eventually figure it out.

    A prominent institutional LP recently said that right now could be an especially bad time to start investing a new fund based on traditional market cycles. Is that a concern of yours?

    Yes, there are cycles, but nobody can really predict them. You can only make your best investments given the environment and stay disciplined around valuations and your investment thesis and not get carried away by hype. The reality is that some vintages of funds will do better than others based on waves of new innovations or when valuations were really low. But it’s hard to predict beforehand and say 2014 or 2015 will be a terrible year for venture funds. Who knows? Timing and luck are involved in all of it, but if you focus on fundamentals and support your companies for the long term, you can hopefully smooth out your returns over time.

    Sign up for our morning missive, StrictlyVC, featuring all the venture-related news you need to start you day.

    Connie

    ,
    , , , ,

  • StrictlyVC: October 22, 2014

    Good Wednesday morning, everyone! (Psst, web visitors, this version of our a.m. newsletter is easier on the eyes.)

    —–

    Top News in the A.M.

    Uber drivers are staging protests today in front of Uber offices across the U.S. and in London over fares driven so low the drivers say they’re actually losing money now.

    The good news: Yahoo reported strong third-quarter results yesterday, with revenue up 1 percent over the third quarter of 2013, thanks in part to mobile revenue that’s up 17 percent from a year ago. The bad news if you’re an antsy Yahoo shareholder: CEO Marissa Mayer said the company is still deciding how to use its $43 billion in holdings in the Alibaba Group and Yahoo Japan. More on the numbers here from the New York Times. And, here, a rare-earnings day interview that Mayer gave the WSJ.

    —–

    Spikes Security Raises $11 Million to Stuff Your Browser Elsewhere

    Branden Spikes didn’t set out to become an entrepreneur. Straight out of high school, he jumped instead into work as a security consultant, eventually working at Elon Musk’s first company, Zip2, then at PayPal, then SpaceX, where, as the Musk’s fourth employee and CIO, Spikes was tasked with keeping the computers of “extremely brilliant Ph.D.’s with access to sensitive IP” from being hacked.

    Spikes also needed to ensure his boss had unfettered access to the Web while operating in a safe environment. (“You can imagine Elon Musk trying to get online and having problems. I’d have found myself fired if I messed that one up,” says Spikes with a laugh.)

    Spikes’s big idea — one he decided to spin into a standalone business in 2012 — is a technology that runs browser software on a separate server, catching nasty bits of malicious code that could otherwise make their way onto users’ laptops. The technology then streams a video of the browser to users’ computers so seamlessly that they don’t know the software is running elsewhere.

    The concept, called browser isolation, isn’t entirely new, and Spikes’s company, Spikes Security, isn’t the only one to offer it. In addition to going up against Authentic8, a Mountain View, Ca.-based startup backed by Foundry Group, two of Spikes’s biggest competitors are Citrix and Microsoft.

    The other companies’ execution leaves much to be desired, though, say Spikes, who calls browser isolation “pretty technically challenging and, if not done properly, really problematic and burdensome for the IT people deploying it and the actual people browsing the web.”

    A growing number of customers appears to agree with Spikes. Spikes Security already has more than two dozen large enterprises as clients, some of which are running the software through Spike Security’s data center, some of which are opting to run the software in their own data centers for privacy reasons. All are “helping us stretch the product and develop the technology at the right pace,” says Spikes.

    Investors like the vision of the 27-person, Los Gatos, Ca.-based company, too. In fact, the startup — which had originally raised $2 million from Javelin Venture Partners, Spikes himself, and other angel investors – is today announcing $11 million in new funding from Javelin, Benhamou Global Ventures, and Lakewood & Company.

    Spikes says the money will go a long way toward helping the company meet growing demand — which is but one of numerous challenges he’s learning to tackle as a first-time entrepreneur.

    In fact, Spikes says he now understands his former boss much better. “For many years, I was puzzled by Elon’s actions and decisions and disagreements, about why $5,000 for this or that purchase wasn’t wise, or why hiring this guy would have been a mistake or why firing this person was a good idea. Now, I find I understand them a lot more.”

