• Pantera Capital’s Dan Morehead on the Future of Bitcoin

    17639963136_8b2c64b746_mAt a StrictlyVC event in San Francisco last week, Dan Morehead, founder of the San Francisco-based hedge fund Pantera Capital, sat down with seed investor and venture advisor Semil Shah to talk Bitcoin.

    Morehead knows Bitcoin as well as anyone. After logging time at Deutsche Bank and Goldman Sachs, then joining Tiger Management, where he rose to the head of global macro trading, Morehead founded Pantera, a 12-year-old outfit that has more recently committed to investing exclusively in Bitcoin and other digital currencies. We wanted to know why — as did Shah — so Shah asked him. Parts of their discussion follow, edited for length.

    SS: There was exuberance over Bitcoin, then not, and now it’s coming back. What’s going on?

    DM: Every technology goes through a hype cycle, where there’s a kernel of truth or a kernel of genius, and once the media catches it, it [captures everyone’s imagination] for a while. Then there’s an awkward period. And Bitcoin went through that. [But] it was more extreme because it has one unique feature. It’s a technology protocol that has a real time price feed. And that’s really, really weird.

    In 2011, no one really cared. By 2013, everyone had [that price feed] on their screens and the press was talking about it, and it led to extreme bubbles [including in Bitcoin mining]. At the end of 2013, the price of Bitcoin was 93 times higher than it was the year before. Bitcoin improves all the time, but it wasn’t 93 times better, so a bubble . . . had to deflate.

    SS: Was it rational for Bitcoin’s price volatilty to affect venture investment in the technology?

    DM: I think people did get over their skis in 2013, thinking it was going to change the world overnight. It’s going to change the world, but it’s going to take a couple decades to do it, as other Internet protocols [have taken].

    One data point about Bitcoin: All the companies in the Bitcoin ecosystem are worth just over $3 billion today. All the Bitcoin that exist are about worth that right now. So you have a ratio of about 1:1. Meanwhile, in talking about the U.S. equity market or the developed company space, the market cap of all the companies in the U.S. is worth five times the value of money supply. So I think you’re going to see a persistent trend of value venture in Bitcoin increasing at a faster pace than the underlying currency or protocol.

    SS: Numerous traditional VCs have made bets on seed- and early-stage Bitcoin companies, but it seems like these bets will take longer [than expected] to play out. Will they have to continue supporting these companies, or will other investors come down the stack?

    DM: It’s certainly taking longer than some people expected a few years ago. But you’re seeing [an influx] of investors. Last month, Circle [Internet Financial] did a round with Goldman Sachs, which was the first major international bank to invest. So not only are you getting the traditional venture investors, but you’re getting strategic investors like big banks and big exchanges trying to get invested in the Bitcoin space.

    SS: You understand Wall Street. How does it perceive Bitcoin, both as a currency and as a technology platform?

    DM: I think most of Wall Street realizes that the systems that move money are incredibly antiquated and incredibly inefficient. Most of them were designed in the 1950s. The main thing for wiring money – SWIFT – is basically sending messages and it’s very primitive and can be disrupted by Bitcoin very easily, and most banks would like to see that happen.

    SS: How would that affect big banks’ fees and the way they make money?

    DM: I think too much was made in the early days of [Bitcoin’s ability] to disrupt banks. A lot of banks now have retail stores – selling services to people. So they can still retain their relationship with the customer and then swap out the back end.

    Also, there are a small number of banks that do cross-border money movement; they’re called correspondent banks, and there’s really only a dozen or so that control an entire market. An extreme example is Africa, where, if you want to move money into or out of the entire continent, there are only two banks that will do it and other banks need to use those two banks and it’s very expensive. So banks want a cheaper way to get money in and out of places like that.

    SS: What is happening in Bitcoin in the rest of the world outside the West, especially where rule of law is weak?

    DM: In mobile money, Kenya is actually the world leader. Southern Africa has weak institutions and currencies that deflate at a rapid rate; Zimbabwe is the world record holder with a 100 trillion dollar note now. So their citizens need a better solution to transact.

    They also are unbanked [along with billions] of other people on earth that don’t have access to a bank but do have a cellphone, and going straight to some mobile money solution — bitcoin is a great solution for that. Already, 75 percent of adults in Kenya use a mobile system called M-Pesa. In fact, 45 percent of the entire GDP of the country is processed in M-Pesa. To me, that’s the future of bitcoin.

    (If you’d like to hear more from this discussion, you can listen to it in its entirety here.)

    Connie

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  • AOL President Luke Beatty on What Happens Now

    Luke BeattyLuke Beatty has had a busy couple of weeks. As President of Media Brands at AOL, Beatty manages an assortment of online media properties, including Techcrunch, Engadget, and MapQuest from his home base in Denver, Colorado. And he’s been spending a good amount of time helping his teams make sense of Verizon’s acquisition offer. (Verizon’s plan to buy AOL for $4.4 billion has yet to formally close.)

    Beatty’s ties to AOL run deep. He roomed with AOL CEO Tim Armstrong during and after college; installed Armstrong on the board of his content platform, Associated Content, which sold to Yahoo in 2010; and joined AOL as an executive in August 2013.

    We asked Beatty if he could explain Armstrong’s thinking around the deal to our readers. Parts of that chat follow, edited for length.

    You oversee nine different properties. How did people react to the news that Verizon is buying AOL?

    When you have a big mixed group like that, and a big announcement like [we had], to try to bundle everybody’s perspective into a common theme is difficult. The majority of my brands have come to AOL by way of acquisition, so I think they already understand what it’s like to be part of a publicly traded company.

    I think a lot care about the decision and they’re interested to see how it affects them both personally and professionally, particularly brands like TechCrunch and Engadget that are engaged in that world and are interested in knowing: Am I going to maintain my editorial independence? Meanwhile, with MapQuest, the implications of being owned by Verizon are very different and can present new opportunities that can be very exciting for them.

    What is going to happen to the content sites? Reports suggest Tim Armstrong is leaving the door open to numerous possibilities.

    I can firmly say there is zero intention on Verizon’s part to spin off the brands or sell them or to find a new home for them. They’re very focused on our media brands and there’s zero interest in divesting any of the brand outfits.

    Does anyone’s role change? Does yours?

