Silicon Valley Watcher - at the intersection of technology and media

Caring.com provides an online resource for helping people take care of their aging parents and it is doing very well.

Since its launch in early 2008 it's traffic has been growing at nearly 15 per cent per month, which compounds into a great upward looking curve that is hitting that magic hockey stick shape.

And it's not surprising it is successful because Caring.com has discovered a huge gap in a very large market.

The statistics are astonishing. There are more than 48 million Americans caring for an aging parent and they will spend more than $100k in that role. This compares to about 2m new brides spending $25k and 4m new mothers spending about $35k.

I spoke with Caring.com co-founder and CEO Andy Cohen. Here are some notes from our conversation:

Mike Arrington at Techcrunch has a great post on standard legal docs for startups that can save them as much as $50k in legal fees when taking investment monies. The Funded Publishes Ideal First Round Term Sheet.

The legal docs were prepared on the behalf of Andeo Ressi, founder of The Funded, a site that ranks VCs. They are designed to protect founders from some of the predatory terms used by VCs.

Woriois an interesting startup spun out of the Laboratory of Computational Intelligence at the University of British Columbia in Vancouver. Its service aims to improve search results by adding "discoverability" to each search query.

The idea is to use machine intelligence to mine a user's activities and relationships on the social web, and then produce relevant results based on an individual model of the user.

This morning I met with Ali Davar, the CEO of Worio. Here are some notes from our conversation:

- We believe that search has reached a level of maturity and that further improvements will be incremental. So what's next? We believe it is something in-between search and the recommendation services such as Stumbleupon or Digg. Our intention is not to out-Google Google.

- The web is messy. It's easy to find things when you know what you are looking for but there is a whole lot more that you didn't know was there. You don't know how much there is that you don't know. We always underestimate the extent of what we don't know. That's what our discovery engine will show you.

- We look at what you tag, what you share, what your friends recommend, and we look at what you do, and then we construct an individual model. We also look at what others are doing, tagging, and sharing.

- We auto tag pages because the way people tag is often very personal to them. Combined with algorithms and personalization technologies, we create a layer of topicality which we then marry with your informational model to deliver relevant results.

- We auto tag also to clean up the data, to get rid of spam, and also to remove the inherent ambiguity of human tagging.

- We work with whichever search engine you use, it doesn't matter.

- Our revenue model will ultimately be advertising but for now we are concentrating on maturing the service.

- We have been around for four years, the first two years part-time. We have raised $3m from angels and are now raising a Series A round.

Foremski's Take: Worio has an interesting service. It can also be used as a handy tool to help people organize their travels around the web, so in that sense, it can act like a service such as Evernote. It will keep cached pages of anything you tag or save. And you can share those pages with friends.

Getting people to use Worio is challenging because, as Mr Davar points out, "we don't know the extent of what we don't know" therefore we don't know how much we are missing when we search using key words. However, Worio has identified a key space that is under served and where there is potentially tremendous amounts of value to be found.

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Please see:

Guest post by Ali Davar: Search's Quest to Capture the Zeitgeist

...Google seems to be effortlessly maintaining its vast market share. But for how long? A recent survey found 62 percent of Internet users would be willing to switch search engines and 45 percent of all respondents said "better search results" would make them switch. What are these elusive "better" results users seek? In the Internet age of real-time content, desired results are less about static information and more about tapping into of-the-moment conversations around a topic.

J.R Johnson is looking very SoCal when I meet him at my favorite meeting spot Apollo Cafe. Well dressed and well groomed, tanned and relaxed.

Mr Johnson is the founder of Lunch., based in El Segundo, Ca. It's a site that gathers like-minded people contributing reviews and recommendations on books, music, movies, etc.

It's a description that might seem to be a familiar one and it is, there are many such places online. But there's an underlying mission with Lunch. that seeks to avoid the morass of online negativity and hate and to encourage the growth of communities where people think before they type. And also, to reveal the common ground between us all.

Here are some notes from this morning's meeting:

My6Sense came out of stealth mode today and it's an interesting company. Headquartered in Israel, it has spent the past 18 months developing sophisticated AI technologies with the goal of helping people sort out the best information from all of their information.

"Information overload is not a problem, it's a challenge," says Barak Hachamov, founder and chairman of My6sense. "We can surface for you your most important information without you having to do anything."

The Web 2.0 culture is a sharing culture. Sharing links, information, news, photos, videos, music -- anything digital is being shared.

But would you share your salary? Would you share part of your income with people that influence you? Would you like to share in the income of others that you influenced?

Do you think that someone like Larry Ellison should share their compensation? You can take a poll here.

What does this all have to do with anything? It's my way of introducing you to Openyear.

I've been meeting a lot of UK entrepreneurs as part of the Traveling Geeks trip and I'm hearing a lot of the same things US startups tell me. They are looking for funding and also fed up with seeing the same people at their meetups.

Funding is a big problem in the UK because there are very few European VC funds actively investing. And very few angels. Many startups are looking to the US for funding but they tell me that most US VC firms have closed their UK offices.

One entrepreneur told me: "We're thinking of relocating some of our team to San Francisco so that we can be closer to the VC firms. Several VC firms have told us that they love our product but we are not over there. And so they wouldn't consider investing."

That was a common theme: that US VCs won't invest in startups unless they are in Silicon Valley.

I didn't have the heart to tell people that even if you are in Silicon Valley funding is really tough right now.

Talenthouse launched today, lead by Roman Scharf, the co-founder of Jajah, a succesful free telephony service.

