StrictlyVC, LLC

Who Us? VCs Blame Bankers for Emphasizing Growth Over Revenue to Startups

Despite all the capital that venture firms have managed to raise in the first and second quarters of this year, venture capitalists at an investor panel at Fortune’s Brainstorm conference this morning said that early-stage valuations are softening, reality is “setting in” for unicorn companies that are too richly valued to be acquired and too immature to go public, and that there’s much more focus on revenue than in recent years.

The VCs also blamed bankers on their messaging to founders, which, until recently, was to focus on growth at all costs.

When it comes to very early-stage valuations, Floodgate cofounder Ann Miura-Ko said she thinks her firm is seeing more “willingness by entrepreneurs to take much lower valuations than what their initial expectations were” for two reasons. One is increasing conservativeness on the part of venture capitalists. The other, she said, is “fear for the next round of financing. They’ve already heard from other entrepreneurs that the next round of financing is going to be really difficult.”

In terms of falling valuations for later-stage companies, general partner Roger Lee of Battery Ventures said they’re all but inevitable, given that there’s been one “truly notable” tech IPO in the U.S. so far in 2017. As he noted, a new category of investors had emerged — including hedge funds and mutual funds — to fund these companies’ later stage funding rounds based on the assumption that there would be a brisk IPO market. Absent one, these companies now need to “focus on the fundamentals” to prove that they’re worth the valuations they were assigned.

Of course the big question, and one posed by Brainstorm co-chair Dan Primack, is why companies weren’t focusing on the fundamentals from the start. “Is it the [founders’] fault or yours,” he asked the VCs, including Spark Capital general partner Megan Quinn, who readily acknowledged that there was “certainly a point in time in the Valley when investors were funding growth above all else.” Because “public markets were rewarding it?” Primack asked. “Yes,” said Quinn, “exactly.”

It’s an observation that Jeff Fagnan, a founder of Accomplice (formerly the tech group at Atlas Venture) agreed with wholeheartedly. VCs’ focus on growth was “definitely driven by the public market,” he told those gathered. “I remember being in a couple of IPO bakeoffs, and these bankers would always focus on [growth] . . . And they said, ‘You don’t really need to worry about profit. Just grow. This is the story that everybody wants to buy.’”

More here.

Connie

July 16, 2016

IPOs
StrictlyVC: July 8, 2016

Love dem short work weeks! Hoping you have a wonderful weekend, everyone.

Quick mention: We leave insanely early on Monday for Fortune’s Brainstorm conference in Aspen, so we won’t have a chance to send out the newsletter; we’ll be back with a good story or two for you on Tuesday.:)

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Top News in the A.M.

It actually happened. Elizabeth Holmes, chief executive of Theranos, has been banned by U.S. regulators from owning or operating a medical laboratory for at least two years.

The Dallas police force used a bomb-defusing robot equipped with an explosive device to kill a shooting suspect last night, police chief David Brown revealed today at a press conference. Bomb-defusing robots have been used by police forces in the past, but this may be the first time one has been use to kill a person. More here.

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Where Today’s Tech Can, And Can’t, Replace Humans

This morning, McKinsey & Co. is releasing a new look at the impact automation is likely to have across various sectors of the economy and, ultimately, the workplace. Its findings are based on analysis of 2,000-plus work activities across more than 800 occupations and includes data from the U.S. Bureau of Labor Statistics.

The good news, says the report, is that automation will “eliminate very few occupations entirely in the next decade.” It adds that automation will eventually affect “portions of almost all jobs to a greater or lesser degree.”

Whether you see this as a good or bad thing could depend on how much of your job involves physical activity or operating machinery.

For example, if even current technologies were broadly adopted, says McKinsey, fully 78 percent of “predictable physical activities” across manufacturing, retailing, and food service and accommodations could be automated. The study notes that working on an assembly line is a “highly predictable” physical activity, whereas forestry or raising outdoor animals is much less so. Either way, as tech grows more advanced, expect that percentage to rise.

What else could be far more automated if current tech was adopted more widely? Plenty of so-called white collar occupations, particularly those that involve collecting and processing data. And it’s not just entry level workers who will be impacted, notes McKinsey. For example, it notes that “stock traders and investment bankers live off their wits, yet about 50 percent of the overall time [in their field] is devoted to collecting and processing data . . .”

Ditto insurance sales agents. McKinsey’s estimate for how much of these jobs could be automated: about 43 percent of workers’ time.

More here.

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New Fundings

Airwallex, a seven-month-old, Melbourne, Australia-based startup that specializes in cross-border transactions, has raised $3 million in seed funding led by Chinese investment firm Gobi Partners. TechCrunch has more here.

SmartNews, a four-year-old, Tokyo, Japan-based news aggregation app, has raised $38 million in Series D funding led by the Development Bank of Japan, with SMBC Venture Capital and Japan Co-Invest L.P. participating. The company has now raised $90 million altogether. TechCrunch has more here.

Uber, the seven-year-old, San Francisco-based ride-share giant, has raised $1.15 billion from a new high-yield loan, according to the WSJ. The company has now raised more than $15 billion in debt and equity. More here.

