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Article from NYTimes.

With Andrew Mason’s forced resignation from Groupon on Thursday, the career of one of the most unusual corporate chieftains has ended.

And what an eclectic journey it has been for the onetime darling of Silicon Valley, which ascended with blinding speed, then crashed just as quickly.

Though Mr. Mason’s departure from the four-year-old company he founded had been speculated about for some time — certainly in light of Groupon’s poor financial performance since its initial public offering — the exit was finalized only on Thursday morning, according to people briefed on the matter.

It was little surprise, coming after yet another disappointing quarter, in which the company missed analyst estimates and posted revenue guidance that also fell short of expectations. The company’s stock slid 24.3 percent on Thursday, to $4.53.

That valued Groupon at just $3 billion — after the company went public in late 2011 at a $12.7 billion valuation.

After meeting Thursday morning, Groupon’s board requested that Mr. Mason resign. He agreed.

Mr. Mason will be replaced on an interim basis by an “office of the chief executive” formed Thursday morning, made up of Eric Lefkofsky, Groupon’s chairman and co-founder, and Ted Leonsis, the board’s vice chairman.

Mr. Mason will still have some presence at the company: He currently owns about 7 percent of Groupon’s stock, and controls a much larger percentage of its voting power.

Mr. Lefkofsky bid Mr. Mason farewell in a fairly standard corporate statement: “On behalf of the entire Groupon board, I want to thank Andrew for his leadership, his creativity and his deep loyalty to Groupon. As a founder, Andrew helped invent the daily deals space, leading Groupon to become one of the fastest growing companies in history.”

In typical fashion, Mr. Mason described the circumstances a bit more trenchantly. Here’s an excerpt from a letter he sent to company employees on Thursday, which he posted online “since it will leak anyway”:

After four and a half intense and wonderful years as C.E.O. of Groupon, I’ve decided that I’d like to spend more time with my family. Just kidding – I was fired today.

He also references “Battletoads,” a cult video game for the Nintendo Entertainment System that a small minority of DealBook remembers as being sometimes absurdly difficult.

A Pittsburgh native who graduated from Northwestern University with a degree in music, Mr. Mason rarely ever seemed like the corporate type. He originally created Groupon as part of a bigger Web venture, focusing on daily deals as the most commercially viable part of that start-up.

Even then, he was known for his quirky humor. Three years ago, Mr. Mason made a video for a fictional “Monkey for a Week” lending service.

As Groupon grew, Mr. Mason’s peculiar demeanor sense of humor continued to garner attention. His grooming came up at least once, as Silicon Valley denizens pondered whether he’d hit a tanning salon before appearing at a TechCrunch conference in 2010 with a prominent bronze glow.

And in 2011, Mr. Mason had an unusual way of not responding to a question by All Things D’s Kara Swisher that he didn’t want to answer: with a “death stare.”

Groupon's I.P.O. roadshow video presentation.Groupon’s I.P.O. roadshow video presentation.

By that fall, as the daily deals giant was preparing to go public, Mr. Mason took on a more professional cast. In a video to prospective investors, the Groupon chief executive looked a bit more professional, complete with slicked-back hair and a dark suit and tie.

It was a persona he settled into post-I.P.O., usually delivering sober financial information in his public appearances.

But other parts of the run-up to Groupon’s I.P.O. in late 2011 were hardly laughing matters. The company took fire for introducing controversial accounting measures in its prospectus, which critics contended masked losses and unfairly diminished a need to spend heavily on marketing.

The Securities and Exchange Commission queried the company over its financial information in a series of letters that were eventually made public.

In August of 2011, Groupon announced that it was dropping the metric.

Two months later, the company revised its prospectus again to further clarify additional financial reporting measures, as well as to include an internal e-mail from Mr. Mason that was subsequently leaked to the press.

Even after going public, Groupon still ran into the occasional issue. It restated quarterly results last year after disclosing a “material weakness” in its internal accounting controls.

For all those troubles, Mr. Mason accepted responsibility.

“From controversial metrics in our S1 to our material weakness to two quarters of missing our own expectations and a stock price that’s hovering around one quarter of our listing price, the events of the last year and a half speak for themselves. As CEO, I am accountable,” he wrote in his letter…

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Article from GigaOm.

