• StrictlyVC: September 17, 2013

    Good morning, Readers!

    Top News in the A.M. 

    Brazil plans to divorce itself from the U.S.-centric Internet over Washington’s widespread online spying, a move feared to be a first step toward politically fracturing a global network built with minimal interference by governments.

    By Paying Employees to Be Closer, Startups Take a Risk

    Paying employees to live closer to the office may seem like a smart idea, but employment attorneys say startups should steer clear of the small but persistent practice.

    Before it was acquired by Microsoft in 2008, semantic search engine Powerset offered financial incentives to employees to live close to its office. At one point, Facebook also reportedly offered a housing subsidy to employees who moved nearer to its Palo Alto headquarters.

    Among the venture-backed startups that continue to provide location-based financial incentives is San Francisco-based Famo.us, whose Javascript framework is helping to fuel faster smartphone, tablet, and PC applications; and Imo, a messaging company in Palo Alto, Calif.

    It’s easy to understand the companies’ rationale. Employees are more accessible when they’re nearby. Presumably, the less time that employees have to spend commuting, the happier and more productive they are.  There’s also a strong case to be made that proximity to the office is better for the environment. If your employees are walking or biking to work, they aren’t polluting the air with car exhaust.

    Still, attorneys say that dangling proximity-related incentives is risky for numerous reasons.

    Though DLA Piper attorney Margaret Keane doesn’t think there is “a person alive who thinks it’s life-enhancing to spend time commuting,” she can envision, for example, a “scenario where you’re [viewed as] favoring one [economic] class over another.”

    It’s a concern echoed by Dan McCoy, an employment attorney with Fenwick & West. He observes that offering incentives to employees to live closer to a company, particularly in an expensive city like San Francisco, could be seen as having a “discriminatory impact” on those who live in cities such as Freemont or South Jose, where housing prices are lower.

    The appearance of age discrimination is another potential pitfall.

    “San Francisco tends to have a younger population as older workers get married, have kids, and leave the city for the suburbs,” says McCoy. “You can imagine an age claim by someone who says, ‘You’re better compensating a twenty-something than me — who has more experience — because they live in this loft by the ballpark.”

    Even if it’s impossible to prove that a company’s policies have an adverse impact, startups should probably think twice about anticipating what’s in their employees’ best interest.

    Assumptions about people and their commutes will inevitably “be misleading or partly inaccurate, just because that’s life,” says McCoy. Think of the person who lives farther away but gets to work faster because of public transportation, he says, or the couple that likes to drive into the city together.

    “Unfair doesn’t necessarily equal lawful,” McCoy notes. “But at a minimum, you’re going to engender a lot of bad will.” And why take that risk?


    New Fundings

    PubNub, a San Francisco-based startup that provides real-time messaging to Web and mobile apps, has raised an $11 million Series B round of funding led by Scale Venture Partners, with participation from existing investors Relay Ventures and TiE Angels. The company raised a $4.5 million Series A round from Relay and TiE Angels in March of last year.

    Apptus, a seven-year-old, San Mateo, Calif., based company, is announcing a $37 million Series A round this morning from investors that include Iconiq Capital, K-1 and Salesforce.com. Apptus develops payment-related cloud software that’s used by hundreds of enterprise customers, including Google and Salesforce.com.

    Upworthy, an 18-month-old, New York-based news curation startup, has raised $8 million in fresh funding from Spark Capital, Catamount Ventures, the Knight Foundation, and Uprising. The site, cofounded by Eli Periser, the former managing editor of MoveOn.org, and Peter Koechley, the former managing editor of the Onion, had raised $4 million in 2012 from New Enterprise Associates, Reddit co-founder Alexis Ohanian, and Chris Hughes, owner of the New Republic.

