Flying under the radar — and away from the eyes of the tech press that might have otherwise paid it attention — was sort of the plan, Demandforce chief marketing officer Patrick Barry told me in an interview a few minutes ago. “We built this company the old-fashioned way. That meant putting our customers first. PR and other things were not a priority. Our customers don’t read tech sites. We focused our efforts on reaching out to our customers.”

Whatever it was, it worked. Demandforce, launched in 2003, had attracted $11.8 million in venture capital investments, primarily from Benchmark Capital. By the time of the acquisition announced today, the San Francisco-based outfit had 300 employees, a profitable business with a run rate of $60 million in annual sales and — get this — $12 million in the bank.

So what does Demandforce do? Marketing for small businesses: Dentist’s offices and hair salons and auto-repair shops and scores of other types of small businesses that make up the majority of the U.S. economy and need help reaching out to their customers.

Demandforce, Barry told me, built bridges to the data stored in old-school marketing software programs — and there are dozens of them — that would typically run on desktop machines, freeing up the data and moving it into the cloud.

From there, it would apply its own marketing algorithms to the business: managing appointment reminders, asking customers for feedback and publishing customer reviews. So far, Demandforce has syndicated 1.5 million reviews to Google and CitySearch and other sites like them that accept Demandforce content.

Intuit said in a statement that it will make Demandforce into a new division in its Small Business Group; it will continue to be led by Rick Berry, Demandforce’s president and founder. He will report to Kiran Patel, the executive vice president and general manager of that group.

After the deal closes, Intuit said, it expects Demandforce to add one to two points to its revenue growth in fiscal 2013, and to be neutral or slightly dilutive this year. Intuit shares rose 44 cents, or less than 1 percent, to $58.04.

But there’s no denying the attraction of services like Amazon Web Services or Joyent or Rackspace, where you can spin up and configure a new virtual machine within minutes of figuring out that you need it. So, many companies seek to approximate the experience they would get from a public cloud provider on their own internal infrastructure.

It turns out that a start-up I had never heard of before this week is the most widely deployed platform for running these “private clouds,” and it’s not a bad business. Eucalyptus Systems essentially enables the same functionality on your own servers that you would expect from a cloud provider.

Eucalyptus said today that it has raised a $30 million Series C round of venture capital funding led by Institutional Venture Partners. Steve Harrick, general partner at IVP, will join the Eucalyptus board. Existing investors, including Benchmark Capital, BV Capital and New Enterprise Associates, are also in on the round. The funding brings Eucalyptus’ total capital raised to north of $50 million.

The company has an impressive roster of customers: Sony, Intercontinental Hotels, Raytheon, and the athletic-apparel group Puma. There are also several government customers, including the U.S. Food and Drug Administration, NASA, the U.S. Department of Agriculture and the Department of Defense.

In March, Eucalyptus signed a deal with Amazon to allow customers of both to migrate their workloads between the private and public environments. The point here is to give companies the flexibility they need to run their computing workloads in a mixed environment, or move them back and forth as needed. They could also operate them in tandem.

Key to this is a provision of the deal with Amazon that gives Eucalyptus access to Amazon’s APIs. What that means is that you can run processes on your own servers that are fully compatible with Amazon’s Simple Storage Service (S3), or its Elastic Compute cloud, known as EC2. “We’ve removed all the hurdles that might have been in the way of moving workloads,” Eucalyptus CEO Marten Mickos told me. The company has similar deals in place with Wipro Infotech in India and CETC32 in China.

Facebook has just announced that it will acquire Instagram, the popular mobile photo-sharing service, for $1 billion in cash and shares.

The social networking giant posted on the acquisition, its biggest yet, on its site, as well as on CEO and co-founder Mark Zuckerberg’s Timeline on Facebook.

Photos are critically important for Facebook, which has been slow to innovate in the fast-growing mobile arena in the important consumer space. By contrast, Instagram has taken the arena by storm, with its delightful and elegant app and the motto, “Fast beautiful photo sharing.”

Consumers have responded (including me — it is the only non-communications app I use many times a day). The San Francisco-based company — with only 13 employees — had 30 million Apple iPhone users before it came to Google’s Android last week, where it got more than a million new users in just 12 hours.

Still, despite all the usage, Instagram had not articulated a plan for, you know, making money. Now, that will presumably be Facebook’s problem to solve.

The Facebook acquisition has been kept very quiet, with its CEO Kevin Systrom working on it in conjunction with new fundraising efforts that would have valued the company at $500 million. Liz Gannes reported on this effort last week, which was poised to close, in fact, before the Facebook deal was struck over the weekend.

Until now, Instagram has received Series A funding of $7 million led by Benchmark Capital just over a year ago, when it only had 1.75 million registered users.

Seed investors include Andreessen Horowitz — which did not follow on later — and Baseline Ventures. Also in the Benchmark round: Twitter creator Jack Dorsey, former Facebooker Adam D’Angelo and Chris Sacca.

In a blog post titled “Instagram + Facebook,” Systrom promised no change, except for the $1 billion mountain of cash:

“It’s important to be clear that Instagram is not going away. We’ll be working with Facebook to evolve Instagram and build the network … The Instagram app will still be the same one you know and love.”

Zuckerberg also promised that Facebook would keep Instagram independent, and that such a large purchase would be rare for the company, which is set to go public soon.

“This is an important milestone for Facebook because it’s the first time we’ve ever acquired a product and company with so many users,” he wrote. “We don’t plan on doing many more of these, if any at all.”

Here is the full press release from Facebook:

Facebook to Acquire Instagram

MENLO PARK, CALIF. — April 9, 2012 — Facebook announced today that it has reached an agreement to acquire Instagram, a fun, popular photo-sharing app for mobile devices.

The total consideration for San Francisco-based Instagram is approximately $1 billion in a combination of cash and shares of Facebook. The transaction, which is subject to customary closing conditions, is expected to close later this quarter.

Mark Zuckerberg, founder and CEO of Facebook, posted about the transaction on his Timeline:

I’m excited to share the news that we’ve agreed to acquire Instagram and that their talented team will be joining Facebook.

For years, we’ve focused on building the best experience for sharing photos with your friends and family. Now, we’ll be able to work even more closely with the Instagram team to also offer the best experiences for sharing beautiful mobile photos with people based on your interests.

We believe these are different experiences that complement each other. But in order to do this well, we need to be mindful about keeping and building on Instagram’s strengths and features rather than just trying to integrate everything into Facebook.

That’s why we’re committed to building and growing Instagram independently. Millions of people around the world love the Instagram app and the brand associated with it, and our goal is to help spread this app and brand to even more people.