    —–

    New Fundings

    B2X Care Solutions, a seven-year-old, Atlanta, Ga.-based company that creates software for handset makers and carriers so their customers can identify, report and fix problems with their devices, has raised $15 million in Series B funding led by previous investor Earlybird Venture Capital. (Earlybird and Grazia Equity had provided the company with an undisclosed amount of funding in 2012.) In related news, the company acquired India-based The Service Solutions (TSS), a company that provides managed customer care services. TechCrunch has more here.

    Benu Networks, a four-year-old, Billerica, Ma.-based company whose real-time subscriber management platform is used by fixed and mobile operators, has raised $27.7 million in Series C funding. Liberty Global Ventures and Arris Group participated in the round alongside earlier investors Spark Capital, Sutter Hill Ventures and Comcast Ventures. The company has now raised $59.3 million altogether, shows Crunchbase.

    CareSync, a three-year-old, Wesley Chapel, Fl.-based care coordination company whose app enables users, their families, and their care teams access, filter, and share health information, has raised $4.25 million in Series A funding led by Tullis Health Investors, Clearwell Group, CDH Solutions, and CareSync founder and CEO, Travis Bond.

    Crowdcare, a 2.5-year-old, Toronto, Ontario-based company that helps companies deliver automated tech support via mobile apps to subscribers, has raised $3.5 million in funding led by Extreme Venture Partners, with participation from earlier investors, including Mantella Venture Partners. Crunchbase shows the company had raised an undisclosed amount of funding in 2012.

    DOZ, a year-old, San Francisco-based marketing-as-a-service startup, has raised $1.5 million from Nexus Ventures, the French public bank Bpifrance, 500 Startups, Kima Ventures, Structure Capital and individuals.

    KnowRe, a four-year-old, New York-based company developing adaptive digital learning platforms around mathematics, has raised $6.8 million led by earlier investor SoftBank Ventures Korea, with participation from KTB Network Co. Partners Investment, SparkLabs Global Ventures, and other unnamed new investors.

    Lytics, a two-year-old, Portland, Or.-based digital marketing startup that sells software-as-a-service to marketers, has raised $7 million in new funding led by Comcast Ventures, with participation from earlier investors Rembrandt Venture Partners and Voyager Capital. Lytics had previously raised $2.2 million in seed funding. Venture Capital Dispatch has much more on the company here.

    MedRobotics, a three-year-old, Raynham, Ma.-based surgical products company that makes a robot-assisted flexible endoscopic platform, has raised $20 million from earlier, unnamed shareholders.

    Moogsoft, a 2.5-year-old, San Francisco-based company whose software detects and repairs outages that its customers’ IT monitoring systems can’t see, has added $3 million to its Series B round, capital that comes from Cisco Investments and an undisclosed public company. The company had initially closed its Series B round in late July, with $11.3 million in funding led by Wing Venture Capital, which was joined by earlier backers, including Redpoint Ventures. The newest capital infusion brings Moogsoft’s total funding to more than $23 million, it says.

    Navera, a five-year-old, San Francisco-based company that sells a cloud-based service for engaging and educating consumers about health-care choices, has raised $8 million in Series B funding led by Mohr Davidow Ventures with earlier investor Emergence Capital Partners participating. The company has raised $13.5 million to date, shows Crunchbase.

    Orchard Platform, a year-old, New York-based startup that links institutional investors with dozens of peer-to-peer platforms, including Lending Club and Prosper, has raised $12 million in Series A funding led by Spark Capital and Canaan Partners, along with roughly half a dozen prominent individuals from the financial services industry. They include former Morgan Stanley CEO John Mack; former Visa president Hans Morris; Capital One cofounder Nigel Morris; and PayPal cofounder Max Levchin.

    SnapLogic, a five-year-old, San Mateo, Ca.-based company whose software integrates cloud applications with applications that run inside enterprises, has raised $20 million in Series D funding led by Ignition Partners. Pharus Capital Management and H. Barton Asset Management also joined the round, alongside earlier investors Andreessen Horowitz and Triangle Peak Partners. The company has now raised $60 million altogether, it says.

    Tipalti, a four-year-old, Agoura Hills, Ca.-based cloud-based service that automates mass payouts, has raised $13 million in Series B funding led by Wicklow Capital.

