ArpexCapital

Dream, People, Culture

Weekly News April 29, 2011

Filed under News by

 

Brazil

·       Resotrando.com, an online restaurant booking service, closed a new round of investment led by Atomico. The company operates in Sao Paulo and Buenos Aires and will soon expand to other markets. The company receives bookings for restaurants 24 hours a day.
o    http://dlvr.it/PJ3cx
·       Vostu has signed a partnership agreement with Universal. This allows for virtual items based on their movies to be put in Vostu’s games. Moreover, there will be some cross-promotion with the films being studied.
o   http://bit.ly/j7TfeZ
·       There were a lot of StartUp events in Brazil this week. Brasilia and Recife had a Startup Meetup. Vitoria had the Startyouup (discussed in previous weeklys). There was the Mega Start-up Lab in BH and then in Sao Paulo the long awaited Geeks on a Plane startup event. On May 13-15 there will be a Startup Weekend in Campinas at Unicamp.
o   http://bit.ly/dR4fWI

 

United States

 

Spotify continues to promise to come to the US and is in negotiations with Facebook. More importantly Spotify, like YouTube, is in talks with major movie studios over offering early access to streaming movies.

o   http://tcrn.ch/mbh2mQ
·       Pixable secured a $36M Series B led by Menlo Ventures. The company enables users to manage their online photos with one set of features centered on search, aggregation, editing, and product creation. It will scale its team and infrastructure and integrate into more platforms.
o   http://bit.ly/jdwwuo
·       Evolv has raised a $15.75M Series C round led by GGV Capital. Evolv has an algorithmic-based SaaS solution for hiring and management purposes. With funds, the company will ramp up global expansion, development, and sales and marketing.
o   http://bit.ly/fd1IfY
·       Pixelpipe raised $2.3m this week. The company has created tools that allow users to distribute content to more than 100 social networks, photo-sharing sites, and blogs at once.
o   http://bit.ly/hkXhAL
·       Storify, a tool that enables professional and citizen journalists to craft multimedia narratives by utilizing various social networking sites onto one embeddable page, has entered into public beta. All of this follows the company’s February Series B and it has been growing quickly.
o   http://on.mash.to/f0mXcv
·       Facebook stock fever has cooled down. It has been reported that current attempts to sell a $1B worth of stock at a $70B valuation is finding no takers. This is due to mediocre projected revenue and EBITDA ($4B, $2B). Facebook is set to roll out a new ad system for news feeds.
o   http://read.bi/iv70qU
·       Facebook has now entered the deals space. Still, it is not a deep discount deal service, rather one more focused on social deals. Products that many users will want to do with friends. Margins and other details are undisclosed. Users pay with Facebook credits or a credit card.
o   http://on.wsj.com/jUI9YR
·       Facebook released the “send” button. This lets users share content with their friends, but only to specific users. It is on 50 partner sites.
o   http://rww.to/jxHXRk
·       Milk, Kevin Rose’s mobile development lab, has raised $1.5M from a bunch of big SV names. The company then hired four new people and is now set to remain a skeleton team and roll out the ambitious mobile product promised at its launch last month.
o   http://tcrn.ch/eKq3Qf
·       Visa recently invested in Square, the mobile payments start-up. Visa declares that they do not compete with each other. Moreover, Square will bring Visa access to segments that previously never used credit cards. Finally, Visa’s participation signals a trust in Square’s security features.
o   http://nyti.ms/mwpqRV
·       Foursquare is trying to raise $20M to $40M at a $500M valuation by early June. The financing will likely be more difficult than for other high-growth companies such as Groupon, Twitter and Facebook.
o   http://on.wsj.com/eRQMeX
·        Sparkfly raised $2.5m for its mobile engagement platform, SparkQuest, connects consumer deal redemption with merchant point-of-sale technology. Consumers can now get instant and repeat rewards at the merchants they frequent most. It also has game-like quests that are connected to merchant deals. These tap into social networks.
o   http://tcrn.ch/h5kF52
 
Venture Capital/Industry
 
 
·       Yuri Milner has disrupted the VC community with his open wallet and big bets. Recently, a glimpse into that wallet shows that Mail.ru  (Russian site founded by Yuri) has minority investments in Silicon Valey worth $2B.
o   http://nyti.ms/jsoNy7
·       There has been an uptick in large corporations acquiring graduates of accelerator programs; the acquisitions tend to happen after VCs have sunk $3-$5M into the young companies.
o   http://on.wsj.com/hkcJUG
·       Square’s Keith Rabois spoke out against websites and called for mobile as the true future. He sees native applications built for specific devices over a mobile website as the necessary course. Moreover he downplayed the geo-location hype, calling it only a piece of the mobile picture.
o   http://bit.ly/ebaoXf
 
 
April 29, 2011 at 13:28 Comments (0)

Are We in a Bubble? For Most VCs, It Doesn’t Matter

Filed under Brazilian Venture Capital, Macro Environment, posts, US Venture Capital by

 

Two interesting posts came out yesterday addressing whether the venture market has entered a “Bubble”. Michael Arrington of Techcrunch believes not and contrasts the Bubble of 1999-2000 with today’s market. Fred Wilson takes a careful but, to my reading, contrary view, warning about current imbalances in the early-stage ecosystem.