We think the fact that Instagram is connected to other services beyond Facebook is an important part of the experience. We plan on keeping features like the ability to post to other social networks, the ability to not share your Instagrams on Facebook if you want, and the ability to have followers and follow people separately from your friends on Facebook.

These and many other features are important parts of the Instagram experience and we understand that. We will try to learn from Instagram’s experience to build similar features into our other products. At the same time, we will try to help Instagram continue to grow by using Facebook’s strong engineering team and infrastructure.

This is an important milestone for Facebook because it’s the first time we’ve ever acquired a product and company with so many users. We don’t plan on doing many more of these, if any at all. But providing the best photo sharing experience is one reason why so many people love Facebook and we knew it would be worth bringing these two companies together.

We’re looking forward to working with the Instagram team and to all of the great new experiences we’re going to be able to build together.

But some deserve the attention: It looks like Instagram is close to wrapping up a Series B round led by Sequoia Capital, according to several sources close to the situation.

Instagram co-founder and CEO Kevin Systrom

The maker of the fast-growing photo-sharing app, which just made its way to Android, is set to receive $50 million at a $500 million valuation, the sources said. Others joining the round could include DST Global.

The Wall Street Journal had reported that some were skeptical that Instagram deserved a half-billion-dollar valuation without revenue to speak of, but there does not seem to be a lack of people wanting to get into the deal.

Instagram received Series A funding of $7 million led by Benchmark Capital just over a year ago. At the time, it had 1.75 million registered users.

The company had 30 million iPhone users before it came to Android this week, at which point it got more than a million new users in 12 hours.

Instagram, which just got its own office on San Francisco’s South Park, had 13 employees at last count. CEO Kevin Systrom declined to comment on fundraising.

(Image courtesy of JD Lasica on Flickr)

The bill makes it easier for some elite companies to stay private, but it also makes it easier for companies to go public by reducing regulatory burdens associated with U.S. IPOs. I spent some time this week asking venture capitalists, secondary market organizers and CEOs how they think it will affect their business.

First of all, the bill says companies with less than $1 billion in revenue — called “emerging growth companies” — don’t have to make Sarbanes-Oxley audited financial reports for up to five years, don’t have to make Dodd-Frank compensation disclosures, can meet with investors before filing to test the waters, and have other rules relaxed.

Here are some relatively readable summaries of the Jobs Act from law firms Perkins Coie and Latham Watkins, and investment bank Goldman Sachs.

There are a slew of rule changes, but the consensus from everyone I talked to is that the JOBS Act is more a reducer of friction than a significant change to the incentives around going public.

The JOBS Act is “more of a perception gain,” said Benchmark Capital partner Bill Gurley, speaking on a panel on IPOs organized by Wealthfront at the Rosewood Sand Hill last night. “It’s marginal, it’s not a revolution.”

Still, the IPO costs today are pretty major, and anything that reduces them could be good for would-be public companies. If it costs $3 million to $5 million today for a company with $80 million in revenue and 10 percent operating margins to go public, “that’s half of your profit right there,” Gurley said.

Multiple speakers at the event griped about the cost of Sarbanes-Oxley as well as the industry of consultants and advisers that has arisen around it. They praised the JOBS Act’s move to give young companies more time to comply so they can push back on the “bullshit overhead” surrounding compliance, as Aruba Networks CEO Dominic Orr put it bluntly.

Some companies anticipate a more dramatic and material effect. Speaking from Washington, D.C., where he’d flown in for the JOBS Act signing, Rally Software CEO Tim Miller told me, “If [the JOBS Act] had passed a year ago we’d probably be a public company today. Right now, it’s so expensive to go public as a small-to-midcap company that it would have taken all our potential profits and then some — and sharing that information publicly would have been a competitive threat to our business.”

On the other hand, another part of the JOBS Act makes it easier for some private companies to stay private. It raises the shareholder limit before companies are required to make public disclosures to 2,000 from 500. And that 2,000 doesn’t include employees.

The consensus I heard is that the infamous 500-shareholder limit has gotten a lot of publicity for the way it affected Google and Facebook, but the reality is that it doesn’t impact very many companies.

Still, raising the limit could, for example, take pressure off Twitter.

A byproduct of the 500-shareholder limit has been the use of restricted stock units, rather than regular stock options, by companies like Facebook, Zynga and Twitter so they can keep hiring without passing the mark. RSUs have become common enough that the SEC released general guidelines for them earlier this year.

RSUs are non-transferable and have no strike price — they’re activated only when a company is sold or goes public. So it’s possible that, post-JOBS Act, companies will go back to providing a more traditional equity upside with stock options.

But some VCs pointed out that the other benefit of RSUs is that they help companies avoid reporting “409A valuations,” which are the tax code’s requirement for a publicly disclosed fair market valuation associated with stock option grants. Private companies like to avoid telling people how much they’re worth.

The coincidence of the JOBS Act and the impending Facebook IPO seems to be prompting the industry to consider the state of secondary markets for private company stock — and perhaps turning away from them.

One of the secondary trading leaders, SecondMarket, last week laid off 10 percent of its staff, while referencing the Facebook IPO.

SecondMarket SVP Jeff Thomas told me this week he thought the major impact of the JOBS Act will be a movement away from RSUs as companies revisit their compensation incentives for employees. Of course, that would be in his interest — because RSUs are non-transferable, they can’t be traded on secondary markets.

Even if going public gets a little bit easier, public markets still come with the problems of “casino investors and quarterly reporting demands” that companies would rather avoid, Thomas argued.

But Gurley and other VCs were dismissive of organized secondary markets. They prefer that their private companies figure out more controlled ways to manage late-stage liquidity for early investors and employees.

Sequoia Capital tells its portfolio companies to include a “right of first refusal” in all their stock options so they can buy them back instead of allowing outside transactions, said long-time partner Doug Leone at the Wealthfront event last night. “Within Sequoia companies, that door is getting shut,” he said.

It’s just a seed round, but a significant one — the company isn’t disclosing the amount, but it should tell you something that the lead investor is Benchmark Capital, which doesn’t usually do seed investments, as a matter of practice. Other investors include SV Angel, CrunchFund, Andy Bechtolsheim, Charlie Cheever and Ariel Poler.

Highlight, which was just released a month ago, has persuaded an impressive selection of VCs and techies to share their actual locations with people they don’t know. Just in the past few weeks, I’ve been notified on Highlight that a VC was within 150 meters of me at a ski resort, that an early Facebook guy was merging onto 280 at the same time as me, and that a Google exec was a block away from my home in San Francisco. And I was officially “friends” with only one of the three people — the others just had mutual connections in common.

