Author Archives: JKNews

About JKNews

Jason E. Klein is an experienced media CEO and builder of digital and traditional businesses who has led two successful turnarounds. He is founder and CEO of On Grid Ventures, an advisory and investment firm in digital media, marketing, and information; a member of New York Angels and Harvard Business School Alumni Angels; and a mentor at several NYC-area “incubators.”

Venture Capital Forum 2013

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Join us for an evening of discussion about venture capital and a wine reception. I’ll be moderating a panel of leading venture capitalists for a discussion of what to expect in the next 12 months: developments in the field; the state of start-ups; what’s likely (and not likely) to be funded in the year ahead.

Any questions or topics you’d like covered?  Let’s us know @JKNews, or email.

Gotham Media Digital Cocktails
Venture Capital Forum 2013
Wednesday, January 30, 2013 from 6:00 PM to 8:00 PM
New York, NY 

Panelists:

  • Steven Brotman Managing Partner, Silicon Alley Venture Partners @StevenBrotman
  • Habib Kairouz Managing Partner, Rho Ventures @HabibKairouz
  • Charlie O’Donnell Partner, Brooklyn Bridge Ventures @ceonyc
  • David Pakman Partner, Venrock @pakman
  • Jerry Spiegel Partner, Frankfurt Kurnit Klein & Selz PC 

Moderator:  Jason E. Klein Founder and CEO, OnGrid Ventures @JKNews

To register, click here:  http://gothammedia.eventbrite.com/

A Venture Capital Recession in 2012

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The National Venture Capital Association data from Money Tree is out, and the VC industry is in a recession:

  • For the full year 2012:
    • VC funds invested declined 10%, to $26.5 billion
    • The number of VC deals done declined 6%, to 3,698.
  • Double-digit decreases in investment dollars across most industries, specifically the traditionally capital-intensive Clean Technology and Life Sciences sectors, offset the increases seen in the Software sector in 2012.
  • Stage of investment shifted from Seed to Early Stage as venture capitalists overall began engaging with companies later in their life cycle than in previous years. Investments into Seed Stage companies decreased 31 percent in terms of dollars and 38 percent in deals with $725 million going into 274 companies in 2012, the lowest annual seed dollars since 2003.
  • Internet-specific companies experienced a 5 percent decline in both dollars and deals for the fullyear 2012 with $6.7 billion going into 976 rounds compared to 2011 when $7.1 billion went into 1,033 deals. However, the year still marked the second highest level of Internet investment since 2001. These companies accounted for 25 percent of all venture capital dollars in 2012, up from 24 percent in 2011.
  • Investments in the NY Metro area held at 11% of the total number of deals, with 397 companies funded, but the dollars deployed declined 18% to $2.3 billion

More details here.

OnGridVentures Top VC Deals of 2012

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Here’s our list of the top Venture Capital deals of 2012 in our sectors, culled from the VentureBeat Top 15 list:

Big Data-Enabled, Next Generation Content

Drilling Info, $166 million

Drilling Info might have the least interesting name on this list, but what it offers is certainly attractive — so much that it raised $166.2 million in a major Q1 funding round. It offers a SaaS-based oil and gas business-intelligence platform, and it claims to be the “most complete source of North American and offshore waters oil and gas information.” It’s easy to see how a company offering easy access to that kind of data could get some serious cash. The round was raised by Insight Venture Partners, Battery Ventures, and Eastern Advisors Private Fund, with Vaquero Capital advising the deal.

Big Data Enabled

Box, $125 million

Cloud storage and collaboration startup Box had a huge year with lots of developments including its OneCloud syncing solution, the opening of an international headquarters in London, and more. But one of its biggest pieces of news was when it raised $125 million in fresh capital for aggressive growth around the world. This latest big round was led by General Atlantic, with participation from Bessemer Venture Partners, DFJ Growth, New Enterprise Associates, SAP Ventures, Scale Venture Partners, and new investor Social+Capital Partnership.

