• Andreessen Horowitz Lands a New GP — and a New Fund

    Vijay_Pande2Andreessen Horowitz is making a big move into biotech, and it’s using a $200 million new fund called the AH Bio Fund – and new general partner, Vijay Pande — to plant its stake in the ground.

    The fund will be used to invest in mostly early-stage startups at the intersection of computer science and life sciences. It’s the first sector-focused fund for Andreessen Horowitz, which is halfway through its main fund, a $1.5 billion vehicle that it announced in March of last year.

    Pande seems a good choice to lead it. He has the know-how and the connections, having spent the last 16 years teaching chemistry, structural biology and computer science at Stanford University, where he says he’ll continue “spending a very small percentage of my time” with his research group there.

    Pande also knows startups, having been involved in a number of them already. Last year, he cofounded Globavir, a seed-funded infectious disease company. Pande also founded Folding@home, a now 16-year-old distributed computing project for disease research that remains his highest-profile work to date.

    Asked if it will be hard to say no to some of the many Stanford-related startups now working on health care-focused, machine-learning startups, Pande calls it a “kid in a candy store” issue, adding that he expects to “see a lot [of startups] from Stanford, Berkeley, and M.I.T.,” among other places. (Conveniently, he notes, he has spent time at all three. He was once a Miller Fellow at U.C. Berkeley and nabbed his PhD in physics from M.I.T.)

    Andreessen Horowitz is quick to note that Pande won’t be making decisions about what to fund on his own.

    More here.

    Connie

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  • Trinity Ventures Raises $400 Million for 12th Fund

    image005Trinity Ventures, a 29-year-old, Sand Hill Road Firm whose recent hits include the IPOs of Zulily, New Relic and TubeMogul — not to mention the still-private but highly valued startup Docker — has closed its 12th fund with $400 million in capital.

    We were in touch yesterday with Ajay Chopra, a general partner at the firm for nearly the last decade, to ask what the fundraising process was like at a time when valuations are high — as are concerns about exits. Our exchange has been edited lightly for length.

    You raised your last fund in 2012 with $325 million. This fund is considerably larger. 

    We’re writing slightly larger checks for the same ownership. With valuations higher, it takes a larger check to get the same ownership in a similarly sized portfolio. But our mission and strategy for achieving it have stayed the same: invest early in world-class teams going after big ideas, support them through good times and bad, and build meaningful businesses together.

    How has the firm’s team changed since that last fund was closed?

    Since then, we’ve added six people to our staff. Four of the new additions are women, and two of those women are partners. We’re very glad that with these additions, we’re probably the most diverse firm of our size.

    The [general partners are] the same except for Noel Fenton, who founded the firm almost 30 years ago and is taking a well-deserved step back.

    What was fundraising like? What did your investors want most to see? Did you sense nervousness on their part over exits, or a general lack of them?

    Besides good performance, they want to see funds where partners have worked well together over several investment cycles with consistent investment style over several funds. They’re definitely concerned about current startup valuations but also understand that from a return standpoint, it’s primarily an issue for late-stage investors.

    How are you dealing with the slowdown in IPOs?

    More here.

    Connie

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  • Pay to Play: How Investors Get Burned in a Downturn

    burnt toastEarlier this year, the law firm Fenwick & West published a report analyzing the financing terms of 37 U.S.-based venture-backed companies that raised money at valuations of $1 billion or more in the 12-month period ending March 31.

    The report’s headline-grabbing conclusion was that in all cases, the investors had received significant downside protection in case the companies’ value declines. (Called a liquidation preference, the companies’ later-stage investors basically received the right to get paid ahead of other investors, as well as the companies’ management teams and employees.)

    The findings were a revelation, but they didn’t provide a complete picture of what could happen in a downturn. In fact, there’s a giant hitch the report did not touch on, and that’s pay-to-play provisions, which became routine during the dot com bust of 15 years ago and could well become commonplace again if things head south.

    “VCs, especially people who’ve been in the business a long time, understand them,” says attorney Barry Kramer, who authored the Fenwick & West report and more recently wrote on Medium about pay-to-play provisions. “It’s part of their calculation. I’m not sure that a good chunk of newer investors, whether non-traditional or because they’re just younger or whatever, have this scenario in mind.”

    They should.

    More here.

    Connie

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  • Watch Out, VCs, Chris Farmer Plans to Massively Disrupt the Industry

    BN-KT144_ChrisF_G_20151013194954For years, Chris Farmer worked as a venture partner at General Catalyst Partners, helping develop its then-nascent seed-investing program while simultaneously working on a big idea: a database that could help screen engineering talent.

