• Sense, a New Sleep Tracker with a Kickstarter Campaign, Has Raised at Least $10.5 Million from Investors

    SenseJames Proud, a former Thiel Fellow who sold his first company, is back with a new company and sleep-tracking product called Sense that’s “part-Nest thermostat, part-Fitbit,” as Forbes describes it.

    In its original story, Forbes makes the company sound bootstrapped, saying Proud “seeded the company with earnings from selling his first startup,” and that the company’s “unmanufactured product” is now “subject to the whims of backers on Kickstarter,” where it launched a campaign this morning.

    If that’s true it’s a little odd, given that Hello, the parent company of Sense, raised at least $10.5 million from 44 investors as part of an $18 million round back in January. So shows an SEC filing we’d stumbled across earlier this year.

    Maybe the company used up that capital to develop the company’s slick prototype. Hello hasn’t yet responded to a request for more information this afternoon. [Update below.]

    Even if it was short the $100,000 it needed to ship its product, it seems like it would have made sense to disclose the funding to Forbes. Instead, I did, asking the Forbes reporter in a tweet if the company was bootstrapped and sending him a link to its Form D. He later thanked me and updated the story, writing that “Forbes uncovered documents that Hello Inc. raised funds prior to launching its Kickstarter campaign. Details on that fundraising round have been included in the above story.”

    Forbes added elsewhere that “Proud did not discuss Hello’s previous fundraising and was only willing to talk about Kickstarter.”

    Forbes wasn’t the only outlet that didn’t report on Hello’s backing. The Verge, Buzzfeed, The Next Web, Ubergizmo and others to write about the device and its Kickstarter campaign, didn’t mention anything about it, either. TechCrunch meanwhile reported that Proud “didn’t disclose external venture funding, but you could assume there’s probably some significant round given that they’ve been working secretly on the product for about a year.”

    For what it’s worth, I think it’s smart for venture-backed startups to test out their products on Kickstarter and other crowdfunding platforms. But if those companies want to turn to the public for support, they should be up front about their financing situations, both with reporters and with the people who might contribute to their campaigns.

    Kickstarter may not insist on knowing about its customers’  balance sheets. (I’m still waiting to hear back from the company about whether publicly traded or venture-backed companies need to provide it — or campaign contributors —  with salient information about their financial picture.)

    I happen to care, though. Maybe it isn’t sporting of me, but if a company is going to go to such great lengths to tell people its creation story, why leave out something so significant?

    UPDATE: Last night, Proud wrote me on Twitter that “always when asked about funding, simply said we’re not talking about it right now, but acknowledged we had raised money.” He then added, “[T]oo many companies launch with a focus that *isn’t* product. I did not want that to be the case for us.” Kickstarter has also responded to my questions this morning, saying that neither venture-backed nor publicly traded companies need to provide disclosures to potential campaign donors.

    Connie

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  • More Startups Seek Out “Step-Up” Candidates, Hike Pay

    step-up candidatesVenture capitalists poured $13 billion dollars into startups in the second quarter of this year, the most money they’ve parted with since the first quarter of 2001.

    That wave of cash — part of a years-long buildup — is having a major impact on jobs. To better understand what’s going on with the high-tech employment market, we talked yesterday with Joe Riggione, cofounder of the executive recruiting firm True Capital. Our conversation has been edited for length.

    What’s the latest and greatest in high-tech hiring?

    We’re starting to see a lot of companies get fatigued in their [ongoing battle] to attract executives and keep them excited. There’s just so much noise. The number of VP of Marketing searches in the Valley right now is absurd, with everyone calling the same people. So people who are working a step below VP level are [becoming very attractive]. They maybe get a little less comp and a little less equity, but their incentive is the title and responsibility.

    And there’s no shortage of good people at the director level from which to choose?

    There are a lot of good senior directors or VPs of Product Marketing who right now report to the CMO, so there’s not a shortage, but it’s definitely competitive among search firms to find the best talent. A top-tier [venture] firm just retained us for about six months to make introductions to top product and marketing and CEO talent. It isn’t about specific opportunities . . . it’s about taking those people out for coffee.