    OnDeck, a seven-year-old, New York-based lending platform that focuses on small and mid-size businesses, said yesterday that it has received commitments for new credit facilities of more than $130 million, including Deutsche Bank, Key Bank and Square 1 Bank. Earlier investors in the company include Google Ventures, RRE Ventures, Khosla Ventures and SAP Ventures. In 2012, OnDeck raised $100 million in debt from Goldman Sachs and Fortress Investment Group.

    TPG Growth, a unit of TPG Capital, has invested 1.45 billion rupees ($22.9 million) in Sutures India Pvt Ltd, Reuters reported yesterday. The Bangalore-based company produces surgical sutures, meshes, tapes and gloves, mostly for India-based hospitals.

    Intel plans to spend $1 billion over the next four or five years on Linux and related open-source technologies, reports the Wall Street Journal.


    Google has acquired the mobile startup Bump Technologies, based in Mountain View, Calif. A source tells AllThingsD that it was worth at least $30 million and perhaps as much as $60 million. The mobile apps of the five-year-old company allow users to transfer contacts and other information simply by tapping two phones together. The company had raised roughly $20 million from Sequoia Capital, SV Angel, Felicis Ventures, and Andreessen Horowitz, among others.


    Andreessen Horowitz has parted ways with two members of its team. Tristan Walker, a former VP of biz dev at Foursquare who joined the firm in the summer of 2012 as an EIR, has moved on to start a new venture. Walker isn’t publicly discussing his next move just yet, but details to come.

    Louis Beryl — a quant hired as a partner by Andreessen Horowitz in 2012 — has also left the firm to launch a new startup. Beryl had worked previously as an associate with Deutsche Bank, Lehman Brothers, and Morgan Stanley, where he traded energy derivatives. Beryl did not respond to a press request yesterday, but his new outfit, tentatively called Earnest, appears to be a new banking offering, one that promises to use data and “forward-looking” algorithms rather than credit scores to identify customers and lend to them at low rates.

    Rhapsody, the digital music service, has laid off 30 workers, or 15 percent of its staff, reports The Verge.

    New Fund News

    Noro-Moseley Partners, the 30-year-old Atlanta-based venture capital firm, has raised roughly $47 million for a new fund titled Noro-Moseley Partners VII, L.P , according to an SEC filing. Noro-Moseley invests in early- and growth-stage healthcare and IT companies and is primarily focused on investment opportunities between Texas and Washington, D.C. According to its new Form D, the firm began officially raising its newest fund on August 30.

    Job Listings

    Boston-based Third Rock Ventures – which invests in biotech drug, device, and diagnostic companies – is looking to hire a senior associate with three to five years of work experience in the life sciences industry. Applicants should have an MBA;  an undergrad degree in life sciences is “strongly preferred.”

    Essential Reads

    When it comes to revenue, the simplicity of Twitter’s products is also a weakness, say Vindu Goel of the New York Times.

    The L.A. Times asks: Could Apple’s next ‘special event’ be Oct. 15?

    Seizing on the conflicts of the bulge bracket banks, boutique banks are booming.


    How you can help with the devastating floods in Colorado.

    Can emotional intelligence be taught?

    Retail Therapy

    Looking to buy a fully functioning shoots-you-5,000-feet-in-the-air jetpackHere it is. (You’re welcome!)


  • StrictlyVC: September 16, 2013

    Top News in the A.M.

    Larry Summers is out as candidate for Fed chair. What now? 

    Tony Conrad to Founders: VC is “Not as Easy as It Looks” 

    Tony Conrad doesn’t doubt for a second that the worlds of founders and  venture capitalists are “highly symbiotic.” But it’s easier to succeed in both worlds if you’re a venture capitalist first, he says.

    Conrad is speaking from his own experience, having worn both hats for the last seven years. Before Conrad cofounded the first of two companies — including the identity startup About.me, where he is CEO — he was a VC. (He’s still a VC, working as a venture partner with True Ventures in San Francisco.)

    As he tells me enthusiastically over coffee near About.me’s offices in the city’s startup-studded Mission District, once he became a founder, he became a much better investor. Among other reasons why: “My ability to gain access to some of the highest quality founders was exponentially improved because they saw me as one of them.”