    Tokopedia, a five-year-old, Jakarta, Indonesia-based e-commerce marketplace that allows individual vendors to set up shop, has raised $100 million in funding led by SoftBank Internet and Media, with participation from Sequoia Capital and earlier investor SB Pan Asia Fund. The company has raised four previous rounds of undisclosed sizes, including from East Ventures, Softbank Ventures Korea, and CyberAgent Ventures, shows Crunchbase. TechCrunch has more here.

    Unum Therapeutics, a newly formed, Cambridge, Ma.-based company that hopes to develop cellular immunotherapies to treat cancer, has raised $12 million in funding led by Fidelity Biosciences and Atlas Venture, with participation from Sanofi-Genzyme BioVentures. The Boston Globe has more here.

    Viamet Pharmaceuticals, a nine-year-old, Durham, N.C.-based company that develops antifungal agents, has raised $60 million in Series D funding from Brandon Point Industries and Woodford Investment Management. In July, Viamet filed for an IPO to raise up to $75 million. It withdrew its registration to go public earlier this week. Its earlier investors include Novartis Venture Fund, Lilly Ventures, Hatteras Venture Partners, Intersouth Partners, Lurie Holdings and Astellas Venture Management.

    —–

    New Funds

    Carmel Ventures, a 14-year-old, Tel Aviv, Israel-based early-stage venture firm, has closed its fourth fund with $194 million, capital it will use to invest in enterprise software, data center infrastructure, big data, cyber security, fintech, digital media and consumer applications companies. Carmel says it began investing out of the new fund in January and has already assembled five portfolio companies, including the content site PlayBuzz and the social games company LuckyFish. The firm’s LPs include returning and new investors, including the search giant Baidu; Ping-An, a China-based insurance company; and Qihoo360, known for its antivirus software. The firm’s six partners are Shlomo Dovrat, Avi Zeevi, Ori Bendori, Ronen Nir, Daniel Cohen and Itzik Avidor.

    Tallwave Capital, a year-old, Scottsdale, Az.-based outfit has raised a $13.2 million seed fund, money it will invest in increments of between $125,000 and $400,000 in early-stage consumer and enterprise businesses. In a news release, the firm said it focuses on software-as-a-service, mobile applications, digital media, ad technology and e-commerce.

    —–

    Exits

    Firebase, a three-year-old, San Francisco-based backend service that helps developers build real-time apps for iOS, Android and the web (as well as sync and store their data), has been acquired by Google for undisclosed terms. Firebase had raised roughly $7 million across two founds, from investors that include Union Square Ventures, Flybridge Capital Partners, Data Collective, Expansion Venture Capital, New Enterprise Associates, and Greylock Partners. TechCrunch has more here.

    Macheen, a four-year-old, Austin, Tx.-based mobile cloud application service provider, has been acquired by the mobile-device security provider Good Technology. Terms of the deal weren’t disclosed. Macheen had raised $34.4 million altogether, including from GemVentures, Mercury Fund, North Bridge Venture Partners, and Mike Maples, Sr.

    Seegrid, an 11-year-old, Pittsburgh, Pa.-based company that makes camera-guided vehicles, has filed for Chapter 11 protection. The company had raised at least four debt rounds, show SEC filings. More here.

    —–

    People

    As part of his settlement last year with the state Coastal Commission over his wedding at Big Sur, entrepreneur-investor Sean Parker is working on mobile app that will help users find access to California’s sometimes hard-to-locate public beaches, reports the San Jose Mercury News. Parker is using the commission’s data to build the app, which will belong to the commission. Sarah Christie, a spokesperson for the commission, calls the relationship an “example of lemons turning to lemonade.”

    —–

    Job Listings

    Facebook is looking to hire a manager of mobile partnerships. The job is in Menlo Park, Ca.

    —–

    Essential Reads

    Google quietly bought a startup in May for $120 million, turning a third of the company’s 70 employees into millionaires. Business Insider takes a look at the biggest New York exit that no one knows about.

    —–

    Detours

    San Francisco has two more Michelin-ranked three-star restaurants than it did last week. Check out a full list of the city’s starred venues here.

    Ben Bradlee, the legendary Washington Post editor, passed away yesterday at age 93. The Post has published his life in pictures.

    —–

    Retail Therapy

    SkyMaul 2: Where America Buys His Stuff.

