Startups

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A16Z Invests $2 Million in Smart Drug Maker Nootrobox

BY: JOE FERRARI    December 4, 2015

On Thursday December 3, 2015 Andreessen Horowitz announced a $2 million seed investment round in San Francisco-based Nootrobox, maker of nootropics (or Smart Drugs) that aim to, according to Nootrobox, “enhance your mental state” and “upgrade your brain.” These products are part of a “biohacking” movement, which treats the human body as software that can be improved through constant tweaking, both supplemental and diet-based. Nootrobox offers three main products: Rise (a daily nootropic to increase working memory and resilience to stress); Sprint (to get into the “flow state”); and Yawn (to help reach a deep level of sleep faster and more often).

The biohacking movement has drawn the attention of Andreessen Horowitz, who also funded Soylent—a meal replacement shake that claims to mix a range of supplements to form a technologically novel food that offers the complete set of nutrients the human body needs for survival. In My Opinion, the Nootroox investment is a preliminary (but significant) stamp of approval on an industry/movement that has drawn harsh criticism and skeptics.

Nootrobox was founded in 2014 by Geoffrey Woo and Michael Brandt after the two met at Stanford while studying computer science. Nootrobox emphasizes that its products are scientifically based, pointing to its efforts to hire PhDs and emphasizing that its main products are comprised of ingredients that have been FDA approved.

According to the Nootrobox blog: “The new capital will allow us to accelerate clinical research and development on nootropics, to double down on our manufacturing and supply chain innovation, and to continue building a world class team across all disciplines of medicine, software, and product manufacturing.”

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Gametime Raises $13 Million in Series A Round

BY: JOE FERRARI    MAY 29, 2015

San Francisco-based Gametime announced yesterday that it closed a $13 million Series A round led by Accel Partners.

Gametime—founded in 2013 by Brad Griffith—allows sport fans to make spur of the moment, on-demand ticket purchases. While traditional ticket platforms such as StubHub, SeatGeak, and Ticketmaster allow ticket purchases before a game is about to begin, Gametime distinguishes itself by allowing fans to purchase tickets after a game has started.

Gametime’s app is extremely easy to navigate: users can freely switch the number of tickets or the sporting event and are provided with a landscape photo of each ticket for sale. I’m a big fan of “less clicks is more” and with Gametime, a user can get admission to a game in under 10 seconds with only 3 clicks.

WSJ reports that nearly 7% of Gametime’s total inventory is sold after a game starts. I decided to test Gametime’s inventory for San Francisco Giants tickets leading up to their game vs. the Atlanta Braves last night (7:15 p.m. first pitch). At 4:30 p.m., there were 50+ tickets, ranging from $9 – $173. At 6:30 p.m., 30 tickets. At 7:15 p.m. — only forty-five minutes later — there were only 7 tickets left. In those 45 minutes, over 60% of Gametime’s San Francisco Giants inventory was consumed, proving there is a market for the spontaneous, last-minute fan.

According to Venturebeat, the idea for Gametime sparked after Griffith and his brother bought last-minute tickets to a San Francisco Giants game and were forced to the print the tickets in the office of a local bar. Printing took a long time, which led to the Griffith brothers arriving late to the game. Griffith decided that an app could solve this issue because all that is needed to check into most sport events is a barcode or QR code, not a physical ticket.

Some sport teams indirectly block Gametime from operating in their stadium by requiring fans to bring a physical copy of a ticket to each game. While its most likely that these teams require tickets for security reasons or some rationally related objective, its not impossible that the restriction is a bargaining chip. Instead, In My Opinion, the physical ticket requirement might be a power play by sport teams in an effort to stall the success of Gametime until said teams can negotiate a cut of Gametime’s revenue. This issue overlaps interestingly with my article on the Golden State Warriors alleged ticket resale restrictions because teams that require physical tickets are arguably engaging in a form of anti-competitive behavior. However, the Warriors case allegedly contains express statements by the Warriors to preclude ticket holders from selling on various platforms. Here, it is unlikely that sport teams have expressly declared that requiring a physical ticket is a bargaining chip to prevent Gametime from eating into said team’s ticket revenue. Not surprisingly, the teams requiring physical tickets are big-ticket teams such as the New York Yankees, New England Patriots, and Anaheim Ducks.

Gametime currently offers tickets to 150+ teams across 35 markets in the U.S. and Canada. Gametime’s Series A will be used for continued growth, mainly through hiring and further product and service development. Although Gametime’s Series A was led by Accel Partners, other sport executives are investors, including: Jeff Maellt (part owner of San Francisco Giants); Casey Wasserman (CEO of sports marketing and talent agency Wasserman Media Group); and David Blitzer (Philadelphia 76ers/New Jersey Devils co-owner).

Gametime’s Director of Communications Sean Pate was kind enough to confirm that Orrick Herrington & Sutcliffe served as outside counsel for Gametime’s Series A.

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Fitbit Heads Public, Seeks $100 Million Initial Public Offering

BY: JOE FERRARI    MAY 21, 2015

On May 7, 2015, San Francisco-based Fitbit began its marathon to the public markets by filing its S-1 Registration Statement. Fitbit will trade on the NYSE under the ticker symbol FIT.

