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Watch: Sebastian Thrun Leaves Stanford to Teach Online

Liz Gannes — Wed, 25 Jan 2012 10:00:03 +0000

One of the most memorable sessions at this year’s DLD conference in Munich was a presentation by Sebastian Thrun, the Stanford professor who recently led development of self-driving cars for Google.

Thrun announced on stage that he is giving up his tenured position at Stanford to teach online courses at a new start-up he’s founded, called Udacity. Here’s the video of the session. (I can’t seem to extract embed code from the Livestream site, but when I do, I will post it directly here.)

Udacity is funded by Charles River Ventures, and already has a staff of 10.

Inspired by the video-and-quiz teaching work of Salman Khan at Khan Academy, last year Thrun co-taught an online course on artificial intelligence, based on the curriculum of one of his Stanford classes. It signed up 160,000 students, and was transformative in many of their lives.

Thrun showed emails from a student who took the AI class, when he could get Internet access, amidst mortar and rocket attacks in Afganistan; and another, a single working mother, who refused to quit the class because it gave her a sense of accomplishment.

Thrun said his experience disproved the common wisdom that small class size is best, and that he hopes to teach 200,000 in each of his Udacity courses. Students frequently watched the AI class videos 30 to 40 times, he said. Of 248 students who received perfect scores in the class, none of them attended the Stanford version; all were online.

“Having done this, I can’t teach at Stanford again,” Thrun said, describing his decision to leave Stanford as a choice between a red pill and blue pill, a la “The Matrix.” (This bit comes just about exactly 20 minutes into the DLD video, if you want to skip ahead.)

Udacity’s first two free seven-week courses will start next month, and will cover building a search engine and programming a robotic car. Here’s a description of the search engine class:

(Photo courtesy of DLD)

Millennial Media Tries Cashing In on Mobile Ad Boom With IPO

Peter Kafka — Thu, 05 Jan 2012 23:23:28 +0000

Millennial Media, the mobile ad network that has been loudly declaring its interest in a public offering for the past few years, has pulled the trigger.

The planned IPO is notable because it’s the first time that a pure-play mobile ad company has gone public. Most of Millennial’s other competitors have been acquired instead, most notably by Apple and Google, the company’s primary competitors.

The company’s S-1 reveals that the start-up lost $7.1 million on sales of $47.8 million in 2010, and $417,000 on sales of $69.1 million in the first nine months of last year. Millennial’s business is focused on selling advertising that runs on mobile apps, and it says it reaches 200 million users worldwide; in December it processed 40 billion ad impression.

The Baltimore-based company says it most recently gave itself an enterprise value of $305 million. That was back in September 2011, when it granted a block of options. The company’s primary backers are New Enterprise Associates, Charles River Ventures, Columbia Capital and Bessemer Venture Partners.

Yammer Poaches Another VP From Salesforce.com

Arik Hesseldahl — Fri, 09 Dec 2011 13:59:14 +0000

Yammer, the popular social enterprise and collaboration platform, has just hired a second senior executive from Salesforce.com.

Sources tell me that Yammer will officially announce on Monday that Samantha Loveland (pictured), VP for customer success at Salesforce.com, has joined Yammer as vice president for worldwide customer engagement.

Loveland — who, according to her LinkedIn profile, goes by “Sam” — will report to David Obrand, another Salesforce alum who was hired by Yammer in October as vice president for global sales. Her job will be to run the team that consults with customers after a sale to make sure they get what they need out of the product.

Yammer is certainly on the move. It’s going to finish the year with a combined four million end users at 100,000 companies, and in September it closed a $17 million round of funding led by the Social+Capital Partnership, a new fund established by former Facebook Vice President Chamath Palihapitiya. Prior investors Charles River Ventures, Emergence Capital and US Venture Partners also participated, bringing the total capital raised to $57 million in four rounds.

Yammer is also something of a rival to Salesforce.com, and has been playing that fact up recently, gently jabbing at Salesforce as a “friend with benefits.” It also took advantage of Salesforce’s publicly available API to integrate Salesforce.com’s Chatter within its Yammer. It is fair to say that these companies have something of a history.

Anyhow, Loveland’s first day on the job at Yammer will be Monday.

Orchestra Raises a Quick $5M for Social To-Do App

Liz Gannes — Mon, 07 Nov 2011 18:01:08 +0000

Orchestra, which calls its iPhone and Web productivity and collaboration app “group chat disguised as a to-do list,” has raised $5 million in funding less than two months after it launched (we broke the news here). The new funding for the Palo Alto, Calif.-based company led by Apple and Ideo alums comes from Charles River Ventures and SV Angel.

API Marketplace Mashape Raises Funding

Liz Gannes — Tue, 06 Sep 2011 18:53:00 +0000

Mashape, an up-and-coming marketplace for APIs, has raised $1.5 million in seed funding — which seems like a pretty small amount given the investors it came from: NEA, Index Ventures, Charles River Ventures, Ignition Partners, Jeff Bezos and Eric Schmidt’s Innovation Endeavors, among others.

The San Francisco-based company, which originated in Italy, helps Web services connect with each other — so for instance the creators of a new social site wouldn’t have to build their own image resizer, and the maker of an image resizer tool would have less trouble getting it distributed.

Mashape has nearly 200 APIs on its platform so far, including Tinypay.me and Rapleaf. No big API companies — like, say, a Twitter — have signed on, but CEO Aghi Marietti said he hoped to graduate up to larger players like the code-sharing site GitHub has.

Mashape plans to make money by taking a cut of any fee its users charge for their APIs, and will help them with things like billing systems.

Exclusive: Yammer Now Works With Salesforce.com

Arik Hesseldahl — Mon, 22 Aug 2011 12:00:18 +0000

I’ve said it before and I’ll say it again: The workplace is getting social. Enterprise software companies are taking a page or three from the likes of Facebook and Twitter to create social streams that keep people informed about what’s going on within a company.

One of the social enterprise companies getting a fair amount of buzz is Yammer. Initially known as a “Twitter for work,” it’s now transforming itself into something of a catchall for updates generated by numerous workplace applications.

Today, Yammer will announce that it will work with another application, and it’s a big one: Salesforce.com. The folks at Yammer used Force.com — Salesforce’s development platform — and Yammer’s own API to grab activity stream data from within Salesforce. Sales leads, deals, marketing campaigns and all sorts of other activity that gets entered into Salesforce.com become objects that can appear directly within a Yammer stream, which is essentially as easy to keep track of and interact with as a Facebook stream.

In fact, a Facebook stream is exactly what Yammer CEO David Sacks compares it to. “A few months ago we released an activity stream API that lets any application push activity stories into Yammer, the same way that Zynga can push items like the latest Mafia Wars score into your Facebook stream,” he says.

Yammer did the integration with help from Appirio, a cloud apps developer that gets tapped to do a lot of third-party integration work.

But doesn’t Salesforce already have its own social software? Why, yes it does. Its Chatter.com service launched to much fanfare with a pair of expensive TV ads that aired during the Super Bowl, which in turn kicked off a bit of a skirmish within Google search results that Yammer took part in.

