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Primary Venture Partners raises $100M to invest in NYC startups

Primary Venture Partners , a seed firm that invests exclusively in New York City startups, has raised a second fund of $100 million. That focus is unusual — even Lerer Hippeau, a firm that’s closely associated with New York , makes some investments outside the region. Primary’s Ben Sun (pictured above with his co-founder Brad Svrluga) said he’s betting, in part, on the New York workforce, particularly “the talent that came into the tech ecosystem post-financial crisis” — a shift that gave the city more talented entrepreneurs, plus a talent pool that they could draw from to build their companies. After all, Sun noted that employment in New York’s tech sector grew by 57 percent between 2010 and 2016 . He also said that Primary (formerly known as High Peaks Venture Partners) offers more support and services than many seed firms — for example, Cat Hernandez, Primary’s partner focused on “human capital,” has been directly involved in hiring nearly 200 employees at the firm’s portfolio companies. Primary is able to offer that level of support with a team of 13 people, Sun said, by leveraging local connections and expertise. The investment team has also grown, with the addition of Steve Schlafman as venture partner last month — Sun described him as “a super highly networked guy who has a really good nose for talent.” (When we talked to Schlafman prior to today’s announcement , he managed to dodge a question about the firm’s fundraising.) “With a singular focus on this market, we were able to build an operating and portfolio impact model that provides concentrated, on-site support to our portfolio companies in a way that wouldn’t be possible across geographies,” Svrluga said in an emailed statement. “Raising this second fund not only gives us the capital to continue to be a high-conviction seed round leader, but to continue to expand our Portfolio Impact team so that we can be an even better partner to our founders on their journey from Seed to Series A.” Primary’s approach has resulted in some big successes already, like Jet.com ( acquired by Walmart for $3.3 billion ) and Coupang ( valued at $5 billion ). Even beyond the most attention-grabbing deals, Sun pointed to the fact that of the 15 companies in the Primary portfolio that have tried to raise Series A rounds, 13 of them have succeeded. As part of this announcement, VCs that Primary has worked with in the past also offered their praise, with Spark Capital’s Kevin Thau describing the firm as a team that “knows the New York Seed market better than anyone,” and Kleiner Perkins Caufield & Byers’ Eric Feng saying it’s “one of the top partners to startups in the city, providing true value guiding their portfolio companies from seed to Series A.” While the firm raised significantly more this time around (Primary’s first fund was $60 million), Sun said it will remain focused on seed deals — with the occasional incubated startup, like  dog food company Ollie . It will, however, be able to write slightly larger checks, say in the $1.5 million to $2 million range, with additional funding reserved for follow-on rounds. “What we’re going to do with this $100 million is follow the same strategy,” Sun said.

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Bessemer launches a seed fund for startups applying machine learning to health

Seeing a tremendous opportunity to leverage machine learning technologies in the healthcare industry, Bessemer Venture Partners is launching a $10 million early-stage seed program to back new startups. Led by the firm’s celebrity healthcare investor, Steve Kraus (seriously: the guy has his own podcast ), and its head of investments in Israel, Adam Fisher , the Deep Health Seed Program will place bets of anywhere between $100,000 and $2 million into early stage companies using machine learning to solve problems in healthcare. It’s no exaggeration to say that machine learning can transform the healthcare industry entirely. The proliferation of data brought on by the increasing digitization of workflows in hospitals, patient information, the popularization of wearables, and mapping of the human genome means that everything from the health of populations to the genetic composition of our cells can be monitored — and potentially managed through the application of data. Bessemer has already placed several bets on this hypothesis including its investment in Qventus ( a hospital management service that we’d covered earlier this month ).  And the firm has a long history of investing in healthcare including early best on companies like  Allena Pharmaceuticals , Docent Health  and publicly traded companies including  OvaScience, Verastem, and Flex Pharma. Some examples of areas where the firm will spend time looking for new investment opportunities include workflow automation startups like Qventus; digital diagnostics companies that look to augment or replace human diagnosticians with algorithms that are better able to identify potential anomalies; predictive and programmatic tools to measure and monitor population health are also on the horizon. Finally, both drug discovery and computational medicine will be improved with machine learning and treatment regimes, too, will find themselves transformed by intelligence and automation. With the new initiative, Bessemer is also taking the covers off of its first investment — in a company called Subtle Medical . Founded by Stanford doctoral candidate Enhao Gong and Stanford professor Greg Zaharchuk, an MD/PhD focused on stroke and neurological disorders, Subtle Medical is focused on improving the quality and speed of medical imaging exams by enhancing the ability to use lower quality scans — obviating the need for repeat imaging procedures.  The company claims it can speed four times as many patients through MRI and PET exams, which both increases the number of patients that can be scanned and reduces patient exposure to radiation.  “The opportunities for AI/ML in healthcare are extremely broad,” according to Kraus. “Healthcare is the largest segment of the economy, and nearly everywhere you look AI/ML can be applied to improve the cost, quality, and speed of the industry.”  

