Archive for the ‘Venture Capital’ Category

Angry Bird Creator (Android) Raises $42mm in Seed Capital

Friday, March 11th, 2011

The latest phone app craze is the game “Angry Birds,” a popular pastime for android users across the globe.  It was developed by Finnish company, Rovio, and is played by over $40 million users per month. The game description on the Android app website reads: “Use the unique powers of the Angry Birds to destroy the greedy pigs’ fortresses! The survival of the Angry Birds is at stake. Dish out revenge on the greedy pigs who stole their eggs. Use the unique powers of each bird to destroy the pigs’ fortresses. Angry Birds features challenging physics-based game-play and hours of replay value. Each of the 225 levels requires logic, skill, and force to solve.”  Is this Company the next Zynga?  Who knows…I questioned Farmville when it came out as well.

Rovio, the tiny Finnish company behiind the iPhone, iPad and Android app Angry Birds, says it has raised $42 million from investors.

The game, consisting of angry birds shot at bewildered-looking pigs, is played by 40 million users every month, the Wall Street Journal said today. its fans, according to Daily Mail, include UK prime minister David Cameron, and Aussie leader Julia Gillard.

The funding round was co-led by venture capital firm Accel Partners, known for working with fast-growing companies such as Facebook. Also involved was the venture capital firm Atomico Ventures, created by Skype co-founder Niklas Zennstrom.

It is part of an “aggressive expansion mode” that Rovio’s co-founder and chief executive Mikael Hed said will make the company an “important entertainment media company for the future”.

Although he would not say what projects the company was working on, or how big of a share of the company was sold, Mr Hed reportedly told TV-industry website C21media.net that Rovio was looking at plans to make a broadcast cartoon version of Angry Birds.

“We will strengthen the position of Rovio and continue building our franchises in gaming, merchandising and broadcast media. Our next big thing is to execute superbly well on our strategy,” Mr Hed said in the article today.

Rovio has all ready been building on Angry Birds’ success with franchise products such as soft toys, which have sold more than 2 milion units.

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Groupon Raises A Billion Dollars

Wednesday, January 12th, 2011

Analysts are debating whether or not Groupon’s capital raise sets the record for the largest raise by a private company in a single venture capital round. However, until it is revealed how much of the financing was new equity capital, we cannot know for sure. Groupon did not detail how the company plans on spending the money, besides using it to “fuel global expansion, invest in technology, and provide liquidity for employees and early investors.” In the past year, Groupon has expanded from 1 to 35 countries, launched in almost 500 new markets, up from 30 markets in 2009, increased subscribers by 2500% reaching over 50 millions users, saved consumers 1.5 billion dollars, and worked with 58,000 local businesses, serving over 100,000 deals worldwide. The Company’s success stems from its ability to offer small businesses that don’t usually advertise online a way to reach local markets. Their success has attracted big investors, including Andreessen Horowitz, Battery Ventures, Greylock Partners, Maverick Capital, Silver Lake, Technology Crossover Ventures, and DST.

Groupon, the site that sells daily coupons for local businesses, has raised $950 million from investors, the largest amount raised by a start-up.

The investment follows Google’s $6 billion bid for Groupon, which fell apart last month. The list of new investors in the company include some of Silicon Valley’s hottest names, like Andreessen Horowitz and Kleiner Perkins Caufield & Byers.

Groupon, which is just over two years old and based in Chicago, has quickly catapulted into the ranks of the top tech companies. By selling coupons, like ones that offer $20 worth of books for $10 at a local bookstore, it gives small businesses a way to advertise and find new customers without spending money upfront.

“They’ve cracked the code on a formula for how to basically give access on the Internet as a marketing channel for offline merchants,” said Marc Andreessen, co-founder of Andreessen Horowitz and a veteran of Silicon Valley. “It’s a very, very big deal because there are a lot of offline merchants that have not been able to use the Internet as a marketing vehicle.”

Mr. Andreessen said Groupon can play the same advertising role for small, offline businesses, like dry cleaners and cafes, that Google’s AdWords has played for online businesses.

“That’s why Google was interested,” he said.

Some analysts have questioned whether Groupon, whose revenue has been zooming upward, can continue to grow at the same rate. Local businesses usually heavily discount their products on Groupon, so they may not want to sell coupons more than once or twice, and some businesses have complained that they lost money on Groupon and that the people who bought the coupons did not become repeat customers.

But in an interview last week, Rob Solomon, Groupon’s president, said there were so many small businesses worldwide that Groupon can continue to grow rapidly, expanding beyond businesses like restaurants and yoga studios to law firms, for instance. He also said the company planned to offer other services to small businesses, like tools to manage their relationships with customers. These include running promotions themselves.