What seems to make people feel comfortable with automatically sharing their location on Highlight is that it’s not shared all the time. Users get pinged when someone with mutual friends or common interests on Facebook is nearby, with a one-time snapshot of that person’s location.

Highlight is also making its app available outside the U.S. starting today. Co-founder Paul Davison told me he’s especially eager for people to use Highlight when they travel. There’s currently no setting to only get Highlight notifications about people you are already friends with — by design, the app is meant to encourage serendipitous connections. For me personally, that’s a bit of a chafe in my hometown, but I can see how it might be exciting to meet friends-of-friends while traveling.

Davison also said a new version of Highlight will be released before the SXSW festival in Austin, Texas, next week that’s built to decrease its pull on users’ batteries (which is indeed an issue with constant location-sharing), and to give users tools to mark people as interesting and friend them on Facebook or follow them on Twitter.

Highlight started when Davison was an entrepreneur-in-residence at Benchmark and still has a team of just two people, based in San Francisco. Competitors include Glancee.

The new location-sharing apps promise to provide more value to users than ever — but they will surely teeter awfully close to the edge of creepy for many people.

Unless you go to Stanford or one of the 10 other colleges where it’s been tested, Glassmap may not have crossed your radar.

The stealthy-till-now company came out of the Y Combinator program last summer, and it’s specifically focused on colleges, families and tight groups of friends. The Glassmap app for iOS and Android constantly shares users’ locations and shows them on a map.

Glassmap founder Geoff Woo says his company’s secret sauce is the work it’s done around managing battery drain, a common problem with smartphone apps that use GPS. This is done through careful management of pushing and pulling data from each user’s client version of the app.

Woo contended that Glassmap is also “more social” than other passive location-sharing services that are not for dating, like Google Latitude and Apple’s Find My Friends. He noted Glassmap features such as integrated text messaging, calling and virtual “waves” (like Facebook “Pokes”). Outside of college campuses, Woo said he sees the app being used among families and close groups of friends.

Meanwhile, another new app that’s getting some attention in Silicon Valley is Highlight, which, like Glassmap, constantly transmits users’ locations, but is very different in practice.

Highlight tells iOS app users when they are in the vicinity of their Facebook friends and other people they might want to get to know, based on common friends and interests.

Highlight explicitly does not show users on a map, but rather pinpoints moments when two users are in close proximity to each other (within 150 meters). The idea is to increase serendipity.

“Highlight makes people friendlier,” co-founder Paul Davison told me.

“The real world is like Facebook where every profile is just a single photo,” Davison said. And so Highlight — which Davison started as an entrepreneur-in-residence at Benchmark Capital — aims to put those faces in context.

Okay, sure, but what about the creepy factor? “If you build this simply enough with the right privacy controls, it could be useful to everyone in the world,” Davison argued.

I personally think Highlight is interesting, especially in the run-up to the location-sharing mecca of SXSW Interactive in Austin next month. But even in this young space, the claws are already out.

When I asked Woo what he thought of Highlight, he quickly dismissed it by saying, “You could just talk to people on the street if you really wanted to. In the mainstream world that’s not something people want to do.”

That was July. Wednesday, Domo will announce that it has raised another batch of money, and is bringing in a new investor. The company has closed a $20 million round led by Institutional Venture Partners.

IVP, which had invested in Omniture and so has a history with James, is joining an all-star cast of investors including Benchmark Capital; Andreessen Horowitz; Ron Conway and David Lee of SV Angel; and Hummer Winblad, plus a bunch of personal investments. The round — which is being described as an A-1 round, brings Domo’s total capital raised to date to $63 million.

IVP general partner Todd Chaffee said Domo is an example of a dynamic management team going after a high-growth market. “We know Josh has the experience to build Domo into a disruptive and dominant player in a growing $10 billion market,” he said in a statement. Aside from Omniture, IVP has backed HomeAway, MySQL, Twitter and Zynga.

James wouldn’t tell me the implied valuation, but he did concede that it’s upward of “a couple hundred million.” And if that’s not surprising enough, what’s equally surprising is one possible use for the money: Acquisitions. Well, maybe.

“Let’s just suppose, and this is 100 percent supposition,” he told me over the phone Tuesday, “that we want to buy someone. We’ve thought about it. We’ve had potential targets cross the email threads. It’s not the right time to do that stuff just yet. But it’s nice to know we have the flexibility when the time comes.”

So where’s Domo, the business intelligence software-as-service play he was building? It’s running as a demonstration with a few early customers, he says. And he’ll have more to say about it publicly in about three to four months.

“We have a few thousand people who say they want to see a demo, and we’re working through that list,” James says. “The feedback has been more positive and at a higher rate than I would have thought possible. I think we’re going to have to figure out how to do a lot of installations all at once.”

That’s what we call a good problem to have.

This time the target is Cotendo, a company that uses a network of 30 data centers distributed around the world to put video content physically closer to consumers, and thus speed up delivery, especially to mobile devices. The acquirer is Internet concern Akamai, which says it will pay $268 million, plus the assumption of unvested options.

Cotendo had been reported to be the subject of a bidding war between Akamai and rival Juniper Networks. Breathless reports at the time, sourced to enthusiastic Israeli newspapers, valued Cotendo as high as $350 million. The deal will close during the first half of 2012.

Even at the lower price, the deal marks a nice exit for several U.S.-based venture capital funds. Cotendo raised $7 million from Sequoia Capital and Benchmark Capital in 2009, and then another $12 million in a round joined by Tenaya Capital last year. In June, it took a $17 million strategic investment from Juniper and Citrix Systems.

Cotendo had grown into an Akamai competitor, with a reputation for being faster at some things than Akamai, and also cheaper to boot. That made it an obvious Akamai target, given its history of acquiring rivals — usually after suing them. In 2005, it took out Speedera Networks for $130 million, after a contentious patent lawsuit between them. Akamai had sued Cotendo last November. So the next time Akamai sues someone, set your stopwatch, because the defendant may be the next one to be acquired.

Akamai’s statement on the deal is below:

Akamai to Acquire Cotendo

Combined technology and teams expected to help accelerate pace of innovation in cloud and mobile optimization

CAMBRIDGE, MA and SUNNYVALE, CA – December 22, 2011 – Akamai Technologies, Inc. and Cotendo announced today that the two companies have signed a definitive agreement for Akamai to acquire Cotendo.