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Lerer Hippeau raises a new $122M fund, plus $60M for follow-on investments

Lerer Hippeau has raised two new funds — $122 million for a sixth fund devoted to seed stage investments, as well as $60 million for a “Select Fund” focused on later-stage deals. Managing Partner Eric Hippeau said both funds will be used to continue the firm’s existing strategy: “We continue to be seed-first investors and New York-first investors. We’re big believers in New York.” And while Hippeau acknowledged that the New York ecosystem is still be waiting for the kind of massive exit that makes “a lot of people very rich, who will then leave and start their own companies,” he pointed to recent success stories like Oracle’s acquisition of Moat and Roche’s acquisition of Flatiron Health . (Lerer Hippeau invested in Moat but not Flatiron; both are New York-based.) “There’s a huge pipeline in New York of companies that have been valued in the hundreds of millions and in some cases billions of dollars — a lot of them are our companies, but not always,” Hippeau said. “That’s where the strength of New York is going to come from in the short term, all of these companies really popping to the surface and adding a few billion dollars of value, one at a time.” The firm announced its first follow-on fund last year . At the time, Hippeau said it had only raised $28 million so that the two funds could be “synced up,” which is what’s happening now. The first Select Fund was used to make follow-on investments in companies that Lerer Hippeau had already backed at the seed stage, like Allbirds and Casper. That will continue with the new fund, but Hippeau said it could also be used for Series A investments in startups that the firm didn’t back initially, and which might now seem like missed opportunities. Caitlin Strandberg Meanwhile, the Lerer Hippeau team has also been growing, with the recent hiring of Caitlin Strandberg (formerly vice president at FirstMark) as principal and Isabelle Phelps as associate, as well as Amanda Mulay as senior talent manager. “I couldn’t be more excited to join the most active early-stage firm in New York, just as it gets fresh capital,” Strandberg said in an emailed statement. “Lerer Hippeau has built a fantastic reputation as being a hands-on, accessible and helpful investor all while cultivating a powerful and engaged community. I’m looking forward to investing in the next great generation of startups, supporting our existing founders and teams, and continuing to build a great tech ecosystem here in NYC.” Lerer Hippeau now has around 20 people on the team . And while firms like Andreessen Horowitz (where Mulay used to work) have made their huge support staff a selling point, Hippeau said that at his firm, “We don’t really want to have dozens of people doing this. We want to be very precise and very selective about how can help.” Still, he said that “the service that’s most in-demand is help with recruiting,” so it made sense to bring on Mulay to help startups hire,  and also to help them “set up a proper HR function.” Lerer Hippeau’s investment team built its reputation in media — Hippeau was formerly CEO at The Huffington Post, Kenneth Lerer cofounded HuffPost and is now chairman at BuzzFeed and Ben Lerer is CEO at Group Nine Media

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Beth Seidenberg of Kleiner Perkins is said to be leaving to start her own fund

