DoorDash Raises $127 Million in “Down” Round

DoorDash raised $127 million in its latest funding round led by Sequoia Capital.
DoorDash

DoorDash Inc. said Tuesday it raised $127 million in its latest funding round primarily from existing investors, the latest sign of the delivery startup’s struggle to secure a slug of capital.

Early investor Sequoia Capital led the round, joined by previous backers Kleiner Perkins Caufield & Byers and Khosla Ventures, said DoorDash CEO Tony Xu in a blog post.

New investors included Y Combinator’s Continuity Fund, though San Francisco-based DoorDash was birthed from the startup incubator itself in 2013. The other new investor is U.K.-based charitable foundation Wellcome Trust, which invests primarily in biotech and health-care startups. Sequoia contributed $40 million of the total, according to a person familiar with the matter.

“We plan to continue investing in our core technology to build the first software-enabled logistics company,” said Mr. Xu in his blog Continue reading “DoorDash Raises $127 Million in “Down” Round”

Zenefits’s Regulatory Headaches Are All Too Common in Silicon Valley

Zenefits founder Parker Conrad presents onstage at the TechCrunch Disrupt conference in 2013.
Getty Images

Silicon Valley has a healthy distaste for regulators preventing them from disrupting old-line industries, but government officials are giving many tech startups a run for their money.

On Thursday the California Department of Insurance said it had opened an investigation into Zenefits’s business practices. The health-benefits broker admitted that many of its California sales representatives used a software program that made it seem like they finished an online-training course necessary to obtain a license.

Zenefits, which last year was valued at $4.5 billion, has followed a well-worn Silicon Valley playbook to challenge the legal bounds of a highly regulated industry in the name of “disruption.” That “win-at-all-costs” attitude appears to have caught up with the company, which this week pushed out its CEO over compliance issues.

But Zenefits has plenty of company in the Continue reading “Zenefits’s Regulatory Headaches Are All Too Common in Silicon Valley”

Zenefits CEO Parker Conrad Resigns Over Compliance Issues

Zenefits founder Parker Conrad has resigned as chief executive.
Bloomberg News

Parker Conrad has resigned as chief executive of health-insurance brokerage Zenefits after the highflying startup came under fire for possibly violating insurance laws and wage rules.

The company, which last May was valued at $4.5 billion just two years after Mr. Conrad founded it, said Monday that David Sacks, the chief operating officer, would take over.

Zenefits is fast becoming a poster child for Silicon Valley excess, as investors including venture-capital firm Andreessen Horowitz and mutual-fund giant Fidelity Investments quickly pumped some $500 million into a business model promising to upend the health-insurance industry. Zenefits gives away human-resources software to small businesses and then collects commissions from health-insurance carriers when users of the software sign up for benefits.

But the company last year ran into trouble trying to hit ambitious revenue targets and to retain employees, The Wall Street Journal has Continue reading “Zenefits CEO Parker Conrad Resigns Over Compliance Issues”

Lyft Doubles Funding With New $1 Billion Round

Ride-sharing company Lyft Inc. could double the amount of cash it has raised to date to fund its expensive war with Uber Technologies Inc.

A Lyft corporate filing in Delaware Thursday authorized the sale of up to $1 billion of new preferred shares that could value the company as high as $5.75 billion, according to private-market data firm VC Experts. Such filings typically indicate that a company is close to completing a funding round, though they don’t guarantee that all shares authorized are actually issued to new investors.

The $5.75 billion valuation would include all common shares authorized for employee equity awards and more, which is how many investors in privately held technology companies calculate valuation.

Bloomberg News earlier reported the Delaware filing.

Lyft had previously raised close to $1 billion from investors including hedge-fund titan Carl Icahn and Chinese ride-sharing company Didi Kuaidi Joint Co. Other backers Continue reading “Lyft Doubles Funding With New $1 Billion Round”

Fed Hike Adds Pressure to Startup Valuations

Square CEO Jack Dorsey celebrates the company’s IPO with his team outside the New York Stock Exchange.
Reuters

The Federal Reserve’s quarter-point hike in short-term interest rates is unlikely to have an immediate effect on runaway startup valuations, but it could exacerbate the cracks already forming in Silicon Valley.

As with other asset markets, from stocks to bonds to real estate, venture capital has been powered by years of near-zero rates. Endowments, foundations and family offices have dialed up their exposure to venture capital in recent years, while mutual funds, hedge funds and big banks have taken riskier bets on startups in the hunt for stronger returns. With hundreds of billions of dollars in assets, these firms can have an outsized impact in the venture world, where investments are often measured in the tens of millions.

Through the first three quarters of this year, startups in the U.S. 

