Dan Primack
Correlation Ventures, a San Diego-based firm that wants to use algorithms to passively invest in VC deals led by other firms. Basically a quant approach to venture capital.
Someone was kind enough to send over one of the firm’s recent decks, and we’ve learned a bit more information:
There’s been some vigorous – and at times vitriolic – debate here over the issue of pay-to-pitch VC conferences and prepayment to VC “finders." I just wanted to briefly address one line of misguided argument: Those charging entrepreneurs to pitch their wares are no different from VCs charging management fees to make investments.
Stage1 Ventures is raising $250 million for a new platform that will invest in hybrid venture deals, with a first close is expected to occur by the end of June.
Hybrid venture deals typically include both a primary and secondary investment. The former is used for working capital and other corporate purposes, while the latter is used to provide liquidity to early company employees and/or shareholders.
Such transactions have been dubbed "DST deals," after Digital Sky Technologies, the Russian investment house that has used the model for later-stage investments in Facebook and Zynga. Earlier practitioners included Advanced Equities and Technology Crossover Ventures, while Elevation Partners recently got in on the action with its $100 million deal for Yelp ($25m primary, $75m secondary).
David Baum, who co-founded Stage1 four years ago as an early-stage investor, says that the past year's liquidity crunch caused his firm to become inundated with direct secondary dealflow. Its $25 million debut fund, however, had neither the capital nor strategic flexibility to pursue such deals. The result was a new barbell strategy, in which Stage1 Ventures will be complimented by the platform, called S1 Capital Partners (yes, the "S1" is supposed to reference an IPO filing).
Did you catch some of yesterday's headlines:
* NY Times: "A $3.5 billion effort aims to help tech startups"
* SF Chronicle: "Alliance to boost startups, hire more grads"
* WSJ: "Intel, Venture-Capital Firms To Make $3.5B In US Investments"
peHUB: "Puh-leeze"
Tuesday's announcement that Intel Capital and 24 venture capital firms would invest billions into U.S. startups is akin to me announcing that I'm going to write about private equity. It's what they do. The only "news" here is that Intel managed to sucker so many news organizations into giving them accolades.
Last December, we published a post titled Whoever Buys Yelp Will Inherit the Lawsuits. At the time, Yelp was in talks to be acquired by Google, although it later opted for a $100 million investment from Elevation Partners (including $75m in secondary liquidity). It also was the subject of several defamation-related lawsuits from local business owners. As we wrote:
Yelp generates extremely strong feelings among business owners, especially in San Francisco where it started. Some love the review service. But, for awhile, there was a steady drumbeat of negative media stories about Yelp that were usually generated by disgruntled business owners who would call reporters and complain, often anonymously because, they said, they feared backlash from Yelp.
Accusations that Yelp would allow business owners to pay Yelp to manipulate their reviews and put the good ones on top were never proven, but some business owners were convinced that it was happening, and it was never clear from the outside exactly how Yelp operated. The company has an algorithm to sort and cull reviews that it says it is constantly working to improve.
Well, now there is a class action lawsuit directly addressing the "extortion" complaint. It was filed yesterday in Los Angeles, by law firms Beck & Lee (Miami) and The Weston Firm (San Diego). The plaintiff is a Long Beach, Calif.-based veterinary hospital that claims
We’ve spent lots of time here discussing pay-to-play, in the context of public pension officials and the placement agents who bribe them. But there is a percolating pay-to-play issue that we’ve only mentioned in passing: The issue of VC conference organizers who charge entrepreneurs to make elevator pitches in front of potential investors.
For the record, I agree with those who criticize such arrangements. VC conference organizers should make their profits from sponsors, not from struggling startups in need of cash. And, if sponsorship doesn’t cover it, then also charge non-presenting attendees. For more on this, you can read the vitriolic comment thread on Jason Mendelson’s Vox Populi post from last week.
But I’m not raising this to discuss the pay-to-play conference situation. Instead, I’m raising it to discuss something even more insidious: Venture capital “finders.”
Last week, a Silicon Valley investor named Hugh Sloan III came across a startup that had received a minor award from Microsoft. He emailed the company founders, saying he had “3 ex Google angels and two Tier 1 venture funds who would be looking at this opportunity with me.”
Sounds great, except there was a giant catch: Sloan wanted $7,500 up-front, in order to set up the meetings. No refunds if the investors didn’t offer term sheets.
Bloom Energy has been developing its "power plant in a box" for the past decade, but has played very coy when it comes to specifics. Beta clients have been asked to keep quiet, and Bloom investors have done little but offer knowing smiles. Approximately $400 million in venture capital thrown into a black box (both literally and figuratively).
Well, until tonight.
The Sunnyvale, Calif.-based company gave a sneak peak to 60 Minutes, just two days before the formal unveiling. Pretty good PR coup, even though the piece did give some voice to Bloom's legions of skeptics.
In short, Bloom promises to build boxes as small or as large as the customer needs (shoebox for a home, foot locker for a small store, multiple refrigerator-sized boxes for industrial facility). Each is filled with stacked ceramic disks, which are imprinted with a type of ink that you won't find in your ballpoint.
You can view the 60 Minutes segment after the jump. My only quibble is that Leslie Stahl notes how Colin Powell has "endorsed" Bloom, without also mentioning that he's a special limited partner in Bloom investor Kleiner Perkins:
Three employees of electric car company Tesla Motors were killed today, following the crash of a small plane in East Palo Alto, California.
Japolnik reports that the twin-engine Cesna was piloted by a "high-ranking official at Tesla," but did not give his or her name. The San Francisco Chronicle adds that Tesla engineer Doug Bourn is the plane's owner, but it is unclear if he was either piloting or aboard as a passenger.
The crash did not cause injuries on the ground, but did lead to both residential damage and power outages.
Fallbrook Technologies today filed for a $50 million IPO, although I can't for the life of me figure out why. The company has decreasing revenue, increasing losses and is looking to raise the type of equity infusion that its existing VC backers should be able to provide. If it weren't for Vringo, this would be in contention for the year's "WTF IPO?!?!" prize.
All of that is a way of leading into our monthly look at VC-backed companies that are in registration to go public on U.S. exchanges. There are of 37 them, representing more than $4.25 billion in targeted raise. This includes 11 additions since our last list, and two removals (Ironwood Pharma and Quinstreet, which both priced).
Get them all after the jump...
Sequoia Capital's Heritage program has had more stops and starts than a game of Mother May I. Now it seems to be taking another giant step forward.
For the uninitiated, Sequoia Heritage is an outsourced investment management platform for college endowments and other small institutions. Private equities, private equities, fixed income, absolute returns and real estate. Kind of like a baby Makena Capital.
Actually, the Makena ties go deeper than just investment strategy. The original head of Sequoia Heritage was Eric Upin, former chief investment officer for Stanford University's endowment. The founder of