Beth Seidenberg joined Kleiner Perkins 13 years ago to focus on life sciences for the storied venture firm. Now, according to a Recode report , she’s heading off to start her own life sciences venture fund in L.A. where she lives. We’ve reached out to Kleiner and we’re awaiting more information. But the firm seemed to confirm the move to the outlet, reportedly noting that Seidenberg will continue to be a partner in Kleiner’s existing funds and stating that Kleiner remains committed to life sciences. While the move is interesting from a firm perspective — Kleiner has undergone one transition after another over the last half dozen years, parting ways with at least 10 investors, including Trae Vassallo, Mike Abbott, Chi-Hua Chien, Matt Murphy, and Aileen Lee — it’s perhaps even more interesting as part of an ongoing change to the broader industry. Whereas a decade or so ago, one held on to his or her role inside a venture fund by their fingernails if they had to, that’s no longer the case. While there are still a handful of firms that it would undoubtedly be hard to leave, it’s become easier for many VCs to abandon situations that no longer work for them for one reason or another. The reason: the volume of money flowing to the venture industry, along with platforms that help to amplify new brands, have made it easier than ever for someone with a track record to launch a venture firm of their own. An almost surprising number of people to do so have worked formerly for Kleiner, which has yet to recover fully from a bruising battle with one of its former investors, Ellen Pao, after she  famously sued the firm for gender discrimination in court. Lee, for example, spent 13 years with Kleiner before leaving in 2012 to start her own seed-stage venture firm, Cowboy Ventures, and becoming one of the highest-profile women in the venture industry. Chien spent nearly seven years with Kleiner before spinning up his own firm in 2014 called Goodwater Capital; it’s already raising its third fund , shows an SEC filing. Meanwhile, Trae Vassallo took the wraps off her own fund — cofounded with former General Catalyst partner Neil Sequeira — last year. Called Defy Ventures, it closed on $151 million for its debut effort. While we don’t know yet why Seidenberg decided to leave Kleiner, we suspect she won’t have much trouble raising her own new fund, either. Life sciences investing has been soaring in recent years, thanks in part to advances in machine learning

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Beth Seidenberg of Kleiner Perkins is starting her own fund

Beth Seidenberg joined Kleiner Perkins 13 years ago to focus on life sciences for the storied venture firm. Now, according to a Recode report , she’s heading off to start her own life sciences venture fund in L.A. where she lives. We reached out to a spokeswoman for Kleiner, who confirms that Seidenberg will no longer be a general partner in any new funds raised by the firm. She stressed, however, that Seidenberg remains a general partner in Kleiner’s current funds. She also said that Kleiner remains committed to life sciences investing, and that in addition to longtime general partner Brook Byers, a founding member of the firm who has long focused on biotech, Kleiner is considering hiring another investor to focus on life sciences. While the move is interesting from a firm perspective — Kleiner has undergone one transition after another over the last half dozen years, parting ways with at least 10 investors, including Trae Vassallo, Mike Abbott, Chi-Hua Chien, Matt Murphy, and Aileen Lee — it’s perhaps even more interesting as part of an ongoing change to the broader industry. Whereas a decade or so ago, one held on to his or her role inside a venture fund by their fingernails if they had to, that’s no longer the case. While there are still a handful of firms that it would undoubtedly be hard to leave, it’s become easier for many VCs to abandon situations that no longer work for them for one reason or another. The reason: the volume of money flowing to the venture industry, along with platforms that help to amplify new brands, have made it easier than ever for someone with a track record to launch a venture firm of their own. An almost surprising number of people to do so have worked formerly for Kleiner, which has yet to recover fully from a bruising battle with one of its former investors, Ellen Pao, after she  famously sued the firm for gender discrimination in court. Lee, for example, spent 13 years with Kleiner before leaving in 2012 to start her own seed-stage venture firm, Cowboy Ventures, and becoming one of the highest-profile women in the venture industry. Chien spent nearly seven years with Kleiner before spinning up his own firm in 2014 called Goodwater Capital; it’s already raising its third fund , shows an SEC filing. Meanwhile, Trae Vassallo took the wraps off her own fund — cofounded with former General Catalyst partner Neil Sequeira — last year. Called Defy Ventures, it closed on $151 million for its debut effort. While we don’t yet know why Seidenberg decided to leave Kleiner, we suspect she won’t have much trouble raising her own new fund.