E-commerce; Social Frameworks

Fab, $117 million

Social shopping startup Fab had a big year, and it recently announced that it sold $6.5 million worth of goods between Nov. 23 and Nov. 29, which is a very good number to kick off the holiday season. With that kind of traction, we’re sure its many investors — Atomico, Pinnacle Ventures, re-Net Technology Partners, Mayfield Fund, DoCoMo Capital, Menlo Ventures, Andreessen Horowitz, Baroda Ventures, and First Round Capital — were glad they put up more than $100 million back in July. Fab CEO Jason Goldberg also informed us that his startup raised another $16 million in October and November at the same terms as the July round, bringing the total to an impressive $117 million. Fab also recently said it plans a “pivot” in 2013, so we’ll see how that pans out.

Social Frameworks, Next Generation Content 

Pinterest, $100 milion

Pinterest, now the third most popular social network in the U.S. after Facebook and Twitter, had a hard time getting VCs’ attention when it first started out. But it didn’t appear to have much trouble raising a new $100 million round in May. The round was led by Japanese web retailer Rakuten, with participation from Andreessen Horowitz, Bessemer Venture Partners, FirstMark Capital, Glencoe Capital, and other angel investors. As 2012 has continued, Pinterest has gained more traction. Recently, it added pin previews inside Twitter and opened its doors to business accounts.

Health Efficiency, Social Frameworks

Castlight Health, $100 million

Castlight Health, one of two health care companies to make this list, dubs itself as “the leader in health care transparency.” It offers consumers and companies comprehensive data about the price and quality of health care, ideally to help them save money while also improving their care. The company attracted astellar $99.9 million investment in May from T. Rowe Price, Redmile Group, Allen & Company, Maverick Capital, Oak Investment Partners, U.S. Venture Partners, and Venrock Associates.

Social Frameworks

Github, $100 million

GitHub, easily one of the most exciting startups of the year, caught a lot of attention in July for raising nearly $100 million for a Series A round. (It could be the biggest Series A ever.) Investors Andreessen Horowitz and SV Angel clearly believe in GitHub’s mission of supplying social coding tools to developers. The company has grown quite popular since its launch in 2008, and it has more than 1.7 million members who have shared more than 3 million code repositories. It recently hired Vlado Herman, the former CFO of Yelp, to help it manage its huge round of funds.
Read more at http://venturebeat.com/2012/12/28/top-venture-capital-deals-2012/#qQ7hmThIhFLXi8qk.99

Five Geo-Marketing Platforms for National Brands

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Increasingly, major brands like Vicks and Nestlé are using location-based marketing platforms to help direct consumers where to buy their products.

Here from Streetfight are five platforms for  brands a way to take advantage of location-based services technology .

1. JiWire’s Compass: Brands such as Clinique, Bobbi Brown Cosmetics, and Jeep utilize real-time product availability data to point consumers toward local retailers that currently have their products in stock.

2. Point Inside: Sprint, Clear Channel, and Meijer use indoor mapping technology to identify consumers’ “micro-locations” inside stores.

3. inMarket: Coca-Cola, Levi’s, Nestlé, and Unilever has used inMarket apps CheckPoints, Extra! Extra!, and List Bliss to target geographic regions, specific retail chains, or individual stores.

4. Swirl: The Swirl mobile app lets consumers “follow” their favorite brands and notifies them when they’re close to retailers like Nordstrom, Macy’s, and Old Navy having sales.

5. Foursquare: Marketers like MTV, Bravo, and People have their own “brand pages” with content and location tips.

 

One King’s Lane wants to be the King of Home Décor

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SF e-commerce retailer One King’s Lane is on track to double revenue in 2012, to $200 million. Its clear vertical focus on home décor is working, with a magazine-like, highly graphic approach.  Each day the site launches up to three thousand new home products assembled around inspirational decorating themes.

The news:  One King’s Lane just closed a $50 million Series D financing,  led by Institutional Venture Partners, expected to be their last round.  Also participating were existing investors Kleiner Perkins Caufield & Byers, Greylock Partners, Tiger Global Management, and new investor Scripps Networks (parent of HGTV, which could bring terrific synergies).  Total raised to date is $116 million.

Breakeven is forecast at $400 million revenue, in 2013 or 2014. One King’s Lane takes no inventory itself, relying on the manufacturers and third parties.  Staff of 350. A quarter of One Kings Lane’s traffic is via mobile, more on holidays and weekends.