Continue reading “Fed Hike Adds Pressure to Startup Valuations”

E-Commerce Startup Jet Raises $500 Million, at $1.5 Billion Valuation

Jet.com CEO Marc Lore talking to staff ahead of the company’s website launch.
The Wall Street Journal

Jet.com Inc. said it had raised $500 million of fresh equity in a new funding round that values the e-commerce startup at $1.5 billion.

Mutual-fund giant Fidelity Investments led the round, joined by previous investors.

Jet said it also expects to obtain $125 million in debt financing, including a $50 million increase in a credit line from Silicon Valley Bank and $75 million from venture debt investors. It also plans a smaller amount of “strategic financing.”

Jet founder and Chief Executive Marc Lore declined to name any other new investors in the round, nor the source of the venture debt or details of the strategic financing.

Jet is challenging Amazon.com Inc., Wal-Mart Stores Inc. and other e-commerce players with an array of household items, electronics, pet supplies Continue reading “E-Commerce Startup Jet Raises $500 Million, at $1.5 Billion Valuation”

Startup Valuations Surge in 3Q, But Data Hints at Pullback

A study by Fenwick & West of 175 financing rounds found that valuations rose a median 51% in the third quarter, a robust rate but the lowest in a year.
Fenwick & West

Startup valuations continued to rise at a torrid pace in the third quarter, though there were potential signs the venture-capital tide may have started to turn, according to new data.

Fenwick & West today published its latest quarterly report digging inside the terms of venture funding deals for Silicon Valley companies. Despite public-market volatility starting in August, not to mention a paucity of tech IPOs, valuations kept on rising.

The study found that 86% of 175 financing rounds observed by Fenwick during the quarter valued the companies at a higher level than in previous rounds. Just 4% of valuations fell, leading to the widest spread between “up rounds” and “down rounds” since Fenwick began calculating this

Continue reading “Startup Valuations Surge in 3Q, But Data Hints at Pullback”

As Private Valuations Increase, Returns Shrink, Study Finds

 

Facebook shares have soared since their 2012 initial public offering. Highly valued startups that have gone public in the past two years have not done as well, on average. 
Agence France-Presse/Getty Images

Late-stage investors in private tech companies are seeing smaller returns, and a new survey suggests that professionals expect the trend to continue.

In one study, Battery Ventures compared valuations of venture-backed tech companies that have gone public in the past few years with their final valuations as private companies. Returns were consistent — until 2014.

Companies that raised their final private rounds between 2010 and 2013 have returned between 35% and 63% per year, through September 2015, as public companies, the study found.

By contrast, those that raised their final private round in 2014 and have since gone public have returned 8% on average.

One big reason for the discrepancy: the 2014 companies won much higher Continue reading “As Private Valuations Increase, Returns Shrink, Study Finds”

Accel Partners Brings Back Steve Carpenter as Executive in Residence

Steve Carpenter

Startups can go far building easy-to-use products that employees adopt at work. But investors are looking for more from them to maximize their potential–and to justify rising valuations.

That, in a nutshell, is why Accel Partners is bringing back Steve Carpenter. An entrepreneur and former Dropbox executive with expertise in helping startups sell to big companies, Mr. Carpenter announced today that he is rejoining the venture firm as an “executive in residence.”

He will help Accel portfolio companies such as Invoice2Go build up sales and marketing as well as offer other expertise to sell directly to companies and to expand their operations to more international markets.

Making products easy to bring into a company organically is a “good way to get started,” says Accel General Partner Sameer Gandhi. “But very few products are magical enough to not need [enterprise sales and marketing expertise] at some point.”

Continue reading “Accel Partners Brings Back Steve Carpenter as Executive in Residence”

Fed’s Interest Rate Decision Splits Startup Investors in Funding Frenzy

A trader on the floor of the New York Stock Exchange reacts to news that the Federal Reserve decided to not raise interest rates.
Getty Images

The Federal Reserve on Thursday left short-term interest rates at near-zero levels, a decision that should keep the funding party going for startups, but one that splits investors.

Like all asset markets — from stocks to bonds to real estate — the valuations of fast-growing tech startups have benefited from years of rock-bottom rates and central bank money-pumping programs.

Low interest rates encourage investors to take more risk because parking capital in bank accounts or Treasuries doesn’t pay off. As a result they tend to chase higher yielding assets like junk bonds and the equity of fast-growing companies. Venture capitalist Fred Wilson explained the relationship between venture capital and interest rates in a 2014 blog post, concluding that the good times for VCs and

Continue reading “Fed’s Interest Rate Decision Splits Startup Investors in Funding Frenzy”

Evernote Founder Phil Libin Moves to VC Firm General Catalyst

Phil Libin is joining venture-capital firm General Catalyst as its newest general partner, two months after stepping down as chief executive of Evernote Inc., maker of a popular productivity app.