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Exits

The videoconferencing company Polycom has abandoned plans to sell itself to the Canadian telecommunications company Mitel and is instead selling for $2 billion to the private equity firm Siris Capital. That’s a 14 percent premium over Mitel’s offer. Bloomberg has more here.

Google is getting deeper into the tech side of the video and broadcasting business. The company yesterday announced that it has acquired Anvato, a platform for encoding, editing, publishing and distribution video across platforms. More here.

The six-year-old, New York-based media valuation platform Integral Ad Science is unveiling some new steps to combat ad fraudsters, including the acquisition of a bot detection company called Swarm. TechCrunch has more here.

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People

LinkedIn is selling to Microsoft because it couldn’t keep pace with the world’s biggest tech companies, cofounder and executive chairman Reid Hoffman told CNBC yesterday. More here.

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Essential Reads

Facebook is shying from substantive policy questions in the aftermath of a gruesome but important Facebook Live video. Buzzfeed has more here.

The IRS is suing Facebook over asset transfers to Ireland. Fortune has more here.

Aaaand, Facebook Messenger is adding end-to-end encryption in a bid to become your primary messaging app. TechCrunch has more here.

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Detours

1001 blistering future summers.

How silence benefits the brain.

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Retail Therapy

Supreme x Nike Air Force 1 Low Premium 08 NRG.

Connie

July 9, 2016

Morning Summary
Bain Capital Ventures Raises $600 Million (and Another Giant Fund is Born)

It’s starting to happen like clockwork.

Firms are closing new funds almost exactly 24 months to the date from their last fund closing. The newest example? Bain Capital Ventures (BCV), which this morning announced a new, $600 million fund.

It last closed two funds — a $650 million early-stage vehicle, and a $200 million co-investment fund to back maturing BCV investments — in June 2014.

Other venture firms to close fast follow-on funds this year include Accel Partners, Andreessen Horowitz, Founders Fund, Lightspeed Venture Partners, Kleiner Perkins Caufield & Byers and General Catalyst Partners.

BCV is the venture arm of the private equity behemoth Bain Capital, which was founded in 1984. The 15-year-old unit opened its first Bay Area office five years ago, planting a flag in Palo Alto; soon, it’s moving into an even bigger office in San Francisco.

It has eight managing directors — including Ajay Agarwal, who leads its West Coast team — and one partner. According to Agarwal, who joined BCV 13 years ago, it used to be that “90 percent of our team was on the East Coast, in Boston and New York, and 10 percent was here, but it’s about 50/50 at this point.”

BCV primarily backs enterprise-focused software companies, though it invests “opportunistically” in consumer-facing businesses, too, says Agarwal. Two examples are Rent the Runway and Jet.com.

The firm says that half of what it does is early stage and the other half is growth stage. It also says it’s run very separately from Bain Capital, though Agarwal has told us in the past that “those connections into companies [from Bain’s broader network] is massive.” When the robotics company Kiva had “six terms sheets and was trying to determine who to pick,” he’d said, “we introduced the company to the head of distribution at Staples.” It helped seal the deal. (Kiva went on to sell to Amazon in 2012 for $775 million.)

BCV’s newest early-stage fund is slightly smaller than its last. Asked about that, the firm says it targeted what it thinks is the “appropriate fund size for our strategy in the current market environment.”

Asked why it didn’t raise another co-investment vehicle this time around, it says it still has capital to deploy from that $200 million fund it closed it 2014. It also said it isn’t quite done investing its previous early-stage fund.

That’s not uncommon either, these days.

As notes an institutional investor at a university endowment with whom we spoke recently, “Every one of our GPs has come back in the last 12 months, with the exception of one guy. VCs are accelerating their fundraising partly because they have nice marks and want to get ahead of any market cyclicality.” (Read: downturn.)

“Partly, too, they see their GP brethren coming in and they know that [the institutional investors who fund venture firms] only have so many dollars. And you want to be at the front of the queue, not the back of it.”

More here.

Connie

July 9, 2016

Fundraising

Bain Capital Ventures
StrictlyVC: July 7, 2016

It’s Thursday, woot!

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Top News in the A.M.

Apple just dropped to fifth place in China’s smartphone market.

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(Some) LPs Speak Up

Venture capital used to be such an insular, under-the-radar industry that entrepreneur-investor Marc Andreessen has said that he’d never heard the term before arriving in the Bay Area in 1994. He’s hardly alone. It wasn’t until the mid- to late-1990s, during the dot.com boom, that the world became acquainted with what venture capitalists do. And it wasn’t until after venture capitalists Fred Wilson and Brad Feld began publishing insights about their work roughly 12 years ago that the art of VC blogging began to border on competitive sport.

The exercise has paid off for many investors. Among those to actively raise their profiles (and presumably, increase their deal flow) through blogging are Jason Lemkin, whose new venture fund we covered here; Hunter Walk of Homebrew; and Mark Suster of Upfront Ventures. (CB Insights has a longer rundown of VC bloggers here.)

Institutional investors, the money behind the VCs’ money, have not followed suit, though there’s reason to think the industry is thinking more about outreach at long last. Indeed, though these limited partners (LPs) have largely remained mum, not sharing much about their selection process, not blogging, and not talking publicly with reporters, a few signals suggest a change may be afoot, including recent feedback from one investor from a mid-size university endowment, who recently shared on background that he’s been asked to raise his profile.