    I don’t see any of our roles changing. We’re operating as an independent company within Verizon, run by Tim, and we plan to operate as we do now.

    What about acquisitions? Will your pacing change as a subsidiary of Verizon?

    We’re going to stay as active or more active than we’ve ever been [relating to] all three parts of AOL. I think that Verizon expects [it].

    One of the secrets to our success: We have a very unique strategy in the sense that when we acquire brands like TechCrunch or [the web ad platform] Adaptv on the platform side, we keep the teams and offices and culture together. We’re not great at everything, but that’s something AOL is great at – retaining expertise and talent.

    Given the beating that ad tech valuations have taken, might Verizon look to add even more pieces to its new ad tech business? Are there gaps it will look to fill?

    As the market evolves and new publisher services are needed, I expect the platform side to continue to add where they need to. If you look at acquisitions that [AOL Platforms CEO] Bob Lord and the [digital advertising] platform side have made over time, it’s been a steady drumbeat of acquisitions, including, recently, with Vidible [bought by AOL in December for a reported $50 million]. We also build internally.

    What part of the deal do you think people don’t fully appreciate or understand?

    [The acquisition] is a huge opportunity for a lot of the brands at AOL, many of which are rooted in blogging and are now very popular brands that are moving to video. For example, “Crunch Report ” – a daily show on TechCrunch —  [you’ll see] that stuff happening more and more. The move to video is extremely exciting, and to have a partner like Verizon that has a big [over-the-top] audience and video distribution [reach] is a huge advantage for us.

    AOL made a big push into video last fall. What have you learned about what consumers want and don’t want, and what percentage of content are you shifting to video?

    Video across all our brands has been growing every month but it’s not like there’s a template, [like] we have to get to the point where 25 percent of the content we produce has to be video. It depends on the brand and the topic and categories. Some things in the tech space are sort of short form. HuffPo is getting into more long-form stuff. It’s about finding the right format for the message.

    What we are seeing, particularly concerning the tech brands, is that three years ago, they were [tailored] for [more niche audiences]. A brand like TechCrunch was for people who were in the business; Engadget was a site about the newest products, gadgets, and technologies, but it was for people inside tech companies. Now, people everywhere care about technologies and how they’re being funded. They want to see Marissa Mayer and Mark Zuckerberg [talk about] what they achieved in the last year. Video is helping that happen. It’s helping [people who don’t work in tech] get up to speed.

    Photo by Kevin Abosch.

    Connie

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  • Uber Exec Tom Fallows on the Company’s Culture, and More

    Tom FallowsAt a StrictlyVC event in San Francisco last week, Tom Fallows, Director of Global Expansion Products at Uber, talked with us about what’s important to Uber right now, why Uber sees the fight for India and China as far from over, and the various ways that Uber and Google differ culturally. (Fallows was hired away from Google late last year. He’d previously spent five years with the search giant, developing, among other things, the Google Express delivery service.)

    Fallows couldn’t answer questions about Uber’s funding situation or its reported bid on Nokia’s mapping business, but he was refreshingly forthcoming when answering others. Our chat, edited for length, follows.

    Explain what you do.

    Obviously, we have the mainline business of offering transportation to people; [my job is largely looking into] how do we expand into new opportunities.  Uber for Business is one of my projects, for example, and that’s just building an enterprise version of Uber so that companies large and small can use it for their business travel.

    Is that taking up the majority of your time? How many initiatives are you working on at any one time?

    It is taking up the majority of my time. I have six different teams that are working on new projects all the time, and in a healthy ecosystem way, projects that aren’t working get wound down or swallowed up and resources [are] diverted.

    Can you point to something that’s been shut down recently?

    Nothing since I’ve been [at Uber]. But I remember while at Google, reading about Uber testing a concept [to deliver common convenience store items to select customers through a pilot project] in Washington, D.C that no longer exists.

    What can you tell us about how some others of its initiatives — including delivering food and packages — are doing?

    I can’t discuss any numbers, but as the press has reported, the Uber Eats [food delivery] product has expanded into several more cities and I think the market has been pretty strong. We’re doing well with Uber Rush, which is a [bike] courier service [that Uber rolled out in New York a year ago].

    What do you make of the argument that not everyone wants Uber to deliver both their food and their transportation — that people want different relationships with different brands?

    I don’t think consumers inherently care about how their item is getting to them so long as it’s getting to them effectively and quickly.

    You founded Google Express. The service has been portrayed in the press as troubled recently, including because the head of Google’s commerce businesses, Sameer Samat, has left to join Jawbone as president. Is that fair?

    I can’t speak to recent stuff, but when I left five months or so ago, but it was doing well. I think it’s the wrong conclusion to draw that [Samat’s departure] is a reflection on the commerce business. It’s a big driver of growth, and a big driver of profitability [at Google]. I don’t know anything but I suspect this was a poaching situation.

    The problem we had at Google Express was that we didn’t have enough capacity. Like every single delivery and on-demand service out there, we had such product-market fit that we just couldn’t keep up with demand. At Uber, that causes surge pricing. At Shopping Express, that caused sellouts, and that was always the pain point that we were dealing with.

    Can you confirm that Uber is currently raising $2 billion more from investors at a $50 billion valuation?

    I read about it as you guys did [in the audience]. I have no idea.

    If the company were to raise $2 billion, what would its top priorities be?  Expanding domestically? Competing more aggressively in India and China?

    I don’t in any way tie this to a fundraising. I literally don’t know anything about it and don’t know if or why we need more money, but the company had said in the last funding round that there are big global opportunities that we’re going after, and in our type of business, for anybody building liquidity and network effect and going into new markets, it can be very expensive.

    India and China are obviously big battlegrounds. How do you compete with regional taxi app companies that have something like 99 percent of the market?

    China and India are huge potential markets and places where we really want to participate  and where we think we can offer great service. [And] although the alternatives in China are very big, the majority of the business is in the taxi ride hailing, which isn’t a business, it’s purely a matchmaking business. They take no fee whatsoever. They have, similar to us, black car and Uber X [type] businesses, but they aren’t nearly as big, so it’s not . . . an open-and-shut case.

