• Bigcommerce Primes Itself for a Big Round

    Mitchell HarperBigcommerce, a five-year-old, Austin-based start-up whose software-as-a-service helps more than 55,000 companies create and manage their online stores, is in the market for more funding, co-founder and CEO Mitchell Harper suggested in a wide-ranging conversation with StrictlyVC last week.

    The company — which charges its customers a flat rate of between $24 per month, all the way up to $1,000 per month for “white glove service” — raised $40 million last July from Revolution, the investment firm cofounded by AOL cofounder Steve Case. At the time, Case told me that neither BigCommerce nor its previous investors, including General Catalyst Partners and Floodgate, were looking for such a big injection of fresh capital. The company, which has raised $75 million altogether, is operating in a space that has since heated up considerably, though.

    Most notably, Shopify, an eight-year-old, Ottawa-based startup with which BigCommerce competes most directly, raised $100 million in December led by OMERS Ventures and Insight Venture Partners. The funding is helping Shopify in its ongoing expansion from online commerce into the brick-and-mortar world, where it has launched a point-of-sale version of its software that’s optimized to run on tablets like the iPad. (Shopify has raised $122 million altogether.)

    In our conversation, Harper wasn’t specific about whether BigCommerce’s strategy going forward will involve the same path. But he did say the company might soon begin acquiring its way into new markets.

    “Most decisions have been build versus buy or partner,” he said, “but that could change. Small business use a lot of tools, from email marketing to social media to inventory; there are probably 30 or 40 adjacent products” that the company could explore. While it doesn’t have specific plans to launch into any of them, he added that in “three months that could change, the market is moving so quickly.”

    In the meantime, BigCommerce, whose revenue is currently growing 20 60 percent year over year, appears to be stepping on the gas. For example, the company, which has offices in Austin and Sydney, is opening an office in San Francisco, too, and earlier this month used some guerrilla tactics to staff it, including descending on engineers at tech bus stops that fill with Facebook, Google, and Yahoo employees. (Using both recruiters and its own engineers to hand out invitations to a happy hour, BigCommerce managed to engage with roughly 1,000 people and snag about a dozen, Harper says.)

    Harper noted that no new funding announcement is imminent, but that because capital right now is “cheap,” a new round is “definitely not off the table at the moment. It depends on the valuation, the dilution, the potential upside that an investor can bring . . . and whether they share the same vision that we do.”

    He added that that while the 320-employee company has been “optimizing for growth” and isn’t profitable as a result, it could be “very profitable” if management were focused instead on getting the company into the black.

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    Connie

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  • Inside Mithril, Part Two

    Mithril.logoOn Tuesday, StrictlyVC took readers inside 22-month-old Mithril Capital Management, a well-known but little-understood investment firm cofounded by longtime friends and colleagues Peter Thiel and Ajay Royan.

    As we’d sat down with Royan for more than an hour at Mithril’s San Francisco offices, we had some additional notes from our chat we thought you might find interesting. They’ve been edited for length.

    You worked with Peter at his hedge fund, Clarium Capital Management, as well as at Mithril. What makes your partnership work?

    We’ve worked together so long that he’s a fantastic foil to my thinking. And after all these years, if Peter is excited about something and I think differently, he’s very open to good feedback. So we have good discussions [and] independent views and there’s enough shared experience and shared principles that we can have a quick, high-resolution conversation about things in depth.

    Mithril has made seven investments to date, most of them eight-figure investments, including in a San Francisco-based security software company called Lookout. Do you take board seats with these investments?

    It’s at the request of the company. My view is [you want to offer] high availability and low interference. You want the check writing to be the most dramatic thing that you do, which is contra to what you hear in the Valley these days. You should be very helpful — and we are, whenever we’re asked, including with sophisticated financial strategy. But companies are staying private longer these days, so they’re encountering operational issues and capital management issues that venture-backed companies didn’t encounter 10 years ago, and that’s where we’re most helpful. But that is not formal governance; that’s really about a good relationship with founders.