The reason, simply: competition. As you may have noticed, a smaller group of so-called top-tier venture funds now manages more of the money flowing into venture capital than ever before. Still, these firms can only responsibly manage so much, which puts pressure on LPs who want stakes in those venture funds.

Perhaps because of uncertainty about the market, LPs are also less interested in brand-new funds right now than in the second or third funds of micro-venture firms that are starting to prove themselves. Forerunner Ventures, which has tripled the amount of money it is managing in the last four years, is just the latest example. These managers, too, can only make room for so many LPs.

Then there’s foreign money. More specifically, there’s more of it than ever to compete with. Take Peakview, which is the investment advisory arm of Shengjing Group and the largest global fund of funds in China. Its U.S.-based managing partner told this reporter in March that Peakview has millions of dollars to invest in U.S. venture firms. To curry favor with them, it’s promising to help their portfolio companies bridge networking gaps between the U.S. and China.

More here.

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New Fundings

BevSpot, a two-year-old, Boston-based software platform that enables mobile bar management, has raised $11 million in Series B funding led by earlier backer Bain Capital Ventures. The company has now raised $19 million altogether. BostInno has more here.

Black Swan Data, a five-year-old, London-based data science startup that analyzes consumer behavior using public and private data, has raised £6.2 million ($8 million) in Series B funding led by Albion Ventures, with participation from Blackstone and Mitsui. TechCrunch has more here.

Brillen.de, a four-year-old, Wildau, Germany-based online business that sells its own eyewear, has raised €45 million ($49 million) in its first round of funding from Technology Crossover Ventures. TechCrunch has more here.

Light, a three-year-old, Palo Alto, Ca.-based computational photography startup, has raised $30 million in Series C funding led by GV. Forbes has more here.

NextVR, a six-year-old, Laguna Beach, Ca.-based startup that develops and delivers video capture technology for live and recorded experience, has raised $20 million from a Chinese investment firm as a part of an upcoming Series B raise. The money is reportedly a quarter of the Series B round; Variety reported earlier this week that the company is looking to raise $80 million altogether, at an $800 million valuation. More here.

Pixie, a five-year-old, Los Altos, Ca.-based company whose guitar-pick-like bluetooth beacons make it harder for users to lose their stuff, is raising a $25 million round of funding, according to a new SEC form that shows it has raised $16.6 million toward that end. According to CrunchBase, the company previously raised $6 million from investors, including Spark Capital and Cedar Fund. The Verge wrote about the company last year.

Post-Quantum, a seven-year-old, U.K.-based company that has developed an encryption system designed to safeguard quantum computers from hackers, has raised £8 million ($10.3 million) in Series A funding from VMS Investment Group and AM Partners. TechCrunch has more here.

Yuntongxun, a three-year-old, Beijing, China-based corporate cloud communications service company, has raised $70 million in Series C funding led by earlier backer Sequoia Capital, with participation from TBP Capital. TechCrunch has more here.

Zingle, a six-year-old, Carlsbad, Ca.-based platform that enables businesses to communicate with customers via texting and other mobile messaging channels, has raised $3 million in equity, shows an SEC filing. Tnooz reported this past spring that the startup recently landed Hyatt as a client. More here.

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Exits

Security giant Avast is acquiring fellow Czech-based antivirus software makerAVG for $25 per share in cash, in a transaction that will total around $1.3 billion. TechCrunch has more here.

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People

Android co-creator and longtime GV general partner Rich Miner is leaving the investing unit to launch an education-focused company within Google, reports Fortune. Miner says he doesn’t know exactly what he’s building yet but it sounds like he already has the “big vision” of it in mind. A GV spokeswoman wrote us separately that though Miner will no longer be leading any deals for GV, he will “remain active with many of his board commitments.”

Elon Musk is still duking it out with Fortune over whether Telsa should have disclosed sooner an investigation into a crash involving one of its cars. (See our column yesterday if you’re coming to this story late.)

In a blog post this morning, Microsoft CEO Satya Nadella announced that long-time COO Kevin Turner is leaving after 11 years at the company. Meanwhile, Citadel Securities has announced this morning that Turner is joining as CEO. TechCrunch has more here.

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Essential Reads

Germany’s digital entrepreneurs are not only convinced that London is finished but also believe they are poised to wrest its crown as Europe’s fintech center. The Financial Times has more here.

Erm. Whoever acquires Yahoo might have to pay Mozilla annual payments of $375 million through 2019 if it doesn’t think the buyer is one it wants to work with. Recode has the story here.

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Detours

What becomes of the brokenhearted’s stuff.

Twenty beautiful modern staircases.

The rise of hip-hop producer Mike Will.

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Retail Therapy

BikeBlock. So simple, a monkey could use it.

Connie

July 8, 2016

Morning Summary
(Some) LPs Speak Up

Venture capital used to be such an insular, under-the-radar industry that entrepreneur-investor Marc Andreessen has said that he’d never heard the term before arriving in the Bay Area in 1994. He’s hardly alone. It wasn’t until the mid- to late-1990s, during the dot.com boom, that the world became acquainted with what venture capitalists do. And it wasn’t until after venture capitalists Fred Wilson and Brad Feld began publishing insights about their work roughly 12 years ago that the art of VC blogging began to border on competitive sport.