    One thing that’s interesting: The transportation business is truly, inherently local. At Google, of course, we could do localization, and we had sales teams in each country, but we didn’t have tech teams or custom features in that many countries, whereas at Uber, you really have to serve every single city independently — even within the U.S. We consider it a strategic advantage, our ability to operationalize at scale the management of these locations that need custom technology and custom solutions.

    What are some other differences between these two powerful companies? We know you joined Uber just five months ago, but are there early impressions you can share?

    Well, the first, strange [observation I made] when I walked into Uber was that one out of three people is a former Google colleague. There are also lots of people from Facebook.  Top to bottom at Uber, it’s [top-notch employees].

    The biggest difference at Uber is that, at heart, it’s still very much a startup with an action bias. In my first couple of weeks, we’d be talking about a new feature and inevitably in that conversation, the question would arise: How long would this take to get out? And someone would say, “I think it’ll be two to three . . .” And in my head, I’d just default, think weeks. And they’d finish, “…days.” And I think, what? [Laughs.]

    It’s a combination of a couple things. It’s much younger technology stack. Also, we’ve all had that experience where something needs change and you just change it and 12 minutes later it’s in the world, and Uber is still on that continuum versus my experience at Google, which, I absolutely love the people and I have nothing but great things to say about it, but it’s not necessarily known for its nimbleness and speed. One of the challenges I had with Google Express was how do we launch and iterate in an environment where you have multi-week review cycles, and all for good reason. Everything had a justification behind it. It’s all part of being a big company. But it’s inherently slower.

    You get the feeling that nearly everything trickles up to Larry Page at Google. At Uber, whose sign-off do you need?

    Very explicitly, the rule inside is: nobody needs to sign off. As a product manager, I’m an owner of my products and it’s my right and responsibility to launch things when I think they’re ready to launch and to be accountable for those consequences. It’s a very intentional, constructive environment, and it’s a bet, and you get mostly great outcomes in terms of speed. And sometimes you stumble because, well, safety checks are put in place for good reasons at good companies.

    So we’re still wonderfully on the side that it’s small enough and people subscribe to this ownership mentality of: I’m going to build, I’m going to launch, but I’m also going to sweat the details and whether it’s something silly like a typo or a weird experience or, meta like a privacy issue, I’m going to be really sure I don’t do that.

    Months after you left Google, Bloomberg reported that Google – an Uber investor – is developing its own self-driving app. Soon after, Google said, “It’s no big deal, it’s just this internal project.” Can you tell us what’s really going on?

    Uh, no. [Laughs.] Google is working on everything so I think probably all sides are true. I know a bunch of folks there . . . so there’s nothing particular I want to comment on . . .

    What about the news that Uber is bidding on Here to get away from its reliance on Google Maps? Is that happening and, either way, does it want to rely less on Google Maps?

    I read about that, too, and I don’t know. I think, macro, as Amazon has progressively moved toward owing its fulfillment centers and even now last-mile delivery, any company in the world strategically wants to ensure that the things that are important to them they somehow they control — whether via a strategic investment, partnerships, or building [their own products]. And there are a number of ways to achieve [that end]. I don’t know anything, but I wasn’t shocked to read that.

    Looking forward, what will Uber look like? This week it was flying people to Cannes in leased helicopters. Will it eventually be leasing planes? Will we see it get into the shipping business? What might surprise people about its roadmap?

    Whether it’s employing helicopters or delivering candy, those are mostly wonderful marketing stunts to get buzz going rather than [future lines of business]. So the short answer is probably no to those things. But, I think, goodness knows.

    Connie

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  • The Muse Raises $10 Million (and Turns Away $10 Million)

    Kathryn MinshewThe Muse, a 3.5-year-old New York-based career site that offers job opportunities, advice, skill-building courses, and video profiles meant to show what it’s like to work at different companies, has just raised $10 million in Series A funding from Aspect Ventures, DBL Partners and QED Investors.

    Co-founder and CEO Kathryn Minshew says the platform, which is largely used by millennials – 65 percent of them women and more than 50 percent nonwhite — could easily have raised $20 million.

    We talked yesterday about the fast-growing, 33-person company — and what happened out on the fundraising trail. Our chat has been edited for length.

    You founded the Muse with two other women, Alex Cavoulacos and Melissa McCreery. How did you come together?

    We met while working at McKinsey, during my first first week on the job in the fall of 2008. Lehman had just fallen. There was a lot of upheaval. Even though McKinsey was a great educational experience, I realized I didn’t want to be a consultant. The three of us kept talking about what it would be like if you could get advice on your career and see inside companies before applying and we finally thought: maybe we should just start [our own career site].

    You say it’s taken off like gangbusters.

    It started off as a very basic content career site in September 2011, but we’d attracted 70,000 people to it in the third month. It wasn’t impressive looking, but based on that user growth, Y Combinator accepted us into its winter program and by the following summer, we had 100,000 people on the site each month. Now, 3.5 million people are visiting each month.

    Most are millennials. Our average user is 29, compared with LinkedIn, whose average user is 47. Sixty-five percent of our users are female, compared with LinkedIn, whose users are 55 percent male.

    Why is that?

    We think it’s partly because LinkedIn is more of a transactional networking tool; it isn’t a place where users feel like someone is looking out for their career.

    How is The Muse making money?

    The vast majority comes from recruiting; we now 300 companies listing jobs and corporate profiles on the site. Generally, companies are measuring their ROI by how may hires they’re making, how aware people are of their brands, and how many people engage with their materials, which we put together in part by sending a videographer into every company’s offices. We want users to see authentic, quality materials about what these workplaces are like. [Companies] just pay to sign up, and we take care of everything.

    What about content?

    We have a small amount of revenue that comes through content marketing. Our users are generally very willing to take our recommendations around career-related products and services, but we want to make sure anything sponsored is noted and that we don’t work with partners that we don’t think are relevant or up to our standards. Trust is an important part of our brand.

    What are some ways that you’re using all the data you’re collecting?

    We can tell that people who are interested in certain companies will probably like other types of companies that wouldn’t be obvious from the [mandate] and size of those companies. We can pull out when someone is open to looking for a job because what they’re clicking on and reading starts to change [and we can personalize the experience for them].

