Matchmaking for Investors and Entrepreneurs

November 1, 2007

Here are two things to check out on the funding front, particularly if you aren’t in tech.

First, a tool that could help democratize the funding hunt — Think of it as matchmaking service between entrepreneurs and investors.

IdeaCrossing is open and free to anyone in the U.S. Entrepreneurs build a profile, and the system matches them to like-minded participating investors. Investors can see these profiles (the entrepreneur doesn’t get to right away) and reach out with time or money.

The site is still in beta with about 1,000 users. It needs critical mass to really work, but is a good idea that could help tap pockets of money in more regions.

It’s also getting easier for nontech companies to get on angels’ radar. More are broadening into retail, real estate and consumer products to appease members with nontech backgrounds.

Some groups are very specific. The founder of IdeaCrossing, a Cleveland nonprofit called JumpStart Inc., invests only in companies that bring jobs to northeast Ohio. One group, 12 Angels Investment Group, invests in firms that help prevent or treat addictions. Others, are funding women- or minority-led firms or ones with a social or environmental bent.

If you know of specific angel networks broadening their portfolios, let us know here.


Profiting from Social Networking

October 29, 2007

By Maha Atal

Here are two potentially billion-dollar questions: How can you turn the Web’s social-network users into consumers? And how can you turn idle browsing into a flourishing bottom line? Back in May, marketers hoped they might have the answer when social-networking giant Facebook opened its network to external developers. This instantly allowed them potential direct access to a user group of millions who are notoriously unimpressed by traditional advertising methods. The only challenge: developing real-world applications that users might want to embed in their profiles, which would have a real-world effect beyond mere entertainment.

Three months later, it’s clear that there’s no foolproof formula for success. Companies categorize their own applications from a list of 22 options and, as such, “businesses” come from across the board. In fact, the most popular “business” listing is Total Sports Fan, a sports application run by Boris Silver, a Wharton School student who has no plans to exploit the app as a business. In fact, he says, he listed it in that category because “he just kind of wanted to.” This free-and-easy attitude is all part of the territory, and other, more serious-minded ventures need to not only understand this attitude but be willing to live with it.

Know Your Audience

Four of the most popular applications within the category include the virtual trading program Fantasy Stock Exchange, a recruitment specialist called Jobster Career Networking, an environmental activist app known as I am Green, and a person-to-person loan service called the Lending Club, which has what may be the most successful business model. Though they’ve attracted 174,000 users among them to date, capitalizing on those users is still a challenge. Here, we assess what they’re doing right, analyze what they could be doing better, and determine what their stories can teach other companies that want to enter the space.

First: This is Facebook, kids. 56.4% of users are under 35, according to ComScore. Applications need to be appropriate and relevant to that audience. Kevin Rablois, of Slide says there are two ways for a business application to grow: through exploiting its social side or by providing users with a means for self-expression.

The Fantasy Stock Exchange (FSX) application, sponsored by virtual stock trading site, is currently the second most popular business application, with 92,000 users signing up since its launch in early July. On the application, as on its mother site, users trade virtual money based on real-time figures provided by NYSE and NASDAQ. The application loads content directly from and the 18- to 35-year-old players using it represent a similar demographic to those already using the company’s core Web site.

Getting Beyond Marketing hopes to earn money by selling banner advertising space on its application pages, promoting the idea that virtual traders can be real spenders. But since Chief Executive Daniel Carroll admits that targeted users are “mostly beginners” who don’t yet have real funds to trade, they are also unlikely to be big spenders. Not to mention that an old-fashioned ad business model rather misses the point of the forum. Young users are wary of potential manipulation, and may be turned off FSX altogether if advertising gets too intrusive. Finally, the application has yet to offer features unique to Facebook. There seems to be no reason users shouldn’t simply go right to

It’s a common mistake, says Facebook Senior Platform Manager Dave Morin. According to him, too many companies still see applications as marketing rather than as new business. They bring users to an application either to advertise to them or to build a connection they hope will subsequently send users off Facebook and to their main business—a company Web site, say, or its online store. Instead, companies should be trying to make the application into a self-sustaining business that generates revenue through the service it provides on Facebook. “The applications that are the most successful are the ones that integrate seamlessly into Facebook,” Morin says, a model that conveniently supports Facebook’s own business ambitions.

A Business-to-Business Model

At the same time, most users expect Facebook to be entertaining and, well, free, so getting them to pay for an application directly is unlikely. Companies such as the career networking site are trying to get other businesses to pay for access to Facebook users.

