Gawker: valleywag, scale venture partners

While wantrepreneurs worry about a recession, it's a great time to be a VC

Nicholas Carlson — Mon, 28 Apr 2008 12:00:00 EDT

During an economic downturn, Scale Venture Partners' Sharon Wienbar explains to Sarah Lacy in this excerpt from a Yahoo Tech Ticker interview, "the strong get stronger, the weak get weaker, the strong buy the weak." Which means that while founding developers are off waiting for their $300 economic stimulus check and trying figuring out a way to make $.92 CPMs on ads on their Facebook apps, life is totally awesome right now for venture capitalists. Another VC, Pascal Levensohn, agrees: "The risk premium is coming back. This is a great time. It imposes discipline on entrepreneurs." In case you needed a translation, "discipline" is VCspeak for "getting ripped off."

MerchantCircle gets new funding to continue spam campaign

Tim Faulkner — Wed, 07 Nov 2007 17:21:49 EST

MerchantCircle has secured an additional $10 million in series B funding from past investors Rustic Canyon Partners, Scale Venture Partners, and Steamboat Ventures (Disney's VC arm), as well as new investors including Barry Diller's IAC and Square 1 Bank. The press release claims, "the investment validates the company's 'merchant-first' business model." I'd say, rather, it confirms that investors who should know better will sink cash into a disreputable business.

MerchantCircle is continuing to spam local businesses, despite promised by CEO Ben Smith that it would stop. Smith still hasn't addressed complaints that his company autodials merchants with false claims, a full year after he told John Battelle that "he's on it." Even to this day, MerchantCircle's targets complain in the comments on Battelle's Searchblog. MerchantCircle says it plans to reach an additional 750,000 businesses over the next year. Local businesses make money through their phone lines. Telemarketers, they'll gladly tell you, take bread from their tables. Is this a merchant-first business model? Or MerchantCircle-first?

The battle to plunk bucks in Splunk

Owen Thomas — Mon, 10 Sep 2007 19:09:09 EDT

The Valley's venture capitalists fall into and out of love with enterprise software. Today, with Facebook and other social networks the talk of the town, it's hard for the makers of boring IT products to get attention. But not, it seems, money. Splunk, in a lightning-fast fundraising effort, has pulled in $25 million in a third round of financing, bringing the company's valuation up to $120 million. Splunk's software analyzes server logs, and in a nod to the collaborative aspects of Web 2.0, lets sysadmins share and discuss the results to figure out if odd patterns are signs of system failures or security breaches. Think of it as a Google for hardcore nerds, but one they're actually willing to pay for. And that, in turn, made Ignition Venture Partners, a Seattle-area venture-capital firm, willing to pay for a stake in the San Francisco company. In every investment, there are winners and losers, though.

The obvious winner is Splunk, which has commanded one of the highest valuations assigned to a software startup in recent times. Splunk also wins the services of John Connors, right, the former Microsoft CFO who's now a partner at Ignition, who's joining the company as a board member.

And the losers? Rory O'Driscoll, left, of Scale Venture Partners, whom Splunk turned down despite bidding to invest at a higher valuation. O'Driscoll indiscreetly complained last week of his disappointment at losing the deal — and no wonder, since Splunks fits in several areas Scale likes to invest in. Also shut out, with a lowball bid: Famed angel investor Ron Conway. Could this be what preoccupied him at last Thursday's party for iLike?

Splunk CEO Michael Baum, though, seems to be celebrating a bit overmuch. In a blog entry last week, in which he alludes to his company's fundraising, Baum writes:

It's a privilege not a right for investors to take a look and consider partnering up with you.

How privileged Connors must feel. How gratified he must feel to be serving on a board with Baum, who signs his blog posts "thebaum." It must be just a little bit of a comedown to go from managing multibillion-dollar budgets at Microsoft to having terms dictated by a cocky startup CEO.