 

Instead of opining one way or the other, I’d like to explore how the structure of typical venture capital funds contributes to Bubbles. Specifically, strict investment mandates and short investment periods force VCs to deploy capital even into inflated markets, which makes the markets more inflated.
 
First, the strict investment mandate: unlike a hedge fund, a VC fund cannot diversify into assets with less inflated valuations or bet against a rising market by, e.g., shorting stocks. The VC must buy (they are “long-only”) shares of companies within a relatively narrow range: if you raised a fund focused on early-stage web businesses in the US, that's what you must invest in.  You can’t pivot and invest in, e.g., growth-stage cleantech businesses in Europe, even if that's a healthier market.
 
Second, most VCs have a limited time period – often only five years – to invest their fund.  Therefore, they must participate in the market now, regardless of conditions.  If a VC waits for the market to correct, he risks not deploying all of his investors’ (LPs) committed capital during the investment period.
 
LPs get upset if you don’t deploy their capital.   Why?  Because they pay you management fees to find good deals and invest, not to watch others invest.  More importantly, if you don’t deploy their capital, you throw their asset allocations off balance. If an LP plans to have 6% of its money in venture investments, that’s what it needs to have, not 3%. Portfolio Theory tells them that returns come from having the proper percentages deployed in different asset classes NOT from individual investments within those asset classes. So they want their capital commitments invested, regardless of market conditions.
 
What will happen to the VC that says to his LPs at the end of the investment period, “Sorry, but we caught a bad part of the cycle. Valuations were too high so we only invested 30% of your money”…?  I don’t know what will happen, actually, but I do know what won’t happen – the VC won’t receive another dime of capital from that LP and probably not from any other LP in the ecosystem; he won't raise another fund and his asset management firm will eventually cease to exist.
 
So, is there a Bubble? For many venture fund managers, the answer is, “It doesn’t matter.” They need to invest, regardless of valuations.
 
ArpexCapital is fortunate to have a bit more flexibility than the average venture fund. Our capital comes from a relatively small group of aligned individuals, including the fund managers.  We all communicate regularly about our pipeline, the market and valuations, so we are on the same page about the decisions that the fund takes.
 
We have a targeted time period in which to invest the capital but not a strictly mandated one: if, at the end of that target period, we have only invested 30% of the fund, no one will complain.   We also have more flexibility about the size and stage of our portfolio investments.
 
We will undoubtedly make mistakes – passing on high return deals and investing in busts – but I hope that our structure allows us to invest without the coercion that a typical fund structure creates.
April 25, 2011 at 05:40 Comments (0)