Between growing interest in fitness tracking devices, mobile health apps and software for adapting to the changing business of health care, digital health had a banner year in 2012.

According to a year-end funding report from health tech accelerator Rock Health, investors poured $1.4 billion into digital health companies last year, which is up 45 percent from their investment total of $968 million in 2011.  The report, released Monday by the San Francisco-based non-profit, also indicated a 56 percent increase in the number of deals closed in 2012.

As we’ve reported previously, these are interesting times in health care funding as investors rethink their support of biotech and traditional life sciences firms but back digital health companies that leverage mobile devices, cloud computing, open data, sensors and other emerging technology. Indeed, citing research from PricewaterhouseCoopers, Rock Health’s report said that investment in biotech and medical devices declined 4 percent and 16 percent respectively in 2012.

In total, the report said 134 digital health companies each raised more than $2 million in the last year, with one-third of all deals falling into four categories: healthcare purchasing tools for consumers, personal health tracking, Electronic Medical records and hospital administration.

While 179 firms and organizations invested in digital health companies, most only took part in a single deal, Rock Health said, with just eight investors making three or more investments in 2012. Qualcomm Ventures led the list of the most active investors, followed by Aberdare Ventures, Merck Global Health Innovation Fund and NEA.

The Bay Area and Boston lead the way in the number and value of  digital health deals, according to the report. But New York could be coming on strong given the launch of several health startup incubators including Blueprint HealthStartup Health and the New York Digital Health Accelerator in the Big Apple last year.

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Article from SFGate.

Americans have missed out on almost $200 billion of stock gains as they drained money from the market in the past four years, haunted by the financial crisis.

Assets in equity mutual, exchange-traded and closed-end funds increased about 85 percent to $5.6 trillion since the bull market began in March 2009, trailing the Standard & Poor’s 500 Index’s 94 percent advance, according to data compiled by Bloomberg and Morningstar Inc. The proportion of retirement funds in stocks fell about 0.5 percentage point, compared with an average rise of 8.2 percentage points in rallies since 1990.

The retreat shows that even the biggest gain since 1998 failed to heal investor confidence after the financial collapse that wiped out $11 trillion in U.S. equity value was followed by record price swings in equities, a market breakdown that briefly erased $862 billion in share value and the slowest recovery from a recession since World War II. Individuals are withdrawing money as political leaders struggle to avert budget cuts that threaten to throw the economy into a new slump.

“Our biggest liability in the stock market has been the total destruction to confidence,” said James Paulsen, the chief investment strategist at Minneapolis-based Wells Capital Management, which oversees about $325 billion. “There’s just so much evidence of this recovery broadening.”

Weekly gain

The S&P 500 climbed 1.2 percent to 1,430.15 last week, extending the 2012 gain to 14 percent, led by financial stocks and consumer companies. The benchmark index from American equity has risen from a low of 676.53 on March 9, 2009, though it is still 8.6 percent below its record high on Oct. 9, 2007. The gauge dropped 0.2 percent to 1,426.66 on Monday.

Now, much of the damage to investors is self-inflicted as U.S. growth improves and companies whose earnings are most tied to economic expansion reap the biggest rewards. Of the 500 companies in the benchmark index, 481 are higher now than they were in March 2009 or when they entered the gauge.

Expedia Inc., the Bellevue, Wash.-based online travel agency, rallied 577 percent, leading consumer discretionary companies to the biggest advance from 2009 through the third quarter. Capital One Financial Corp. rose 39 percent this year as the McLean, Va.-based lender posted profit that beat projections by 19 percent last quarter.

PulteGroup Inc., the largest U.S. home-builder by revenue, more than doubled this year after the Bloomfield Hills, Mich.-based company had its biggest annual earnings increase in 2012 and the housing market rebounded.

Individuals are selling into the rally, cutting the proportion of assets in stocks to 72 percent from 72.5 percent in 2009, according to 401(k) and IRA mutual fund data from the Washington-based Investment Company Institute compiled by Bloomberg. The data is for all equities, bonds and hybrid funds, and excludes money markets. Investors are lowering the proportion of stocks they own in retirement funds during a bull market for the first time in 20 years.

Safer investments

The percentage of households owning stock mutual funds has also fallen, dropping every year since 2008 to 46.4 percent in 2011, the second-lowest since 1997, according to the latest ICI annual mutual fund survey.