On Jobster’s Facebook application, called Jobster Career Networking, users post résumés and declare career goals. Jobster then feeds those résumés to companies such as Nike, GE, and Merrill Lynch, which pay a $100 monthly premium fee to access résumés from Facebook. That’s in addition to the $300 they pay for résumés from the main database. It’s a premium they’re prepared to pay to access young workers with perhaps nontraditional backgrounds. “We aren’t after the companies that want a classic job board,” says Jobster’s Vice-President for Corporate Communications Christian Anderson. In its first month on Facebook, Jobster Career Networking moved 300 companies from regular to premium membership and brought in 50 new partners, generating several hundred thousand dollars in revenue, according to Jobster CEO Jason Goldberg.

Given that Facebook is a social network whose main function is entertainment, there’s a danger that job hunting may not be an activity users wish to load onto their profile, when they can do so just as well on or any other job search site. In fact, mixing business with pleasure is a concern for users who might not want their new boss hearing about their high jinks on vacation. This reality could provide a stumbling block for Jobster’s latest feature, which enables users to add endorsements from Facebook friends to their résumé cover letters.

Rablois is skeptical of Jobster’s plan. “Why would I want recommendations of my skills or a dedication posted along with drunken photographs?” he wonders. And won’t employers disregard friends’ recommendations as entirely, unashamedly biased?

Jobster’s Anderson says users have expressed the same concern. “We’ve really had to work to clarify that companies won’t see your profile, that you won’t be ‘friending’ companies.” Consequently, says Anderson, they won’t be able to judge the friends you cite as references; they’ll just know how many recommendations you have. But this means that Jobster Career Networking has to restrict its links to the social core of Facebook to function as a professional application. It’s a risky strategy. Given that the application adds little to users’ experience of Facebook, they might as well use or other recruitment sites. If users ultimately decide against linking their private and professional lives, companies will be quick to pull their support. For now, though, it’s paying off: 52,000 users have downloaded the application since late July.

Showing a Green Side

I am Green lets users list simple environmentally conscious choices they make in their daily lives on their public Facebook profiles. On the application’s main page, users can talk about green technology, organic produce, and environmental issues. Founder Karel Baloun plans to monetize his 27,494 users by selling advertising space and selling green products on manufacturers’ behalf. Baloun says he’ll avoid young users’ hostility to advertising by providing content only from the green companies they already like and discuss on the application page and by polling them about the brands they’d like to see involved.

Slide’s Rablois thinks this might work, because users committed to a niche cause might be eager to buy green products. Then again, potential sponsors might not pay much to participate in such a niche market. Like, Baloun is trying to bring an old media business model into a new media space.

Fees for Lending Service

The smallest of these four business applications may be the closest to developing the most appropriate business model. On Lending Club, a person-to-person lending company that launched via a Facebook application in May, the social component is at the center of its business model. Borrowers load the application to meet up with lenders from within their existing Facebook networks and social groups. They then negotiate rates directly. Once an agreement has been made, they head to, based in Sunnyvale, Calif., to enter bank account details, so funds can be transferred directly between accounts. Lending Club takes a small cut, up to 3%, of each loan.

Says LendingClub CEO Renaud Laplanche, “Person-to-person lending works best in an a environment where people feel connected to one another, lending to friends and friends of friends.” He also claims that peers trust peers to give better rates than a bank. So far, the site has attracted 13,163 users. With its 3% transaction fees, Laplanche estimates that by the end of August, the company will have moved $1 million since its June launch. But the revenue for the company in the same three-month interval is only $30,000. Given the minimal costs of maintaining the Web site and its relatively small staff of 21 people, this may be enough for now, but as the application grows, its infrastructure costs will expand. Raising the company’s commission, however, would quickly jeopardize its value proposition to users.

Facebook, where users expect applications to augment their social experience with little effort and at no cost, may be a tough environment for companies whose ultimate goal is making a buck, especially since so many companies are still trying to work with traditional ad models. Ultimately, the most successful applications are those whose business model, brand identity, and natural users match the culture and demographic on the network. As such, the top applications may not provide plug-and-play solutions for every brand hoping to enter Facebook. But the lessons they teach about the need for authenticity and relevancy are universal tenets for marketers in the Web 2.0 age.

Source: BusinessWeek Online

Site Linking Global Buyers, China Factories, Plans IPO

October 23, 2007

A few years ago, Jane Ivanov of Indianapolis was pregnant for the first time and frustrated. Amid the array of clothing available to expectant women, there was one thing she couldn’t find: sexy lingerie. Sensing an opportunity, the business-school graduate and her husband pooled $50,000 from their savings and credit-card borrowings to start a maternity-lingerie brand called Eve Alexander. All she needed was the manufacturer.For that, she turned to, then a little-known Chinese Web site that has become a significant gateway for global trade. On the site, which connects small manufacturers in China and elsewhere with potential customers, Ms. Ivanov found a supplier in Hong Kong that could make the bras she wanted.