Helping to mitigate the challenges of operating in a hyperconnected world, Akamai provides a secure platform over which businesses can engage users across the Web, mobile, cloud, or a mix of public and private network environments. Cotendo offers an integrated suite of Web and mobile acceleration services. The combination of the two companies’ technologies and teams is expected to increase the pace of innovation in the areas of cloud and mobile optimization.

“As we look to accelerate growth across the dynamic landscapes of cloud and mobile optimization, we are excited to be joining forces with Cotendo,” said Paul Sagan, president and CEO of Akamai. “Cotendo’s technology, partnerships and people are a strong complement to Akamai. Together, we believe there is tremendous opportunity for our combined technologies as enterprises embrace the move to the cloud and seek solutions for an increasingly mobile world.”

“The Cotendo team is very proud of our accomplishments in delivering proven and effective solutions for accelerating Web and mobile assets. By combining our innovative technology and employees with Akamai, we expect our customers and partners will gain access to a comprehensive, global platform and wider portfolio of leading-edge services supported by some of the most experienced providers in the industry,” said Ronni Zehavi, CEO and co-founder of Cotendo. “We look forward to working with Akamai in an effort to create the strongest offering in the industry.”

Founded in 2008, Cotendo is headquartered in Sunnyvale, CA, with a technology center in Israel. Cotendo currently has approximately 100 employees, with over 50 based in Israel.

Under terms of the agreement, Akamai will acquire all of the outstanding equity of Cotendo in exchange for a net cash payment of approximately $268 million, after expected purchase price adjustments, plus the assumption of outstanding unvested options to purchase Cotendo common stock. The closing of the transaction, which is subject to customary closing conditions, including regulatory approvals, is expected to occur in the first half of 2012.

The San Mateo, Calif.-based Edmodo has one of those growth curves that grab investors’ attention. It’s now at five million users, up from 500,000 a year ago.

Edmodo supports a range of classroom-specific activity, from internal message boards to online quizzes and grading, both on the Web and mobile devices. The Edmodo interface looks a lot like Facebook — or especially an enterprise collaboration tool like Yammer.

At the moment the service is completely free. Edmodo Chairman Rob Hutter told AllThingsD the company doesn’t have any immediate plans to bring in revenue. The VC funding is meant to fuel continued growth and hiring.

This is the first joint investment for Hoffman and Cohler, who are both newly minted hotshot venture capital partners, and who previously worked together at LinkedIn and in some capacity at Facebook (where Hoffman was an early investor and Cohler was an early employee). Other Edmodo investors include Union Square Ventures and Learn Capital.

Kleiner Perkins has nabbed former Twitter engineering head Mike Abbott, who left the social communications company less than two months ago to be an entrepreneur in residence at Benchmark Capital.

(Well, that didn’t last long, Mike, but maybe the food was better at 2750 Sand Hill Road than at 2480 Sand Hill Road.)

In an interview this morning, Abbott said that he hopes to stay a VC for 20 years (yipes!), since it allows him to work closely with a wide range of entrepreneurs and also get a broad view across a spectrum of businesses.

“I am really energized about what’s been happening in a lot of places like software,” he said. “From my experience, I think I bring a lot of differentiation for the companies Kleiner is invested in.”

And tech cred too. “We think engineers will be thrilled to have access to Mike and he’s a magnet for talent,” said Kleiner partner Ted Schlein, who compared him to all the comic-book heroes, The Avengers, in one person. “Mike is multi-faceted.”

Abbott was indeed a high-profile hire for Twitter a little over a year ago from Palm, where he served as head of its software and services, in charge of its webOS mobile platform.

He was brought in to provide a level of discipline and reliability to the Twitter communications platform and service, which had been plagued by persistent outages that made the Fail Whale infamous.

Abbott will focus on social, mobile and cloud investments at the well-known Silicon Valley venture firm while working on a team that includes high-profile players Mary Meeker and Bing Gordon.

Here’s the official press release:

Michael Abbott Joins Kleiner Perkins Caufield & Byers as Partner

Engineering Leader to Help Social, Mobile and Cloud Entrepreneurs Build Teams and Ventures

MENLO PARK, Calif., December 1, 2011 – Kleiner Perkins Caufield & Byers (KPCB) today announced that Mike Abbott, former vice president of engineering at Twitter, has joined the firm as a partner on its digital team. Abbott led the building of innovative, high-performance applications and services at Twitter, Palm and Microsoft. With a deep background in social and mobile applications and infrastructure, Mike is also an expert in enterprise infrastructure and cloud computing and “big data” businesses, having founded Composite Software, and advised Cloudera and Jawbone.

“I’m excited to join KPCB’s partners to build new ventures faster,” said Abbott. “The partner mix of founders, operators and investors is ideal for entrepreneurs racing to scale at this disruptive time.”

“Mike is an exceptional and well-respected leader with an outstanding track record shipping great products,” said Ted Schlein, partner, KPCB. “Mike’s deep expertise from Palm and Twitter will help social, mobile and cloud entrepreneurs win.”

Dick Costolo, CEO of Twitter, said, “Mike is a huge engineering talent and will be a terrific asset to Kleiner’s technology companies. He was instrumental in helping us scale Twitter’s architecture to support incredible growth ̶ from 100 million daily Tweets in January 2011 to about 250 million daily tweets today.”

In less than a year and a half, Abbott grew the Twitter engineering team from 80 to more than 350 engineers in an intensely competitive recruiting market. Abbott’s team rebuilt and solidified Twitter’s infrastructure. Prior to joining Twitter in 2010, Abbott led the software development team at Palm that created HP/Palm’s next-generation webOS platform. Abbott was previously the general manager at Microsoft for .NET online services, which became Azure. Prior to that, he co-founded Passenger Inc. and founded Composite Software. Abbott has advised and invested in numerous software companies such as Cloudera, Hearsay Labs, Saynow and Jawbone.

Mike Abbott is just the third senior KPCB partner added in three years, joining Bing Gordon and Mary Meeker, each with exceptional records serving mobile, social and cloud entrepreneurs. KPCB’s digital team also bolstered its infrastructure expertise with the recent addition of Ray Bradford from Amazon Web Services, where he helped grow the company’s cloud database business.

It wouldn’t be a bad exit for a bunch of U.S.-based venture capital funds, either. Cotendo raised $7 million from Sequoia Capital and Benchmark Capital in 2009, and then another $12 million in a round joined by Tenaya Capital last year. In June, it took a $17 million strategic investment from Juniper and Citrix Systems.