Money has gone to the relative safety of fixed-income investments. Managers who specialize in corporate bonds and Treasuries have received nearly $1 trillion in fresh cash since March 2009, ICI data show. Federal Reserve Chairman Ben S. Bernanke‘s zero percent interest-rate policy and the lowest inflation in almost 50 years have helped spur a 29 percent rally in debt securities since President Obama’s first term began, according to the Bank of America Merrill Lynch‘s U.S. Corporate and Government Index through the third quarter.

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Article from SFGate.

It’s suddenly a lot harder for venture capitalists and startups to raise funds, as investors fed up with low returns turn their backs on the sector.

Most industry observers agree that lots of young firms will simply not be able to raise their next round of funding, commencing a period of belt tightening, consolidation and closures. At a minimum, it seems to mark the beginning of a more level-headed investment climate in Silicon Valley, after years of insatiable lust for all things mobile and social.

But if the drop-off is too sudden and steep, this new austerity could spill over into an economy highly dependent on the tech sector. Indeed, as The Chronicle reported last week, the industry has an enormous impact, with each tech job creating 4.3 indirect jobs in the community, according to a Bay Area Council Economic Institute report.

The investors and venture capitalists I spoke to insisted that we’re not on the verge of anything like the dot-com meltdown, characterizing the shift as a minor and healthy correction, or a “rationalization.” One suggested it was little more than the usual process of separating good and bad ideas in the marketplace.

But the numbers suggest something new is afoot. In the third quarter, the amount that U.S. companies raised in venture capital dropped 32 percent from the prior year, according to Dow Jones VentureSource. Venture capital funds themselves raised 17 percent fewer dollars from the second to third quarter, even as the number of funds grew, according to a joint report from Thomson Reuters and the National Venture Capital Association.

Economic uncertainty

Some partially blame the economic uncertainty surrounding the outcome of the election and the “fiscal cliff.” But the main problem seems to be that many of the “limited partners” that fund venture capital are pulling back after years of frustration.

Ever since a brief period in the late 1990s when venture capital burned bright, the industry has been delivering consistently weak returns on the whole.

In fact, despite requiring greater risks and larger capital outlays, venture capital has been underperforming the stock market over the past decade, according to a report this year by the Ewing Marion Kauffman Foundation.

Joe Dear, chief investment officer for CalPERS, told Reuters this summer that venture capital “has been the most disappointing asset class over the past 10 years as far as returns.” The huge pension fund for California’s public employees didn’t return repeated calls from The Chronicle.

Investment horizons have steadily spread out, from five to 10 to sometimes 15 years, as exit opportunities like acquisitions and initial public offerings fail to materialize. This has sometimes forced investors to put in more money to protect their initial funds.

‘Pretty grumpy’

“The industry definitely, for the last decade, has been a tough place to be,” said Ray Rothrock of Palo Alto venture capital firm Venrock. “We’re all pretty grumpy right now.”

Some of this is due to macroeconomic conditions outside the control of venture capitalists, notably the housing and banking crises. But at least some of it has to do with poor picks and herd mentality, funding companies with few real prospects and driving up the entry price for legitimately promising companies beyond what they could pay off.

“The market overfunded the number of companies in the system,” said Hans Swildens, founder of Industry Ventures in San Francisco. “There’s a glut.”

Even the grand promise of Web 2.0 companies that lured so much recent money hasn’t generated the hoped-for returns. The ones that managed to go public were often disappointments, including Facebook, Zynga and Groupon, in some cases leaving late-stage investors underwater on their holdings.

That was a final straw for some.

Last week, Forbes dug up figures from CB Insights that highlighted a wide and growing gap between the number of companies that raised initial funding and companies securing the follow-on investments, known as a Series A, generally necessary to keep going. This year, there have been 1,747 seed or angel rounds but only 688 Series A deals, underscoring the coming crunch.

Bad businesses

Based on as scientific a survey as the PR pitches in my inbox, there’s a tremendous number of silly, redundant and poorly executed companies out there that don’t warrant additional funding. The real problem isn’t that many of these companies won’t raise more money; it’s that they raised money in the first place.

For the venture capital industry to get back on track, it needs to embrace a renewed sense of discipline – on company picks, deal terms and total spending.