Mr. Libin becomes the fourth general partner in Silicon Valley for General Catalyst, which also has two GPs in New York and three in Boston, where the firm was founded 15 years ago.

In an interview, Mr. Libin said he had spoken to a few venture-capital firms and hadn’t planned on going back to work so soon, but because he thought the fit was particularly good with General Catalyst, he wanted to start right away. He starts work next Monday and will help the firm deploy its $675 million seventh fund.

“They have experience creating companies from the beginning,” said Mr. Libin, who said he most enjoys helping entrepreneurs as they form their ideas. “That combined with the geography. Continue reading “Evernote Founder Phil Libin Moves to VC Firm General Catalyst”

Tech Boom? Not In the IPO Market

GoPro executives and employees celebrate during the company’s initial public offering.
Getty Images

The percentage of IPOs held by tech companies is at a seven-year low, according to new data, and those firms that have gone out are performing poorly, the latest signs that the public market isn’t buying what venture capitalists are selling.

Only 11% of U.S. IPOs so far in 2015 were held by tech companies, the lowest level since 2008 when 10% were tech and the financial crisis was in full force, according to research firm Renaissance Capital.

With 15 tech IPOs through August, this year could see the fewest such offerings since 2009. Shares of those 15 tech companies on average have fallen 4% from the IPO price, and 20% after the first day’s close, the latter being the price where retail investors are more likely to get in.

The weakening IPO picture starkly contrasts with the euphoric mood in the

Continue reading “Tech Boom? Not In the IPO Market”

Star of “Startup.com” Charged With Accounting Fraud

Kaleil Isaza Tuzman
ZUMAPRESS.com

Kaleil Isaza Tuzman, star of the 2001 documentary “Startup.com” that chronicled the rise and fall of his company govWorks Inc., was arrested in Colombia on Monday, charged with market manipulation and accounting fraud related to a later company he founded, KIT Digital.

The charges against Mr. Tuzman were announced on Tuesday by Manhattan U.S. Attorney Preet Bharara. KIT Digital’s former chief financial officer, Robin Smyth, was also charged with accounting fraud and was arrested in Australia. Messrs. Tuzman and Smyth are both being held pending extradition proceedings. Both were also sued by the Securities and Exchange Commission.

A call to Mr. Tuzman’s cell phone was answered by a woman identifying herself only as “Amanda,” who claimed to be his lawyer, but who declined to comment. Mr. Smyth couldn’t immediately be reached for comment.

The indictment alleges that Mr. Tuzman engaged in a scheme with an outside hedge fund to artificially Continue reading “Star of “Startup.com” Charged With Accounting Fraud”

What’s Driving VC Firms to Take Bigger Risks

Getty Images

A flood of capital is driving up valuations for seed-stage companies, pushing even responsible-sounding venture capitalists to take bigger risks.

In his candid September investor update, Jerry Neumann of New York’s Neu Venture Capital notes that it has gotten tougher for seed-stage firms like his because startup valuations are swiftly rising, the competition is fiercer and early-stage venture-capital firms aren’t sharing as many deals.

As a result, Mr. Neumann says he eschews investments in companies where the payoff is obvious since such companies attract so much interest, prices skyrocket and potential returns plummet.

Put a whole pack of ultra-competitive type As with checkbooks into a room with a company and tell them that whoever invests wins, with the unstated but obvious caveat that whoever pays the most gets to invest, and you end up with nothing but Pyrrhic victories.

Neu, founded in 2008,  prefers to invest in companies with Continue reading “What’s Driving VC Firms to Take Bigger Risks”

ZocDoc Valued at $1.8 Billion in New Funding Round

Cyrus Massoumi, founder and CEO of ZocDoc
ZocDoc

Online doctor-appointments service ZocDoc Inc. is now one of New York’s most highly valued, venture-backed companies after raising $130 million in funding.

The new round, which closed at the end of July, values ZocDoc at $1.8 billion, the company confirmed on Wednesday. Only office-leasing startup WeWork Companies Inc ., recently valued at $10 billion, and food-delivery service Blue Apron Inc ., at $2 billion, are valued higher as venture-backed private companies in New York, according to Dow Jones VentureSource.

ZocDoc ‘s latest round was led by Scottish investment firm Baillie Gifford and London-based Atomico, the venture firm started by Skype co-founder Niklas Zennstrom .