    You’ve said that with Mithril’s first, current fund, you ended up with a more standard fund structure, though you really wanted to form a corporation. Will you pursue a different structure the next time around?

    No, [what we have] is a standard default that works for everyone. Our LPs in the first fund — we were careful in who we ended up working with. About a fifth of the capital is principal capital, so that was meaningful. We ended up working with a lot of family money – so, larger family endowments [as opposed to institutional capital] and sovereigns, as well. But in most of these cases, if we look at our LP base, it’s almost all direct investors, it’s people who are looking at us as a partner in Silicon Valley to understand what’s going on in the technology space, to be invested in it, so it changes the character and complexion of it.

    What’s your view on valuations? Is Mithril at all price sensitive?

    Entry price is really important. But you want to enter on a basis where you can hold over the long term. Almost every investment we’ve made has been a non-auction process. Even if there was an auction going on, it’s usually gotten sidetracked in favor of having a conversation with Mithril because [we’re typically] investing at an inflection point in a company’s business. Take Lookout for example. It’s known for its anti-virus protection for phones. But because it’s protecting 50 million devices . . . it now has a network of phones using applications like a neighborhood watch. And you can extrapolate information from this network and understand where the threats are coming from across different artificial silos. It’s not just AT&T or T-Mobile’s phones. It’s not phones owned by GE employees or your family members. So its historic business is still valid and growing fast, but there’s a whole other S-curve starting, and that’s what we’re underwriting. It was almost like a new Series A for a company that’s already a $500 million to $600 million company.

    You believe there’s still too little tech investing, and that the world needs more firms like yours and Andreessen Horowitz and Khosla Ventures. Why?

    From an investor point of view, there’s just very little going on [on] a relative numbers basis. It might not feel that way sitting in San Francisco or counting the number of words associated with technology in the newspapers today relative to 10 years ago. But on a global basis, you look at real estate investment and you look at power plants and real assets . . . and [tech investment] is just minuscule compared with the money that goes into these other asset classes. The fact that so little capital has generated so much value in such a short time has made it have an outsize effect in people’s minds. If you look at the Fortune 500 by revenue, there are a lot of industrial companies; if you rank it by profits, it’s remarkably tech heavy. I think the whole world is just beginning to understand what that means.

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

    Connie

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  • Upstart Takes a Turn Into a Bigger Market

    Dave GirouardTwo years ago, Upstart, a two-year-old, Palo Alto-based company debuted a newfangled funding platform that pairs accredited investors with students or recent graduates who are looking to finance their ideas. The idea, essentially: investors lend their own capital against the future earnings of the borrower, capital that is expected to repaid with interest within 10 years.

    Though the peer-to-peer lending aspect isn’t novel, the way that Upstart assesses risk, which is tied directly to a borrower’s academic credentials, seemed to be.

    Now, says Upstart, it’s using similar analysis to roll out a new and surprisingly old-fashioned product: three-year, $25,000 loans which will be assigned to people based not on their future earnings potential but their basic employability.

    It’s a natural fit for the company. Not only is Upstart planning to target people without much work or credit history (a demographic it knows well), but it will be again be assessing those individuals’ risk profiles based on where they went to school and what they studied while there.

    A Harvard graduate who majored in business, for example, might be assigned an annual percentage rate, or APR, of 6.5 percent, while someone who studied education at Bowling Green State University might be assigned an APR as high as 20 percent. (Those are lowest and highest ends of the loans’ range, respectively.)

    The move isn’t a pivot, says CEO Dave Girouard, who says the business of funding future earnings is strong, with 30 percent more “Upstarts” on and backers on the company’s lending platform as last year.

    Still, Girouard sounds even more enthusiastic in describing the market opportunity for traditional loans. By his account, most banks won’t touch anyone without a credit or employment background and neither will alternatives like LendingClub and Prosper, which creates an opening for Upstart.

    Its window is limited. Girouard notes that once people drift into their 30s and 40s and gain employment histories that can be assessed by a broader spectrum of lenders, Upstart loses its advantages as an underwriter.