But hope springs eternal in Silicon Valley.

Rothrock stresses that the industry’s trend-line averages mask very strong results and ongoing investment at top firms, as well as growing venture capital activity among corporations like Google. Companies are just being more selective and looking beyond consumer Internet opportunities.

“We’re steady as she goes in terms of funding enterprise,” he said.

Secondary opportunity

Swildens oversees a secondary fund that buys shares from limited partners and venture firms looking to liquidate part of their holdings. He sees this period as a ripe opportunity for bold investors to get into promising companies at suddenly reasonable rates.

“Ours is one of the few firms aggressively putting money into these funds,” he said.

Mark Heesen, president of National Venture Capital Association, is similarly optimistic. He says the industry could be primed for a strong comeback in 2013, as long as the broader economy strengthens.

Above all, what the industry needs are some wins – acquisitions or initial public offerings that put investors clearly in the black and start to restore some lost confidence.

“If we see these exit markets start to generate good returns, I think you’ll see limited partners look at this asset class again,” he said.

James Temple is a San Francisco Chronicle columnist. E-mail: jtemple@sfchronicle.com Twitter: @jtemple

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Article from NYTimes.

Google’s venture capital arm is investing in a start-up founded by Apple alumni that is seeking to make mobile users a little less anonymous to advertisers.

Adelphic Mobile, based in Boston, has raised $10 million from Google Ventures and Matrix Partners, a firm that invested in the company during an earlier fund-raising round. The company has raised $12 million to date.

Adelphic was founded in 2010 by Changfeng Wang and Jennifer Lum, both of whom used to work for Quattro Wireless, a mobile advertising start-up that was acquired by Apple and became the foundation for iAd, Apple’s mobile advertising network.

Mobile advertising has been a disappointment to many people in the technology industry. The explosion of mobile devices initially prompted exhilaration among marketers about the potential for peppering people with ads on the cellphones that are always at hand. Google and Apple both bought start-ups to help bolster their mobile advertising efforts.

But many companies, including Facebook, have found it more difficult to make money from mobile advertising than through traditional Web sites. That is in part because of the limited screen real estate people have on their smartphones and their wariness about having it filled up with advertising.

“It’s not growing nearly at the rate it should have been given mobile media consumption rates,” said Ms. Lum, the president of Adelphic.

Adelphic is focused on another problem with mobile advertising: the relative poverty of data that advertisers have about the mobile users they are trying to reach. Through Web browsers on computers, it is easier to deliver targeted ads to users by keeping data on their browsing habits employing tools like browser cookies, the small identification files advertising networks place on computers.

Mobile advertisers do not know as much about users because mobile browsers and apps are not as commonly configured to allow the kinds of identification techniques that work on computers. As a result, advertisers do not know much more about the audiences they are trying to reach other than the type of cellphone they have and the wireless network they are on, Ms. Lum said.

Adelphic seeks to paint a more detailed picture of mobile Web users by using complex software to analyze dozens of “signals” about mobile users’ online activities, though Adelphic is not willing to go into too much detail about how the process works (it says it respects the privacy policies of the publishers that show its advertising).

Through its data mining, the company says it can identify the likely age of mobile users, as well as their gender and general location. In turn, the company tells advertisers it can deliver ads to the specific audiences they are after.

Rich Miner, general partner at Google Ventures, said in an interview that mobile advertising would become more effective over time and that Adelphic’s service was helping to push the market forward.

“With the growth of mobile, we’re still very early and, just like in traditional online ads, there’s still a tremendous amount of innovation and value to be created,” said Mr. Miner, who also co-founded Android. Google acquired that company and used its technology as the basis for its Android mobile operating system.

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Article from Fenwick & West.

Background—We analyzed the terms of venture financings for 117 companies headquartered in Silicon Valley that reported raising money in the third quarter of 2012.

Overview of Fenwick & West Results

Venture financings in 3Q12 continued to show solid price increases from their prior round, but 3Q12 was not as strong as 2Q12.

    • Up rounds exceeded down rounds in 3Q12, 61% to 17%, with 22% of rounds flat. This was another strong quarter, but not as strong as 2Q12 when 74% of rounds were up, 11% down and 15% flat. This was the 13th quarter in a row in which up rounds exceeded down rounds.

