This Week in VC with Dana Settle of Greycroft Partners

Posted on May 19, 2010 | 18 comments


Our guest this week on #TWiVC was Dana Settle, partner at Greycroft Partners, a venture capital firm with offices in New York and Los Angeles.  It’s always fun debating companies with Dana because she’s always so knowledgeable on deals – particularly those in the digital media, ad-tech and eCommerce spaces.

You can watch the video here – lots of great stuff worth seeing.  Greycroft is an early-stage VC.  Their first fund was a $75 million fund raised in 2006 and they very recently announced a brand new $130 million fund.  Closing a VC fund in 2009/10 is a major achievement in and of itself.

In the intro section of the show we talked a lot about why VC funds are becoming smaller again and where Greycroft fits.  We also discussed the fact that you have evolving stages of VC broadly defined as “super angel” funds of $20-40m (Founder Collective, Felicity Ventures, Dave McClure, Jeff Clavier with SoftTech, Mike Maples, Rincon Ventures & Crosscut in SoCal), early-stage VCs (Greycroft, First Round Capital, True Ventures), A Round investors (Foundry Group, Union Square Ventures, GRP Partners), B Round investors (DAG, Matrix, Polaris, Lightspeed, Battery) and growth equity players (General Atlantic, Insight Venture Partners, Summit, Francisco Partners).

Of course none of these funds (my own included) want to be lumped into just one category because we all move across the spectrum.  But having different funds available for different stages of one’s company is actually a really good thing.  It means that the investors can focus on the issues that one faces at that particular stage.

We also talked about the emergence of New York City as the “hot” new area of entrepreneurship, VC and innovation driven by the quantification of the online advertising industry.  We talked about the flow of people with hedge fund backgrounds into these areas where units can now be traded rather than necessarily bought in a bespoke RFP (request for proposal) way.  An obvious example that comes to mind is Roger Ehrenberg, whose fund Information Arbitrage, is looking at companies in these categories.

Another topic we debated early in the program was “lean startup” vs. “fat startup” where we both took the obvious hedge and said “it depends.”  But truthfully both Dana and I are more aligned with the lean startup principles and believe you only go FAT when you’ve really proved out your product / market fit.  To be fair to Ben Horowitz – I think he thinks this as well.

DEAL OF THE WEEK:

Gilt Groupe – We both admired this company.  The “private sale” market phenomenon was started in France by Vente-Privee (literally means “private sale”) and was replicated in Germany by BrandsforFriends.  In the US we’ve had Gilt Groupe, RueLaLa, HauteLook, Swirl and many others.  Dana and I both see this as a “winner takes most” category so we’re guessing that Gilt group is raising money “to get fat” as we discussed early in the show in contrast to the lean startup.  It will be tough for there to be many huge winners in this category.

If I were a number 3-5 players I’d be looking to exit early while there’s still a lot of enthusiasm for this hot market.  Note that I’m not defining who numbers 1,2 are.  Time will tell.

Gilt Group is currently the largest private sale web site in US.  Founded in November 2007 in New York City by Alexis Maybank and Kevin Ryan (co-founder of DoubleClick); CEO is Susan Lyne (ex-CEO Marta Stewart Living Omnimedia) Revenue estimates:  $50mm in 2008; $170mm in 2009 (versus budget of $150mm); $450mm forecasted for 2010.  Note that these are “gross” revenue numbers.

-CEO hinted to WSJ that it may go public in early 2011.  Competes with HauteLook, RueLaLa (sub of GSI Commerce), Billion Dollar Babes, ideeli, Glam List

Current round: $35mm in Series C (extension of Series B at higher valuation) from General Atlantic, Matrix Partners.  Total raised: $83mm; Series B round (July 2009 for $43mm) valued company at $400mm

Read more: TechCrunch, Reg Form D, WSJ interview w/ Susan Lyne

OTHER DEALS:

 

1. Booyah – Develops a location based service platform that pairs the virtual world with mobile gaming.  Booyah’s most popular application is social LBS game is MyTown; users engage in a mobile game centered around real world locations and activities, including check-ins, virtual purchases of real-life locations, collecting rent on properties, virtual goods.  It seems to be geared on a “Monopoly” style game.