The exercise has paid off for many investors. Among those to actively raise their profiles (and presumably, increase their deal flow) through blogging are Jason Lemkin, whose new venture fund we covered here; Hunter Walk of Homebrew; and Mark Suster of Upfront Ventures. (CB Insights has a longer rundown of VC bloggers here.)

Institutional investors, the money behind the VCs’ money, have not followed suit, though there’s reason to think the industry is thinking more about outreach at long last. Indeed, though these limited partners (LPs) have largely remained mum, not sharing much about their selection process, not blogging, and not talking publicly with reporters, a few signals suggest a change may be afoot, including recent feedback from one investor from a mid-size university endowment, who recently shared on background that he’s been asked to raise his profile.

The reason, simply: competition. As you may have noticed, a smaller group of so-called top-tier venture funds now manages more of the money flowing into venture capital than ever before. Still, these firms can only responsibly manage so much, which puts pressure on LPs who want stakes in those venture funds.

Perhaps because of uncertainty about the market, LPs are also less interested in brand-new funds right now than in the second or third funds of micro-venture firms that are starting to prove themselves. Forerunner Ventures, which has tripled the amount of money it is managing in the last four years, is just the latest example. These managers, too, can only make room for so many LPs.

Then there’s foreign money. More specifically, there’s more of it than ever to compete with. Take Peakview, which is the investment advisory arm of Shengjing Group and the largest global fund of funds in China. Its U.S.-based managing partner told this reporter in March that Peakview has millions of dollars to invest in U.S. venture firms. To curry favor with them, it’s promising to help their portfolio companies bridge networking gaps between the U.S. and China.

More here.

Connie

July 8, 2016

Firm Dynamics

Horsley Bridge Partners, LPs, Peakview, Sapphire Ventures, Venture Investment Associates
StrictlyVC: July 6, 2016

Happy Wednesday, everyone!

Quick mention for those of you who’ve been in and out on vacation: On September 29, a Thursday night, at the glass-lined offices of SurveyMonkey in Palo Alto, we’re hosting our fifth and newest StrictlyVC INSIDER event, and it’s going to be great. Featured guests include the inimitable Marc Andreessen, along with SurveyMonkey CEO Zander Lurie, who will update us on the unicorn company and where it goes from here. We’ll also be announcing a third interview that you won’t want to miss. Seating is limited and many spots have been snapped up by readers already, so don’t wait too long to nab yours.

Much thanks to our wonderful partners in the evening, without whom we couldn’t host these things. They include the young, early-stage venture firm Bolt; Ballou PR, to which many startups (and VCs) have turned to raise their profile in Europe; and Mattermark, which organizes and sells information about a wide swath of startups and, increasingly, other businesses.

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Top News in the A.M.

Twitter is streaming Wimbledon today.

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Tesla Says It Told Government of Autopilot Crash Ahead of Stock Sale

Tesla says it told regulators about the May 7th crash involving one of its electric cars in self-driving Autopilot mode nine days after the incident, adding that there was nothing unusual in either the delay or its decision to keep quiet about the incident before a federal investigation was publicly announced last Thursday.

Tesla says the company was informed of the accident “shortly” after it took place.

Tesla’s statement, issued late this afternoon, seems to be a direct response to a Fortune article published earlier today that notes the enormous stock sale that Tesla announced on May 18. States the Fortune piece:

“On May 18, eleven days after [Tesla owner Joshua] Brown died, Tesla and CEO Elon Musk, in combination (roughly three parts Tesla, one part Musk), sold more than $2 billion of Tesla stock in a public offering at a price of $215 per share—and did it without ever having released a word about the crash.

“To put things baldly, Tesla and Musk did not disclose the very material fact that a man had died while using an auto-pilot technology that Tesla had marketed vigorously as safe and important to its customers.”

When Fortune sought comment from Musk, he first replied that he didn’t think the fact of the crash was “material to the value of Tesla” and therefore did not need to be disclosed at the time of Tesla’s stock sale. He reportedly continued, via email to Fortune:

“Indeed, if anyone bothered to do the math (obviously, you did not) they would realize that of the over 1M auto deaths per year worldwide, approximately half a million people would have been saved if the Tesla autopilot was universally available. Please, take 5 mins and do the bloody math before you write an article that misleads the public.”

In this afternoon’s statement, Tesla said it had disclosed the incident to the government by May 16.

Asked by Reuters why Tesla didn’t also disclose the accident to the public before that share sale, the company sent the outlet the following statement:

“Tesla does not find it necessary, nor does any automaker, to share the details of every accident that occur in a Tesla vehicle. More than a million people die globally every year in car accidents, but automakers do not disclose each of these accidents to investors, let alone before those investigations are complete and without regard to what the results of those investigations end up being.”

More here.

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New Fundings

Darktrace, a three-year-old, London-based company that makes enterprise cybersecurity software, has raised $65 million in growth equity funding led by KKR, with participation from TenEleven Ventures, SoftBank, and return backer Summit Partners. TechCrunch has more here.

