• Arvind Sodhani on the Giant that is Intel Capital

    arvindsodhaniintelcapital-304Last week, at a conference in San Francisco, I was asked to interview Intel Capital’s president Arvind Sodhani, who also holds the title of executive VP of Intel Corporation. The idea was to give the audience insight into how the nine-year-old corporate venture unit – which employs 85 investors around the world and invests between $300 million and $500 million each year – does what it does.

    Suffice it to say that it’s complicated. Here’s a cheat sheet, though, for investors and entrepreneurs looking for more, ahem, intel.

    Intel, like most corporate VCs, won’t invest in something that looks like it could be a financial home run but has no bearing on the company’s business. Every investment has to have the potential of delivering both a strategic and financial return. The good news: In one form or another, Intel’s business touches almost every sector out there, so it’s investing in everything from wearables to semiconductors to Hadoop, the bedrock software of so-called big data businesses — which Intel sees as a growth sector. Indeed, readers might recall that in late March, Intel forked over $740 million for an 18 percent stake in Cloudera, which produces the most popular version of the Hadoop software framework.

    Which raises another point: Intel Capital is stage agnostic. While it sometimes makes a swing-for-the-fences deal like Cloudera, it’s also willing to fund very nascent ideas, Sodhani told me last week, calling the organization’s “sweet spot between $5 million and $20 million – that’s where we’re doing the bulk of our investments.”

    As for where it’s making its bets geographically, Sodhani said that half of Intel Capital’s investments are here in the U.S., with the rest distributed globally, including in China, where the organization recently committed to invest up to $100 million in companies working on smart devices, as well as Israel, Russia, India, Brazil, Japan and elsewhere.

    Unsurprisingly, some places work out better than others. Intel Capital has backed companies in places like Vietnam and Chile, for example, but hasn’t been able to consistently find deal flow in either country. It also recently placed an investor in Nigeria to scout out opportunities in Africa, though Sodhani said it “takes a year-and-a-half to two years before someone new in a country can get going and see investments . . . When you arrive in a new country, it takes time to figure out the legal framework, what instruments are available . . . there are lots of different issues.”

    One of them is helping to develop a tech-friendly ecosystem, which Sodhani credits Intel Capital with doing in a variety of places like Vietnam, where startups are still a relatively new phenomenon. While there are plenty of founders, said Sodhani, wresting potential employees out of their solid jobs to work for those founders is still in an upward battle. “Entrepreneurs are willing to take the risk; the hard part is how do you get the rest of the people to come and join the company.”

    Before we’d parted ways, I’d asked Sodhani to share how investment decisions are made within Intel Capital. He suggested that, despite the sprawling design of the organization, it isn’t unlike most venture firms. Every Tuesday, it holds a weekly partner meeting where all deals receive some air time and potential new investments are presented. Company experts are then brought in to discuss and evaluate new funding prospects, questions are asked and researched, and after at least a second look at a company, a committee of five people within Intel Capital decides whether or not to back it. (Sodhani says that Intel Capital can “move lightening fast when there’s a great deal if we’re made aware that it’s a competitive situation. We can put together a term sheet in less than 24 hours if we want.”)

    Like a lot of firms with deep pockets, Intel Capital is also willing to overlook price if the technology is deemed as a must-have. “Valuations are very [high], and I’d say that we’re probably getting to a point where we need to be careful of them,” Sodhani said. Still, he’d added, “some things we have to hold our noses and say, [Let’s move forward], because the technology is important to us.”

    Open source software is one of those things, he continued. “It’s becoming very expensive, but open source is producing lot of software that’s critical. The whole trend of IT migration to the cloud — that’s a $30 trillion idea.”

    Connie

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  • StrictlyVC: June 17, 2014

    Good Tuesday morning, everyone! We’re so sorry to those of you who tried and couldn’t click through yesterday’s assortment of links. Our ESP was doing some closed-curtain emergency maintenance until around noon PST. (We’re just relieved that we didn’t find a digital dust pile when we were allowed back into the system.)

    —–

    Top News in the A.M.

    AT&T will be the exclusive carrier for Amazon‘s new smartphone, which is expected to be unveiled tomorrow, according to WSJ sources.

    —–

    True Seed Investors

    In recent years, the bar has been steadily rising for funding rounds of all sizes, including seed rounds. Indeed, last week, early-stage investor Jeff Clavier told us that “there are way more seed [stage] VCs investing at the same time – when there are proof points – than those who just go with their gut instincts.”

    Clavier readily admits that he’s among those looking for early products, not ideas, as was once the case. His firm, SoftTech VC, pores over the business ideas of between 500 and 750 companies each quarter and invests in just four or five of them. Given so many proposals, startups with traction inevitably stand out. “We need a way to filter them somehow,” he explained.

    Still, as round sizes and valuations shoot upwards, and VCs like Clavier focus on the numbers that can justify their increasingly large bets, a contrarian opportunity has arisen for investors who are willing to just go with their gut. One daredevil that falls in this category is venture capitalist Manu Kumar, a man renowned in Silicon Valley for helping massage messy concepts into fundable businesses. Others include Pejman Nozad and Mar Hershenson, founders of the eponymous early-stage firm Pejman Mar. As Hershenson, who I met with last week, told me, “We invest super early, when there are two or three people and no product. It’s what true seed meant a long time ago.”

    Hershenson and Nozad – a former rug dealer turned highly successful angel investor – are rushing into this void with open arms. With a debut fund of $40 million, the 10-month-old firm has already backed a dozen teams, half of which have gone on to raise additional funding from heavy-hitting venture firms, including from Sequoia Capital, Kleiner Perkins Caufield & Byers, Canaan Partners, and Khosla Ventures. (Guardant Health and DoorDash are among those to raise a follow-on round. Soon to be in the market – EagerPanda, a semantic search startup.)

    Nozad’s reputation for risk-taking has become a huge source of dealflow, a fact which Hershenson knows from first-hand experience. Fifteen years ago, her husband, Matt, co-founded Danger, an early smartphone company. When he was trying to get the company off the ground, he knocked on investors’ doors for nine solid months. “One day,” she recalls, “Matt came home and said, ‘Well, Pejman Nozad is giving us money.’ I said, ‘Who is Pejman?’ Matt said, ‘He sells rugs.’ It was like, ‘What?!’” Microsoft subsequently acquired Danger in 2008 for $500 million

    Hershenson – herself a three-time entrepreneur who remained friends with Nozad over the years – also drums up deal flow by spending her days at Stanford, where she received her PhD in electrical engineering.

    “I’m there all the time – when there are final project classes, if they need anyone to judge [a competition] or [give a] talk. We’re close with the students and with the organizations at the school.” There are “a lot of amazing people at Stanford,” she adds. “There’s plenty for everybody – let’s put it that way.”

    In fact, the firm is hosting six “companies” from Stanford this summer at its 5,000-square-foot office in downtown Palo Alto, Ca.

    “We don’t run it like an incubator: some of them are graduating but some will go back to school,” she explains. Still, Pejman Mar is giving each between $15,000 and $25,000 in convertible, uncapped notes.

    “We won’t count them as portfolio companies,” she tells me. They’re too nascent. Later on, though, who knows? “Maybe some of them will work out,” she says with a smile.

    —–

    New Fundings

    BitGo, a year-old, Bay Area-based bitcoin security platform aimed at making virtual currency easier and safer to use, has raised $12 million in funding, including from Redpoint Ventures; Bitcoin Opportunity Corporation, a Bitcoin investment vehicle run by the entrepreneur Barry Silbert; and Ashton Kutcher’s A-Grade Investments. Dealbook has morehere.

    BuzzFeed, the 5.5-year-old, New York-based media company may raise a $200 million funding round — its fifth to date — reports VentureBeat. The company has raised $46.3 million to date, including from New Enterprise Associates, Lerer Ventures, RRE Ventures, Hearst Ventures, and SV Angel. Asked for comment, a BuzzFeed spokesperson told VentureBeat, “We don’t comment on rumors and speculation.”

    Clari, a two-year-old, San Francisco-based mobile sales productivity platform, has raised $20 million in Series B funding led by Bain Capital Ventures. Northgate Capital also participated in the round, along with earlier investor Sequoia Capital. The company has raised $26 million altogether, shows Crunchbase.

    Cloud Elements, a two-year-old, Denver-based cloud API integration service, has raised $3.1 million in Series A funding led by Grotech Ventures and Icon Venture Partners, with participation from Galvanize Ventures.

    Crobo, a three-year-old, Berlin-based online gamer acquisition network, has raised $5.7 million from unnamed investors to double its team and continue to expand in Asia and the U.S.

    LeukoDx, a five-year-old, Towson, Md.-based medical diagnostics company that makes a test to diagnose sepsis and other conditions, has raised $7 million in new funding from the private equity group Axcel Partners and individual investors. The company has raised $9.3 million to date, shows Crunchbase.

    PowerVision, a 12-year-old, Belmont, Ca.-based medical device company that’s developing implantable intraocular lenses, has raised $30 million in Series D funding. New investors Aisling Capital and Correlation Venture Partners joined earlier investor Venrock to add $10 million to the $20 million that the company closed on earlier this year. Others of the company’s investors include Advanced Technology Ventures, Frazier Healthcare, Johnson & Johnson Development Corp., and Medtronic. The company has raised at least $86.5 million to date, shows Crunchbase.

