• A New Way to Fund Unicorns Starts to Look Less Magical

    unicornIf you haven’t heard of a fairly new twist on investing called special purpose vehicles (SPVs), you probably aren’t an institutional investor or a wealthy individual with direct ties to either a venture firm or a high-flying startup like Pinterest or Postmates.

    But don’t worry if you’ve missed the opportunity to invest in one. Investors may find they weren’t worth the risk if valuations of so-called unicorns — some given “haircuts” recently by their mutual fund investors — start to slip more broadly.

    The vehicles – essentially pop-up venture firms that come together quickly to make an investment in a single company – began surfacing around 2011, leading up to Facebook’s IPO, and they’ve been on the rise since. In April, the Wall Street Journal reported on several low-flying SPVs that have been used to connect investors with high-profile, still-private companies like the data analytics company Palantir Technologies and the grocery -delivery outfit Instacart.

    Another company that has raised money via numerous SPVs is the digital scrapbooking company Pinterest. When it set out to raise more than $500 million earlier this year, the venture firm FirstMark Capital raised a $200 million for a SPV to help fund it. In 2014, Pinterest separately raised $131.1 million through two SPVs organized as Palma Investments by SV Angel, the seed-stage fund founded by renowned investor Ron Conway.

    It’s no wonder that investors are drawn to the vehicles. In the case of Facebook, early access to the company produced big dividends for investors. Investor Chris Sacca similarly amassed an outsize stake in Twitter for investors Rizvi Traverse and J.P. Morgan by creating SPVs that paid off. (How richly depends on when they began cashing out. As of late September, Rizvi Traverse had sold more than 10 percent of the 15.6 percent of Twitter it owned at the time of its November 2013 IPO. Twitter’s shares peaked in January of 2014 at $69 per share; they’re now trading at roughly $26 apiece.)

    Whether investors in newer SPVs will see such rewards remains a question mark – and there a lot of investors in newer SPVs.

    More here.

  • StrictlyVC: December 11, 2013

    110611_2084620_176987_imageGood morning!


    Top News in the A.M.

    That new Palantir Technologies round, the one valuing it at $9 billion, has shot past $107 million, according to an SEC filing. TechCrunch has more here.


    The Part-Time VC

    Semil Shah has a full-time job, spending most of each week doing mobile product marketing for a company called Swell in Palo Alto. The rest of the time, Shah is either writing a weekly column for TechCrunch; working as an informal (but paid) mobile technology consultant to several Sand Hill Road firms; or trying to participate in competitive seed-stage financings using a $1 million fund called Haystack that he raised last year.

    Shah — who has so far backed 16 companies and is beginning to think about a $5 million to $10 million second fund – calls his schedule “not normal.” However unusual it may be, Shah could well represent the future of early-stage investing given its ongoing atomization. I talked with him about his immediate plans over coffee last week. Our conversation has been edited for length.

    How does someone with a.) a regular job and b.) no investing track record raise a million dollars?

    I’ve always been interested in investing and basically wanted to get practice, so I turned to [VCs and founders] who I know for help. There’s a ton of trust involved and every LP is different. Even just getting a $25,000 LP check from someone who has the means isn’t easy. But I think people knew that I wanted to do it and was having a hard time, and [eventually] I sort of passed the passion test. I also invested some of my own money [in the pool] and didn’t charge a management fee.

    How has it been going?

    I’ve now invested in 16 startups across four areas, including marketplaces, core infrastructure, online and offline commerce logistics, and mobile computing. Quite a few are doing well, includingHired [which marries tech talent with jobs]; Paddle8 [a virtual art auction house that has already gone on to raise a Series B round] andInstacart [a same-day delivery grocery startup that counts Sequoia Capital’s Mike Moritz as a board member].

    What size checks are you writing, and what are you getting in return for them?

    I can write between checks of between $25,000 and $100,000, though they’ve usually been around $25,000. And as someone on the edge of these deals, you aren’t setting the terms; you’re asking to be in the deal. For me, you take what you can get. It’s very competitive; I was surprised by how competitive it is.

    How are you selling yourself to sought-after entrepreneurs?

    I do think that by working full-time in mobile, I connect better with entrepreneurs because my operational knowledge is sharper. I also tell everyone my terms of engagement, which are that I’m on call for the entrepreneurs. I let them know that I think [they’ll] figure out what they need to do, then to call me if I can help in a certain area or just to talk to, because I’m not one of the big players. I kind of underpromise and try to be helpful and available, rather than say, “I’m going to do all these awesome things for you.”