    Connie

  • Spikes Security Raises $11 Million to Stuff Your Browser Elsewhere

    browser_thumbBranden Spikes didn’t set out to become an entrepreneur. Straight out of high school, he jumped instead into work as a security consultant, eventually working at Elon Musk’s first company, Zip2, then at PayPal, then SpaceX, where, as the Musk’s fourth employee and CIO, Spikes was tasked with keeping the computers of “extremely brilliant Ph.D.’s with access to sensitive IP” from being hacked.

    Spikes also needed to ensure his boss had unfettered access to the Web while operating in a safe environment. (“You can imagine Elon Musk trying to get online and having problems. I’d have found myself fired if I messed that one up,” says Spikes with a laugh.)

    Spikes’s big idea — one he decided to spin into a standalone business in 2012 — is a technology that runs browser software on a separate server, catching nasty bits of malicious code that could otherwise make their way onto users’ laptops. The technology then streams a video of the browser to users’ computers so seamlessly that they don’t know the software is running elsewhere.

    The concept, called browser isolation, isn’t entirely new, and Spikes’s company, Spikes Security, isn’t the only one to offer it. In addition to going up against Authentic8, a Mountain View, Ca.-based startup backed by Foundry Group, two of Spikes’s biggest competitors are Citrix and Microsoft.

    The other companies’ execution leaves much to be desired, though, say Spikes, who calls browser isolation “pretty technically challenging and, if not done properly, really problematic and burdensome for the IT people deploying it and the actual people browsing the web.”

    A growing number of customers appears to agree with Spikes. Spikes Security already has more than two dozen large enterprises as clients, some of which are running the software through Spike Security’s data center, some of which are opting to run the software in their own data centers for privacy reasons. All are “helping us stretch the product and develop the technology at the right pace,” says Spikes.

    Investors like the vision of the 27-person, Los Gatos, Ca.-based company, too. In fact, the startup — which had originally raised $2 million from Javelin Venture Partners, Spikes himself, and other angel investors – is today announcing $11 million in new funding from Javelin, Benhamou Global Ventures, and Lakewood & Company.

    Spikes says the money will go a long way toward helping the company meet growing demand — which is but one of numerous challenges he’s learning to tackle as a first-time entrepreneur.

    In fact, Spikes says he now understands his former boss much better. “For many years, I was puzzled by Elon’s actions and decisions and disagreements, about why $5,000 for this or that purchase wasn’t wise, or why hiring this guy would have been a mistake or why firing this person was a good idea. Now, I find I understand them a lot more.”

    Connie

    , , , ,

  • StrictlyVC: October 21, 2014

    Hi, happy Tuesday, everyone! (Web visitors, you can click here for an easier-to-read version of today’s email newsletter.)

    —–

    Top News in the A.M.

    Apple reported blow-out fourth-quarter results yesterday.

    Verizon, meanwhile, posted its third-quarter results, narrowly missing earnings expectations but showing strong customer growth.

    Yahoo is set to reports its third-quarter results today.

    —–

    Oh No You Didn’t, Facebook

    Yesterday, Facebook sued DLA Piper along with three other firms and nine lawyers who represented Paul Ceglia, a New York man who emerged in 2010 with claims that he was entitled to at least 50 percent of Facebook.

    Given that it’s nearly 2015, Facebook’s move comes as something of a surprise. Ceglia’s suit against Facebook was dismissed back in March by a federal judge amid clear evidence that his claims to Facebook were based on a “recently created fabrication.” More, two years ago, Ceglia was arrested and charged with mail and wire fraud for allegedly falsifying the contract and creating bogus emails to support his case. (His criminal trial is now scheduled for May.)

    Facebook’s festering ire at the firms that represented Ceglia is understandable to a point. Ceglia’s lawsuit and the questions it raised were a huge distraction before Facebook went public in 2012.

    Industry observers are probably cheering on Facebook, too, partly in hopes that law firms will think harder about bringing frivolous lawsuits.

    Still, Facebook’s rationale for pursuing these firms at this late date sounds a little vengeful. “We said from the beginning that Paul Ceglia’s claim was a fraud and that we would seek to hold those responsible accountable,” Facebook General Counsel Colin Stretch said in a statement given to reporters yesterday. “DLA Piper and the other named law firms knew the case was based on forged documents, yet they pursued it anyway, and they should be held to account.”

