VENTURE CAPITAL MARKET OVERVIEW, ISSUE 42 (JUNE, 15 – 21)

Merger and acquisition deals: Twitter, GameStop, successful startups – beauty, medical care, Internet of Things, money transfer, new funds – USA, Chile and Japan.

M&A. Twitter Acquires Machine Learning Startup Whetlab

Twitter announced that it has acquired Cambridge-based machine learning startup Whetlab in an effort to accelerate the company’s own in-house efforts on the matter. Deal terms were not immediately available, but Twitter will gain both access to Whetlab’s technology and small team following the acquisition, while Whetlab’s current product will be discontinued next month.

Whetlab was developing A.I.-like technologies that would make machine learning easier for companies to implement. Its system had been designed to get a company’s internal systems off the ground automatically, and therefore, more quickly than before. This could potentially reduce the time it takes to train a new machine learning system from months to just days.

On its company website, Whetlab explains that their patent-pending system would offer an alternative to hiring experts to architect and tune a machine learning system in-house as is traditionally done, as it would do this work instead. The company even boldly claimed it did a better job than today’s human experts, noting that its tech had “outperformed the top machine learning researchers in configuring systems for the hardest cutting-edge problems.”

The tech, which was developed by researchers at Harvard, Toronto, and Sherbrooke universities, was being put to use for things like object recognition, speech processing and even computational biology. It was running in a closed beta, according to a FAQ on the Whetlab website about the planned shutdown, which is taking place on July 15, 2015. The startup, a team of five, was only around a year old at the time of the acquisition.

M&A. GameStop Buys ThinkGeek

What do you do when your primary physical sales channel is drying up? You sell something that your audience loves, preferably online, and if that doesn’t work you buy someone that does. To that end, GameStop, the beleaguered game sales company, has bought ThinkGeek, a beleaguered geek toy company, for $140 million at $20 a share.

GameStop profit was up last year thanks to solid console sales but generally the business of selling optical media is on a downward slope. GeekNet, the parent company of ThinkGeek, cancelled a merger with Hot Topic to broker this sale even as the company was facing a decline in earnings. However, it does still sell physical products that would work well in GameStop stores.

According to a GameStop press release, the “transaction provides a natural extension of GameStop’s existing product offering and is expected to add an immediate incremental $100+ million in annual net sales.”

The acquisition will close by Q2 2015.

STARTUP. Beauty Booking Site Wahanda Raises Another $73M, Buys ZenSoon

Wahanda, the startup out of the UK that has built a platform for beauty salons and consumers to find and book appointments based on time and location, continues its march to expand by rolling up regional rivals. The company announced it has picked up a further $73 million in funding, and that it is buying ZenSoon, a beauty platform in France.

The $73 million is coming from the sole outside investor in the company, Japan’s Recruit Holdings, which now owns 80% of the company after buying out other investors in May of this year. Although Recruit itself runs a similar beauty and hair booking site in Japan, Wahanda operates independently.

Wahanda counts the former CEO of Just-Eat as its chairman, and it has been following a model very typical in e-commerce both in Europe and elsewhere, followed by the likes of Groupon, Delivery Hero and Just-Eat: to achieve better economies of scale for their platforms, and to grow their footprint, businesses buy up regional rivals rather than starting in new markets from scratch and competing in costly competition with similar players.

The acquisition of ZenSoon also comes less than two weeks after Wahanda bought Dutch competitor Treatwell for $38 million. This is Wahanda’s fifth acquisition to date and takes up the company’s total number of salons to 20,000.

STARTUP. Mapbox Raises $52.6M To Be The “Map Layer” For All Apps

With questions swirling over who may end up buying Nokia’s mapping division Here, a startup trying to disrupt it and other big boys like Google has raised some major funding. Mapbox, a developer of customizable maps used by third-party apps like Foursquare, Pinterest, Mapquest and 16,000 others, has raised $52.55 million in a Series B round of funding. The company claims that it’s one of the biggest rounds ever in the world of mapping and location-based startups.

The round was led by DFJ Growth with participation also from existing investors Foundry Group. DBL Partners, Thrive Capital, the Pritzker Group, former Goldman Sachs president Jon Winkelried and Promus Ventures all also chipped in.

The news comes at a pretty recent and fast moment of growth for Mapbox — “an insane two years,” in the words of Eric Gundersen, Mapbox’s very enthusiastic CEO and founder.