Sources:  Pando Daily, Forbes, Techcrunch.

Vox Media Gains Traction with SB Nation

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Vox Media, fueled by $30 million in VC funding, is building an engine for  next-generation content.  The ingredients are a clear vertical focus,  low cost digital-only content, highly social.  In Vox’s case, no paywall and fully ad-supported. The numbers:

  • 800 paid bloggers, who I presume are fueled by their team passion more then money.
  • 9.4 million unique visitors, half which return 20x each month, growing at 20% per year.  A fraction of what espn.com gets, but the trend is positive.
  • Direct sales force of 25 people, focused on premium CPM sales to big national brands.
  • Proprietary CMS called Chorus:  supports robust commenting and forums, and links sites with databases on teams and players.
  • Revenues of $25 million, reportedly at breakeven now.
  • Valuation of $140 million, based on most recent round.  Accel Partners is lead VC, with additional funding from Comcast Ventures, Khosla Ventures, Allen & Company, Providence Equity Partners, and Ashton Kutcher.  CEO is Jim Bankoff, headquartered in Washington, D.C.
The valuation is hefty at over 5x revenue, but sports sites with passionate fans are highly valued, plus the engine can expand to other verticals.

Data sources:  Forbes and TheNext Web.

Mobile First?

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It’s about time that some are questioning the mobile first gospel.  Check out this post by Fred Wilson, citing also Vibhu Norby.

The Wall Street Journal bets on e-commerce with 72Lux

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E-commerce is a key component of a next-generation content model, and the Wall Street Journal has taken a big step in this direction by launching a launching a shoppable gift guide for the holiday season, with more to follow for Valentine’s Day and Mother’s day in 2013, as reported in Advertising Age.

72Lux is “the software that sits behind the site and lets them create any form of content that is shoppable,” according to Heather Marie, 72Lux’s 28-year-old CEO.

Wall Street Journal Select allows readers to purchase the gifts — which range from a $2,900 Tag Heuer watch to a $19.95 book about home-brewing beer — directly from WSJ Select.  Customers can add products from participating retailers, which include Nordstrom, Best Buy, and Coach, to a single shopping cart and pay for them all with one payment.

“The release of the gift guide is really the new beginning of a more-concerted effort to develop additional revenue streams around commerce,” said Alisa Bowen, the chief product officer at Wall Street Journal parent company Dow Jones.

More from Advertising Age here.

Plus, the Wall Street Journal even promoted the site with a full page ad, Monday, December 8, 2012, page b8:

Who Gets Better Returns, Professional VCs or Angel Investors?

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Early stage venture capitalist John Frankel (@john_frankel) has compiled some very rich data on the returns of early stage and venture investing.  Some key points:

  • Venture capital funds, in aggregate, managed an anemic 4.4% end-to-end pooled return over the last 10 years
  • As one Kauffman Foundation report sums it up, “since 1997, less cash has been returned to investors than has been invested in VC.”
  •  A typical firm now makes two-thirds of its revenue from annual management fees rather than performance-based carried interest.  The larger the fund, the more likely it is that income is tied to fund size rather than performance. The incentive becomes raising larger funds rather than generating stronger returns.
  • Angel groups, on the other hand, have done exceptionally well.  Every large angel return study has mean angel IRRs ranging from 18 percent to 38 percent.  Amongst angels, top performers conduct more due diligence before investing and are subsequently more actively involved with ventures.

You can see the detailed charts of returns here.

The Pitfalls of Mobile

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The push for mobile-first makes good sense, but the mobile landscape is fraught with difficulties, as highlighted by Semil Shah in TechCrunch.

Mobile has low barriers to entry, particularly in apps, and a proliferation of aspiring players in most every mobile category.   Reaching scale in mobile is elusive, and many startups might wind up as profitable ongoing ventures, without a huge exit, disappointing investors.

As Shah points out, citing VC Andy Weissman: investors in mobile services and apps may “wait and see” which services are scaling best.

You can read Shah’s full piece here, also crediting Albert Wenger from Union Square Ventures.