Now, she spends her days taking care of her two children and her nights fulfilling hundreds of catalog orders and arranging shipments to retailers, including more than 100 maternity boutiques, hospitals and online stores, most recently

For almost a decade, Corp., led by founder Jack Ma, has been positioning itself at the virtual nexus between China’s manufacturing juggernaut and buyers around the world who want its low-cost goods. Charging manufacturers to promote their products and services to customers on its site with English-language listings, it now dominates China’s business-to-business market. World-wide, it is the most visited import/export site, according to Web-site tracker Alibaba is about to take a major new step.

Today, Alibaba Group, its parent company, which is 39%-owned by Yahoo Inc., is expected to officially announce the initial public offering of to Hong Kong retail investors. The IPO is expected to be the biggest ever by a Chinese Internet company, raising as much as $1.3 billion, with trading in Hong Kong set to begin early next month. With a collection of online businesses, Alibaba Group has made headlines as one of the few Chinese Internet companies with a global profile.

Mr. Ma has expanded Alibaba Group to include, an online auction site that has overtaken eBay Inc. as the market-share leader in China, and online payment and software operations. Two recent additions to the group are Alimama, an online marketplace for Web publishers and advertisers, and Koubei, a classifieds site of which Alibaba Group owns 53%. These other operations aren’t part of the IPO.

In 2005, Yahoo paid $1 billion for its stake in Alibaba, and it turned over control of Yahoo’s Chinese operations to Mr. Ma.

Based in the eastern city of Hangzhou, near Shanghai, gets the bulk of its revenue from small and midsize Chinese manufacturers who pay to join the site. The company helps them post listings that include descriptions of their products, contact information and, in some cases, videos showcasing the suppliers’ factories. Buyers also can post their requests for products in the “buying leads” section. Yu Xuehui, owner of heater manufacturer Ningbo Jasun Electrical Appliance Co., says Alibaba helped take his business to a new level. While he had to rely on outside firms to sell his products in the past, and mostly did domestic orders, he now has relationships with clients around the world. “I knew I wanted to export but had nowhere to start,” Mr. Yu says. Since joining the site six years ago, he says his annual revenue has increased by $1.3 million.

According to a copy of the preliminary IPO prospectus reviewed by The Wall Street Journal, Alibaba’s revenue in the year’s first half was 957.72 million yuan ($127.6 million), 61% more than the same period last year. It has about 24.6 million registered users, and, since it began charging for some services a few years ago, has amassed more than 255,000 paying members. Net profit this year is expected to more than triple, to $83 million.

But as Alibaba has expanded, so has its exposure to problems from counterfeiting to product safety. In its preliminary prospectus, Alibaba acknowledges that in providing a way for importers and manufacturers to communicate online, it risks listing tainted products and counterfeits. “We anticipate . . . that certain items listed on our marketplaces infringe third-party [intellectual property] rights or that suppliers list products and services that are substandard or potentially controversial,” it says.

The nonprofit International Anticounterfeiting Coalition says it considers Alibaba to be a platform for counterfeits. One of its members, Rob Holmes, CEO of LLC, a private investigator that specializes in helping brand owners identify violations of intellectual-property rights, says Alibaba is “a major thorn in the side” of his clients. Manufacturers peddling counterfeit products use the “buying leads” section as a way to find customers, Mr. Holmes says.

Another problem: Some suppliers who have legitimate contracts with apparel brands covertly produce unauthorized lots of the products and sell them on Alibaba, Mr. Holmes says. “I would say about a third of the product on Alibaba is gray market, easily,” he says.

The company declined to comment because it is in the quiet period before its IPO. But Alibaba says on its Web site that it regularly cooperates with intellectual-property-rights owners, industry associations and government agencies to fight against violators. ” respects intellectual property rights and we expect our users to do the same,” the statement says. In general, it is the responsibility of Alibaba users, and not the company itself, to comply with intellectual-property-rights laws. According to a Goldman Sachs report, the company takes down nearly 100 listings per month in response to patent and copyright complaints. Goldman is a lead underwriter of the IPO, along with Morgan Stanley.

Alibaba was founded in 1999 by Mr. Ma, a former English teacher from Hangzhou, and the company has grown to more than 6,000 employees.

Thousands of small- and midsize business owners recently came to a gathering called Alifest, an annual bazaar arranged by Alibaba to bring its clients together. Sebastien Breteau, CEO of Asia Inspection, says he lists his services on so that buyers can pay to have their manufacturers inspected for safety and compliance or for quality control.

Meanwhile, Ms. Ivanov is expanding her brand to include other maternity apparel. “Because of Alibaba, housewives can make something of themselves,” she says.

