• App Annie Rakes in $55 Million as It Races Away from the Pack

    App-AnnieAccording to Comscore, activity on smartphones and tablets now absorbs 60 percent of our digital media time, driven predominately by apps. Yet, for the most part, anyone hungry to know how — and how often — those apps are used has been left in the dark.

    Onavo, an app analytics company, was widely seen as providing better insights into app usage than most analytics startups. But when it was acquired by Facebook last year, its insights were moved behind a curtain.

    Now, App Annie, the five-year-old, San Francisco-based mobile analytics company, says it has developed everything Onavo featured and much more.

    To an extent, it’s following Onavo’s playbook.

    Onavo’s mobile measurement product evolved out of a couple of applications designed to do something very different – help users reduce their expensive data consumption. Once the company gathered enough user data, it shifted gears, turning itself into a market intelligence product.

    Similarly, App Annie is rolling out a tool today called Usage Intelligence that provides customers with detailed analytics about individual app usage and engagement – information that largely comes from its free, five-month-old VPN Defender app, which offers encrypted and secure access to a user’s favorite sites and apps.

    Conveniently, VPN Defender also gives App Annie a window into its users’ app usage.

    The development is a big deal for app developers and investors who’ve been unable to accurately gauge how apps fare on the open market, as well as how people use them after they’ve been downloaded.

    It’s a huge boon, too, for App Annie, which makes money by selling yearly contracts for its analytics and says its broader tool sets are already being used by most top mobile app developers, giving it insights into 675,000 apps as a result.

    The company — whose average contract is $80,000 per year — isn’t yet profitable, says cofounder and CEO Bertrand Schmitt. “I’d be sad if we were,” he says. “It would mean we don’t know where to invest next.”

    App Annie is clearly an IPO candidate, though. In fact, the 300-person company has just raised $55 million in Series D funding led by Institutional Venture Partners, a late-stage investment firm that just saw its 101st portfolio company go public in December. “Among the reasons we chose to work with IVP was their extensive experience with IPOs,” says Schmitt, who says an offering isn’t in the cards for 2015 but suggests it’s not too far off either.

    In the meantime, App Annie — which has now raised $94 million altogether — remains focused on growing its business as fast and as wide as possible. The company already has 10 offices around the world. And it expects its headcount to reach 450 by year end as it pursues several new markets more aggressively, including India and South America.

    Schmitt says App Annie intends to create more of a social network around the business that makes it easier for developers to share and collaborate on App Annie.

    Unsurprisingly, the company also plans to release many more apps like VPN Defender from which it can continue to wring valuable and lucrative insights for its customers — and break further away from competitors in the process.

    “If we keep improving as we have done, how do you fight?” says Schmitt. “There’s no other company with the same ability to execute.”

  • The Lesson of Jim Goetz: Great VCs Make Their Own Luck

    Jim GoetzPeople may be surprised that low-profile Jim Goetz of Sequoia Capital just landed the largest-ever acquisition of a venture-backed company. They shouldn’t be.

    Researchers have shown that superstar investors are remarkably consistent over time. In fact, when it comes to predicting which startups will be successful, individual VCs are roughly five times more powerful as leading indicators than the firms for which they work, according to a study published last May by Harvard and Carnegie Mellon academics. (The study controlled for all kinds of deviations, including industry, investment amount, the amount of experience of the VC at the time of the investment, and the age of the startup itself.)

    As one of the study’s authors, Matthew Rhodes-Kropf, told me when the study was first published, “The guys who know how to get big exits get big exits no matter where [they’re employed]. The guys who fail are pretty consistent about that, too.”

    Goetz is clearly one of the guys in the first camp. An entrepreneur who later became a general partner at Accel Partners, Goetz scored numerous hits for the firm, including Perbit (sold to Juniper), Rhapsody (acquired by Brocade Communications), and Entrisphere (sold to Ericsson). Goetz was so good, in fact, that in 2004 Sequoia Capital hired him away from Accel.

    Lucky Sequoia. Facebook’s $19 billion acquisition of WhatsApp could mean as much as $3.4 billion for Sequoia’s LPs, given that Sequoia invested a reported $60 million in the company across three separate rounds for an ownership stake of as much as 19 percent. And it’s just one of the big exits that Goetz has provided Sequoia. He led the firm’s investment in AdMob, which raised less than $50 million and was acquired by Google for $750 million just three months later; and he was also the force behind Jive Networks, Nimble Storage, and Palo Alto Networks, all of which have enjoyed successful public offerings.

    Another Accel partner, Peter Fenton, has followed a remarkably similar trajectory as Goetz. At Accel, Fenton quietly amassed a portfolio of 10 startups, later helping to sell two of them — JBoss to Red Hat and Wily Technologies to Computer Associates — in hugely successful outcomes for Accel.

    In mid-2006, Fenton was also headhunted by another VC firm – in this case, Benchmark Capital. At Benchmark, Fenton has continued to knock the ball out of the park. Two of his more prominent investments include Yelp (which went public in 2012); and New Relic, which was valued at $750 million in a funding round a year ago. In addition, Hortonworks and Zendesk are expected to go public in the near future. And did we mention Twitter? Fenton sits on its board and will reportedly net hundreds of millions of dollars personally alongside Benchmark, which owned 6.7 percent of the company at the time of Twitter’s November IPO.