    Is there a danger that companies are promoting people into roles for which they’re not equipped?

    Most of the time, these are people who’ve been with a company as it has scaled, so they might be at a director level but they’ve already run a team. Think of a director of product marketing at [the online storage company] Box or [the cloud telecom company] RingCentral. In many cases, these are people who work at companies that have already gone public or are about to, so it’s a much lower-risk hire than maybe a director who hasn’t led a team.

    What other trends are you tracking right now?

    The equity conversation is changing substantially; it’s moving from talk about percentages to value. Deals are more competitive than ever, and [recruits are better educated], so you can’t get away with a tricky cap table any more. Employees know the difference between 1 percent of a company that’s worth one thing and .75 percent of another company [that could prove to be more valuable].

    Is it harder to hire people into growth companies whose shares are already richly priced?

    Frankly, it’s easier than [recruiting at earlier-stage companies]. VCs are so well-networked that they know everybody already [to recruit into a young company]. When you’re in the growth-equity stage of things, they don’t, so it’s easier to get them excited about a good candidate versus [their] having a bias. They’re more open-minded.

    How has compensation changed over the last year? Have any stats for us?

    Our compensation data for 2013 versus 2014 so far shows that compensation is flat for VP of Engineering jobs. CEO pay has risen 11 percent in the last year; CFO pay has risen 14 percent; and VP of Sales jobs are up 13 percent.

    Why is CFO pay up so markedly?

    There’s a lot of demand for CFOs with public company experience. A lot of startups are getting out [onto the public market] or hope to.

    And CEOs? Same story?

    We recently had a CEO opportunity at a growth-stage company where the execs were trying to recruit a finalist candidate from one of the top four publicly traded software companies. The [hiring company] was willing to give this person a $1 million signing bonus, which isn’t commonplace. But his employer gave him even more to stay.

    Connie

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  • TubeMogul Investor Knows When to Get Out of the Way

    TubeMogul IPOWhen in 2004, college friends of Michael Berolzheimer asked him to invest in their prepared foods company, the former investment banker wrote them a $200,000 check. When that company was acquired for $122 million in 2007, Berolzheimer plowed his roughly $2 million in proceeds into seed-stage investments. By 2011, he’d decided to formalize his process, raising a $7 million fund from friends and family and naming his San Francisco-based firm Bee Ventures.

    Today, Berolzheimer has invested in 32 startups, including the video advertising software company TubeMogul, which goes public today. In fact, Berolzheimer was the company’s first investor. He says he was sold on the team after meeting them in 2007 at UC Berkeley’s Haas School of Business, where he was getting his MBA.

    Whether TubeMogul is another home run for Berolzheimer remains to be seen. While he believes the eight-year-old startup “has a long way to go in terms of its growth cycle,” institutional investors seem to think otherwise. At least, yesterday morning, TubeMogul revealed that it was dropping its price range from $11 to $13 per share to between $7 and $8 per share. And Scott Sweet, the founder of IPO Boutique, says that “even with that haircut, I’m not sure we have an ‘up’ deal.”

    Sweet doesn’t think the company should be going public right now at all, given that the public market performance of ad tech companies has been poor of late. “If this IPO breaks,” Sweet says, “it’ll further tarnish a niche that needs good news. It would be a lose-lose.”

    Berolzheimer acknowledges that today — and the coming months — may prove an uphill battle for TubeMogul. “There’s a chance that it gets misunderstood by investors,” he says.

    He’s also quick to note that Bee Partners holds stakes in numerous other promising startups. Tradesy, a consignment site, is among them. Bee Partners wrote the company its first check in 2012; in May, it raised a $13 million Series A round led by Kleiner Perkins Caufield & Byers.

    Bee Partners was also the first investor in the aerial robotics platform Skycatch, which raised a $13.2 million Series A round in May that was led by Avalon Ventures and included Google Ventures, ff Ventures, and renowned investor Ram Shriram.

    Indiegogo, the global crowdfunding platform, is another of its investments. Bee participated in both the company’s seed and Series A fundings.

