- Every day dozens of companies file their funding rounds with the SEC, but often these stories go uncovered by the mainstream tech press until they receive a pitch. These filings are public, and often quite interesting if you’re willing to dig into the names of the directors to see what’s cooking. Many of these companies are based outside of Silicon Valley and don’t build consumer tech – placing it outside of the editorial focus of many tech publications.
Check out the companies whose funding has come across the wire so far today:
Kentucky-Based Frogdice Games Raises $576K for Online RPGS, Virtual Worlds, and Casual Games [Source: SEC Filing] The company has been around since 1996, and is lead by Michael Hartman. Titles include Coin ‘n Carry, Threshold RPG, Primordiax, Tower of Elements, and Dungeon of Elements. Investors in the round were not disclosed.
Chicago-Based Whoozat Raises $750K to Connect Social Affinity Groups. [Source: SEC Filing] The company is founded by Curt Conklin and investors in this round include Brill Street + Co founder Nancy Lerner Frej and former Ameritrade COO and Nebraska Senate nominee Peter Ricketts. The website currently says coming soon Summer 2013.
Skyword Raises $6.7M in Venture Funding. [Source: SEC Filing]
Skyword was formerly Gather.com (their site now times out and Twitter account has been deleted), which raised over $27M from 2004 to 2010, and the core leadership team remains the same. Between the two companies they have taken over $40M in investment.
AbilTo Raises $1.5M from Liam Donohue at 406 Ventures to Build Behavioral Health Programs for Adults Making Life Transitions. [Source: SEC Filing] The company is based in New York and founded by Michael Laskoff. The company announced a $3M Series A earlier this week lead by 406 Ventures, and the $1.5M in this filing is their portion of the capital committed.
Variable Technologies, Creators of the Node Sensor Platform, Raised $2M. [Source: SEC Filing] To learn more check out this article in BusinessWeek, explaining how George Yu is building a sensor to measure anything.
- On the mission to see into the future, there is a tendency to over value the information and lessons of the past. With 20/20 hindsight it seems obvious that things would turn out the way they have. Cell phones? Computers? “If I had been alive back in the 1950s I so would have called that,” you say. Television? Telephone? Automobiles? “Obviously I would have been first in line to get mine!”
But would you have? Really? Massive changes in how we build things, operate our companies and think about technology have often taken place gradually, and met plenty of resistance along the way. Even visionaries miss great things all the time, just look at the Bessemer Venture Partners anti-portfolio, read Dustin Curtis’ “What a Stupid Idea” reflecting on early looks at Pinterest and Vine, or the long list of VCs who didn’t invest in Facebook early on but then made a late stage play to add the Facebook logo in their portfolio.
Echoes From the Past
Limited partners (LPs) complain that their venture capital investments haven’t had returns that were as good as in the 90s. Venture capitalists complain that companies founded today aren’t as innovative as they used to be or that valuations are higher than they used to be. And the press? Writers who have never been anything remotely close to entrepreneurs will continue to bitch about everything.
“Company ABC would never do that” – says who, Company ABC is like 4 years old? “I’m not a sales guy” – you’re a 22 year old computer science graduate, you’re not really anything yet! “Startups who tried that in the 90s totally bombed” – yeah well it is 2013 now, might be time for another go. “I wish we could invest, but founders who fit our profile have computer science degrees” – your profile is 20 years old, the Internet has gotten a lot more programmable since you were in school.
Fighting for the Future
Listening to these complaints and excuses for not doing something (e.g. changing strategy, trying sales, trying a model that previously failed, investing despite lack of founder credentials) is like hearing parents complain that the kids’ music is too loud, and rock was so much better in their day. And the worst part is that they try to dress all this up as some version of “pattern matching”, which is the one of those terms you can throw out to make people nod and stop arguing with you. One of these days I’d like to jump up from the boardroom table and shout, “screw your pattern matching, I saw the results and I don’t believe you!” just to see what happens.