In My Opinion, Fitbit’s move toward the public market helps the digital health industry move from the niche label most people attribute to it. This past February, I wrote about Under Armour’s acquisition of two digital health apps (MyFitnessPal and Endomondo) and posited that those acquisitions were a sign of companies willing to make bets on the niche industry of digital health. However, Fitbit’s filing illustrates that digital health products are moving away from that niche label for two reasons: (1) Fitbit’s products encompass much more than wearable technology; and (2) well known consumer brands are entering the space.

Fitbit’s products are much more than wearable technology, extending beyond physical products and into health analysis/feedback and social interaction. Fitbit’s wearable wristband and clippable devices track users’ daily steps, calories burned, distance traveled, floors climbed, and active minutes. This data is displayed in real-time and analyzed, providing users with feedback to encourage a healthier lifestyle. From a social perspective, users can enter into Fitbit Challenges, which is an online dashboard and mobile app that allows users to enter into friendly competitions with other users.

As outlined in Fitbit’s prospectus, competition is also heating up with the introduction of health apps and products from Apple, Google, Microsoft, and Samsung. Rather than partnering with a well known brand, Fitbit has publicly declared that it will steer clear of any integration. Addressing Apple integration rumors, Fitbit commented that: “We do not currently have plans to integrate with [Apple’s] HealthKit . . . It is an interesting new platform and we will watch as it matures, looking for opportunities to improve the Fitbit experience. At the moment, we’re working on other exciting projects that we think will be valuable to [Fitbit’s] users.”

Fitbit’s prospectus also flexes its financial strength. Though operating at a loss in 2012 and 2013 ($4 million and $52 million, respectively), Fitbit reported net income of $131 million in 2014, largely from selling nearly 11 million units, an increase of approximately 150% from the previous year. Those 11 million units translated to $745 million in sales, an increase of over 200% from the previous year’s sales of $271 million. Fitbit is also in full stride through Q1 of 2015, booking $48 million in net income ($336 million in sales) and approximately 3.9 million units sold. At that pace, Fitbit will close 2015 with a net income of approximately $200 million (surpassing $1 billion in sales) and 16 million units sold.

According to Dealbook, Fitbit’s offering is led by Morgan Stanley, Deutsche Bank, and Bank of America Merrill Lynch, with Fenwick & West LLP and Goodwin Procter LLP offering legal advice.

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Startup Profile: Instacart

BY: JOE FERRARI    JANUARY 16, 2015

On January 13, 2015, San Francisco-based Instacart announced a $220 million financing round. The recent round includes Silicon Valley-based venture capital firms Kleiner Perkins Caufield & Byers and Sequoia Capital, and values Instacart at $2 billion. According to CrunchBase, Instacart has raised close to $275 million to date.

I reached out to Instacart to get a sense of its business, culture, and vision. Company spokesperson Michelle Faulkner was kind enough to answer some questions about the company:

IMO: In one sentence, what is Instacart?

MF: Instacart is a fast-growing grocery delivery service whose Personal Shoppers handpick and deliver items from trusted local stores.

IMO: What is your vision for Instacart?

MF: Our vision is to enable all kinds of local retailers to get online and be able to offer same-day delivery.

IMO: When did Instacart launch?

MF: Instacart launched in 2012 in San Francisco, and we’re now in 15 cities across the U.S.: Atlanta, Austin, Boulder, Boston, Chicago, Denver, Houston, Los Angeles, New York City, Philadelphia, Portland, San Francisco, San Jose, Seattle, Washington, DC.

IMO: How many employees are at Instacart?

MF: 110 full-time employees, plus 4000+ Personal Shoppers who are independent contractors.

Michelle also described the Instacart as “[e]xtremely customer focused. Our #1 value is customer focus, and everyone on our team is empowered to do whatever it takes to surprise and delight customers.”

However, like any startup, Instacart faces the formidable challenge of prioritizing time: “[T]here are so many different areas we could tackle and so many things we want to do. We need to prioritize relentlessly.”

Lastly, Michelle said that Instacart will use its new funds “primarily for category expansion, geographic growth and technology enhancements.” The company appears to be a hit amongst grocery stores, securing partnerships with stores such as Whole Foods, Costco, and Fairway Market.

Instacart faces competition from the likes of AmazonFresh, Fresh Direct, Ebay Now, and Google. However, as reported by the NY Times, CEO Apoorva Mehta argues that Instacart is distinguishable from those companies because of its “ability to try new things in a very quick way.” Instacart invests in its software and its people, not in warehouses or trucks, and this allows it to pivot rapidly. Moreover, Instacart focuses solely on groceries and has not displayed an intent to compete with companies – like Ebay Now – who tout their ability to deliver a wide range of products.

A huge thank you to company spokesperson Michelle Faulkner for her time, and best of luck to Instacart!

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Los Altos-Based Box Heading Public

BY: JOE FERRARI    January 12, 2015

On January 9, 2015, Los Altos-based Box filed an amended S1 Registration Statement declaring its intent to raise up to $162.5 million through an initial public offering. Box plans to register as many as 12.5 million shares of Class A common stock, expected to price between $11 and $13 a share. Box originally filed its S-1 in March 2014, but delayed its offering at that time. 

