TechCrunch Disrupt champion Shaker, an Israeli virtual world startup, has closed a $15 million round of financing. The round was led by Shervin Pishevar at Menlo Ventures. CrunchFund was already an investor in Shaker, and participated in this new round as well.

Other investors in this round include Eric Schmidt’s Innovation Endeavors, Troy Carter and Rami Beracha from Pitango.

Here’s the TechCrunch post about Shaker winning Disrupt last month, and here’s their launch post and demo video.

The company was founded in Israel but recently opened a San Francisco office, which will be the new company headquarters. Shaker was founded by Ofer Rundstein, Yonatan Maor and Gad Maor.

Pishevar has a serious crush on the company. I asked him to tell me why he invested, and how he first met the team. In his own gushing words:

I was blown away by talent of the Shaker team. I’ve been searching for many years for what only Shaker has accomplished. We at Menlo Ventures are excited to be leading this major investment in Shaker. Shaker is the human serendipity engine. Shaker is going to touch and transform human connection and entertainment worldwide.”

Mike, so here’s the crazy story of how I met them. I was working on scouting a Jedi Council retreat in Cabo. I met these amazing guys from Mexico at Summit Series who are were working on an entrepreneurs resort. I began mentoring one of them, Bear. He wanted to learn how to become an investor and VC in the future. My advice was to go forth and travel around the world scouting for amazing startups and bring it back. I didn’t expect to hear from him for months. Instead, a mere 3 weeks later he had traveled to Egypt and Israel, and I flew into Burning Man. He said, “Shervin, I listened to you! Thank you! And I found this amazing startup, Shaker. And they are flying into the Playa tonight and they are competing in Techcrunch Disrupt!” That night I met them and was very impressed with them and their vision. But with no connection I had to wait until the following Tuesday to get the demo at a Samovar in San Francisco. Within a minute, I knew what I saw was the future. I had been looking for this for years. Their product execution was nearly flawless. A very hard feat to accomplish given the vision. The next day I brought them in to meet the rest of the Menlo partners. They agreed and we were off! Meanwhile, while we tried to come to an agreement on an investment, Shaker won Disrupt! I actually got the term sheet done and signed from the streets of Haiti the following weekend while I was volunteering in Haiti for jp/hro! Hopefully, there will be karma in that and all of the serendipity that brought us together.

I am very excited that Shaker is my first major investment at Menlo! Go Shaker!

Why’d we invest? Like Airtime, Shaker addresses the difficulty in meeting new people on the Internet:

“We are trying to address the problem of what has happened the last 10 years of social media,” says Parker, who was also the founding President of Facebook. “Your social network has become more rigid and constraining.” Airtime, it seems, will be more about meeting new people. “Facebook is about identity, the people you already know,” says Parker. “It has little to do with people you don’t know.”

Shaker is a virtual world where you can meet new people using your Facebook identity (picture and basic information). It’s strangely addictive. And we’re very excited to be investors.

…which you can only get if you have a blog and replace the header logo with the Apple logo 🙂 . Or you visit an Apple store three times. A nice surprise, I didn’t even know it existed (here’s more on it).

This was a real checkin, even though most of my Foursquare checkins are part of my fantasy life. Just bought a shiny new Macbook Air.

Nuance has acquired Seattle-based startup Swype for something more than $100 million, says a source with knowledge of the deal.

I’m a big fan of Swype, and this is a brilliant acquisition by Nuance. Swype first launched at a TechCrunch conference in 2008. It’s software for mobile devices, and helps people input text at far faster speeds than through normal methods. It will soon be on over a hundred million devices.

Nuance already has T9, a predictive text application first developed in the 90s, and T9 competes directly with Swype. Oddly enough, the cofounder of Swype, Cliff Kushler, also founded T9. Check out this CNN article earlier this year on Kushler.

I have no idea how this acquisition affects the existing Nuance T9 product. I assume we’ll hear more about that in the future from Nuance.

Sidenote – Swype didn’t win the launch competition at the TechCrunch event. They came in second to Yammer. I wrote an article last year on why the best company doesn’t always win, even when the judges jump out of their chairs to try it out. From that article:

And like UJAM, Swype stole everyone’s hearts. People wanted to try Swype themselves, and you can see all the judges getting up from their seats after the demo to try it themselves. People were jumping up and down in the audience. Etc. Watch it all here.

Swype also had amazing founders, and since TechCrunch50 has gone on to do amazing things. Their software is now being built into tens of millions of mobile handsets a year, and they collect a fee for every install.

But at the time they just weren’t far enough along to win the show. Their first big licensing deals were ahead of them, and the judges felt more comfortable with Yammer as the winner. And like UJAM, a lot of audience members were really angry that Swype didn’t win it all.