It’s not as if Yammer were partnering with Salesforce here. Sacks says that Yammer just, well, did it. “The nice thing about the open API world that we live in is that you don’t necessarily have to seek permission to use these APIs.”

The wider point of Yammer, Sacks says, is to pull social data not just from one application, but from many. Not everyone in a company is going to be using Salesforce.com in the first place. The sales department might, and senior management might, but it’s of little use to, say, the human resources department or the accounting department. So Yammer talks to other applications, too. Case in point: Netsuite. Yammer announced an integration with that cloud-based business management suite of applications in May. It also works with Microsoft’s SharePoint and Active Directory.

And there will be more, Sacks says. “We’re seeing a trend with all these various line-of-business applications to build their own social networks into what they do,” he says. “And we’re already seeing customers and potential customers complaining about this, because they wind up with a dozen different social networks in their company and that defeats the whole purpose.” Yammer, he says, will be the middleman application that brings all those social streams into one place for everyone in a company. The comparison to Facebook is no accident: Yammer’s technology is based on Facebook’s Open Graph protocol.

So what happened to Chatter? Well, ask Salesforce and you’ll see some impressive stats and customer wins. Salesforce says that Chatter is used by 100,000 companies, among them Dell, Qualcomm and Lenovo.

But Yammer’s got 100,000 customers of its own, boasts three million corporate end users, and is adding them at a rate of about 200,000 a month. And there are some pretty impressive names among them, including chipmaker Advanced Micro Devices, LG Electronics, eBay and Thomson Reuters. And it got those without having to spend tens of millions on Super Bowl ads. A half-million of those customers are using the paid version of Yammer.

It’s a fast-moving business and there are numerous players. Another big one to watch is Jive Software, which was said last week to have hired bankers for a pending IPO, and which is being valued at $1 billion.

No wonder Yammer has done so well in raising funding. It has brought in a combined $40 million, which was topped off last November by a $25 million round led by US Venture Partners, with Emergence Capital, Charles River Ventures and the Founders Fund also participating. Ron Conway’s SV Angel was an early investor as well.

Meet Evan Reas of LAL and His Proximity-Based Social Graph for Colleges (Video)

Liz Gannes — Tue, 03 May 2011 01:20:07 +0000

The start-up LikeALittle, or LAL, had fended off NetworkEffect’s reportorial advances for weeks. Funny, considering the site helps people flirt with one another.

But last week we were granted access to the Palo Alto “hacker house” where the recently seed-funded LAL team has set up shop to expand its early success into a larger vision. No, LAL is not turning its flirting site into a dating site, but rather becoming a way for people to interact with others who are nearby, as co-founder and CEO Evan Reas described in a video interview embedded here.

LAL, which started at Stanford University last fall and now is live at 450 different colleges, gets 250,000 page views per day for its message boards and Web chat service. Reas estimates 75 percent of Stanford students have used the site. But total user numbers are slightly hard to ascertain, he noted, because LAL allows people to post and chat anonymously.

Reas promises that LAL’s grand vision will become more apparent in the coming weeks, but for now here’s why he’s been able to bend investors’ ears:

A dynamic social graph determined by users’ locations seems like an alternative to the static real-name-based Facebook social graph.
Flirting provides enticing content for both participants and voyeurs.
When it comes to virality, densely populated college campuses seem to be a match waiting to be lit.

LAL participated in the most recent class of Y Combinator and raised a seed round led by Marc Andreessen of Andreessen Horowitz, as was reported by TechCrunch.

Here’s the full list of investors, provided by LAL: Marc Andreessen, Paul Buchheit, Ron Conway, Scott Cook, Charles River Ventures led by Saar Gur, Matrix Partners led by Josh Hannah, Ashton Kutcher and Guy Oseary, David King, Yuri Milner, Shervin Pishevar, Brian Pokorny, Keith Rabois, Naval Ravikant, David Sacks and Y Combinator.

Reas told us LikeALittle was probably the seventh or eighth idea he and his co-founders Prasanna Sankaranarayanan and Shubham Mittal prototyped under the header Hawthorne Labs. The quick viral success of LAL at Stanford indicated to the three that they might have found their elusive “billion-dollar idea,” so they stuck with it, Reas said. Prior to Hawthorne Labs, Reas had been a co-founder of ProFounder and received his MBA from Stanford.

Here’s our video chat with Reas, shot in the “hacker house” backyard.

[ See post to watch video ]

Formspring Absorbs What's Left of Q&A Competitor PeerPong: The People

Liz Gannes — Thu, 21 Apr 2011 22:29:08 +0000

Q&A start-up PeerPong has shut down, and competitor Formspring has already picked up PeerPong CEO Ro Choy to serve as its COO.

PeerPong “wound down just this past month,” Choy told NetworkEffect, and a couple other members of the PeerPong team joined Formspring as well. To be clear, Formspring did not acquire PeerPong, but at least three of its employees moved over together.

TechCrunch reported Choy’s hiring today, but glossed over the mention of PeerPong. Choy said PeerPong had six employees before it closed.

A cached message from the PeerPong home page reads:

We’re Sorry, but PeerPong is in end of life mode.

When we launched Peerpong.com in early 2010 we believed we could use advanced semantic technology to let people access expertise across social media. We succeeded in finding and indexing over five million people by their knowledge and expertise whether on Twitter, Facebook or Linkedin, and helped answer questions from hundreds of thousands of users from these ridiculously smart people over the last year.

Unfortunately we find ourselves in a tough position where the service alone can’t support our business goals and sadly need to discontinue the site. I want to thank everyone who committed their time and effort to Peerpong, including the many members who had great answers for all types of questions, from technology to food to dating, and to the Peerpong team directly for the many months trying to unite NLP/semantics with an engaging user experience. There’s no pithy comment to summarize the experience of trying to make something incredible and falling short, only deep gratitude and few, but significant regrets.

Ro Choy – CEO

PeerPong had raised $2.8 million from Partech International, DCM, First Round Capital and Charles River Ventures after being incubated at Partech under the name Muchobene. PeerPong, which Choy joined as CEO in January 2010 after leaving social app maker RockYou, promised to help connect users to subject matter experts through social media.

Earlier this year, PeerPong was experimenting with a so-called pivot to offer a new service called Rendezvous that would have semantically analyzed users’ Facebook profiles to find events and people they might be interested in. But that didn’t work out either.

Formspring, meanwhile, says that as of this week users of its service will have submitted three billion answers to each other’s questions.

Ladies and Gentlemen, Open Your Checkbooks: It's Demo Day Season!

Liz Gannes — Mon, 21 Mar 2011 11:00:32 +0000

Now might be a good time to invest in Red Bull or Nissin (maker of Top Ramen). Consumption of both will likely spike as participants in various startup accelerator programs hustle toward their big end-of-session “Demo Day,” at which they will themselves seek investment.

This week is Y Combinator’s Demo Day (NetworkEffect will be in Mountain View, CA, on Tuesday for coverage of one of the sessions), followed by those of AngelPad, 500 Startups and Tech Stars New York in the coming weeks. Each will feature rapid-fire presentations from the hopeful founders of the Groupon of the enterprise, or Foursquare for moms, or the Gilt Groupe of gadgets, or AirBnB for dogs (I’m mostly kidding, but you get the idea).

