• Is the RealReal the Real Deal?

    realreal-730x442At a low-slung, 45,000-square-foot warehouse in an industrial corner of San Francisco, I’m hovering over a purse. It’s in the hands of Graham Wetzbarger, the director of authentication at The RealReal, a 2.5-year-old luxury consignment company that also operates a 10,000-square-foot warehouse in L.A. and a 20,000-square-foot warehouse in Manhattan.

    Holding up the bag for closer inspection, Wetzbarger shakes his head. “The Louis Vuitton Neverfull is like the unofficial bag of Asia; it’s so popular that everyone has one or more than one.” This, adds Wetzbarger, is no Neverfull, pointing to the quality of purse’s lining, its exposed zipper tape, and a spot of loose stitching. “It’s also more slouchy than it should be [given its age]. Then, when we look at the date code, the formatting is all wrong, too.” He shows me a leather tag featuring a number series. “This combination would mean it was made in the 84th week of 1962.” [Eye roll.] Louis Vuitton “wasn’t even doing date codes until the ‘80s.”

    The devil is truly in the details for The RealReal, a fast-growing online marketplace that’s taking business from both eBay and Sotheby’s by making it simple for dowagers and other well-heeled consumers to sell their lightly used designer goods. The company is now processing roughly 40,000 pieces of clothing, shoes, handbags, fine jewelry and fine art a month, and this year, it projects that it will do more than $100 million in revenue. In fact, the business is growing so quickly that the biggest challenge for Julie Wainwright, RealReal’s founder and CEO, is managing all the moving parts of her business.

    It’s easy to see why 2.5 million people have registered to use the site. The RealReal takes authenticity so seriously that it employs authenticators like Wetzbarger, along with a staff gemologist, and a horologist. In addition, the company trains its customer-facing teams on how to spot and handle “fakes.”

    The RealReal also makes it easy for its growing base of consigners to turn underused items in their home into cash. To sell an item, a consumer simply sends an item to the company based on the list of 750 brands like Chanel and Prada that RealReal accepts. RealReal also has 30 salespeople around the country who visit clients’ homes, which “allows us to get product we’d never get, from people who’d never even think of consigning,” says Wainwright. In return for doing practically nothing, consigners receive up to 70 percent of each sale.

    Once they do, they’re hooked, Wainwright says. “When people get their first check, they’re delighted. They had no idea they had that much money sitting around their house.”

    In fact, says Wainwright, she’s begun to notice a change in consumer behavior that bodes well for RealReal. “Once people start consigning, they change the way they buy retail. Once they understand the value of the resell items, they [rationalize more new purchases], knowing they can pay a high price . . . and make a lot of that money back by reselling [those goods].”

    Still, the company has its challenges, the biggest of which, right now, is managing its growth. “It’s hard,” says Wainwright candidly. She points to the company’s two-story warehouse in Manhattan, which has been a headache for the company since almost the start. Because it’s union-controlled, no one can operate the elevator on Saturdays or Sundays. Time Warner Cable, which goes down regularly in the city, only recently approved a two-year-old order for fiber.

    Fortunately, the company will soon vacate the city and move into a 125,000-square-foot warehouse in New Jersey, but the move has taken much longer than Wainwright anticipated. “Our warehouses are crazy full, because it never occurred to me that it would take seven months to negotiate a lease in New Jersey and another three months to get it refurbished.”

    Dealing with used inventory can be trying, too. The company’s buyers – 60 percent of whom buy 7 items a year — often become sellers. Its consigners are repeat customers, typically offloading items on RealReal three times a year. But adding inventory – which the company must do each month to keep growing – can be tricky, especially in summer months when many of its consigners are away on vacation.

    That’s saying nothing of RealReal’s stiff competition. In addition to other new consignment marketplaces, eBay – which sells between $2 billion and $4 billion in luxury goods each year – looks unprepared to cede much territory. For example, eBay Valet, a service introduced last December, invites users to take a picture of an item. The company then evaluates the item, estimates its value, then sends the user a prepaid box to ship it to eBay.

    There isn’t a lot of room for error. As other e-commerce companies like OneKingsLane and Fab have shown, growth can slow suddenly. And while RealReal is growing quickly, it isn’t yet profitable. Despite having raised $43 million from investors, it’s hard to see how RealReal won’t require more money to turn the corner.

    Wainwright has navigated tough waters before. Back in 2000, she was brought in to manage Pets.com, a fast-growing pet supply startup that became a poster child for dot com failures when the market went south. Though dealt a difficult hand, she still managed to return investors’ capital.