Homee, a nearly year-old, L.A.-based company whose mobile app helps users design rooms for free, has raised $5 million in Series A funding from Founders Fund and Tinder CEO Sean Rad. TechCrunch has more here.

KisanHub, a four-year-old, Cambridge, U.K.-based enterprise farming platform that connects agronomic and operational data to enable smarter decision-making, has raised $1 million in seed funding led by Notion Capital. TechCrunch has more here.

Service Partner One, a year-old, Berlin-based startup that’s trying to build a kind of office operating system for office managers, has raised $10 million in Series A funding led by EQT Ventures, with participation from Earlybird Venture Capital, Target Global, Rheingau Founders, Ringier Digital Ventures, and Vito Ventures. TechCrunch has more here.

StockTwits, an eight-year-old, San Diego-based real-time financial communications platform for the financial and investing community, has raised $2 million in new funding led by Social Leverage, a venture fund cofounded by StockTwits founder Howard Lindzon. The company has also just announced that Ian Rosen, co-founder of Even Financial and a former general manager at MarketWatch, is becoming CEO, as Lindzon becomes executive chairman of the company. TechCrunch has more here.

Twistlock, a 1.5-year-old, San Francisco-based company that makes enterprise security software for virtual containers, has raised $10 million in Series A funding led by TenEleven Ventures, with participation from Rally Ventures, an unnamed strategic investor, and return backer YL Ventures. GeekTime hasmore here.

Veriflow, a three-year-old, San Jose, Ca.-based network breach and outage prevention software company, has raised $8.2 million in Series A funding led by Menlo Ventures, with participation from earlier backer New Enterprise Associates. SDX Central has more here.

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New Funds

Akkadian Ventures, a San Francisco-based firm that buys shares of privately owned startups from entrepreneurs, angel investors, and venture capital firms that are looking to sell a portion of their holdings, is raising a fourth fund, shows an SEC filing that doesn’t list a target. The firm closed its third fund with $74 million in October 2014. More here.

Forerunner Ventures, an early-stage, San Francisco-based venture firm that’s known as an e-commerce specialist, has closed its third fund with $122 million, shows an SEC filing. Forerunner’s second fund, which held its first close in 2012, was capped at $75 million, says Fortune. More here.

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Exits

Alibaba has acquired Wandoujia, a Chinese app store for Android devices, for a reported $200 million. Wandoujia was reportedly valued at more than $1 billion in January 2014 when it raised $120 million in funding led by SoftBank. But TechCrunch notes that “increased competition from carrier-run app stores and rivals like 91 Wireless and Qihoo 360, not to mention reports of internal conflict, appear to have impacted its development over the past two years.” More here.

Google has acquired Moodstocks, a startup based out of Paris that develops machine-learning based image recognition technology for smartphones. Terms of the deal aren’t being disclosed. It’s not clear how much Moodstocks had raised, notes TechCrunch. Any related data has been scrubbed from CrunchBase, though TechCrunch reported in 2010 that Moodstocks had raised $500,000 in seed funding from European investors. More here.

SGN, an L.A.-based gaming company led by ex-MySpace CEO Chris DeWolfe, has acquired TinyCo, a San Francisco-based mobile game studio. Terms of the deal weren’t disclosed. According to CrunchBase, TinyCo raised $38 million in funding from investors, including Andreessen Horowitz, Pinnacle Ventures, and SV Angel. The Wrap has more here.

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People

Bret Taylor, best known as the longtime CTO of Facebook, has joined the board of Twitter. More here.

Zenefits may have dramatically readjusted its valuation (from $4.5 billion to $2 billion), but an analysis by The Information suggests that its Series A investors are still currently sitting on a none-too-shabby paper return of 1,800 percent. More here. (Subscribers only.)

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Data

Primary Venture Partners has taken a look at second-quarter seed activity in New York City. You can check it out here if you’re interested in what’s up and coming.

In separate news you can hopefully use, Mergermarket has just released its global M&A roundup report for the technology, media and telecom (TMT) sector for the first half of this year. You can check it out here.

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Essential Reads

Snapchat just rolled out a way of saving and sharing old snaps in a private archive inside the main app. More here.

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Detours

What. A 61-year-old Canadian man survived an attack by a 300-pound mother black bear by punching it in the face. (H/T: Significant Digits.) More here.

How Stephen Colbert met his wife.

Selfie-elbow.

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Retail Therapy

“Catastrophe.” Have you seen it? It’s so good. (More here.)

Connie

July 8, 2016

Morning Summary
Tesla Says It Told Government of Autopilot Crash Before Stock Sale

Tesla says it told regulators about the May 7th crash involving one of its electric cars in self-driving Autopilot mode nine days after the incident, adding that there was nothing unusual in either the delay or its decision to keep quiet about the incident before a federal investigation was publicly announced last Thursday.

Tesla says the company was informed of the accident “shortly” after it took place.

Tesla’s statement, issued late this afternoon, seems to be a direct response to a Fortune article published earlier today that notes the enormous stock sale that Tesla announced on May 18.

