This Week in VC Episode 6 with @Jason Calacanis: Best One Yet

We just had our sixth episode of #TWiVC and I felt this one was the best. This week was had Jason Calacanis as our guest. It’s always fun chatting with Jason because he’s knowledgeable about the market, quick on topics and pushes me to talk more about VC / entrepreneur issues. We’re staring to get the hang of how to divide the show up into talking about deals but also talking about issues for entrepreneurs during funding.

Next Wednesday we’ll have Dana Settle of Greycroft Partners, a New York / LA early-stage venture capital fund.

I think this episode is worth watching (video is here) but as always I’ll try to summarize for anybody short on time. In terms of topics we spoke about:

- Do VC’s send your presentations around to other people if they don’t fund you? (short answer: very, very rarely. But it does happen. What I caution people about more is the implicit knowledge that is shared over time without VCs realizing that they’ve passed along knowledge they learned from you. This is unintentional and inevitable. Nevertheless, if you share too much in your funding process or meet too many VCs expect a certain amount of your ideas to spread around the startup community.

- What are the three most important lessons investors could pass along to first-time entrepreneurs raising money? We covered the topics discussed on VentureHacks. We read each of these statements from Chris Dixon, Babak Nivi, Naval Ravikant and me. It’s worth clicking on the link and reading the very short recommendations given by all of us. In the show Jason & I spoke about each person’s claims and gave our opinions.

- What are “Reg D” filings with the SEC and why does this make it harder to stay in stealth mode? We covered the topic in the video and if you don’t know the issue you might learn from listening to our discussion. Josh Kopelman wrote about this previously and if you don’t understand the issue it’s worth reading his post. Dan Primack covered the issue on PEHub in which he asserted that there were ways around Reg D. I’d link to it but it’s behind a paywall. The following was available:

“I kept hearing about startups that raised VC funding, but which hadn’t filed Form Ds (nor issued a press release). I asked some of the participating VCs, and they told me their attorneys had figured out a way to keep their stealth-mode companies stealthy.Yes, this strategy is not for every company. Clearly a startup should consult its lawyer before filing or not filing.But the attorneys I relied on to write this piece told me that they’ve done lots of Section 4(2) deals in the past, and would recommend it to clients who had relatively simple financing agreements (not tranched-out, not too many investors, etc.) and who had biz reasons for wanting to remain stealth.”

- We spoke about the changes to an “accredited investor” proposed by Chris Dodd — This would be bad for angel investing. We spoke briefly about why.

- When you see a big round that is announced, does it mean that they really raised all this money? Short answer: no. Often times when companies raise “bridge” financing (this is money from internal investors. We discussed in the video why they don’t price this money but give it as convertible debt) they don’t make announcements to the market. They also avoid Reg D. But when the finally convert the debt to equity the round gets filed with the SEC and thus journalists often pick up on it. They therefore might announce a $10 million round when in reality sometimes $8 million has already been spent.

- We spoke about employment contracts for entrepreneurs — We talked about “change of control” provisions in your contract and how to negotiate them. Specifically we talked about what single trigger vs. double trigger acceleration works and “termination without ‘cause’.”

DEAL OF THE WEEK

StackOverflow — We both have a love fest for Joel Spolsky who also co-founded Fog Creek Software. He is the author of “Joel on Software” and I was a reader nearly 10 years ago when I had never heard of Fred Wilson, Brad Feld and VentureHacks didn’t exist. StackOverflow is a free Q&A site for software developers, blending functionality from wikis, blogs, forums, and social voting (similar to Digg/Reddit); 7.1mm unique visitors per month; new funds will be used to build out engineering team and build out product.

I first discovered it from Dharmesh Shah’s blog OnStartups. He had a version of StackOverflow installed here and I thought it was a great resource for entrepreneurs. YOu should check it out.

$6mm in Series A: Investors: Union Square Ventures (Brad Burnham) (lead), Ron Conway, Chris Dixon, Caterina Fake, Naval Ravikant, Nirav Tolia, Joshua Schachter, Micah Siegel, Bob Pasker — Read more: VentureBeat

OTHER DEALS

1. SocialVibe — Social media monetization platform that benefits non-profit organizations and social causes. Users participate by performing tasks, taking surveys or watching advertiser videos. Joe Marchese and Willan Johnson are President and COO, respectively. Jay Samit is rumored to be CEO but is not on the website for some reason. If you watch the video you’ll see that Jason & I debated whether Austin Ventures or Redpoint had funded HowAway / VRBO … turns out we were both right!