    With her eyes set on profitability in 2015, Wainwright is determined to manage growth before it overwhelms her company. It’s a quality problem. With consigners flooding her warehouses with high-priced goods, she has a closet anyone would envy.

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    Connie

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  • 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.

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    Connie

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  • 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

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  • 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

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  • 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.”

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    Connie

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  • About.Me Lands $11 Million in Fresh Funding

    About.me screenshotAbout.me thinks you want more control over how you’re perceived online, and a growing number of investors is betting it’s right. Indeed, the company — which invites users to create a digital landing page that can link to their Twitter, Facebook, Linkedin and Instagram accounts — has just landed a fresh $11 million in funding led by Foundry Group, along with True Ventures, SoftTech VC, CrunchFund and Bullpen Capital.

    It’s a strong vote of a confidence in a company that sold to AOL in late 2010 and whose cofounders, Tony Conrad and Ryan Freitas, helped buy it back last February for a fraction of what AOL paid. At the time, they said they believed About.me could scale more quickly as an independent operation, and they made transforming the platform into something sticky — versus a place for users to “set it and forget it” — their top priority.

    “We’d created tools for people to create [these online identity pages] but there weren’t engagement loops in the product,” says Conrad. “It wasn’t that that it wasn’t creating value for you, but it wasn’t creating value for us,” he adds, laughing.

    Today, numerous new features that allow users to see who has viewed their profile, compliment other users’ pages, and discover other people on the platform with similar interests, are gaining traction with the company’s registered user base of 4.5 million users. (The company doesn’t break out monthly active users but Conrad calls them “incredibly healthy and growing.”)

    Going forward, says Conrad, the company plans to do even more for some of its fastest-growing demographic groups, including college students.

    “Kids don’t have that much experience, and a lot of them don’t look that great in a traditional CV or resume product,” says Conrad. “About.me ends up replicating what happens in the real world and helps them leverage their personality and their strengths, so that’s one group where we want to create some additional functionality.” Think of the ability to include a resume below the fold as you scroll down, “or a list of ‘here are six things I’ve done,’ ‘here’s my superpower,’ and ‘here’s who inspires me,’” he says.

    As for revenue, that can wait, evidently. “Some of [the company’s new funding] will be used to test out different [paths] to revenue,” says Conrad. “Like Twitter tested out Promoted Tweets and Promoted Accounts, we’ll be busy putting stuff out there and testing it. But the focus of [the new round] isn’t on becoming cash flow positive,” he adds.

    About.me previously raised $5.7 million.

    Connie

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  • Louis Beryl’s Big Ambitions at Earnest

    louisberyl_1342762481_41Earnest is a startup that provides small loans to people based on their earning potential. But its marketing may be more savvy than earnest.

    For now, the company is selling itself as an alternative for people who have trouble nabbing an affordable loan. The big difference between Earnest and traditional lenders is that Earnest looks beyond credit history to where a person attended school, what she studied, and her current job and income. The proposition isn’t so unlike that of another venture-backed startup, Upstart, which also recently jumped into the small loans business, though Earnest asks applicants for much more information, including access to their checking, savings, investment, and retirement account balances. (Both companies employ language about giving “financially responsible” clients the rates they “deserve.”)

    It’s an intriguing proposition. It’s also mostly a teaser, unsurprisingly. Earnest says it can afford to charge lower interest rates than most because its technology has lowered its own costs. But the loans that Earnest offers customers — 5.5 percent interest on a one-year loan and 6.5 percent for a two-year loan of up to $20,000 – aren’t just hard to beat; they’re too low margin for Earnest to produce a meaningful return for the investors who’ve given the year-old company $15 million (money, by the way, that Earnest is partly using to extend to new customers). To learn more about what’s going on — and what’s next — I talked yesterday with Earnest founder Louis Beryl, a Princeton and HBS graduate who has worked on Wall Street and at Andreessen Horowitz. Our chat, edited for length, follows.

    You spent a year-and-a-half at Andreessen Horowitz before founding Earnest. What were you doing exactly, and how did it lead to this company?

    When I was coming out of [HBS], I was hired as an internal data scientist to look across [Andreessen Horowitz’s] portfolio at how we were making investments [such as] looking at how a team’s make-up changes as it grows. [Andreessen Horowitz] wants to help that great founder build a great company, and being able to anticipate in advance who [startups] need to bring on and in what capacity [is a big part of its value add].

    I also did more traditional VC stuff, including looking at financial technology companies. As it relates to Earnest, I started thinking: If you were going to build a financial services company from scratch, using data to understand people, how would you do that?

    Earnest says it can lend to someone at a very low rate because that person is so low risk. It doesn’t take origination fees, either. So are you counting on zero defaults, or are your products basically loss leaders, or both?

