Dear Startup Investor:
Your startup portfolio has ten holdings. We added the latest ones, Apploi and Connect, in the last couple of weeks. So, in going over the latest developments of our startups, we’ll be skipping them.
Let’s start with one of the busiest companies in our portfolio, Wefunder, headed by the estimable Mike Norman.
Wefunder
We recommended Wefunder because it has some of the best deals available online.
We were once again reminded of this fact earlier this week. Zenefits was a March 2013 “Staff Pick” of Wefunder’s. It was valued around $7 million. By the beginning of this year, its valuation had skyrocketed to $70 million, a remarkable tenfold increase. A couple of days ago it completed another round of fundraising. This one was for $66.6 million. Its valuation: an astounding $500 million.
For Real: A 4,000% return
Wefunder did the math for us in a tweet this past Wednesday. The portal’s “online investors [got] a 4,000% unrealized return.”
Who were these investors? Well, they’re people just like you. We took a picture of some of them, if you’re curious…
Just Saying or Asking
We sent Mike Norman, co-founder and president of Wefunder, our congrats. And got this reply…
“Thanks! Huge win for our investors and the industry in general.”
Also, may I add, a huge win for those Startup Investors who followed our recommendation and put money into Wefunder. If you haven’t invested in Wefunder yet, there’s still time. But the company will be closing its fundraiser any day now, so go ahead and get in touch with Wefunder as soon as possible. The minimum it’s asking is $1,000, a very affordable amount.
Wefunder’s reputation as a top-notch startup portal got the best kind of validation this week. So, I’ll say it one more time…
Congratulations to the entire staff at Wefunder. Great job.
Ansa
Ansa launched its super-fast XMPP-based app in March. Natalie Bryla says it’s “ridiculously fast and responsive.” We liked the old version but we like the new version even more.
I’ve always thought that Ansa’s privacy features would have natural appeal in Putin’s Russia and it looks like I was right. Russians are signing up in greater and greater numbers. So are Ukrainians. (It might be the only thing they agree on these days.)
From the Netherlands to Nigeria
Ansa is gaining customer traction in other countries, too. Lebanon, Saudi Arabia and the Netherlands are all discovering Ansa’s unique blend of security, privacy and fun. India has also become a significant market. Ansa’s newfound popularity has even reached the shores of Africa.
And it’s all been word of mouth. Ansa has done absolutely no marketing in these countries.
The company is now attracting 5,000 to 10,000 new users every 10 days. The majority is from overseas.
So, what happens when Ansa decides to do some proactive marketing to these markets?
“We’re going to find out soon,” Natalie told me. “In about a month’s time we’ll be devoting some of our resources toward these markets. I think the potential is huge.”
In the meantime, Ansa continues to tweak its technology. It’s introducing some new features, including voice memos, location sharing and contact sharing. It’s also improving the “Find Friends” flow to make it easier to connect with contacts.
Natalie’s Favorite Demographic
The “ephemeral” mobile messaging space continues to be white-hot. Yahoo bought Blink in mid-May. Snapchat has attracted interest, despite not living up to the privacy promises it made to its users. And very small, early startups like Ansa are garnering customers as more and more news comes to light on how our privacy is under attack from our own government and various and sundry snoopers.
With interest up across the board in privacy-protecting social media apps such as hers, I asked Natalie how she decides whom to target. “It’s not easy, Andy,” she told me. “But I will tell you this. We like the 17- to 35-year-old demographic a lot. They tend to be early adopters, our favorite kind of people.”
Just Saying or Asking
Topping things off, Ansa is going Hollywood. Watchers of the new HBO series, Silicon Valley, better take note. Ansa has been written into the script. Natalie wasn’t sure when the show will air. “But you’ll let me know, won’t you, Natalie?” I asked.
“Actually, Andy, I don’t watch the show. Too busy running a real startup.”
Figures.
SpeechTrans
CEO John Frei is a man on the move. Last week he was in Florida. This week back in his home base of New Jersey.
And next week he’s going to Las Vegas where he’ll be taking center stage on Wednesday at Hewlett Packard’s (HP) “Discovery Event.”