    I ask Berolzheimer to characterize his firm’s style. “We find opportunities to support the company in any way we can, and if we can’t, we get the heck out of the way.”

    He adds, “We’ve had some small wins and a few losses but we’re generally happy with how the portfolio is maturing.” It’s a “starter fund,” he says. “Just like founders, you have to start somewhere.”

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    Connie

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  • BetterDoctor Raises $10 Million, Led by NEA

    Ari TullaZocDoc, a seven-year-old online service that helps users find and book appointments with doctors who accept their insurance, is raising a new, $152 million round of funding that values the company at $1.6 billion.

    That kind of momentum might dissuade some competitors, but not Ari Tulla, the founder of BetterDoctor, whose Web and mobile apps also help users locate the most appropriate doctors for them. Before founding BetterDoctor three years ago, Tulla spent five years at the phone giant Nokia, including as the head of its app studio; he has seen first-hand what determined competitors can do — especially when there’s an enormous market up for grabs. (According to Tulla, 70 million people in the U.S. alone seek out new physicians each year.)

    We talked yesterday with Tulla about his 25-person company, which just raised $10 million in Series A funding led by New Enterprise Associates. Our chat has been edited for length.

    You had a nice job at Nokia. Why leave to start what seems like a very different business?

    It was a personal vendetta for me. About 10 years ago, my wife became ill and it took us many months to find the right help for her. [Afterward], I [began investigating] different systems and learning how they work – Aetna’s, Kaiser’s, even some hospitals like Stanford. You could always find doctors through these services, but you weren’t given any information beyond doctors’ names and where they worked; you couldn’t see who they are, what they focus on specifically [etc.]. Finding the right doctor is complicated, because your perception of quality might be very different than mine.

    ZocDoc, among others, also promises to help consumers find the right doctors. What does BetterDoctor differently?

    The big difference between BetterDoctor and ZocDoc is that we will feature millions of doctors, pulling in information from [reviews site] Yelp, Doximity [an online social networking service for U.S. physicians], and government data made available through the Open Data Act to [learn] where doctors are, which doctors are referring each other, all the procedures the doctors have done and performed and the prices they’ve charged. We’re not just going to feature those doctors whose are paying ZocDoc [to be listed in its service].

    Do doctors have any control over what you feature about them?

    They can claim their profile for free and edit their information. We’re also selling the doctor on the ability to upgrade their practice profile, where we create a mini website for them, because most practices still don’t have a good site or any online presence. They exist inside of BetterDoctor – they don’t get their own URL – but we take photos of the practice, write content for the doctor and basically create a picture that allows doctors to look more human to patients. We also [let validated doctors pay for] premium visibility.

    How many doctors are in the database currently, and how many doctors have paid for these mini sites?

    We have a clean database of million doctors at this point and we’ve built 15,000 [sites].

    You used to make mobile apps and games for Nokia. How are you using that background at BetterDoctor?

    We try to make it easy and fun for both doctors and patients to use the [platform] by making it very simple. Especially for patients, when you’re looking for a doctor, you’re often at your weakest. So the [user interface] works seamlessly and looks looks very minimalistic. We want to be sure that when you’re sitting there with a 100-degree fever, you can’t get lost.

    —–

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    Connie

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  • Mitch Kapor on Dropcam and Data Collection

    MitchKaporLotus Software founder Mitch Kapor is well-known for his philanthropy, including through the Kapor Center for Social Impact, which funds startups as one prong of a strategy to strengthen underrepresented communities.

    But Kapor has also made many bets on companies based purely on their technology and teams. Among them is the home surveillance startup Dropcam, acquired last month by Google’s Nest Labs for $555 million. In fact, Kapor was its first investor.

    Late last week, we talked about how that deal came together, and how Kapor feels about the outcome.

    How did you find Dropcam five or so years ago?

    I came across it through a third founder who left very early, Anson Tsai, who went on to found Cardpool, a market for buying and selling gift cards. Cardpool was acquired by [the payments network] Blackhawk early and very successfully. I’d met Anson socially through [entrepreneur and popular blogger] Andrew Chen.

