Good morning, and happy Tuesday!
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Wall Street is showing puzzlingly few signs of panic that we’ll default on or debt. Meanwhile, Silicon Valley seems to be paying even less attention. But it’s time to freak-out, argues Dealbook’s Andrew Ross Sorkin.
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Silicon Valley’s ‘Undertaker’ Doubles Down, Too
Everyone in Silicon Valley seems to be wearing more than one hat these days. Venture capitalists are active startup founders. Active startup founders are raising venture funds.
Even Sherwood Partners – a 30-person company that industry insiders long ago coined “the undertaker” because of its decades-long history of shuttering companies – has launched a second business. Called AgencyIP, it’s a platform for selling the patents, trademarks, and other intellectual property of failed startups that Sherwood unwinds.
I caught up with Sherwood founder Marty Pichinson yesterday at his Mountain View, Calif., office to learn more, as well as see how Sherwood is doing in these boom times.
When we last talked a couple of years ago, people thought so-called “winter” was coming for startups. It did not. Has that been bad news for Sherwood?
Not at all! After more than 20 years in the business, we now have VCs bringing us in earlier where they really want management to focus on tomorrow and let us take care of hiccups or financial problems that can take a company off track. We’ve been doing a lot more corporate restructuring.
What kind of hiccups are you ridding companies of?
It can be anything. Sometimes they made a bad deal for equipment, or they paid people to [take the company one direction] and now they’re going another way. VCs will bring us in before raising a new round so we can help reduce any unsecured debt first.
Beyond renegotiating equipment leases and analyzing who to cut, what else can you do in this kind of roaring economy? Is it impossible to work out cheaper rent right now, given low vacancy rates?
Nothing is impossible. We’re kind in what we do. If you’re a jerk in life, people don’t want to work with you. Even though we’re renegotiating debt, maybe you’re talking about a few months. If everyone pitches in a little, there’s a better chance that the company will make it.
What’s the failure rate right now? Has it changed because of all the seed-funding we’ve been seeing?
Nah. About 2,000 companies are funded per year and about 20 percent of those companies exit, meaning 1,600 [fail]. Maybe it’s because your customers aren’t coming in fast enough, or another player has beat you to market, or your board members don’t have the resources to re-up anymore and they’d sooner walk away and save their dry powder.
Right now, I’m closing a 12-year-old company that raised $227 million. It needs $40 million more but its investors are tired. Do you put it in this company or put it another? It’s all about placing bets.
Why launch AgencyIP?
We probably sell more orphaned [intellectual property] than anyone around. We launched the company eight months ago and we already represent more than 1,800 patents, including from CBS and Showtime and other Fortune 500 companies. We’re like William Morris, negotiating the best deals possible for the IP we have [along with finding ways to repackage it]. We can take two patents that aren’t the best in the world, for example, and put them together and they can become better.
Who’s buying what, and what’s the range of how much they are willing to pay?
Our offices are full of people all the time, so we have excellent relationships with everyone. And we’ve had IP sell for $500,000 and we’ve sold it for between $25 million and $30 million.
You’ve seen plenty of cycles. Where are we in this one?
To me, there’s never been storms or halos. Someone is always reinventing something. These young people can see through time. Who ever thought that Facebook would be what it is — or Amazon, or Google, or Twitter?
Change is continuous and every four or five or six years, there’s a paradigm shift to where smart people think the new deals will be and as part of that readjustment, you get rid of the old things. Maybe you shouldn’t bail out. But you can’t hold on to everything forever.
New Fundings
Appoxee, a 2.5-year-old mobile engagement platform based in Tel Aviv, has raised $1.8 million in seed funding led by Lazarus Israel Opportunities Fund and individual investor Mosche Lichtman. Previous investors Cyhaw Ventures and Oryzn Capital also contributed to the funding, which brings the total amount raised by the company to $2.4 million.
Basis Science, a two-year-old, San Francisco-based smartwatch maker, has raised $11.8 million as part of a Series B round it began raising earlier this year, when it collected $11.5 million. Together, with the company’s Series A funding, Basis Science has raised $32.3 million from investors, including Mayfield Fund, DCM, Norwest Venture Partners, Intel Capital, Dolby Family Trust, Stanford University and Peninsula-KCG.
Pacejet Logistics, a 36-year-old, Columbus, Oh.-based company whose shipping software connects a customer’s order processing system to a network of shipping carriers, has raised $4.5 million in Series C funding led by Athenian Venture Partners.
Personalis, a two-year-old, Menlo Park, Calif.-based company that sells genome sequencing and analysis services to life-sciences researchers, has raised a $22 million B round that brings its total funding to $42 million. Investors in the company include Lightspeed Ventures Partners, Mohr Davidow Partners, and life science investor Abingworth.