Boardroom fantasies aside, people who are really great at pattern matching don’t get distracted by inessential details like what founders are wearing on 2nd street this week, what kind of parties they throw, the alma mater of the software engineering team, what Dave McClure said at a conference, or even whether the company is raising at a $5M or $12M pre-money valuation out of Y Combinator this batch. These are things that might matter for a moment in time, but quickly fade into the past. What matters most is trying to understand how a combination of past knowledge combined with present action will ultimately generate a favorable result.
Fight for the future, or get out of the way.
P.S. I’m not claiming I am some great visionary, but I’ve been placing some bets so we’ll see in 10 years or so.
Image credit: Bioepherma
500 Startups announced the non-stealth participants in their current batch today in a TechCrunch article, and while they’ve kindly put them in alphabetical order… you probably know by now that’s not how I roll.
I’ve been tracking many of these companies for awhile now and will certainly start tracking those I missed. It will be interesting to see how this rank and momentum scores at the beginning of the program compare to the end of the program.
Are you a future investor, employee or customer for these companies? Get on it.
My advise to the startups looking to increase their score? Every day we hustlin’ #500strong
Full Disclosure: I am a 500 Startups mentor. I haven’t written a full ethics statement for this blog but this is my rule of thumb: no free equity/options. I make investments from time to time, you can see them on my AngelList profile.
This is the Startup Index series, an ongoing effort to measure the momentum of startup companies using external signals. It is calculated based on weighted factors such as web traffic, social media share of voice, inbound links, etc. I usually add some music, to make cruising a spreadsheet a little more fun. Enjoy!
The Startup Index is inspired by the Seattle 2.0 Index, which Marcelo Calbucci produced each month to create a leaderboard for local startups and it is now the basis for the Geekwire 200 in Seattle. But why stop at Seattle? There are many so many startup communities around the world, and today I’ve applied our algorithm to 533 startups from New York that we’re currently tracking. Check them out, see who’s on top and how they’ve been trending this past week, and as always let me know if there are companies I’ve missed and I’ll get them added.
One great source for stories about private companies in the U.S. are the SEC filings of REG D forms. These forms are filed by companies who have completed or are in the process of raising funding. They are not required for many companies, but you’d probably be surprised to learn how many interesting companies are raising money and not being covered by the tech news media. I pull together the most interesting ones through the day, some get their own story and others make it into the roundup.
Do you have a startup that recently raised, or a tip about a company I should cover? Drop me a note at morrilldanielle (at) gmail.
SureDone Raises $416K from NY Angels for Multichannel Ecommerce Management Solution, Edward Tolson Joins Board — Other investors include Philip Grieshaber, Jeffrey Silverman, Sacha Levy and Leo Wang. [Source: SEC Filing]Bleachers Raises $1M from Angels for Video Sharing Geared Towards Parents & Kids — The founding team includes co-CEOs Sam Klein and Frank Jordan as well as Emily Mommsen (CFO). [Source: SEC Filing]Perspecsys Raises $9.8M Series B for Cloud Data Protection (FinSMEs reports $12M) [Source: SEC Filing]Zoove Raises $15.3M Venture Round for It’s Star Star Vanity Numbers Service — Converts Promissory Notes [Source: SEC filing]Imagine K-12 Graduate LearnSprout Raises $2.7M from Formation 8 for Education APIs — The company launched in July 2011 and is also backed by Andreessen Horowitz. [Source: SEC Filing]
- In a regulatory filing today it was revealed that InkTank Storage, the creators of Ceph, have raised $13.4 million in venture funding to continue building their support and services business enabling customers to implement Ceph infrastrucutre. The company is backed by New Dream Network.
Ceph is a massively scalable open source storage system which is operated on-premise by companies who want to essentially build the equivalent of Amazon S3 (but run in-house) and provides object, block, and file storage. Businesses deploy Ceph to their existing commodity on-premise hardware and scale out their storage as needed. While S3 is probably the easiest solution right off the shelf for startups and other small technology companies, companies with specific security needs and those with on premise architecture are welcoming this open source alternative. As one developer put it, “unless you know you need it you probably don’t, yet.”