    I don’t think people realize there was a third founder.

    Yes, with Greg [Duffy] and Aamir [Virani], who’d worked together at [the email startup] Xobni, which was just shut down by Yahoo, ironically [roughly a year after it was acquired for undisclosed amount]. I think the chemistry wasn’t right, so Anson left to start his own company, but I liked Greg and Aamir and what they were doing and thought they were riding some good themes so invested.

    Were you privy to any of Dropcam’s conversations with Google? I always wonder which investors know what and when.

    Our relationship as seed investors is heavily concentrated from the time we first make an investment up through a Series A. In Dropcam’s case, the Series A came pretty early, because, to his credit, Sameer [Gandhi] of Accel saw something in the company [and led the company’s Series A round in 2011]. Once Dropcam had a board, our relationship changed. I was involved, but more on demand, when Greg or Aamir wanted coaching or advice or introductions. In fact, I found out about the sale by reading about it in my Twitter stream and getting congratulated, and that’s typical if you don’t have a board seat. Seed investors often find out about big events as they’re happening or sometimes just before.

    What kind of return did you see on your investment? More than 100x?

    Definitely more than 100x. It was a big return.

    As a big believer in the company, do you think selling to Google was the best outcome for Dropcam?

    The right outcome has to do with the founders who are in place and deciding the right thing to do. Sometimes, they think it’s the right time to sell because being part of something bigger helps in achieving strategic objectives and getting [a financial] outcome. There are tradeoffs, too, if you stay on your own. You enjoy your independence and you can maybe build something larger, but it comes with a lot of headaches.

    I’m surprised people aren’t more concerned by certain companies’ moves to dominate the connected home, given their growing reach into other aspects of our lives. Do you have any thoughts about why that is?

    I think ultimately there will be some kind of new social contract backed up by laws that will put some restrictions on what companies that collect a lot of data on people can do with that information, and that would include Google, Apple, and Facebook. I believe it will be a long and messy road to get there, but if we look at what’s going on today, we see the outlines of how it will happen. For a number of years, for example, Silicon Valley companies resisted releasing their employment data. Google gets credit for its willingness to put it out there, though. It was difficult, because its diversity numbers are terrible. But the time had come for the company to take a step forward and it has.

    When do you think we’ll see these protective regulations?

    Probably 5 or 10 years from now, and I think it will come from unhappiness among consumers and other forces that convince Google that its long-term interests are better served by agreeing to do something that previously it found difficult or impossible to do.

    People will have to get more upset about the whole subject of large amounts of personal information being collected. But change happens. Consider gender issues. There’s been one embarrassing scandal after another, with Tinder, Github, and others. I don’t think there’s more of that going on now than before, but people are more aware that it’s going on now, it’s covered more, and there’s more of a climate that this isn’t right. It’s an issue that’s no longer ignored.

    We’re not there yet on data collection, but I think we’ll get there. It will happen.

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    Connie

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  • Missed Connections: Larry Page on Income Inequality

    Brin, Page, KhoslaOver the weekend, Khosla Ventures released a video of its founder, Vinod Khosla, interviewing Google’s founders, Larry Page and Sergey Brin, who rarely participate in joint speaking engagements.

    Page and Brin come across as charming in different but complementary ways. Page plays the straight man, responding earnestly to Khosla’s questions about Google’s priorities. “I guess we feel that, right now . . . the actual amount of knowledge you get out of your computer versus the amount of time you spend is still pretty bad. And I think our job is to solve that,” he says.

    Meanwhile, Brin is like the smart-alecky brother who cracks wise at Page’s expense. When Khosla asks the founders about machine learning, Brin drapes an arm around Page, saying, “Well, look, this is our latest model right here. See? Not perfect yet but doing pretty well.” The crowd bursts into laughter as Page buries his face in his hands. (We also laughed, watching it online.)

    For all the founders’ endearing chemistry, the interview is far from a public relations coup for Google,  whose gleaming private buses sparked San Francisco’s so-called “culture wars” last winter. In fact, the video might serve as further evidence that Google’s CEO and co-founder doesn’t think very much of the growing wealth disparity between tech workers and everyone else.