Showtime in Las Vegas
The event will focus on the HP MyRoom. Think of it as an upscale version of Google’s Skype. SpeechTrans just finished upgrading its translation software for MyRoom applications. It now lets live interpreters complement the software’s translation functions. It seamlessly ties people directly into a multilingual conference call. And you don’t have to take notes, because the proceedings can be automatically transcribed. It’s also Google Glass compatible. Glass images can be transmitted onto the shared MyRoom video screen.
SpeechTrans’ successful pilot program with African Telco MTN is coming to an end at the end of this month. MTN covers 22 countries across the Middle East and Africa. The current pilot program serves 250,000 users. It will transition into a full-scale one on July 1, giving SpeechTrans access to a 50-million-user base.
If all goes well, SpeechTrans will not only seek a long-term contract with MTN. It will also seek contracts with other major global Telcos. Right now it’s in early talks with four other Telcos.
Pivoting to a New Revenue Model
The biggest news? A change in strategy from the paid model to a “freemium” model. SpeechTrans is redesigning its mobile app to drive engagement on the basis of point accumulation. It’s gamenifying engagement, in other words. So users who sign up for free will seek higher levels of service at ascending price points as they use the app more.
By the way, SpeechTrans is now averaging more than 1,000 free downloads a day.
As far as fundraising goes, SpeechTrans has begun to raise money in a new Series A round. Given the level of interest so far, John says he expects to finish the round by the end of June.
Just Saying or Asking
“That’s a lot on your plate,” I told John, “Is there anything else our Members should know?”
“Well, yes and no. I can’t talk about it much yet. But it involves the SpeechTrans’ Bluetooth wristband. A very exciting development. I’ll be able to tell you more next month, I hope.”
Guess we’ll have to end our update on MTS on a somewhat mysterious note.
SeedInvest
“The fundraise was a huge undertaking,” says Aaron Kellner of SeedInvest. “We raised more than we targeted. But I’m glad it’s over. Now we can devote our full attention to the startups and investors who use our site.”
SeedInvest planned on raising $3 million. They ended up raising $4,155,000. So what now?
“We have some of our most impressive companies yet about to list on the site. Check us out. The summer is shaping up great for us.”
Optimistic Over Title III
“Even with all the uncertainty over the Title III regulations [for non-accredited investors]?” I asked.
“We think they’ll come out before the end of the year,” said Aaron. “At the latest, the beginning of next year. And we’re confident they’ll get it 80% right. And that the rules will be conducive to a workable eco-system.”
Aaron doesn’t believe the portals will be crushed by the SEC’s new round of regulations…
Portals Slated to Play Key Role in the New Equity Crowdfunding Rules
“The portals are obviously something we care about. The proposed regulations regarding the startup portals weren’t carefully thought out. The language on prohibiting the portals from giving investment advice on companies listed on the sites is a good example. It would prevent us from providing visitors to our site with any search filters. One lawyer even said we wouldn’t be allowed to list companies alphabetically, as that could be construed as a form of investment advice.”
The guys at SeedInvest are as plugged into the arcane policy-making machinery of Washington, D.C., as much as anybody I know. If the SEC is backtracking on some of its more onerous proposed rules of last September, that’s really good news.
Just Saying or Asking
I ended our conversation with another question. “So you’re looking forward to the launch of Title III investing?”
“We’re preparing. We’re building a firewall between our Title II startup listings and our Title III ones. Companies will be allowed to raise funds under Title II and Title III at the same time. It’s going to be fun.”
You should check out SeedInvest’s site if you haven’t done so already. These guys know what they’re doing.
Next Caller
Most B2B startups literally build their businesses up one customer at a time during the first couple of years. It’s the thrill and agony of being a startup. You win a customer. Your sales jump up 5% to 10%. You lose one? It feels like a crushing blow.
Next Caller’s ride so far has been more thrilling than agonizing. By the time it graduated from Y Combinator, it had already signed up Zendesk (serving 40k customers) and Nextiva (with 80k customers). Both customers immediately integrated Next Caller’s system into their own.
Since then they’ve added two more “native integration” clients, Vertical Communications and 8×8 Inc.