The company was cofounded and launched in May 2012 by several of the original open source Ceph authors including Sage Weil, who serves as CEO & Chief Architect of InkTank and was formerly cofounder of Dreamhost. InkTank also boasts Dreamhost as a featured customer, where they power the DreamObjects scalable object storage service.
At OpeStack Summit last month GigaOm’s Barb Darrow indicated that “Ceph is hot, hot, hot”. According to her post:
Based on an informal poll of speakers and attendees, Ceph storage is where itâ€™s at. The Swift storage system? Not so hot. Best Buy moved from Gluster to Ceph because of the latterâ€™s self-healing capabilities. Ceph offers object and block storage all in one integrated product while Swift handles object storage only. Mirantis EVP Boris Renski said Swift, which comes out of Rackspace, has lots of production installs, but Ceph is viewed as having a more â€œelegantâ€ architecture. â€œUnlike Swift, you can use Ceph as the backend for both object and block.â€ Also, because of a better algorithm for handling data replication, it can promise better scaling, he said, although Mirantis has not fully tested that out yet.
The VAR Guy (a great blog btw if you are just getting into reading about enterprise tech) covered Cuttlefish, the latest release of Ceph, noting that InkTank has been developing impressive channel partners in the past year:
That update, combined with the close relationships Inktank has forged with other big-name partners including SUSE, Canonical and Dell, promises to raise Ceph’s profile within the channel even further, and cement its key role in open-source Big Data computing. That’s a lot of momentum for a storage platform that essentially had no commercial presence at all until about a year ago. We’ll stay tuned as Ceph and Inktank continue to move forward.
An air of inevitability forming around Ceph and InkTank. Watch this space.
To learn more I recommend this talk from OSCON by Ross Turk:
The company was cofounded by Ivan Lee, Chris Meill, and Brian Laub and the goodbye note is also signed by Marco, Sam, Gene and Bart. It looks like the 7 person team will join Yahoo’s mobile team. Notably Jessica Lee, the companies UI designer, does not appear to be included in the note so it is unclear whether she will be part of the acquisition.
The Geomon game, their first and only title, was free to download but makes money when users make in-app purchases to improve their characters and purchase other premium experiences. Sources familiar with the company say they had roughly 300,000 users signed up. According to AppData they last shipped an update to the iOS app in July 2012.
Yahoo! has been on a tear with small talent acquisitions this year so far, and PandoDaily’s Erin Griffith wrote a piece titled “Canâ€™t raise a Series A? Just sell yourself to Yahoo” suggesting that many small teams unable to survive the Series A crunch might find safe harbor there. The article goes on to describe common characteristics of companies acquihired by Yahoo!:
Her targets all generally fit the profile of a Series A crunched startup (though obviously I canâ€™t speculate on each of their exact options when they sold). For starters, none has raised a Series A round. Most had accumulated seed funds in the form of a â€œparty roundâ€ with long lists of angel investors but no lead investor. All are consumer-facing. None had experienced any truly notable traction before the deal. (Astrid seems to have been the biggest with 4 million users.) Only one or two had a clear path to revenue. All were well-designed by talented teams of fewer than 10 employees. None of their products were particularly revolutionary or even unique in their categories. All of them were shut down and folded into Yahooâ€™s offerings upon acquisition with hardly a peep of outrage from their users.
Other acquisitions by Yahoo! this year include Stamped, ONtheAir, Snipt.it, Jybe, Summly, Astrid, Milewise, and GoPollGo.
Read the full announcement:
I get a lot of feedback asking why the monthly startup momentum index doesnâ€™t include revenue as a signal. There are two reasons, and the first is that most startups donâ€™t want to provide that data to outsiders. The second is a bit counterintuitive, but stick with me and Iâ€™ll explain: revenue doesnâ€™t actually matter for finding hot early stage startups.