    Stretch might just as well have said, “DLA Piper and the other named law firms deserve an atomic wedgie, and we’re going to give them one to remember.”

    DLA Piper sent StrictlyVC a comment about the suit today. Written by Peter Pantaleo, DLA Piper’s general counsel, the firm calls the lawsuit “entirely baseless” and “filed as a tactic to intimidate lawyers from bringing litigation against Facebook. DLA Piper, which was not part of this case at its outset or its conclusion, was involved for 78 days. Facebook and Mr. Zuckerberg claim that they were damaged in those 78 days, yet a mere 10 months after DLA Piper withdrew from the case and while the litigation was still pending, Facebook went to market with an initial public offering that valued the company at $100 billion. Today, Facebook is worth $200 billion and Mr. Zuckerberg is among the richest people in the world. We will defend this meritless litigation aggressively and we will prevail.”

    Either way, a 2011 conversation we had with a corporate litigation attorney about Ceglia suggests that Facebook’s case against DLA Piper and the others probably isn’t a slam dunk.

    Generally speaking, this attorney explained, lawyers have to “ensure that there’s a good faith basis for the claims that they file on behalf of their clients. That doesn’t mean that they have to think that they necessarily will prevail, but there has to be some kind of factual basis, in their view, to provide some support for the allegations.”

    Presumably, DLA Piper didn’t know when it took the case that Ceglia fabricated the evidence to support his claims.

    We’re also guessing it will be hard to argue that Ceglia’s lawyers used uniquely reckless judgment in taking on the Ceglia case. In 2010, for example, DLA Piper decided to represent CNet founder Halsey Minor in a Chapter 11 proceeding despite Minor’s long history of stiffing service providers.

    DLA Piper subsequently dropped Minor eight months after engaging with him, but you see the point: if it were so easy to sue a law firm over its ne’er-do-well customers, we wouldn’t have lawyers.

    Facebook says its lawsuit is a matter of principle. We think it sounds heavy-handed. It also seems very much like another distraction that the company doesn’t need.

    —–

    New Fundings

    Bitnet Technologies, a 10-month-old, San Francisco-based digital commerce platform provider for bitcoin payments, has raised $14.5 million in Series A funding led by Highland Capital Partners. Other investors include Rakuten, Webb Investment Network, Bitcoin Opportunity Corp., Stephens Investment Management, Commerce Ventures and Buchanan Capital Management. Bitnet’s team is largely from the payment gateway company CyberSource and from Visa, which acquired CyberSource in 2010 for $2 billion.

    Bowery, a year-old, New York-based enterprise startup focused on simplifying the process of setting up, managing, and sharing development environments, has raised $1.5 million in seed funding from Google Ventures, Bloomberg Beta, RRE Ventures, Homebrew, Betaworks, SV Angel, BOLDstart Ventures, Magnet Agency, Deep Fork Capital, and angel investors Naveen Selvadurai and Ryan Holmes. The company had earlier raised an undisclosed amount of seed funding from General Catalyst Partners and First Round Capital.

    CAA, the 39-year-old, L.A.-based sports and talent agency, has agreed to a deal with the private equity firm TPG that sees the latter’s stake in CAA grow from 35 percent to 53 percent in exchange for roughly $225 million. Deadline Hollywood has more here.

    CloudCannon, a two-year-old, San Francisco-based company behind an easy-to-use content management system designed to help web designers and their clients work together more easily, has raised $500,000 in seed funding from individual investors. TechCrunch has more here.

    GoCatch, a three-year-old, Sydney, Australia-based taxi booking and payments app, has raised roughly $4 million (in U.S. dollars), from investors that include Square Peg, a venture firm backed by billionaire James Packer, along with numerous wealthy Australian families such as the Kahlbetzers, the Liberman family, and the Millner family. The Australian outlet BRW has more here.

