Controversial pay-per-post startup PayPerPost has raised $7 million in a second round of financing, bringing their total raised capital to just over $10 million. Like their previous round from last October the financing was led by Draper Fisher Jurvetson, with participation from Inflexion Partners and Village Ventures. New investor DFJ Gotham, a fund affiliated with Draper Fisher Jurvetson, also participated.
It is generally a bad sign when a company is not able to bring in a new investor for a financing. The company and existing investors generally like to do so because it brings in fresh connections and ensures that a new third party is involved in valuing the round. When a company does a second round with the same investors, it can be (but isn’t always) a sign that the company is in trouble. In Pay Per Post’s case, the simplest explanation would be that most VCs want to keep their hands clean. Getting involved with PayPerPost could hurt their reputation and exclude them from other deals.
Listen to our podcast interview with founder Ted Murphy and investor Josh Stein here. The company’s profile is here.
Update: An email from Josh Stein at DFJ which points out an inaccuracy above and provides a believable reason for the makeup of the round:
Hi Mike -
Saw your post just now on the PPP Series B. We can obviously agree to disagree on the merits of Payperpost’s model but I thought I should correct you on one factual point: the Series A was not led by DFJ – it was led by Inflexion Partners, who introduced us to the company and brought us into the deal. When I first saw the Series A, $2m of the round had already been spoken for, so at the time I was only able to invest $1m and did not take a board seat due to the small size of the investment.
This is an important point as it leads into the genesis of the Series B. Having worked with the company closely over the past months and having been very impressed with the progress, I made a pre-emptive offer to the company to lead their next round, allowing us to increase our ownership % and enabling me to join the board. Put another way, I liked the company so much that I’d prefer to own more for my fund vs. bringing in an outside investor.
I only bring this up as a personal fyi (feel free to mention on TC or not).
As always, count me as a big TC fan. Keep up the great work.