Congratulations to the founders and executives (Mike McSherry, Cliff Kushler, Aaron Sheedy, Loreen Milbrath and Mark Illing), employees and investors (the company has raised just $14 million). I loved this application from the first time I saw it. Hopefully this acquisition will let the team continue to create even better technology to help us with those damned tiny keyboards. If this was a company that I met today for the first time, I’d invest aggressively in it (yes, I know, hindsight, etc. But you know what I mean).

You lived. You really, really lived.



I want to welcome MG Siegler as our newest general partner at CrunchFund. MG, who I worked with for several years at TechCrunch, will join me and Patrick Gallagher in the next couple of weeks.

More on this shortly.

Update: MG’s post with details on his decision is here. TechCrunch post on his future role as a columnist there is here.

Google announced a real time “premium” analytics product last week. Pricing? Contact them to find out.

It’s $150,000 per year. Wowza.

Thanks for your interest in Premium. The program has a flat annual fee of $150,000 which we invoice monthly ($12,500 per month).

The Premium features (including faster data, unsampled reporting, more custom variables) can be enabled on your existing GA account within 2 business days of you joining the program – no retagging necessary.

Please let me know if you’d like to set up some time to discuss further.

Thanks again

Google Analytics Premium is here!

This e-mail is confidential. If you are not the right addressee please do
not forward it, please inform the sender, and please erase this e-mail
including any attachments. Thanks.

The above terms reflect a potential business arrangement, are provided
solely as a basis for further discussion, and are not intended to be and do
not constitute a legally binding obligation. No legally binding obligations
will be created, implied, or inferred until an agreement in final form is
executed in writing by all parties involved.

“No one likes a tattletale, Danny… except of course, me.” Ty Webb (Chevy Chase), Caddyshack.

An interesting twist in the Zynga lawsuit with Vostu over game stealing – At least one Vostu employee, and a source says there are more – has approached Zynga with “evidence” of just how overtly Vostu was copying popular Zynga games. A source tells me that these employees are asking for payouts from Zynga to turn over the information.

Two thoughts on this. First, this is really bad for Vostu if it’s true (and I think it is) – if you tell employees to just go copy something exactly there’s a good chance that someday that’s going to become publicly known. Second, I wonder if these employees understand that they are going to get sucked into this litigation now whether they want to or not, and there’s little to no chance of getting any kind of payment from Zynga. Their best bet is probably to simply hope for a Zynga job offer once the dust settles.

Nick Bilton, the NY Times lead technology writer, may be one of the most heavily recruited tech writers around. He was our number one most desired hire while I was at TechCrunch. And apparently at CNET, too. He turned down an offer from CNET and parent company CBS that would have given him over $1.5 million in total compensation, says a source.

Instead, he elected to stay at the NY Times earning, by my estimate, significantly less than $150,000 per year.

CBS was looking for Bilton to do regular tv bits on technology, and write heavily for CNET, for an annual salary of over $500,000, says the source. In addition, I’ve heard, CBS subsidiary Simon & Schuster was to purchase the rights to his upcoming book to be titled “Owned,” which is about “the end of privacy and ownership.” Bilton’s first book, I Live in the Future & Here’s How It Works: Why Your World, Work & Brain Are Being Creatively Disrupted, will be available in paperback shortly.

But he hasn’t done a book deal around Owned yet. Simon & Schuster, says a source, was going to pay him “seven figures,” or at least $1,000,000, for the book.

A source close to CBS says these figures are wildly inaccurate. A Simon & Schuster deal around Owned was only “a possilibity, not a reality,” says the source. And the total CBS/CNET combined compensation was in the $300,000 per year range, not $500,000+.

Either way, it was quite a potential raise.

Bilton did manage to get a new job at the NY Times out of this, at least. He’ll become a weekly technology and business columnist, and will continue to blog. Last year he wrote some 350 blog posts and about 50 print articles. Now he’ll focus on the weekly column and write only occasionally on the blog, I hear.

I know TechCrunch was also aggressively pursuing Bilton, as was the Huffington Post (perhaps competing with each other, who knows). Other publications were also actively pursuing him as well.

Not bad for a guy who never got a journalism degree, or any other degree. Bilton’s background is in design. And he’s one of the best writers the NY Times has. They’re lucky to have kept him.

“Facebook does not track users across the web,” – A Facebook spokesperson on September 25, 2011

and

“Generally, unlike other major Internet companies, we have no interest in tracking people.” – Facebook employee on September 25, 2011

v.

“A method is described for tracking information about the activities of users of a social networking system while on another domain.” – Facebook Patent application dated September 22, 2011

Whoops

See: HowTo: Setup secure and private Facebook browsing

My mouth fell open, literally, as I read the extremely private email from investor Chamath Palihapitiya (pictured) to Airbnb CEO Brian Chesky. The message in the email was fine, even reasonable. But the fact that it was leaked to the press, and contained so many incredibly sensitive confidential financial details about Airbnb and its founders, amazed me.