    The data is useful for employers, too. They want to be able to compare their recruiting efforts to other companies, so if they say, “We didn’t see as many applications for this role as we wanted to,” we can tell them, “We can see 1,000 people clicked on that role and 40 people applied. That conversion is substantially lower than your close competitor; maybe there’s something in the job description that isn’t communicating what you want it to.”

    How many markets is The Muse operating in currently?

    We’re actively serving jobs in eight markets right now, including New York, San Francisco, L.A., Chicago, D.C., and Boston. But we’re launching soon in Atlanta, Austin, and Houston, and we get nice – and angry – requests from Portland, Raleigh-Durham and other places asking why we aren’t there yet, so we’re investing heavily in expanding the number of cities we serve.

    How was fundraising?

    Even though the market is very good right now, you never know how it’s going to receive your particular company. But it was fun – even a bit crazy. The market is a little insane. People were aggressively pushing us to do things that didn’t make sense. I had to go to a lot of people who I really like and who would probably be very valuable and useful and say, “We’re not going to raise $20 million.”

    Connie

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  • Bill Maris Addresses Sensational Headlines at Disrupt

    Bill Maris at DisruptBill Maris of Google Ventures gave a thoughtful performance yesterday at the TechCrunch Disrupt conference in New York. Interviewed by the outlet’s co-editor, Alexia Tsotsis, the two covered a range of high-profile stories that have been published in the last year and relate either to Google Ventures’s portfolio companies or to controversial – even seemingly strange — statements that Maris has made to reporters.

    Earlier this year, for example, in a Bloomberg profile, Maris was quoted as saying: “If you ask me today, is it possible to live to be 500? The answer is yes.”

    The Bloomberg piece actually provides readers with a fairly rich picture of what Maris is trying to achieve at Google Ventures. But Maris’s very specific prediction has stuck to him like chewed gum and Tsotsis gave him the chance to address it yesterday — an opportunity he seized, suggesting the “science fiction headline” belies the truth.

    The reality, he said is that “for generations, physicians and researchers have worked really hard to diagnose, treat and prevent disease. And so I’m interested in the people that are doing that. And if that adds five years to people’s lifespans, if it adds 10 years . . . I think it’s a worthy pursuit.”

    At the beginning of the last century, he noted, the lifespan in the U.S. “was about 40 years; now it’s about 77.”  There’s “a ton of work that has to be done” to address the question of whether humans can live 500 years, Maris continued. But he said he thinks things are moving in the right direction. “I think it’s possible within a generation or two, at the most, to cure cancer.” Maris also noted that the “first human genome was sequenced in 2004. It took about 15 years and $2.7 billion, and now you can sequence a genome on a machine that can sit [on a small side table] for under $1,000 in a couple of hours.”

    Maris was also asked about the reputation of Uber — heralded as Google Ventures’s largest deal ever when Google backed it in 2013 —  as “ethically challenged.” Calling Uber the “fastest-growing company we’ve ever seen,” he offered that any outfit growing so fast is invariably going to “bump into challenges.” Maris also shared some color about one of his first meetings with Uber CEO Travis Kalanick about a potential tie-up.

    “When we invested in the first round of Uber, my partner, David Krane, and I went to see Travis and talk about the round,” said Maris. “I told Travis the same thing I told Matt Rogers and Tony Fadell when we invested in Nest [Labs] . . . which was: ‘What does it take to take it off the table? We don’t want to get into an auction. We’re not looking to save money on valuation, and hopefully you’re not looking to crank it as much as possible.’ And Travis said, ‘Here’s what it’s going to take. Here’s the price and what I want the round to look like. Are you on board with that?’”

    After Maris said Google Ventures was, and they “shook on it,” that’s “exactly the deal that we did, and Travis was as good as his word,” said Maris, offering that Kalanick could “easily” have asked for “15 to 20 percent more.”

    Tsotsis next moved on to Google Glass — which Maris says is alive and well, despite reports suggesting otherwise. We’d hoped she might ask Maris about another, Uber-related headline this year: the news that Google plans to develop its own Uber competitor.

    As you may recall, Bloomberg had reported back in February that Google was “preparing to offer its own ride-hailing service, most likely in conjunction with its long-in-development driverless car project.” At the time, Bloomberg said that David Drummond, Google’s chief legal officer and senior vice president of corporate development (as well as an Uber board member), had “informed Uber’s board of this possibility, according to a person close to the Uber board.” Bloomberg further reported that “Uber executives have seen screenshots of what appears to be a Google ride-sharing app that is currently being used by Google employees.”

    Shortly after the piece was published, a “person familiar with the matter” told the Wall Street Journal that the “news that Google is developing an app to rival Uber has been blown out of proportion.” Reported the Journal: “The person said a Google engineer has been testing an internal app that helps Google employees carpool to work, and the app isn’t associated with the company’s driverless cars program.”

    That seemed to settle the matter. Given the size of the opportunity Uber is chasing — and Google’s slowing growth — we’re not certain why.

    (By the way, in case you’re curious: Unlike Maris’s colleague Ray Kurzweil – who reportedly takes 150 supplements each day to extend his life — Maris doesn’t take any, he said yesterday.)

    Connie

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  • A Startup Exposes the Shadiness of Shipping

    Shipping IndustryAmong a sea of specialized data companies, Windward, a five-year-old, 35-person, Tel Aviv-based company, stands out. The reason: it’s among few companies attempting to collect and sell detailed, real-time information about global ship activity.

    Its story attracted Horizon Ventures of Hong Kong to its door. (Horizon just led a $10.8 million strategic investment in the company, with participation from Windward’s early backer, Aleph). Windward also counts a dozen governments around the world as customers. After poring over some of Windward’s findings about ship behavior, we also found ourselves wanting to learn more.

    Luckily, we were able to catch Windward’s cofounder and CEO, Ami Daniel, as he bounded around New York City yesterday, trying to strike new partnerships. Our chat, edited for length, follows.

    You were a navy officer for six years before starting Windward. Did you start thinking about the company during that period?

    I was entrepreneurial as a teenager, and when I left the Navy, I hooked up with [Windward cofounder] Mantan [Peled], who I’d served with for five or six years. We wanted to do something big, and we felt that oceans were the Wild West. More than 90 percent of the world’s trade is carried by sea [according to the International Maritime Organization, or IMO], yet the shipping ecosystem is much more opaque than most people realize.