    Tapatalk, a five-year-old, L.A.-based social app that aggregates discussions from forums all over the Internet, has raised $5.8 million in funding from Floodgate and Accel Partners. The company, founded in Shanghai, had relocated to California to participate in the 2.5-year-old, Santa Monica, Ca.-based accelerator, MuckerLab.

    True North Therapeutics, a year-old, South San Francisco-based biotechnology company that’s developing therapies designed to treat autoantibody-driven rare diseases, has raised $22 million in Series A funding. Backers include Kleiner Perkins Caufield & Byers, MPM Capital, SR One, Biogen Idec New Ventures, and Baxter Ventures. Last year, True North was spun out of another privately held biotech company, iPierian, which was acquired in April by Bristol-Myers Squibb.

    UCloud, a two-year-old, Shanghai-based cloud computing infrastructure and services company that aims to be the Amazon Web Services of China, says TechCrunch, has raised $50 million in Series B funding led by Bertelsmann Asia Investments and Legend Capital. The company had previously raised $10 million in Series A funding from Bertelsmann, along with DCM.

    VeloCloud, a two-year-old, Los Altos, Ca.-based company whose software delivers wide-area networking services through the cloud, has raised $21 million in new funding led by New Enterprise Associates, with participation from Venrock and The Fabric, a networking incubator.

    Victorious, a 13-month-old, L.A.-based startup that is reportedly looking to help YouTube stars create their own revenue-generating sites and apps, is raising a $13 million round led by Kleiner Perkins Caufield & Byers, with Lowercase Capital and former YouTube executive Dean Gilbert also participating. Recode has the story here.

    Virtru, a 2.5-year-old, Washington, D.C.-based company whose encryption software enables email users to revoke emails, prevent forwards, and set expiration dates (among other things), has raised $6 million in new funding led by Bessemer Venture Partners. The company, which raised $4.3 million in debt financing earlier this year, has raised $10.3 million altogether.

    Walker & Co., a year-old, Palo Alto, Ca.-based company that makes razors and shave creams with African-Americans in mind, has raised $6.9 million in Series A financing from earlier investors to expand its product line. Andreessen Horowitz led the round. Upfront Ventures, Collaborative Fund, Daher Capital, and Johnson + Partners also participated.

    Weaved, a seven-month-old, Palo Alto, Ca.-based company whose technology is focused on securely networking devices across the Internet, has raised $250,000 in seed funding from TMT Investments, a four-year-old firm that’s based in St. Helier in the English Channel and which expressly backs seed-stage startups that focus on the so-called Internet of Things.

    XiaoZhu, a two-year-old, Beijing-based company that aspires to become China’s Airbnb, has raised $15 million in Series B funding led by Legend Capital, with earlier investor Morningside Venture Capital, participating. According to China Money Network, the company currently has operations in 13 Chinese cities and provides connects users with lodging in more than 130 cities in the country.

    —–

    New Funds

    Bull City Venture Partners, a two-year-old, Durham, N.C.-based early-stage firm that invests in companies in and around North Carolina, has closed a $26 million third fund from LPs that include Blue Cross and Blue Shield of North Carolina, Capitol Broadcasting Company, Cisco, venture capitalist Brad Feld, Grosvenor Capital Management, Industry Ventures and Red Hat.

    The family behind Dolby Laboratories is launching a new, early-stage venture fund to formalize its “ongoing, multi-generational commitment to supporting talented entrepreneurs.” Longtime VC Pascal Levensohn, who wound down his own venture firm in 2010, has joined the outfit to invest in new startups and determine which companies in its portfolio merit follow-on funding. TechCrunch has more here.

    McDonald’s has launched a digital incubator in Silicon Valley, prompting at least one nerd to ask: Can I have fries with that augmented reality app? (Yes, fine, StrictlyVC is that nerd.) The fast-good giant isn’t sharing much yet, but TechCrunch has more here.

    Nauta Capital, a 10-year-old, Barcelona-based early-stage venture fund focused on Spanish startups, is raising a fourth fund and targeting $150 million for the effort, reports VentureWire. The firm, which closed its third fund with $150 milllion in 2011, counts ForceManager, a Barcelona-based company that makes a sales force management system, among its most recent investments.

    —–

    IPOs

    Trupanion, a 14-year-old, Seattle-based company that provides medical insurance for dogs and cats, has filed for an IPO. The company had raised at least $9 million from investors, shows Crunchbase. Its biggest shareholders include Maveron, which owns a 33.7 stake in the business; Highland Capital Partners, which owns 15.8 percent; and RenaissanceRe Ventures, which owns 12.7 percent.

    U.S. IPOs expected to price this week.

    —–

    Exits

    Fusion-io, the eight-year-old, Salt Lake City, Ut.-based flash storage gear company, is being acquired by its older rival SanDisk, for about $1.3 billion. Both companies are publicly traded. Reuters has more here.

    Parastructure, a two-year-old, San Francisco-based startup that builds data-analysis software on top of open source infrastructure, has been acquired by Dropbox. Terms of the deal aren’t being disclosed, though a “reliable” TechCrunch source says the company was purchased for an amount in the “lower eight figures.” The company hadn’t publicly disclosed any outside funding.

    Streem, a two-year-old, San Francisco-based, cloud-based subscription service that offers users unlimited storage for music, movies, and other online content, is being acquired for an undisclosed amount of cash and stock by Box, the cloud-based file-management service. Streem has raised $875,000 in seed funding from Y Combinator, 500 Startups, Start Fund, IronFire Capital, Arbor Ventures, and numerous angel investors.

    —–

    People

    “Dilbert” creator Scott Adams, who spent many years lampooning cubicle culture has a.) cofounded an Internet startup and b.) wrote a post yesterday about so-called pivots — without mocking them even a little bit.

    Dan Slagen, senior VP of marketing at Nanigans, a Boston-based Facebook ad software firm, has left to become the chief marketing officer of HourlyNerd, a Boston-based online marketplace matching MBAs with businesses needed part-time or hourly work. Beta Boston has the news here.

    The tech world is “gearing up for its own destination wedding of the century,” reports PageSix, which has some details on the upcoming wedding in Italy of Nikesh Arora, Google‘s chief business officer, and real estate executive Ayesha Thapar. Guests are reportedly expected to include Google cofounders Larry Page and Sergey Brin, along with Facebook CEO Mark Zuckerberg.

    —–

    Job Listings

    Instacart, the San Francisco-based same-day-delivery service that yesterday announced $44 million in new funding, is looking for a business development lead.

    —-

    Essential Reads

    Is Klarna the new PayPal?

    Wired gets a rare peek into Amazon‘s fulfillment operations.

    Why customized ads are so creepy to us: “I am never quite sure if Facebook’s advertising algorithms know nothing about me, or more than I can admit to myself.”

    —–

    Detours

     A bazillionaire’s guide to stress relief.

    Why so many people put off going to bed, even when they know they’ll regret it the next morning.

    —–

    Retail Therapy

    Exactly. Why buy all that extraneous material for your torso when all you really want is the hoodie?

    —–

    To sign up for StrictlyVC, click here. To advertise, click here.

    Connie

  • True Seed Investors

    Pejman MarIn recent years, the bar has been steadily rising for funding rounds of all sizes, including seed rounds. Indeed, last week, early-stage investor Jeff Clavier told us that “there are way more seed [stage] VCs investing at the same time – when there are proof points – than those who just go with their gut instincts.”

    Clavier readily admits that he’s among those looking for early products, not ideas, as was once the case. His firm, SoftTech VC, pores over the business ideas of between 500 and 750 companies each quarter and invests in just four or five of them. Given so many proposals, startups with traction inevitably stand out. “We need a way to filter them somehow,” he explained.

    Still, as round sizes and valuations shoot upwards, and VCs like Clavier focus on the numbers that can justify their increasingly large bets, a contrarian opportunity has arisen for investors who are willing to just go with their gut. One daredevil that falls in this category is venture capitalist Manu Kumar, a man renowned in Silicon Valley for helping massage messy concepts into fundable businesses. Others include Pejman Nozad and Mar Hershenson, founders of the eponymous early-stage firm Pejman Mar. As Hershenson, who I met with last week, told me, “We invest super early, when there are two or three people and no product. It’s what true seed meant a long time ago.”

    Hershenson and Nozad – a former rug dealer turned highly successful angel investor – are rushing into this void with open arms. With a debut fund of $40 million, the 10-month-old firm has already backed a dozen teams, half of which have gone on to raise additional funding from heavy-hitting venture firms, including from Sequoia Capital, Kleiner Perkins Caufield & Byers, Canaan Partners, and Khosla Ventures. (Guardant Health and DoorDash are among those to raise a follow-on round. Soon to be in the market – EagerPanda, a semantic search startup.)

    Nozad’s reputation for risk-taking has become a huge source of dealflow, a fact which Hershenson knows from first-hand experience. Fifteen years ago, her husband, Matt, co-founded Danger, an early smartphone company. When he was trying to get the company off the ground, he knocked on investors’ doors for nine solid months. “One day,” she recalls, “Matt came home and said, ‘Well, Pejman Nozad is giving us money.’ I said, ‘Who is Pejman?’ Matt said, ‘He sells rugs.’ It was like, ‘What?!’” Microsoft subsequently acquired Danger in 2008 for $500 million

    Hershenson – herself a three-time entrepreneur who remained friends with Nozad over the years – also drums up deal flow by spending her days at Stanford, where she received her PhD in electrical engineering.