    Conrad’s juggling act has also benefitted About.me, which sold to AOL just days after publicly launching in 2010 and was bought back by Conrad and True Ventures earlier this year. Among the biggest perks he enjoys as a CEO with continuing VC ties is sitting on several boards for True, where he’s privy to instructive conversations, including about conversion marketing metrics. Such insights “totally inform everything we do at About.me,” he says.

    Given the advantages of straddling both spheres, it’s no wonder that more founders have begun dabbling in venture capital. Andy Dunn, for example, the cofounder and CEO of the venture-backed men’s clothing company Bonobos, also helps run an angel investment firm called Red Swan Ventures.

    Still, Conrad suggests that the path from entrepreneur to investor is a bit trickier than the reverse path.

    For example, founder-investors tend to be a little too entrepreneur friendly at times. (Conrad notes that when True Ventures makes an initial investment, typically in the range of $1.25 million, it expects 20 percent ownership in exchange. Founders without extensive investing experience often ask for far less equity, even when writing similar-size checks.)

    Pointing to individuals like LinkedIn founder Reid Hoffman and Workday co-CEO Aneel Bhusri — both partners at Greylock Partners — Conrad says another big benefit to launching a startup as an experienced investor is not having to learn every last thing on the fly.  “We already understand the nuances [around] ownership. I didn’t have to learn how to operate on a board, or [the difference between] participating preferred [shares] versus just a straight-up liquidation preference. I already know that.”

    It isn’t that every VC is suited to be a founder, says Conrad. But the opposite is also true. “You’re seeing a lot of founders who say, ‘Oh, I’m going to go do a fund. It’s easy.’ But it’s not easy. How many of them are killing it? It’s not as easy as it looks.”


    New Fundings

    DataRobot, a Boston-based startup that emerged from the TechStars incubator program this spring, has raised $3.3 million in funding, including from Atlas Venture. The company —  which counts Atlas partner Chris Lynch as a director — produces an app for building accurate predictive models.

    Mobile Iron, a Mountain View, Calif.-based mobile device management company, has raised $47.5 million in new funding. The round brings Mobile Iron’s total funding to roughly $150 million. Last year, the company raised a $40 million Series E. Investors include Institutional Venture Partners, Foundation Capital, Norwest Venture Partners, Storm Ventures and Sequoia Capital.

    Amedica, a Salt Lake City-based maker of spinal and reconstructive implants, has raised $7.5 million as part of a $10 million round, according to an SEC filing. Last year, the company closed on $30 million in financing from investors, including Creation Capital.

    Okta, a San Francisco-based identity management service for enterprises, has closed on $27 million from Andreessen Horowitz, Greylock Partners and Khosla Ventures. Sequoia Capital led the round. The company has raised just north of $50 million since its late 2008 founding.

    Egalet , a Malvern, PA.-based company that was founded in 1995 and develops drug-delivery platforms that release pain medicine, has raised $10 million in fresh funding from previous backer Index Ventures. The company plans to use the capital to advance of its opioid treatments into late-stage clinical development.

    Y-Prime, a Malvern, Pa.- based producer of software and professional services to manage global clinical trials, has raised $5 million from  Ballast Point Ventures of St. Petersburg, Fla.

    In the Market

    Hidden Reflex, a seven-person company based in Washington, D.C., is in the market for roughly a million dollars to fuel the continued development of its free, Chromium-based Epic Privacy Browser , which promises users’ greater privacy by blocking the tracking scripts deployed by online ad networks. (The company still earns revenue through sponsored search results, but the results are based only on the search terms employed and a user’s general geographical location, says CEO Alok Bhardwaj.)

    The company has already raised less than a million in seed funding, including from Washington Post. But Bhardwaj tells me the browser, which debuted publicly in late August and has since attracted “a couple hundred thousand users,” would use another round toward developing more privacy services to compliment the browser. Says Bhardwaj of the opportunity, “Everyone wants more privacy. For us, it’s kind of a matter of fighting [user] inertia.”