Running a Hatchery for Replicant Hackers

October 22, 2007


At 26, Phil Yuen’s identity lay somewhere between Dilbert and a Microserf. His office, on the first floor of Building 16 on the Microsoft campus in Redmond, Wash., did not have a window. Not to worry. “I could see the window from my manager’s office,” he said.

Mr. Yuen was a midlevel manager who wrote specifications for enterprise project management software — giant computerized flow charts. “I drew boxes and lines to help other people draw boxes and lines,” he said.

Then one night last spring, he was sitting in his apartment, surfing the Web. He went to (“news for nerds”) and saw an article that Paul Graham, the essayist and guiding light of computer programmers, was establishing a start-up company, later called Y Combinator, which would be giving seed money to hackers to start businesses. The word “hacker” is not derogatory in the computer world, but it is someone who is creative and resourceful with code.

“It’s like Rob De Niro wants to start an acting school,” Mr. Yuen said. “Do you want to join it? You get to work with him every week, you might even get a small little movie deal out of it at the end.”

Mr. Graham, a 41-year-old dimple-cheeked entrepreneur who sold his company, Viaweb, to Yahoo in 1998, had developed a large following for his lucid and contrary essays in a geek community more comfortable expressing itself through programming code than coherent paragraphs. Among his essays, “How to Start a Startup” is a siren call, resonating with Gen Y programmers pondering quarter-life crises and with college students too inexperienced to be jaded.

After the establishment of Y Combinator, more than 200 teams, with two to four people a team, applied in just a few days for eight slots announced by the new company, which operates in Mountain View, Calif., and Cambridge, Mass.

After being accepted, Mr. Yuen and his team established two start-ups in the last seven months: one he gave up on; the other, called TextPayMe, is a service that sends cash payments to an online account through text messaging — akin to PayPal but using a cellphone.

Last month, Mr. Yuen was in Mountain View, in the heart of Silicon Valley, demonstrating his product to venture capitalists and other tech entrepreneurs. At a Y Combinator dinner, he asked Evan Williams, a co-founder of Blogger, who was a guest speaker at the event, for his cellphone number and then sent him $2 using TextPayMe. (Mr. Yuen, incidentally, has now accumulated a trove of cellphone numbers of Silicon Valley heavyweights and offers from three venture capital firms.) Mr. Williams, intrigued, mentioned he had the same idea earlier that day while brainstorming with friends. “It’s something in the air,” he said.

That night, at the dinner, Mr. Williams addressed a room full of refugees from Oracle, AOL, Microsoft and Accenture. “I think this is so cool what you guys are doing,” said Mr. Williams, who sold his company to Google in 2003. “I would love to be part of something like this. I’m so jealous.”

If it is possible to systematize the archetypal two guys in a garage (and they are generally guys), the year-old Y Combinator wants to do it. The company’s formula is to throw smart people together and provide them $6,000 in seed money per person to cover the initial costs of the company, cookie-cutter legal paperwork and an extensive network of business contacts.

In return, Mr. Graham and his partners — Jessica Livingston, Trevor Blackwell and Robert Morris — collectively own 1.2 to 12 percent of the company, with an average of 6 percent. The company holds two boot camps a year for about eight groups each session, a summer one in Cambridge and a winter one in Mountain View. Y Combinator is not so much an incubator as a hatchery for baby companies, and as with all things spawned in bulk, some will die, some will flourish and some will eke by.

“Y Combinator comes down to two kids in a room with two computers and ramen noodles for a summer,” said Chris Sacca, a principal of new business development at Google and a speaker at Y Combinator’s one-day start-up school conference in October at Harvard. “It takes ambitious geeks and puts them in a situation with no distraction and expects audacious outcomes from them. The reason we like it is that that is what Google is.” Indeed, Google has made acquisition overtures to one of the companies that was formed during the summer session, which the founders turned down.

Mr. Graham got the idea for starting Y Combinator after giving a talk to student entrepreneurs at Harvard, where he received his Ph.D. in computer science. He told them to look for seed money from rich people they knew, preferably ones who had made their wealth from technology. “Then I said, ‘Not me,’ and they all looked kind of downcast and then I felt like a jerk,” he said. Then, on reflection, Mr. Graham thought, why shouldn’t he try to support young hackers?

The goal for Y Combinator’s young entrepreneurs is twofold: to make something people want (which is the company’s motto); and to stretch their financing long enough for additional investment or to get acquired. For instance, Mr. Graham’s former company, Viaweb, which made software to build commercial Web sites, was bought by Yahoo and reborn as .com. One Y Combinator business created last summer, a company that uses cellphones for social networking, got financing from a venture capital firm. Two other Y Combinator companies, a calendar Web site called and a news site,, received additional angel financing.

Y Combinator relies on certain premises: that open-source software and falling hardware prices means that tech start-ups are cheap to finance; that large companies are no longer at the forefront of innovation; and that mature technology companies find it cheaper to buy than to build.