The record-breaking amount of money that Groupon has raised gives the company the ability to expand into those new areas — and to cash out earlier investors who may be getting impatient after the company walked away from Google’s buy-out offer.

For the venture capital firms, the investment is a way to get into one of the fastest-growing companies. Kleiner Perkins, which made a name for itself last decade with investments in Google and Amazon.com, has been slow to social media, but is turning that around with recent investments in Twitter and Groupon.

Mr. Andreessen said he considered Groupon, Facebook, Skype and Zynga — all companies in which his firm has invested — to be the four most promising companies in this era of Web start-ups, comparable to Google, Yahoo, eBay and Amazon a decade ago.

Other investors include Battery Ventures, Greylock Partners, Maverick Capital, Silver Lake, Technology Crossover Ventures and DST, the Russian investment firm that previously invested in Groupon.

Goldman Values Facebook at $50 billion, Digital Sky Technologies Makes 400% on its Investment Since 2009!

Monday, January 3rd, 2011
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The New York Times announced today that Goldman Sachs and Russian Investor Digital Sky Technologies are investing $500 million into Facebook at a valuation of $50 billion.   According to Second Market, some private investors have bid up the Company’s shares to imply a value of $56 billion.  This bid comes soon after Google announced a $6 billion bid for Groupon a couple weeks ago.  Some call the Facebook valuation astronomical, and it theoretically doubles the net worth of founder Mark Zuckerberg to approximately $14 billion.  Two years ago Microsoft attempted to purchase a stake in Facebook at $15 billion, which at the time was deemed too high.  Digital Technology’s original 2009 stake in Google, which valued the company at $10 billion has since quintupled.  While Goldman is purchasing shares, VC firm Accel Partners is selling very aggressively at much lower valuations.  When examined more closely, with this purchase, Goldman may have bought it’s right to the Facebook IPO.  If Goldman is able to IPO shares of the company at a higher price, it could eventually simply divest of its shares in the open markets at a higher valuation and make a fat fee in the process.
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According to Reuters, “Goldman Sachs is investing $450 million of its own money into Facebook and that it’s bringing along $50 million from Digital Sky Technologies and as much as $1 billion more from its high-net-worth clients — all at a valuation of $50 billion.

The enormous sums of money involved here clearly ratify the valuation: this isn’t a handful of shares trading in an illiquid market, it’s an investment substantially larger than most IPOs.

It’s worth remembering here that only two years ago, when Microsoft bought into Facebook at a $15 billion valuation, that sum was described in the NYT as “astronomical”. But that said, Facebook’s multiples have clearly shrunk from those heady days: in 2007, Facebook could actually use Microsoft’s $240 million to fuel its expansion. Today, it’s reportedly earning $2 billion a year, which implies to me that this is a cash-out rather than a dilutive offering. Facebook has raised, in total, about $850 million to date, and there’s no obvious need for a massive new round of funding which would dwarf that entire sum.

If Goldman is leading the buyers, then, who are the sellers? VC shop Accel Partners has been selling Facebook shares quite aggressively of late, at lower valuations than this. They could easily provide all the shares that Goldman is buying and still be left with a stake worth some $3.5 billion. And it’s entirely conceivable that some early employees might well want to diversify their holdings and have maybe a little less than 99% of their net worth in Facebook stock.

As for Goldman, it has probably bought itself the IPO mandate, which could easily generate hundreds of millions of dollars in fee income. It has also become the only investment bank which can give its rich-people clients a coveted pre-IPO stake in Facebook: the extra cachet that brings and the possible extra clients, make this investment a no-brainer. Facebook doesn’t need to stay worth $50 billion forever — Goldman just needs to engineer an IPO valuation somewhere north of that, then exit quietly in the public markets. And that is surely within its abilities.

According to Dealbook, “the deal could double the personal fortune of Mark Zuckerberg, Facebook’s co-founder.

Facebook, the popular social networking site, has raised $500 million from Goldman Sachs and a Russian investor in a deal that values the company at $50 billion, according to people involved in the transaction. The deal makes Facebook now worth more than companies like eBay, Yahoo, and Time Warner.

The stake by Goldman Sachs, considered one of Wall Street’s savviest investors, signals the increasing might of Facebook, which has already been bearing down on giants like Google. The new money will give Facebook more firepower to steal away valuable employees, develop new products and possibly pursue acquisitions — all without being a publicly traded company. The investment may also allow earlier shareholders, including Facebook employees, to cash out at least some of their stakes.