    We’re making loans to very credit worthy, very responsible [customers] so yes [to your question about defaults]. We also plan to expand with [clients] over time. If you’re someone who takes a $15,000 to $20,000 loan out of graduate school, we hope to provide other products for you as your situation changes. We’re laser focused on the products we’ve just launched, but we’re going to listen and if [our customers] want credit cards, we’ll move into that. If they want home or car or student loans or a deferral product because they have low cash flow today . . . we’ll move into that.

    Are you interested in the financial advisory business, as with a Wealthfront? You’re asking for an awful lot of financial information from your potential customers.

    We’re not interested in Wealthfront’s business, though we think we’d be complementary to them and maybe [attract] the same types of people.

    Hundreds of people come to our site and enter their information on a regular basis. You could choose not to give over much information, but a lender who doesn’t understand you well has to [charge you more interest]. We say that if you deserve better, we’ll price you at a lower rate than anything in the market.

    This is a low-margin business, that’s a fact. . . But we’re not here trying to make the highest margin on every client . . . We’re similar to Amazon in that we’re always thinking how we can deliver the lowest-cost product that delivers happiness to consumers every day. This is a very mission-driven organization. We believe we’re building the modern bank of the next generation.

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    Connie

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  • VC Ed Sim on Seed-Stage, East Coast, Enterprise Investing

    Ed SimBack in December 2012, Fred Wilson of Union Square Ventures told entrepreneurs who crowded into the New York law offices of Cooley that they more should focus on enterprise technologies – and not simple analytics masquerading as such.

    A lot has changed since then, says Ed Sim, cofounder of the seed-stage fund Boldstart Ventures in New York, who suggests that when it comes to even pure enterprise tech – beyond enterprise applications – New York is catching up to the Bay Area. We talked last week about what he’s seeing and how his firm is funding what it’s finding. Our conversation has been edited for length.

    You raised a $1.5 million proof-of-concept fund in 2011, then another $17 million last year. So things must have gone well with that first fund.

    We sold companies to Salesforce (GoInstant), LinkedIn (Rapportive), Google (Divide), Akamai (Blaze.io), and Telenav (ThinkNear), so that beta test is proving fruitful.

    What size checks are you writing today?

    Between $250,000 and $350,000, with half [the fund] reserved for follow-on rounds. Our upper bound is $1.5 million. We shoot for an ownership stake of anywhere from 3 to 8 percent, depending on how early we get in.

    How do you differentiate Boldstart from other firms?

    It’s a leveraged model. We put together an advisory board of 12 folks — people we’ve funded over the years, many of whom have had successful exits – and they’re very helpful from a deal flow and diligence perspective.

    Also, [firm cofounder] Eliot [Durbin] and I kind of figure out one or two things the entrepreneur needs to get a Series A done, whether it’s to refine the products, or introduce the founder to a few customers. Then we’ll co-invest with a few other micro VCs to share the load in what we do. It’s been working thus far. Our portfolio companies have gone on to raise more than $250 million in follow-on financing.

    Which firms do you tend to work with?

    We’re probably one of few teams in New York with a big focus on enterprise at the micro VC level. Other investors elsewhere, including in Boston, do more. So for example, we’ve co-invested with Atlas Venture in two companies.

    Why aren’t more seed-stage investors focused on the enterprise in New York? Are there fewer angels and micro-VCs in New York with enterprise investing experience?

    Enterprise is where the money is and plenty is happening in New York, including a number of Israeli technology [companies relocating here] because of customer traction.

    There’s a lot of talent around, too. One of our portfolio companies, Divide, was started by a team that was building software products at Morgan Stanley. [Divide, whose software helps corporations manage their employees’ personal smartphones, was acquired last month by Google for undisclosed financial terms.] Security Scorecard, which is still operating in stealth mode, was founded by guys who were heading up the security division of Gilt Groupe. A third [portfolio company], Yhat, was founded by people who spun out of the analytics and data warehousing group of OnDeck Capital.

    For us, this whole angel scene is tied to the vagaries of the stock market. When it’s doing well, more are out [writing checks]. Now, people are in wait-and-see mode because no one is sure which way the market is going, so that’s more opportunity for us.

    Connie

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  • That’s It?

    Evan SpiegelAlmost a week ago, some odious years-old emails written by Snapchat CEO Evan Spiegel were leaked to the media, and it’s a wonder how quickly their content seems to be have been swept under the rug.

    It’s understandable, to a point. Spiegel’s emails were written when he was a college student trying to impress his fraternity brothers, not the CEO of Snapchat. Emails are also private communications that, very arguably, should remain private.