    “I’m there all the time – when there are final project classes, if they need anyone to judge [a competition] or [give a] talk. We’re close with the students and with the organizations at the school.” There are “a lot of amazing people at Stanford,” she adds. “There’s plenty for everybody – let’s put it that way.”

    In fact, the firm is hosting six “companies” from Stanford this summer at its 5,000-square-foot office in downtown Palo Alto, Ca.

    “We don’t run it like an incubator: some of them are graduating but some will go back to school,” she explains. Still, Pejman Mar is giving each between $15,000 and $25,000 in convertible, uncapped notes.

    “We won’t count them as portfolio companies,” she tells me. They’re too nascent. Later on, though, who knows? “Maybe some of them will work out,” she says with a smile.

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

    Connie

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  • StrictlyVC: June 16, 2014

    Good morning, all; hope you had a wonderful weekend. Go U.S.A.!

    —–

    Top News in the A.M.

    Verizon says it wants to kill net neutrality to help blind, deaf, and disabled people. But, surprise, groups representing disabled Americans, including the National Association of the Deaf, the National Federation of the Blind, and the American Association of People with Disabilities aren’t advocating for this plan, reports Mother Jones.

    —–

    Jeff Clavier on Dilution, Marketing, and Series A Stunts

    Last week, for a conference in San Francisco, I was asked to interview Jeff Clavier, the straight-shooting founder of the early-stage investment firm SoftTech VC. We were tasked with addressing the so-called Series A crunch and its ripple effects. As part of that chat — edited here for length — Clavier volunteered some interesting tidbits, including how to prepare startups for their next round of funding, and the most ruthless firm on Sand Hill Road.

    You aim for a certain ownership percentage with each deal. Do things usually go as planned? I hear of uncomfortable situations cropping up between Series A and earlier investors.

    When you invest at the seed round, you have the legal right to maintain ownership provided that you clear the hurdle of being a major investor, and we always ask to be a major investor and have pro rata rights. However it’s true that there are some Series A firms on Sand Hill – I won’t mention any names but one that comes to mind starts with an S – that always try to cut you out of your pro rata ownership because they always want to take as big a chunk as possible of Series A rounds. They typically want something in the 30 percent range.

    If you want to take 30 percent and let insiders take their pro rata, that’s going to be a pretty dilutive round for the founders, so there are some games that they play. The way to counter the game is to organize a bit of a process where you can have multiple firms submitting term sheets, then figure out which is most interesting and the fairest to the founders as well as the insiders.

    Are you seeing more Series A firms try to elbow seed-stage investors out of the picture entirely?

    Yes, the “piggy” round. . . We have seen entrepreneurs take these rounds in lieu of a seed round – mostly people who’ve been around the block once or twice — and if there’s enough conviction from the VC to help entrepreneurs with the earliest stages of their companies’ life, it’s great for the entrepreneurs.

    Is that true from an equity standpoint, too? I wonder whether it’s good that — with so many seed and post-seed rounds today — entrepreneurs have given investors 20 percent of their startups before they even reach a Series A financing.

    It’s actually more than that. The seed round dilution is typically 20 to 25 percent dilution, plus [there’s the issue of] the option pool, meaning reserves for future hires. When you tack on your Series A – and some firms try to get 25 to 30 percent ownership for themselves, then you have the add-on of the insiders pro rata, which can be five to seven percent – those two rounds can be pretty dilutive.

    What we’ve seen with companies that are doing really well and are sort of “hot” is the percentage target of the Series A investor will go from 25 to 30 percent to 20 to sometimes 15 percent, because when you’re in a competitive situation, paying up is not the only way. Being easy to deal with and friendly from a term sheet perspective is also a way to win those competitive situations.

    So really only the hottest entrepreneurs are not getting screwed.

    I wouldn’t say screwed. If you can [run your company without outside investors and it’s a hit], you’re home free. [If you can’t], it’s really the support and help that you’re going to get alongside the cash that makes a fundamental difference in the seed-to-Series-A journey. You pay in dilution for what you get in terms of capital and support.

    Given that it’s your biggest challenge, how do you help your seed-funded companies nab Series A funding?

    Part of it is understanding the market dynamic. You know that some firms like to meet startups very early on and create relationships over a year, for example, like our friends at Emergence Capital. They love to meet companies way ahead of any fundraising, so roughly a year before we know we’ll have to fundraise, we’ll either introduce our companies to them or they’ll ping us, because they’re pretty good at that. Then, a year later, we’ll [reach out to say], “They’re thinking of doing a round, we’d love to get your feedback,” wink, wink.

    —–

    New Fundings

    91JinRong.com, a three-year-old Beijing-based company whose online platform acts as middleman between loan providers and individuals or companies who need financing (generating revenue from listing fees, advertising and commissions), has raised $10 million in Series B financing from Lightspeed Venture Partners, according to China Money Network. The company has raised roughly $20 million to date, including from Matrix Partners, says the report.

    Besomebody, a three-year-old, Austin, Tx.-based social network, has raised $1 million in seed funding from media company The E.W. Scripps Company.

    Boston-Power Inc., a nine-year-old, China-based company whose battery manufacturing operations were originally based in the U.S., has raised new funding of approximately $250 million from unnamed Chinese and other global institutional investors, reports Venture Capital Dispatch. The company had previously raised $100 million led by GSR Ventures, where Boston-Power’s chairman and acting chief executive, Sonny Wu, is a managing director. The company’s other investors include Oak Investment Partners and Foundation Asset Management.

    CounterTack, a three-year-old, Waltham, Ma.-based firm whose security software monitors endpoints throughout a customer’s organization to watch, then quash, the behavior of hackers, has raised an additional $5 million in Series B funding from Razor’s Edge Ventures. The company, which closes the round with $20 million, has now raised $36 million altogether, including from Goldman Sachs, Siemens, Fairhaven Capital and OnPoint Technologies, the venture capital arm of the U.S. Army.

    Lucid, a 10-year-old, Oakland, Ca.-based company that develops operating systems for energy management in buildings, has raised $8.2 million in Series B funding led by Formation 8 Partners. Zetta Venture Partners also participated in the round, which brings the company’s total funding to $9.9 million, shows Crunchbase.

    Moment.me, a two-year-old, New York-based company whose online platform helps users assemble mobile microsites for events, has raised $1.65 million in new funding form earlier investors Singtel Inov8 and Blumberg Capital, along with an unnamed European fund. The company has raised $3.2 million in funding to date, shows Crunchbase.

    Instacart, a two-year-old, San Francisco-based same-day grocery delivery company, has raised $44 million in Series B funding led by Andreessen Horowitz. Earlier backers Sequoia Capital, Khosla Ventures and Canaan Partners also contributed to the round, as did Box CEO Aaron Levie and Y Combinator president Sam Altman. The company has now raised $54.8 million altogether, shows Crunchbase.

    Valencell, an eight-year-old, Raleigh, N.C.-based maker of biometric data sensor technology, has raised more than $7 million in Series C funding, including from TDF Ventures, True Ventures and Best Buy Capital. The company has raised more than $13 million in funding to date and more than $3 million in grants.

    WeLab Holdings, a year-old, Hong Kong-based Internet finance start-up, has raised $14 million from Li Ka-shing, Asia’s richest man, and Sequoia Capital. Dealbook has more here.

    —–

    New Funds

    Frost Venture Partners, a four-year-old, San Juan Capistrano, Ca.-based incubator, has raised $38.4 million for its Frost VP Early Stage Fund II LP, shows a new SEC filing that doesn’t list a target. The firm, which partners with major corporations to identify gaps in their big data analytics arsenals, has spun out a number of companies, including Predixion Software, Cirro, and OspreyData. The firm was founded by Stuart Frost, the founder of DatAllegro, a maker of data warehouse appliances that Microsoft acquired in 2008 for $275 million.

    New Science Ventures, a 10-year-old, New York-based venture firm that backs both life sciences and IT startups across the globe, has raised $12.4 million for a third fund that’s targeting $100 million, shows an SEC filing. Svelte Medical Systems, a 6.5-year-old, New Providence, N.J.-based maker of expandable coronary stents, is among its portfolio companies.

    —–

    Exits

    European daily deal aggregator Bownty has acquired local competitor Yunait, which claims to be the leader in Southern Europe. TechCrunch has more here.

    Earbits, a 4.5-year-old, Venice, Ca.-based commercial-free, music-streaming service, is shutting down. The company had raised roughly $630,000 in seed funding, shows Crunchbase. Its investors included Bee Partners, Start Fund, Charles River Ventures, and individual investors.

    Milestone Systems, a 16-year-old, Denmark-based open platform company focusing on IP video management software for surveillance systems, has been acquired by Canon Europe. Terms of the deal aren’t being disclosed. Milestone had raised $27 million from Index Ventures, shows Crunchbase.