    But that still leaves 20 million potential borrowers in the U.S. alone, and “there are a lot of places we could take this over time in terms of underwriting,” he adds.

    Upstart has raised $7.6 million from Kleiner Perkins Caufield & Byers, NEA, First Round Capital, and Google Ventures, among others. It hasn’t raised any capital in the last year, though. Girouard says he expects to raise another round in the “second half of this year.”

    Connie

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  • Inside Mysterious Mithril Capital

    Ajay RoyanOne of the best-known things about Mithril Capital Management is that it is named after a fictional metal from J. R. R. Tolkien’s fantasy writings. Put another way, the 22-month-old investment firm, cofounded by influential investor Peter Thiel and his longtime colleague Ajay Royan, remains mostly a mystery, even to those in San Francisco, where it’s based.

    That’s probably because local investors don’t see much of the firm, suggests Royan, sitting in a modern conference room at the firm’s well-appointed offices in the Presidio, where roughly a dozen people — principals to vice presidents who’ve worked for one of Thiel’s past companies — are trying to create a kind of modern-day Berkshire Hathaway.

    More specifically, Mithril is assembling a highly concentrated portfolio of companies that most in Silicon Valley have never heard of, let alone would ever fund. (Think underwater robots in Toulouse, France, and a Boston-based technology company that’s enabling travelers to book train tickets the same way for every rail line.) It’s going long on these companies, too. When the firm raised $540 million for its debut fund, it turned not to institutional investors but “larger family endowments and sovereigns,” who agreed to let Royan and Thiel lock up their money for as long as 12 years. The pair, who personally contributed up to a fifth of the fund’s capital, told investors they wanted the option to wait out markets if necessary.

    Of course, Berkshire Hathaway’s founder Warren Buffett famously doesn’t invest in technology. But Royan, who speaks in elegant paragraphs peppered with scholarly references, says that’s a product of timing. Tech was a “boom and bust” industry once, not a long-term bet. Today, he says, “If you ran the Warren Buffett gambit in 2014 de novo, you’d probably only be doing technology-driven investing, because that’s where you build [today’s] lasting franchises.”

    StrictlyVC talked with Royan last week; here’s some of that chat, edited for length:

    You were born in India, raised in Abu Dhabi and graduated from Yale – a degree in political economy in hand — by age 20. What did you want to do, and how did you wind up working alongside Peter Thiel?

    I wanted to be an industrial designer; I wanted to be an entrepreneur. And I became aware of Peter through mutual friends around a friend’s wedding in New York. At the time, he’d recently sold PayPal to eBay and was thinking about [starting his hedge firm] Clarium [Capital Management] and our initial conversations were around my joining him as an entrepreneur in residence and starting a company.

    And you did, eventually becoming a managing director at Clarium. Why leave to co-found Mithril with Thiel in 2012? What was the impetus?

    With a hedge fund, people can invest whenever they want but they can also redeem whenever they want; it doesn’t matter how successful you are. And a big macro event like the 2008 financial crisis created a [system-wide need for liquidity] precisely when, because you have convictions and a view of the future, you wanted to invest more. That led to a conversation about permanent capital and longer-term investing.

    What was the initial idea?

    The initial idea was to have permanent capital, for it to almost be like a corporation that would go public 15 years down the line, and Peter and I would happily lock up our own capital for that period. [But] that turned out to be a very radical proposal. People were like, “Whoa.” [Laughs.] So we ended up defaulting to a more standard fund structure. But we asked for people to be thoughtful about how to make it a long term fund, so it has almost a six-year investment period [so we can wait out frothy markets if we want]. It’s also . . . almost a 12-year fund, so when we talk with entrepreneurs, we can say [that while] we started in 2012, we can have a view inside this balance sheet all the way to 2024.

    You’ve made seven bets so far, in very disparate types of companies. One of them is C2F0, a collaborative cash flow optimization company in Kansas City that tries unlocking capital trapped in trade relationships. What kind of process led you to the company?