    Consider Page’s response when Khosla somewhat timidly asks him about “short-term issues like you see in San Francisco,” such as “people not appreciating that people who are part of the ideas economy … are doing much better than people who aren’t.” Page might have used the question to assert Google’s interest in being a good corporate citizen. Instead, he effectively dismisses the idea that Google has any responsibility for San Francisco’s growing divide between rich and poor.

    “This kind of thing is really a governance problem,” says Page, “because we’re building lots of jobs, lots of office buildings, and no housing. So it’s not surprising that [has] caused a lot of issues. You also have a lot of people who are rent controlled, so they don’t participate in the economic increase in housing prices. It actually hurts them. It doesn’t help them. So I think those problems are more structural and very serious problems. We’re not really on a path to fix those problems in this area.”

    Page sounds more tone deaf when Khosla asks him about the consequences of machines replacing human jobs. “If you really think about the things that you need to make yourself happy – housing, security, opportunities for your kids – anthropologists have been identifying these things — it’s not that hard for us to provide those things,” he tells Khosla. “The amount of resources we need to do that, the amount of work that actually needs to go into that is pretty small. I’m guessing less than 1 percent at the moment.”

    Because everyone needs to “feel like you’re needed and wanted and have something productive to do,” one solution might be to “just reduce work time.” Page adds, “Most people like working, but they’d also like to have more time with their family or to pursue their own interests. So that would be one way to deal with the problem, if you had a coordinated way to just reduce the workweek.”

    Simple, right? Not exactly. Page sidesteps the economic consequences of reducing employee hours in an economy in which most people still live paycheck to paycheck. Does he expect companies to pay their employees the same amount of money for less hours? Should the government foot the difference? He doesn’t say.

    Judging from the interview, Page wasn’t prepared to talk at length about social issues. After all, this wasn’t a sit-down with the Washington Post. He and Brin were being interviewed by Khosla, a fellow billionaire, at an intimate CEO summit.

    But it’s probably time to ditch the platitudes of “Abundance,” a book by serial entrepreneur Peter Diamandis that describes a world in which everyone’s quality of life will continue to rise thanks to the exponential growth of technology. (“I totally believe we should be living in a time of abundance,” Page tells Khosla.)

    At the very least, Page might pretend for a moment that he’s not worth $30 billion and think how his words might sound to those who are working to make ends meet and, in many cases, failing. It’s worth remembering that more than 46 million Americans are now living in poverty.

    We know Brin was just joking when he said his friend Page was a robot. Now it’s time to prove it.

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    Connie

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  • The Promise, and Challenges, of Synthetic Biology

    synthetic-biologySynthetic biology, a discipline that combines chemistry, engineering, and molecular biology to manipulate particular molecules for specific ends, is a little too complex for most Bay Area cocktail parties, where talk of Snapchat usually predominates. “It’s a quagmire of discussion,” says Hemai Parthasarathy, a neuroscientist who is today the scientific director at Peter Thiel’s Breakout Labs in San Francisco.

    It could also be one of the most lucrative fields in science. By using gene-sequence information and synthetic DNA, a growing number of established companies and startups are attempting to reconfigure the metabolic pathways of cells to perform new functions that could benefit everything from the agricultural to cosmetic industries.

    One such company is Pareto Biotechnologies, which has already raised seed funding from Breakout Labs and other, undisclosed investors. Soon, Pareto will be seeking Series A funding, too.

    The company, though young, is farther along than most. Ten year’s worth of lab work has already gone into its platform by founders who include a chemical biology and proteomics professor at the Salk Institute in San Diego, and a serial entrepreneur who has previously founded three other molecular biology companies.

    “I don’t want to call other companies we’ve seen naïve,” says Parthasarathy. “But there isn’t necessarily depth to their underlying technology. A lot [of teams] will submit proposals to us that are theoretically sound, but execution is where synthetic biology lives and dies, and it always ends up being harder than you think.”