    How so?

    Talk to a big commodity trader, for example – someone who buys and sells more than $100 million in oil every year. His secret sauce is his connections, like port agents who know who is entering or leaving the ports, or the mine manager who knows when cargo is rolling out to market, or the contact in Nigeria who knows how to buy [low and sell high]. It’s an industry that’s based on 200-year-old methods. It’s all very gray. It’s kind of like real-estate in New York. [Laughs.]

    You claim Windward has a better picture than anyone of everything that’s happening. How does your tech work? 

    We start by checking whether you are who you say you are and creating a record of what you’ve been doing. We also calculate what you say you’re transporting by gauging, for example, how long you’re in the jetty, and how long it’s taking you to load what you’re carrying compared with the average loading rate for the same cargo. We don’t necessarily trust you to tell us how much oil you’re carrying. There’s a lot of [subterfuge in shipping]. For example, ships only report their final destination 41 percent of the time, and 55 percent of ships misrepresent their port of call for most of their voyage.

    Aren’t there mandates against doing such things?

    The IMO is responsible for maritime data and there are mandates issued by the UN, which is the regulator. But there is no punishment for not complying. You can steal an identity. You can turn off your data transmissions. I personally approached the head of the IMO to give him an executive summary of our findings and to ask for the organization’s feedback and they never called us back.

    And you collect all this information how? Through satellites? Sensors? 

    It starts with public information, then we get commercially available information. Spire, for example, is a San Francisco-based company that tracks ship transmissions and weather and sells information to companies like us. Beyond our data partnerships, we go to port agents and logistics brokers and we say, “We’ll give you technology [in exchange for information].”

    Everyone has a small segment of the picture. There are no magic solutions, no one vendor, no one protocol. Everybody’s stories are different, so it’s very time- and resource-intensive work. But one of the moats we’re building is one of the biggest databases ever.

    But you have competitors. 

    We do have competitors, including IHS [a company that sells information and analytics about the maritime industry to customers]. But what we’re doing is better. Others take this older approach of information services, with analysts looking at databases and writing reports and then selling a giant report to everybody. We’re taking a data science approach, using Hadoop and Apache Spark to compute and slice and dice things automatically according to different queries.

    You have a dozen governments paying you to subscribe to this platform. Can you give us some idea of what they’re paying you?

    We’re happy that we’re being paid for the value that we’re providing, which is high, but I can’t be more specific except to say that we’re seen three times revenue growth year over year for the last three years and we’re making enough that we’ve barely touched the [$5 million Series A round we closed in 2013 from Aleph].

    Like another intelligence specialist, Palantir Technologies, Windward started with government customers but wants to begin targeting financial clients. Have you lined up any firms so far?

    We’re in beta testing. No one is paying yet. But we’re not cash strapped. We can afford to engage with customers as we develop the product. We want to make a billion dollar company out of this  That’s why I’m in New York, meeting with hedge funds and commodity traders. Legwork!

    Connie

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  • A Far-From-Comprehensive List of Women Who Venture Firms Should Be Pursuing

    Emily WhiteIn recent weeks, StrictlyVC has received several requests from readers asking what women we’d propose that venture firms hire. The timing isn’t surprising. Ellen Pao’s gender discrimination lawsuit against Kleiner Perkins dominated the headlines throughout March and triggered anew discussions about the gender imbalance in the venture community. Then there was Fortune’s sit-down with Marc Andreessen, in which he said his venture firm – whose general partners are exclusively male — has repeatedly tried, and failed, to hire the same female executive as a GP.

    VCs are asking recruiters for help, too, says Joe Riggione, a cofounder of the executive recruiting firm True Capital, who tells us that even before the Pao trial got underway, “we’d begun getting investor searches where they asked us to prioritize female candidates.”

    Riggione sees a particularly “big opportunity on the operator side,” because so many women have the engineering, product and marketing experience that would make them attractive venture candidates, particularly for investor roles where they can be groomed into general partners.

    We don’t think it’s all that hard to come up with potential general partners, either. Let’s face it: Any top female executive would have the same odds of developing a great track record as a male executive pulled into a venture firm. In fact, in little more than an hour this weekend, we came up with a short list of 16 women that firms would be smart to pursue if they’re truly interested in diversity (and they should be, for the obvious reason that more diverse teams are more effective teams). Here’s what we came up with, in alphabetical order. Note: we have not talked to these women about this list or gauged their interest in VC.

    Sukhinder Singh Cassidy. Cassidy is the founder and CEO of the e-commerce video platform company Joyus. We’ve no idea how it’s doing, though it has raised $41 million, including a $22 million round led by Marker last November. (It also just settled a lawsuit against it by a company claiming it infringed on its patents.) We’d probably hire Cassidy no matter its fate. Before Joyus, she served (briefly) as the CEO of Polyvore, spent a year as an entrepreneur-in-residence at Accel Partners, and before that, logged five-and-a-half years as president of Asia Pacific and Latin America operations at Google. Cassidy was also a senior VP of business development at the now publicly traded company Yodlee, which she helped form with numerous colleagues from Amazon, where, yes, she also once worked, as a business development manager. (And her resume goes on. In fact, this reporter wrote a piece for BusinessWeek about Cassidy’s impressive track record back in 2001.)

    Caterina Fake. A Vassar grad, Fake cofounded Flickr and Hunch, both of which were acquired for nice sums (by Yahoo and eBay, respectively). Fake is also a seasoned investor who is a partner of Founder Collective and has made numerous seed-stage investments, including in the online marketplace Etsy, where she wound up serving as board chair for five years. Fake is currently running her newest company, four-year-old Findery, and likely wants to see it through to some natural exit. It could be worth starting to woo her from now, though.

    Shana Fisher. Fisher may not be interested in working for anyone but herself, which is currently the case, but it’d be worth making the effort to see. Fisher currently runs her own New York-based, early-stage firm, High Line Venture Partners, but earlier in her career, she was an SVP of strategic planning at IAC; served as a VP and director of media and technology mergers and acquisitions at Allen & Company; and, oh, yeah, was a program manager at Microsoft before that. Did we mention that she was also one of the first investors in Pinterest?