    Rational Group, the 13-year-old, Isle of Man-based parent company of the online games “PokerStars” and “Full Tilt Poker,” which reportedly have more than 85 million registered players, has been acquired for $4.9 billion by Amaya Gaming Group, a publicly traded, Montreal-based gaming company. The Las Vegas Review-Journal has more here.

    —–

    People

    Fortune profiles Tony Fadell of Nest Labs, asking: Could he jump back to Apple some day, having proven himself away from his former employer? Or might he ultimately be a candidate to succeed Google CEO and cofounder Larry Page?

    Halsey Minor, CNET cofounder and newly minted bitcoin entrepreneur, says he doesn’t “believe bitcoin will be the last coin we will all be using. We went through a whole bunch of search engines before we got to Google.”

    Investor-entrepreneur Keith Rabois talks with investor Semil Shah about his new company, Homerun, and how the Bay Area’s housing crisis might resolve itself: “Oakland should be the second-best place in the world to start a company and maybe, even one day, the best place in the world.”

    That’s a lot of space: Apple Tree Life Sciences is relocating from Princeton, N.J., and just signed a 10-year lease for roughly 14,000 square feet at 230 Park Avenue.

    —–

    Job Listings

    Seedchange, a two-year-old, San Francisco-based online broker-dealer looking to connect investors with early-stage startups, needs a director of venture capital business development.

    —–

    Happenings

    If you’re in the area: 32 high-tech companies from Michigan and the Midwest will make pitches for funding Tuesday and Wednesday at the 33rd Michigan Growth Capital Symposium in Ann Arbor.

    —–

    Data

    CB Insights looks at those venture firms with the most portfolio companies to go public so far in 2014.

    —–

    Essential Reads

    Bad news: Bitcoin may not so decentralized after all.

    LinkedIn in facing a lawsuit for emailing user contacts without permission.

    The dark side of Facebook, where people lie, steal, and make millions.

    Why U.S. venture firms can’t find the Twitter of China.

    —–

    Detours

    Why we sleep together.

    When street art meets high finance.

    What $3,600 a month can rent you right now around New York City.

    The Beyoncelogues.

    —–

    Retail Therapy

    Storage bins, for Gen Xers.

    —–

    To sign up for StrictlyVC, click here. To advertise, click here.

    Connie

  • Jeff Clavier on Dilution, Marketing, and Series A Stunts

    survivorLast week, for a conference in San Francisco, I was asked to interview Jeff Clavier, the straight-shooting founder of the early-stage investment firm SoftTech VC. We were tasked with addressing the so-called Series A crunch and its ripple effects. As part of that chat — edited here for length — Clavier volunteered some interesting tidbits, including how to prepare startups for their next round of funding, and the most ruthless firm on Sand Hill Road.

    You aim for a certain ownership percentage with each deal. Do things usually go as planned? I hear of uncomfortable situations cropping up between Series A and earlier investors.

    When you invest at the seed round, you have the legal right to maintain ownership provided that you clear the hurdle of being a major investor, and we always ask to be a major investor and have pro rata rights. However it’s true that there are some Series A firms on Sand Hill – I won’t mention any names but one that comes to mind starts with an S – that always try to cut you out of your pro rata ownership because they always want to take as big a chunk as possible of Series A rounds. They typically want something in the 30 percent range.

    If you want to take 30 percent and let insiders take their pro rata, that’s going to be a pretty dilutive round for the founders, so there are some games that they play. The way to counter the game is to organize a bit of a process where you can have multiple firms submitting term sheets, then figure out which is most interesting and the fairest to the founders as well as the insiders.

    Are you seeing more Series A firms try to elbow seed-stage investors out of the picture entirely?

    Yes, the “piggy” round. . . We have seen entrepreneurs take these rounds in lieu of a seed round – mostly people who’ve been around the block once or twice — and if there’s enough conviction from the VC to help entrepreneurs with the earliest stages of their companies’ life, it’s great for the entrepreneurs.

    Is that true from an equity standpoint, too? I wonder whether it’s good that — with so many seed and post-seed rounds today — entrepreneurs have given investors 20 percent of their startups before they even reach a Series A financing.

    It’s actually more than that. The seed round dilution is typically 20 to 25 percent dilution, plus [there’s the issue of] the option pool, meaning reserves for future hires. When you tack on your Series A – and some firms try to get 25 to 30 percent ownership for themselves, then you have the add-on of the insiders pro rata, which can be five to seven percent – those two rounds can be pretty dilutive.

    What we’ve seen with companies that are doing really well and are sort of “hot” is the percentage target of the Series A investor will go from 25 to 30 percent to 20 to sometimes 15 percent, because when you’re in a competitive situation, paying up is not the only way. Being easy to deal with and friendly from a term sheet perspective is also a way to win those competitive situations.

    So really only the hottest entrepreneurs are not getting screwed.

    I wouldn’t say screwed. If you can [run your company without outside investors and it’s a hit], you’re home free. [If you can’t], it’s really the support and help that you’re going to get alongside the cash that makes a fundamental difference in the seed-to-Series-A journey. You pay in dilution for what you get in terms of capital and support.

    Given that it’s your biggest challenge, how do you help your seed-funded companies nab Series A funding?

    Part of it is understanding the market dynamic. You know that some firms like to meet startups very early on and create relationships over a year, for example, like our friends at Emergence Capital. They love to meet companies way ahead of any fundraising, so roughly a year before we know we’ll have to fundraise, we’ll either introduce our companies to them or they’ll ping us, because they’re pretty good at that. Then, a year later, we’ll [reach out to say], “They’re thinking of doing a round, we’d love to get your feedback,” wink, wink.

    Connie

    ,
    , ,

  • StrictlyVC: June 13, 2014

    It’s Friday the 13th! Have a great weekend, everyone, and to all the terrific dads out there, we wish you a very happy Father’s Day on Sunday!

    —–

    Top New in the A.M.

    OpenTable, the publicly traded restaurant booking service, is being acquired by publicly traded travel giant Priceline Group for a whopping $2.6 billion in cash, a deal that values OpenTable at a 46 percent premium to its current market cap. The WSJ has much more here.

    —–

    VCs Just Bet $32 Million on This 76-Year-Old; Here’s Why

    Thanks to the startup industry’s obsession with youth, you might think that running a fledgling venture-backed company is a young person’s game. But it’s often a different story when it comes to healthcare companies, where more experience can mean a smoother path through the lengthy FDA process — and a failure to deeply understand a technology can prove fatal.

    Seventy-six-year-old Alan Levy, an organic chemistry PhD and serial CEO, is a case in point. Guy DiPierro, a corporate attorney who acquired a smoking cessation technology from the University of Basel, spent nearly a decade trying to turn it into a commercial enterprise, but his progress was painstakingly slow. By 2012, he’d successfully attracted a $2.25 million grant from the National Institute of Health for his company, Chrono Therapeutics, but he knew it wasn’t enough; he knew he needed someone like Levy.

    Smart thinking. Last fall, after he pitched Levy on his anti-smoking cure, Levy, who has shepherded four early-stage companies to significant liquidity events, signed on. And yesterday, Chrono announced a $32 million round led by 5AM Venture and Canaan Partners — both of which have backed Levy in previous companies. I talked with Levy yesterday about signing up for a fifth company, and what made Chrono too good an opportunity to miss. Here’s part of that conversation, edited for length:

    How is Chrono’s product different from what’s already available?

    With other solutions, you put on a nicotine patch and it delivers a low, constant dose of nicotine. But you can improve efficacy if you can prevent smokers’ cravings, which are highly predictable. Take someone who wakes at 6 o’clock. We begin delivering nicotine to that person at 5 a.m., so that when he wakes, he’s feeling good. Smokers’ cravings typically spike after dinner, too, when they’re metabolizing everything — including nicotine — more quickly.

    It’s well-known that you can increase efficacy from around 10 percent to 50 percent [by delivering nicotine in targeted fashion], so the industry has been trying to do it for more than a decade. Our proprietary technology can do it reproducibly, robustly, and in a cost-effective manner.

    Tell me about the form factor and the cost.

    The product is about the size of a small men’s watch and it can be worn as a watch, as an arm band, or a patch. It’s this circular product, mostly made out of plastic, into which a disposable cartridge snaps. It’s the razor-razorblade model.

    It’s a 10-week course of treatment. Existing products on the market cost between $400 and $500 and that’s what our product will cost, too, for the band and 70 daily cartridges.

    When will it hit the market?

    We’ll need to do what’s required for the FDA which, in this case, is very little compared with what it would be if it were a new drug . . . so we should be able to market the product within three years.

    How can you be so certain?

    Nicotine delivered through the skin [is a decade-old technology] that’s been shown to be very safe. Even if someone puts on two patches, they may get sick to their stomach, but no one dies from patches. Because of that, there’s a specific pathway to approval that’s low cost and low risk.

    You sold your last company in 2012, less than three years after it was founded. Why not kick up your heels and relax?

    I did take a weekend off. [Laughs.] On a more serious note, I saw [Chrono’s technology] as something that could have an enormous impact – perhaps more than any other product I’ve developed in my career. The consequences of smoking are just devastating and as an ex-smoker, I know how hard it is to quit.

    You’re 76. Did your age ever come up in Chrono’s funding discussions? You don’t see a lot of 76-year-olds raising huge venture rounds in information technology.