The company takes its name from an obscure mathematical term, describing a function that generates other functions. Y Combinator is a company that creates other companies — a sly reference that would elicit a smile from a very narrow set of people, but luckily the same set that the company is trying to appeal to. It is the philosophical triumph of the passionate computer hacker over the uptight M.B.A.

“Paul is telling us, ‘If you are having a good time, and you are building something that other people want, then the money is not going to be a problem,’ ” said Beau Hartshorne, 24, whose vision for a company he is calling Pixoh will allow people to resize and crop their photos within a Web browser.

Mr. Graham is more focused on creating cool products — that is, coding as art — than developing revenue models and protecting intellectual property. Thus, Y Combinator may not be as good at teaching participants how to build self-sustaining companies than it is preparing them to sell, or flip, their businesses. For Silicon Valley corporate war chests, acquisitions are often made for technical talent as well as product, which generally has to be rebuilt if it is kept at all. The whispered acquisition rate for companies is about $1 million to $2 million per technical employee.

“It’s a way for recruiting for Yahoo where you don’t have the risk and uncertainty of knowing if they can actually do something,” said Joel Spolsky, a technology entrepreneur in New York City who also has a wide readership on the Internet.

“The danger is that you will run out of money before a buyer shows up,” said Peter Rip, a managing director of Leapfrog Ventures, a venture capital fund in Menlo Park, Calif. “We are seeing a lot of guys being attracted to the ease with which they can start a company, but starting is really only the first step.”

From a financial standpoint, the Y Combinator investments are small in a world where valuations are measured in millions of dollars, if not billions. “In the traditional venture capital model, $6,000 isn’t enough to pay your corporate lawyer fees for your first financing,” said Mr. Sacca of Google.

“It’s not just about the money,” said Jeff Mellen, 24, who quit Oracle with three of his friends to build an operating system that works within a Web browser.

Y Combinator provides the validation that young techies should keep pursuing their dreams. “I could get the same amount of money from my parents, but that wouldn’t tell me if my business plan or idea was a good one,” Mr. Mellen said. “That tells me my parents love me.”

Source: New York Times

A Practical Internet for Your Phone

October 19, 2007

By Kate Greene

In theory, at least, Internet access on cell phones is a useful thing. However, the slow speed at which Web pages load, their small formats, and the phones’ clunky interface collectively make extracting information from the Internet excruciating. But now a new startup based in Cupertino, CA, called Mobio aims to directly connect cell-phone users to the information they want, allowing them to bypass Web browsers.

This week, Mobio will introduce its first product: a suite of free, downloadable “widgets” for cell phones. These widgets can collect real-time information from a number of different Web services–for instance, mapping services and directory listings for restaurants–and combine them into a simple program on a phone. Mobio’s suite features nine collections of 50 widgets, including ones that give quick access to the phone numbers of local cab services and locksmiths, ones that provide maps to local restaurants that are open late, and ones that let a person buy movie tickets and book a table at a restaurant.

The idea behind widgets isn’t new, of course. Apple’s OS X operating system has offered them for years, letting people track sports scores, compare gas prices, and search the Web, all without using a browser. And recently, a number of established companies and startups have been working to put the same sort of capabilities on cell phones. Nokia, for example, offers a collection of feed services called WidSets that let people get blog updates and see recently posted Flickr pictures. A startup called Plusmo, based in San Jose, CA, offers a similar service. Both Nokia and Plusmo’s applications, however, draw from a single source at a time.

What distinguishes Mobio, says Sanjeev Sardana, the vice president of products, is that its widgets show information and provide access to a combination of disparate services. The information is provided by partners such as OpenTable, an online reservation service. The information is then collected on Mobio’s server; combined with other services, such as directory listings and an online map; and downloaded by phones that have Mobio’s software. Mobio acts, in effect, like the middleman, aggregating the useful data from around the Web and dispensing it to phones over the cellular network.

To get the widgets, individuals need to register themselves and their cell phone on Mobio’s website. Following authorization, the software will be downloaded to a person’s phone. Depending on the network connection, this should take about a minute.

It’s not easy to manage the data that is streamed to and stored on resource-constrained gadgets such as mobile phones. However, Sardana believes that Mobio’s technology addresses some of the major technological challenges. For one, the data that’s sent over the network is compressed by the server software so that it doesn’t eat up as much bandwidth, which makes it faster to update. Additionally, only the information that’s needed for a specific query is sent. For instance, if someone is leaving a movie for which he or she reserved tickets using a widget and wants to find a restaurant nearby, that individual won’t need to reenter his or her location information. The data from the movie transaction is used by the application to locate the individual at that time; the restaurant widget then searches for eateries near the theater.