    Today, that idea forms the basis of SignalFire, a San Francisco-based investment firm that Farmer, who is its sole general partner, calls the “most quantitative fund in the world.” He says to “think of us as the world’s most elite angel group, with a central institutional fund, built on top of a mini proprietary Google.”

    It all sounds pretty audacious, of course, but there’s some “there” there, as we saw first-hand during a demonstration last week.

    According to Farmer, SignalFire’s platform, Beacon, tracks more than half a trillion data points that it collects from two million data sources, from patents to academics publications to open source contributions to financial filings.

    As a result, SignalFire is able to keep close tabs on the comings and goings of millions of engineers around the globe. And that’s just one piece of the picture. SignalFire also invests heavily in unstructured data, including raw consumer transactions that allow Beacon to see where consumers are spending their time and money — and which companies and sectors are growing or not.

    Much more here.

    Connie

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  • Y Combinator Tells VCs Not to Worry About Its New $700M Fund

    Twitter_AliAlmost a year-and-a-half after Ali Rowghani resigned as COO of Twitter, he’s been appointed the head of Y Combinator’s growth fund by the organization’s president, Sam Altman.

    TechCrunch had heard whispers of the move earlier this week, but Altman made the announcement official earlier yesterday, tweeting of Rowghani that he’s a “wonderful partner to help companies scale.”

    Rowghani joined Y Combinator as a part-time partner back in November of last year. Earlier in his career, from 2002 through 2008, he served as the CFO of Pixar. (Rowghani had joined Twitter as CFO from Pixar but was made COO in 2012.)

    Yesterday, we hopped on the phone with Rowghani to discuss some of his plans moving forward.

    Most notably, Y Combinator will be leading investments in startups with its new growth capital, which is coming in part from Stanford University, Willett Advisors, and TrueBridge Capital Partners, according to the Wall Street Journal. Indeed, as TechCrunch reported early this week, YC is the lead investor in Checkr, a San Francisco-based startup that runs background checks and vets potential hires for fast-growing startups. The company is raising at least $30 million in Series B funding, at a valuation north of $250 million.

    For VCs who haven’t had to compete with Y Combinator in later-stage rounds, this is a Big Deal.

    More here.

    Connie

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  • VC Jeff Clavier on Getting to the Promised Land

    Jeff ClavierLast month, we talked with Jon Callaghan of True Ventures and marveled at the billion-dollar-plus return that his firm is poised to reap from leading the seed round of the wearable fitness company Fitbit.

    But True isn’t the only venture firm for which Fitbit is a giant home run. During a recent sit-down with Jeff Clavier, founder of the venture firm SoftTech VC in San Francisco, he joked that as another investor in Fitbit’s seed round, he finds it hard not to take a daily interest in the share price of the company, which went public in June and is now valued at more than $7 billion. (Its lock-up period ends in December.)

    More from that recent chat follows, edited for length.

    You moved up to San Francisco from Palo Alto a couple of years ago. How’s it going? How many companies do you have up here now?

    We have several dozen portfolio companies in San Francisco and three more in [nearby] Oakland. We started out in Palo Alto 11 years ago, then three years ago we started hanging out at [the San Francisco workspace collective] Founders Den and having weekly meetings there. By the time AOL kicked us out of its buiding in Palo Alto two years ago, there was no point in looking elsewhere because freaking Palantir [the private data analytics company] had killed the startup activity.

    Meaning?

    More here.

    Connie

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  • A Survey On Diversity, or Lack of It, at Venture Firms

    sheepThe Venture Capital industry is stuck in yesteryear – the same people, living the same lives and having the same experiences making largely the same decisions. This sameness may have been a strength but is now creating blind spots. For every idea we fund, how many great ideas don’t even get a sounding board because we can’t relate to the problem or the entrepreneur? How much better off would we be if we had a larger lens from which to take bets on a broader class of entrepreneurs and ideas? My suspicion is greatly.

    So begins an op-ed by venture capitalist Chamath Palihapitiya about some research that his firm, Social + Capital, has just produced in concert with The Information on the state of diversity in venture capital.

    You may think the results can’t possibly surprise you, given venture capital’s stubbornly persistent reputation as a bastion of largely white, privileged men who’ve attended top universities and gone on to land plum operating assignments or start their own venture-backed companies on their path to becoming VCs.

    You’ll still be taken aback.

    According to the organizations’ conclusions, fully 92 percent of senior investment team members at top venture firms are men, and 78 percent of them are white. More shockingly, fully 21 of the 71 most active U.S. venture firms – that’s 30 percent — employ only white “leaders,” as they’re called in the study.

    Even compared with tech giants — many of which have been called out for terrible gender and diversity numbers — the venture firms look lousy in this rendering.