On May 18, eleven days after [Tesla owner Joshua] Brown died, Tesla and CEO Elon Musk, in combination (roughly three parts Tesla, one part Musk), sold more than $2 billion of Tesla stock in a public offering at a price of $215 per share—and did it without ever having released a word about the crash.

To put things baldly, Tesla and Musk did not disclose the very material fact that a man had died while using an auto-pilot technology that Tesla had marketed vigorously as safe and important to its customers.

When Fortune sought comment from Musk, he first replied that he didn’t think the fact of the crash was “material to the value of Tesla” and therefore did not need to be disclosed at the time of Tesla’s stock sale. He reportedly continued, via email to Fortune:

Indeed, if anyone bothered to do the math (obviously, you did not) they would realize that of the over 1M auto deaths per year worldwide, approximately half a million people would have been saved if the Tesla autopilot was universally available. Please, take 5 mins and do the bloody math before you write an article that misleads the public.

In this afternoon’s statement, Tesla said it had disclosed the incident to the government by May 16.

Asked by Reuters why Tesla didn’t also disclose the accident to the public before that share sale, the company sent the outlet the following statement:

Tesla does not find it necessary, nor does any automaker, to share the details of every accident that occur in a Tesla vehicle. More than a million people die globally every year in car accidents, but automakers do not disclose each of these accidents to investors, let alone before those investigations are complete and without regard to what the results of those investigations end up being.

More here.

Connie

July 8, 2016

Morning Summary

Autopilot, crash, Tesla Motors
StrictlyVC: July 5, 2016

And we are back! Hope you had a terrific holiday weekend, everyone!

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Top News in the A.M.

Late last night, NASA‘s Juno spacecraft finally reached Jupiter, five years after the probe left Earth. More here.

The latest Yahoo offers are expected tomorrow, with the final round expected in two weeks. More here.

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Why That Google Capital Deal Could Mean More PIPEs

Last Wednesday, Google Capital ventured into the world of investing in publicly traded companies, announcing it has backed Care.com, a platform that connects people with caregivers which went public in early 2014.

With Google Capital investing $46.35 million, it became Care.com’s single largest shareholder, according to The New York Times. The deal also sent nine-year-old Care.com’s shares soaring. On the day of the announcement, Care.com was valued at $278 million; by the end of trading on Friday, the company’s market cap had reached $508 million.

It might have seemed interesting, if unremarkable, to some industry watchers. Others, however, think the deal may well usher in a new era of private investment in publicly equities, or PIPE deals, despite their checkered history.

Those who’ve been around for a boom and bust (or two) are already familiar with them. PIPE deals became increasingly attractive in the aftermath of the late 1990s tech bubble, when the public market shut for tech companies, stranding not only ambitious startups hoping to IPO but publicly traded outfits, too.

Faced with few options, some of those cash-strapped companies turned to outside investors like venture investors and hedge funds. In return for capital, the companies typically provided their public shares at a discount — along with the promise that if their shares were to fall in value, these new investors would be provided more shares to make up for their losses.

In some cases, things worked out well. Phil Sanderson, today a managing director at IDG Ventures, was working as a partner at Walden Venture Capital at the time and says he led two investments in publicly traded companies that provided quick, meaningful returns to the firm. One of those bets was on VitalStream, a content delivery network that was later acquired; the other was the IT management company Niku, also acquired.

Sanderson says the two companies produced a “3x to 5 x return in a two- to three-year period,” and he credits those returns with approaching both firms with a VC-like mentality. “I’d join the board, bring in sales, help recruit employees. I would also communicate to analysts I knew about the company, and I’d be out there talking with hedge funds, getting them to buy and build positions in the stock. It was a lot of work but it paid off.”

Other companies weren’t so lucky.

More here.

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New Fundings

Adents, a nine-year-old, Paris, France-based serialization and traceability software specialist, has raised €12 million ($13.4 million) in funding from earlier backers NAXICAP Partners, Omnes Capital and CapHorn Invest. More here.

Echobox, a three-year-old, London-based service that helps publishers better understand viral content and provides suggestions on which articles to share on social networks at specific times, has raised $3.4 million in new funding. The round was led by Mangrove Capital Partners, with participation from Saul and Robin Klein’s LocalGlobe. TechCrunch has more here.

HourlyNerd, a three-year-old, Boston, Ma.-based online platform that connects small businesses needing expertise with MBAs who can help them, has raised $22 million in Series C funding funding led by General Catalyst Partners, with participation from Highland Capital Partners, GE Ventures, Mark Cuban, Greylock Partners, and Bob Doris of Accanto Partners. The company has now raised $33 million altogether. More here.

Instabridge, a 3.5-year-old, Stockholm, Sweden-based Wi-Fi sharing community and mobile app, has raised $1 million in new funding led by Draper Associates, with participation from earlier backer Balderton Capital. TechCrunch has more here.

Natural Cycles, a three-year-old, Nordic startup that bills itself as a fertility tracking service, has raised $6 million in Series A funding led by Bonnier Media Growth, the venture arm of the Swedish media business. Earlier backers Sunstone and e.ventures also joined the round. The company has now raised $7.5 million altogether. TechCrunch has more here.