    There was this question-asking process basically saying: Are there things other than credit underwriting that make sense in an economy where it’s hard to mobilize capital? Who’s thinking about this? And our team ran a screen and we looked at companies in the space; we looked to see if they were working with good investors and whether they had a technology DNA, because you do have a lot of financial people who think about stuff like this, but we didn’t want a transactional business. We didn’t want to do an exchange on Wall Street.

    How many companies do you talk with, who at the firm ultimately decides what Mithril will fund, and what size checks is the firm writing?

    I think we’ve [funded] less than 1 percent of what we’ve looked at in the last 20 months . . . The investment committee is Peter and myself [because] we want to be able to make decisions quickly . . . And we make investments between $20 million and $100 million-plus in size.

    Have you written a $100 million check?

    We have a $100 million exposure, including reserves, to a company, already [though I can’t say which]. It’s not in stealth, but we haven’t announced the investment at the company’s request. But we do have about 20 percent of the fund committed to a single name at this point.

    (We’ll be running more of our interview with Royan this week, readers, so stay tuned.)

    Connie

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  • Same Companies, Different Impressions

    OLYMPUS DIGITAL CAMERAVenture capitalists are a lucky lot. Their work is prestigious, the pay can be exceptional, and they’re educated daily by smart entrepreneurs.

    One job hazard, however, is missed opportunities. For example, many in Silicon Valley passed on Uber, one of the fastest-growing companies on the planet. (To his credit, Uber’s hard-charging CEO, Travis Kalanick, appears to have talked to everyone before the company raised its first round.)

    You might wonder now how so many investors missed Uber’s potential, but the reality is that finding the Next New Thing is a lot harder than it looks. Indeed, last week at the “demo day” of the incubator program AngelPad in San Francisco, one could find many savvy investors making radically different calculations about the same companies.

    PeopleGoal, a New York-based startup whose performance management software aims to wring the best out of employees, captured the attention of Josh Breinlinger, a venture partner at Sigma West who was among the earliest employees of the freelance marketplace ODesk. “That’s one of two that really stood out to me,” he said after the companies’ presentations.

    Hiveary, an infrastructure monitoring platform, and TapFwd, a big data mobile ad platform, were more interesting to Niko Bonatsos, a principal at General Catalyst Partners who said he liked the technology behind both, as well as that both seemed like they were addressing “real problems in hot markets.” Of Hiveary, in particular, Bonatsos said, “If you talk to enterprise [software developers and IT departments who collaborate to speed the deployment of new applications and services], they will describe that they need a solution for this problem.”

    Meanwhile, Paintzen, a marketplace for home and office painting, stood out the most to Manu Kumar, the founder of the seed-stage venture firm K9 Ventures, one of the earliest investors in the ride-share service Lyft. “It just feels like an industry that’s ripe for disruption,” said Kumar, who especially liked the team’s argument that it can eventually expand into other verticals, including flooring, cabinets, and windows. “If they can go after those other areas, they can scale,” said Kumar.

    Breinlinger made the same point separately. “If Paintzen can do the same thing they’ve done for painting for other home services, I think it becomes really interesting,” he said.

    But Bonatsos was less impressed with Paintzen. “It sounds interesting. They make [arranging a paint job] very easy. I don’t know how big the market is, though. It’s one and done; it’s not frequency. How often do you paint your house?”

    Asked about the other verticals that Paintzen wants to pursue, Bonatsos said that “to me, that’s not a good sign” that Paintzen is pursuing a big-enough market from the get-go. “The numbers [the founders] gave out – [a] $10 billion [market] for painting in the top metro areas. Well, let’s say they capture $1 billion out of the $10 billion, and their piece is 30 percent. It’s a $300 million market for them. That’s interesting,” said Bonatsos, “But it’s not like, ‘Oh, my God.’”

    (For a full tearsheet of AngelPad’s newest batch of startups, click here.)

    Connie

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  • Demo Day for AngelPad: The Anti Y Combinator

    OLYMPUS DIGITAL CAMERAToday, AngelPad, the San Francisco-based incubator, is hosting an invitation-only “demo day” for 150 to 200 angels and VCs, and you can bet these investors are going to bring their checkbooks.