    GrabTaxi, a two-year-old, Malaysia-based mobile application that assigns available cabs to nearby commuters using mapping and location-sharing technology, has raised $65 million in new funding — its third round of 2014.Tiger Global Management led the round, with participation from new investor Hillhouse Capital and previous investors Vertex Ventures, GGV Capital, and the Chinese travel giant Qunar. The company has now raised “approximately $90 million,” says TechCrunch. (Here’s a Bloomberg piece from June that profiles GrabTaxi’s founder, former HBS student Anthony Tan.)

    Intel Capital, the 23-year-old, Santa Clara, Ca.-based global corporate venture arm of Intel, announced last night that it has invested $28 million across five Chinese companies, including makers of wearables and Internet of things devices and components. They are: EyeSmart Technology, LeWa Technology, Shenzhen Fibocom Industrial Development, Shanghai Ailiao Information Technology, andGuangdong Appscomm Digital Technology. The outlet peHUB has more here.

    La Belle Assiette, a 1.5-year-old, Paris-based online marketplace for customers seeking out private chefs, has raised $1.7 million in seed funding, including from BlaBlaCar cofounder Nicolas Brusson; three founders of l’Atelier des Chefs (Europe’s largest cooking classes company); and Kima Ventures. The company had previously raised $500,000 in seed funding.

    Magic Leap, a three-year-old, Hollywood, Fla.-based still-stealth company that says its hardware and software will deliver “cinematic reality,” has officially closed on $542 million in Series B funding. (Recode had reportedlast week that the company was zeroing in on a $500 million round.) Investors include Google, Kleiner Perkins Caufield & Byers,Andreessen Horowitz, Obvious Ventures, Qualcomm and Legendary Entertainment.

    Mirantis, a four-year-old, Mountain View, Ca.-based OpenStack cloud vendor, has raised $100 million in Series B funding led by Insight Venture Partners, with participation from August Capital and earlier investors Intel, WestSummit Capital, Ericsson and SAP. The company has now raised $120 million altogether. GigaOm has more here.

    NuCurrent, a five-year-old, Chicago-based company that makes high-efficiency antennas for wireless power applications, has raised $3.48 million in Series A funding from Independence Equity, Hyde Park Angels, Harvard Business School Angels, and undisclosed corporate investor and earlier backers.

    Sequenta, a six-year-old, San Francisco-based biotech company whose technology detects minimal residual diseases, has raised an undisclosed amount of funding from Celgene Corp. and other, undisclosed strategic investors. The company had previously raised at least $41.5 million, including from Index Ventures, Mohr Davidow Ventures, and Foresite Capital, shows Crunchbase.

    Snowflake Computing, a two-year-old, San Mateo, Ca.-based cloud-based data warehousing company, has raised $26 million in Series B funding led by Redpoint Ventures, with participation from Wing Ventures and earlier investor Sutter Hill Ventures. The company has now raised roughly $50 million altogether. GigaOm has more here.

    STAQ, a two-year-old, New York-based ad tech firm that sells a collection, reporting, and integrations system that helps users view their campaigns, inventory, and audience data, has raised $2.5 million in Series A funding led by Genacast Ventures and Core Capital, with participation from earlier investors Kinetic Ventures, Revel Partners and The Hive. The company had previously raised $1.1 million in seed funding.

    StackIQ, an eight-year-old, La Jolla-based supplier of IT-automation technology to large businesses, has raised $6 million in Series B funding from new investors Grayhawk Capital, Keshif Ventures, DLA Piper and OurCrowd, along with earlier investors Anthem Venture Partners andAvalon Ventures. The company has raised at least $7.8 million to date, shows Crunchbase.

    Vomaris Innovations, a 10-year-old, Tempe, Az.-based regenerative medical device company that develops a microcurrent field generating wound dressing, has raised $5 million in new funding, shows an SEC filing. The company had previously raised $5 million in equity and $200,000 in debt, show earlier filings.

    WeGoLook, a four-year-old, Oklahoma City-based company that dispatches in-person “lookers” to verify claims made by Internet sellers about their products (including cars), has raised $1.75 million in Series A funding led by i2E, which was joined by Seedstep Angels; the company’s founders; and other, undisclosed investors.

    ZipLine Medical, a nearly eight-year-old, Campbell, Ca.-based medical device company that’s developing noninvasive surgical skin closure devices, has added $5.7 million to its Series C round, which initially closed in January of this year. China Materialia, a Shanghai-based venture firm, led the newest funding. The company’s earlier Series C investors includedRA Capital Management, XSeed Capital and Claremont Creek Ventures. The company has now raised $16 million to date, shows Crunchbase.