Next Caller has signed up almost 300 customers so far. Just this past week, it added two more: SignPost (a cloud-based platform for digital and mobile marketing) and Global Intelligent (it provides calling cards and “pinless solutions”).
Global Intelligent is just one example of the many ways Next Caller can be used by companies other than those running call centers. Global has to contend with a black market for its pinless calling cards. It loses 25% of its revenues to fraud. Next Caller’s vast database will help it identify the callers and determine whether they’re legitimate users.
Just Saying or Asking
“What’s next?” I asked Ian. “Looking to boost our sales team with an important hire. Can’t say more right now,” he replied.
So be it. We’ll be giving you more details on this next month.
Appvance
Every month Appvance rolls out one or two diagnostic tools. Its most recent one works with Akamai technology.
Taking the Risk Out of Akamai and New Relic
Akamai is a leader in web and mobile app scalability technology. One of its popular products selects the servers located nearest to users. Why? In order to deliver ultrafast response times.
The world’s biggest companies and government agencies use it. Yet, the level of its performance can vary.
So Appvance introduced a product that tests the performance of this Akamai product to make sure it delivers fast user experiences every time. Appvance’s PerformanceCloud is “easy, rapid and affordable,” says the company.
Another of Appvance’s new products works with New Relic’s Application Performance Management (APM) technology.
APM was developed to watch software as it is being used. It then flags any problems it sees. Here’s the rub. It’s used only after an app is launched.
Appvance’s insight was simple. Wouldn’t it be cheaper and easier, not to mention a lot less frustrating for users, if problems were identified before users were exposed to them?
Enter Proactive APM. It tests the app while still under development. Once the app is launched, it compares actual performance to simulated performance. Slower-than-expected transaction times alert the company of potential issues.
Now, that’s a much better way of doing things.
StackIQ
We recommended StackIQ in early April. We liked how they made the Cloud more manageable for companies. We also liked their partners. StackIQ plays in the same sandbox as Dell, HP, Red Hat, IBM and Cisco.
Of the above, the one partner you may not have heard of is Red Hat. But it’s an incredibly important company for StackIQ.
StackIQ Puts the Shine on Red Hat
Red Hat specializes in “open source” solutions, that is, solutions that anybody can help develop and refine, like a Wikipedia for technology. Red Hat takes open source solutions and makes them better.
Recently, it bagged Alcatel-Lucent, a telecom leader in moving to the Cloud. Alcatel decided to use one of Red Hat’s OpenStack platforms. OpenStack was developed as – you guessed it – an open-source technology.
It’s a big win for Red Hat. But Alcatel needed help to use Red Hat’s platform. It chose the StackIQ Cluster Manager, not long after we made our recommendation to you.
Think of it this way. Alcatel bought the pieces of the puzzle from Red Hat. But to help it put the pieces together, it turned to StackIQ.
Red Hat rightly says that StackIQ Cluster Manager plays a key role in helping enterprise customers “automate” the management of Red Hat’s OpenStack platform.
One More Piece of News
StackIQ closed their round. They raised over $2 million through the OurCrowd portal. Congrats to StackIQ and their capable founder and CEO, Tim McIntire.
MST
MST keeps its promises. This surgery device company said it would be transitioning from product development to more of a marketing mode. And, sure enough, it’s well on its way.
It recently hired an experienced sales professional to spearhead its marketing efforts. Before the end of this year, MST will be doing a limited rollout of its video system. Next year, a full-scale rollout is planned.
By then, MST hopes to have partnered with a global player who can market MST’s AutoLap worldwide.
The Last of the Runway to Rising Revenues
Reading in-between the lines, that means revenue won’t really jump this year. Next year the company will be judged more on its sales activities. (To refresh your memory, MST is expected to make around $500k this year.)
In Europe MST has been in talks with a local distributor on launching its product later this year. Again, if the timing holds, then actual sales won’t really begin to flow until next year.
And, lastly, MST in nearing completion of its latest version of its AutoLap. It will boast new features identified through its ongoing clinical testing, while adding modifications that make serial production more efficient.
Sincerely,
Andy Gordon
Startup Investor Portfolio