The company, founded in Washington D.C. in 2010, was essentially bootstrapped at first, barring a small injection from the Knight Foundation, until 2013, when it raised a modest $10 million from the Foundry Group.

STARTUP. Doctor On Demand Pulls In $50 Million To Continue Expansion Of Its Virtual Doctor Visit Platform

Telemedicine startup Doctor on Demand announced that it has raised $50 million in Series B funding and signed its 200th employer customer. The funding will be used to continue to grow the service as well as sign up new partnerships.

Doctor on Demand provides customers one-on-one sessions with physicians either through and individual account or through employer partnerships such as Comcast Corporation. It also works with national health plans such as United Healthcare and Blue Cross Blue Shield Association and claims to provide in-network or subsidized access to more than 25 million Americans.

The recent growth is a positive sign for Doctor on Demand, and the new infusion of cash will help the startup continue to grow. The startup raised $24 million in seed and Series A prior to the latest round, putting the total at $74 million now.

Tenaya Capital led the Series B round, and included new investors Qualcomm Ventures, Dignity Health, Jump Capital and 23andMe’s Anne Wojcicki. Existing investors Venrock, Shasta Ventures, and Sir Richard Branson also participated.

STARTUP. BelezaNaWeb Raises $30M To Bring Brazil’s Beauty Market Online

Brazil’s leading beauty ecommerce company, BelezaNaWeb (“Beauty on the web”), has raised a $30M Series C round from an undisclosed New York City private equity firm.

Brazil is the largest market in the world for beauty products behind the US and China, pushing $43 billion of cosmetics, perfume and personal care products to a population of almost two hundred million.

BelezaNaWeb founder and CEO Alex Serodio estimates that less than 1% of that volume is sold online (compared to 10% in the US), painting an eleven-digit market opportunity to get digital at just the right time. Brazil just cracked the Top 10 list of retail ecommerce markets globally, with 22% growth last year, and fashion and beauty driving more transactions online than all of electronics, mobile phones and books combined.

Unlike the US, with massive and varied retail distribution channels for beauty products, direct sales dominate in Brazil, accounting for 70% of cosmetics and perfume sales, according to Serodio (versus 9% of cosmetics sales in the US).

STARTUP. French IoT Startup Actility Raises $25M From Foxconn, Orange And More

Startup activity in France around Internet of Things continues to heat up. Following news that Samsung had taken an investment in Sigfox, another IoT startup, Actility, announced that it has raised $25 million, led by Ginko Ventures, the European investment arm of Foxconn. Others in the round include the carriers Orange, Swisscom and KPN, as well as Fonds Ecotechnologies managed by Bpifrance Investissement, Idinvest Partners, and Truffle Capital.

Founded in 2010 in Paris, Actility’s primary product is ThingPark, a platform that it has developed for IoT deployments of varying sizes, from single enterprises through to entire cities. ThingPark is based on the LoRa specification.

Actility is one of two big Foxconn investment stories, representing a newer effort from the manufacturing giant to take strategic stakes in businesses that might someday become its biggest customers. It’s also reportedly working with Alibaba on a $500 million investment into India’s Snapdeal.

STARTUP. Money Transfer Startup Azimo Raises $20M At A $100M Valuation

Azimo, a mobile money transfer startup out of London is jumping into the funding ring with a $20 million raise. CEO and co-founder Michael Kent says the company will use the investment to continue to build out its operations across Europe and deeper into the community of migrants who already form the bedrock of its services.

While Azimo — which was founded in 2012 and covers 200 countries and 80 different currencies –is not disclosing its valuation, we have confirmed with reliable sources that it is just under $100 million.

The Series B round was led by Frog Capital, with participation from MCI Management and existing investors e.ventures and Greycroft Partners. It brings the total raised by Azimo to $31 million.

On the surface, Azimo is similar to other remittance services like WorldRemit and TransferWise — also UK startups, albeit bigger in size and more heavily funded.

Kent says that part of what sets Azimo apart from these others is less its size but the fact that for now it’s focused mainly on growing its business in Europe and specifically among a demographic that is often neglected by tech services: individuals who are often migrants who may earn less than the average income, and who regularly send a portion of that income far back home to family, with Africa, Latin America, Eastern Europe and parts of Asia “all popular corridors for us.”