Demo Days are intended to attract interest from press and investors and serve as a sort of culminating experience. But these days, companies have often launched or raised money along the way.

In the case of Y Combinator, the alpha dog of the accelerator programs, the 45 presenting start-ups have already been offered $150,000 in convertible debt from Yuri Milner and SV Angel’s new Start Fund, and most or all of them have taken it. (So perhaps they’re now sustaining their late-night coding binges with fancy noodles and exotic tea.)

Some think Start Fund’s copious check-writing will mean other angel investors will have less of a chance to invest in Y Combinator companies, as the extra cash will help the start-ups skip over angels and go straight to venture capital. And many early investors, including VCs like Charles River Ventures, have already forked over investments for some of the 45 new YC startups.

The funding scene is currently so competitive, many of these companies can get money when and if they want it. And we expect to hear angels, as usual, grumble about getting shut out of the best deals.

A couple of the names I’ve heard come up as expected highlights of the current YC batch include the campus flirting site LikeALittle and the real-world friend-finding facilitator Grubwithus.

Participating founders take Demo Day very seriously. Earbits CEO Joey Flores, a current Y Combinator participant, wrote on Sunday in a blog post already viewed more than 15,000 times (the whole Y Combinator experience has become fetishized) that participating in the program is similar to joining the Marines.

It is crawling on your belly through mud with bullets whizzing over your head intense, with a looming deadline that feels like it’s going to make or break your entire existence… Everything you do between the starting of your company and that day will change how easy or difficult it is to raise money, and what value [investors] put on your company. Effectively, if YC is Marine Corps Boot Camp, Demo Day is the day we go on our first real mission with live enemy fire.

For context, the Y Combinator presentations this week will feature the six-year-old program’s largest class ever, and the first to be formally advised by new Y Combinator partner Paul Buchheit, the creator of Gmail and co-founder of FriendFeed. Buchheit joined Y Combinator from Facebook, which recently committed to giving the program’s companies special attention and resources.

Image via Flickr user GoonSquadSarah.

Massive Health Raises $2.25 Million From Massive List of Investors

Liz Gannes — Wed, 02 Feb 2011 17:33:15 +0000

Massive Health, the new start-up from former Firefox creative lead Aza Raskin, announced this morning it has raised $2.25 million in seed funding from Mohr Davidow Ventures, Felicis Ventures, Greylock Partners’ Discovery Fund, Andreessen Horowitz, Charles River Ventures and angel investors.

Massive Health has yet to launch; in fact, Raskin (pictured) left Mozilla only at the end of last year. And you have to imagine he’s been pretty busy, considering how long that list of investors is, even without the names of the angels.

Raskin said via email, “We were well over-committed and decided to raise only the amount we felt we needed to build a lasting business in health care.”

Massive Health will create applications to help users with chronic diseases like diabetes get healthy through diet and exercise.

“Crowdsourcing, game mechanics, and social networking are cool, but applying it to help someone get and stay healthy? That’s exciting. That’s powerful,” co-founder and CEO Sutha Kamal wrote today in a blog post about the round (somewhat oddly posted on his and Raskin’s personal blogs–but as we said, they’ve been busy).

“We are talking about tight feedback loops and deep insight into the interface which is your body,” Kamal continued. “There is something magical in the intersection of health, motivation, data analysis, and your social graph. That’s where habits are formed, behaviors are changed, and people get healthy.”

Similar projects we’ve mentioned include RunKeeper and other fitness apps, as well as Jane McGonigal’s new start-up, Social Chocolate, whose first game is to be a wellness motivator called SuperBetter, for users with chronic conditions.

Zendesk, Growing Like Mad, Adds a COO

Arik Hesseldahl — Tue, 25 Jan 2011 05:00:33 +0000

Zendesk, the Web-based help desk outfit, says its revenue has grown 300 percent in the last year (though it didn’t disclose an amount). It has also tripled its number of business customers, who use it to keep track of help desk calls, to 5,000. Add in iPhone, Android and BlackBerry apps, as well as integration with Salesforce.com and Twitter, and Zendesk has touched some 22 million end users, the company says.

No surprise then that it’s beefing up its executive team. Zendesk named Zack Urlocker chief operating officer. Urlocker is ~~currently~~ a former executive in residence at Scale Venture Partners. Before that he was an executive vice president at MySQL, and helped boost its sales to $100 million before it was acquired by Sun Microsystems.

Among the new Zendesk customers are Groupon, OpenTable and Zappos Insights, as well as established brands like Adobe and Sony Music. This news comes on the heels of its $19 million round of funding led by Matrix Partners late last year, along with Charles River Ventures and Benchmark Capital.

Techies Pause Long Hours for Long Weekend of Snow Kiting in Utah

Liz Gannes — Tue, 25 Jan 2011 00:20:33 +0000

It’s a good time to be an entrepreneur in Silicon Valley, and not just because the parties are getting swankier. More than 30 techies went snow kiting in Park City, Utah, over MLK weekend on a trip organized and funded by the venture capital firm Charles River Ventures.

Snow kiting is the winter and land equivalent of kite surfing (which has been the hot new thing for some five years or so), and it looks insanely fun. Forbes video anchor Kym McNicholas got to go along last weekend, and posted this video report:

CRV partner Bill Tai (pictured) is well known in Silicon Valley as a kiting ambassador and enthusiast, and has been organizing such trips for the past four years, with the group size growing each time. Many of the invite-only Utah participants, including McNicholas, had been to previous editions in Maui, though many were snow kiting for the first time.

This year’s snow-kiting participants included Dropbox CEO Drew Houston, Tango CTO Eric Setton, Twitter Director of Search and Geo Othman Laraki, Apple Engineering Director Andy Belk, Speechpad CEO Konstantin Othmer, Triggit COO Susan Coelius Keplinger and Threadsy founder Rob Goldman. Co-organizer and CRV partner Saar Gur said via email that CRV “picked friends and techies who bring an awesome attitude to try the sport.”

The trip seems to function as a marketing event for CRV and a fun boondoggle for everyone involved. One repeat participant told me the trip only increased his positive impressions of Charles River Ventures, but that it didn’t necessarily mean he would take its money. He did say he’d be less likely to go to events that made him pay to attend.

Scribd Raises $13M More for Web Docs

Liz Gannes — Tue, 18 Jan 2011 20:02:57 +0000

Scribd has raised $13 million in a Series C funding led by MLC Investments of Australia and SVB Capital, and including previous investors Redpoint Ventures, Charles River Ventures and Kinsey Hills Group.

The Web-hosted document company, founded as a sort of YouTube for PDFs in 2006, now has raised a total of $26 million.

Based in San Francisco, Scribd says it has more than 60 million monthly visitors, and attributes recent traffic growth to its social sharing initiatives on sites like Facebook. In addition to pure hosting, it offers users nifty OCR technology that translates document images into searchable files for free.

Scribd is planning a major mobile expansion for 2011, and said it would use the funding toward that effort as well as for other product and revenue projects.