Interesting that Booyah is led by a former game producer, Keith Lee, who formerly launched very large products for Blizzard Entertainment.  I would also note that they claim 2.1 million users making it considerably larger than some of its peers that have historically received more tech press inches.

-Monetization: virtual goods (1/3 of total revenues); Partnerships with major brands (currently partnered with H&M and Travel Channel); forecasted to hit 6mm users by end of Summer 2010

-Competes in the same space as FourSquare, GoWalla although with a slightly different approach.  Founded in August 2008 in Palo Alto, CA, by Sam Christiansen and Keith Lee.  Current round: $20mm in Series C by Accel Partners (Jim Breyer, board member at Wal-Mart, Dell, and FaceBook), KPCB, and DAG Ventures.  Total raised: $29.5mm

Read more: CrunchBase profile, TechCrunch

2. BuzzFeed.  Helps content publishers and advertisers launch campaigns that develop viral distribution attributes and therefore gain “buzz.”

-Founded in October 2006 by Jonah Peretti (co-founder of Huffington Post).  Current round: $8mm in Series B from RRE Ventures (Will Porteous)(lead), SoftBank, Hearst Interactive Media, SV Angel (Ron Conway), Founder Collective.Total raised: $11.5mm

Read more: VentureWire (requires login), Mahalo Profile Page

3. SimpleGeo – Provider of simple, turnkey location based services to content publishers and online service providers looking to location-enable their applications or services.  SimpleGeo provides sites with LBS databases and tool sets (such as SpotRank), while also helping sites warehouse and analyze the large volumes of generated LBS data; all services and data accessible through simple APIs.

In the show we talked about why this is important to mobile application developers.  Primarily because you can launch applications where you focus on a acquiring a user base with a compelling product while not having to worry about how to build your services into a map view or having to build in services that find local businesses, etc.  The SimpleGeo API will provide you access to these services.

They were founded in May 2009 in Boulder, CO, by Joe Stump (former lead Digg architect) and Matt Galligan (founder Social Thing). Employees: 20.  In similar sapce to MixerLabs GeoAPI (acquired by Twitter).

We also talked a lot about Stickybits (who uses the SimpleGeo platform) and Occipital who has the red-hot RedLaser scanning product.  Go Boulder!

Current rount: $8.14mm in Series A from Redpoint (lead), Foundry Group, with previous investors, First Round Capital, Lowercase Capital (Chris Sacca), Ravi Narasimham.  Total Raised: $9.64mm

Read more: TechCrunch, ReadWriteWeb, TheNextWeb

 

4. Lookout – SaaS provider of security and data back-up services for smart phones.  Company is run by John Herring and was formerly known as Flexilis.  We both loved this company (and lamented the fact that we weren’t investors since they were founded in LA before relocating to Silicon Valley).  If you watch the show you’ll hear a great story about how this team got their start by hijacking data from stars on the red carpet at the Oscars.  If you want the easy version you can read that story here!

-Configurable from desktop-based web-based UI.  Founded in 2007.  Employees: 27.  Competition: McAfee, Symantec.  Current round: $11mm in Series B by Accel (lead), Khosla Ventures, Trilogy Partnership.  Total raised: $16.5mm

Read more: VentureBeat

OTHER DEALS (Cont):

 

5. Jelli- I went on record saying that I wanted to invest and that I think this company will create a big success.

Platform that provides radio music programming via crowd sourced contributions from social community; programming is syndicated nationally.  Founded in 2009 by Mike Dougherty (ex-TellMe) and Jateen Parekh (formerly a product lead on Amazon’s Kindle).  Tested platform on San Francisco’s Live 105; then scaled out for national syndication with positive audience uplift .