    It didn’t [come up]. Most of the investors in the healthcare space know me or we know one another. They know my energy level and my level of involvement, as well as my management style and accomplishments. Fortunately, I’m very healthy; in fact, in two weeks, I’m going on a two-week biking trip to Poland.

    I don’t think [healthcare executives] necessarily have to be my age. [Laughs.] But experience counts. If Groupon fails, it doesn’t make that much of a difference. I don’t think anyone is gong to die. But [at my last company], if [the product] failed, there was the potential for people to die and that’s been true of many products that I’ve developed.

    You’ve heard people in the venture world say, “We can have a product out there and have it fail.” People don’t go into healthcare with that attitude. No one can afford it.

    —–

    New Fundings

    5app, a three-year-old, London-based company whose software allows enterprises to create their own “app stores” to regain some control over what employees are putting on their phones, has raised $5.1 million in funding led by Beckman Group and other unnamed investors. TechCrunch has more here.

    Crowdability, a year-old, New York-based education and research platform that’s hoping to capitalize on the equity crowdfunding market, has raised $1 million in seed funding, including from Howard Lindzon and Steadfast Venture Capital.

    Glympse, a six-year-old, Seattle-based company whose app invites users to chart their location on a map and share it with others in real time, has raised $12 million in Series C funding, including from new investors UMC Capital, Verizon Ventures and unnamed strategic investors, along with earlier investors Ignition Partners, Menlo Ventures and Naya Ventures. The company has raised nearly $20 million altogether.

    HackerRank, a two-year-old, Palo Alto, Ca.-based technical recruitment platform and code-challenge community, has raised a $9.2 million in Series B funding led by Khosla Ventures and Battery Ventures. They were joined by numerous individual investors, including Motorola Mobility VP Peeyush Ranjan and former Facebook senior director of engineering Greg Badros.

    HashPlex, a nine-month-old, Seattle-based cryptocurrency-miner hosting company, has raised $400,000 in seed funding from investors, including Bitcoin Opportunity Corp., and Facebook engineer Jason Prado. TechCrunch has the story about company (the first of its kind that we’ve seen) here.

    Nuzzel, the three-year-old, San Francisco-based social news startup founded by Friendster founder Jonathan Abrams, has raised $1.7 million in seed funding from a long list of investors, including Lowercase Capital, Homebrew, Streamlined Ventures, DG Incubation, World Innovation Lab, and numerous individuals, including San Francisco philanthropist Daniel Lurie. The round marks the company’s second, $1.7 million round of seed funding; it has raised $3.4 million to date.

    Mobile Majority, a two-year-old, Santa Monica, Ca.-based mobile-advertising startup formerly known as PaeDae, has raised $8 million in Series B financing led by an undisclosed strategic investor. Earlier investors, including 3G Capital, also participated in the round. The company has raised $12.9 million to date, shows Crunchbase.

    Peel, a five-year-old, Mountain View, Ca.-based company whose software turns smartphones and tablets into universal TV remote controls, has raised an undisclosed amount of funding from Alibaba Group. Crunchbase shows the company has previously raised $36.7 million, including from Harrison Metal, Lightspeed Venture Partners, Redpoint Ventures, and Translink Capital.

    VigLink, a five-year-old, San Francisco-based platform used by publishers to insert native advertising in the form of links into their content, has raised $18 million in Series C funding led by RRE Ventures. Other investors in the round included Emergence Capital, First Round Capital, Google Ventures, Correlation Ventures, and Silicon Valley Bank.

    Vizury Interactive Solutions, a 5.5-year-old, Bangalore City, India-based ad retargeting company, has raised $16 million in Series C funding led by Intel Capital. Ascent Capital and earlier investors Nokia Growth Partners and Inventus Capital Partners also participated in the round, which brings the total that the company has raised to date to $27 million.

    Webtrekk, an 11-year-old, Berlin-based analytics software company that helps marketers optimize their marketing spend, has raised $33.9 million from Deutsche Private Equity. The company has raised about $35 million altogether, shows Crunchbase.

    —–

    IPOs

    Shares of Mobile Iron, the seven-year-old, Mountain View, Ca.-based company that makes mobile security software for enterprises, closed their first day on the public market yesterday at $11.02, up from their offering price of $9 per share. Mobile Iron filed to go public in April.

    —–

    Exits

    Medio Systems, a 10-year-old, Seattle-based predictive analytics company, is being acquired by Nokia for undisclosed terms. TechCrunch reports that Nokia will use the company’s technology in its location-based services and more specifically, to provide users more personalized maps. Medio had raised at least $30 million, shows Crunchbase, including from Trilogy Equity Partnership, Mohr Davidow Ventures, Frazier Technology Ventures and Accel Partners.

    —–

    People

    Lindy Fishburne, the executive director of the early-stage, science-focused fund Breakout Labs, talks with the WSJ about why she cofounded the organization with Peter Thiel — and sheds a bit more light on how it works.

    Investor Vinod Khosla tells the New York Times he’s scaling back the risk he’s willing to take on when it comes to clean tech. “We stay committed to the area, but will likely do less and will do only certain types of clean tech projects that are not capital-intensive,” he says.

    Heidi Roizen, operating partner at DFJ, talks with Stanford Graduate School about relationships — real and imagined — in the age of social media. “There’s a lot of research and writing about weak links being potentially more powerful than strong ones. And I’m a big believer in that.”

    Nextdoor‘s backers are breathing a sigh of relief today. Yesterday, the company’s CEO, Nirav Tolia, pleaded no contest in a San Mateo, Ca., court to a misdemeanor for leaving the scene of a highway accident that a driver says Tolia caused. According to Reuters, Tolia will pay a $239 fine, spend 30 weekend days in a county program in lieu of 30 days’ jail time, serve two years’ probation, and will be responsible for restitution to the victim, an executive recruiter who recently filed a civil suit against Tolia over the accident. Tolia was originally facing felony criminal charges but the local district attorney says he reduced them because Tolia “accepted responsibility right up front and never tried to lie about what happened or avoid responsibility.”

    —–

    Job Listings

    Rockefeller University is looking for an investment analyst to help with its endowment; the job is in New York City.

    Optoro, a company that raised a $23.5 million last July from Revolution and others, is looking for a business development associate. The job is in Lanham, Md., just outside of Washington, D.C.

    —–

    Essential Reads

    Everything you need to know about Samsung‘s razor-thin Galaxy Tab S.

    Why Elon Musk just opened Tesla’s patents to his biggest rivals.

    Atari has a comeback plan. Really.

    —–

    Detours

    Lean out: The dangers for women who negotiate.

    Bizarre moments at the World Cup opening ceremonies.

    Remember to go outside later and look up.

    —–

    Retail Therapy

    Customizable backpacks. (H/T: InsideHook.)

    We tried but we can’t get past the ridiculous name. (Also: Who breaks down doors?)

    —–

    To sign up for StrictlyVC, click here. To advertise, click here.

    Connie

    , , ,

  • VCs Just Bet $32 Million on this 76-Year-Old; Here’s Why

    OM ChoiceThanks to the startup industry’s obsession with youth, you might think that running a fledgling venture-backed company is a young person’s game. But it’s often a different story when it comes to healthcare companies, where more experience can mean a smoother path through the lengthy FDA process — and a failure to deeply understand a technology can prove fatal.

    Seventy-six-year-old Alan Levy, an organic chemistry PhD and serial CEO, is a case in point. Guy DiPierro, a corporate attorney who acquired a smoking cessation technology from the University of Basel, spent nearly a decade trying to turn it into a commercial enterprise, but his progress was painstakingly slow. By 2012, he’d successfully attracted a $2.25 million grant from the National Institute of Health for his company, Chrono Therapeutics, but he knew it wasn’t enough; he knew he needed someone like Levy.

    Smart thinking. Last fall, after he pitched Levy on his anti-smoking cure, Levy, who has shepherded four early-stage companies to significant liquidity events, signed on. And yesterday, Chrono announced a $32 million round led by 5AM Venture and Canaan Partners — both of which have backed Levy in previous companies. I talked with Levy yesterday about signing up for a fifth company, and what made Chrono too good an opportunity to miss. Here’s part of that conversation, edited for length:

    How is Chrono’s product different from what’s already available?

    With other solutions, you put on a nicotine patch and it delivers a low, constant dose of nicotine. But you can improve efficacy if you can prevent smokers’ cravings, which are highly predictable. Take someone who wakes at 6 o’clock. We begin delivering nicotine to that person at 5 a.m., so that when he wakes, he’s feeling good. Smokers’ cravings typically spike after dinner, too, when they’re metabolizing everything — including nicotine — more quickly.

    It’s well-known that you can increase efficacy from around 10 percent to 50 percent [by delivering nicotine in targeted fashion], so the industry has been trying to do it for more than a decade. Our proprietary technology can do it reproducibly, robustly, and in a cost-effective manner.

    Tell me about the form factor and the cost.

    The product is about the size of a small men’s watch and it can be worn as a watch, as an arm band, or a patch. It’s this circular product, mostly made out of plastic, into which a disposable cartridge snaps. It’s the razor-razorblade model.

    It’s a 10-week course of treatment. Existing products on the market cost between $400 and $500 and that’s what our product will cost, too, for the band and 70 daily cartridges.

    When will it hit the market?