Mobile Ad Network Millennial Media Raises $27.5 Million to Fight Apple and Google

Tricia Duryee — Wed, 05 Jan 2011 15:37:16 +0000

Millennial Media, which is often considered the largest independent mobile ad network in the U.S., has raised $27.5 million.

The funding comes from Bessemer Venture Partners, Columbia Capital, Charles River Ventures and New Enterprise Associates (NEA).

To date, the Baltimore-based company has raised $65 million. But that hardly seems sufficient when fighting Goliaths like Apple and Google, which both made multimillion-dollar acquisitions last year in the space.

Previously, CEO Paul Palmieri said it was Millennial’s intention to stay an independent company, and therefore aim for an IPO. Is $65 million enough?

The funds will be used for acquisitions in 2011, and to invest in the company’s international business, which is considered smaller than its competitors’, such as Google’s. So far, it has built a team in London, and has begun to expand to the Asia-Pacific region.

Market share statistics are notoriously poor in the space, but in December, IDC estimated that Millennial was the largest independent mobile ad network at 15.4 percent, trailing behind Apple with 18.8 percent share and Google/AdMob with 19 percent share. Millennial’s share was estimated to be larger than Yahoo’s 10.1 percent share.

Millennial declined to give specific numbers, but said it achieved “operational profitability” in 2010, and tripled its revenues during the year.

AppRats Can Make You Huge on YouTube–It Hopes…

Drake Martinet — Mon, 03 Jan 2011 17:05:34 +0000

It’s been a long time since Samuel Goldwyn and Louis B. Mayer ruled Hollywood and decided on the fates of the legion of stars under their strict command.

Today, of course, it’s a mess out there for talent, as the media landscape continues to fracture into ever tinier bits.

Thus, the curtain rises on AppRats, a start-up out of i/o Ventures that is taking an aggressive approach to helping YouTube’s top 100 celebrities build their fan bases on Facebook.

How aggressive?

AppRats isn’t asking for permission, even from clients.

I met with AppRats’ only two employees, CEO Charlene Kuperstein and CTO Ryan Moriarty, near their new Santa Monica, Calif. headquarters to talk about the market opening they think needs filling.

And, when asked what they were doing exactly, Moriarty–who recently became Dr. Moriarty after finishing a PhD in computer science and cryptography from UCLA–was quick to answer: “We’re hacking Facebook.”

After a recent round of seed funding, led by George Zachary of Charles River Ventures, and joined by the likes of Twitter’s head of Geo-Othman Larakai, AppRats now has another $230,000 with which to be disruptive.

Currently, a YouTube celebrity often interacts with fans using the Google-owned video site’s comments box directly below the video player.

A channel page–such as this one from MysteryGuitarMan–will list all the videos published by the producer’s account, and allow a some customization by the owner.

Fans leave comments, post response videos and follow along with the two to three videos most of YouTube’s top 100 channels post in a week.

AppRats has created FaceBook apps for each of the YouTube 100. They act like YouTube channel pages, but drop them inside Facebook and shake in some soft-core game dynamics.

“We make a branded spot to hang out with your favorite YouTube celebrity. It allows users to rate themselves as fans,” said Moriarty. “They can see how many videos they’ve watched, which ones they’ve missed, and get alerts about when the next video is published.”

Kuperstein said there was a three-week period around Thanksgiving when AppRats was adding 100,000 users a week, or three times its typical traffic, which is usually generated by YouTube celebrities linking to the AppRats Facebook app from elsewhere on the web.

The reason: AppRats started adding posts to a Facebook users’ wall every time they viewed a video.

But would that be essentually spamming all of a user’s friends?

“Exactly. And then Facebook shut that down,” admitted Kuperstein. “Now, we are emailing people whenever a new video from a subscribed channel comes out.”

For all its bravado, a great many questions remain for AppRats’ services, which its founders only seem to regard as a workaround.

That includes a major move into social from YouTube or, more likely, a major video push from Facebook might, overnight, fill in the crack that currently incubates AppRats.

Whether AppRats can hack its way out of these kinds of jams, of course, remains to be seen.

[ See post to watch video ]

AngelPad, an Incubator for Entrepreneurs With Credentials

Liz Gannes — Thu, 11 Nov 2010 19:12:20 +0000

AngelPad, the new incubator created by former Googlers, held its first end-of-session Demo Day last night at its office on a dead-end alley in San Francisco’s SOMA district. It was a familiar format for those who have been to Y Combinator and TechStars Demo Days, and indeed just about every one of the hundred or so investors in the room is a frequent presence at those events.

Thomas Korte

AngelPad is captained by the amiable and energetic former Google product evangelist Thomas Korte, who brought in many of the eight participating start-ups from his personal connections. They included somewhat typical tech start-up fare: A couple of Web curation tools (Curated.by and Snip.ly), a get-together planning app (RollCall) and a simpler interface for selling your stuff online (EggCartel). There was also a user-generated outdoors site (AllTrails) and an app that tracks the energy consumption of computers and other devices (Hug Energy).

Probably the most notable difference between AngelPad and other incubators is the level of high-profile experience most of its founders already have. At least half seemed to have worked on product and engineering at Google, and others come from established companies like Microsoft, Yelp, Playdom and RockYou.

(Also, is it just me, or does the name AngelPad scream for a reality show that would be sort of like “Real World” mashed with “Top Chef” about Silicon Valley start-ups?)

After the demos, I asked MoPub founder Jim Payne, who managed product for Google Maps Premier and AdMob metrics, what he and his co-founders thought the AngelPad differentiator is. He said, “As compared to Y Combinator?” I said, “First of all, as compared to doing this outside an incubator.”

Payne replied that he “wouldn’t and couldn’t” have started his company without an incubator, and that taking that route would be forcibly sitting yourself and your start-up “out in the weeds.”

MoPub is a mobile ad server, and will soon announce its first round of funding, said Payne. He and other AngelPad participants said they liked the small size of the program and the more free-form curriculum as compared to more established incubators.

Sean Plaice of Hug Energy at AngelPad's first Demo Day

Bill Tai of Charles River Ventures, who had been chatting with Payne when I walked up, bid him goodbye with the admonition to let Tai get in on the MoPub round. Tai told me that he thought MoPub and Adku were the most interesting of the AngelPad eight. Adku wants to help e-commerce sites optimize what products they are featuring using real-time data mining about what’s relevant to a visitor’s location and demographic.

Tai said he agreed that founders in the first AngelPad class do have more experience, particularly at large companies. But he added that’s not necessarily always an asset. “At Y Combinator there may be a higher probability of a breakout idea,” Tai said, “because less-experienced people don’t have context.”

Zynga Makes Another Acquisition: Conduit Labs

Kara Swisher — Tue, 17 Aug 2010 16:45:40 +0000

It looks like the San Francisco-based gaming company is going to suck up social gaming start-ups, one city at a time.

Today, it announced the acquisition of Cambridge, Mass.-based Conduit Labs, which specializes in social music games. It will now become Zynga Boston.

