Dan Primack
StockTwits, a burgeoning financial media company launched last year as a Twitter-based messageboard for traders, today will announce that it has raised $3 million in Series B funding. Foundry Group led the round, and was joined by return backer True Ventures. “The question you have to ask yourself when doing a round of this size is […]
My weekly video spot with Reuters was focused on the situation at Canopy Financial, which yesterday filed for fraud-induced bankruptcy protection. Per usual, I'm taping just a few paces away from the home office:
Next Wednesday, Chip Hazard of Boston-based Flybridge Capital Partners will hold office hours for local entrepreneurs. His partner David Aranoff will follow suit the following week, after all of Hazard's available slots got scooped up.
In the interim, three Boston-based partners with Siemens Venture Capital will hold office hours of their own. So will Rob Go, a senior associate with Spark Capital. Even local tech journalist Scott Kirsner has gotten in on the act, "selling out" a series of recent one-on-ones at a Cambridge sandwich shop.
In each case, the idea is to meet with local entrepreneurs that may be otherwise unable to get facetime with professional VCs. The investor typically schedules the meetings (thus leading to some pre-screening), but the subject matter is at the entrepreneur's choosing.
It appears that venture capitalists aren't the only ones to have erased Canopy Financial from their websites, following allegations that the company cooked its books. peHUB has learned that law firm Wilson Sonsini also scrubbed itself clean, removing references to Canopy from the profiles of partner and associate Daniel Green. Here's the cached version of Green's bio, for example, and here's the current version.
If this sounds familiar, it may be because Wilson Sonsini did the same thing with Entellium, the last company known to have enticed well-known VC firms with bogus financials. As Gawker's Owen Thomas wrote in October 2008:
If your company ever gets into serious trouble, wouldn't you like to know your lawyer's standing behind you publicly? Better hope you're not represented by Wilson Sonsini, then. After Seattle software startup Entellium saw its CEO and CFO charged with wire fraud and cooking the company's books, Entellium disappeared from Wilson Sonsini Goodrich & Rosati partner Craig Sherman's list of clients.
It's unclear if Wilson Sonsini attorneys were the "legal professionals" ex-Canopy CEO Vikram Kashyap "relied on financial... in accepting the authenticity of the company’s financials," as he said in his only public comment on the matter.
There's almost always some shutdown news that precedes Thanksgiving, and this year appears to be no different. The Keiretsu Forum's Denver chapter has decided to fold after its December events, due to dwindling membership.
In an email obtained by peHUB, chapter president Steve Murchie says that the Denver group is down to just 10 active angel investors, compared to a chapter high of 35. He also says that Keiretsu Forum may stop in Denver as part of a traveling roadshow, with more specific details to come at the group's final meeting on December 2.
Murchie makes no reference to Keiretsu Forum leadership recently asking chapters to waive presentation fees for pre-revenue startups that are seeking to raise less than $500,000 from investors. That move was widely viewed as a response to Jason Calacanis' public attacks on the pay-to-present model, although
Earlier today we reported on massive fraud at Canopy Financial, a San Francisco-based company that had raised over $88 million in VC funding. Company founder Vikram Kashyap has just issued the following statement, via his attorney:
Vik Kashyap had no prior knowledge whatsoever of any fraud regarding Canopy’s financial statements. He is as surprised as anyone about these allegations. He relied on financial and legal professionals in accepting the authenticity of the company’s financials. Going forward, he will leave his role as CEO of Canopy, but will remain as Chairman of the Board of Directors, helping to ensure that anyone who committed fraud is held fully accountable.
We have requested an interview with Kashyap, although don't expect that it will be granted.
Eight years ago, Vikram Kashyap left his job as an associate with Battery Ventures, in order to get the type of operating experience he felt was required to become a “world class” investor. After stops at eMeta and American Express, Kashyap launched Canopy Financial, a company whose technology helps streamline the administration of Health Savings Accounts. Canopy raised over $88 million in VC funding, including $62.5 million this past summer from Spectrum Equity Investors and return backer Foundation Capital.
Today, Kashyap is unemployed and Canopy executives are likely to face both criminal and civil accusations of fraud (although no charges have yet been filed).
As first reported this morning by TechCrunch, Canopy Financial appears to have largely been a facade. Its technology is real, but many of its tax statements, customer records and financial results were bogus. Sources tell peHUB that the company laid off approximately 100 of its 120 employees last Thursday, after an investor audit showed signs of severe impropriety.
"The entire company thought everything was going great until two or three weeks ago," says a former employee who asked not to be identified. "Once that [audit] happened things moved very fast. The last week in our office was like going to a funeral."
Hot Potato, a social networking startup focused on connecting friends and fans through live events, has raised $1.42 million in first-round funding.
First Round Capital and RRE Ventures co-led the deal, with Josh Kopelman of FRC and Will Porteus of RRE taking board seats. Also on the Hot Potato board is Allen Morgan, the former Mayfield Fund partner who now operates as an angel investor.
Other investors include: Ron Conway, Betaworks, Ken Lerer (independent of Betaworks), Chris Dixon and Founders Collective. Strauss Zelnick, Scott Banister, Ben Lerer Josh Kushner and Zach Klein.
Brooklyn-based Hot Potato is the brainchild of Justin Shaffer, who had spent the past seven years working on digital media initiatives for Major League Baseball. On his LinkedIn page, Shaffer describes the company thusly:
We’re building tools for real-time social collaboration amongst groups who share an interest in any event or experience as it’s happening. Whether checking in, recording your perspective, or just enjoying others contributions, it’s more fun to participate in events with Hot Potato.
"What we're building is the intersection of Facebook and Twitter, but around live events in real-time," Shaffer explains. "Facebook and Twitter are personal monologues telling the story of me, whereas we're building an environment of collective storytelling by people at an event, or watching an event."
NYPPEX Private Markets tomorrow will release new research, arguing that secondary market investors are overvaluing VC-backed Internet juggernauts Twitter and Facebook. Specifically, the New York-based group believes that individual investors using private-market stock exchanges are paying VC-sized valuations without the corresponding benefits.
Take Twitter, which recently raised around $98.2 million of Series E funding at a $1.13 billion post-money valuation ($15.98 per share). NYPPEX says recent “odd lot” bids for the company have been at a $1.29 billion valuation, or $20 per share. A big different, of course, is that the Series E round consists of convertible preferred stock with a 1x liquidation preference. The “odd lot” shares, on the other hand, are plain vanilla common stock. In other words, folks buying on secondary exchanges are paying more for less.
Winning Harvard Business School's annual business plan competition is officially worth $50k and a silver fruit bowl (sans fruit). For this past April's winner, it also helped foment a VC feeding frenzy.
"We almost immediately began getting a lot of interest from VC firms around the world," says Matthew Prince, president and CEO of CloudFlare, an Internet security startup focused on website access control. "We were in a really luxurious position to be able to look around to see who made the most sense for us to work with, from both an expertise and personality perspective."
CloudFlare went with Venrock and UV Partners, which recently provided a $2.05 million Series A round. Ray Rothrock of Venrock and Carl Ledbetter of UV Partners joined the CloudFlare board of directors.