    We’ll need to do what’s required for the FDA which, in this case, is very little compared with what it would be if it were a new drug . . . so we should be able to market the product within three years.

    How can you be so certain?

    Nicotine delivered through the skin [is a decade-old technology] that’s been shown to be very safe. Even if someone puts on two patches, they may get sick to their stomach, but no one dies from patches. Because of that, there’s a specific pathway to approval that’s low cost and low risk.

    You sold your last company in 2012, less than three years after it was founded. Why not kick up your heels and relax?

    I did take a weekend off. [Laughs.] On a more serious note, I saw [Chrono’s technology] as something that could have an enormous impact – perhaps more than any other product I’ve developed in my career. The consequences of smoking are just devastating and as an ex-smoker, I know how hard it is to quit.

    You’re 76. Did your age ever come up in Chrono’s funding discussions? You don’t see a lot of 76-year-olds raising huge venture rounds in information technology.

    It didn’t [come up]. Most of the investors in the healthcare space know me or we know one another. They know my energy level and my level of involvement, as well as my management style and accomplishments. Fortunately, I’m very healthy; in fact, in two weeks, I’m going on a two-week biking trip to Poland.

    I don’t think [healthcare executives] necessarily have to be my age. [Laughs.] But experience counts. If Groupon fails, it doesn’t make that much of a difference. I don’t think anyone is gong to die. But [at my last company], if [the product] failed, there was the potential for people to die and that’s been true of many products that I’ve developed.

    You’ve heard people in the venture world say, “We can have a product out there and have it fail.” People don’t go into healthcare with that attitude. No one can afford it.

    Connie

    , , , ,

  • StrictlyVC: June 12, 2014

    Hi, good morning, everyone!

    —–

    Top News in the A.M.

    Twitter COO Ali Rogwani has left Twitter, tweeting this morning, “Goodbye Twitter. It’s been an amazing ride, and I will cherish the memories.” CEO Dick Costolo then tweeted, “Thank you for being an incredible executive & partner. Twitter could not have succeeded without you.” (Eric Hippeau of Lerer Ventures tweeted in reaction to the news: “Twitter COO has resigned: when things go bad, COO usually the first to take the blame. COO usually not a viable role and position.”) Re/code had reported yesterday that Rogwani was slowly being stripped of some of his authority over the company’s slow growth. More here and more to come; this story is breaking.

    —–

    What is Amazon Thinking?

    Back in October, when the bestselling book about Amazon, “The Everything Store” was first published, I talked about Jeff Bezos with Michael Maccoby, a psychoanalyst who writes about business executives and teaches leadership at Oxford’s Saïd Business School. His impression of Bezos, he told me, was that Bezos needed a strong right-hand man, something that Bezos – unlike Bill Gates, Steve Jobs and others – hasn’t seemingly had or wanted. Maccoby then veered into what sounded slightly absurd to me at the time, even if it made for provocative copy; he compared Bezos to Napoleon.

    In recent weeks, the analogy has begun to seem a little less outlandish.

    As I noted in my interview with Maccoby, both Bezos and Napoleon enjoyed success at a young age, both rejected the established wisdom, and both took on seemingly invincible enemies and defeated them.

    Napoleon also pushed his luck eventually, ignoring repeated advice not to invade Russia. And however stretched, it’s hard not to see some comparisons to Amazon’s recent assault on suppliers that have fallen out of the company’s favor. Yesterday, it was Warner Home Video, whose popular movies Amazon is refusing to pre-sell or market, much to the chagrin of its customers.

    Two weeks ago, it was the German publishing company Bonnier Media Group, the delivery of whose books Amazon has slowed dramatically because Bonnier seemingly refuses to give Amazon a bigger cut of the earnings of its electronic books.

    Meanwhile, the publishing house Hachette and Amazon have been at odds for months, reportedly over deep discounts on Hachette’s electronic books that Amazon wants to impose. While publishers are rooting for Hachette’s CEO, no one is expecting a quick fix, and Hachette, its authors, and consumers are being made to suffer in the meantime. Said one author to CNN Money this week, “I feel like I’ve been stabbed in the back by a company I supported.”

    Are its tactics going to stir up a tsunami of congressional subcommittees and political investigations and give ammunition to Walmart and Target, which sorely want to take back the ground that Amazon has stolen from them? Will they embolden Alibaba, which just opened its first online storefront for U.S. customers? We don’t know yet, but what’s worse, it doesn’t seem like anyone at Amazon is asking these questions.

    Back in October, Maccoby noted that “Napoleon was very successful as long as he had Talleyrand as his foreign minister.” When he lost Talleyrand, he spun out of control. “The danger with someone like Bezos is the same danger that Napoleon had,” Maccoby had added. Without enough pushback, “you can go too far.”

    —–

    New Fundings

    Aduro BioTech, a 14-year-old, Berkeley, Ca.-based immuno-oncology company focused on early-stage cancer therapies, has raised $55 million in Series C funding led by Johnson & Johnson Development Corp. Earlier investor Morningside Group and other, undisclosed investors also participated in the round. Aduro has raised at least $92 million to date, shows Crunchbase.

    Breakout Labs, a year-old, San Francisco-based program of the Thiel Foundation that invests in early-stage science startups, has staked three biotech companies that are at work on early-stage therapies for Alzheimer’s disease, gastrointestinal disorders and bone surgery, respectively. FierceBiotech has much more here.

    Declara, a 1.5-year-old, Palo Alto, Ca.-based social learning platform that connects large numbers of people to massive amounts of content, has raised $9 million from Linden Venture Fund and the corporate investment arm of Singapore’s Economic Development Board. The funding adds to the $16 million in Series A funding the company announced in April led by GSV Capital, with Data Collective, Founders Fund and Catamount Ventures participating.

    FightMe, a three-year-old, U.K.-based collaborative social video network, has raised $1.35 million from HTG Ventures and individual investors. The company had previously raised $500,000. TechCrunch has more here.

    Fitbay, a year-old, New York-based social commerce startup that helps customers discover clothes that fit their unique shape and size, has raised $2 million in seed funding from Steadfast Venture Capital and Scandinavian Spotify investor Creandum. The company had previously raised $400,000, shows Crunchbase. Fortune has much more here.

    Freshdesk, a four-year-old, San Francisco-based customer service software company, has raised $31 million led by earlier investor Tiger Global Management, with Google Capital and Accel Partners — which has also invested in the company previously — participating. The company has raised $45.1 million altogether, shows Crunchbase.

    Hybrent, a two-year-old, Chicago, Il.-based hospital supply chain software developer, has raised $500,000 in seed funding from undisclosed management and health care supply chain experts.

    OYO Sports, a three-year-old, Acton, Ma.-based toymaker that uses advanced manufacturing techniques and social media analytics to create mini figures of famous players while they’re popular with fans, has raised $3 million in new seed funding, reports the WSJ. Atlas Venture and Boston Seed Capital led the investment, bringing the company’s total capital raised to $4.6 million.

    Procore Technologies, an 11-year-old, Carpinteria, Ca.-based company that makes construction management software, has raised $15 million in Series D funding, including from Bessemer Venture Partners. The company has raised $19 million altogether, including from Persistence Partners, shows Crunchbase.

    ScalingData, a four-month-old, Bay Area-based company that aims to create applications that can run easily on the big data repository Hadoop (and which was founded by veterans of the Hadoop vendor Cloudera), has raised $4.4 million from General Catalyst Partners, Google Ventures and Red Hat CTO Brian Stevens. Venture Capital Dispatch has the story here.

    SiSense, a nearly four-year-old, Tel Aviv-based big data analytics company focused on business intelligence, has raised $30 million in new financing led by DFJ Growth, with participation from existing investors Battery Ventures, Genesis Partners and Opus Capital. The company has raised $44 million to date, shows Crunchbase.

    TrackingPoint, a three-year-old, Austin, Tx.-based maker of high-tech weapons, has raised $29 million to broaden into commercial drones and other applications, reports Venture Capital Dispatch. Genesis Inventions and earlier investor McHale Labs led round, with participation from earlier investor Austin Ventures and new investor GTP Holdings. The company has raised roughly $35 million to date.

    Visual Unity, a 23-year-old, Prague-based video infrastructure company, has raised $7.2 million in funding from 3TS Capital Partners in Budapest.

    Wut, a months-old, San Francisco-based company whose app lets users send out short, random messages without being identified, has raised seed funding from Foundation Capital. Other investors in the round include Google Ventures, SV Angel, Eniac Ventures, Lowercase Capital, and Dave Morin’s Slow Ventures. TechCrunch has the story here.

    —–

    New Funds

    Epic Ventures, a 20-year-old, Salt Lake City, Ut.-based venture firm, is looking to raise $75 million for its fifth fund. It’s part of the way there, too, thanks to New Mexico’s new State Investment Council, which just approved a commitment to Epic for up to $10 million. (In exchange, Epic, which has an office in New Mexico, has agreed to invest in local companies.) Among Epic’s investments is HG Data, a 3.5-year-old, Santa Barbara, Ca.-based business intelligence company. Epic was formerly known was Wasatch Venture Fund. (It changed names in 2007.)

    Generator Ventures, a seed-stage, San Francisco-based firm that launched recently, has graduated an inaugural class of 11 companies from its newly launched accelerator program, the firm tells the WSJ. Generator Ventures is focused entirely on new technologies to serve the country’s aging population. Much more here.