    Pareto is also going after not just one molecule or organism but a system for designing whole classes of molecules, and the company has already developed enzymatic pathways that can, it hopes, lead more quickly to end products.

    Right now, for example, the company is working with a cosmetics company that “has a molecule that’s worth hundreds of millions of dollars to them,” says Pareto’s CEO and cofounder Jamie Bacher. “The chemical falls perfectly in the class that we can work with,” and it wants Pareto to modify it in a way that improves its interaction with skin.

    Pareto has designed a simple, two-week experiment to see if it can produce the desired outcome. If it succeeds, scaling comes next. Pareto wants to be able to generate enough molecules – maybe a few milligrams’ worth — to prove to the cosmetics company that it’s a viable commercial process. Cosmetics happens to be a $200 billion a year industry, but it’s just one of the sectors Pareto is targeting. “We can cross up and down industries,” says Bacher.

    Pareto isn’t without its challenges. While it may have a jump on some of the competition thanks to its knowledge around certain metabolic pathways, it’s still in the process of proving out its technology.

    The broader industry, while potentially quite lucrative, is also often dogged by concerns over the cultural implications of altering nature. Consumers might not care what was involved in the making of their anti-aging creams, but flavors and fragrances that are being genetically modified by micro-organisms in vats — rather than extracted from plants — are getting pushback from critics who say the technologies threaten farmers in third world countries.

    There’s also debate over what’s “natural.” Explains Parthasarathy, “You can chemically synthesize some of these molecules of interest using organic chemistry processes, and people call that artificial flavoring. Or you can grow it in a forest and purify it and then it’s ‘natural’ flavor. People claim synthetic biology products are natural because they’re being grown in an organism, and there’s some question whether that’s a valid designation.”

    Ultimately, it comes down to consumer buy-in, notes Parthasarathy. For her part, she thinks it’s all much ado about nothing. “I think it’s irrelevant how a particular chemical is produced, whether it’s natural or artificial. If it’s a purified chemical, it’s irrelevant to one’s health how it came to be purified.”

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  • Relationship Science Trains Its Sights on the Venture Industry

    relsciIn February of last year, a New York-based company called Relationship Science (RelSci) pulled back the curtains from an online platform it has been developing since 2010, one that now features 3.5 million profiles of the world’s “decision-makers,” all of them mapped out to illustrate how they’re connected to one another and everyone else.

    Characterized as a “Rolodex for the 1 percent” by Dealbook, it’s not a directory that one is asked to join. Power players can’t remove themselves, either. Everything that Relationship Science uses is public data – some scraped from the Web, some from third-party data providers, and some turned up by some of its 500 employees in Indian and New York, who pore over SEC documents, campaign finance databases, annual reports and the like to create a graphical view of each individual and his or her “strong” to “weak” links to others.

    The big idea is to help businesses and nonprofits recruit, strike deals, raise money and sell stuff by arming them with more information about how to get to particular people. And nearly 450 clients – many on Wall Street – have bought into the vision, paying Relationship Science between $9,000 and “upward of six figures” a year for its competitive intelligence. Now, the company is looking to pull others into the fold, from political campaigns to sports franchises to more VCs, the company’s chief marketing officer, Josh Mait, told me yesterday.

    Relationship Science has already raised $90 million from investors, including billionaires Henry Kravis, Ken Langone, and Ron Perelman. Are you in the market again or will you be in the foreseeable future?

    I don’t have a crystal ball. I think we’ve raised a decent amount of money and that it’s given us the ability to build a sophisticated asset that can now be extended in a number of ways.

    The company doesn’t provide users with phone numbers or email addresses or a way to message anyone else on the platform, putting the onus on users to find creative ways to contact the people they research. Will that ever change?

    We don’t have contact information because we’d have a big fat spam machine otherwise. We made a purposeful decision to provide instead deep dossiers on people and companies and to let our clients – who are pretty sophisticated businesspeople – figure out how to act on it.

    What are some of the platform’s most-used features?