NightBalance, a six-year-old Delft, The Netherlands-based that makes a device that’s worn around the upper torso to address sleep apnea (it nudges wearers into different sleep positions in the night), has raised €12.5 million ($13.9 million) in Series B funding co-led by Inkef Capital and Gilde Healthcare Partners. Earlier backers Thuja Capital, Health Innovation Fund, and Van Herk Ventures also joined the round. More here.

NeoGrowth, a 5.5-year-old, Mumbai, India-based fintech startup, has raised $35 million in new funding co-led by IIFL Asset Management and earlier backer Accion Frontier Inclusion Fund. Other earlier backers, includingOmidyar Network, Aspada Investments, and Khosla Impact, also participated. Livemint has more here.

Network Locum, a five-year-old, London-based healthcare startup whose staffing platform and workplace management software targets the U.K.’s National Health Service (NHS), has raised $7 million in Series B funding led by BGF Ventures. TechCrunch has more here.

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IPOs

Foxconn, which assembles most of Apple’s iPhones, has filed for an IPO of its cable and connector unit in Hong Kong that could raise up to $1 billion. The WSJ has more here.

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People

Richard Boyle has joined Canaan Partners as a partner. Boyle was previously chairman and CEO of LoopNet, before it was acquired several years ago.

Former Facebook employee Antonio García Martinez (who worked for the company for less than two years) has published a score-settling book dedicated to “all my enemies.” He reportedly compares Facebook’s oppressive work culture to North Korea.

The Chinese billionaire who wants to out-Tesla Tesla.

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Data

Twelve venture-backed IPOs raised $893.9 million in the second quarter of this year, says Thomson Reuters and the NVCA. That’s a 56 percent increase by dollars and a 100(!) percent increase by number of offerings compared with the first quarter. Nine of the quarter’s offerings were life sciences IPOs. Eleven were U.S.-based companies. More here.

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Essential Reads

Inside Alphabet’s money-spinning, terrorist-foiling, gigabit Wi-Fi kiosks.

Much to teenagers’ chagrin, Snapchat is catching on with the olds, says the WSJ.

Employers and start-ups are testing more ways to give employees faster access to their wages.

—–

Detours

How to raise brilliant children, according to science.

Why ATMs at the bar or corner store could soon go away.

Garbage Box.

—–

Retail Therapy

Cookies are coming.

Connie

July 8, 2016

Morning Summary
Why That Google Capital Deal Could Mean More PIPEs

Conceptual 3d abstract illustration.

Last Wednesday, Google Capital ventured into the world of investing in publicly traded companies, announcing it has backed Care.com, a platform that connects people with caregivers which went public in early 2014.

With Google Capital investing $46.35 million, it became Care.com’s single largest shareholder, according to The New York Times. The deal also sent nine-year-old Care.com’s shares soaring. On the day of the announcement, Care.com was valued at $278 million; by the end of trading on Friday, the company’s market cap had reached $508 million.

It might have seemed interesting, if unremarkable, to some industry watchers. Others, however, think the deal may well usher in a new era of private investment in publicly equities, or PIPE deals, despite their checkered history.

Those who’ve been around for a boom and bust (or two) are already familiar with them. PIPE deals became increasingly attractive in the aftermath of the late 1990s tech bubble, when the public market shut for tech companies, stranding not only ambitious startups hoping to IPO but publicly traded outfits, too.

Faced with few options, some of those cash-strapped companies turned to outside investors like venture investors and hedge funds. In return for capital, the companies typically provided their public shares at a discount — along with the promise that if their shares were to fall in value, these new investors would be provided more shares to make up for their losses.

In some cases, things worked out well. Phil Sanderson, today a managing director at IDG Ventures, was working as a partner at Walden Venture Capital at the time and says he led two investments in publicly traded companies that provided quick, meaningful returns to the firm. One of those bets was on VitalStream, a content delivery network that was later acquired; the other was the IT management company Niku, also acquired.

Sanderson says the two companies produced a “3x to 5 x return in a two- to three-year period,” and he credits those returns with approaching both firms with a VC-like mentality. “I’d join the board, bring in sales, help recruit employees. I would also communicate to analysts I knew about the company, and I’d be out there talking with hedge funds, getting them to buy and build positions in the stock. It was a lot of work but it paid off.”

Other companies weren’t so lucky.

More here.

Connie

July 8, 2016

Investment Opportunities

Google Capital, PIPEs
StrictlyVC: July 1, 2016

Wowsa. It has been a comically busy day over here, but we did not forget about you! Happy Fourth of July weekend, everyone — see you back here Tuesday.:)

—–

Top News in the A.M.

Zenefits, the HR software startup that replaced founder and CEO Parker Conrad last February over regulatory improprieties, has publicly announced a deal with its investors that gives some of them more of the company in exchange for their promise not to sue. The deal also sees the company’s valuation adjusted downward from $4.5 billion to $2 billion. After new CEO, David Sacks, announced the new deal, early investor Marc Andreessen tweeted his support, adding that his firm “did not threaten to sue, nor did we have any intention of suing.”

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Silicon Valley’s Favorite Fixer: Bradley Tusk

If the producers of the next “World’s Most Interesting Man in the World” commercial were looking for a Silicon Valley type, a prime candidate might be Bradley Tusk, a 42-year-old New Yorker who advises companies such as FanDuel and Tesla that are disrupting highly regulated industries.