In what feels like a modified roll-up strategy, Zynga has done this recently in Austin, Los Angeles and other cities, to expand its studio operations geographically.

Zynga did not disclose the price it paid for Conduit Labs, which raised $8.5 million in funding from Charles River Ventures and Prism VentureWorks.

Here is the official press release:

ZYNGA ACQUIRES CONDUIT LABS

SAN FRANCISCO–Aug. 17, 2010–Zynga today announced it has acquired Boston-based social games company Conduit Labs. Effective immediately, the Conduit Labs office will become Zynga Boston, a new game studio focused on new product development. Today’s announcement expands Zynga’s studio operations, adding to locations already in San Francisco, Austin, Baltimore, Bangalore, Beijing and Los Angeles. Terms of the acquisition were not disclosed.

Conduit Labs’ CEO, Nabeel Hyatt, will become head of the new Boston studio. The Conduit Labs team will be immediately integrated into Zynga’s workforce. Conduit Labs, founded in 2007 and funded by Charles River Ventures and Prism VentureWorks, has developed several free-to-play social games for the web.

“Boston is an epicenter for technology and has a strong talent market, making it an ideal location for us to expand operations,” said Mike Verdu, senior vice president of games at Zynga. “As one of the most prominent social game companies in Boston, the Conduit team shares a similar culture and drive with Zynga, and together we anticipate great successes from our new studio.”

Today’s acquisition, along with the recently announced joint venture with SoftBank for the launch of Zynga Japan, continues to extend the company’s footprint worldwide, creating more opportunities for Zynga to connect the world through games.

Swipely Nabs $7.5 Million in Series A Funding for Social Spending (And to Attack Blippy!)

Kara Swisher — Tue, 11 May 2010 08:59:50 +0000

Oh, joy: More venture bucks for more socializing of credit card information.

Today, it is Swipely’s turn to grab the spotlight in the ever-crowded space to, as the start-up’s press release so aptly says, “turn purchases into conversations.”

Yes, it says that.

BoomTown excitedly awaits the next big thing to be intrusively socialized, such as these start-ups: Wipely (it records and shares every time you clean your bathroom), Diaply (don’t let your friends miss every diaper change!), and, of course, Hypely (every time a social category is overfunded by VCs, you get a poke).

In any case, Swipely–now in private beta, founded by Tellme co-founder Angus Davis and backed by some top venture firms and Silicon Valley angel investors–got $7.5 million in funding to try to take on sites such as Blippy.

Index Ventures is leading the latest Swipely round, which includes Greylock Partners and First Round Capital, as well as investors such as Ron Conway and Chris Sacca.

Swipely said Danny Rimer of Index Ventures will join its board of directors, and Reid Hoffman of Greylock Partners will serve as an observer.

Swipely had previously raised $1 million.

Blippy, its presumable rival, has raised close to $13 million from its own fancy-pants group of moneybags: August Capital, Sequoia Capital, Charles River Ventures, Conway (again!), Twitter CEO and co-founder Evan Williams and other well-known investors.

To differentiate itself, the Providence, Rhode Island-based Swipely is trying to go for a more circumspect approach to what is essentially a service that encourages digital blabbery about purchases.

Swipely’s take on making shopping social will involve sorting out credit info and giving you, your friends and retailers a lot of options to share, and the service is stressing opt-in over automated sharing–as well as better security, taking aim after a recent Blippy breach–via a “swipe.”

Get it?

Unlike Blippy, Swipely does not show the amount of money spent–for now–and lards in data, such as catalogs, on some purchases to encourage others to buy too.

Swipely seems, most of all, to be aiming for the high-minded version of social spending. But, please let us not forget: All these attempts are trying to get people to spend more, no matter how pretty you dress it up.

Here is another screenshot (click on it to make it larger):

And here’s the official press release:

Swipely to Reinvent How People Shop, Share and Save

Index Ventures, Greylock Partners, First Round Capital and Industry Luminaries Unite to Back New Start-up with $7.5 Million in Series A Funding

PROVIDENCE, R.I.–May 11, 2010 – Swipely (swipely.com), an online service that gives users an easy way to turn their purchases into conversations, announced it has completed its Series A round of financing, and a new preview version of its service is now available by invitation. Index Ventures led the Series A round, with participation from Greylock Partners, First Round Capital, and a number of well-known angel investors.

“Our mission is to fundamentally change the way consumers shop and share by adding value to every swipe,” said Angus Davis, Founder and CEO of Swipely. “Our service will transform everyday purchases at restaurants, movies or online retailers into conversations with friends, personalized recommendations and opportunities to save money.”

Founded and backed by veterans of Tellme, Microsoft, Netscape, eBay, LinkedIn and PayPal, Swipely provides a secure platform for consumers to recommend purchase experiences, discover new places and products through trusted friends, save money, and have more fun shopping.

Enter Swipely

On Swipely, every purchase is a “swipe.” Users start swiping by following an easy and secure sign-up process to import purchases from their credit or debit card accounts. Users can also import purchases from email for purchases made at any online store.

Users can rate their swipes and add comments or photos. Many swipes are geo-located automatically to specific store locations. Swipely also supports product details by integrating catalogs and menus from more than 250,000 retail and restaurant locations, allowing users to start conversations around specific outfits, meals, songs, movies, gadgets and millions of other products.

Discovering a new restaurant, movie or pair of shoes is easy on Swipely when users follow their friends. Upon seeing a great swipe for a new restaurant, users can click to see it on the map, and add it to their wishlist. Discovering music, movies and apps is easy, too–users can just press play on select swipes to hear a song preview, see a video trailer or browse app screen shots.

Swipely places a strong emphasis on protecting consumer privacy and security, and has passed reviews and audits from leading third party security and privacy organizations. Users have complete control over swipes get posted, and the specific amount spent remains private.

Industry Leaders Across Coasts and Continents Unite to Back Swipely

Swipley’s Series A funding was led by Index Ventures, with Greylock Partners and previous investor First Round Capital also participating. Danny Rimer of Index Ventures will join Swipely’s board of directors, and Reid Hoffman of Greylock Partners will serve as an observer on Swipely’s board. To date, Swipely has raised $8.5 million in funding.

Swipely will use the funding to continue to grow the team and explore other benefits for consumers and businesses, including new ways for users to shop, share and save, and new tools to help businesses, understand and reward customers.

“We believe that the convergence of payments and social media is the natural next step in the evolution of the web. The notion of being able to use day-to-day transactions as a conversation element makes a great deal of sense and we expect it to be extremely popular,” said Danny Rimer, General Partner at Index Ventures. “Angus and the team have created the most compelling approach to enable this behavior and we’re very excited to be investors in Swipely.”

“We have been working with Angus since day one, when it was clear he had identified a huge opportunity with Swipely to change the way we shop and save on the Web,” said Josh Kopelman, Managing Partner at First Round Capital. “I’m excited to continue my support of Angus and his team as they take what started out as a visionary idea and turn it into a reality that will reinvent the way we talk our shopping experiences.”

“Swipely gets it right. Swipely offers a great service that helps consumers benefit from their card swipes,” said Reid Hoffman, Partner at Greylock, and Co-Founder and Executive Chairman at LinkedIn.