    One, called Pathfinder, allows you to run paths between any entity to any entity. Say I’m a partner at a VC firm, looking at a company and trying to reach potential investors. I might make a list of all my board members, which would provide me with more axis points to find relationships. Our search capabilities also help clients to do smart prospecting. If you want to hire someone with a particular criteria, it might turn up 15,000 individuals, but we can help you find people in that grouping who are just one degree [of separation] away from you. And we have news and alerts on the people most important to you, which isn’t always a news item in a publication but can be when someone sells a stock or makes a donation to a cause.

    Are you capturing people’s outside interests? I’d think that would be useful.

    We’re able to capture some interests and affiliations. I wouldn’t want to exaggerate it , though. It’s hard data to capture other than sporadically. We do allow clients to put in their own information, and when they come across someone’s profile, we’ll surface any commonalities they have with that person.

    VCs already have other options. Many might also argue that it’s not rocket science, figuring out who is connected to whom in the startup industry. It’s not nearly so big or opaque as Wall Street.

    I think you’re right about that perception. But I’d argue that any firm that’s looking for a competitive advantage should have a good handle on what their strongest relationships are — especially during critical moments when you want any edge you can get.

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  • Julie Wainwright on Lessons in E-Commerce

    juliewainwrightJulie Wainwright is an e-commerce pioneer. In the late ‘90s, she was the chief executive of Berkeley Systems, a maker of popular games and computer screen savers; Reel.com, which was one of the first companies to sell videos online; and the short-lived retailer Pets.com (best remembered for its legendary sock puppet marketing campaign).

    She’s still at it, leading the RealReal, a fast-growing online consignment business she began building in 2011 and that StrictlyVC visited last week for a profile. As part of that sit-down, we asked Wainwright to share some of what she has learned through her online selling adventures. Our chat has been edited for length.

    The RealReal has raised $43 million from investors. Do you think your personal brand made a difference early on?

    I don’t know about that. To the people who already knew me, absolutely. But coming into new VCs, I’m not like them in any way. I’m a woman, and I’m an older woman. One even said [whispering], “A lot has changed.” And I was like, “Really? Basic business has changed? I don’t think so. Tactics change, but not business fundamentals.”

    Very broadly, what are the advantages and disadvantages of being a veteran of this industry?

    Youth has so many advantages, because you don’t know what you don’t know, and you take risks and put yourself in situations that, if you had a broader perspective or more learning, you wouldn’t. And great breakthroughs can come through when you don’t have fear. But every business goes through a trial period, and that’s where you need a playbook and that’s where I’d say you really enjoy the beauty of experience. I have a playbook, and I’ve hired people with deep playbooks, so early on, we were already a business with great potential.

    Pets.com raised your profile for better or worse. What are some things you learned from that experience?

    The key lesson I learned there is that strategic investors’ interests and your company’s interests are not always aligned.

    I already knew that anything relating to commodities, Amazon was going to do better and cheaper, even back in 1997. I’d been watching them. I’d been to their warehouse. I’d seen their infrastructure. They were so far ahead. So when I was brought in to lead Pets.com, I said the only way I’ll do it is if Amazon is a strategic investor in the business. And Amazon put in $60 million. And I thought that because they put in so much money that we had a safe harbor and that they’d just end up buying this company; I thought we’d create this category, which was huge, and then just merge with them. Drugstore.com thought the same thing.

    And they copied both of you instead.

    Maybe they just ran the numbers and decided it was cheaper than buying. They did the same thing with [the daily deals business] LivingSocial. Now Amazon is doing their own daily deals.

    The market turned on you at Pets.com. What happens if that happens again now?

    We have a very capital-efficient business here. I don’t have the same issues that any other e-commerce-built business that I know of does. Because our goods come from our seller and buyer base, and we have a huge repeat rate, we’d be okay even if we couldn’t get more financing. We’d just have slower growth.

    What do you think other e-commerce companies, including Fab and One Kings Lane, are doing wrong?