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Wes Blackwell joins Scout Ventures to invest in early-stage, veteran-led startups

We haven’t written much about Scout Ventures , but the New York City-based firm has built up a big portfolio over nearly a decade of investing, with exits like Olapic ( acquired by Monotype for $130 million ) and Kanvas ( acquired by TechCrunch’s parent company AOL ). And, it’s done all of this with just one full-time partner, Bradley C. Harrison — until recently, when the firm brought on Wes Blackwell as partner. Blackwell is an advisor to Washington, D.C. startup studio DataTribe and previously led enterprise implementation, account management and tech support at LiveSafe . And like Harrison (who graduated from West Point and served in the Army for five years), Blackwell is a veteran of the U.S. Armed Forces, having spent more than a decade flying helicopters in the Navy. “If you’d asked me five years ago if I would have partnered with an Annapolis Navy brat, the answer would have been an unequivocal no,” Harrison said. But he said that as he and Blackwell started spending more time together, he realized that their backgrounds were complementary: “It made all the sense in the world.” And the Armed Forces background isn’t just another line in their bios — Harrison said that about half of the companies that Scout has invested in were founded by veterans. “We don’t find a lot of competition in this stuff,” he explained. “It’s a pretty tight community.” Scout typically writes initial checks of between $500,000 and $750,000 and aims to take a stake of around 10 percent.

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Former Google China head targets AI opportunities with new $900M Sinovation fund

Sinovation  Ventures , one of China’s prominent funds which is helmed by former Google China head Kaifu Lee, has announced a new investment fund that’s targeted at a total raise of $900 million. This newest fund is the firm’s fourth, and it promises to be its largest to date. Sinovation is a little different from other firms in that it raises its fund using one U.S. dollar vehicle and another in Chinese RMB to give founders currency options, one of its competitive advantages. The firm confirmed today that it has closed the $500 million USD fund, and it has kicked off the process to raise an additional 2.5 billion yuan, or around $400 million, in Chinese currency to round out this new vehicle. The addition of that U.S. capital means it now has $1.7 billion under management across six funds, four of which are in U.S. dollars and two are Chinese RMB. The firm has invested in over 300 companies, some of which include Meitu ( Hong Kong IPO ), bike sharing startup Mobike ( which sold to Meituan this month ), AI firm Face++, English language learning service VIPKid and crypto mining giant Bitmain. Lee has made his mark in many ways, but in recent years he’s become recognized as an authority on artificial intelligence , both on tracking promising companies in the space and looking into the future at where the tech is headed. So it isn’t a huge surprise that this new fund is heavily focused on what the firm sees as the huge opportunity for AI, as well education and robotics. The focus on deals is at seed and Series A stage, and, while Sinovation operates in the U.S., it is strongest in the Chinese market.

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Andreessen Horowitz is planning to launch a dedicated crypto fund

The SEC may be firing off subpoenas to crypto investment funds and ICO projects left, right and center  — apparently over 80 — but that isn’t stopping Andreessen Horowitz, the influential Silicon Valley firm known as A16z, from starting its own crypto-based fund. The rumor has been going around for a while — not a huge surprise since the firm has invested in the likes of Coinbase, Earn.com and CryptoKitties and co-founder Marc Andreessen (pic above) is a big crypto advocate — but it now appears there is genuine substance to it. Recode spotted a couple of A16z job vacancies that seem to confirm that the wheels are in motion. One for a ‘ Finance and Operations Manager, Crypto Assets ‘ and another for a ‘ Legal Counsel, Crypto Assets ‘ explicitly detail that the firm is planning “a separately managed fund focusing on crypto assets.” The legal role itself includes “compliance with appropriate SEC regulations,” and in particular “managing the firm’s/fund compliance with all SEC/other regulations,” while the operations manager is tasked with the challenging job of valuing crypto assets among other responsibilities. Some of the responsibilities A16z has for its legal counsel job role A number of traditional VC funds have invested in crypto companies and, in a few cases, joined initial coin offerings (ICOs), but there hasn’t been a stampede. The more prolific crypto investors have been dedicated funds like Pantera Capital, Polychain Capital and Sparkchain Capital. Those firms hold crypto assets — most of which is in Ethereum — in order to invest and divest in company tokens and cryptocurrencies as part of ICOs or just generally as retail investors do. Despite the potential for big gains and the ability to liquidate an investment at any time, crypto is in a legal grey area and that has put many U.S. investors off, even if some have dabbled on the side through personal investments. If it goes ahead, A16z’s fund might blaze a trail for others to follow. Join Ethereum creator Vitalik Buterin at our blockchain event on July 6 Disclosure: The author owns a small amount of cryptocurrency. Enough to gain an understanding, not enough to change a life.