    For those who might like to do what you’re doing, how would you advise them to separate themselves from the pack?

    I think firms and individuals have to brand themselves because it’s so competitive, and there are three ways to do it: there’s content marketing, including through blogs and social media; there’s referral marketing – you work with someone and give them an amazing reference; and there’s performance marketing. At the beginning, what do you do? You media market to gain exposure. Either way, entrepreneurs are smart; they figure out [who adds value and who doesn’t].

    Any big surprises now that you’re so entrenched in the market? What trends are you seeing?

    There are a lot of companies coming out of Y Combinator and [other high-profile incubators] that are getting fancy with terms and trying to get cute with the caps, and the market doesn’t really bear that out. I think sometimes with first-time founders, you get into the game, and you just get caught up in everything.

    I think another thing that most people on the founding side don’t understand is the exit profile of most companies. There’s a $20 million to $50 million band, and a $50 million to $100 million band, then the curve just drops. Entrepreneurs and investors publicly say, “Oh, we’re not going to talk about exits,” but everyone is silently making their own exit profile when they’re considering making an investment.

    Do you think when the time comes to raise a second fund, investors will be ready to bet on you again?

    I hope so. I’ve gotten lot of inbound [deal flow] from my other deals. I feel like I’ve passed the trust threshold and also the he-got-into-early deals threshold. I want to be investing in private, early-stage technology for the rest of my life.


    New Fundings

    CarbonCure Technologies, a six-year-old, Halifax, Nova Scotia-based company that repurposes waste carbon dioxide to make “greener and stronger” concrete, has raised $3.5 million led by BDC Venture Capital. Other investors in the round include Eagle Cliff Partners, 350 Capital, Innovacorp and an unnamed strategic Shanghai-based investor. The company previously raised $1.4 million, in January 2012.

    Datahero, a two-year-old, Palo Alto, Calif.-based company whose Web application helps users visualize and understand their data, has raised $3.15 million in additional seed funding by existing investorFoundry Group. Foundry committed $1 million to the company last year, along with Neu Venture Capital and numerous individual investors.

    Doctor on Demand, a new, San Francisco-based company behind a mobile app that connects users with physicians for a $40 consultation fee, has raised $3 million in seed funding. The capital comes fromVenrock, Andreessen Horowitz, Google Ventures, Lerer Ventures,Shasta Ventures, and Athena Health chief executive Jonathan Bush. VentureBeat has more here.

    Egnyte, a seven-year-old, Mountain View, Calif.-based company provides enterprise file-sharing and storage, has raised $29.5 million in Series D funding led by Seagate, CenturyLink, and Northgate Capital. Previous investors Kleiner Perkins Caufield & Byers,Google Ventures and Polaris Partners also joined the round, which brings the company’s total funding to $62.5 million.

    Extole, a four-year-old, San Francisco-based referral marketing platform, has raised $5 million from Norwest Ventures, Shasta Ventures, Redpoint Ventures and Trident Capital.

    FirstFuel Software, a four-year-old, Lexington, Mass.-based energy analytics business, has raised $8.5 million in Series B funding led by new investor E.ON SE. Previous investors Battery Ventures,Rockport Capital and Nth Power also participated in the round, which brings the company’s total backing to $21 million.

    Jamf Software, an 11-year-old, Minneapolis, Minn.-based maker of Apple device management software, has raised $30 million in funding led by Summit Partners, which was joined by GSV Capital Corp.

    Loop Commerce, a two-year-old, Mountain View, Calif.-based “gifting service,” has raised $4 million from PayPal. The funding, which comes just one month after Loop closed on a $7.2 million Series A round, brings the company’s total funding to $12.2 million.

    Novomer, a nine-year-old, Waltham, Mass.-based chemistry technology company, has raised an undisclosed amount of venture funding from Saudi Aramco Energy Ventures, the corporate venture arm of Saudi Aramco. Novomer has disclosed previous funding of $31.4 million, according to Crunchbase, including from Physic Ventures and Flagship Ventures.

    Simulmedia, a four-year-old, New York-based company specializing in so-called “targeted” TV advertising, has raised $25 million in Series D funding led by Valiant Capital. R&R Venture Partners, a new fund created by Dick Parsons and Ronald Lauder, also participated in the round, alongside previous investors Avalon Ventures, Union Square Ventures, Time Warner Investments and Allen & Company. Simulmedia has raised nearly $59 million to date.