Series B rounds were especially strong, with 92% of Series B rounds up, and Series E (and later) rounds were relatively weak, with only 44% up. However 64% of the Series B rounds were software and internet/digital media companies, while only 39% of the Series E rounds were from those industries, and as described below, software and internet/digital media were the strongest industries.

  • The Fenwick & West Venture Capital Barometer™ showed an average price increase of 78% in 3Q12 – again a solid result but a decrease from 99% in 2Q12. There were three financings in 3Q12 that were up over 750% (two in internet/digital media and one in hardware), and if these three were excluded the Barometer would have been up 50% rather than 78%.
  • The median price increase of financings in 3Q12 was 23%, down from 30% in 2Q12, and the lowest median price increase in the past two years.
  • The results by industry are set forth below. In general the software and internet/digital media industries continued to be the strongest, cleantech showed good results on very low volume, hardware lagged a bit and the life science industry trailed significantly.

Overview of Other Industry Data

The third quarter of 2012 was generally not a strong one for the venture industry, with the upcoming election, the looming “fiscal cliff” and global economic uncertainty perhaps weighing on investors’ minds.

  • Venture investing in the U.S. was down slightly in 3Q12 compared to 2Q12, and 2012 is on track to be below 2011.
  • M&A was down slightly in 3Q12 compared to 2Q12, and was also down slightly in the first nine months of 2Q12 compared to the first nine months of 2011.
  • The number of IPOs was down slightly both in 3Q12, compared to 2Q12, and in the first nine months of 2012 compared to the first nine months of 2011.
  • Venture fundraising in 3Q12 lagged 2Q12, but year to date fundraising in 2012 was above 2011 levels. Funding continues to be concentrated in a limited number of large funds, although less so in 3Q12 than 2Q12.
    • Venture Capital Investment.

      Dow Jones VentureSource (“VentureSouce”) reported that U.S. companies raised $6.92 billion in 820 venture financings in 3Q12, a 14.6% decrease in dollars and a 5% decrease in transactions from the $8.1 billion raised in 863 financings in 2Q12 (as reported in July 2012). Similarly, venture investment was down 15%, and the number of financings was down 3%, for the first nine months of 2012 compared to the first nine months of 2011.

      Venture capital investment in Silicon Valley was down 22% from the first nine months of 2012 ($8.2 billion) compared to the first nine months of 2011 ($10.5 billion), although the number of deals was only down 6.5%. That said, Silicon Valley received 39% of all U.S. venture investment in 3Q12.

The median amount raised in a 3Q12 financing round was $3.7 million, the lowest quarterly median amount since 1997. This result was driven in part by first round financings, whose median amount raised is on track to be $2.5 million for 2012, which would be the lowest annual amount since 1992.

The lead venture investors in 3Q12 were Google Ventures with 21 deals, Kleiner Perkins with 17, and 500 Startups and NEA with 16 each. Google Ventures recently announced that it was increasing its annual fund size from $200 million to $300 million, which will allow it to make more late stage investments (Sarah McBride, Reuters, 11/8/12).

Similar to VentureSource, the PwC/NVCA MoneyTree™ Report based on data from Thomson Reuters (the “MoneyTree Report”) reported that $6.5 billion was invested in 890 deals in 3Q12, a 7.1% decrease in dollars and a 1% decrease in transactions from the $7.0 billion raised in 898 deals in 2Q12 (as reported in July 2012). The MoneyTree Report also indicated that venture investing in 2012 is on track to be below 2011 amounts in both dollars and deal volume, and that seed stage venture investing was especially weak.

The MoneyTree Report also reported that software and internet/digital media investing remained strong in 3Q12 at $2.1 billion, but both industries declined in dollar terms from 2Q12 amounts. Life science investing, led by follow-on biotech financings, increased in dollar terms from 2Q12, but is down 19% year-to-date compared to the first nine months of 2011. Cleantech investing declined 20% in dollars compared to 2Q12, but saw an increase in the number of deals as investing in this sector appears to be shifting to smaller, less capital intensive deals.

    • Merger and Acquisitions Activity.

