Tuesday, August 27, 2013

The Startup Ecosystem: Predator vs Prey


About Udemy (from their web site): Udemy helps students make moves. Whether you want to get promoted, break into a new industry, start a company, further a passion, or just accelerate your life, Udemy helps you learn from the amazing instructors in the world, so that you can get there and get there faster. Our team recruits the world's top experts, including New York Times best-selling authors, CEOs, celebrities, and Ivy League professors. These expert instructors have taught over 500,000 students on Udemy, helping them learn everything from programming to photography to design to yoga and more. Founded in 2010, Udemy is funded by Insight Venture Partners, Lightbank, MHS Capital, 500 Startups and other investors who previously foresaw the internet giants YouTube, LinkedIn, Twitter, Groupon and Yelp. Udemy is headquartered in San Francisco, California.

You can find a larger version of this infographic here.

Wednesday, August 14, 2013

The Next Silicon Valley is Probably Going to be….Silicon Valley, says CB Insights

“With the exception of New York, major venture hubs have shown little progress in dethroning Silicon Valley as the place for tech VC. Massachusetts and Texas are losing ground while everyone else is flat,” according to CB Insights, a New York based database firm. 

As the legendary Larry Bird once said to the other NBA players in the 3-point shot competition: you guys are all shooting for second place.  You know that, don’t you?

From CB Insights: “Silicon Valley has long dominated the spotlight for promoting and financing the growth of emerging tech companies. And so when you’re the 800 lb gorilla in an area, there will be others who aspire to knock you off of your perch. And so we see lots of breathless proclamations from other cities and regions that they are the “next Silicon Valley”. Chicago threw its hats in the ring during Groupon-mania but it is not the Silicon Valley as the data shows. And a quick Googling of the term “the next Silicon Valley” shows Seattle, Los Angeles, Bangalore, Tel Aviv and even the Brooklyn tech triangle (yes – really) have all thrown their hat into the ring thinking they could be contenders.

“But if we look at the data, we can answer if there has been any shift from Silicon Valley to other markets in reality or if this is all just talk. Specifically, we’re going to look at a few other venture hubs namely SoCal (LA & San Diego), Colorado, Massachusetts, New York, Texas and Washington.”

Has Silicon Valley seen a decline in tech sector deal activity over time? Not the case. Tech sector deal levels in H1 2013 topped those of H1 2012 by 10% and H1 2011 by nearly 21%, respectively. On a year-over-year basis, Silicon Valley tech deal activity has grown 19%.

And while Silicon Valley’s VC funding to tech companies saw a notable dip between Q3’12 and Q4’12, it has since picked up going back to historical levels. Year over year funding has actually increased 3% and dollars are trending upward over the past two quarters.

But with the exception of  New York, geographic markets from SoCal to Texas have had a difficult time in growing their share of venture-backed tech businesses. 

In the race for second place, CB Insights recognizes the following winners, placeholders, and losers.

Winner: New York
New York’s share of tech deals has grown steadily over the past three years and has stayed near 20% for each of the past three quarters. This has been spurred by a few things. Many of NY’s largest venture-backed exits have taken place since 2010 so it’s a region with some momentum. At the same time, a strong core of investors has emerged to back New York-based cos. For example, Spark Capital and Union Square Ventures, both top-tier firms, have co-invested in NY-based Kitchensurfing, Skillshare and Tumblr among others and continue to be active in the market.

Static: SoCal
While tech funding and deals in the region has grown 8% and 18% on a year-over-year basis, SoCal has little to show in terms of overall growth or decline by share of deals and dollars versus other geographic markets.

Static: Colorado
Colorado’s share of tech deal and dollars has remained very flat since Q2’10.

Static: Washington
Washington’s share of tech deals has hit over 5% in just four of the past 13 quarters, while funding share drifted above 5% just twice (with a high of 7%).

Loser: Massachusetts
While Mass. has taken the #2 spot in VC funding across all sectors in four of the past five quarters, its share of tech deals versus the given geographic markets has fallen over time and hit below 10% in each of the past two quarters. Funding share in Mass. is more mixed, but average and median deal share has trended at 9% since Q2’10. 

Paul Graham of Y Combinator recently called out Boston investors, writing about Dropbox. “Because the best investors are much smarter than the rest, and the best startup ideas look initially like bad ideas, it’s not uncommon for a startup to be rejected by all the VCs except the best ones. That’s what happened to Dropbox. Y Combinator started in Boston, and for the first 3 years we ran alternating batches in Boston and Silicon Valley. Because Boston investors were so few and so timid, we used to ship Boston batches out for a second Demo Day in Silicon Valley. Dropbox was part of a Boston batch, which means all those Boston investors got the first look at Dropbox, and none of them closed the deal. Yet another backup and syncing thing, they all thought. A couple weeks later, Dropbox raised a series A round from Sequoia.”

Loser: Texas
While deal share has slowly trended downward in Texas (only 4 more tech deals were completed in the state year over year, funding share has seen a steeper decline. Between Q4’11 and Q1’12, funding share fell 600 basis points and then another 400 basis points the following quarter. Since then, funding share to the Texas tech market has remained at or near historical lows.

Angel investors should recognize that the analysis above is based primarily on Venture Capital (not Angel) funding and that angel group results, as shown in the GUST reports, may differ significantly. But the current CB Insights report, available here, is based on substantial data as expressed in a fine series of graphs.

Tuesday, August 13, 2013

Arkami Parlays a $473,333 Kickstarter Campaign into $1.8 million Angel Round

Arkami™ of Alsiso Viejo, CA, today announced a $1.8 Million Series A round of angel financing, following its successful Kickstarter campaign in March..
This round includes  investments from Gordon Clemons, McNeel Capital,  and Mark Swanson as well as a number of other veteran angel investors. The funding will be used to accelerate the development of myIDkey, meet customer demand, and facilitate company growth. “While myIDkey is a compelling market opportunity, what stands out is the management team,” said Gordon Clemons.
“myIDkey is a complete password management system that fills-in passwords across all frequently used web sites on personal computers and smart mobile devices. It stores all of your passwords and critical information on a portable Bluetooth / USB device. Unlocked with the swipe of a finger, myIDkey enables you to voice-search for logins, passwords and ID information on its own OLED screen for quick access while on the go. By utilizing myIDkey apps for iPhone and Android, you can easily manage and edit passwords and encrypt select files to protect with your unique fingerprint.”
myIDkey recently completed a Kickstarter campaign that sold more than 5,000 units in 30 days, making it one of the most successful technology projects ever launched for the consumer market.
On Kickstarter
Arkami launched its Kickstarter campaign on Feb 20, 2013, with the ambitious goal of raising $150,000. Within a month they had raised $473,333   from 3,927 Backers.  While our Editors find that many of our angels would prefer not to be identified, or at least to keep the details of their individual investments private, we were surprised to see that Kickstarter provides us a list of all 3,927 backers, along with their photographs..  By clicking on a particular investor, you can see how many investments she has made and what they are.

Picked randomly, we see that Rosie Siman, from New York, NY, joined Kickstarter in  May 2009 and has backed 162 projects. Eric Damon Walters of  Rochester, MN, joined April 2010, backed 2168 projects. For details on these folks, and lots more, click here to review the Arkami pages.