    In four years’ time, AngelPad has become one of the most reliable hit machines in Silicon Valley. And it’s done it largely by operating as a kind of anti-Y Combinator, even while the famed incubator was its inspiration.

    There’s the cosmetic difference, for starters. While Y Combinator is located in sunny Mountain View, Ca., AngelPad, which also has offices in New York, rents out space on a gritty block of San Francisco’s Tenderloin neighborhood. (It’s a little too gritty for its demo day; AngelPad is hosting its event today at an upscale restaurant roughly a mile away.)

    AngelPad isn’t as widely known as Y Combinator, and intentionally so. Founder Thomas Korte, who spent seven years as an international product manager at Google, likes to keep things intimate, stressing the importance of community to the startups that pass through AngelPad as well as the network of investors with which he works. (Even the press who can attend its demo day is tightly restricted.)

    In another departure from Y Combinator’s mode, AngelPad tends to focus on enterprise companies, typically admitting just one or two consumer-facing startups into each of its “cohorts.” For Y Combinator, working with startups that cater to businesses is a much newer development.

    Perhaps the biggest difference, though, is that while Y Combinator looks to grow even bigger, adding ever more partners to work with its startups, AngelPad is, in a sense, shrinking. Korte once relied heavily on former Google colleagues to help mentor startups at AngelPad. Today, he and his wife and AngelPad partner, Carine Magescas, coach all of the startups themselves.

    (Korte does make one notable exception. He still arranges for each startup passing through the program to meet once with one of his trusted advisors — friends like Wesley Chan, currently an entrepreneur-in-residence at Google Ventures. It’s a kind of “reality check. You need outside input once in a while,” says Korte.)

    Clearly, AngelPad’s approach is working. AngelPad startups in the news include Storefront ($7.3 million Series A led by Spark Capital), Crittercism ($30 million Series C), and Boxbee ($2.3 million seed round), and Korte tells me that another AngelPad company, the mobile advertising startup MoPub — acquired by Twitter for $350 million in stock last fall — will be worth roughly one billion dollars when Twitter’s lock-up expires in the next couple of weeks.

    So how does the AngelPad process work? Twice a year, Korte and Magescas stage an open application process that usually attracts about 2,000 applicants who are asked to submit a two-minute video, along with an essay, about their company. The couple then whittles the list down to between 100 and 200 of the most promising teams, interviews each for 25 minutes over a two- to three-month period, then chooses a dozen of them to coach over the following 10 to 12 weeks.

    Each team receives $60,000 in exchange for 6 to 7 percent of their company. (AngelPad uses capped convertible notes.) At the end of the program, a demo day is staged, and Korte and Magescas then spend the next six weeks or so working with the startups to secure seed funding.

    Most of the money is coming from the couple’s bank account. (Korte was among the first couple of hundred of Google employees.) Korte says “several individuals also participate in each cohort,” and that AngelPad also raised a $7 million fund last year to help fund its startups.

    As for what he’s looking for, he mentions numerous things, including “mobile-enhanced” businesses that do things in a way that we’ve always done them but in a more efficient way. (He points to the delivery service PostMates, another AngelPad startup that has gone on to raise significant funding.)

    Korte says he doesn’t rule out applicants that are entering well-covered terrain, either, a lesson he learned at Google. “Apart from self-driving cars, Google has almost never been the first in anything, honestly,” he notes. “What they’ve done is be significantly better at every single one of those,” he adds.

    Seemingly, the same could be said for AngelPad itself.

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

    Connie

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  • For Beckon CEO Jenny Zeszut, It Pays to Be Nice

    Jenny ZeszutJenny Zeszut knows what it’s like when things don’t go as planned.

    Today, Zeszut is the CEO of Beckon, a two-and-a-half-year-old San Francisco-based marketing analytics software company that helps customers like Converse, Nokia, and BSkyb transform messy data inputs into useful insights about their marketing efforts.