Current round: $7mm in Series A from Battery Ventures (Satya Patel)(lead), First Round Capital; includes converted $2mm Seed round raised in Q4 2009 from First Round Capital, TriplePoint Capital, Alfred Lin (Sequoia, ex-COO Zappos), Peter Sperling (Apollo Group), Manny Rivelo (SVP Cisco); Total raised: $7mm

Read more: VentureWire (requires login), SF Business Times

 

 

6. Grockit – Provides online adaptive test prep services and community.  Moving into online education courses for 8th-12th grade in Summer 2010.  Founded in December 2006 in San Francisco by Farb Nivi (ex-Princeton Review/Kaplan top instructor)

-Competitors: Knewton.  Current round: $7mm in Series C from Atlas Ventures (lead), Benchmark, Integral Capital.  Total Raised: $17.7mm

Read more: TechCrunch

 

 

7. Huddle.  Provides an enterprise collaboration and storage platform.  Huddle allows users to maintain an interconnected network of secure online workspaces for file sharing, ideation, project management and virtual meetings.  60k unique visitors in March 2010.

Having raised money from Josh Hanna whom I’ve only heard great things about (he founded Flutter when we were both living in London – he sold it to BetFair, now a HUGE company in online gambling) I have to imagine they are doing something right.

That said, I have lived in this market personally and think that it is a minefield with promising companies that haven’t succeeded.  I don’t like the idea of taking on WebEx or GotoMeeting.  Those companies are already going to be crushed by Skype’s new screen sharing capabilities.  I don’t like going against Google Docs or against 37Signals for project management.  File sharing?  Dropbox.  Enterprise collaboration?  Yammer, Salesforce Chatter.

So my only advice to Huddle was pick a narrow enough scope to have a product category where you can be the BEST and you can scale in that category.  I’m guessing if you compete across the board you will struggle to hit scale.   But there still is much value in helping enterprises succeed – so good luck!  I always route for London startup companies.

Current round: $10.2mm in Series B from Matrix Partners (lead), with existing investors Eden Ventures, Charles McGregor.  Total raised: $15.0mm

Read more: TechCrunch

  • Rahul Chaudhary

    Mark, I would like to get your thoughts on the following

    1. Angel investors – Now a days, lot of the angel investments are in the range of 25k-50k per deal. What type of equity does an angel investor get with these small investments and what kind of return he would expect in the best case scenario? I know that angel investors like spread the bets by doing number of small investments, but wouldn't it be better to have few large and focused investments instead of too many small ones?

    2. Location based services – Google Latitude has 3 million active users and some 8 million have signed up since the service launched. If and when google adds check-in features and/or when facebook launches its check-in features, how do you think its going to affect other location based services?

  • Rahul Chaudhary

    Mark, I would like to get your thoughts on the following

    1. Angel investors – Now a days, lot of the angel investments are in the range of 25k-50k per deal. What type of equity does an angel investor get with these small investments and what kind of return he would expect in the best case scenario? I know that angel investors like spread the bets by doing number of small investments, but wouldn't it be better to have few large and focused investments instead of too many small ones?

    2. Location based services – Google Latitude has 3 million active users and some 8 million have signed up since the service launched. If and when google adds check-in features and/or when facebook launches its check-in features, how do you think its going to affect other location based services?

  • http://bothsidesofthetable.com msuster

    1. Yes, angels often do many $50k bets. I'm not a huge fan of this strategy. I prefer less investments but ones you can focus more on.
    2. Just because you have a lot of users doesn't mean you have a successful product. See: Google Buzz.

  • http://bothsidesofthetable.com msuster

    1. Yes, angels often do many $50k bets. I'm not a huge fan of this strategy. I prefer less investments but ones you can focus more on.
    2. Just because you have a lot of users doesn't mean you have a successful product. See: Google Buzz.

  • Rahul Chaudhary

    Agreed that more users does not necessarily mean successful product. But if you look at the location based services, having more users and gaining market share is important in order to grow their business. It would be really interesting to see how they react once Facebook adds check-in feature.