    Goetz and Fenton aren’t lucky; they’re consistent. And their success may encourage more firms to poach star players, particularly if their LPs have anything to say about it. Brian O’Malley, a rising star at Battery Ventures, was recently lured over to Accel. With Goetz’s big deal, other firms are surely poring over other firms’ rosters in search of their own superstars.

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  • Former Sequoia Partner Mark Kvamme at Center of Controversy Again

    Kvamme,Mark-304Mark Kvamme, a former partner at Sequoia Capital, has cultivated numerous fans since moving to Ohio in early 2011. But he has also attracted critics who worry that his relationships with some of Ohio’s biggest power brokers are a little too cozy.

    In the latest controversy, press reports on Friday revealed that Drive Capital, Kvamme’s new, Columbus-based venture firm, received a $50 million commitment from Ohio State University several months ago despite concerns that the fund is unproven.

    As of early August, Drive Capital had raised $181 million for its debut fund, which is targeting $300 million. Kvamme’s sole partner in the endeavor is Chris Olsen, also formerly of Sequoia Capital.

    Kvamme did not respond to a request for comment over the weekend. Ohio State officials also did not respond to requests for information.

    Records released on Friday to the Associated Press and Cleveland’s Plain Dealer newspaper show that university officials were pushing back against the school’s investment in Drive Capital until April, over concerns that the firm’s Midwest investing thesis was based on “the attractiveness of what is perceived as an underserved market” rather than proof of concept.

    An email on April 5 from Ohio State’s chief investment officer, Jonathan Hook, to the school’s chief financial officer, Geoff Chatas, shows Hook told Kvamme directly that the school’s officials “did not see his fund as a good investment.” Later emails show that between April and July, when the investment was made, Kvamme and his wife, Megan, dined with then-president of Ohio State, Gordon Gee, during which time Kvamme seems to have secured a verbal commitment from Gee.

    “Your thoughtful questions, insightful comments, and sense of humor always give us food for thought accompanied by the delicious meal,” Kvamme wrote Gee in an email dated May 15. “We also always come away from our dinners with more ideas on how we can make Ohio the center of innovation and creativity.”

    In his email, Kvamme also asked Gee to approach other major universities for funding commitments, including the University of Michigan, Indiana University, and the University of Wisconsin.

    Gee replied to Kvamme that he would “see how we can best get other institutions to join with us.”

    Joseph Alutto, who succeeded Gee as the school’s interim president in July, had also questioned the size of the investment that Ohio State was planning to make in Drive Capital in the weeks before Alutto took his new office. Writing to Chatas in June, Alutto asked: “What is the justification for a $50 million investment rather than one in the $20-30 million range you had described as more typical? Let’s discuss.”

    Several weeks later, in an email to Chatas signed by “G,” the sender wrote that he had convinced Alutto to “honor the Kvamme agreement,” adding, “We are back on solid ground. Make that happen quickly.” (The name and email address of “G” were redacted by OSU when it submitted the emails to the media.)

    Venture capital is very much a relationship-driven business, of course. And surely, Kvamme looks as good a bet as any. Kvamme led Sequoia’s early investment in LinkedIn – a bet that has paid off handsomely for Sequoia’s LPs. Kvamme also borders on VC royalty. His father, Floyd, is a partner emeritus at Kleiner Perkins, and his ex-father-in-law is famed venture capitalist Pierre Lamond, long one of Sequoia Capital’s most powerful partners.

    Still, the investment appears to represent the largest commitment to a venture firm that Ohio State has made. Venture capital investments represented just 0.7 percent, or $21.7 million, of the $3.1 billion that the university was managing as of June 30.

    The agreement is also attracting scrutiny as Gee has reportedly been seeking an investment from Kvamme. According to the emails provided to news outlets on Friday, Gee, who remains at Ohio State in an emeritus position and as a law professor, talked about soliciting a $1.5 million contribution from Kvamme to help establish a higher-education policy center.

    An OSU spokeswoman told the Plain Dealer that it’s “important to note that exchanges about Mr. Kvamme as a possible donor took place well after the investment was made, and on the Center in particular, Gordon did not even know about the idea for such an institute at the time he started advocating for the investment opportunity.”

    Combined with school officials’ apparent change of heart, the “huge departure” for the university has critics like Brian Rothenberg, the executive director of the public interest group ProgressOhio in Columbus, concerned.

    “Mark Kvamme seems to have a very inquisitive mind and he doesn’t mind pushing the envelope, but it’s a toxic mix with public money,” says Rothenberg.

    Rothenberg has been focused on Kvamme’s activities for some time. In fact, ProgressOhio is challenging the constitutionality of JobsOhio, a private nonprofit that Ohio Governor John Kasich created with Kvamme’s help in January 2011. Gee joined the board six months later.

    The job, which brought Kvamme to Ohio from Silicon Valley, was expected to last just five months. But by August 2011, Kvamme had acquired an Ohio’s driver’s license, along with a farm outside Sunbury, Ohio. Apparently, he had also fallen in love. (Kvamme is now married to the daughter of Greg Browning, the former director of the Ohio Office of Budget and Management.)

    In 2011, Kvamme said he hoped to create 30,000 new Ohio jobs through JobsOhio. But from the outset, the program, which manages roughly $100 million per year, has operated under a shroud of secrecy. (The bill that created JobsOhio states that “records created or received by JobsOhio are not public records.”)

    ProgressOhio and others have characterized that lack of transparency as unconstitutional. The Supreme Court of Ohio will begin hearing oral arguments relating to the case this Wednesday.

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