    But Zeszut’s future didn’t always look so rosy. Back in 2006, Zeszut cofounded Scout Labs, among the first startups to harness social media as a tool for companies looking to better understand and engage their customers. Writing for TechCrunch in 2007, Michael Arrington called it “one of the more interesting startups” to launch that year.

    The problem was, Scout Labs was growing up inside Minor Ventures, a venture fund started by CNet founder Halsey Minor. Minor’s expensive tastes coupled with the economic meltdown of 2008 were bankrupting him and making it impossible for Scout to pay its growing number of employees. More, his involvement made raising capital from other investors more difficult, suggests Zeszut. (Minor has famously battled with many VCs in the past.)

    When Javelin Ventures and El Dorado Ventures stepped in to give Scout a lifeline, Zeszut was relieved. In 2010, when an opportunity arose to sell the company, she seized it. (Lithium Technologies paid $20 million to $25 million for Scout, which had raised $9 million altogether.) Zeszut knew she and her startup had dodged a bullet.

    Investor Ron Palmeri, who was a managing director at Minor Ventures, has told me he thought Scout Labs could have become a much bigger company under different circumstances. “If anyone knows marketers and their needs, it’s Jenny,” Palmeri said yesterday in an email.

    Talking with me yesterday, however, Zeszut didn’t sound remorseful. Though she loved Scout, four years of ups and downs had made “an early-ish exit more attractive than sticking it out over the long term,” she says. The experience also taught her plenty of lessons that inform how she’s running Beckon today.

    The biggest lesson she learned was that it pays to be nice. When Scout wasn’t able to pay “a big team of employees, almost with no notice, I told them to go home. But they stuck with us,” says Zeszut of herself and Jochen Frey, her CTO at Scout Labs and now Beckon’s CTO and cofounder. “They took money from their 401(k)s to pay their nannies.” Almost everyone on that team is now at Beckon, which has 27 employees. “I’m probably more proud of that than any exit,” she says.

    It turns out that this lesson applies to investors, as well. “One thing you learn is that the biggest decision isn’t who your cofounders are but who your investors are, because you’re [stuck with them] unless you sell your company.”

    When I ask her if she resents Minor, she maintains her equanimity. “There are no hard feelings there,” she says. “It’s a bummer, what happened. But he gave me an amazing opportunity; I might never have had a chance [to become an entrepreneur] if he didn’t.”

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

    Connie

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  • Creatively Destroying Medicine

    kablooeyMed tech has a long history of boom and bust. But yesterday, at a stellar half-day conference in Mountain View called Strictly Mobile, listening to famed cardiologist Eric Topol address the crowd, it was easy to believe that the pattern will be shattered. In fact, Topol, author of “The Creative Destruction of Medicine,” argued persuasively why little about today’s healthcare system will look the same in less than a decade.

    Receiving remote medical care is already becoming more common as technologies improve, as he noted. Startups like American Well and Doctors on Demand produce apps that allow users to video-chat with doctors to get medical help in real time. Scanadu makes a puck-shaped scanner that’s packed with sensors designed to read your vital signs, including heart rate, blood pressure, temperature, and blood oxygen levels. (The company, which recently began shipping the product, halted production last week to fix a manufacturing glitch.)

    Other companies hoping to make traditional medical instruments obsolete include EyeNetra, whose device, the Netra-G, can measure the refractive error of the eye using a smartphone and a cheap pair of plastic binoculars that anyone can use. (The alternative: a $5,000 machine called an autorefractor.) Similarly, CellScope turns a smartphone into an otoscope that provides a magnified view of the middle ear, allowing parents to see for themselves whether their child has an ear infection — instead of first dragging him to the doctor’s office.

    Naturally, there are plenty of obstacles between now and the day when hospitals can focus on therapeutics and leave more of the diagnostics to us. For one thing, not everyone wants to know more about their health. (Scanadu cofounder Sam De Brouwer, who was also at the conference, attributed such attitudes to consumers’ “lack of tools.” Noting that the only medical tool in most homes, still, is a thermometer, she suggested that people will grow very attracted to medical apps once they realize their power. “There’s something deeply fascinating about our body,” she told the assembled attendees.)