    —–

    New Funds

    Google Ventures has upped the size of its inaugural European fund from $100 million to $125 million, its managing partner, Bill Maris, said yesterday. More here.

    OneVentures, a 7.5-year-old, Sydney, Australia-based firm that makes early-stage bets on technology companies based in Australia, has raised more than $60 million for a $100 million fund it began raising back in March. The firm’s focus is wide-ranging, including healthcare, education, mobile, media, cloud computing and data, sensors and robotics, and “food security.” It looks for companies that are already making $5 million to $15 million in annual revenue.

    PureTech, a 10-year-old, Boston-based operating company that specializes in seed and early-stage investment in novel therapeutics, medical devices, and research technologies, has raised $55 million in new funding led by the U.K. investment manager Invesco Perpetual. FierceBiotech has more here.

    —–

    IPOs

    Connecture, a 15-year-old, Brookfield, Wi.-based company whose enterprise software is used to build health-insurance exchanges, has filedto raise up to $86.3 million in a public offering. Some of its biggest outside shareholders include Chrysalis Ventures, which owns 28.5 percent of the company; SSM Partners, which owns 20.2 percent; and LiveOak Equity Partners, which owns 10.6 percent.

    Workiva, a six-year-old, Ames, Ia.-based cloud-based data analytics company that helps companies collect, manage, report and analyze critical business data in real time, has filed to go public. One of its biggest outside investors is Bluestem, a Midwest private equity firm.

    —–

    Exits

    Crunchbase, the AOL-owned database of tech companies and people, could very well be spun off into its own standalone company, said AOL CEO Tim Armstrong yesterday at a TechCrunch conference, adding that while AOL would remain a majority stakeholder in the business, AOL would consider either funding a spin-off itself or taking outside capital.More here.

    BrightRoll, the 8.5-year-old, San Francisco-based cross-platform digital video advertising service, is in talks to be acquired by Yahoo, reports TechCrunch, which says that “term sheets have been signed” and that the price will likely be in the neighborhood of $700 million. Brightroll has raised $40.2 million over the years, including from Adams Street Partners, Scale Venture Partners, Comerica Bank, True Ventures, Trident Capital, KPG Ventures, Michael Tanne, Fabrice Grinda, Auren Hoffman and Jeff Clavier.

    Videoplaza, a London-based video supply-side platform, is being acquired or an undisclosed sum by the video distribution and analytics platform Ooyala (itself now owned by Australian telco Telstra). More here.

    —–

    People

    At the London-based TechCrunch Disrupt conference yesterday, AOL CEO Tim Armstrong squelched recent rumors suggesting that Yahoo and AOL might merge, saying that of a 30- to 40-page presentation he’d just prepared for his board about AOL’s 2015 plans, “I don’t think Yahoo is mentioned once in that deck.”

    Venture capitalist Jim Breyer says startup founders should raise money right now if they can, given the volatility of the public markets. As he tells Bloomberg: “I encourage our best companies, which believe they don’t need to raise cash, to do so opportunistically.” Breyer points to the media company Legendary Entertainment — which raised $250 million at a multibillion-dollar valuation this month led by SoftBank, Fidelity Investments, and Morgan Stanley — as one portfolio company that agreed with his thinking, adding: “A company is better off with 18 months of cash in the bank.”

    Oracle billionaire Larry Ellison owns a $300 million Hawaiian paradise, and Business Insider takes readers on a tour of it.

    Maha Ibrahim, a general partner at Canaan Partners, tells the Silicon Valley Business Journal she spent a decade trying to ignore the topic of gender in venture capital, but no longer. “At Canaan, we have two female general partners. We have six female investor professionals (including GPs), and the great thing is that 20 percent of the companies that we’ve invested in . . . were founded by females. So diversity is really important to us, and we believe that it starts by leading by example. We might as well start doing it ourselves.”

    —–

    Happenings

    The Post.Seed Conference is coming up in San Francisco on December 2, and it will feature an impressive line-up of investors to speak on a wide range of early-stage financing issues, including Chris Dixon, Paul Martino, Keith Rabois, Naval Ravikant, Ryan Sarver, Semil Shah, Hunter Walk, Brandon Zeuner, and many others. (I’ll be there, too, moderating a panel.) You can sign up here.