      Dow Jones reported 99 acquisitions (including buyouts) of venture-backed U.S. companies for $13 billion in 3Q12, a 10% decrease in transactions, and a 5% decrease in dollars from the 110 transactions for $13.7 billion reported in 2Q12 (as reported in July 2012). Nearly half of the companies acquired this quarter were based in California. For the first nine months of 2012, there were 314 acquisitions of venture backed companies for a total of $39.5 billion, a decrease from the 404 acquisitions for $40.6 billion in the first nine months of 2011.

Similarly, Thomson Reuters and the NVCA (“Thomson/NVCA”) reported 96 venture-backed acquisitions in 3Q12, a 6% decrease from the 102 reported in 2Q12 (as reported in July 2012). IT companies dominated the acquisition environment in 3Q12, with 70 of the 96 transactions.

  • IPO Activity.

    VentureSource reported 10 IPOs of U.S. venture-backed companies raising $807 million in 3Q12. This was a slight decrease from the 11 IPOs raising $7.7 billion ($6.8 billion was Facebook) in 2Q12 (as reported in July 2012).

    Similarly, Thomson/NVCA reported 10 IPOs raising $1.1 billion in 3Q12, compared to 11 IPOs raising $1.3 billion in 2Q12. (It appears that Thomson/NVCA includes sales by shareholders in their calculation of the amount raised). Six of the IPOs were in the IT industry, six were from companies based in California and all were from companies in the U.S. For the first nine months of 2012, there were 40 IPOs compared to 41 IPOs in the first nine months of 2011.

  • Venture Capital Fundraising.

    Thomson/NVCA reported that 53 U.S. venture funds raised $5.0 billion in 3Q12, a 15% decrease in dollars but a 40% increase in funds from the $5.9 billion raised by 38 funds in 2Q12 (as reported in July 2012). Fundraising for the first nine months of 2012 was $16.2 billion raised by 148 funds, a 31% increase in dollars from the $12.4 billion raised in the first nine months of 2011, but a 13% decrease in funds. The concentration of fundraising by a few large funds decreased a bit in 3Q12, where the top five funds accounted for 55% of fundraising, as compared to 2Q12 when they accounted for 80% of fundraising, but was still significant.

    Thomson/NVCA also reported that the number of mid-sized venture funds ($250-800 million in size) raising funds has declined significantly over the past five years, with 41 and 45 raising money in 2006 and 2007 respectively, while only 16 raised money in 2011 and only 10 raised money in the first half of 2012 (Private Markets, Mark Boslet, 10/2/12).

    Dow Jones reported generally similar fundraising results, finding that $4.73 billion was raised in 3Q12 (but by only 37 funds) and that fundraising for 2012 to date was $17.5 billion versus $12.7 billion in the first nine months of 2011. However Dow Jones found that 9% more funds raised money in 2012 to date compared to the same period in 2011.

    Venture fundraising again lagged venture investment in 3Q12 by a significant amount.

  • Developments in Non-IT Fundraising.

    With traditional fundraising by non-IT venture funds (e.g. life science, cleantech and hardware funds) especially challenging, some alternative funding mechanisms are appearing. This funding is often by entities, such as large corporations and governments, that have motives for investing in addition to financial return (e.g. filling product pipelines, diversifying a nation’s economy), or that have a longer time horizon.

    For example Thomson/NVCA has reported that corporate venture capitalists participated in 17.5% of life science financings in 2011 through the first half of 2012, up from 15.3% in the 2010/2011 time frame. Large pharmaceutical companies are also expanding their investments in, and forming closer ties with, traditional venture capitalists (Timothy Hay, VentureWire, 10/9/12). Johnson & Johnson is even creating early stage “innovation centers” in life science hubs such as San Francisco, Cambridge, London and China to improve access to early stage life science companies. (Brian Gormley, VentureWire, 9/18/12).

    Similarly, in the cleantech area, Broadscale Investment Network has been formed to connect large energy corporations with energy start-ups for investing and partnership purposes, and well known companies like GE and Duke Energy have paid to participate in this venture. (Yuliya Chernova, Venture Wire, 9/24/12).

    In sovereign investing, the Russian government backed fund of funds, RVC-USA, has committed up to $400 million to U.S. start-ups focused in medical devices, IT infrastructure, energy efficiency technologies and telecommunications. Similarly, another Russian fund, Rusnano has invested hundreds of millions in U.S. venture funds, especially those focused in the life sciences (Jonathan Shieber, LBO Wire, 9/11/12).