Cotendo is an Akamai competitor. Its content delivery system uses a network of distributed servers around the world to put content physically close to consumers, and it specializes in speeding up delivery to mobile phones and tablets, which is a lot like the business Akamai is known for. The thing about Cotendo is that it has a reputation for being faster at some things than Akamai, and also cheaper.

Akamai has been known to buy competitors. In 2005, it took out Speedera Networks for $130 million, after a contentious patent lawsuit between them. Part of the story driving the Akamai takeover chatter is the fact that Akamai sued Cotendo last November. Akamai CFO J.D. Sherman will be speaking at a Credit Suisse conference in Phoenix on Wednesday. Maybe he’ll shed a little light on the situation.

Meanwhile, analyst Brian Marshall of ISI likes the idea of Juniper acquiring Cotendo in a joint deal with AT&T. Since AT&T is a big Juniper customer, accounting for about 8 percent of sales, and AT&T is also a big Cotendo customer, it would mean good things for Juniper’s relationship with AT&T. If the numbers being reported are correct, it would amount to about 10 percent of Juniper’s cash on hand, which was about $3.4 billion as of the quarter ended Sept. 30. It would be a much bigger deal for Akamai, which had $688 million in combined cash and short-term investments as of the same date.

Raj Abhyanker

Abhyanker alleges that he pitched a neighborhood site to Benchmark in 2007 and said at the time he would call it Nextdoor if he could buy the domain. Benchmark conducted due diligence on the deal and indicated it wanted to invest.

But the prominent Silicon Valley firm then pulled out, according to Abhyanker, who filed with the Superior Court of California in San Jose.

At fault, according to Abhyanker, are Benchmark and Nextdoor, as well as Facebook CTO Bret Taylor, who was at Benchmark at the time and had agreed at least informally to advice Fatdoor.

After the Benchmark funding fell through, Abhyanker was fired as CEO and Fatdoor changed focus to eventually become a local deal aggregator called The Dealmap. Earlier this year, The Dealmap was bought by Google, along with its one granted patent and more than 40 patent applications that name Abhyanker as the lead inventor.

Abhyanker — who is now a practicing patent attorney — is faulting Benchmark for getting him kicked out of the company he co-founded, because the VC firm’s failure to invest made Fatdoor’s investors lose confidence in the start-up’s original concept, and because the Fatdoor board used a CEO headhunter to find his replacement that was recommended by Benchmark.

Nirav Tolia

This all came to a head because Nirav Tolia — who was a Benchmark enterpreneur-in-residence later in 2007 — in October launched a local social network called Nextdoor that is funded by Benchmark.

Reached for comment, Nextdoor CEO Nirav Tolia said Abhyanker’s charges are without merit.

“I have never met this person, and the idea and naming of Nextdoor was originated solely by the employees and founders of our company,” he said.

Indeed, Abhyanker’s complaint makes the assumption that Tolia has been working on Nextdoor since 2007. Abhyanker omits any mention of Fanbase, the Benchmark-funded sports directory Tolia started out of his stint as a Benchmark EIR that launched in 2009.

Nextdoor is a pivot of Fanbase, using the company’s remaining funding and the same team, Tolia had told AllThingsD when the neighborhood site launched last month.

Tolia on Thursday said he had received an email from Abhyanker last month after Nextdoor launched, asking to be named to Nextdoor’s founding team.

The email, which Tolia forwarded to AllThingsD, says:

“I am wondering if you would be open to me being in your founding team, in exchange for me filling a part time general counsel, business development vp, and/or board role, and perhaps a small angel investment in cash, resources, and space.”

In addition to Benchmark, Nextdoor and Tolia, Benchmark partners Kevin Harvey, Peter Fenton, Mitch Lasky and Bill Gurley are named in the complaint.

Also named are Bret Taylor and Jim Norris, the FriendFeed founders who helped launch Google Maps and were Benchmark EIRs at the time and had allegedly committed via email before the Benchmark deal fell through that they would be Fatdoor advisors.

Abhyanker claims that Taylor and Norris specifically appropriated his idea for neighborhood-level privacy controls, a feature of Nextdoor that Tolia himself attributed to “an early Google Maps employee” in a recent interview with the San Jose Mercury News. Update: Tolia said he was referring to Prakash Janakiraman, his co-founder at Fanbase and Nextdoor who formerly worked at Google on Maps. Tolia also noted he joined Benchmark four months after Abhyanker made his pitch.  

The evidence for that accusation seems a bit vague, but is particularly notable because Taylor is now Facebook’s CTO.

A spokeswoman for Benchmark said the firm does not comment on pending legal matters. Taylor said he was not aware of the lawsuit and he has no comment.

Asked to clarify why the complaint doesn’t mention Fanbase, Abhyanker said through a spokesman: “Upon reason and belief, Fanbase was just a holding company to bid themselves time until everyone forgot about our Fatdoor/Nextdoor.”

Stamped-COMPLAINT – Abhyanker v. Benchmark Capital Et. Al. – FILED-PUBLIC

Asana, the high-profile group collaboration start-up founded by former Facebook execs, is moving out of private beta after a year, and will launch to the general public.

Currently in use by thousands of users at hundreds of beta companies, Asana said it will now put its efforts at tweaking the product to a wider test.

In Sanskrit, “asana” means “sitting down,” and refers to strong but relaxed postures in yoga, presumably so frustrated workers can achieve a digital form of nirvana.

The product can be used for free by teams of fewer than 30 users.

“Our beta users have helped us in shaping our prioritization in the workspace,” said Asana co-founder Dustin Moskovitz.

Moskovitz said that the company — which raised $9 million in venture funding two years ago, and $1 million before that from Benchmark Capital, Andreessen Horowitz and angel investors — is not in need of more funds and will not yet release a paid product.

Co-founder Justin Rosenstein added that one future direction will be the growth of the mobile application arena for Asana, which already has offerings.

Here are some screenshots of the Asana offering:

Neighbors have lots of things to talk about — yard sales, crime, recommendations for local service providers, public works projects, safety issues, block parties and lemonade stands, gripes and gossip. There are online places to do that, like email lists, message boards, blogs and newspaper Web sites — but to date there hasn’t really been a successful local social network.

The ambitious Nextdoor has been in tests for the last year and has 176 active neighborhoods throughout the U.S. Spearheaded by Epinions founder Nirav Tolia, it is backed by Benchmark Capital and Shasta Ventures.

Tolia said in an interview with AllThingsD last week that Nextdoor has become essential in some test neighborhoods — for instance, some teachers in Woodside, Calif., apparently told parents this fall to sign up for Nextdoor to receive community updates.

