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Why European startups should be furious about Autonomy

Bobbie Johnson — Sun, 25 Nov 2012 12:00:11 +0000

How fast things turn round. When Hewlett Packard’s $11 billion deal to purchase Autonomy hit the headlines little more than a year ago, it was hailed as a victory for the British tech sector. Sure, the price was high, and HP’s strategy unclear, but this was a solid company with some interesting technology — a big win for the local scene.

But the fall, when it came, was fast and relentless.

Less than a month after the deal was struck, its architect, HP boss Leo Apotheker, was on his way out, replaced by Meg Whitman. A few months later, Autonomy CEO Mike Lynch walked the plank too. And this week things exploded as Whitman announced an $8.8 billion writedown of the deal amid claims of fraud and misleading accounting that the SEC and FBI are investigating.

Whatever the realities of the deal — and Lynch vigorously denies Whitman’s claims — the damage has already been done. And it’s not just to Autonomy and HP, either.

Transatlantic tough times

Here’s one deep, abiding result of this debacle that shouldn’t be ignored: it’s likely to sour any future dealings between America’s technology giants and their European counterparts. What Silicon Valley CEO, faced with a potential acquisition of a British company, is not going to remember Meg Whitman’s claims? And what acquirer will not let the fear of being undone — just like Apotheker was — color their decisions?

For anyone skeptically minded, Autonomy underscores an unhappy trend for transatlantic technology deals. So many of the biggest European tech exits have ended in ignominy, or at the very least obscurity. MySQL was bought by Sun for $1 billion shortly before it went supernova and got snapped up by Oracle. In 2008, Microsoft spent $1.2 billion buying Norwegian search company Fast; a few months later the company was charged with fraud for violating accounting rules.

And then there’s Skype. Rightly paraded as one of the great European software success stories, it has a checkered history. Before it was bought by Microsoft for $8.5 billion, of course, it had been acquired and then jettisoned by eBay, which wrote its original bumper purchase price down by $1.4 billion.

Negative patterns are hard to shake, and in meeting rooms from San Jose up to San Francisco, you can bet anyone talking to a British entrepreneur about a possible buyout is going to think of Autonomy and this mess.

And yet, and yet. The story is so much more complex. After all, eBay’s troubled purchase of Skype happened under the leadership of… Meg Whitman. Sound familiar?

Meanwhile, the Autonomy buy wasn’t just Apotheker’s deal: it also took place on the watch of HP’s board — a hyper-connected, super-smart group of the Valley’s best and brightest. I’m not just talking about Whitman herself, but also Marc Andreessen, the man worshipped by many as the new leader of the pack. Then there’s Ray Lane of KPCB, once a bright star now having his role reduced, and Alcatel-Lucent’s Patricia Russo — who, as the head of a French-American firm, has particular experience of the European-American situation. Let’s hope pressure continues on those individuals to see why they got things so very wrong.

Truth is, attempting to draw lessons from HP-Autonomy doesn’t get you far. The British company may be tarnished by the accusations, but HP is a mess, switching from one disastrous strategy to another without understanding what is happening to it. And because it’s impossible to separate the misinformed decisions from the bad ones, coming to a broader conclusion about how fit European technology companies really are would be terrible. Each deal should be looked at on its own merits, not in some gigantic cultural context stuffed with lies, fraud and unproven accusations.

Yet we know human nature, and we know it is a fickle, arbitrary thing. What a shame for everyone.

Meg Whitman photo courtesy of Shutterstock user drserg

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Kleiner Perkins adds Design Fellows program to promote design in technology

Eliza Kern — Tue, 20 Nov 2012 18:00:05 +0000

Coming off the success of the investment firm’s engineering fellows program, Kleiner Perkins is launching a Design Fellows Program on Tuesday that will give promising design students a three-month internship with top companies in Kleiner Perkins’ portfolio to hone their design skills. Kleiner Perkins’ decision to place design students in top tech firms puts a particular emphasis on the importance of connecting design and technology.

“The importance of design as a critical part of product development and a vital strategy for companies to win in the marketplace is increasing, and KPCB sees design as a key factor in evaluating today’s consumer digital investment opportunities,” the firm noted in a press release.

Kleiner Perkins Design Fellows will work with on “design challenges” with one of the company’s funded companies, including Coursera, Flipboard, Klout, Nest, One Kings Lane, Opower, Path, Shopkick, Square and Zaarly.

The company will also pair the Design Fellows with members of the Design Council, to provide mentoring and leadership opportunities. Design Council members include: Zach Klein, DIY; Sahil Lavingia, Gumroad; Elle Luna, Mailbox; Gentry Underwood, Mailbox; Marcos Weskamp, Flipboard; Wesley Yun, Samsung; and Matt Beebe, Tylr Mobile.