  • Rahul Chaudhary

    Agreed that more users does not necessarily mean successful product. But if you look at the location based services, having more users and gaining market share is important in order to grow their business. It would be really interesting to see how they react once Facebook adds check-in feature.

  • http://www.victusspiritus.com/ Mark Essel

    This is a huge resource for angels and investors, and doesn't hurt to know as a founder. I hadn't heard at least one company that I should have (Booyah). Surprising user base for an LBS game company.

  • http://www.victusspiritus.com/ Mark Essel

    This is a huge resource for angels and investors, and doesn't hurt to know as a founder. I hadn't heard of at least one company that I should have (Booyah). Surprising user base for an LBS game company.

  • http://www.victusspiritus.com/ Mark Essel

    As a regular buzz user, it feels successful to me and I see it growing more useful and fun as time goes on. Hopefully it will get the resources needed to continue to refine it. Starting so big was a bad move in my opinion, no chance to refine the tool to a growing user base.

  • http://www.victusspiritus.com/ Mark Essel

    As a regular buzz user, it feels successful to me and I see it growing more useful and fun as time goes on. Hopefully it will get the resources needed to continue to improve. Starting so big was a bad move in my opinion, no chance to refine the tool to a growing user base.

  • http://starttowonder.blogspot.com sjain

    Mark, I love this show. Thanks for doing this. Get to learn a whole lot plus reading into thoughts of industry heavyweights is really helpful.

    I would love if you do either a blog or discuss on TViVC first time enterprenuers approaching a VC
    Plus also dividing the equity for angel investors all sorts of those questions.

    Thanks,
    Sachin Jain

  • http://starttowonder.blogspot.com sjain

    Mark, I love this show. Thanks for doing this. Get to learn a whole lot plus reading into thoughts of industry heavyweights is really helpful.

  • http://www.kidmercuryblog.com kidmercury

    also this week in venture capital, the financial reform bill in the US that some angels/VCs in the US were concerned about was passed. however, many of the parts that were damaging to the angel community were removed. here are some links:

    http://www.pehub.com/71971/washington-reform-up
    http://www.thecorporatecounsel.net/Blog/2010/05

  • http://www.kidmercuryblog.com kidmercury

    also this week in venture capital, the financial reform bill in the US that some angels/VCs in the US were concerned about was passed. however, many of the parts that were damaging to the angel community were removed. here are some links:

    http://www.pehub.com/71971/washington-reform-up
    http://www.thecorporatecounsel.net/Blog/2010/05

  • http://twitter.com/jcflash80 Jonathan Chin

    Hi Mark, great episode. You mentioned in this episode about the Mcdonald's content that is being distributed now and how the vast majority of America in fact does eat there. Along with the emergence of SEO and online reputation management how do you feel about the lack of regulation on internet content, particularly blogs and forums? I mean they can material have an impact on people now if a negative result shows up in your Google results.

    Originally isn't this what journalism regulation and integrity was all about?

  • http://twitter.com/jcflash80 Jonathan Chin

    Hi Mark, great episode. You mentioned in this episode about the Mcdonald's content that is being distributed now and how the vast majority of America in fact does eat there. Along with the emergence of SEO and online reputation management how do you feel about the lack of regulation on internet content, particularly blogs and forums? I mean they can material have an impact on people now if a negative result shows up in your Google results.

    Originally isn't this what journalism regulation and integrity was all about?

  • http://www.87415555.com.cn/ ugg boots uk

    also this week in venture capital, the financial reform bill in the US that some angels/VCs in the US were concerned about was passed. however, many of the parts that were damaging to the angel community were removed. here are some links:

    http://www.bagsmkt.com/mbt-women-habari-c-1567….
    http://www.87415555.com.cn/

  • http://www.87415555.com.cn/ ugg boots uk

    also this week in venture capital, the financial reform bill in the US that some angels/VCs in the US were concerned about was passed. however, many of the parts that were damaging to the angel community were removed. here are some links:

    http://www.bagsmkt.com/mbt-women-habari-c-1567….
    http://www.87415555.com.cn/