Why won’t Facebook conquer this particular social space? Because, Tolia concluded, answering his own rhetorical question, “your neighbors and friends are different people.” Nextdoor is also built with the assurance that all participation will remain private and trusted (that is, to whatever extent you trust your neighbors).

If you go to Nextdoor today, hoping to sign up in your neighborhood, you may not find much. The company has instituted a high barrier to entry for each new local network, in an attempt to ensure they each get enough members to become active from the start.

Nextdoor communities start when someone who lives in a neighborhood registers, draws the neighborhood boundaries on a map and then gets 10 more people to verify in the next 15 days that they live within the boundaries.

Community members then verify themselves through a variety of methods, including entering the code they receive on a Nextdoor postcard sent to their home address. People outside the community can’t register or view any content.

Users can post their email, phone number, photos and names of family members — whatever they feel comfortable sharing. They can put up local reviews, list items for sale, or just spew what’s on their minds. Eventually they will receive local offers, should Nextdoor get to the point that it needs to start making money, Tolia said.

Nextdoor is actually an extension of Tolia’s last company, Fanbase, a “Wikipedia for sports” that grew to 10 million users but didn’t turn out to be as impactful and interesting as he had hoped. That company raised $12 million from Benchmark Capital and Shasta Ventures, which Nextdoor continues to use.

For a comparison between Nextdoor and another approach, see also Will the Local Social Network of the Future Be More Like Facebook or Twitter?

The anecdote appears in a new profile of Dropbox in the latest issue of Forbes, which also disclosed that the service is on track to hit $240 million in sales this year, even though the vast majority of its users pay nothing to use it.

But the meat of the story comes further in: Dropbox just closed a massive $250 million Series B round of funding, at an implied valuation of $4 billion, from Benchmark Capital, Goldman Sachs, Greylock Partners, Institutional Venture Partners, RIT Capital Partners and Valiant Capital Partners. Early investors Sequoia Capital, Accel Partners, and Hadi and Ali Partovi also participated in the round, bringing Dropbox’s total funding to date to $257.2 million. Houston’s stake, Forbes says, amounts to 15 percent of the equity, which would be worth about $600 million.

Houston may yet live to regret turning Jobs down. The Apple CEO proposed another meeting that never happened, then managed to single out Dropbox for disparagement as part of his iCloud keynote in June. That got the attention of Houston, who quickly fired off a memo to his team that included a list of once-hot companies that later crashed: MySpace, Netscape, Palm and Yahoo. Apple — which once viewed Dropbox as the sort of “strategic asset” for which it keeps its $70 billion war chest stuffed — is now the competition.

According to sources close to the situation, Twitter VP of Engineering Mike Abbott has left the company.

He is apparently interested in doing more investing.

[UPDATE: Twitter confirmed the departure in a statement, noting that Abbott was joining Benchmark Capital as an entrepreneur in residence. Benchmark’s Peter Fenton is on the Twitter board.

“We can confirm that Mike Abbott is no longer with Twitter. Mike will be available to assist the company in his new role as an Entrepreneur in Residence at Benchmark Capital. We thank Mike for his leadership in growing an outstanding team of engineers from 100 to 400 that have successfully taken on the unique challenge of making Twitter reliable and stable. While Mike led the engineering team, Twitter grew from handling 55 million tweets a day to 230 million. Twitter is focused on aggressively moving forward to fulfill the profound opportunities that are in front of us.”

Said Fenton:

“What Mike Abbott accomplished at Twitter is nothing short of heroic, when Benchmark introduced him to the company we felt he had the courage and entrepreneurial drive to build a strong engineering foundation. Today we applaud him for that extraordinary accomplishment. As we continue to work closely with the team at Twitter, we’re delighted to welcome Mike to Benchmark as an entrepreneur in residence. Mike will not only continue to lend his considerable talents to supporting the team at Twitter, but as a true entrepreneur at heart, will undoubtedly be an incredible asset to our entrepreneurs and our portfolio overall.”]

The move feels sudden, but sources said it has been brewing for a while and happened several days ago.

Abbott was a high-profile hire for Twitter a little over a year ago from Palm, where he served as head of its software and services, in charge of its webOS platform.

He was brought in to bring a level of discipline and reliability to the Twitter communications platform and service, which was plagued by persistent outages that made the Fail Whale infamous.

In large part, Abbott has done that, as Twitter has grown significantly. It now has 230 million tweets per day, he said in a recent interview.

Twitter does not have a replacement as yet, sources said.

Why walk away from a company that by all accounts is humming on all cylinders, with stock that has, since its 2004 IPO, zoomed from $13 a share to $120?

“I wanted to see if I could build my own company” was the reason he gave Salesforce CEO Marc Benioff. Having been on the ground floor in an engineering capacity at two companies over 16 years — the first was E.piphany — he wanted to build something of his own. “I’m a builder of things,” he says.

Today he’s taking the first step in that direction: Weissman has joined Benchmark Capital as its Entrepreneur in Residence.

Benchmark makes sense for Weissman, given its investments in enterprise and data-focused start-ups like Domo; Hortonworks, the former Yahoo team devoted to Hadoop; and Engine Yard.

That’s a pretty good indication of the kind of company he’d like to get involved with by way of Benchmark. Weissman describes himself as a “data guy,” and he was deeply involved in building out the architecture of Salesforce.com. As such, he’s a big believer in the Salesforce state religion of a “multitenant, shared computers, shared everything” view of the cloud, and the way data — and services around it — gets delivered.

There are obviously lots of things happening around ways to handle data and databases.

“There’s lots of new ways of doing things — Hadoop and NoSQL and things like that. Basically, there’s a lot of new companies and young developers who, because of the scale of data they’re working with, the relational database just wasn’t cutting it,” he says. “And while I love the relational database, I’m really intrigued by some of the new technologies. Many aren’t ready for prime time, but a lot of enterprises are interested in them, just the same.”

How does it intend to do that? By integrating real locations into the experience.

Last month, Red Robot Labs unveiled its first location-based game, called Life is Crime, which required players to commit virtual crimes at various landmarks in Seattle.

The experiment took place over the weekend at the Penny Arcade Expo, where competing players “committed” more than 20,000 crimes at the convention center and “hospitalized” more than 1,000 criminals, “trafficked” $1 million in contraband and “robbed” a total of $35 million.

The round of funding was led by Benchmark Capital with Shasta Ventures, and existing investors Rick Thompson, co-founder of Playdom, and Chamath Palihapitiya, former Facebook executive, also participating.