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Alibaba’s Ant Financial is reportedly raising billions more at a valuation of at least $100B

Ant Financial, the Alibaba affiliate that looks after the firm’s hugely popular Alipay service, is reportedly gearing up for an enormous funding round that could take its valuation to $100-$150 billion. The Wall Street Journal reported that Ant is in talks to raise upwards of $9 billion at the $100 billion mark, while Bloomberg suggested that Singapore’s sovereign fund Temasek is vying to lead a round of $10 billion at a valuation of $150 billion. Either round would make Ant the highest valued unicorn on the planet although it is hard to call the firm a startup considering its reliance and history with Alibaba, which it spun out of seven years ago. Alibaba declined to comment on “market rumors.” The round looks like a pre-IPO raise, with Ant tipped to go public potentially as soon as this year, although exactly where it will list remains unclear. That was the case last year, when the company raised $4.5 billion at a valuation of $60 billion , but a valuation of $100 billion plus would see Ant eclipse financial heavyweights like Goldman Sachs and PayPal. Ant is clearly a global leader based on its China business, where it offers the Alipay mobile payment service, digital banking and other financial services. All told, it claims to reach over 520 million users in China, but it is likely Ant’s overseas expansion plan, mixed with Alibaba’s phenomenal money-making, that is driving its valuation to these new levels. Ant spent 2017 making a series of investments to expand its ecosystem across Asia and beyond. That included a high-profile investment in KakaoPay, the mobile payment service from Korea’s top messenger app, deals across Southeast Asia and the $1.2 billion acquisition of remittance firm MoneyGram which was ultimately aborted after failing to gain U.S . government approval . It also doubled down on India, where it has backed local payment champ Paytm. Ant’s strategy has been simple, find local partners with existing reach who can help it get into the payment and financial services in Southeast Asia and other key markets in Asia. It is still early days for that push but that expansion focus, plus its relationship with Alibaba — which plans to take up an option to buy 33 percent of Ant’s business — appears to be pushing the valuation to these new heights.

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Lightspeed just filed for $1.8 billion in new funding, as the race continues

Just a day after General Catalyst, the 18-year-old venture firm, revealed plans in an SEC filing to raise a record $1.375 billion in capital to shower on startups, another firm that we’d said was likely to file any second has done just that. According to a fresh SEC filing , Lightspeed Venture Partners , also 18 years old at this point, is raising a record $1.8 billion in new capital commitments from its investors, just two years after raising what was then a record for the firm: $1.2 billion in funding across two funds (one early stage and the other for “select” companies in its portfolio that had garnered traction). Still on our watch list: news of bigger-and-better-than-ever funds from other firms that announced their latest funds roughly two years ago, including Founders Fund, Andreessen Horowitz, and Accel Partners. The supersizing of venture firms isn’t a shock, as we wrote yesterday — though it’s also not necessarily good for returns, as we also noted. Right now, venture firms are reacting in part to the $100 billion SoftBank Vision Fund, which SoftBank has hinted is merely the first of more gigantic funds it plans to raise, including from investors in the Middle East who’d like to plug more money into Silicon Valley than they’ve been able to do historically. The game, as ever, has also changed, these firms could argue. For one thing, the size of rounds has soared in recent years, making it easy for venture firms to convince themselves that to “stay in the game,” they need to have more cash at their disposal. Further, so-called limited partners from universities, pension funds and elsewhere, want to plug more money into venture capital, given the lackluster performance some other asset classes have produced. When they want to write bigger checks to the funds in which they are already investors, the funds often try accommodating them out of loyalty. (We’re guessing the greater management fees they receive, which are tied to the amount of assets they manage, are also persuasive.) What’s neglected in this race is the fact that the biggest outcomes can usually be traced to the earlier rounds in which VCs participate. Look at Sequoia’s early investment in Dropbox, for example, or Lightspeed’s early check to Snapchat. No matter the outcome of these companies, short of total failure, both venture firms will have made a mint, unlike later investors that might not be able to say the same. There is also ample evidence that it’s far harder to produce meaningful returns to investors when managing a giant fund. (This Kaufmann study from 2012 is among the mostly highly cited, if you’re curious.) Whether raising so much will prove wise for Lightspeed is an open question.

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