Tusk made his bones in Silicon Valley through advising Uber, which paid him in equity for his services while still a Series A company, dramatically boosting Tusk’s net worth (he says he hasn’t sold any), and in the process, creating a model for his newest firm, Tusk Ventures.

Right now, Tusk Ventures, founded less than a year ago, has a dozen clients. Most of the 30 staffers who work at the company come out of politics at “high levels,” says Tusk, and each helps two clients navigate their respective regulatory waters, such as keeping them up to date with a curated email that they receive by 7 a.m. every morning.

His services come at a steep price: clients pay Tusk Ventures in equity and agree to sell him up to 10 percent of their company. (Tusk is raising a venture fund to ramp up his investing activities, though he declined to speak about any specifics at a dinner with reporters earlier this week. )

Startups make room for Tusk in their cap table because of his connections. Tusk was formerly Michael Bloomberg’s campaign manager, helping him to get elected to an unprecedented third term as the mayor of New York City after convincing the New York City Council to extend the role’s term limits. (Tusk also worked with Bloomberg to explore a bid for the current U.S. presidential campaign. Although he claims he found a way for Bloomberg to win, Bloomberg apparently thought the solution was too complicated.)

Another complementary business, seven-year- old Tusk Strategies, develops and runs political-style media campaigns for a host of Fortune 500 companies, including Google, Walmart, AT&T; media companies like AMC, NBC News, The Weather Channel; and institutions like Stanford.

Somewhat astoundingly, Tusk oversees three other outfits, too: a casino management company called Ivory Gaming Group (it owns one casino in Fresno); Kronos Archives, a custom archives business for companies and individuals; and a family foundation focused on reducing hunger in the U.S.

Did we mention he’s also trying to unseat current New York City Mayor Bill de Blasio in next year’s Democratic primary?

Oisin Hanrahan, CEO of Handy — an online platform for booking household services, and a client of Tusk Ventures — jokes that the more clients Tusk takes on, the “earlier my morning emails seem to arrive.”

More here.

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New Fundings

Digi.me, a seven-year-old, London-based personal data aggregation and exchange platform, has raised $6.1 million in Series A funding led by Swiss Re. TechCrunch has more here.

Everplans, a six-year-old, New York-based end-of-life company that invites users to create, share and store legal, financial and health information in one place so loved ones can later access it, has raised $6.4 million led by Mousse Partners. Other participants include Transamerica Ventures and RGAx, a subsidiary of Reinsurance Group of America. More here.

Index, a four-year-old, San Francisco-based startup that makes retail software, has raised $19 million in Series B funding led by General Catalyst Partners. TechCrunch has more here.

Revinate, a seven-year-old, San Francisco-based company that makes guest experience software for the hospitality industry, has raised $13 million, shows an SEC filing that shows a $15 million target. (H/T: Fortune.). Earlier backers include Tenaya Capital, Northgate Capital, Industry Ventures, Benchmark, Formation 8 and Tao Capital Partners. More here.

Spirometrix, a four-year-old, Pleasanton, Ca.-based company focused on the development and commercialization of breath analysis devices for applications in disease diagnosis and management, has raised $17.4 million in Series C funding led by Shanghai Fosun Pharmaceutical. Earlier backers NGK Spark Plug Co., South Valley Angels, Iconical, Ohio Innovation Foundation, and Carmen Innovation also joined the round. More here.

Woven Digital, a six-year-old, Culver City, Ca.-based digital media and content company that caters to young men, has raised $18.5 million in Series B funding led by WPP Ventures, with participation from earlier backers Institutional Venture Partners and Advancit Capital. Variety has more here.

Zoox, a two-year-old, Palo Alto, Ca.-based startup said to be building technology that could compete with Google’s self-driving cars and Cruise Automation, has raised $200 million at a $1 billion valuation, including from Lux Capital and DFJ. TechCrunch has more here.
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IPOs

BioVentus, Durham, N.C.-based company that makes bone stimulation devices, has filed for a $150 million IPO. The company’s investors include Essex Woodlands Health Ventures, Smith & Nephew, Spindletop Healthcare Capital, Pantheon Global, Ampersand Capital and Alta Partners.

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People

Hyperloop One co-founder and CTO Brogan BamBrogan is out at the company and former VP of engineering Josh Geigle will be taking over BamBrogan’s role as CTO. More here.

The SEC is probing a range of transactions linked to Nikesh Arora, the Silicon Valley executive who recently resigned, suddenly, as president of SoftBank. More here.

Senator Elizabeth Warren has lashed out at the tech industry in a new speech railing against consolidation and concentration in the American economy. More here.

—–

Essential Reads

Apple is reportedly in talks to buy music streaming service Tidal.

BMW has announced its first self-driving car — a day after a fatality involving Tesla‘s Autopilot feature was confirmed.

—–

Detours

Ah, Seal.

Why buying organic groceries in Brooklyn can be a serious trial.

—–

Retail Therapy

Office chair by Porsche. (Not a joke, probably?)

Connie

July 8, 2016

Morning Summary