Red Robot Labs said it aims to grow its game studio and develop its gaming platform. It will also form third-party studio partnerships.

The nine-month-old company was founded by Mike Ouye, who previously headed up monetization and revenue for Playdom, which was bought by Disney, and Crowdstar, an independent social games company. The other co-founder-slash-investor is Palihapitiya, who is also the founder of the Social+Capital Partnership, a venture fund focused on the social and technology spaces.

Of course I have something to say about the news yesterday that AOL would be a key investor in a new early-stage venture fund being started by TechCrunch’s perpetually petulant editor Michael Arrington — with a big, fat and decidedly greasy assist from a panoply of Silicon Valley’s most powerful VC firms and angel investors.

Arrington has previously called me “chief whiner” — oooh, buuuurn, although fair enough, since I have compared him to an egomaniac turtle named Yertle in the past — about my nagging him over the importance of upholding standards of fairness and ethics in journalism.

So as not to let him down, let me begin the whining.

First, my initial reaction when I first heard about the deal: Ugh. Sigh. Hopelessly corrupt. Now 100 percent more icky! A giant, greedy, Silicon Valley pig pile.

I was upset.

By early evening, after my kids told me to chillax, my dark mood had changed to accept that the transaction — however profoundly distasteful to me — was part and parcel of the insidious log-rolling, back-scratching ecosystem that has happened in every other center of power in the universe since the beginning of time.

And so it goes in Silicon Valley.

In fact, the creation of a $20 million investment kitty that Arrington has dubbed CrunchFund is simply the formalization of a long-standing arrangement that has already been going on since he founded his popular tech blog.

That is to say, in which the basic standards of journalism are first warped by calling it newfangled truth-telling and then endlessly corroded by using a wily and unusually aggressive combination of favors and threats to extract, from start-ups and VCs in need of press, both exclusive access and information.

And now, inevitably, money.

This could have been a lot cleaner, of course, by Arrington simply resigning from TechCrunch, becoming a VC and perhaps starting a new blog where his agenda is much clearer, from which he could huff and puff away as he does with much entertaining gusto at real and (mostly) imagined slights.

There is certainly precedent for VCs blogging, including Fred Wilson, Brad Feld and Ben Horowitz. And, despite my criticisms about ethics, it is clear that Arrington is a talented writer whose unique voice would be even stronger if it was truly seen as separate from what has become a news organization.

But because of his obvious need to be the center of attention — requiring the ermine kingmaker mantle and foisting his patented I’m-here-to-tell-it-like-it-is attitude on us all — that appears to be impossible.

(By the way, I await Arrington’s usual inane rant about the fictional conflicts of interest related to my gay Google marriage anytime now in 3 … 2 … 1, always and purposefully leaving out the pertinent facts that I can only wed one person, get no financial benefit and am also a prominent critic of the scary search behemoth, while he can make a badillion questionable and grossly tangled investments.)

Personal annoyances aside, what’s most interesting here is the group of Silicon Valley power players who lined up to bow and scrape and then hand over a small pile of dough to the blogger who would be king.

They include: Sequoia Capital, Redpoint Ventures, Kleiner Perkins, Greylock Partners, Austin Ventures and Accel Partners, as well as individual investments from partners at Benchmark Capital and Andreessen Horowitz, entrepreneur Kevin Rose and DST Global’s Yuri Milner. And, of course, the inevitable Arrington BFF Ron Conway.

Holy googa mooga, that would be, well, everyone, except Ashton Kutcher and Justin Timberlake (who will surely appear soon enough).

As one person also pointed out to me, I don’t recall this many competing VCs investing in one company, let alone another venture fund.

It goes without saying that the reasons they all decided to jump in this fetid pool with abandon are quite varied, if all entirely compromised.

One investor told me — off the record, naturally — that he thought it would be an interesting experiment to see what happened and so he wanted in, especially since everyone else was doing it.

Another well-known VC said that there is no downside to being financially affiliated, especially in attracting talent to its start-ups, with Arrington and, by extension, TechCrunch.

The well-respected Reid Hoffman of Greylock was the only one brave enough to talk on the record, explaining the reasoning pretty clearly:

“Techcrunch will get some real deal flow from entrepreneurs that we would otherwise not see, because they have established a prominent position as the SV/Tech industry information feed. As many tech entrepreneurs read it — both within Silicon Valley and globally — and view the information news feed to be their target for announcing themselves to the world, Crunchfund will have access to deal flow to these diverse and early stage companies. Some of these companies will be the kind of early stage companies with billion-dollar potential that Greylock invests in.”

There you have it: No one can afford to be out of the deal flow in these times, even if it means cutting corners.

While TechCrunch’s owner, AOL, said Arrington will no longer be managing editor, with only writing duties at the site he dominates and with no editorial control, Hoffman’s use of TechCrunch for CrunchFund was accurate, because in the eyes of many they are interchangeable.

That’s due to the fact that Arrington still breaks or is clearly the source for important stories on the site and, more importantly, is the big swinging dude who attracts all the eager entrepreneurs to the party. He is the fulcrum of that site, even as it has grown.

And so it will remain, I am guessing, no matter how much AOL insists it will not be so, because the easy questions pile up quickly:

Will Arrington keep doing what are clearly news stories, for example, even though he protesteth too much — as he did in the New York Times yesterday — that he is not a journalist?

And, if so, is it right for him to do so given his insider status, creating a nonparity of sourcing and crystal clear conflicts of interest?

Most of all, can he resist his palpable love of news-breaking and scoops, even if he gets them in ever more unseemly ways?

As if to make it all pretty, Arrington told reporters yesterday that he has put a clause in his limited partnership agreement so he can report on anything he likes, and in any way, about his investors and their companies, however confidential, except those he invests in.

O joyous day! Freedom of the press is preserved and our sacred First Amendment can breathe a sigh of relief, now that it is enshrined in an unholy blogger-VC LP agreement.

After pausing for a moment so that Thomas Jefferson and Edward R. Murrow can stop spinning in their graves, you can go down this road for many increasingly bumpy miles, which only becomes more twisted and confusing as it continues.

I finally talked to one investor in CrunchFund, who said simply and honestly: “It’s not that much money, so who cares?”

Indeed, who does care anymore about crossing what had long been very bright lines in journalism and, if you want to get all cosmic, in life?

Obviously, most of all, not AOL, or its CEO Tim Armstrong, or its head of content, Arianna Huffington. The pair, for whatever reason, decided to make a startling exception for Arrington from a rule that explicitly bars reporters at its media units from investing in the companies they cover.