Weekly News April 22, 2011

Filed under News by

Brazil
· At The Future of Payments conference in Sao Paulo last week, John Donahoe (CEO of eBay) affirmed that Brazil is the company’s top priority. This is not only big for Mercado livre, but for all PayPal competitors. Donahoe highlighted that PayPal succeeded in getting installment payment agreements with Visa and Mastercard (important for Brazilian market).
o http://bit.ly/gEhqcT
· Power.com has shut down. It launched in August 2008 for Orkut users and publicly in November 2008. The service lets users log into multiple social networks simultaneously. It also lets users move content from one network to another easily, and contact people across all of their social networks. The company had frequent litigation with Facebook and others.
o http://tcrn.ch/h3VxmH
· Raphael Lullis is the latest Brazilian on TechCrunch, with his creation SalaryShare. It is a site where users create a closed off “salary pool”. From there invited users may register and anonymously share their salaries. High level of synergy with Raphael’s other job website Job4Dev, a jobs site for developers.
o http://bit.ly/gOjcOL
· Astella Investimentos has entered into HelpSaude. The company will help the entrepreneurs in managing their growth and services expansion. HelpSaude is a health professionals and cures vertical search engine.
o http://bit.ly/eA6J5o
· Espirito Santo is starting to focus on start-ups. At the end of each month there will be workshop events. Furthermore, FUMNET was established. FUMNET aids Esprito Santos’ start-ups and pays for one entrepreneur to go to Silicon Valley at the end of the year for a pitch presentation.
o http://bit.ly/i42jaE
· Intel Brasil has chosen the projects that will go onto the International Science and Engineering Fair in Los Angeles this summer. Some of the interesting projects for the tech sector is a Paulistano project that focuses on how video games assist those with ADHD and a Sulista’s project of a device that interprets commands via sound input.
o http://bit.ly/ib7KSx
· Restorando.com, the online restaurant booking service, announced that it has closed a new round of investment. The fundraising was led by Atomico, the venture capital firm founded by Skype co-founder Niklas Zennström.
o Lavca.org
United States
· NYC stealth startup Kohort raised a large seed round of $3M. ArpexCapital is one of the investors. CEO Mark Davis is well-known in the NYC VC world and has only said that Kohort is related to social media.
o http://tcrn.ch/gzSqs0
· Apple is now selling Square devices (mobile payment processor) online and in stores. With its $10 Square credit, Square is likely losing money on the deal, but an Apple boost could lead to more transactions on the service and more money in the long-run.
o http://tcrn.ch/ebo9vq
· News.me has launched on Apple’s app store and is ready for the iPad. It is a social news reading app that presents the news that the people you follow on Twitter are reading and then uses a program to filter it. Revenue model is a subscription fee.
o http://tcrn.ch/gDGtc5
· The social search engine has arrived – search engine company, Blekko has integrated Facebook into its program. Users can now log into Blekko with their Facebook information and have two results list, with one being a list of their Facebook News Feed as it pertains to the search item.
o http://tcrn.ch/gCcwkw
· Google Offers officially launched in NYC, the Bar Area, and Portland. It will alert consumers to local business deals. People can also get email alerts.
o http://on.wsj.com/hqO4Wv
· eBay’s purchase of Where Inc is leading to an expansion of PayPal. Where is a location based mobile service and will be integrated into the PayPal unit. Now users of the WHERE mobile app can make payments via PayPal. Where can now see who saw the ad, clicked on it, and then bought it, all in a mobile context.
o http://bit.ly/h7GSeW
· Intuit (Square’s largest concern) has launched it’s iPad app. Intuit has only recently begun to target the lower end of the market, where Square is currently excelling. Intuit has the advantage of having relationships with 4.5 million businesses through its QuickBooks business.
o http://tcrn.ch/gHmEdL
· PlaySpan is launching UltimatePay, a payment system that allows companies to offer a fast, in-app and secured transaction system. It offers a wallet infrastructure and a monetization platform known as MaaS (monetization as a service™), with all the components of both online and mobile payment solution that a merchant needs in an out of the box.
o http://bit.ly/ggwJi1
· LocalResponse aggregates real-­time social media check-­ins from Facebook, Twitter, Foursquare, Instagram and other services to provide a simple interface for local businesses to directly respond to the most influential customers. Will use the freemium model.
o http://tcrn.ch/een6ua
· Venuetastic (Y-Combinator project) has launched an alpha version. The company aims to make booking an event space easy and linking business that don’t specifically work in events with non-traditional commercial space. Initially Bay Area focused, large market, and monetization via booking commissions.
o http://tcrn.ch/hXaHqd
Venture Capital Industry
· Miami has begun a new tech startup culture as evidenced by firms such as Concierge (Voice Information technology), IncubateMiami, and the Miami Innovation Fund. Miami has long had ties to Latin America, so there tech startups should be no exception.
o http://prn.to/gBMZa4
· El Dorado Ventures published the five key points for a successful Enterprise 2.0 startup. 1) Lead with the product, 2) Leverage cheap existing infrastructure, 3) Evolve your selling process, 4) Integrate personality with the product, 5) Lower costs.
o http://bit.ly/fJYgeh
· A lot of VCs are moving into the food investment sector. The reason for this surge is that all of the investments in this space all integrate social media features. Jay Jamison of BlueRun Ventures sees this area as a several billion dollar market with strong growth potential.
o http://bit.ly/gKQ7Rh
· Forrester Research estimates that the cloud computing market will hit $241B in 2020 (currently $41B-2011). Forrester estimates that when business move e-mail and other tech services to the cloud, growth will boom.
o http://on.wsj.com/fJbfbC
April 22, 2011 at 10:50 Comments (0)

Kohort

Filed under posts, US Venture Capital by

As Matt Harris of Village Ventures tweeted, yesterday was de facto national Kohort day.  Techcrunch announced the company's Seed round, in which Arpex was fortunate to participate alongside a group of excellent investors. News of the funding spread quickly in the twittersphere, in part because Kohort's CEO, Mark Davis, has a large presence in New York's venture and entrepreneurial ecosystem.

Mark is a tornado of entrepreneurial activity: at various overlapping points he has worked at DFJ Gotham, founded both the New York Venture Community and Columbia Venture Community, earned his MBA at Columbia and authored one of the must-read venture blogs.  Mark provides a real-world example of an "inevitable entrepreneur", as described in my last post. We wanted to invest in Kohort because of the idea, of course, but were sold because of Mark and his team.   Here's to a bright future for them.

April 20, 2011 at 10:22 Comments (0)

« Older Posts