    StarMaker Interactive, a three-year-old, San Francisco-based music entertainment platform behind mobile apps like “The Voice,” has raised $4 million in Series A financing from Qualcomm Ventures andiGlobe Partners.

    Talend, an eight-year-old, Los Altos, Calif.-based open-source data integration company, has raised $40 million from Bpifrance, Iris Capital, and Silver Lake Sumeru. The company has now raised just north of $100 million, according to Crunchbase.

    Utilidata, a Providence, R.I.-based maker of grid management systems for the electric utility industry, has raised more than $20 million in Series B financing, it announced yesterday. Formation 8 Partners and Saudi Aramco Energy Ventures led the round, joined by existing investors Braemar Energy Ventures and American Electric Power.

    Yodo1, a three-year-old, Beijing-based mobile games publisher and platform, has raised $11 million in Series B funding led by GGV Capital. Singtel Innov8, Pavillion Capital, and Iris Capital also participated in the round, which brings the company’s total funding to $18 million.

    The Zebra, a two-year-old, Austin, Tex.-based automotive insurance comparison platform, has closed $3 million as an add-on to $1.5 million that the company had previously raised for its seed round. Investors in the financing include U.K tech entrepreneur Simon Nixon, Mark Cuban, Mike Maples, Jr., Floodgate, Silverton Partners, Birchmere Labs and Swallow Point Ventures.


    New Funds

    Dubai-based investors Arya Bolurfrushan and Paul Kenny have formed a new, early-stage venture capital firm called Emerge Ventures that will focus on Middle East technology companies. The firm isn’t disclosing how much money it will be investing, but it has already backed three companies, including Lumba, a San Francisco-based mobile-gaming company that caters to the Arabic-speaking world.



    Chip Wilson, who founded Lululemon in 1998, is stepping down from his role as chairman after offending the company’s customers with some public comments. (Most notably, he suggested that women’s thighs make Lululemon’s yoga pants see-through, telling a Bloomberg interviewer: “It’s really about the rubbing through the thighs, how much pressure is there over a period of time and how much they use [the item].” Wilson, one of Canada’s richest businessmen, will remain on the board. The company has also named a new CEO. More on the story here.

    Yahoo CEO Marissa Mayer really wants to acquire Imgur, reports Business Insider, saying Yahoo has been talking with the four-year-old, San Francisco-based photo-sharing service all fall. If founder Alan Schaaf sells the company for as much as BI speculates that it’s worth, he’ll make a huge fortune; Schaaf has never raised outside funding.



    Ideeli, a six-year-old, New York-based women-focused flash sales site that has raised more than $100 million from investors, is trying to sell itself whole or piecemeal, sources tell AllThingsD. The company’s investors include Next World Capital, StarVest Partners, andKodiak Venture Partners.



    Harvard is hosting its Conference on Web and Internet Economics today through Saturday in Cambridge. You can learn more here.

    The Le Web Paris conference rolls into its second day. The agenda is here; you can find video of the event here.


    Job Listings

    Comcast Ventures is looking to hire an associate in San Francisco. To apply, you need at least two years of experience at a venture capital firm, investment bank, or consulting firm; people with biz dev or product management experience will also be considered. Applicants should also have an “established industry network” within the San Francisco venture and startup community.



    According to the WSJ, companies aren’t waiting nearly as long as they once did to stage secondary offerings. The median time this year between a company’s IPO and the completion of its second stock offering has been just 151 days, down from 368 days in 2011.


    Essential Reads

    As the world awaits the announcement of Microsoft’s newest CEO, Microsoft’s top executives, and Steve Ballmer himself, reflect on the man and his legacy.

    Vanity Fair takes a fresh look at numerous tech giants’ sudden interest in architecture, and what the choices of Apple, Google, Facebook, and Amazon say about their culture.



    Forget cocaine; drug cartels are now selling our stolen iPhones.

    Malcolm Gladwell on why being nice really isn’t so awful.

    Even as content goes digital, “talent” is stuck with obsolete contractsthat give most “home video” proceeds to studios, which once needed the money to make and distribute VHS tapes.

    Time looks back at 2013, publishing a “selection of underreported, improbable and astounding images” that we couldn’t stop scrolling through.


    Retail Therapy

    It’s too cold for camping, but come springtime, this flashlight, which doubles as a USB backup battery source, could come in very handy.

    “Ah, this sweater is precisely what I’ve been looking for,” said no grown man ever.


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