    —–

    People

    Google cofounder Sergey Brin could be the next space tourist to journey to the International Space Station. Relatedly, Sky News is reporting this morning that Google is in talks with Virgin Galactic about acquiring a stake in the space tourism venture.

    LeBron James, the 29-year-old NBA star, reportedly realized a profit of more than $30 million in cash and stock in the Beats sale to Apple, having struck a deal to get a small stake in the company at its inception in 2008 in exchange for promoting its high-end headphones.

    Venkat Panchapakesan is Youtube’s new head of engineering, reports Re/code. He previously headed up Google’s Apps group; he’ll report to Susan Wojcicki, who took control of YouTube in February.

    —–

    Job Listings

    Google has just posted a job listing for a corporate development manager to help identify and evaluate both acquisition and investment opportunities. The job is in Mountain View, Ca.

    —–

    Data

    Comscore has released some findings based on a survey of more than 5,800 U.S. online shoppers. Some highlights: When shopping on mobile devices, 41 percent of respondents said they prefer a retailer’s full website versus a mobile website (34 percent) or mobile app (25 percent). Satisfied shoppers who share their thoughts via social media are most likely to post on Facebook (86 percent) followed by Twitter (34 percent), Google + (23 percent), Pinterest (21 percent), and Instagram (19 percent). And despite the glut of new startups that are promising immediate delivery, respondents said that delivery costs and free shipping trump faster delivery. Fifty-eight percent of respondents said they have added items to their shopping carts to qualify for free shipping, and 83 percent are willing to wait an additional two days for delivery if shipping is free. If you want to check out more stats, the full enchilada is here.

    —–

    Essential Reads

    Path is about to perform a vanishing act on the content of its more than 10 million users.

    Amazon has rolled out a streaming music service for its Prime members.

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    Detours

    What happens when you combine a banana, clay, and some rap music.

    Now, what happens when you put a bored person in an empty airport with an iPhone.

    The big wheels of “Billionaires’ Lane” in the Hamptons.

    —–

    Retail Therapy

    Go to sleep with a clear conscience.

    —–

    To sign up for StrictlyVC, click here. To advertise, click here.

    Connie

  • What Is Amazon Thinking?

    amzn-amazon-stock-logoBack in October, when the bestselling book about Amazon, “The Everything Store,” was first published, I talked about Jeff Bezos with Michael Maccoby, a psychoanalyst who writes about business executives and teaches leadership at Oxford’s Saïd Business School. His impression of Bezos, he told me, was that Bezos needed a strong right-hand man, something that Bezos – unlike Bill Gates, Steve Jobs and others – hasn’t seemingly had or wanted. Maccoby then veered into what sounded slightly absurd to me at the time, even if it made for provocative copy; he compared Bezos to Napoleon.

    In recent weeks, the analogy has begun to seem a little less outlandish.

    As I noted in my interview with Maccoby, both Bezos and Napoleon enjoyed success at a young age, both rejected the established wisdom, and both took on seemingly invincible enemies and defeated them.

    Napoleon also pushed his luck eventually, ignoring repeated advice not to invade Russia. And however stretched, it’s hard not to see some comparisons to Amazon’s recent assault on suppliers that have fallen out of the company’s favor. Yesterday, it was Warner Home Video, whose popular movies Amazon is refusing to pre-sell or market, much to the chagrin of its customers.

    Two weeks ago, it was the German publishing company Bonnier Media Group, the delivery of whose books Amazon has slowed dramatically because Bonnier seemingly refuses to give Amazon a bigger cut of the earnings of its electronic books.

    Meanwhile, the publishing house Hachette and Amazon have been at odds for months, reportedly over deep discounts on Hachette’s electronic books that Amazon wants to impose. While publishers are rooting for Hachette’s CEO, no one is expecting a quick fix, and Hachette, its authors, and consumers are being made to suffer in the meantime. Said one author to CNN Money this week, “I feel like I’ve been stabbed in the back by a company I supported.”

    Are its tactics going to stir up a tsunami of congressional subcommittees and political investigations and give ammunition to Walmart and Target, which sorely want to take back the ground that Amazon has stolen from them? Will they embolden Alibaba, which just opened its first online storefront for U.S. customers? We don’t know yet, but what’s worse, it doesn’t seem like anyone at Amazon is asking these questions.

    Back in October, Maccoby noted that “Napoleon was very successful as long as he had Talleyrand as his foreign minister.” When he lost Talleyrand, he spun out of control. “The danger with someone like Bezos is the same danger that Napoleon had,” Maccoby had added. Without enough pushback, “you can go too far.”

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

     

    Connie

    ,

  • StrictlyVC: June 11, 2014

    Happy Wednesday, everyone! Sorry for an abundance of typos in yesterday’s issue. StrictlyVC’s beloved children have discovered her early a.m. writing spot. [Sad trombone sound effect.]

    —–

    Top News in the A.M.

    Microsoft is resisting a government search warrant to compel the firm to turn over customer email data held in a server located overseas. Its fear, and that of other tech firms, too: that if the government prevails and can reach across borders, foreign individuals and businesses will flee to their non-U.S. competitors. The Washington Post has the story.

    —–

    This Was Going to Be an Interview with Arvind Sodhani

    I’d planned to run an interview with the president of Intel Capital, Arvind Sodhani, this a.m., but that exchange didn’t come together last night as planned. The good news (sort of): I’ll be interviewing Sodhani, along with SoftTech VC founder Jeff Clavier, at the IBF venture capital conference in San Francisco today. Looking forward to seeing some of you there!

    —–

    New Fundings

    EdgiLife Media, better known as LoveWithFood, a five-year-old, San Mateo, Ca.-based company that has evolved into snack delivery company à la NatureBox, has raised $1.4 million in seed funding. Among its investors: Kapor Capital, 500 Startups, TEEC Angel Fund, Ironfire Capital, Scrum Ventures and an AngelList syndicate led by Facebook Ads creator Yun-Fang Juan. The company has raised a little more than $2 million date. The WSJ has more here.

    Exabeam, a year-old, San Mateo, Ca.-based big data security analytics startup, has raised $10 million in Series A funding led by Norwest Venture Partners. Other investors in the round included Aspect Ventures and entrepreneur-investor Schlomo Kramer.

    Gill Business Systems, a four-year-old, Kiev, Ukraine-based inventory distribution system for passenger bus transportation carriers and online ticket sales, has raised $3 million in Series A funding from InVenture Partners, Intel Capital and FinSight Ventures.

    Handybook, a two-year-old, New York-based company whose app enables users to order housecleaning or other home repair services on demand, has raised $30 million in new funding led by Revolution Growth. Other participants in the round include earlier backers Highland Capital and General Catalyst Partners. The company has now raised $49 million altogether. Dealbook has more here.

    Homestay, a seven-year-old, Dublin, Ireland-based online travel booking platform, has raised $3 million in funding led by Delta Partners, with participation from Enterprise Ireland. The company has also acquired Berlin-based HomestayBooking, reports FinSMEs.

    IndoorAtlas, a two-year-old company whose indoor mapping technology can reportedly determine locations inside a structure to within six feet, has raising $4.5 million in a round led by Mobility Ventures and the Finnish seed fund KoppiCatch, reports the WSJ’s Deborah Gage. The company, which has offices in Finland and Mountain View, Ca., might have benefited from an extended profile in the New York Times last month that noted the “somewhat unorthodox” business plan of the company, which will “measure and store your building’s magnetic fingerprint in its computing cloud” but charge customers $99 per month per building to then keep that information private.

    Innovari, a three-year-old, Austin, Tx.-based interactive energy platform developer, has raised an undisclosed amount of Series B funding from VantagePoint Capital Partners. The company, which operated in stealth mode until now, hasn’t publicly disclosed previous funding or investors.

    Krux Digital, a 4.5-year-old, San Francisco-based data management platform that helps brands understand consumers’ behavior, has raised $35 million in Series B funding from SAP Ventures, Time Warner,Temasek, and Visionnaire Ventures, along with earlier investors Accel Partners and IDG Ventures.

    Light, a year-old, Palo Alto, Ca.-based company that’s says it’s re-imagining the art and science of photography, has raised a $9.7 million Series A round co-led by Bessemer Venture Partners and Charles River Ventures. Qualcomm also participated in the funding.

    Okta, a six-year-old, San Francisco-based identity management service that helps companies manage security across theirs and their employees’ applications, has raised $75 million in Series E funding led by Sequoia Capital. Earlier investors Andreessen Horowitz, Greylock Partners, and Khosla Ventures also participated in the round, alongside new investors Janus Capital Group and Altimeter Capital. The company has raised $155 million to date, shows Crunchbase.

    Payoneer, a nine-year-old, New York-based financial services company that enables users to transfer and receive money through re-loadable MasterCards, has raised an undisclosed amount of funding from the investment arm of Ping An, a China-based insurance company. The company has raised at least $39 million in previous funding rounds, shows Crunchbase, including from Carmel Ventures, Susquehanna Growth Equity, Greylock IL and Vintage Venture Partners.