Mobio’s widgets currently only work on phones in the Cingular, Sprint, and T-mobile networks, and only if they’re Java-enabled, although the company expects that future versions of the software will be compatible with Windows Mobile and Blackberry. This somewhat limited availability highlights one of the challenges of offering Web services to mobile phones, says Daniel Dailey, professor of electrical engineering at the University of Washington, in Seattle. “It’s hard to have client software run on all the phones,” he says.

Sardana thinks that in the future, the widgets could take advantage of real-time location information provided by the phone. Existing applications were designed with GPS in mind, but the location-based feature will have to wait until more phones have the capability. “As more handsets become GPS-enabled,” Sardana says, “then we will seamlessly blend that into our applications.”

MIT Technology Review

‘Web 2.0’ Deals Spread Beyond San Francisco

October 19, 2007


Venture-capital investment in so-called Web 2.0 companies, generally ad-supported Web sites in fields like social networking or blogging, is showing signs of maturity, with deals spreading outside the San Francisco Bay Area, according to new data released Monday.

The Bay Area, known for producing some of the most high-profile Internet companies, exploded last year with $413.7 million over 69 rounds of financing, which easily trumped any other region in the U.S. or overseas. However, in the first half of 2007, venture capitalists invested just $90.5 million in 25 rounds there, according to data from Dow Jones VentureOne and Ernst & Young LLP.

Meanwhile, New England topped the Bay Area in dollars with $102 million in the first half, over 10 deals, compared with $62 million and 12 deals in all of 2006.

Overall, the research showed that investors directed $646.2 million into 101 deals world-wide in the first half of the year, a 6% increase in investments over the same period in 2006, amid a rising interest in Web 2.0 in Europe and Israel. U.S. investments were virtually unchanged from the first half of 2006 with 67 deals and $357 million invested.

The data show that $52 million was put to work in 20 European Web 2.0 deals in the first half, roughly double the deals and investments seen in the same period last year. Israeli Web 2.0 companies raised $15 million in five deals in the first half, up from two deals and $5 million invested in all of 2006.

Investment in Web 2.0 start-ups has skyrocketed in the past two years as inexpensive technology has made it easier for people to communicate through the Internet.

“If you’re a venture guy, there are few areas you can look now and find an equally attractive place to put your money,” said Scott Raney, partner at Redpoint Ventures, Menlo Park, Calif. “You can’t beat an investment of $5 million in a company that could get acquired for hundreds of millions.”

Mr. Raney said companies better understand how to monetize the Web and are moving on from building a Web property — like a social network that attracts a particular demographic — to building a Web business that knows how to deliver targeted advertising to that demographic.

Meanwhile, valuations for Web companies continue to rise, a worrisome factor for venture capitalists in a much-hyped market. Mr. Raney said investors are split on whether it is best to invest in an unproven company at a low valuation or invest a large chunk of money at a high valuation in a company that is already gaining traction.

Source: Wall Street Journal


Business Search Goes Beyond The Browser

October 19, 2007

By J. Nicholas Hoover

The market for enterprise search is booming, growing 39% to $1.4 billion last year, according to IDC. Prices and features vary widely, ranging from the free IBM OmniFind Yahoo Edition to systems that cost hundreds of thousands of dollars.

For lightweight search–a few document repositories or a low-traffic Web site–OmniFind Yahoo Edition or Google Mini Search Appliance, which begins at $1, 995, are enough. But large companies with thousands of employees who use search in the context of their daily work–say, a legal department that uses e-discovery–may require a high-end search system from Autonomy, Fast Search & Transfer, or Endeca. “You need different tools to solve different problems,” says IDC analyst Susan Feldman.

Web search tools and enterprise search products often coexist in companies, with employees using their browser search tool of choice on the Web and a company-provided search application when accessing databases inside the corporate firewall.

OmniFind Yahoo Edition can be installed with just three clicks by selecting which content repositories and intranet sites to search. At the other extreme, if a company wants to personalize search based on job roles, add layers of security, include taxonomies, and hard-wire answers to questions, the project could take months to complete.

Enterprise search bars are popping up all over the place. Fast has a connector for Microsoft’s SharePoint. Autonomy integrates search with Microsoft’s Outlook toolbar and SAP applications. Search boxes are showing up in CRM and workflow apps, too, often built in by the software vendor.

It’s possible to search more and more business information, including PDFs, SQL Server databases, and file systems. There are specialists like Dutch company WCC, which can combine a fingerprint search with other data to find identity matches.

Increasingly, search will be a helper app that automatically populates forms with information from content repositories–Adobe’s Intelligent Document Platform does that–or scans legal documents to automatically create lawyer profiles, as done by Recommind’s MindServer Legal.