“Furthermore, the company has a great team: Angus is a seasoned tech entrepreneur with an impressive track record and it is great to work with Danny and Josh.”

Other Swipely investors include Lowercase Capital led by Chris Sacca, former head of special initiatives for Google; Keith Rabois, EVP of Slide, and former PayPal and LinkedIn executive; SV Angel led by Ron Conway; Anton Commissaris, previously SVP of revenue and business development at Mint.com and now director at Intuit; Lee Hower, venture capitalist and angel investor; Charles Moldow, former Tellme executive; and Emil Michael, White House Fellow and former Tellme executive. Davis is also a significant investor in the company.

Series Seed Documents–With an Assist From Andreessen Horowitz–To Help Entrepreneurs With Legal Hairballs

Kara Swisher — Mon, 01 Mar 2010 17:03:48 +0000

Series Seed Documents, templated documents for entrepreneurs to use for seed-stage deals, will be launched today, part of an effort by Silicon Valley lawyer Ted Wang and pushed by venture capital firm Andreessen Horowitz.

The point: So new entrepreneurs don’t waste time and money negotiating often unnecessarily complex legal papers.

Series Seed Documents was planning its announcement tonight, after briefing reporters. But BoomTown was alerted to the move by a tweet last week from Fenwick & West lawyer Wang that read: “Excited about launching Series Seed documents next week.”

Oops!

The Twitter post has since been taken down (but here is an image of it, below, natch!).

“Who even knew that a corporate attorney would have a Twitter account?” joked Marc Andreessen of Andreessen Horowitz in an interview this morning.

Actually, Wang (pictured here) is Twitter’s lawyer!

His practice, which focuses on representation of “emerging companies,” as noted on his Fenwick & West Web site, also includes Aardvark, Billshrink, Clicker, Facebook, Flixster and Widgetbox.

Andreessen Horowitz, which was the first to agree to use Series Seed Documents, will be joined by a spate of high-profile angel and early-stage investors.

The group includes SV Angel’s Ron Conway, First Round Capital, “micro-cap” investor Mike Maples, SoftTechVC’s Jeff Clavier, True Ventures, Polaris Ventures, Charles River Ventures and Harrison Metal.

“We want to make the process as transparent as possible, which is to say, we want to take all the mystery out it,” said Andreessen. “And it is online for everyone to understand.”

Of course, noted Andreessen, the price for the round is still open to negotiation, but wrangling over typically standard legal issues often hurts deals.

“The big reason we are doing it is that we think for these early stage round, bashing over these terms does damage only brings mistrust,” he said.

Andreessen noted that this template approach is only appropriate for small, early rounds of about $500,000 to $1 million.

“VCs who do angel rounds should be acting like a VC in a VC round and acting like an angel in an angel round,” he said. “The problems come when VCs act like VCs in angel rounds.”

Andreessen said using Series Seed Documents would cost start-ups about $7,000 compared with a low of $15,000 and up to $100,000 in many similar deals.

“It helps streamline the process and makes starting a company easier and more efficient,” said Conway of SV Angel, who is a well-known angel investor. “And cheaper–all in all, it is a benefit to both the entrepreneur and the investor.”

Millennial Media Acquires TapMetrics

Kara Swisher — Tue, 23 Feb 2010 14:56:08 +0000

Although it has also been rumored to be an acquisition target, after the recent sales of AdMob to Google (GOOG) and Quattro Wireless to Apple (AAPL), mobile advertising firm Millennial Media is doing some buying of its own.

That would be its just announced acquisition of TapMetrics, a San Francisco-based mobile analytics firm.

Baltimore-based Millennial is one of the larger mobile ad networks in the U.S., but will surely need more scale in the current period of consolidation if it is to stay independent.

Millennial has raised just over $37 million in venture funding, including a $16 million round in November, from firms such as Bessemer Venture Partners, Columbia Capital, Charles River Ventures and New Enterprise Associates.

Terms of the transaction to buy TapMetrics–which has only raised a seed round–were not disclosed.

Here’s the official press release:

MILLENNIAL MEDIA ACQUIRES TAPMETRICS
Adds Deep Cross-Platform Mobile Analytics Capabilities to Existing Developer Program

SAN FRANCISCO, CA, and BALTIMORE, MD, February 23, 2009–Millennial Media, the largest independent mobile advertising network, announced today that it will acquire TapMetrics, a San Francisco-based mobile analytics firm, focused on application usage and behavior.

TapMetrics software suite provides detailed analytics to enable developers to better manage their application sales and revenue in a sleek, intuitive dashboard. By adding TapMetrics, Millennial Media will offer developers more capabilities across mobile platforms:

• Real-Time, Highly Detailed Analytics
• User Interaction Information
• Feature and Version Adoption
• Device Types
• Crash Reporting
• Competitive Ratings System
• Buzz Tracker & Reviews

“The market has recognized Millennial Media as the leader in mobile advertising. As a result of their deep commitment to advertisers, they deliver the best business partnership and monetization for mobile companies–particularly developers,” said Chris Brown, Co-Founder and CEO, TapMetrics. “What is exciting to us is that Millennial Media now has the only scalable solution for developers that doesn’t contain an operating system bias, making Millennial Media the natural partner for us.”

“When we raised our growth round of financing in November, we stated that we would make investments to accelerate our growth,” said Michael Avon, Executive Vice President and Chief Financial Officer, Millennial Media. “We are acquiring TapMetrics, because the company shares our approach to serve the needs of developers, regardless of mobile platform. In addition, TapMetrics’ data and analytics capabilities complement our company’s own focus and development plans. We continue to actively evaluate other potential acquisitions to further expand our business.”

Millennial Media operates the leading mobile advertising platform worldwide. Since adding $16M to its strong cash position in November, Millennial Media has expanded its offerings to key customer segments, to include OEM and platform partnerships that seek to access its strong base of developers and publishers. Additionally, Millennial Media’s employee base has grown by more than 20%, as it continues to expand operations in the U.S. and Europe.

On February 16, 2010, the company released other key 2009 year over year mobile advertising growth figures, including:

• Brand business grew 756%; Performance business grew 171%
• Average deal size increased 353%
• Non-U.S. impressions increased 175% year over year
• 357% increase in Apple OS impressions
• 90% increase in RIM OS impressions
• 81% reach of the Mobile Web users

For more information on growth statistics, please visit www.millennialmedia.com/research and download the full 2009 Year in Review.

Millennial Media is headquartered in Baltimore, Maryland; and has offices in New York, Los Angeles, San Francisco, Chicago, Atlanta, and London. TapMetrics will continue to be based out of its San Francisco headquarters. Terms of the transaction were not disclosed.

Yammer Grabs $10 Million More in Funding

Kara Swisher — Wed, 03 Feb 2010 05:24:50 +0000

Yammer, the enterprise equivalent of Twitter, said it had grabbed another $10 million in financing.

But the question for the San Francisco-based microblogging service for businesses and closed groups is: “What are you working on?”

Yammer has both free and a paid–the gold level is $5 per user, per month–versions and is essentially a useful productivity tool.