The new investment comes as the SEC has begin an inquiry into the increasingly hot private market for shares in Internet companies, including Facebook, Twitter, the gaming site Zynga and LinkedIn, an online professional networking site. Some experts suggest the inquiry is focused on whether certain companies are improperly using the private market to get around public disclosure requirements.

The new money could add pressure on Facebook to go public even as its executives have resisted. The popularity of shares of Microsoft and Google in the private market ultimately pressured them to pursue initial public offerings.

So far, Facebook’s chief executive, Mark Zuckerberg, has brushed aside the possibility of an initial public offering or a sale of the company. At an industry conference in November, he said on the topic, “Don’t hold your breath.” However, people involved in the fund-raising effort suggest that Facebook’s board has indicated an intention to consider a public offering in 2012.

There has been an explosion in user interest in social media sites. The social buying site Groupon, which recently rejected a $6 billion takeover bid from Google, is in the process of raising as much as $950 million from major institutional investors, at a valuation near $5 billion, according to people briefed on the matter who were not authorized to speak publicly.

“When you think back to the early days of Google, they were kind of ignored by Wall Street investors, until it was time to go public,” said Chris Sacca, an angel investor in Silicon Valley who is a former Google employee and an investor in Twitter. “This time, the Street is smartening up. They realize there are true growth businesses out here. Facebook has become a real business, and investors are coming out here and saying, ‘We want a piece of it.’”

The Facebook investment deal is likely to stir up a debate about what the company would be worth in the public market. Though it does not disclose its financial performance, analysts estimate the company is profitable and could bring in as much as $2 billion in revenue annually.

Under the terms of the deal, Goldman has invested $450 million, and Digital Sky Technologies, a Russian investment firm that has already sunk about half a billion dollars into Facebook, invested $50 million, people involved in the talks said.

Goldman has the right to sell part of its stake, up to $75 million, to the Russian firm, these people said. For Digital Sky Technologies, the deal means its original investment in Facebook, at a valuation of $10 billion, has gone up fivefold.

Representatives for Facebook, Goldman and Digital Sky Technologies all declined to comment.

Goldman’s involvement means it may be in a strong position to take Facebook public when it decides to do so in what is likely to be a lucrative and prominent deal.

As part of the deal, Goldman is expected to raise as much as $1.5 billion from investors for Facebook at the $50 billion valuation, people involved in the discussions said, speaking on the condition of anonymity because the transaction was not supposed to be made public until the fund-raising had been completed.

In a rare move, Goldman is planning to create a “special purpose vehicle” to allow its high-net worth clients to invest in Facebook, these people said. While the S.E.C. requires companies with more than 499 investors to disclose their financial results to the public, Goldman’s proposed special purpose vehicle may be able get around such a rule because it would be managed by Goldman and considered just one investor, even though it could conceivably be pooling investments from thousands of clients.

It is unclear whether the S.E.C. will look favorably upon the arrangement.

Already, a thriving secondary market exists for shares of Facebook and other private Internet companies. In November, $40 million worth of Facebook shares changed hands in an auction on a private exchange called SecondMarket. According to SharesPost, Facebook’s value has roughly tripled over the last year, to $42.4 billion. Some investors appear to have bought Facebook shares at a price that implies a valuation of $56 billion. But the credibility of one of Wall Street’s largest names, Goldman, may help justify the company’s worth.

Facebook also surpassed Google as the most visited Web site in 2010, according to the Internet tracking firm Experian Hitwise.

Facebook received 8.9 percent of all Web visits in the United States between January and November 2010. Google’s main site was second with 7.2 percent, followed by Yahoo Mail service, Yahoo’s Web portal and YouTube, part of Google.

For Mr. Zuckerberg, the deal may double his personal fortune, which Forbes estimated at $6.9 billion when Facebook was valued at $23 billion. That would put him in a league with the founders of Google, Larry Page and Sergey Brin, who are reportedly worth $15 billion apiece.

Even as Goldman takes a stake in Facebook, its employees may struggle to view what they invested in. Like those at most major Wall Street firms, Goldman’s computers automatically block access to social networking sites, including Facebook.”

Intel Funds Startups

Saturday, March 13th, 2010

As the economy improves and VC firms have been unable to raise capital, Intel’s internal VC firm has decided to start a new $200 million technology fund.

According to Bloomberg, “Intel Corp., the world’s largest chipmaker, and a group of 24 venture-capital companies will invest $3.5 billion in U.S. technology companies over the next two years to spur domestic job growth.

The effort includes a new $200 million technology fund by Intel Capital, the company’s investment arm, Intel Chief Executive Officer Paul Otellini said in a speech today at the Brookings Institution in Washington. The investments will be focused on information technology, biotechnology and so-called clean technology.