  • Kauffman Report on Immigrant Entrepreneurs.

    A recent Kauffman Report by Vivek Wadhwa concludes that the U.S. is becoming less attractive to foreign entrepreneurs. The report found that the percentage of Silicon Valley-based companies with a foreign born founder decreased from 52% over the period 1995-2005 to 43% over the period 2005-2012. Visa/immigration problems was listed as a major problem. The improvement in the entrepreneurial environment in countries outside the U.S. was also a likely factor. The report found that by far the largest number of entrepreneurial immigrants to the U.S. came from India (33%), followed by China (8.1%), the U.K. (6.3%), Canada (4.2%), Germany (3.9%), Israel (3.5%) and Russia (2.4%).

  • Accelerators and Angels.

    As noted above, early stage venture investing has declined recently, but the growth of early stage non- venture funding is continuing and may be offsetting this trend.

    For example, the number of accelerators and incubators continues to grow, with worldwide estimates ranging from 200-700. There is concern, however, about the value of some of these accelerators. A recent study by Kauffman Fellow Aziz Gilani of venture firm DFJ Mercury analyzing 29 accelerators found that 45% failed to produce even one graduate that obtained venture funding. David Cohen of Techstars has encouraged accelerators to publish their track records, so that entrepreneurs can be better informed in their selection process. A possible trend in the accelerator environment is increased specialization, with accelerators focusing on assisting entrepreneurs in a specific industry. (Tom Stein, Private Markets, 9/512; Mark Boslet, Private Markets, 10/2/12).

    Angel investing also continues to grow, increasing 3.1% in the first half of 2012 over the first half of 2011, with 40% of such funding going to seed and early stage companies. Jeffrey Sohl, “The Angel Investor Market in Q1/Q2 2012: A Market in Steady Recovery”, Center for Venture Research, October 10, 2012.

  • Venture Capital Return.

    Cambridge Associates reported that the value of its venture capital index increased by 0.61% in 2Q12 (3Q12 information has not been publicly released) compared to -5.06% for Nasdaq. The venture capital index was also slightly higher Nasdaq for the 12 month period ended June 30, 2012, 6% vs. 5.82%, but still lagged for the ten year period ending June 30, 2012, 5.28% to 7.21% per year. The Cambridge Associates venture index is net of fees, expenses and carried interest.

  • Venture Capital Sentiment.

    The Silicon Valley Venture Capitalist Confidence Index™ produced by Professor Mark Cannice at the University of San Francisco reported that the confidence level of Silicon Valley venture capitalists was 3.53 on a 5-point scale in 3Q12, a small increase from the 3.47 reported in 2Q12. Venture capitalists expressed concern about high valuations, macro economic uncertainty and life science funding, but felt positive about the depth and breadth of innovation in Silicon Valley, especially in the mobile, cloud and payment industries, and the availability of strategic acquirors with substantial cash holdings.

  • Nasdaq.

    Nasdaq increased 6.1% in 3Q12, and is flat in 4Q12 through November 8, 2012.

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Article from GigaOm.

Once an entrepreneur, always an entrepreneur — or something like that is true of 27-year-old Joshua Kushner, who despite being one of the hottest hands in the venture capital business has started his second startup, according to sources in New York.

Kushner, who eschews attention, is keeping everything hush-hush, so much so that even the name of the company is under wraps. In fact, I am still waiting to hear back from him. What I have learned is that it is focused on the healthcare business and is trying to take advantage of the changes in the healthcare industry due to universal healthcare. It has been funded by Kushner’s fund and has hired about fifteen people, mostly in engineering and design.

One of the reasons why Kushner’s new effort is interesting is because he has proved to be a stunningly successful venture capitalist, with a keen eye for consumer internet trends. Kushner started his first startup, Vostu (a social-gaming company based in Brazil) when still a junior in college about five years ago.

He left to work full-time on Thrive Capital, which has three funds and has about $200 million under management. As a venture capitalist, Kushner has been on a tear. His investments include Instagram, CodeAcademy, Dwolla, Fab, Warby Parker, and GroupMe. Of the lot, Instagram was acquired by Facebook and GroupMe was gulped by Skype before it was acquired by Microsoft.

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