Source: Information Week

Is InfoSpace’s New iPhone App Better Than Just Using Google Search?

October 19, 2007

by Eric Zeman

InfoSpace made its Find It application available for the iPhone today. Using a screen with iPhone-esque buttons in the browser, users can search for restaurants, stores, health care providers and such. Are the results more useful than Google’s?

First off, Find It is a consolidated, browser-based application to help you find specific, relevant items quickly. It has eight predetermined search parameters that focus on finding businesses or services in a given locality. They are: Dine Out, Go Out, Shop, Travel, Health, Services, Number, and Person. Since its search functions are limited to those eight, I basically performed Google searches in my zip code with those same eight parameters as my search terms. (I changed “Dine Out” to “Restaurant” and “Go Out” to “Bars”.)

The nice thing about Find It is that you don’t have to type anything except for the zip code. Once you have, it remembers that location and lists it as an option for future searches. Hitting the “Dine Out” button brings you to a short list of search options, such as “all restaurants”, “Mexican” and so on. I tapped “all restaurants” and watched as 50+ results popped up for my town. Five are listed at a time, and the distance and street address are clearly listed on the screen. Clicking on the name of a restaurant brings up its full address and phone number, which can be automatically dialed from the browser.

You can also choose to map the locations five at a time. The one bummer is you can’t get directions directly from the map results. You have to choose the restaurant and then select to get directions from there. It gives basic directions from the center of the zip code used to perform the search. The vast number of results, though, and the ability to narrow down search results by cuisine type makes getting useful and relevant results a snap.

Now it is Google’s turn. I searched for “restaurants” in my zip code. The top three results were displayed at the top of the screen, followed by a list of general search results. Each result listed the address and phone number, which could be dialed directly from the first search page. You could click on any of these results and it would automatically take you into the Google Maps application, showing you where the restaurant was located on the map along with the other results. From here, choosing any of the particular restaurants gives you all the normal options found in the Google Maps app, including door-to-door driving directions and adding the restaurant as a contact. If you wanted to view more of the results beyond the initial three, there is a little link that reads: More & Local Map. This takes you to all the results and the Google Maps application.

Google’s mapping capabilities were a bit more refined that InfoSpace’s, but Find It holds its own for a number of reasons. The Google results were limited to just 10 restaurants. Fully half of them were national fast-food chains. Find It listed nearly everything in the vicinity, and included a nice dose of local mom-and-pop type places. With Google, once the Google Maps application was opened, there was no “back” function to take you to the original results. You had to hit the “home” button on the iPhone and then re-open the browser. Find It’s maps remain in the browser page, and you can go back to previously viewed pages easily.

Both searches performed equally well at making addresses and phone numbers easy to see and use. Each lets you perform more targeted results if you are looking for a specific restaurant or place to eat. Performing a search for McDonald’s produced the same results in both Find It and Google.

As much as I worship at the altar of Google, I have to say, Find It was more intuitive and produced a much better list of results that mattered to me.

Source: Information Week

Social Networking for Private Companies

October 19, 2007

If you aren’t a public firm, you’re likely in a financial black hole — with no way compare your results with the competition. You might think a 10% increase in revenue is great, but rivals might be posting 20% growth.

A company called iLumen Inc. aims to lift the veil by creating an online community where private companies can disclose their data anonymously and see how they stack up against others. On Tuesday, iLumen will introduce a social-networking component to its Financial Information Network for participants to get feedback from advisors and peers, as well as information from blogs and surveys.

Three major banks, including Wachovia, have signed on to contribute with the hopes that their advice will lead to new business for them. Businesses that join the network ($40 a month or $395 a year) might get their credit worthiness assessed by banks or a CPA firm might identify tax and accounting issues.

Of course, this service will only be useful if there are enough firms inputting honest data. So far, that only totals about 12,000 — and it’ll take more advisors to make the price tag pay off.

Still, iLumen’s efforts bolster the niche networking opportunities that are flourishing online for small businesses, from LinkedIn, StartupNation, and Prosper to last week’s launch of Bank of America’s small business forum. The trick for firms is picking the right posse.

Readers, What are the best online networking opportunities for private companies?

A Richer Trip to the Mall, Guided by Text Messages

October 19, 2007

SEARCH engines made it easy to find items at online stores. Now the Internet is poised to solve a more vexing problem: finding items while you are at the mall.

Technology companies like NearbyNow of Los Altos, Calif., and GPShopper in New York have introduced mobile Internet applications that allow shoppers to use their cellphones and PDAs to search the inventory and prices at the local mall, save them wasted steps and, sometimes, turn up last-minute bargains and promotions.

GPShopper’s Slifter service for mobile product searches was first to the market last year, but some analysts believe that NearbyNow’s mall-centric approach has more immediate potential.