    Take Microsoft, where just 17 percent of employees are women. That puts Microsoft behind Facebook, Amazon, and Apple, where 23 percent, 25 percent, and 28 percent of employees are women, respectively. Meanwhile, at venture firms, just 8 percent of senior VCs are women.

    As for ethnicity, venture firms don’t score quite as terribly, as long as you’re willing to overlook that the 71 firms employ just four black people who happen to be men. (Given that 12 percent of the American population is African-American, you should not overlook this.)

    Says Palihapitiya in his op-ed, “The bottom line is that the VC community is an increasingly predictable and lookalike bunch that just seems to follow each other around from one trivial idea to another.” To “fund the big ideas of our day,” he continues, “we need to improve the decision making — or change the decision makers within our industry.”

    For a link to the diversity data collected from VCs; the rankings; and Palihapitiya’s full op-ed, click here.

    To download an Excel file of all the data, click here.

    If you want to complain to Palihapitiya about these findings, which, it should be noted, rank Social + Capital as the most diverse venture firm among those managing more than $1 billion in assets, you can find him here on Twitter.

    Connie

  • Emergence Capital, Long a Top SaaS Investor, Zeroes in on Mobile Enterprise Apps

    Screen Shot 2015-09-07 at 8.43.58 PMSince its founding a decade ago, Emergence Capital Partners has become among the startup industry’s most highly regarded investors in enterprise software-as-a-service companies.

    Fact is, few firms are as specialized. But the approach has paid big dividends. In fact, in 2013, Emergence saw one of the industry’s biggest returns with the IPO of Veeva Systems, an enterprise cloud provider for life sciences companies. In 2008, Emergence invested $4 million in the startup. When it went public, it was valued at $4.4 billion, and the firm’s stake was transformed into more than $1.2 billion.

    Veeva’s market valuation has since slid to $3.2 billion, and Emergence has since quietly shifted its focus from SaaS startups to mobile enterprise applications. Among its newest investments: ServiceMax, a company whose applications are used by field service workers who are tasked with, say, completing installations or warranty repairs.

    “We think this is a bigger trend than SaaS has been to date,” says general partner Kevin Spain, who just published a detailed industry report that you’ll probably want to read.

    We talked with him about it Friday. More from that conversation follows here.

    Connie

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  • For Top VCs, a Demo Day to Call Their Own

    Double-alaskan-rainbowFor the second time in its two-year history, in a small space that’s easy to miss on a leafy Palo Alto street, the boutique venture firm Pejman Mar brought together seven startups earlier this week to present their fledgling ideas to some of the best early-stage investors in the startup industry.

    Roelof Botha of Sequoia Capital was there, as were investors Jeff Clavier, Manu Kumar, and Kent Goldman. There was also a contingent of bearded VCs, who’d driven over from their respective Sand Hill Road firms. “It looks like we dressed each other today,” joked one to another who was wearing a similar shirt.

    The investors had come partly because the presenting teams all have ties to Stanford. Some of them haven’t graduated. Others have advanced engineering degrees. Almost all camp out regularly at Pejman Mar’s simple but cheery offices, batting around ideas and, sometimes, receiving a $15,000 to $25,000 convertible note from Pejman Mar in the process.

    Yet another attraction for the VCs: an afternoon that’s refreshingly intimate by current standards. At the event, there were no more than 60 people gathered, and at least a third of them were involved in the startups that were pitching. (Most seem to be launching the alpha versions of their products right now.)

    To continue reading, click here.

    Connie

  • An Insider on Switching VC Firms

    bpo lrgLast week, we sat down with venture capitalist Brian O’Malley of Accel Partners to talk about where he’s shopping now.

    We also asked O’Malley — who was recruited into Accel from Battery Partners in 2013 — what it was like to transition between the heavyweight firms, and what he views as the biggest differences between them.

    More from that candid chat follows. Our conversation has been edited lightly for length.

    Founders sometimes feel “orphaned” when a cherished VC board member leaves to start his or her own fund or, in rarer cases, is recruited into a new firm. What happened to your portfolio companies when you changed firms?

    The simplest way to look at [these transitions] is that with the money comes the board seat, and the money is from the firm, not from Brian. So at the end of the day, it’s the firm’s call about whether you stay or go.

    Sameer [Gandhi], who recruited me in, had [been recruited into Accel from Sequoia Partners back in 2008] and gone through a similar process, so I think there was a general attitude of: “Look, your entrepreneur relationships are the one thing you take with you, and your reputation is all you have, so let’s err on the side of doing right by the teams you’ve backed.” The thinking was, “If it takes these startups a year to get things figured out, that’s okay. At the end of the day, they chose Battery to work with you, and it’s kind of not fair [to abruptly end those ties].”

    What did Battery think?

    More here.

    Connie

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