Intel takes stakes in companies that have technology that can be used to increase future processor sales. Intel’s microprocessors run about 80 percent of the world’s personal computers. Otellini also said Intel is part of a group of companies that agreed to increase hiring of U.S. college graduates, creating as many as 10,500 jobs in 2010.

“We cannot afford to let our future scientists and engineers sit idle after graduation,” Otellini said.

Microsoft Corp., Google Inc., General Electric Co., Hewlett-Packard Co., Cisco Systems Inc. and Dell Inc. are part of the group that will boost graduate hiring, focusing on people with engineering and computer science degrees.

Intel, based in Santa Clara, California, fell 48 cents to $20.39 at 4 p.m. New York time on the Nasdaq Stock Market. The stock is little changed this year.

Lobbying Efforts

Intel Capital has invested about $6.2 billion over the past 20 years in U.S. companies, according to Intel. The company, which competes against Advanced Micro Devices Inc., spends about $5 billion a year on research and development.

U.S. semiconductor companies including Intel have lobbied the government to raise standards in math and science education, increase funding for research at universities and cut corporate taxes to promote domestic investment.

Intel, which gets three-quarters of its sales overseas, has manufacturing plants in the U.S., Israel, Ireland and is building its first in China.

Advanced Technology Ventures, Kleiner Perkins Caufield & Byers, Menlo Ventures and Mohr Davidow Ventures are among the firms that will contribute to the $3.5 billion of investments, Intel said.”

Venture Capital Firms Struggle Without Capital

Thursday, March 11th, 2010

Although strategic acquirers and PE firms have seen some respite this year, venture capital firms are still hurting.  They are struggling to raise cash after poor returns.  Last year, 125 venture funds raised 13.6 billion, down from $28.7 billion in 2008 and $40.8 billlion in 2007.  This makes sense, since the VC industry is driven by IPO exits.  Highland Capital was able to raise a $400 million fund last year, half of what it raised in 2006.

According to Mr. Tam of WSJ, “The technology bubble popped a decade ago, but the venture-capital industry that helped finance the boom stayed largely intact. Now venture-capital firms are going through their own brutal culling.

Venture firms are struggling to raise new cash, hampered by poor investment returns and a difficult economy. Last year, 125 venture funds in the U.S. collected $13.6 billion, down from 203 funds that raised $28.7 billion in 2008 and down from 217 funds that raised $40.8 billion in 2007, according to data tracker VentureSource.
The Next Big Thing

“There are a lot of firms that have dropped off,” says Rebecca Lynn, a principal at venture capital firm Morgenthaler Ventures in Menlo Park, Calif. “We’ll see a continued shakeout as a lot of firms that aren’t the top firms won’t be around.”

There were 794 active venture-capital firms in the U.S. at the end of 2009, meaning they have raised money in the last eight years, down from a peak of 1,023 in 2005, according to Thomson Reuters and the National Venture Capital Association.

Amid all the gloom, some start-ups are still managing to find backers. Pacific Biosciences Inc., which makes DNA sequencing instruments, has raised more than $260 million and tops a list of 50 venture-funded companies compiled by research firm VentureSource, a unit of Wall Street Journal owner News Corp. (See the complete list.)

Many venture firms—which put money into young companies with the aim of profiting later when those firms are sold or go public—profited handsomely in the boom years in the late 1990s and early 2000, when the industry fueled the dot-com bubble and spawned hits such as eBay Inc. and Yahoo Inc. Even when the boom went bust, venture firms kept going because their funds typically are set up as long-term, 10-year investment vehicles that don’t quickly close down like a hedge fund might.

Pacific Biosciences is working on a DNA sequencing process that it says will allow a person’s genome to be sequenced in under an hour for less than $100 making a future of personally tailored genetic medicine more feasible.

But in the past decade, many start-ups have flopped or have struggled to go public amid an unwelcoming market for inital public offerings. The tough environment has been exacerbated by the credit crunch, which makes it difficult for many start-ups to obtain bank lines of credit, say venture capitalists.

While failed start-ups aren’t new, some of the busts have been particularly big recently, with the investments selling their assets for just a tiny fraction of the amount they raised.

Take, for example, Copan Systems Inc. The data-storage company, based in Longmont, Colo., raised more than $107 million in venture capital over the past eight years, according to VentureSource. Despite all the cash, the start-up fizzled: Late last month, Copan’s assets were sold in a private foreclosure sale to Silicon Graphics International Corp. for $2 million.