    First, I think both are doing a lot right. As a consumer, I love One Kings Lane. I’d say, looking at things from a very superficial level, that Fab overextended its growth by moving too quickly. It also has a lower average price point, and to make money at a lower price point, you have to be phenomenally efficient. For example, the average selling price point of Zulilly [the daily deals site for mothers and children] is $50, and Zulilly is making money. I bet Fab’s [average selling price point] is close and it’s not. The difference is Fab was really interested in expanding internationally and bought all these companies and had to merge them all and it didn’t have its own manufacturing facilities, then switched to its own pick, pack, and ship [model] . . . It’s just done so much in three years, whereas Zulilly has always focused on its products and how to get cost-efficient.

    You think it’s too late for Fab?

    My guess is that Fab can do it. It has to get really focused, though.

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  • Currency Expert: Bitcoin “Not a Clear Winner”

    BitcoinJesse Powell was once a hard-core gamer who spent his teen years playing the trading card game “Magic: The Gathering” in tournaments around the country. The 33-year-old has become something of a currency specialist since. Back in March 2011, while the rest of the tech world was obsessing over Facebook’s valuation, Powell was shutting down his gaming forum and e-commerce business to focus on Bitcoin, eventually founding the venture-backed cryptocurrency exchange Kraken.

    Kraken trades a variety of “coins,” including Litecoin, Dogecoin, Namecoin, Ven and Ripple. But the company, which makes its money off exchange fees, receives the bulk of its revenue by trading 1,000 to 2,000 Bitcoin per day (valued at between $600,000 and $1.2 million, based on its current price of $601).

    That ratio could change, Powell told me yesterday in an interview that’s been edited for length.

    When you were building Kraken, did you anticipate that Bitcoin would become so much more dominant than other virtual currencies?

    I didn’t know if Bitcoin would be the currency to end all currencies. I thought it might be version 1.0 and that somebody might come out with something much better. It was hard to know if it’d be the Facebook of currencies or the MySpace, so we wanted to be currency agnostic and be able to capture the market, whichever way it developed.

    Do you have your answer now?

    I’m not nearly as bullish on Bitcoin as I was a year ago. There are a lot of good-looking new currencies coming out. Bitcoin has a huge network effect right now and a brand name, but technically it has some problems. The mining lately has been a big problem; consolidation is a big risk for the whole system.

    You’re talking that mining pool that has, numerous times, provided more than half the computational power needed to mine new coins. Can you explain what a mining pool is to readers and why that’s such bad news?

    With mining, you’re basically crunching numbers, solving puzzles with your computing power and coding; it’s the way you prove that you’re securing the network, that you’re auditing the transaction. It’s kind of like, because so much auditing [goes into each transaction] it would be impossible for someone to scam the system. But if someone controls more than 50 percent of all Bitcoin mining taking place, that person or group could have a majority vote and basically dictate what happens. So someone could spend Bitcoin, and you could say, “No, my 51 percent vote says you didn’t” in order to sell the same Bitcoin twice.

    Why do people use mining pools in the first place?

    It’s like a lottery pool. People compete to mine the coins, with a winner rewarded with 25 of them every 10 minutes. So people tend to pool their mining efforts to increase their likelihood of getting some portion [of those Bitcoin], and they often want to be part of the biggest pool to increase their odds, even though [what they’d win] would be less valuable [divided up among more people]. But a pool that can tip past 50 percent is a big problem.

    Wouldn’t miners be hurting themselves if they tried scamming the network?

    Financially, it’s not in their best interest, because people would stop using it. But, say, China directed all the fabs in the country to stop producing chips for Apple and start producing Bitcoin mining chips. A country does have the ability to destroy bitcoin.

    And no one could do anything about it?

    There are things that could be done, changes to the way that mining is done that could make China’s miners obsolete overnight. But other coins that are emerging don’t have this vulnerability, like Ripple [which is] why I could see another currency like Ripple or [the next-generation cryptocurrency] Ethereum emerging as the winning currency – or maybe we’ll just have 100 different currencies.

    Do you have a financial stake in Ripple?

    Yes, I am an investor in Ripple Labs, and I have some [of its] currency.

    It may be that Bitcoin lives on as a store of value, like gold, but isn’t used in day-to-day transactions. But I think there’s enough new interesting stuff that’s built off the Bitcoin idea that it’s not a clear winner.

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