We’ve talked a lot this month about the importance of the marrying of good design and tech, particularly at our recent RoadMap conference, in the future of business and innovation in Silicon Valley:

But now that computers and connectivity are ubiquitous, design is a vital part of how the best hardware, software, services, and systems are created: good design is the difference between products that make our lives better and those that make our lives more difficult.

Kleiner Perkins has already offered a similar program with its Engineers Fellows program, now in its second year of accepting applications, providing promising engineering students with summer internships at Kleiner Perkins companies and funding to relocate for the summer.

The Design Fellows program will begin accepting applications on Tuesday and will run through January 31, 2013.

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Red hot Codecademy gets $10m from Index and KPCB

Bobbie Johnson — Tue, 19 Jun 2012 10:59:34 +0000

Updated: Much-vaunted New York teaching startup Codecademy is taking on a new round of funding, adding Index Ventures and Kleiner Perkins as investors — and raising $10 million to help it expand globally.

It’s fair to say that the site, which provides game-like online courses to teach people how to code, has had a blockbuster year so far. It’s spent 2012 seeing enormous growth, adding new marketplace features, and gaining a legion of fans, including New York mayor Michael Bloomberg.

But even though the site has seen a breathless rise to prominence, the money isn’t just being used to keep the servers spinning while demand grows: it’s got ambitions too.

Ahead of an on-stage interview with me at LeWeb London on Tuesday, co-founder Zach Sims told me that the new funds “give us the ability to go international” — something useful given that 50 percent of the company’s user base already comes from outside the U.S.

And in a post on the company’s blog, he explains his belief that the latest investors are well-placed to help it achieve that expansion.

“A few weeks after we launched Code Year, we met Neil Rimer and Saul Klein of Index Ventures. Saul told us, about the world he wanted for his kids – one where code was a foreign language as important as Chinese and English for people to learn. Mary Meeker of Kleiner Perkins visited our office around the same time and painted a picture of a few industries that needed to be shaken up – education chief among them.”

“It became clear that we needed partners who both understood the importance of a global company… and the process of scaling a company far beyond the nine people we have grown to now.”

It’s actually the first investment from Index’s new €350 million early stage fund, but still, it’s only eight months since the business announced its last round of funding, a $2.5 million round from investors including Union Square Ventures, Ron Conway’s SV Angel and Michael Arrington’s Crunchfund.

This time round Union Square is following up, with Index’s Saul Klein leading the round and KPCB’s Mary Meeker joining in too.

So what do they see in it?

Index’s Klein told me that he was excited by Codecademy for many reasons, but not least because “it’s not a content-needy educational publisher” but “a marketplace for students and teachers.”

He also pointed out that with a global depression, it made sense to back a company that gives people the chance to learn new skills and potentially find jobs that they wouldn’t have otherwise been able to access.

That seems a proposition that is not just popular with VCs but also a magnet for billionaire tycoons: not only did Bloomberg express his support for the site, but investors include Russian Yuri Milner (who adds to his previous investment) and Virgin founder Richard Branson.

Here’s my chat with Zach Simms at LeWeb:

Photograph of Codecademy founders Zach Sims and Ryan Bubinski used under Creative Commons license courtesy of Hack NY

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SoundCloud gets $50 million in new funding

Om Malik — Mon, 02 Jan 2012 23:00:48 +0000

SoundCloud, a Berlin-based web audio startup, has raised $50 million in new funding from investors led by Kleiner Perkins Caufield & Byers, Mike Butcher reports. GGV Capital also participated. The company confirmed in a press release it raised the funds, but it isn’t releasing information about how much money it got from the investors. Previous investors in the company include Union Square Ventures, Index Ventures and Doughty Hanson Technology Ventures.

Mary Meeker, a partner at Kleiner Perkins Caufield & Byers, will take a board observer seat at the company. Butcher reports the company is said to have pre-money valuation of $200 million. It’s yet another case of KPCB trying to invest in fast-growing web companies at valuations that can politely be termed “generous.” It seems to be part of a transition away from its big cleantech bets.

The company that was started by Alex Ljung and Eric Wahlforss in 2007 has signed up more than 9 million folks. SoundCloud started as a collaboration platform for musicians and deejays. In more recent times, the company has refocused on becoming a “web audio” platform and launched multiple mobile apps. Ljung in an earlier interview said the launch of mobile apps had added about a million new people to SoundCloud platform. It was also one of the GigaOM Euro 20 startups to watch.

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Kleiner Perkins raising $250M China fund

Katie Fehrenbacher — Thu, 03 Nov 2011 14:40:51 +0000

Venture capital firm Kleiner Perkins Caufield & Byers is raising a second $250 million fund to invest in Chinese companies, according to a filing. Kleiner hasn’t closed on any of the funds yet, called the KPCB China Fund II, according to the document.

