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Mbloom Funds Mbloom Founders' Startups [UPDATED]
The Maui-based technology fund mbloom, cofounded by local entrepreneur Arben Kryeziu and California-based Nick Bicanic, today announced its first two investments: $350,000 each in Flikdate, a real-time video dating service, and Ozolio, a live HD webcam hosting service.
The fact that mbloom's first investments were in companies founded by the fund's managers caught the eye of Hawaii-born entrepreneur Eric Nakagawa, who posted links to Hawaii business registration reports for Ozolio and Flikdate. And a commenter noted that there was a third company listed on the "mbloom investments" page: Code Rebel.
I don't know enough about venture capital to know how common it is for a fund, state government backed or not, to invest in companies founded by the fund's managers. But it was certainly unusual enough to spark discussion on Nakagawa's post.
What stood out to me was that Kryeziu and Bicanic's co-founder status in the funded companies was not mentioned in the local news article. It makes many of the statements and quotes awkward.
"Kryeziu said mbloom decided to invest in the two startups because they were familiar with their work," the story reads. "In addition to the financial investment, general partners Kryeziu and Nick Bicanic will provide mentoring to Flikdate’s and Ozolio’s teams and give them access to their resources and network."
Meanwhile, a Flikdate press release put out last month quotes Bicanic as Flikdate's CEO, and quotes Kryeziu as "Managing Partner of mbloom."
mbloom is billed as "Hawaii's first early-stage technology fund," and in January announced the close of a $10 million early-stage venture capital fund. That fund was backed by a "public-private partnership" between the Hawaii Strategic Development Corporation and Devon Archer, a New York-based investor.
UPDATE: Kryeziu has responded on Nakagawa's Facebook post:
"Our investment process is governed by a robust due diligence and risk management framework. In the event of potential related party transactions Mbloom investment decisions are supervised and approved by an LP advisory board. We will be addressing the community concerns over the coming days...
"CodeRebel was reviewed by mBloom, but did not meet the funds investment criteria – it shouldn’t have been on the website.
"We have also made several additional investments which will be announced soon."
UPDATE 2: Official statements from mbloom and HSDC:
mbloom: Not only is there no smoking gun – there’s no gun at all. The irony here is that if we don’t defend ourselves, we end up looking guilty. But if we do defend ourselves, we also end up looking guilty.
HSDC: HSDC was aware of the private investor’s interest in Arben’s and Nick’s already existing businesses and worked with them to establish a fund governance process to review and evaluate related party transactions, if they were deemed appropriate for the fund. Through this process, Flikdate and Ozolio were approved for investment by the limited partners of the fund, and not by Arben and Nick.