Emergence Capital took the lead in the Series B round for Yammer, along with ubiquitous Silicon Valley investor Ron Conway and previous investors.

Yammer previously raised $5 million from Charles River Ventures and The Founders Fund.

Here’s the release:

Yammer Secures $10 Million in Series B Funding from Emergence Capital and Previous Investors

Investment To Fuel Product Innovation and Sales Coverage

SAN FRANCISCO, Calif., February 3, 2010–Yammer, Inc., the leader in Enterprise Microblogging and Real-time Communications, today announced that it has received $10 million in its Series B round of funding. Emergence Capital leads the round; with general partner Jason Green joining Yammer’s Board of Directors. SV Angel, led by seasoned Silicon Valley investor, Ron Conway, is also participating as are previous investors, including Charles River Ventures and Goldcrest Investments from Dallas.

Yammer launched its solution in September 2008 and has experienced rapid user adoption with over 60,000 organizations globally having adopted the solution. Drawing on this momentum, Yammer will use the proceeds to accelerate product innovation and increase sales coverage.

“Yammer is revolutionizing the way employees communicate and collaborate, filling a need that email has failed to deliver,” said Jason Green, general partner at Emergence Capital. “Yammer has a passionate and proven executive team, a compelling freemium business model, a loyal customer base and a huge market opportunity. We are thrilled to be joining them in the next phase of their rapid growth.”

Companies and organizations of all sizes across a wide range of industries benefit from Yammer. They use Yammer for a multitude of reasons, including improving workforce productivity, connecting a geographically dispersed team, getting new employees up to speed, and increasing the flow of content and knowledge.

“Yammer is focused on improving the way employees communicate and stay connected to critical information about their company and job,” said David Sacks, founder and CEO at Yammer. “We’re pleased with the rapid growth and market adoption we’ve achieved and are poised to accelerate it with exciting enhancements to our product and with broadened sales coverage. We’re eager to work with Emergence Capital and leverage their expertise in building world-class Software-as-a-Service (SaaS) companies and are gratified that proven technology investors such as SV Angel and Charles River Ventures are also participating in the funding.”

Blippy Opens to Public and Scores High-Profile Investors–Including Twitter's Evan Williams–For the Twitter of $$

Kara Swisher — Thu, 14 Jan 2010 14:00:05 +0000

Blippy, a start-up that lets users broadcast their credit card transactions online, will open itself up to the public today and announce a slate of high-profile Silicon Valley investors.

The size of the investment–$1.6 million–is actually not so large as the names on its funding roster.

They include: Sequoia Capital, Charles River Ventures, well-known angel investor Ron Conway, Twitter CEO and co-founder Evan Williams, and a trio of splashy entrepreneurs: Jason Calacanis, James Hong and Ariel Poler.

They are all presumably hoping the site–with the unlikely name of Blippy and headed by longtime Silicon Valley entrepreneur Philip “Pud” Kaplan–will become a viral hit with users and yet another step in the continuing socialization of everything a person does online.

The San Francisco-based company, which has only four employees (including Kaplan, who has also put his own money into the venture), has been in invitation-only private beta for the last several months.

In an interview last night, Kaplan said that the site now has about 5,000 users, accounting for $5 million in purchases in just the past few weeks. An average transaction, according to Blippy statistics, is just above $42.

Kaplan said he hoped Blippy would soon log $1 million in transactions per day.

“We are hoping to create a site that is useful and informative to people, based on a Twitter model of sharing information in an open way,” said Kaplan. “People care about what they spend and we think this is an obvious thing to share.”

Indeed, Blippy takes online transparency even further, allowing a user to automatically post on its Web site messages about the type and amount of the transaction every time they use a credit card–at least the one they designate as their “Blippy” card–for others to see and comment on.

The twist of Blippy–whose motto is: “What are your friends buying?”–is that it is more passive than the more active tweeting or texting.

While most of the transactions don’t contain a lot of information–for example, “cat spent $3.55 at In-N-Out Burger”–Blippy is obviously going for deeper information, which it already collects for sites like Apple (AAPL) iTunes and Amazon (AMZN).

Retailers, restaurants and other vendors might also benefit from the flow of information, finally learning who their best customers really are and perhaps rewarding them.

And, of course, the key part is that your friends see what you are buying and you can all jabber (or gripe) online about what you bought, how much you paid and what you thought of the purchases.

How all this will make money is still being pondered, of course, but one might imagine a dedicated Blippy credit card or some kind of innovative analysis of the spending data or even group-sale offers to users.

And integration with Facebook and Twitter seems inevitable, eventually widening the circle of nosy friends, as does the emergence of reviews, mobile apps, search and more.

Kaplan is best known for a site he created during the Web 1.0 bubble, FuckedCompany, which chronicled the ongoing start-up implosion as it happened.

He later started online advertising service AdBrite, followed by a short stint as Entrepreneur-in-Residence at Charles River Ventures.

It was there that he met Blippy co-founders Ashvin Kumar and Chris Estreich.

Kaplan said the money raised was enough to fund Blippy for the next 12 to 18 months.

But why not hear him talk about Blippy? Here is the video of a BoomTown interview with Kaplan, which I posted in late December:

[ See post to watch video ]

Philip "Pud" Kaplan Talks About Blippy–the Twitter of $$

Kara Swisher — Wed, 23 Dec 2009 16:59:37 +0000

To start, let’s just dispense with huffing and puffing angst over whether or not people should broadcast their credit card transactions online.

Because that’s what you can do on a new site, with the unlikely name of Blippy, headed by longtime Silicon Valley entrepreneur Philip “Pud” Kaplan.

Blippy has already gotten a lot of oh-dear attention for its premise, which is yet another step in the continuing socialization of everything a person does–the inevitable trend toward radical transparency online.

Now in invitation-only private beta, the new service sends out messages about the type and amount of the transaction, every time you use your credit card–at least the one you designate your “Blippy” card–for others to see and comment on.

In other words, a kind of Twitter for spending.

The twist of Blippy–whose motto is: “What are your friends buying?”–is that it is more passive than the more active tweeting or texting.

(Presumably someday, your body will tweet from the gym, or while you are sleeping.)

While most of the transactions don’t contain a lot of information–for example, “cat spent $3.55 at In-N-Out Burger”–Blippy is obviously going for deeper information and already has it for sites like Apple (AAPL) iTunes and Amazon (AMZN).

Retailers and restaurants and any vendor might also benefit from the flow of information, finally knowing who their best customers really are and perhaps rewarding them.

And, of course, the key part is that your friends see what you are buying and you can all jabber online about what you bought, how much you paid and what you thought.

How it is all going to make money is being pondered, of course, but you might imagine a dedicated Blippy credit card or some kind of analysis of the data or sale offers to users.

And integration with Facebook and Twitter seems inevitable, eventually widening the circle of nosy friends, as does the emergence of reviews, mobile apps, search and more.

Kaplan came to All Things Digital Worldwide HQ–also known as the cottage behind my house–to chat about all this and more.

He is, of course, best known for a site he created during the Web 1.0 bubble, called FuckedCompany, which chronicled the ongoing start-up implosion as it happened.

