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Stealth Deals of Q1


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April 15, 2005

Stealth Deals of Q1

Justin Hibbard

Keyboards are clacking across the country as business people tally up the first quarter's numbers. In the next two weeks, researchers will release statistics for VC investments over the past three months. I predict the amount of money invested will be up significantly from a year earlier and the previous quarter. But that depends on whether the researchers count all of the deals that were done. Startups and VCs are disclosing fewer deals than they used to. Michael Moritz of Sequoia Capital commented on this trend at the VentureOne conference this week: "It's coming from e-mail, the Internet, telephones, the length of time it takes to transmit an idea. People don't understand how much of an ally furtiveness is for a young company." That's understandable. But lest we forget that we should value--rather than fear--the free flow of information, what follows are a few early-stage deals you didn't hear about during the first quarter, including the latest investment by John Doerr at Kleiner Perkins. These weren't touted in press releases or reported by news outlets.

* Zazzle.com -- Kleiner Perkins and Google board member Ram Shriram invested $16 million in the series A round of this Menlo Park, Calif. startup, which provides a marketplace for buying and selling custom goods on the Internet. Consumers can use the site to design a custom T-shirt, poster, print, or card and make money every time it sells. Zazzle was founded in 1999 and launched its service in 2003. Kleiner Perkins managing partner John Doerr and Shriram serve on the board.

* FilmLoop -- This Menlo Park, Calif. company was formed in January and claims to be developing "Internet and media-based applications." We don't know much more than that. Guy Kawasaki of Garage Technology Ventures and Jon Callaghan of Globespan Capital Partners invested $6.5 million in the company's series A round. Founder Kyle Mashima has held senior management positions at Adobe, Objective Software, Claris Corp., and Apple Computer.

* BA Systems -- Just four months old, this San Jose, Calif. company is so stealthy that we have little idea what it's doing. Bessemer Venture Partners led its $880,000 series A round. Founder P.J. Singh has been an entrepreneur-in-residence at Bessemer since 2003. Previously, he founded router maker Allegro Networks and gigabit Ethernet company Packet Engines. Could another communications equipment play be in the offing?

* Teneo Systems -- Founded in December, this stealth startup appears to be funded entirely by its founders, whose past ventures likely supplied them with the means. Venkat Rangan is the former founder and chief technology officer at Yodlee.com, and Charu Rudrakshi is the former VP of engineering at BizRate.com. They put $4 million into Teneo in February.

* Affinity Engines -- This Palo Alto, Calif. maker of social networking software attracted attention last year when it sued Google, claiming that former Affinity employee Orkut Buyukkokten stole code when he left to join the search company. That code allegedly became Orkut, Google's social networking service. The lawsuit is still ongoing in Santa Clara County Superior Court. In February, Affinity quietly raised $400,000 in a Series A round. Shareholders include Stanford University, Concept2Company (an outfit funded by VC firm Advanced Technology Ventures to help university employees start companies), MIPS Technologies board member Fred Gibbons, and former Silicon Valley Bancshares CEO John C. Dean. At the time of the funding, Buyukkokten still owned at least 5% of the company.

05:26 AM

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