The size of the fund is so far smaller than Kleiner’s first $360 million fund, which, according to the Wall Street Journal, it raised back in 2007. Dow Jones’ Jonathan Shieber reported recently that Kleiner’s Shanghai-based affiliate, KPCB China, has been working on raising a local-currency fund with a target of at least 600 million CNY ($89.4 million). I’m not sure how these funds are related or if they are the same (will update when I know more).

Shieber says that yuan funds aren’t subject to the same investment restrictions as foreign funds. For example, foreign funds can’t invest in companies in certain sectors, like some energy firms. Kleiner has been looking for deals in Internet, cleantech and life sciences in China, but partner Ray Lane said earlier this year that the firm is spending more time on finding cleantech deals there.

Lane told the Journal:

China has an environmental problem that technology can address and that can be a foundation for setting up very successful businesses in China.

Kleiner has been trying to have a closer collaboration between its China-based and Menlo Park, Calif.–based teams, and KPCB China has had significant turnover in 2011. Both partners from KPCB China and Kleiner in the U.S. are named on the filing. The two groups have co-invested in two Chinese firms already, including water filtration company Mobius Water and solar thin film company PVNext Corp, according to the Wall Street Journal.

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Seed funded startups ripe for shakeout, VCs say

Colleen Taylor — Wed, 28 Sep 2011 00:50:43 +0000

Individual seed investors have been an increasingly powerful force in Silicon Valley’s startup funding landscape. But in an onstage conversation at GigaOM’s Mobilize conference in San Francisco Tuesday, two venture capital heavyweights said that while the VC industry has been shaken up by the increase of seed backers, the current environment will likely lead to a fall.

“There will be a day of reckoning, certainly. There are way too many companies getting seed funding,” said Maha Ibrahim, a partner at Canaan Partners. That’s because many of the companies receiving seed funding now are likely to have trouble raising larger amounts of money down the line, she said, since they’ve become used to the kind of terms that only seed investors can offer.

Nevertheless, at the early stages it’s hard for traditional venture capital firms to compete with groups of individual seed investors with a “willingness to put together a relatively large syndicate [of investors who invest in startups] at very favorable terms,” Kleiner Perkins partner Matt Murphy said.

In addition, Ibrahim said the fact that so many startups are content with seed funding may indicate a larger problem: A lack of the kind of ambition needed to really make a big impact on the tech world. “I’ve been disappointed most in the lack of companies coming in raising classic series A rounds,” she said. “The lack of entrepreneurs who want to go in and go big.”

Even if there is a day of reckoning on the horizon for some startups, both Ibrahim and Murphy said they generally expect the amount of mergers and acquisitions in the tech world to heat up in the months ahead. “We’re going to see a very rich M&A environment,” Murphy said. That’s something that will be good news for seed investors and traditional VCs alike.

Watch live streaming video from mobilize2011 at livestream.com

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The future of mobile: a segment analysis by GigaOM Pro

Mon, 26 Sep 2011 07:01:22 +0000

As our demand for data increases, so too do the number of mobile devices and services. Add to that the infrastructure needed to support such connectivity, and a wide, complex picture of the mobile industry emerges. This report examines the various sectors of the mobile landscape and what the future holds for each. Hardware, cloud services, mobile search, advertising, location-based services and the growing ubiquity of the Internet of Things will all play an important role in the concept of mobility as it shifts and evolves over the next several years. With the help of more than a dozen contributors, GigaOM Pro presents a comprehensive analysis of the companies and trends that will lead us into the next era of mobile.

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Square gets $100M, valued at $1B

Om Malik — Wed, 29 Jun 2011 05:05:37 +0000

One thing is clear: Investors are in love with Square, the payments company co-founded by Jack Dorsey, the co-creator of Twitter. The company today announced that it has received yet another big slug of funding. The veteran venture capital firm of Kleiner Perkins Caufield & Byers is leading the $100 million investment in the company. The company is said to be valued at $1 billion. Techcrunch first reported the likelihood of this round of financing and hyper valuation about two weeks ahead of the Wall Street Journal.

Square CEO & Co-Founder Jack Dorsey

In comparison, Square was valued at $240 million in January 2011 when it did its last round of financing and raised $27.5 million. Square so far has attracted about $30 million in funding. Visa, the credit card giant, made an undisclosed strategic investment in the company recently.

Former star wall street analyst Mary Meeker is going to join the board of Square, which also includes Vinod Khosla of Khosla Ventures and Larry Summers, economic advisor to President Obama. The high-powered board, a charismatic founder, a seasoned operator (Keith Rabois) and a fast growing product offering has made Square one of the hottest new companies in Silicon Valley. It doesn’t surprise me; Square always felt like a game changer to me, though it’s hardly a slam-dunk even now.