Disclosure: CrunchFund is an investor in Airbnb.

The face that the email was between just two people (meaning very low chance of a random leak) and was written way more carefully than quick communications normally are, led me to immediately assume that Palihapitiya has some kind of crazy agenda to hurt the company.

Mouth still open, I was preparing to write a story about how suicidal this was for Palihapitiya – clearly no startup would ever trust him with confidential information again. They’d fear that if he didn’t like the deal he’d just publish all those details.

Luckily Palihapitiya picked up the phone when I called. He insists it wasn’t a purposeful leak, and he’s horrified that it’s now public. He says that he believes that his assistant forwarded the email to her boyfriend and that it was forwarded from there, directly or indirectly, to Kara Swisher. (we just spoke again, he says he’s fairly certain it wasn’t a leak from his team). He’s still trying to understand exactly what happened, he says. In the meantime, he gave me this statement:

I believe we know the source of the leak and are taking decisive action to address it. I’m very sorry this is being publicly dragged out right now. This really was just an attempt to give Brian private feedback on how to think about these things.

Here’s the original email. Which, again, has reasonable points. But it contained information that Palihapitiya only knew because he was evaluating an investment. The fact that it was made public is a serious problem for him.

Update: It’s worth noting that Swisher has edited the email. In her original post the email showed a “Cc Marc, Reid, my deal team” – I assume that’s Marc Andreessen, Reid Hoffman, etc. It’s interesting that she removed that without noting it. I wonder why…

Update 2: From Chamath’s Facebook profile:

From: Chamath Palihapitiya
Date: Sat, 1 Oct 2011 11:16:05 -0700
To: Brian Chesky
Subject: Airbnb financing…

Brian,

Thanks again for giving me the chance to participate in your latest financing. I had a chance to review the docs at length yesterday and I wanted to follow up as, quite honestly, I’ve never seen a deal like this over ~60 investments I’ve done and I’m pretty concerned.

I’m all for getting the best valuation you can, minimizing dilution and maximizing control. We did this brilliantly at Facebook…all of our financings (except our first $$$ from Peter Thiel) were done not out of necessity but opportunity. As such, our investors had virtually no control and it resulted in a much better outcome. As we’ve discussed, I generally don’t believe investors add much to a success story and so minimizing their impact is a great strategy when you are onto something that is working.

This said, while several of these concepts are reflected in the current deal, there is one big thing that I am fundamentally against and violates my principles and will prevent me from participating in your round. When I saw that you guys were taking $31M out of the company, I didn’t think much of it as I just assumed it would entirely be via a secondary sale.

But as I understand the deal, it seems that you are doing only $9.6M in secondary and $22.5M as a dividend to common (of which $21M goes to you and your co-founders). I am really uncomfortable with this and don’t think its in the spirit of building a good, long term business. Effectively, it is a strategy that allows you guys to take money out of the business and not dilute yourself — I’m not sure why this is such a big deal when you guys are almost 90% vested and the financing is at $1.2B where your dilution is marginal. Further, it excludes many of the employees that probably have helped you and your co–founders get the company to this place as most of these folks probably don’t have any stock but have unexercised stock options and thus won’t get a dividend.

My basic principle on this stuff is that if you want liquidity, that’s fine, but you should make it available to everyone. Otherwise, no one should get it. Your current deal is the farthest away from this principle that I’ve seen in a while…this strategy has been done once before — at Groupon. We can see how “well” they are doing and how short term the investor community is now viewing their motives. I really think you can do better than this…and that you are better than this.

Separately, when you look at successful tech companies, it seems that dividends are an approach used by cash rich operations to distribute excess earnings — in fact, the most successful, cash rich tech company in the world, Apple, hasn’t issued a dividend and they have more than $75B in cash! Again, while I think Airbnb will be a good company, this is nowhere near the truth now — you guys still need to scale and build this thing for the future.

I really think you are onto something but I would implore you to not take the easy way out. Treat your employees the same as you’d treat yourself. Do things that you will be proud of and can defend to anyone including your Board, employees, prospective hires etc. In such a competitive hiring market, you are competing with not just your obvious competitors, but also any successful tech company who is also looking for great talent. A principle that treats your employees as well as you’d treat yourself is a huge strategy for differentiation, retention and long term happiness of the exact types of people you will need to be successful. In contrast, if you are viewed as self-dealing and shady, it will only hurt your long term prospects…

In summary, I’m passing on this financing because I strongly disagree with what’s going on. I’m not sure who advocated this approach but I did mention this to Reid [Hoffman, another Airbnb investor via Greylock Partners] last night and he was of a similar mind to myself and surprised this was the approach being taken. If you want some good advice — I would ask that you consider pinging him about different ways to think about going about the liquidity portion.

If you change your mind on how to close this financing, let me know and I’d love to reconsider. Otherwise, good luck and lets keep in touch.

Take care,

Chamath