    Placed, a three-year-old, Seattle-based location-based analytics provider that lets users opt-in to online surveys, has raised $10 million in Series B funding led by Two Sigma Ventures, with participation from earlier investor Madrona Venture Group. The company had previously raised $3.4 million, shows Crunchbase.

    Plex, a 19-year-old, Troy, Mi.-based software company that sells its ERP and automation software to manufacturers in a variety of industries, has raised $50 million in funding led by funds and institutional accounts managed by T. Rowe Price, as well as with earlier investor Accel Partners. The company has raised $86.5 million altogether, shows Crunchbase.

    RebelMail, a months-old, Washington, D.C.-based company that makes an interactive email product, has raised a $2 million seed round co-led by Vaizra and Boldstart. Other investors include Lerer Ventures, David Tisch’s Box Group, Gary Vaynerchuk’s Vayner RSE, and angel investors. Business Insider has the story here.

    SourceClear, a year-old, Seattle-based software security startup whose analytics and machine-earning tools better protect popular development frameworks from hackers, has raised $1.5 million in seed funding from individual investors.

    Stitch Fix, a three-year-old, San Francisco-based online retailer and personal shopping service, has raised $30 million in Series C funding from earlier investors Benchmark and Baseline Ventures. The company has raised $46.8 million altogether, shows Crunchbase.

    TurnKey Vacation Rentals, a 1.5-year-old, Austin, Tx.-based rental manager that helps homeowners manage and rent out their space, has raised $3 million in seed funding from Silverton Partners and about a dozen angel investors from the online travel industry, including Rich Barton, Gregg Brockway, and Alexis de Belloy. TurnKey has raised $4.8 million altogether.

    Visier, a four-year-old, Vancouver-based analytics platform that helps HR professionals understand key data like which top talent is at risk of leaving and what’s driving turnover, has raised $25.5 million in Series C funding led by Adams Street Partners. The company has now raised $46.5 million, including from earlier investors Foundation Capital and Summit Partners.

    Weave, a months-old, Pleasant Grove, Ut.-based VoIP service for doctors that also helps manage patient records, has raised $5 million in Series A funding led by A Capital, the new, early-stage fund of Ronny Conway. Other investors in the round include Homebrew, SV Angel, and Y Combinator.

    Zaius, a two-year-old, Cambridge, Ma.-based company that simplifies how businesses collect, analyze and use data to improve customers’ digital experiences, has raised $6.3 million in Series A funding led by Matrix Partners.

    Zula, a two-year-old, New York-based team communication app cofounded by Vonage cofounder Jeff Pulver, has raised $3 million in Series A funding led by Mort Meyerson, the former CEO of EDS and Perot Systems. Other participants in the round included Ourcrowd, Microsoft Ventures, and other individual investors.

    —–

    New Funds

    Index Ventures, the 18-year-old, early-stage venture firm with offices in Geneva, London and San Francisco, has raised $543 million for its seventh and newest fund, the firm announced yesterday. The WSJ has more, including a look at Index’s seven exits over the last 12 months.

    Khosla Ventures is targeting about $1 billion for its fifth fund, reports peHUB. The firm closed Khosla Ventures IV in 2011 with $1.05 billion. According to peHUB, that fund charged a 2 percent management fee and a 30 percent carried interest rate and was generating a 1.08x total value multiple as of March.

    Lowercase Capital, a 6.5-year-old, Bay Area-based venture firm, is reportedly raising a new $25 million fund. With it, Lowercase’s founder and managing director, Chris Sacca, will be stepping away from day-to-day operations, too, reports TechCrunch, citing the tremendous success of the firm’s first two funds. (TechCrunch co-editor Alexia Tsotsis observes that the value of Lowercase’s debut fund, an $8.5 million vehicle, has risen more than 100 times thanks to an early investment in Uber.) Much more here.

    Scrum Ventures, a Foster City, Ca.-based early-stage firm that backs mobile-technology startups looking for growth in Asian markets, has raised $4.3 million of a planned $20 million second fund, shows an SEC filing first flagged by VentureWire. Scrum was founded by Tak Miyata, a graduate of Waseda University in Tokyo who went on to launch two startups: Neven Vision, a biometric and photo recognition company acquired by Google in 2006; and J-Magic, another picture-based search company that was acquired in 2009 by Mixi, a Japan-based social network. Miyata remains CEO of Mixi America. Among the firm’s newest investments is EdgiLife Media (see above, in “New Fundings”).

    —–

    IPOs

    HealthEquity, a 12-year-old, Draper, Ut.-based custodian of health-savings accounts, has disclosed plans to raise up to $100 million in an IPO. The company has raised at least $12.5 million from investors, shows Crunchbase, including Berkley Capital.

    Minerva Neurosciences, a seven-year-old, Cambridge, Ma.-based company that develops treatments for central nervous system diseases, has revealed plans to price 5.45 million IPO shares at between $10 and $12. The company had filed for an IPO confidentially in February.

    —–

    Exits

    Alibaba Group is buying all the remaining shares of mobile browser firmUCWeb in the biggest merger in Chinese Internet history. Reuters has more here.

    MobileSpan, a three-year-old, Santa Clara, Ca.-based company that helps employees securely access content behind their company’s firewall, has been acquired for undisclosed terms by DropBox, which plans to shut down the company by year end. MobileSpan had raised $2.3 million from True Ventures and K9 Ventures, shows Crunchbase.

    Skybox Imaging, a five-year-old, Mountain View, Ca.-based provider of high-quality satellite photos, has officially been acquired by Google for $500 million after weeks of negotiations. The company had raised at least $91 million from investors, shows Crunchbase, including Draper Associates, Asset Management Ventures, CrunchFund, Canaan Partners, Norwest Venture Partners,Khosla Ventures, and Bessemer Venture Partners. Dealbook has more here.

    Singapore Telecommunications is acquiring two ad tech companies for $400 million, reports TechCrunch. Kontera, an 11-year-old, San Francisco-based company that sells its content marketing, social marketing, and analytics software to brands, is fetching $150 million. The company had raised $36.1 million from investors, including Sequoia Capital, Carmel Ventures, Tenaya Capital, and Globespan Capital Partners. SingTel is meanwhile paying $235 million for Adconion, a nine-year-old cross-channel digital advertising company with offices in Santa Monica, Ca., and London. Adconion had raised $114 million from investors, including Index Ventures and Wellington Partners.

    —–

    People

    Ross Levinsohn has left his latest gig as CEO of Guggenheim Digital Media, reports Re/code. The former interim CEO of Yahoo and former president of News Corp.’s Fox Interactive Group had joined Guggenheim in January with a mandate that included acquiring new media companies. None of several attempts at deals — including to acquire Hulu — panned out, however. No word yet on Levinsohn’s next move, says Re/code, but it notes that Levinsohn’s famously debonair ‘do remains, as ever, “hairtastic.”

    Scott McNealy, the billionaire co-founder of Sun Microsystems, has four sons, and he spent part of this week playing caddy to one of them, a Stanford sophomore, at a Tuesday practice round at the U.S. Open. “I’ve been caddying for him – carrying car seats, luggage, food, his golf bag – since he was 1 years old,” McNealy joked to Golfweek.

    Jane Mendillo, who has served as the president and CEO of Harvard Management Company since 2008, made the surprising announcement yesterday that she is stepping down from her role at the end of this year. Mendillo worked for HMC for 21 years altogether. Harvard hasn’t yet released its performance for the latest fiscal year, which ends June 30, but according to the Boston Globe, the university estimates an average annual return of 11 percent to 12 percent for the past five years on Mendillo’s watch. “Harvard Management is in a really good spot now,” Mendillo told the Globe. “The company and the portfolio are firing on all cylinders.” Mendillo added that she has no immediate plans to take another job.

    Pinterest has made a couple of big hires, reports VentureBeat. Michael Lopp, a former director at Palantir, as well as former senior engineering manager at Apple, has joined the company as its head of engineering. Meanwhile, Bob Baxley, the former director of design for Apple’s online store, is Pinterest’s new head of product design and research.

    Viryanet, a 26-year-old, Southborough, Ma.-based company that makes mobile workforce management software, has been acquired by Verisae, a 14-year-old, Minneapolis-based maker of cloud-based maintenance, energy, and sustainability management software. Verisae is paying roughly $18.8 million in cash for the company, which has been trading publicly, with a roughly $8.5 million market cap.

    —–

    Job Listings

    NewSchools Venture Fund, a 16-year-old, Oakland, Ca.-based venture philanthropy firm, is looking to hire an associate partner.

    —–

    Data

    Tech immigrants: An excellent map of Silicon Valley’s imported talent.

    —–

    Essential Reads

    Uh oh, startups. Amazon is planning to launch a marketplace for local services later this year, and Reuters sources say that means access to everything from babysitters to handymen.

    The bitcoin app that could create a black market for leaked data.

    The young princes of L.A.’s tech scene.

    Two studies by researchers at Virginia Tech have found that even cars that aren’t fully autonomous but that automate some of the most dangerous aspects of driving could have as big an effect as seatbelts.

    —–

    Detours

    A tomato a day keeps the doctor away.

    The political memoir title generator.

    A letter written by John Steinbeck in 1958 to his love-struck son.

    —–

    Retail Therapy

    Paint-speckled furniture.

    Augmented reality glasses that will not make you look absurd. Comparatively.

    —–

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    Connie

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