The prospectus outlined three issues that troubled me. First, Box has not yet turned a profit despite its 10 years of existence:

“We have incurred significant losses in each period since our inception in 2005. We incurred net losses of $50.3 million in our fiscal year ended December 31, 2011, $112.6 million in our fiscal year ended January 31, 2013, $168.6 million in our fiscal year ended January 31, 2014, and $121.5 million in the nine months ended October 31, 2014. As of October 31, 2014, we had an accumulated deficit of $482.7 million.”

Second, the prospectus disclosed an active patent dispute with OpenText, a large software company based in Canada.  

Third, Box raised a total of $543 million from a wide pool of investors including Andreessen Horowitz, Bessemer Venture Partners, Draper Fisher Jurvetson, General Atlantic, Salesforce and SAP Ventures. Its most recent private equity round valued the company at $2.4 billion. However, based on the IPO figures, the valuation actually hovers around $1.6 billion.

Wilson Sonsini and Goodwin Procter will provide legal counseling, with Morgan Stanley, Credit Suisse, J.P. Morgan, Canaccord Genuity, Pacific Coast Securities, Raymond Jones, and Wells Fargo Securities acting as underwriters.

Stripe Cashes in $70 Million of New Funding, Raising Valuation to $3.57 Billion

By: JOE FERRARI    December 17, 2014 

Stripe, the San Francisco-based online payments startup, announced it has recently raised $70 million in fundraising, valuing the company at $3.75 billion.

Stripe was founded in 2009 and offers processing services for online and mobile transactions.

Stripe separates itself from therest because of its cross-platform capabilities: the company provides plenty of code, allowing software programmers to quickly incorporate payment features into their apps.

Investors are not the only ones buying into Stripe’s promising future. Stripe recently announced partnerships with Apple, Facebook, Alibaba, and Twitter – an impressive group of companies considering they all utilize different payment platforms, which demonstrates Stripes’ unique flexibility.

The recent round of fundraising comes after a successful $80 million Series C round led by Sequoia Capital in January 2014. Stripes’ recent $70 million will help it continue its international expansion efforts.

Stripe also has an impressive investor roster. The startup originally took money from Y Combinator, a start-up incubator, and since has accepted money from Peter Thiel, Elon Musk, Sequoia Capital, Khosla Funds, General Catalyst, and Founders Fund.

With this recent round, Thrive Capital joins the party.

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GIF Keyboard Company Riffsy Raises $3.5 Million

By: JOE FERRARI    November 8, 2014 

Riffsy – the San Francisco-based maker of a popular GIF keyboard for iOS 8 – announced that it has raised $3.5 million in a recent round of fundraising led by Redpoint Ventures. Riffsy’s keyboard is designed to allow users to copy and paste a wide range of images and videos into conversations with friends and contacts. Riffsy has hundreds of thousands of GIFs and videos available to choose from and paste into iMessage, text message, or Twitter conversations. 

So how is it that a company that builds an app that allows you to send GIFs raised $3.5 million? In other words, can a GIF keyboard company turn profit for its investors? Venturebeat reports that the company has larger aspirations: “Beyond the keyboard as it is, the team wants to eventually add ways for users to personalize their keyboards and GIF libraries, be able to pull from their own photos and videos, and eventually even store their libraries in the cloud and be able to access them from multiple devices.”

And Riffsy has some solid numbers in its corner. In its first three weeks, the app was downloaded more than a million times. In My Opinion, this only paints part of the picture though, because downloading doesn’t equate to actually using an app. I personally have downloaded many apps that I ended up not using and deleting. In any event, Riffsy does have promising user engagement numbers: once installed, users keep coming back to Riffsy’s GIF keyboard, opening it nine times a day on average and sharing more than five GIFs every 24 hours. 

CEO David McIntosh says the company is currently focused on its product and growing its user base and not monetization, but eventually plans to bring in revenue through branded and sponsored content.

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Bright Future for Eventbrite 

By: JOE FERRARI    March 17, 2014 

San Francisco-based Eventbrite is a self-service online ticketing platform that allows people all over the world to create events, sell tickets, and manage registrations for events of all types and sizes. 

Eventbrite has processed around 140 million tickets for organizers, translating to more than $2 billion in gross ticket sales in 179 countries. Nearly 60,000 organizers around the world use Eventbrite each month to manage, promote and sell tickets.

Recently, Eventbrite raised a new round of funding rumored to be around $60 million, which places a valuation of the company just north of $1 billion.

Darrell Etherington at TechCrunch reports that the startup wasn’t looking to raise more money ahead of a rumored 2014 IPO, but was made an offer that was too good to pass up.

This recent round of funding most likely pushes the IPO to 2015.

The articles on this blog are those of the author individually. Nothing on this blog is to be construed as legal advice and is not meant to be so. If you have legal problems, please hire an attorney and consult with him/her. Do not rely on anything written in this blog for legal advice. Everything written here is my own opinion. 

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