    Kimber Lockhart: Lockhart was recently appointed chief technology officer at One Medical Group, a very well-funded primary care practice, which she’d joined in April of last year as its VP of engineering. Given that plum assignment, she might be hard to wrest from the company, but if we were hiring, we’d give it a shot. Before joining One Medical, the Stanford grad was a senior director of web application engineering at the storage company Box, which she joined in 2009 after it acquired her two-year-old collaborative document editing startup Increo Solutions.

    Marissa Mayer. Life doesn’t seem so rosy for Mayer as the CEO of Yahoo, though she undoubtedly knew what she was walking into when she accepted the job in July 2012. (After all, life hasn’t been too rosy for any of Yahoo’s many recent CEOs.) Whether Mayer would leave without being ousted remains a question, but one senses she’d probably be a good investor (maybe even better than CEO). Certainly, she’s been building on her investing skills, collecting a wide range of startup stakes that include the automated investment service Wealthfront and the wireless power startup UBeam.

    Mary Meeker. Kleiner Perkins spent a dozen years trying to recruit Merrill Lynch’s longtime star investment analyst. It finally succeeded in late 2010, and Meeker, who helps lead the firm’s digital growth funds, sounded happy enough to be there during the very public trial last month of former junior partner Ellen Pao, where Meeker testified that Kleiner is the “best place to be a woman in the business.” Still, all things considered, we wouldn’t be shocked if Meeker decided on a change of scenery given the right circumstances.

    Michelle Peluso. Peluso is the CEO of the discounted luxury e-tailer Gilt.com, as well as a board member. It’s hard to know how the company is doing. It planned to go public in the third quarter of last year, then the fourth quarter, and instead wound up raising $50 million earlier this year. (The company has raised $286 million since it was founded in 2007.) Still, Peluso, who assumed the role of CEO in February 2013 from cofounder Kevin Ryan, has been widely credited with helping to revive the company’s fortunes. She’s also held some other major-league roles – – including as a top honcho at Citibank for four years and as the longtime CEO of Travelocity – that would make her a very big catch for any venture firm, particularly one focused on later-stage investments.

    Deborah Quazzo. Quazzo is the founder and managing partner of GSV Advisors, a six-year-old, Chicago-based broker dealer that provides advisory services to the education and business services sectors, as well as invests in related startups. Quazzo, who also co-founded the investment bank ThinkEquity Partners, was recently taken to task by the Chicago Sun-Times, which criticized her role as a member of the Chicago school board. It noted that during Quazzo’s tenure (which is ongoing), the district has tripled its spending on education-technology companies she has invested in. In response, Quazzo, who said she didn’t appreciate becoming the outlet’s “punching bag,” has promised to donate any profit she sees from those investments.

    Sheryl Sandberg. We don’t need to explain why it would be the coup of all time for any firm to hire Facebook’s longtime COO except to say that, in addition to having such an impressive career (Google, Treasury Department), she seems — from this distance, anyway — imminently likable. We’d guess this is the person Andreessen Horowitz has pursued, by the way, though it’s just a hunch based on Marc Andreessen’s penchant for working with his close colleagues. (The firm didn’t respond to our request for more information about the female GP it has tried to hire. But as many readers will know, Andreessen joined the board of Facebook in 2008. Sandberg, who was invited onto Facebook’s board in 2012, joined the company in 2008.)

    Gwynne Shotwell. Shotwell is the longtime president of SpaceX, which she joined in 2002 as its VP of business development. With a master’s and undergraduate degree in mechanical engineering and applied math from Northwestern University and the very apparent endorsement of Elon Musk, we figure if she can help him run his spaceship company, she can probably figure out venture capital, too. (She’d presumably add a lot in particular to firms like DFJ and Founders Fund and Lux Capital that more aggressively think “outside the box.”)

    Kara Swisher. This may be the most controversial of our picks, mostly because it’s very hard to imagine Swisher abandoning journalism. Still, we think Swisher would be a huge get for a top venture firm. A former Wall Street Journal columnist turned co-executive editor of the highly successful All Things Digital franchise, Swisher isn’t just great at landing scoops and synthesizing information but she’s an entrepreneur now, too, having given her old employer the finger in late 2013 and more recently forming the media property, Recode, with her longtime partner, Walt Mossberg. Swisher isn’t a technologist. But you can imagine the flow of opportunities that would find their way to her based on her extensive network.

    Tiffany To. To has spent the last three years as VP of product management and marketing at Coho Data, a company whose storage appliances help enterprises scale-out storage. Before that, she was a group product manager at VMWare. (She has also held product and marketing jobs at Intel and SGI.) To, who graduated from Stanford with a computer systems engineering degree, also has an MBA from UC Berkeley’s Haas School. (Just remarking.)

    Trae Vassallo. Vassallo, a strategic partner at Kleiner Perkins Caufield & Byers, might be turned off from venture capital, given what sounds like an uneven experience at Kleiner. To wit, she led the company’s investment in Dropcam and reportedly played an instrumental role in its investment in Nest Labs but was eventually cut in a broad downsizing. (She also testified recently that she once had to fend off a former colleague who showed up in her hotel doorframe in his bathrobe.) A firm would be smart to try changing her mind, if so.

    Emily White. White’s career has taken off over the last eight years, beginning with a job at Google as a director of its Asia Pacific Latin America online sales and operations. In 2010, she jumped to Facebook, ultimately becoming the director of mobile partnerships at its subsidiary, Instagram. White’s name was in the news more recently because of another role – as COO of Snapchat, a job she left in March after just 15 months. We don’t know if she’s interested in venture capital right now. According to Recode, White has “long wanted to become CEO of a company herself.” Given how highly she’s regarded by entrepreneurs, though, we’d certainly give her a call if we were running a top venture firm.

    Susan Wojcicki. Wojcicki probably has more money than most venture firms, even the big ones. She’d also be very hard to pry from Google, where she spent nearly 14 years as its SVP of Adwords and Adsense and where she has spent the last year-plus running its enormous YouTube subsidiary. Still, who would have thought LinkedIn cofounder Reid Hoffman would join Greylock Partners? Sometimes, you just never know.

    Julie Zhou. She headed to Facebook nine years ago after getting her undergraduate and master’s degrees in computer science at Stanford and has been managing design and research teams across numerous products ever since. Zhou has also demonstrated a knack for sharing what she has learned about design and management issues. (See here.) We’re guessing she’d bring plenty to the table.