The new payment ecosystem is changing pretty rapidly and has become a playground for corporate giants that include everyone from eBay to Verifone to Google to Apple and telecom carriers. Square, for now, has the groundswell to keep growing amongst small and independent business that have been unable to take credit cards.

According to the Wall Street Journal, Square is processing nearly $4 million in payments each day. It will process a billion dollars in payments with a year, Rabois told the newspaper. Rabois, formerly of PayPal and Slide, believes that Square is going to be worth more than PayPal.

Square, based in San Francisco, is the latest among the fast-growing Internet startups to attract massive slugs of money from investors. Foursquare, Twitter, DropBox and Air BnB are some of the startups that have taken investments in order to create momentum for their business.

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With Twitter Deal Kleiner Perkins Spends for Cachet

Om Malik — Wed, 15 Dec 2010 21:57:49 +0000

There was a time when white-shoe venture capital firm Kleiner Perkins Caufield & Byers, was the first money in hot new start-ups that defined categories. These days, it seems the best the Sandhill Road firm can do is can try to edge its way into hot Internet start-ups at a massive premium. A good case in point is the recent funding for Twitter. KPCB is leading a $200 million investment round for Twitter which values the fast-growing social information platform at a whopping $3.7 billion. At that price, assuming some, if not all previous investors participated in the round, KPCB got between 4 and 5 percent of Twitter.

Now maybe KPCB’s lead partner John Doerr will have to pull out a comment from the archives. He famously said that “I have seldom paid so much for so little of a company,” when referring to KPCB’s early investment in Google. And that was at a time when KPCB was an actual Internet kingmaker.

This isn’t the first time the firm has paid up for a piece of a hot start-up. Even though the firm talks up its Zynga connection, it had to spend big to crash that party. The firm also recently launched a $250 million sFund (Social Fund), a way for them to regain a footing in the fast-shifting social and digital media industry.

This is in sharp contrast to the days when it backed Sun Microsystems, Genetech, Compaq, Netscape, Amazon, Google and @Home Networks: companies that defined not just their categories, but also spawned entire industries. The new social revolution has passed that mantle of über investor onto Fred Wilson’s New York-based Union Square Ventures (Twitter, Etsy, Foursquare) and Accel Partners (whose investments include Facebook and Groupon).

As an investor, one needs to be early in spotting trends, especially in the Internet arena, where things morph at lightening speed. Talking about the third wave in 2010 is sort of like suddenly discovering Lady Gaga today. But KPCB doesn’t have much choice. As we wrote earlier, KPCB is taking a sharp hairpin turn at a high speed as it tries to shift its investment momentum away from clean-tech to Internet and digital media investments. Hiring Mary Meeker was the right move, and now with the Twitter investment, is the fund betting it will regain its cachet?

Nevertheless, for Twitter, this money is going to come in handy, especially as it tries to expand its footprint and take on a much larger role. The San Francisco-based company is growing at a great clip, but it needs to spend on scaling its business and at the same time solve the quandary of a business model. It hasn’t quite figured out where its sales (and profits) are going to come from.

Yesterday, Erick Schonfeld pointed out that Twitter might be seeing slower growth in the U.S., which isn’t a good sign, considering U.S. (and Europe) continue to be the only monetizable Internet markets. Twitter, as I wrote earlier, is going to see significant growth in emerging Internet economies like India, Brazil and Indonesia in the coming years, which aren’t quite monetizable for U.S.-based companies.

Nevertheless, as long as there are folks looking to spend wildly to hang with the cool kids, Twitter’s trio of CEO Dick Costolo and co-founders Evan Williams and Biz Stone don’t have much to worry about.

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Kleiner Perkins Seeks Follow-on Funds for Green Growth Startups

Josie Garthwaite — Fri, 16 Jan 2009 21:17:40 +0000

Venture capital firm Kleiner Perkins has reopened its $500 million Green Growth and $700 million KPCB XIII funds, reaching out to investors for extra cash to support already-backed companies through the economic downturn, peHub reports.

The firm will reportedly allow both new and previous investors, an unusual step for a firm that generally has oversubscribed funds — and a sign that (a) Kleiner Perkins expects exits to be scarce in the next several years, (b) investors are opting for more conservative plays in a time of financial turmoil, (c) university endowments and automakers, which rank among Kleiner Perkins biggest investors, are increasingly strapped for cash, or most likely (d) some combination of the above.

Boosting the Green Growth and KPCB XIII funds could be especially important for clean energy startups in the firm’s portfolio, including geothermal developer Altarock Energy, ethanol and biodiesel maker Altra Biofuels, utility-scale solar thermal company Ausra and fuel-cell maker Bloom Energy. The companies, along with KPCB-backed plug-in hybrid car startup Fisker Automotive, are working on technologies with long development cycles and massive upfront costs — characteristics that might otherwise spell doom in an extended credit squeeze.

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