    —–

    Essential Reads

    Humanity’s last great hope is venture capitalists, argues the WSJ.

    —–

    Detours

    Dating versus married: How text messages change over time.

    Hoverboards? We’re not there yet.

    A somewhat surprising look into a social network for doctors, where one popular post is “guess the diagnosis.” (Doctors: They’re funny and awful, just like us!)

    —–

    Retail Therapy

    James Bond’s Lotus Esprit Submarine. Elon Musk owns one. Now you can, too.

    Connie

    ,

  • Oh No You Didn’t, Facebook

    wedgieYesterday, Facebook sued DLA Piper along with three other firms and nine lawyers who represented Paul Ceglia, a New York man who emerged in 2010 with claims that he was entitled to at least 50 percent of Facebook.

    Given that it’s nearly 2015, Facebook’s move comes as something of a surprise. Ceglia’s suit against Facebook was dismissed back in March by a federal judge amid clear evidence that his claims to Facebook were based on a “recently created fabrication.” More, two years ago, Ceglia was arrested and charged with mail and wire fraud for allegedly falsifying the contract and creating bogus emails to support his case. (His criminal trial is now scheduled for May.)

    Facebook’s festering ire at the firms that represented Ceglia is understandable to a point. Ceglia’s lawsuit and the questions it raised were a huge distraction before Facebook went public in 2012.

    Industry observers are probably cheering on Facebook, too, partly in hopes that law firms will think harder about bringing frivolous lawsuits.

    Still, Facebook’s rationale for pursuing these firms at this late date sounds a little vengeful. “We said from the beginning that Paul Ceglia’s claim was a fraud and that we would seek to hold those responsible accountable,” Facebook General Counsel Colin Stretch said in a statement given to reporters yesterday. “DLA Piper and the other named law firms knew the case was based on forged documents, yet they pursued it anyway, and they should be held to account.”

    Stretch might just as well have said, “DLA Piper and the other named law firms deserve an atomic wedgie, and we’re going to give them one to remember.”

    DLA Piper sent StrictlyVC a comment about the suit today. Written by Peter Pantaleo, DLA Piper’s general counsel, the firm calls the lawsuit “entirely baseless” and “filed as a tactic to intimidate lawyers from bringing litigation against Facebook. DLA Piper, which was not part of this case at its outset or its conclusion, was involved for 78 days. Facebook and Mr. Zuckerberg claim that they were damaged in those 78 days, yet a mere 10 months after DLA Piper withdrew from the case and while the litigation was still pending, Facebook went to market with an initial public offering that valued the company at $100 billion. Today, Facebook is worth $200 billion and Mr. Zuckerberg is among the richest people in the world. We will defend this meritless litigation aggressively and we will prevail.”

    Either way, a 2011 conversation we had with a corporate litigation attorney about Ceglia suggests that Facebook’s case against DLA Piper and the other firms probably isn’t a slam dunk.

    Generally speaking, this attorney explained, lawyers have to “ensure that there’s a good faith basis for the claims that they file on behalf of their clients. That doesn’t mean that they have to think that they necessarily will prevail, but there has to be some kind of factual basis, in their view, to provide some support for the allegations.”

    Presumably, DLA Piper didn’t know when it took the case that Ceglia fabricated the evidence to support his claims.

    We’re also guessing it will be hard to argue that Ceglia’s lawyers used uniquely reckless judgment in taking on the Ceglia case. In 2010, for example, DLA Piper decided to represent CNet founder Halsey Minor in a Chapter 11 proceeding despite Minor’s long history of stiffing service providers.

    DLA Piper subsequently dropped Minor eight months after engaging with him, but you see the point: if it were so easy to sue a law firm over its ne’er-do-well customers, we wouldn’t have lawyers.

    Facebook says its lawsuit is a matter of principle. We think it sounds heavy-handed. It also seems very much like another distraction that the company doesn’t need.

    Updated to include a statement from DLA Piper.

    Sign up for our morning missive, StrictlyVC, featuring all the venture-related news you need to start you day.

    Connie

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