While revenue is a useful signal to founders, indicating they are creating something people want, it is also a lagging indicator of success. Startups who are willing to reveal revenue data publicly do so because it reflects well on them. Theyâ€™re in control of their destiny and decide when and how to raise money. Investors and employees have already missed the window of massive upside that comes with getting in before the company reaches this milestone.
By the time a startup has a predictable and steadily growing revenue stream that means it has built a product and brought it to market successfully, so the risk of investing in it has gone down tremendously and so has the reward. This is why Y Combinator stands to be massively successful – they invest early enough to capture the upside of startups that havenâ€™t figured these things out yet, and then they help them improve and de-risk the company before involving future investors. The YC model tolerates much greater uncertainty than other angel investors and in return they receive outsized gains from big wins, plus minimal losses from companies that fail.
Early revenue can be dangerously distracting for founders. Once you have some of it you want more, and without strict discipline itâ€™s easy to optimize for immediate gratification rather than the big vision. For founders who have never made $10k a month this feels like a lot of money, especially for the young software engineers straight out of college who never even had salaries that high.
Now in order to make your graph go up and to the right you need to make $12k next month, and $14.5k the next, and $17k the month after that. And thatâ€™s just 20% growth month-over-month, which is not actually that sexy of a growth rate – after a year you should have a $87k month in revenue, giving you an annual run rate of just over $1 million. Thatâ€™s a tiny business, and remember this is revenue not profit. If you run a tight ship this might be break even, but if youâ€™re doing B2B software you probably need to hire support, sales, and lotâ€™s of engineers. You need to raise more money.
What if this same startup, who is seeing steady but not spectacular linear revenue growth, is also fast becoming the most well known new company in its emerging space? Theyâ€™re discussed on Hacker News all the time, friends have started using them, theyâ€™re clever and engaging on Twitter and I see them retweeted all the time, their company blog shows up on Techmeme once in awhile and when their CEO comes to speak at a conference he is the highlight of the event. Iâ€™m seeing them everywhere. A couple friends have gone to work there.
Be everywhere, be awesome.
How much does this public awareness increase the value of the company? A lot.
When you see unexpected, small, or otherwise questionable companies in my latest top 20 list swallow your cynicism and dig deeper. For investors this is a list of pre-qualified leads worth reaching out to. For knowledge workers these are companies with upside opportunity if you join the team right now. For founders, this is acknowledgement of the hard work youâ€™re putting in pre-revenue to build a massively valuable company.
Donâ€™t let revenue be your vanity metric.
In an email sent to users today Clipboard, a service similar to Pinterest for organizing links and bookmarks across the web, the company announced they have been acquired by Saleforce and will shut down the service on June 30th, 2013. The company has also posted a farewell announcement on their blog.
The email also states they acquired 140,000 users. The company raised a seed round of funding in October 2011 from Andreessen Horowitz, Index Ventures, CrunchFund and other angels.
Clipboard founder Gary Flake is a well known Yahoo! expat who lead their Yahoo! Research Labs following the Overture merger where he had been Chief Science Officer. Flake also spent time at Microsoft where he founded Microsoft Live Labs and served Technical Fellow. Given the lack of traction of Clipboard and the fact that the product is being shuttered, this acquisition appears to be focused on acquiring him and other talent from the team.
Read the full announcement here:
- Last week I published the April index of startups ranked by momentum. But scrolling through hundreds of rows isn’t much fun when all you really want to find the diamonds in the rough, so I thought I’d pull out the top 20 B2B companies with the most momentum right now.
The index is built using time series data collected on several signals to create a momentum score combining the footprint of the company and the velocity of changes in the signals. It’s also designed to let consumer and B2B startups to stand on equal footing.
I’ve also included their most recent funding date and round amount. Enjoy and if you have suggestions for startups we should add to the index submit them here.
Full Disclosure: I am an angel investor in Bitnami.