That happened after he recently did a complete 180 from a previous decision to stop investing and jumped right back in, leaving Armstrong and Huffington to clean up the ethical mess.

They only made it worse, with their decision to throw journalism under the bus by letting Arrington do as he pleased, while touting how important it was for other content sites at AOL to remain more pure.

In the spirit of full disclosure, these kinds of ethical lapses are endemic these days in journalism. Case in point: The appalling phone-hacking controversy taking place at News Corp.’s News International unit in Britain.

While I cannot speak for Dow Jones, I can say that the behavior in another News Corp. property certainly takes its toll on those who adhere to higher standards at the company, especially when it comes to morale.

Thus, I can imagine how others feel at AOL — including those you-know-who-you-are silent ones at TechCrunch — who can’t and, more to the point, wouldn’t make the deals Arrington has been allowed to get away with.

It is not a good feeling, I can assure you.

And, while I have not spoken to her about it, I’d imagine that Huffington cannot be thrilled to be pushing for better journalism at AOL and trying to burnish her cred by hiring some top reporters, while also having to deal with this.

That’s okay, because Armstrong was perfectly willing to do the awkward pretzel-twist needed to explain away the controversial situation, also in an interview with the Times:

“TechCrunch is a different property and they have different standards. We have a traditional understanding of journalism with the exception of TechCrunch, which is different but is transparent about it.”

In this case, Tim, I am sorry to inform you that transparency is a complete canard and is more likely to end up covering up a lot more transgressions than it ever will reveal.

And, essentially and lazily sloughing it off by saying, “That’s just Mike being Mike,” is not going to cut it, at least not with me.

Not that any amount of tsk-tsking about it matters, I suppose, as Arrington finally gets his fervent Pinocchio-on-a-star wish to be a real-boy VC, can add yet another tainted buck to the pile of billions his venture pals already have, and just call it another typical day in Silicon Valley.

Still, when you are the designated whiner-in-chief, it is pretty much all one can do.

Whether or not to sell any of their shares in Twitter is the big decision facing stakeholders of the microblogging service right now, as the second $400 million part of the company’s recent funding by Russia’s DST Global is completed in the next several weeks.

That includes everyone from early angel investors to those who bought it on the secondary markets to Twitter’s 600 employees, all of whom can sell a portion — up to 20 percent, sources said — of their holdings.

It’s all part of a recent $800 million mega-funding by Twitter, valuing the San Francisco company at $8.4 billion.

While $400 million went to Twitter, the second tranche of $400 million of the total was targeted to cash out current investors and also employees of the company.

Current investors include Benchmark Capital, Union Square Ventures, Spark Capital and several other venture firms, as well as a spate of prominent angel investors, such as Ron Conway.

Whether DST — as well as other smaller buyers, including early Twitter investor Chris Sacca and T. Rowe Price, according to the tender offer — gets them and others to sell enough shares is the big question, especially since few want to get caught in what one shareholder called the “Facebook idiot box.”

That would be referring to those who sold their investments in Facebook two years ago, when the social networking giant allowed its employees to sell 20 percent of their stakes to DST.

The financing was part of a $100 million add-on to a $200 million investment in the social networking company by the aggressive Russian investor.

At the time, the tender offer valued Facebook at $6.5 billion for the common stock, or $14.77 a share.

Of course, Facebook is worth upward of more than 10 times that now. Oops!

That’s why high-profile Silicon Valley venture firm Andreessen Horowitz, for example, is not selling out any of the shares it bought earlier this year in an $80 million transaction in private secondary markets.

Reasons to sell, of course, are also compelling.

Some investors might want to lock in upside, especially if they think the latest valuation is too high.

For venture capitalists in the company, some might want to return a win to their limited partners, while Twitter employees might want to put a down payment on a house after years of toiling in the start-up.

Others might also be worried about Twitter’s prospects going forward and might determine that the recent round was the high point of its market value. Twitter has indeed struggled to find a sustainable and lucrative business model, focused on advertising.

In addition, although it has recently stabilized, others might worry about Twitter’s management changes over the last year, as co-founders Biz Stone and Evan Williams have departed. Twitter creator and other co-founder Jack Dorsey is now running the company’s product efforts, with CEO Dick Costolo (who looks a lot like that Woody Allen shot above from the classic movie, “Take the Money and Run”).

Then again, that was exactly the take on Facebook several years ago, so it is now a case on all sides of seller beware.

Twitter declined to comment and I have not heard back yet from DST about the status of the transaction.

Investors in the round include Benchmark Capital and Omidyar Network. The San Francisco company also said its co-founder Daniel Hoffer will be taking over as President and CEO.

In order to raise the round, Hoffer explained that the company’s new legal status is listed as a B Corporation, which allows it to sell a stake in the company while also striving to have a higher transparency and social responsibility when compared to other entities.

CouchSurfing is a lot like it sounds.

It enables people to find a place to crash for free when traveling around the world, but Hoffer says it’s much more than that. He describes it as a social network that allows like-minded people to meet and learn about each other. Examples range from organizing a picnic in the park to a party at someone’s house, or a trip to Mongolia, where a farmer will give you a place to stay in a yurt and teach you the local customs.

Matt Cohler, general partner at Benchmark Capital, has joined its Board of Directors, along with Todor Tashev, investment partner at Omidyar Network, as a board observer.

CouchSurfing’s round of capital follows the $112 million investment in Airbnb, which operates in a similar space of connecting strangers online to swap housing — although it charges a fee.

Hoffer said the company’s status is changing, but the mission is not.

The capital will be used for rolling out new features that the seven-year-old non-profit with only 25 employees was not able to support before, including a much-needed mobile application.

Up until now, CouchSurfing has not charged users to find accommodations, nor has it advocated that guests pay hosts for their stay. Instead, it has primarily been making money by charging for identity verification, so that two strangers feel more comfortable with each other.

It will also be looking into new revenues streams. “It’s important for us to collect revenue in a way that’s comfortable to our community,” Hoffer said. “We are looking at premium offerings as one possibility. It’s important to us that core surfing and hosting remains free.”

Hoffer expects to hire a dozen engineers shortly to accomplish its list of objectives.

Following Airbnb’s massive round of funding, questions arose on its ability to safely connect people online as it scales after one customer had an extremely bad experience when her apartment was robbed.

Hoffer said that their service is designed so that people stay with people when they are home.

“Even our profiles are designed to facilitate meaningful connections, so when couch surfers stay with each other, they know each other in a more meaningful and personal way,” he said.

Photo Credit: C.M. Keiner.