Sparkcentral, a two-year-old, San Francisco-based company whose customer service platform aims to help big companies monitor and manage complaints from social media sources, has raised $4.5 million in Series A funding led by Sigma West. Previous backers also participated in the round, including Social+Capital Partnership, Graph Ventures and Sebastien de Halleux, co-founder of Playfish.
Swirl Networks, a year-old, Boston-based developer of a location-based iPhone app that helps retailers engage with consumers while they shop, has raised $8 million led by Hearst Ventures. The round also included funds from previous investors SoftBank Capital and Longworth Venture Partners.
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New Funds
Montage Capital, an early-stage firm focused on investing in financial services, e-commerce, and resources (like energy, food and water) companies that are between their angel and Series A rounds, has raised $2.2 million in funding, according to an SEC filing. Montage, based in Menlo Park, Calif., was founded by Todd Kimmel, who was most recently a general partner at Mayfield Fund, which he joined in 2009. Before Mayfield, Kimmel worked as a principal at Advanced Technology Ventures.
Thrive Capital Partners, a Peoria, Ill.-based firm that looks to develop and buy companies that offer a positive social impact, is seeking up to $10 million for a new fund, according to an SEC filing. The outfit, which began fundraising late last month, has so far raised $450,000.
The Entrepreneurs’ Fund III (TEF3), a San Mateo, Calif.-based, early-stage, IT-focused venture fund, is looking to raise $100 million for a fund called Entrepeneurs’ Fund IV, shows an SEC filing. TEF3 was founded by Jeffrey Webber, a founding partner of R.B. Webber & Co., a Mountain View, Calif.-based management consulting firm that went out of business in 2004, 13 years after it was founded.
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Exits
Publicly traded ad management company Digital Generation has acquired a four-year-old, Santa Monica, Calif.-based company called Republic Project for $1.4 million in cash. Republic Project operates an ad campaign platform and raised $1 million in funding last year from 500 Startups, Google Ventures, Venture 51 and individual investors.
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IPOs
Reuters takes a look at how hard it is for even professionals to make money off IPOs once a company is out.
The hot IPO market isn’t doing much to boost M&A, either, reports Venture Capital Dispatch.
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People
Jason Goldberg and Nishith Shah, the CEO and CTO of troubled online retailer Fab.com, have told staffers (and AllThingsD) that they are forfeiting their 2014 salaries. Fab has raised more than $300 million in venture capital from Menlo Ventures, Andreessen Horowitz, and Atomico among many others; the company has raised another $30 million in debt.
John Martin, a Baker Botts attorney who has been serving as chair of the firm’s technology practice, was just named Partner in Charge of the firm’s Palo Alto office.
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Happenings
Place, a day-long conference centered around indoor marketing, starts around 9 a.m this morning in San Francisco. You can find details here.
If you’re in the Bay Area, you might also want to hit up the Ritz Carlton at Half Moon Bay, for the second day of Venture Alpha West, which kicks off at 8:15 with a keynote by Tim Draper of Draper Fisher Jurvetson.
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Job Listings
The pharmaceutical company Merck announced last week that it’s laying off 8,500 employees and cutting $2.5 billion in costs over the next two years. But, good news: it’s still looking for an associate director for its Digital Innovation and Outreach team — a role that requires building relationships with venture capitalists, startups, academia and “thought leaders.” A bachelor’s degree and some exposure to venture capital or private equity is required. The job is in Palo Alto, Calif.
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Essential Reads
Twitter could be valued at as much as $20 billion once it begins trading.
Facebook is building a 394-unit residential community for its employees, just a stone’s throw from its Palo Alto campus. Aside from the creepiness factor (and undeniably, there is one), you might be interested in knowing exactly what the development’s plans look like.
Nest could help transform people’s homes — if they don’t choke over the $129 price — says Wired’s Steven Levy.
Google‘s executive chairman, Eric Schmidt, tells a crowd that Android is “more secure than the iPhone.” (The crowd does not buy it, seemingly.)
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Detour
More evidence that you should eat five times a day.
Amazing pictures by photographer, world traveler, and serial trespasser Bradley Garrett.
Whatever you think of Supreme Court Justice Antonin Scalia, this is a great interview with him.
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Retail Therapy
In our youth, we had a place for these kinds of sweaters: the Ugly Sweater Drawer. Still, if you’re easy on the eyes and under 35, you can probably pull off one of these retro numbers. (Older than that and the look is really no longer ironic.)
This is pretty cool, though we don’t advise it for the office. You’d probably feel pretty stupid, getting yourself fired for shooting a rubber band, or 600 of them, at your coworker.
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