    Bain Capital Ventures, which runs a PE-like model with its associates, has parted ways with four of those associates: Greg Mervine, Joshua Sommerfeld, Mike Griffin; and Josh Bruno. No word on what Sommerfeld, Mervine or Bruno are up to next — they may be up for grabs — but Griffin has landed at role as a business analyst at SevOne, a network performance management software company that raised $150 million from Bain Capital back in January.

    SecondMarket‘s longtime chief strategy officer, Jeremy Smith, has left the company. A SecondMarket spokesman told me the company doesn’t comment on specific employees. I was also informed that there are no current plans to replace Smith. Meanwhile, a source close to the company says Smith’s decision to leave was driven by personal reasons. Namely, he wanted to raise his children in the Midwest, where he grew up – not in New York City. (According to his LinkedIn bio, he’s now a director of product development at H&R Block in Missouri.)

    New Fund News

    Lip Bu Tan, who famously founded Walden International in 1987, is raising a new fund called Walden Riverwood Ventures I-B, L.P., according to a Form D processed on Friday by the SEC. The fund’s target is listed as $250 million. Along with Tan, who as been serving as CEO of Cadence Design Systems since 2009, the filing lists Michael Marks , a founding partner of the Menlo Park, Calif.-based private equity firm Riverwood Capital.

    A former NBA star and former NFL player have teamed up  to launch their own, tech-focused venture capital fund. Called Justice Mashburn Capital Partners, the firm’s cofounders —Jamal Mashburn, a former forward with the Dallas Mavericks and Miami Heat, and Warren Justice, long an offensive tackle with the Philadelphia Eagles — have already made their first investment, in Detroit-based LevelEleven.

    San Francisco-based hedge fund Artis Capital is raising a $7 million special purpose vehicle called Artis Practice Fusion SPV II. VentureBeat reported in July  that Practice Fusion — which produces cloud-based electronic medical records software that enables doctors to better manage their patient relationships — has been raising a $60 million, fourth round of funding to help finance its rapid growth. The company has already raised roughly $130 million in funding; Artis participated in its $34 million Series C round last year.


    Intel has acquired 10-year-old, venture-backed Indisys for  “north of” $26 million. The company had raised just less than $6 million from Inveready Seed Capital SCR SA and Intel Capital.

    Job Listings

    Bessemer Venture Partners is looking for a full-time analyst to join a two-year program in its New York office. You can learn more here.

    Essential Reads

    When Twitter goes public, cofounder Evan Williams and backer Chris Sacca, Union Square Ventures, and Spark Capital will hold stakes that likely exceed a billion dollars. “For me personally, this is a once-in-a-decade or once-in-a-career kind of investment,” Spark Capital’s Bijan Sabet tells the New York Times.

    Vanity Fair takes a  deep dive into “Waspy” San Francisco neighborhood Pacific Heights, where it discovers that socialite entrepreneur Trevor Traina is helping stack the neighborhood full of exceptionally wealthy tech entrepreneurs, including Bebo cofounderMichael Birch and Zynga founder Mark Pincus. The old guard is mock horrified by all of them. “They bore the hell out of me,” says San Francisco society doyenne Denise Hale.

    A look into the latest at Klout, the company everyone loves to hate (even more so now that it lost its COO last week to Uber).

    VC Fred Wilson on the importance of exit interviews.


    If you have time, here’s an excellent piece to read about  Floyd Mayweather, the “last of boxing’s old-school, carny-barker showmen, the last of the third-person narcissists, the last of the great American prizefighters.” (He also apparently wears his boxers and shoes exactly one time before casting them off.)

    Retail Therapy

    Pretentious beer glasses, when you’re a beer snob and not afraid to show it.

    “American Psycho” style glasses from Oliver Peoples. You don’t have to be a murderous character to kill in these babies!


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