    A much bigger obstacle, said Topol, is the American Medical Association, which has a vested interest in maintaining the status quo and that has one of the largest lobbying budgets in the U.S.

    Here, Topol suggested that the best shot at change will come from directly from consumers demanding it, along with “employers with big-time purchasing power.” It’s an uprising that Topol fully expects as more information about healthcare costs becomes available. (Steven Brill’s 26,000-word piece in Time last year, highlighting the exorbitant prices we pay for hospital gauze and Tylenol tablets, was a good start, Topol noted.)

    A cynic might say that the picture Topol paints sounds too rosy and lacks specifics. Indeed, asked about the legal liabilities for already risk-averse doctors, Topol’s answer seemed optimistic. Doctors who’ve been freed by new technologies will likely develop stronger relationships with their patients, making them less inclined to sue, Topol suggested.

    Investors could also lose interest in digital health if it doesn’t take off fairly quickly. As veteran health care investor Terry McGuire of Polaris Ventures told me back in January, ““On the life sciences side, billion-dollar exits aren’t as common as on the tech side … So you go through these wonderful moments as now, when everyone is again a healthcare investor, but in three years, they won’t be.”

    I hope the skeptics are wrong. It was exhilarating to hear someone talk about mobile technologies that can help patients and doctors do so much more. The doctor will Skype me now? I’m ready.

    Connie

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  • Preempting Others, Tiger Leads $80 Million Round in Quora

    QuoraLogoQuora, the question-and-answer platform cofounded roughly five years ago by top Facebook engineers Adam D’Angelo and Charlie Cheever, has just raised a whopping $80 million in new funding led by Tiger Global Management, the 13-year-old Park Avenue-based hedge fund. Its new valuation, reportedly: $900 million

    The deal marks the third outsize funding that Tiger has led in the last six weeks alone. In March, Tiger led a $77 million growth round in OnDeck Capital, reportedly to fuel the small business lending site’s international and product expansion plans while making it harder for other market entrants to compete. Tiger and T.Rowe Price also plugged $60 million into the online ticketing and event planning company Eventbrite at a valuation of more than $1 billion.

    Tiger and T.Rowe Price had invested a separate, $60 million in Eventbrite in just April of last year, and according to the Wall Street Journal, Eventbrite wasn’t looking to raise more money.

    Tiger’s funding of Quora — which earlier investors Peter Thiel, Matrix Partners, North Bridge Venture Partners and Quora cofounder Adam D’Angelo also joined — sounds like a similar case.

    In fact, other venture firms never really had a chance, suggests Quora’s business head, Marc Bodnick, who left the private equity firm he co-founded, Elevation Partners, to join Quora in January 2011. Quora “wasn’t actually raising money,” he tells me. “In fact, we had most of the money from the last round [$50 million round, closed in 2012] in the bank. But we’d improved the company in the two years since, and Tiger approached us about investing in the company a couple of months ago.” Tiger’s 33-year-old partner, Lee Fixel, was the one to make the call.

    Quora, which has now raised roughly $140 million altogether, plans to do four things with the funding: expand Quora into other languages, à la Wikipedia; create “great mobile products” (its ever-improving email digests are one example); scale up the product technically by hiring more engineers and product managers; and put the rest in the bank. “We want to stay independent and make sure Quora lasts forever,” says Bodnick.

    Given that the company “hasn’t even started to monetize,” according to Bodnick, it might need all that cushioning.

    “Our ultimate goal is to share and grow the world’s knowledge,” he says. “In the last two years, we’ve built the biggest [online] library of first-hand knowledge, and the second-biggest [online] library after Wikipedia of general knowledge.” (It now has material on more than 500,000 topics.)

    While the company’s revenue model is “likely going to be advertising-related” — Bodnick notes that a third of Quora’s traffic is looking for something specific and that its direct intent traffic “should create exciting financial opportunities” — that won’t be the focus for a while. “Right now,” says Bodnick, “the big question is: How do we make the product better and keep scaling it?”