    Photo (above) of Emily White, via Instagram.

    Connie

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  • Need a Breather? This VC is Hoping So

    1c44283.how-iphone-spacesThis week, StrictlyVC chatted with Steve Schlafman, a principal with RRE Ventures in New York who spends a fair amount of his time considering on-demand startup models. Among the deals he has led for RRE are Managed by Q, a 1.5-year-old, New York-based company that provides office cleaning and services like restocking to small businesses; and Shuddle, a year-old company in San Francisco that employs women to shuttle around children on behalf of their busy parents. (The proposed promise: the ride is safer than an Uber.)

    Along with Vayner/RSE, Schlafman also led a $6 million Series A last September in Breather, a company that provides on-demand rooms in cities so that visitors can pop in to relax with friends, finish a speech, or maybe make some calls that would be harder to execute from a crowded coffee shop.

    It may be Schlafman’s boldest, and riskiest, bet. Getting enough repeatable business to make profitable use of Breather’s rooms — which the company leases — would seem to be an enormous challenge. Breather also operates in a crowded sector with more than a handful of competitors, including LiquidSpace, which also invites users to find and book private spaces to rent by the hour, day or longer. (It has raised more than $26 million, including from Shasta Ventures, Floodgate and Greylock Partners.)

    Schlafman, who says Breather might look for capital later this year, isn’t concerned, telling us that it’s all in the execution. Here’s more from our chat, edited for length.

    You call Breather the craziest idea you’d ever seen, yet you invested anyway. Why?

    I became a user, and they’ve just completely nailed the experience of creating a fourth space. Think about it. For a long time, people had their home space and work space and there wasn’t much in between. Then along came Starbucks and cafes and public spaces that had multifunctional uses, but we believe that people need another space, so when you’re in [San Francisco’s] SOMA [neighborhood], for example, and you have two hours, you can pull out your phone, book a room, and have a business meeting or [quietly decompress].

    A lot of startups now offer people an alternative to Starbucks.

    A lot of companies are focused on coworking on demand, including LiquidSpace, PivotDesk and WeWork; they’re very much catering to a business user. Breather is building a tightly controlled experience that’s aesthetically pleasing. You can sell to a business user or a consumer.

    How many rooms does it currently offer users?

    It has 60 spaces right now – something like 15 in San Francisco, almost 40 in New York. The company just opened in Boston, too. What’s nice is that as soon as they put a space on the map, it gets to breakeven. What I love about [cofounder and CEO] Julien [Smith] is that he’s scrappy. He isn’t a Silicon Valley-type operator in a tweed jacket. He’s a child of the Internet who believes in testing, including when it comes to developing relationships with landlords. I’m not sure he’d want me to spill the beans, but he’s looking at asset-light models where Breather isn’t necessarily taking on the lease.

    How many people are these rooms supposed to accommodate?

    These are fairly small rooms, with a couch and a desk and a conference table with chairs and WiFi, and you can fit 5 to 10 people in them, which is great as companies can use it for overflow space or small offsite events, instead of spending a sh_tload of money on a hotel. It’s hard to wrap your head around the concept, but once you use one, you get it.

    That’s a big challenge, though, getting people to think about heading somewhere new. I’d also think establishing repeatable business would be tricky. How is the company juggling that?

    They’ll be introducing a smart pricing algorithm, so that not every hour is created equally. [It’ll be] upwards of $35 to $40 an hour during peak times. You’ll also be able to unlock certain services eventually. In the meantime, based on early cohorts, the payback is very fast on our marketing spend.

    How does Breather ensure that there’s nothing funky going on in these rooms?

    Trust is a huge factor. Every single time a room is cleaned – and we partner with a well-known cleaning service right now — there are reviews coming from the cleaning side, as well as from [the next] consumer.

    Will the spaces always run on the smaller side?

    That’s where we think there’s a good opportunity to build a completely new category. The idea is to have a breather in every city in the world. Will that happen in the next year or two? I don’t know, but once I tried it, I was sold.

    (Readers: We’ll be talking with Schlafman and other investors about the fast-changing on-demand economy next month in San Francisco.)

    Connie

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  • As On-Demand Valet Battle Intensifies, Luxe CEO Shifts Gears

    Curtis LeeThe battle to baby your car is heating up. This morning, Zirx, a year-old, San Francisco-based company that will park your car, wash it, fill up its gas tank, and rotate its tires, is announcing $30 million in new funding. The round comes roughly a month after Luxe, another San Francisco-based valet app, raised $20 million. (Luxe has now raised roughly $25 million altogether, while Zirx has raised around $36 million.)

    Yesterday, we talked with Luxe CEO Curtis Lee – a former product manager at Zynga, YouTube, Google, Skype, and Groupon — about the competition, and whether and when these types of companies turn profitable. Our chat has been edited for length.

    You now have 40 full-time employees and hundreds of contract workers parking customers’ cars in San Francisco, L.A., and Chicago. Yet you say that parking cars is step one. What’s next?

    We’re more of a services platform than anything else. We happen to park your car, but we’re already doing gas fill-ups, car washes, and oil changes . . . Your car is effectively an urban locker, and we want to get stuff delivered to your car, as well as do things with it, like pick up your keys, get your groceries . . .

    How do you decide when to roll out new services?

    I’m a product manager. My cofounder [CTO Craig Martin] is a engineer. We worked at Zynga together, and we tend to like to do experimental things often. If they work, we double down. If they don’t, we won’t. And we saw that early on, the primary reason customers decided to use us was for our additional services.

    What are you charging for some of these services?

    Our rates vary depending on the city, but in San Francisco it’s $5 an hour [to have your car valet parked] and $15 per day. Car washes are $40. Gas fill-ups are the cost of the gas plus a $7.99 surcharge.

    Are you dealing with much poaching?

    Certainly, other companies are trying, especially because our guys are so obvious on the streets [wearing the Luxe uniform, which are bright-blue jackets]. We’re the only company that shows customers where our lots and our valets are on a map. That makes us vulnerable sometimes, but our retention remains very high. We think [our workforce] is fairly happy. We also have more demand than our competitors, and [valet pay] is hourly based, so [our valets are] not going to make as much money elsewhere. It’s like Uber; people want to work for Uber because it has the [consumer] demand.