    Besides, it isn’t like Spiegel holds public office. He never signed up to be a role model. He certainly shouldn’t be held accountable for a culture in which objectifying women not only remains socially acceptable but, for some, seems to border on a competitive sport.

    Still, Spiegel’s lone public apology, in which he said he was “mortified and embarrassed,” didn’t go far enough. How about some response from others close to the company, the same people who blog and tweet and talk so openly with reporters about how Silicon Valley is changing the world?

    On Friday, Stanford Provost John Etchemendy emailed the university’s student body to say the school is “positively ashamed” that the emails were sent by a Stanford student.

    If Snapchat’s influential investors are also ashamed of the noxious attitudes toward women that were conveyed in those emails, they should also say something. It’s easy enough to condemn their content without hanging Spiegel out to dry. And frankly, not doing anything seems like an implicit endorsement, as if what Spiegel wrote isn’t that bad. (It is.)

    “We can choose to turn a blind eye to such statements and chalk them up to youthful indiscretion,” wrote Etchemendy to Stanford’s undergraduates. “Or we can be more courageous, and affirmatively reject such behavior whenever and wherever we see it, even — no especially — if it comes from a friend, a classmate, or a colleague.”

    Nobody’s going to change Silicon Valley’s attitude towards women overnight, but here’s hoping Etchemendy’s message resonates not only with the men and women of Stanford but with Snapchat’s board, as well. A few choice words could help send the message that objectifying women isn’t okay, no matter how “hot” your company might happen to be.

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    Connie

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  • Wearable that Relies on Your Heartbeat Nears Series A Close

    bionym_nymi_colors_stackedIf things go its way, you may soon be hearing more about Bionym, if not using its product. The spin-off from the University of Toronto has been developing a wristband that distinguishes wearers by their heartbeat. The big idea: there’s no reason to use keys and pass codes and credit cards when we can be identified instead through our unique electrocardiography.

    A lot of pieces have to fall into place for the wristband, called the Nymi, to work out. But because the potential also seems substantial, I asked company president Andrew D’Souza to walk me through what’s happening as the company prepares to dot the i’s and cross the t’s on a Series A round that it’s closing.

    I know the company’s founders studied biometrics and cryptography at the University of Toronto. What’s the core technology here?

    It’s a set of algorithms that helps identify you based on your unique ECG. This was a tech licensing company initially, but we realized the way this functionality should be put out in the world is through a wearable wristband.

    Which still hasn’t been produced yet, is that right?

    We’ll start the production efforts over the summer and expect to ship the first 10,000 [units] next fall.

    How confident are you of that?

    It’s a fair question. [The successful production of the Nymi] was the biggest risk for me in joining the company [last year]. But we bought in James Elson, who led the complete product development cycle for the AirHog, the best-selling radio-controlled helicopter in the world. He has shipped about 8 million units, spent a third of his career in China, and has all kinds of relationships and knows what to ask.

    How is the Nymi designed, loosely?

    It’s basically a polymer wrapped around a hard plastic puck that houses the electronics, like a Fitbit, which also has an enclosed puck. Jawbone’s UP band and Nike’s FueldBand use flex circuits, which introduce more manufacturing risk.

    Something like 2.7 million people have already purchased wearable bands, most of them fitness trackers – and most of them Fitbits. Is there any concern over asking people to put another piece of hardware around their wrist?

    No, we think the wearable market is where mobile was in the ’90s. Most of the devices sold so far have a single use case – like tracking steps, or notifying me when I get texts. Going forward, we’ll see platforms emerge. When Apple announces its iWatch, [it’s likely to be] a health-focused platform. Android Wear, [Google’s software platform for wearables] will [center] on context-aware, location-based services. We think there’s also an opportunity for an [identity-centric] personalized platform, and that there’s a market of people who will prefer it.

    What about all the peripherals you’ll need for Nymi to work?

    We’ve had phenomenal interest from Fortune 100 companies about building applications integrations into some of their products. We have an open SDK, so in the same way that people build apps on iPhones, we’re giving early access to key partners [to create related apps]. Essentially, we want to allow people to bypass whatever credential they use and use Bionym as a proxy for it, from laptops and smart phones to payment companies to home security.

    More than 7,000 developers have signed up for the SDK – from college students to major corporations. That’s what we’re most excited about.

    You’re accepting pre-orders at your site. Will you sell exclusively through the site or will people be able to order the Nymi through major retailers?

    Amazon is essentially ready to start selling and other major retailers have reached out about listing us. But we’ve been hesitant to go to physical or digital retail until we know exactly why people are ordering our devices and who they are.

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    Connie

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