INVESTMENT. Dat Venture Opens Second Class For Startups Expanding Into The U.S.

For people who didn’t grow up in the U.S., navigating the American startup scene can be intimidating. Dat Venture, a Boston-based accelerator for international entrepreneurs, wants to change this. Dat, which is kicking off its second cohort, has refashioned the traditional accelerator model into a program designed to lower the barriers for international entrepreneurs looking to bring their businesses to the U.S.

The new batch of 16 startups includes a Spanish augmented reality company, a French biochemistry company, and Clean Tech companies out of Spain and Colombia.

Instead of providing seed funding in exchange for equity, Dat Venture asks companies to pay their own way. In exchange, they arrange housing at shared living space Krash and office space at WeWork, and help founders build relationships and expand their American customer base.

“These are not idea-stage companies — they’re much later-stage than the typical MassChallenge or Techstars company,” says Matt Hurley, co-founder of Dat Venture, who was previously at Techstars in Boston.

“They’re just entering the growth stage of their company — 70% are revenue-generating, and 75% have already raised one round of funding,” Hurley says.

Hurley’s co-founder Tomas Ratia moved to Boston from Spain seven years ago, so he’s familiar with the difficulties of breaking into the startup scene as a foreigner. Neither Hurley or Ratia have substantial experience in venture investing, but they seem to be well-connected in Boston’s tech scene.

INVESTMENT. Kleiner Perkins Creates A New Seed Stage Initiative That Will Give Founders New Software To Grow

Kleiner Perkins has launched a new, small seed stage investment initiative within its latest fund to invest in technology like virtual reality and drones that will offer founders a suite of additional services.

As part of this new fund called the Edge fund, Kleiner Perkins has brought on Roneil Rumburg, an engineer, and Ruby Lee, a product hire, to build software that will help those founders deal with various problems like recruiting and operations. Kleiner Perkins will write $250,000 checks as uncapped convertible notes.

This fund has a bit of a different structure too. Midha and the team plan to spend around two of the days investing, and the other days working “in product mode” — which would mean engineering, designing and shipping code.

Like many new venture capital configurations, the Edge fund is still an experiment. Midha will spend around a half hour to 45 minutes meeting with companies and then say they will give a final verdict on an investment in around 72 hours. The goal is to be as “founder friendly” as possible — though, in theory, most firms would say they would be shooting for that goal.

INVESTMENT. Start-Up Chile Launches Pre-Accelerator For Female Founders

Start-Up Chile, the government-backed accelerator program that’s funded over a thousand international startups in the past four years, is launching The S Factory, a pre-accelerator for female founders.

The 12-week program is designed to educate first-time women entrepreneurs with an intense course load that includes pitch training, an investor preparation lab, and progress reports from mentors.

The percentage of female-founded startups that have participated in Start-Up Chile’s accelerator is on par with the percentage of venture-backed female founders in the U.S., which has hovered around 15 percent for the past three years.

Instead of establishing a gender quota for the accelerator, Start-Up Chile decided that a bootcamp for less experienced entrepreneurs would have a bigger impact on changing this ratio. Ideally, graduates of The S Factory will be qualified for acceptance into Start-Up Chile at the end of the three months.

INVESTMENT. Yahoo Japan Invests In Monk’s Hill Ventures’ Fund For Southeast Asia

Southeast Asia-based VC firm Monk’s Hill Ventures has welcomed a big name investor to its list of LPs after Yahoo Japan, the internet portal and $24 billion valued joint venture between Yahoo and SoftBank, invested an undisclosed amount into its inaugural fund.

Monk’s Hill is a relatively new addition to the investor landscape in Southeast Asia, but it is a firm bubbling with credentials. Founded last year by principals Peng T. Ong — co-founder of Match.com and founder of NASDAQ-listed Interwoven — and Kuo-Yi Lim, formerly CEO of Infocomm Investments, its initial fund is targeted at reaching $80 million.

There was (and still is, for that matter) room for additional LPs. Yahoo Japan — which invested via its YJ Capital fund — is one such late arrival. Lim told that the remaining slots for the first fund — which he said would be active for “three to four more years, at the very least” — will be filled by the end of September.

Lim declined to say exactly how much Yahoo Japan added to the coffers, but he called it an “important and strategic investor”. Beyond a validation for the year-old VC firm, it’s a partner that will unlock new opportunities, Lim said.