“The company had some traction but it just required too much money to get there,” says Phil Siegel, a partner at venture-capital firm Austin Ventures, which invested in Copan. Silicon Graphics acknowledges that it got a good deal.
Journal Community

The market has been lukewarm toward venture-backed initial public offerings since the dot-com bust in 2000 and 2001. And while some venture capitalists have profited in recent years by selling start-ups for big sums—think of Google Inc.’s $1.7 billion purchase of video site YouTube in 2006—the returns from such deals typically aren’t as lucrative as those generated by IPOs.

Overall, venture-backed companies generated $17.1 billion in IPOs and mergers and acquisitions in 2009, down 34% from $26.1 billion produced in 2008, according to VentureSource.

Many venture capitalists—especially those working at lesser-known firms that don’t have the same access to the best deals as high-profile firms such as Sequoia Capital and Accel Partners—don’t have much of a track record to show investors as they try and garner new cash. As a result, some venture firms are winding down.

Frazier Technology Ventures late last year said it didn’t plan to raise a new fund. Len Jordan, a partner at the Seattle venture fund, says the firm “concluded it wouldn’t be successful in raising a new fund after we had spent some time trying.”

Frazier Technology is continuing to support the start-ups it has invested in out of its current $104 million fund, says Mr. Jordan.

Other venture firms are lowering their fund fees or are raising smaller funds than in the past. Late last year, venture-capital firm Highland Capital closed a $400 million fund, half the size of its previous fund, which was raised in 2006.

And Draper Fisher Jurvetson, Battery Ventures and Opus Capital have all offered lower fees to investors in recent months as they have pursued new funds.

In response to the tough environment, some venture firms are searching for better returns in new areas. While Steamboat Ventures, an affiliate of Walt Disney Co., has continued to have exits in the U.S., it has also focused overseas in the past four years, particularly in markets like China, says John Ball, a Steamboat managing director.

The venture firm today has a third of its capital allocated to Asia, with two thirds in the U.S., he says. “It’s a useful way to diversify across markets,” says Mr. Ball.

Meanwhile, Austin Ventures has de-emphasized its investments in young companies and is instead focused on larger private-equity deals that take $15 million to $25 million of capital, says Mr. Siegel.

That arena is less crowded, he says, which means there’s more opportunity. “We’re moving to where the puck is going,” says Mr. Siegel. “

ADC2: Video Compression Startup in Boston

Sunday, January 17th, 2010

video tech

ADC2 was founded in 2008 by Sunil Reddy, Angel Decegama, and Lewis Stoller.  It is a startup aiming to improve the speed of online video by enhancing compressing technology for high-definition movies.  In 2006 Angel and Lewis launched TrueLight Technologies, which was based on wavelet transformation processing, a process that was developed in the 1980s to manipulate the data in the individual image frames of a video file.

Truelight was started simply to serve the security market, where resolution is a paramount concern.  ADC2′s potential customers are Comcast, Motorola, and AT&T.  AT&T recently asked the firm if it could move forward and provide pricing for its new products.

ACD2′s process can take a HD video that would be about 500MB normally and compress it down to 140MB or even 73MB, keeping almost the same resolution.  At 140MB, the HD video could play across a 1.5 Mbps connection.  The five person team has been funded solely by its partners.

For more information, please refer to Mass High Tech…

~IS

Venture Capital Startup: SQUEELR

Monday, November 30th, 2009

squeelr-txt

On a quiet day in 2009, Matt Mankins of Boston began his work on two Internet starups, while running a bookstore…this is the kind of motivation and drive we promote at LA, LLC.  The latest startup was called SQUEELR, an anonymous microblogging platform written for the iPhone.  Mankins got the idea after working for the MIT Media lab and watching protesters in Iran sidestep censorship using Twitter.  Microblogging began a tool for Mankins to promote anonymous whistleblowing.  Markets for this tool include Iran and China, where censorship is still very common.

SQUEELR is based in Cambridge, MA., 20 minutes from LA, LLC headquarters in Boston.  Originally, the founder chose to charge 99 cents for 5 posts and $5 for 20, in order to keep away spam.  The way the technology works is that posts, or Squeels are tagged by time of post and by location.  Matt expects future squeels to use location based technology more heavily.  This way, viewers will be able to see squeels by the location they are in, or could have emergency squeels streamed to their phones.  The SQUEELR platform is currently integrated with the iPhone camera, so that pictures can be taken and immediately streamed.

Matt’s bookstore, Lorem Ipsum Books, unfortunately is not doing so well.  Sales have plummeted since the recession, giving Matt even more drive to focus on the startups.  Kudos to this young entrepreneur!  I hope he gets funding….

~IS

For more information, please check out the latest MHT release…