NearbyNow first tested its system last holiday season in the Eastridge mall, in San Jose, Calif. The mall posted about 10 signs prompting shoppers to send a six-digit text message to the address “Nearby” for sales information. Shoppers received a welcome message from the mall, listing the number of sales in progress and asking users to type in the brand or product they were seeking.

The service then returned a list of stores with the item, including prices and relevant sales.

“If you type in jeans, you’ll get 90 stores, but if you type in Levi’s 501s, you might get 14 or 15,” said Scott Dunlap, NearbyNow’s chief executive. “We have every product in the mall, which is typically 600,000 to 800,000 items.”

Mobile shopping applications may sound like a novelty appealing only to shopping-crazed teenagers, but they are at the cutting edge of an increasingly competitive local online shopping services. Companies like ShopLocal, StepUp and others have sought to aggregate and display local inventory information online, to support the 94 percent of commerce that still happens offline.

Greg Sterling, principal of Sterling Market Intelligence, a commerce consultancy, said that NearbyNow is tying together online and offline shopping. “Others are trying, but so far nobody’s had the kind of success they’ve had,” he said. “They’re definitely onto something.”

Mr. Dunlap of NearbyNow said more than 2,000 Eastridge shoppers conducted searches from their mobile devices on Dec. 16, the day the service began. The most interesting results came from a handful of promotions the company tested that day, along the lines of Kmart’s blue light specials. Everyone who conducted searches was sent, at specific times, offers to win movie tickets or $25 gift cards if they were among the next 10 people to buy items from a given store.

“It was a little scary,” Mr. Dunlap said. “We watched about 100 people answer their phones and walk straight for the store. Depending on the offer, you could start a stampede.”

Predictably enough, teenagers bought the cheapest item in the stores. “But you’d also see adults buying $100 shoes,” Mr. Dunlap said. The average total purchase for the promotion topped $25.

NearbyNow, which earns about $1 from retailers or manufacturers each time someone views a Web page for the advertiser’s product, now operates in 13 malls, but just one in the Northeast, the Maine Mall in South Portland. But Mr. Dunlap said the company would cover 20 by the end of this month, and 100 by November.

Melinda Holland, senior vice president for business development at General Growth Properties in Chicago, which owns the Eastridge mall, said NearbyNow’s service is “a significant evolution” in the company’s Internet offerings.

“Today, people might go to to see colors and styles, then go to the mall after that,” Ms. Holland said. “This is the next step, where you can look for that small-size T-shirt in the Eastridge mall, so we love it.”

GPShopper’s Slifter service lets shoppers use their mobile devices to search for products at more than 20,000 retailers. According to Alex Muller, the company’s chief executive, more than 100,000 people use Slifter, typically searching for goods several times monthly.

At the moment, Mr. Muller said, Slifter relies on users to type in their ZIP codes along with a description of the item, but soon the service will recognize the user’s location and save that step.

One potential sticking point for services like these, and new ones from NearbyNow, Krillion, BrandHabit and others, is that retailers typically do not have the sophisticated technology to track their stores’ inventories and transfer that information to their own Web sites, let alone those of other companies. Web sites can ill-afford to tell shoppers that a product is available, only to have customers find out at the mall that it is not.

NearbyNow, which on its Web site offers the same mall-search service it features for mobile devices, gets around this problem by helping users reserve items. A NearbyNow representative then calls stores to check availability, and sends e-mail messages to customers to confirm the reservation.

NearbyNow last year received $2.5 million in financing from Draper Fisher Jurvetson, a leading Silicon Valley firm that backed Hotmail, Skype and Overture, among others. Krillion raised $3.1 million from Hummer Winblad Venture Partners, a high-profile firm that backed Napster and the Knot, among others.

To show how much this market resembles trench warfare at the moment, Krillion has spent the last year focusing on a single category: major appliances. Krillion pulls data from the Web pages of appliance retailers and manufacturers, and integrates it with geographical data of its own, to build 275 million product-specific Web pages. Krillion users can search those pages for product specifications and prices in their local area.

On product pages, users are presented with a “click to call” button, connecting prospective customers with salesclerks at the store so they can ask questions or check on availability.

Joel Toledano, Krillion’s chief executive, said Krillion charges companies to advertise on the search results pages and elsewhere on the site. He said Krillion would add consumer electronics in the coming months.

Industry analysts said that as online services improve at helping consumers find what they want offline, the e-commerce industry could see its ascendancy wane. That puts online commerce “in a backup position,” Mr. Sterling, of Sterling Market Intelligence, said.

“The Internet, which was going to enable any business to sell to anyone in the world,” he said, “ultimately may be used mostly to do the opposite — provide consumers with information on where to buy locally.”

New York Times Online