    Connie

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  • MobileIron Founder Tae Hea Nahm on the Korea Connection

    south-korea-mapTae Hea Nahm, a founding managing director of the early-stage firm Storm Ventures, was born in Seoul, Korea, and he still spends at least one week in the country every quarter. He goes to attend startup board meetings. He visits with Samsung and with some of Storm’s LPs, including Korea Telecom. Nahm, who has also cofounded four mobile companies — including MobileIron, which filed to go public yesterday — also seeks out new ideas on these trips. We talked yesterday about what he sees.

    You’re in Korea more often than most U.S VCs, I’d imagine.

    Well, I’m Korean, so visiting is relatively easy for me. It also helps me with my mobile investments in the U.S. People who invest in digital advertising look at startups in Silicon ValIey and New York; I feel that Silicon Valley and Korea are naturally synergistic in the same way when your primary [focus] is in on mobile.

    Where do you look for trends?

    I like to ride the subway in Seoul to get an idea of what people do. In New York, for example, most people are listening to music on their mobile devices or maybe reading a Kindle or something because connectivity on the subway is very poor. In Seoul, about a quarter of people on the subway are streaming a drama or sports show on their iPads or Galaxy Notes because they have the Internet infrastructure to do it.

    Mobile video is really going to take off here, too. It’s why a huge investment is being made by Samsung and Apple to create higher resolution displays. It’s why, on the other side, content video providers like Amazon and YouTube and Netflix expect more people to watch their content over mobile devices. It’s also why one company we started in Korea that optimizes your mobile video session across multiple wireless networks is doing very well.

    Other than gaming, where else has Korea gotten a jump on the U.S.?

    An example I saw and didn’t take advantage of are credit card readers. Many years ago, a taxi driver who picked me up basically scanned and processed my credit card with a cellular reader that was like a bigger form of Square. Kakao, the messaging platform, also took off must faster in Korea than messaging took off here in the U.S. In that case, it was mostly driven by cost. In the U.S., the savings of using free messaging here is less compelling than in Europe or Korea. But it also just fits in with human nature.

    How hard is it to separate out what’s an early indicator of a big trend, versus something that might be popular specifically because of the culture?

    It can be difficult. I email with my wife a lot, but in Korea, a husband and wife would rarely email each other; dating back at least 10 years, they’d text each other because email is considered slow and formal whereas texting is faster and spontaneous. There, I felt like texting was more cultural, and my initial assumption was incorrect.

    Are so-called ephemeral apps interesting to the Korean market?

    Yes. There’s a company in Korea, Between, that allows you basically to just create a private social network between two individuals, and either individual can terminate the whole conversation and all the content stored. It’s like a private communication locker, versus a Snapchat, where it’s just a private message.

    Would you try to bring it to the U.S or incubate something similar? You’ve incubated several companies here in the past.

    I’ve started companies like Airespace [acquired by Cisco for $450 million in 2005] where I was the founding CEO and hired the first 24 employees, and MobileIron, where I hired the first three founders. At the same time, we don’t want the reputation of ripping off entrepreneurs’ ideas, so we don’t just form clones.

    Also, the problem in [recreating an idea] is whether the founders you hire will really be passionate about the idea. Passion for their idea is what makes entrepreneurs so special. If I have the belief and desire and the executive team doesn’t have it, it doesn’t work.

    There must also be major differences in the way things are marketed. What are some of the biggest ways the markets in Korea and the U.S. continue to differ?

    Korea is a very small homogenous country, so if five people believe something, everyone will believe it, whereas because the U.S. is so big and diverse that word of mouth is much less powerful. Westeners also like things that are more realistic; Asians like things that are more cartoonish.

    And Koreans like tutorials; they like to go through manuals to teach themselves how to become power users. Americans hate them. They like to push buttons and get results. I don’t know if Apple brainwashed them or understood them, but American users don’t want to read anything.

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    Connie

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