    What of allegations that on-demand startups short-change workers by classifying them as independent contractors?

    We’re not obsessed or worried about it. I think it’s more a philosophy thing than the letter of the law. You treat employees – and independent contractors – with respect. It’s not as much about classifications. Who knows what will happen. [Any potential legal changes] aren’t in our hands. But we’re keeping an eye on it.

    Do you pay your valets minimum wage? Do they make much in tips?

    It’s completely optional, but our customers can give tips [via our app] because they were trying to do it regardless, through cash. Our guys make way more than minimum wage for sure because of the demand we get.

    Also, our guys don’t need to own cars. There’s no equipment necessary [beyond a scooter to get to customers more quickly]. Twenty percent of Uber drivers’ salaries go toward wear and tear and gas.

    It’s seems like potentially hazardous work, zipping around town to pick up and drop off customers’ cars as quickly as possible.

    We put [our valets] through extensive training so they understand where they need to drop off people’s cars, as well as make sure they aren’t doing anything that puts them at risk. Our bright blue jackets are also designed to ensure people see them. And we have a valet office where people can hang out and eat free food and relax and, if there are issues, go to office hours and talk with us.

    Your arrangement with city garages is pretty central to your future profitability. Are these typically monthly arrangements for spots?

    We have different agreements with different parking lots all the time — everything from monthly to yearly to daily arrangements. But parking lot owners take care of us and we take care of them, turning over the space enough times that we can make a profit on a per unit basis. The best analogy is to Priceline. For hotels, unused rooms are sunk costs. Priceline has created a billion-dollar business just by providing discounts to customers and getting [hotels paid] for their underutilized inventory.

    Still, some VCs think services businesses like yours are too cost intensive. What are they missing?

    We’re basically creating a behavioral change. Those days of searching for parking, wasting time, wasting gas – they’ll disappear in time. Also, parking alone is a $100 billion market globally and a $30 billion market in the U.S. And you’re seeing tremendous growth of car ownership internationally, including in Brazil, China, and India, all of which are undergoing massive urbanization without enough infrastructure to keep up. There are just huge opportunities for us.

    Will you be fundraising again this year?

    We’re open to raising [again] when the time is right.

    Photo courtesy of Forbes.

    (Bay Area readers, to learn more about the shifts in on-demand startups, you might want to check this out next month. We’ll be there to moderate a panel.)

    Connie

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  • Wences Casares on the Future of Xapo (and Bitcoin)

    Wences CasaresWences Casares is among the most-trusted proponents of the digital currency bitcoin. Indeed, last year, Casares – a serial entrepreneur who previously ran the digital wallet service Lemon (acquired by LifeLock in late 2013) – raised $41 million for his now 40-person, Palo Alto, Ca.-based company, Xapo, including from Benchmark and Fortress Investment Group.

    That amount has since been dwarfed by other bitcoin startups – the payments processor and wallet startup Coinbase announced a $75 million round in January, for example – but Casares says he doesn’t need more capital any time soon. Despite a price crash last year and some high-profile security breaches, bitcoin’s growth, and Xapo’s, continues apace, he says. We talked the other day in a conversation that has been edited here for length.

    When you were raising money for Xapo last year, a single bitcoin equaled $650. Now, bitcoin are worth $225 a piece. How has that price fall impacted your business?

    For people who’ve been looking at bitcoin for three or four years, that’s not really the story. Bitcoin has done the same thing several times: [jump from], nine cents to $10; $1 to $17; $17 to $30 — all the way to $100. So those who’ve been around along time have seen it go from nine cents to $200.

    Also, when we raised that money, there were 3 million people using bitcoin. Today, there are 12 million. There were 20,000 transactions; today there are 100,000. Back then, bitcoin represented 50 percent of all cryptocurrency volume; today, it represents 96 percent.

    But are your customers transacting more now that it’s worth less, or are they continuing to sit on it?

    There are two very different markets. You have the California and New York market, [where people] own it as a speculative payment and who never do a payment, and [those 10 million people] account for most of the bitcoin. Then you have emerging markets where you see [2 million other] users with a lot less coins, and they’re using it because they don’t have credit cards and that hasn’t changed with the price.

    Where are people most actively using bitcoin in emerging markets, and is it becoming any easier to use in those places?

    People are using it in India, Turkey, Indonesia, Brazil. The barriers remain enormous. It’s very hard to use it. But if you have no other way of paying online, you’re willing to go through enormous hurdles.

    You’ve said that establishing trust is the biggest hurdle that bitcoin faces. Isn’t simply understanding it an even bigger obstacle?

    Bitcoin looks like the internet before there was a browser. A lot of us tried explaining PCP stack and how the protocol works [etc.] and nobody really started using it because of those explanations. It happened because someone wanted to keep in touch over email or Skype or Facebook.

    [Similarly], the main use case for bitcoin is micro-transactions, and the internet will look different five years from now when you can move cents and hundreds of users who don’t have credit cards but $5 of bits can unlock certain things that you can’t unlock any other way.

    Xapo’s business is centered on a bitcoin wallet whose users store the bitcoin in vaults – or physical servers — around the world. What are they like, how many does Xapo manage, and why are they located where they are?

    These are large facilities where there are sections owned by other companies, with sections that are exclusive to us that we don’t share with anyone else. We have five – one in Switzerland and the others on other continents. They’re not very close because you have to be able to lose one due to a disaster like an earthquake, flooding or nuclear war.

    Would you ever need more?

    No. Even if we were 10,000 times our current size, it isn’t like bitcoin take up more space. We have five [servers] because each bitcoin has five keys. Imagine a door that has five keys and you need three to open it. Basically, if you lose one or two facilities owing to natural disaster or theft, you can use the other three to move the bitcoin to a safe location.

    Many bitcoin companies are tackling numerous things, like Coinbase. It’s a wallet provider. It’s also an exchange. Why are you focused on the wallet alone?

    Because it’s hard enough to win at one business and do it really well. At the beginning, AOL gave you connectivity and weather and email addresses and financial news, and it didn’t win at any of those things. Bitcoin is the same. A lot of companies do many things; we’d rather build the best wallet in the market.

    Connie

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