$11.65mm in Series C — Investors: not announced — likely an inside round; previous investors: Redpoint and JAFCO — Read more: : SEC Registration Form D, peHUB, SoCalTech

2. Invidi — Provider of addressable television advertising and marketing services to cable, satellite and telco-delivered television carriers. Addressable advertisements are capable of being targeted to the individual household. Following Microsoft’s addressable advertising trials with NBC in June 2009, many suspect that Google’s investment may have some defensive motivations, as well. Invidi is based in New York and founded in 2000.

$23mm in Series D — Investors: Google (Shishir Mehrotra, Director of Prod Mgmt for Google TV Ads, YouTube Ads)(lead), with GroupM, Motorola Ventures, Menlo Ventures, InterWest, EnerTech Capital, Westbury Equity Partners, BDC Capital — Read more: VentureBeat, TechCrunch reports that addressable TV adverts are 65% more efficient and 32% more effective

3. Ad.ly — (disclosure: I led the funding on Ad.ly) Provides an in-stream advertising platform for any content creator (individual or organization) with an online social presence. Current publishers include Kim Kardashian, Mandy Moore, Deepak Chopra, and Newsweek. Advertising clients include: Sony, Microsoft, NBC, and Clicker. Following several completed advertising campaigns, Ad.ly has demonstrated both high user engagement and better than average conversion rates of 1%-3.5% (versus 0.05% for traditional display advertising) for February 2010. Ad.ly currently has 70,000 publishers reaching 45mm readers. Arnie Gullov-Singh (ex-EVP of product, technology and operations for MySpace) also joined as CEO, as Sean Rad will assume the role of President.

$5mm in Series A — Investors: GRP (Mark Suster)(lead), Greycroft Partners (Dana Settle), and Matt Coffin (founder of LowerMyBills) — Read more: TechCrunch, SoCalTech

4. Swipely — Blippy competitor founded by TellMe founder, Angus Davis, in Fall 2009. Swipely is a social network orientated around users credit card transaction data. Users can choose which transactions they would like to share (by category or individual transactions), choose to hide price data, add comments or notes to purchases, and express “like” or “dislike” sentiments for each purchase. Swipely can even append transaction data with relevant information such as menus or store catalogs.

$7.5mm in Series A, following an angel round consisting of “millions” in seed capital — Investors: Index Ventures (Danny Rimer)(lead), Greylock Partners, with existing investors First Round Capital, Lowercase Capital (Chris Sacca), Keith Rabois (Slide), SV Angel (Ron Conway), Anton Commissaris (former VP at Mint) — Read more: TechCrunch, peHUB

5. Klarna — Klarna provides a service that allows consumers to purchase via invoices or on account (store credit) from online merchants. The service allows users to shop by a personal identification number (instead of providing personal contact information or payment information) and pay by invoice (delayed cash on delivery) or account (credit). Sellers can lower transaction fees by aggregating purchases into fewer transactions, while also providing buyers with an attractive alternative payment method. Klarna is apparently the first European board for legendary Sequoia partner, Michael Moritz.

Rumored to be appox. $9mm — Investor: Sequoia Capital (Michael Moritz) — Read more: TechCrunch, PaymentsViews

6. AdReady — Develops software tools and management platform that assists content publishers and ad agencies with the creation of display ads. Primarily targets SMBs. CEO/President is Karl Siebrecht (ex-Pres of Atlas at AQuantive and ex-GM of ad platform product management, search and display marketing, and mobile and gaming advertising for Microsoft). Founded in 2006 by Aaron Finn.

$5.3mm — Investors: Madrona, Bain Capital, Khosla Ventures — Read more: TechCrunch

7. Criteo — Provider of online ad retargeting services and personalized recommendation service. Leverages persistent cookie to follow a user and display recurring display advertising that matches a previous transaction intent or behavior. Criteo was founded in 2005 in France; now based in Palo Alto, CA.

$7mm in Series C; last round was in 2008; total $24mm raised — Investor: Bessemer (Byron Deeter)(lead); previous investor included Index Ventures, did not participate — Read more: TechCrunch, peHUB

8. WordStream — Provides software and services that help businesses manage SEM and SEO campaigns. WordStream solutions both create, generate, manage and analyze the performance of large keyword databases. On the show we also spoke about a company I really like called DataPop and how they help with keywords, AdSense text and landing pages.

$6mm in Series B; total raise of $10mm — Investor: Egan-Managed Capital, Sigma Partners — Read more: TechCrunch

9. Doxo (November 2009 financing, just announced in May 2010 as company exited stealth mode). Paperless billing for consumers. Cloud-based systems is compatible with major existing systems. Senior exec team is ex-QPass (mobile payments platform sold to Amdocs)

$5.25mm in Series A — Investors: Mohr Davidow, Bezos Expeditions (Jeff Bezos) — Read more: TechCrunch