Founded in New York in 2007, ZocDoc ‘s site helps people find and book medical professionals online for free. Doctors can advertise open appointment slots and fill them more quickly, paying a subscription fee of $3,000 per year Continue reading “ZocDoc Valued at $1.8 Billion in New Funding Round”

Warby Parker Co-Founder Eyes $125 Million For First VC Fund

Two young guns in venture-capital are looking to profit from the flood of capital washing over Silicon Valley.

Early 30-somethings Jeremiah Daly and Andy Hunt, formerly partners at VC firm Highland Capital Partners, are trying to raise $125 million for their new fund Elephant Partners, according to a presentation reviewed by the Wall Street Journal.

The target is ambitious, more than triple the $40 million median amount raised by first-time U.S. venture funds last year, according to Dow Jones VentureSource. It is also higher than the $103 million median total raised by all U.S. firms last year.

Elephant Partners is hoping to follow in the footsteps of another new firm, Binary Capital, which last year raised $125 million. That firm was also started by two young investors, Jonathan Teo, formerly of Benchmark, and Justin Caldbeck, formerly of Bain Capital.

Mssrs. Daly and Hunt, a co-founder of eyeglasses company

Continue reading “Warby Parker Co-Founder Eyes $125 Million For First VC Fund”

Jet.com Uses Clever Tactic to Save Money

Jet.com’s affilate program, Jet Anywhere, lets customers click on links to other retail sites and get a commission in the form of virtual cash.
Jet.com Inc.

As Jet.com opens its doors Tuesday with a splashy membership-only retail site, it’s worth paying attention to a clever tactic the startup is using to help users save money and mitigate steep losses over the coming months.

As The Wall Street Journal explains in a page-one story Monday, Jet.com is spending as much as $300 million over the next five years to support an outside merchandise-buying program. The “concierge” service creates the illusion that Jet has millions of products for sale. When a customer buys an item that isn’t available from Jet or its retail partners, a representative quietly buys it from another site.

The service is needed to take on Amazon in dozens of product categories while Jet

Continue reading “Jet.com Uses Clever Tactic to Save Money”

Behind the Numbers of Jet.com’s Audacious Plan to Attack Amazon

Jet.com CEO Marc Lore addresses staff.
Jet.com

If you haven’t yet heard of Jet.com, you soon will. The new online marketplace is launching on Tuesday and plans a massive advertising blitz in the coming months to lure customers away from Amazon.com .

A page-one Wall Street Journal story Monday illustrates how Jet is one of the most audacious and costly business experiments in e-commerce history.

Here’s a behind-the-numbers look at Jet’s massive undertaking. Make sure to view the table at the end that puts Jet’s ambitions in perspective.

$50: The annual membership fee Jet will charge customers for its “club price savings” on millions of products. These fees will be Jet’s sole source of profit, so it will need to do everything it can to lure members from Amazon.com and elsewhere and keep them loyal.

100,000: The number of people that have registered as of Friday.

Continue reading “Behind the Numbers of Jet.com’s Audacious Plan to Attack Amazon”

SoundHound App Emerges to Take On Apple and Google in Voice Search

Hound

After spending years developing technology for voice recognition and search, SoundHound introduced a new app just as technology’s biggest companies escalate a turf war over artificial intelligence and digital assistants.

SoundHound, known for a Shazam-like app that figures out the name of a song by listening to the melody, released an app Tuesday called “Hound” that thrusts it directly into competition with Apple’s Siri, Google Now and Microsoft ’s Cortana.

Hound takes voice search to the next level in how it quickly handles complex questions, SoundHound founder and chief executive Keyvan Mohajer says. In a demo, he showed how the app handles a natural-language voice search that included multiple questions but was short on important, identifiable terms. One example: “What is the population of the capital of the country in which the Space Needle is located?”

The example ultimately is asking for the population of an indirectly defined Continue reading “SoundHound App Emerges to Take On Apple and Google in Voice Search”

David Lee Leaves SV Angel

The guard is changing at SV Angel, one of Silicon Valley’s more influential startup investors.

Managing  Partner David Lee said Tuesday he is leaving the firm he has helped run with Ron Conway, the pioneering angel investor who formed SV Angel to institutionalize his investments that previously included early bets on Google and Facebook.

In a tweet, Lee thanked Conway and said he is “moving on to life’s next chapter,” without specifying his next role. In 2012, Lee moved from San Francisco, where SV Angel is based, to Los Angeles, where his  wife is from.

Lee didn’t immediately respond to a request for comment.

In a letter to SV Angel’s limited partners, founders and partners, the firm said Conway and his son, Topher, will now serve as co-managing partners of the fund.

“While we can all share in many historic successes and wish David well, the best is yet ahead,” Continue reading “David Lee Leaves SV Angel”