Kaplan later started online advertising service AdBrite and was an Entreprenuer-in-Residence at Charles River Ventures for a short time after he left AdBrite.

It was there that he met Blippy co-founders Ashvin Kumar and Chris Estreich. Funding for the trio is forthcoming, said Kaplan.

Here’s Kaplan holding forth in a longish video interview, where we curse and discuss my porn-and-Cheetos spending habits (don’t judge!):

[ See post to watch video ]

And, in the spirit of full transparency, here is Kaplan in two videos on YouTube–in one he is sweetly singing “Easy” with his wife and in the other, he is drumming like a heavy metal lunatic:

F—edCompany Founder Views VC From a New Perch

Tomio Geron — Tue, 23 Jun 2009 18:02:09 +0000

Philip Kaplan lampooned the Internet bubble in the early 2000s with his Web site F—edCompany. Now he’s evaluating companies from a decidedly different vantage point. Kaplan, most recently founder of online advertising company AdBrite, has joined Charles River Ventures, the firm that has invested in start-ups such as Twitter, SocialMedia Networks and Metaplace, as an entrepreneur-in-residence to advise and evaluate companies. We caught up with Kaplan, also known as “Pud,” to get his thoughts on the move.

Dow Jones: Why did you decide to join Charles River Ventures?

Mr. Kaplan: I’ve always been interested in the venture capital business from the other side.

Read the rest of this post on the original site

When Twitter Met Facebook: The Acquisition Deal That Fail-Whaled

Kara Swisher — Mon, 24 Nov 2008 08:45:09 +0000

[Updated with new details about deal, including who worked on it and info on a cash component.]

About three weeks ago, Facebook and Twitter ended several weeks of serious talks, in which Facebook was offering to acquire Twitter for $500 million of its stock, which also included a cash component.

While rumors of Facebook’s interest were brought up in an interview with Facebook CEO Mark Zuckerberg at the Web 2.0 Summit a few weeks ago, some shot down the idea as silly.

Quite incorrectly, as it turns out, since top execs at both Facebook and Twitter were right then at the tail end of discussions, which were initiated by the privately held Facebook in mid-October, about bringing the two together.

Those talks, sources on both sides said, are now over.

So why did the deal break down?

Well, as is usually the case, over price–was $500 million worth of Facebook stock actually worth $500 million?–and the typical concerns about integration and costs.

But, more important, it seems, was a feeling among Twitter investors and execs that the start-up should still take a shot at building its revenues–there are none right now–as well as it had done at building its growth.

“It’s more about timing,” said one person familiar with Twitter’s motivations. “There is a strong feeling that there is still an opportunity–even with the economic downturn–to blow this thing out.”

Still, combining the world’s fastest-growing social-networking site with what is quickly becoming the best-known microblogging service is actually a natural fit.

That’s especially true given that Facebook–for all its powerful online social connections–has seen Twitter race past it in innovating in the “status update” arena.

While some sources at Facebook said Zuckerberg was becoming frustrated by the buzz Twitter was getting–a market that should have been dominated by Facebook–others at the company said he was interested in buying Twitter because of his respect for its progress.

Indeed, at the Web 2.0 interview, Zuckerberg called Twitter an “elegant model” and said that he was “really impressed by what they’ve done.”

Indeed, with about six million registrations, as reported in October, up 600 percent over the last year, the San Francisco-based Twitter–launched in 2006–has had impressive growth.

(It has also been plagued by technical issues, which are–to be fair–decreasing.)

In any case, for those not familiar with it, the premise of Twitter is dead simple: A registered user logs in via the Internet or a mobile phone and answers the “What are you doing?” question the service asks in only 140 characters or fewer.

It’s quite a clever idea, although–so far–not a money-making one.

To try to goose that, Twitter’s board replaced the engineer who created Twitter, Jack Dorsey, with another founder, Evan Williams, who had served as its chairman and chief product officer.

The more experienced Williams (pictured here) had already built one company–Pyra Labs, which created the Blogger blogging service–that he sold to Google in 2003. He also started the audio and video search site Odeo, where Twitter was actually born.

Still, its investors have not come down on Twitter to hold back its growth efforts, and have handed over $20 million to the start-up so far. In its last round, Twitter was valued at $98 million.

Its funders include: Union Square Ventures, Charles River Ventures, Digital Garage, Spark Capital and Bezos Expeditions, backed by Amazon Founder and CEO Jeff Bezos.

In addition, well-known Silicon Valley figures, such as Marc Andreessen and Ron Conway, have also invested. Interestingly, Andreessen is also on Facebook’s board.

Other private investors include FeedBurner Co-Founder (and now Googler) Dick Costolo, former Epinions Co-Founder Naval Ravikant and former Googler Chris Sacca.

Twitter needs all the investors it can get, since it has no revenue, although it has been exploring things like charging business customers and adding advertising into the consumer service.

Lack of revenues was an issue for Facebook, said sources, especially related to fees Twitter pays for delivery of its messages to cellphones.

While the issue has been manageable in the U.S., Twitter cut off its SMS support in some international markets this summer because of too-high costs.

But, if Twitter was offered to Facebook’s 120 million users, Facebook execs estimated that it might have to deal with huge SMS fees–up to $75 million annually.

“Facebook has its own revenue-generating challenges,” said one person close to the company. “As much as Twitter would give them a lift in the status area, it was still a worry.”

Not enough, said several sources, to stop Facebook from making another approach at some point in the future. “We’d hate to see Twitter go to another company,” said one source.

Indeed, while all are even more price-conscious than Facebook, large companies that could also be interested include: Google (GOOG), Yahoo (YHOO), Microsoft (MSFT) or a large telecom company, such as Verizon (VZ).

If it had completed the deal to buy Twitter, it would have been Facebook’s most significant acquisition by far.

Zuckerberg and Williams did meet and get along well, but the deal was primarily negotiated by Spark Capital partner Bijan Sabet (Spark is a Twitter investor) and Facebook deal guy Dan Rose.

But in this time, at least, the Twitter side was still not interested in selling at the price Facebook had offered.

The $500 million offered was in an all-stock form, said sources on both sides, at the $15 billion valuation that came from the Microsoft’s investment in the company last October.

The Twitter side felt that figure was inflated and the shares should be valued at the lower figures that have also been reported for Facebook’s true valuation, more in the $5 billion range.

That would have given the deal a $150 million price tag, which was seen as too low, especially since it was in Facebook stock and not cash initially.

In fact, Twitter wanted cash, which some sources say was offered by Facebook in the $50 to $100 million range, in addition to stock, but taking too much stock was still a major issue.

There are other ways the pair could have approximated a safer choice for Twitter, via warrants, of course, or other methods.

But, said several sources close to Twitter, the primary reason for not selling was because its board simply did not want to yet or perhaps ever.

Said one source: “The question is, is it really a good idea to sell on the first chance you get?”

Well, for Twitter, we’ll just have to wait and see about that, of course.

[Photo of Evan Williams by Joi Ito. Licensed under Creative Commons 2.0 By-Attribution license.]