Talenthouse aims to be the first online community for artists worldwide. It allows them to exhibit their work and also to connect with each other to collaborate on projects.

"With Talenthouse we eliminate the age-old artistic struggle for recognition and instead focus on creative excellence,” said Roman Scharf, CEO of Talenthouse. “We are filling a tremendous void felt by the artistic community."

The site has won support from international artists:

Eight top experts have joined together to launch Socialbrite - an online resource for non-profits searching for consultants and media tools to help them take their message to new audiences.

"We're here to help nonprofits master the social Web to bring about meaningful social change," said J.D. Lasica, a consultant and author of four books about emerging technologies. "There's nothing else like this on the Web for nonprofits, social change organizations, non-governmental organizations (NGOs) and educators. Socialbrite's mission is to shine a light on the best practices, social tools and strategies that will benefit each of these important constituencies."

I'm a big fan of the team behind Lunarr, a startup based in Portland, OR, and led by two of Japan's top entrepreneurs: Toru Takasuka and Hideshi Hamaguchi. I was sad to hear that Lunarr is shutting down its service by May 10.

Lunarr did well in attracting a large number of beta users for its collaborative based web service but couldn't break out into a larger market.

It must be difficult pulling the plug and closing down a company and its community of staff and users, there are a lot of people affected. But that's the discipline required in running a startup, knowing when to move on. Usually outside investors turn off the lights. In this case funding was not a problem because Toru Takasuka is one of Japan's wealthiest entrepreneurs. But it doesn't make sense to continue in a venture that has diminished prospects for success.

One of many things that intrigued me about Lunarr was its location in Portland. [Please see: Portland's High Tech Community And The Space To Think.]

Why would top Japanese entrepreneurs choose Portland rather than Tokyo or Silicon Valley? It was because Lunarr itself, was exploring the the cultural differences between Japan and the US, and its styles of collaboration in the work place.

I became good friends with Hideshi and we spent many hours talking about the cultural differences between Japan and the US and I learned a lot. I was also a guest of Lunarr on trip to Tokyo last year, along with Marshall Kirkpatrick from ReadWriteWeb, Kristen Nicole (Mashable at the time), and Bob Walsh from 47Hats.

And on my recent trip to Portland to visit Intel's R&D labs I popped into Lunarr with my 21 year old son Matt. We had dinner with Hideshi and spent many hours talking about innovation and culture. I returned home tired from the trip but inspired from our conversation and I know my son felt the same.

I wish the Lunarr team great success in their next venture. And I look forward to our next meeting.

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Please see:

Japan Notes: My first trip to Japan . . .

This week: Tokyo Diary - My Deep Dive into the Mashup Culture of Japan

Tokyo Diary: Arrival and Immersion...

Tokyo Diary Day 1: Ancient Temples and Traditions ...

Tokyo Diary Day 1 - Journey to Top of Tokyo and Dinner with Japan's Top VC

Tokyo Diary Day 2 - A Japanese Garage Startup . . .

Tokyo Diary Day 2 - Meeting Top Web 2.0 Entrepreneurs . . .

Portland's High Tech Community And The Space To Think

SmartyCard is a startup focused on the educational market for "tweens" with games that allow them to collect virtual cash they can use in virtual worlds such as Club Penguin, or to buy toys, books, and music.

Parents buy SmartyCard "points" in $10 increments and their kids have to complete a series of educational games before they can unlock and use the points as virtual cash.

"It's a way for parents to manage their kids' allowance and teach kids to learn and earn. And to make sure that at least some of their time spent online is being used well," says Chris Carvalho, GM of SmartyCard.

The company launched last month at the DEMO conference, winning an award. It is one of four game and educational ventures created by Gazillion Entertainment, which recently came out of stealth mode.

SmartyCard estimates that there are about 26 million tweens in the US, kids aged between 8 and 12 years. Its business model is to target the allowances of tweens, and to collect as much as 50 per cent of the value of SmartyCard points, in exchange for providing thousands of educational games.

"With virtual goods we can achieve an almost one for one value exchange but for most things it is about 50 percent," says Mr Carvalho. That means a $10 SmartyCard once it has been "unlocked" by a kid by winning the points, can be used to buy $5 worth of books, games, or music.

That seems like a large share taken by SmartyCard but the company says the educational value it provides would cost a lot more if parents had to purchase online educational programs.

Most kids use their unlocked points to buy a monthly membership in a virtual world such as the popular Club Penguin, and this is also where there can be a more equal exchange of dollars and points.

"It's like eating your vegetables before you get your desert, before you go play in the virtual worlds," says Aaron Burcell, VP of marketing. That doesn't mean that the educational games are dull, like vegetables.

I'm sitting with Matt Malden, CEO and Founder of Yield Software, and he's listening to one of my favorite rants: Why should I spend lots of time optimizing my content for search engines, choosing keywords, pointing out don't follow links, etc? I refuse do it. I'd rather spend my time optimizing my content for my readers and trust (hope) that the search engines optimize themselves to find my content, and so far so good.

But Mr Malden knows that for the vast majority of web site publishers, search engine optimization (SEO) is a vital part of their online marketing; along with running text-ad campaigns; and bidding on keywords in search engine marketing (SEM) programs such as Google's AdWords; and testing out the effectiveness of their landing pages. That's because the majority of their traffic comes from user queries in search engines and from organic search results. If you don't do these things consistently well, you won't get the traffic, and your business will off a cliff.

He also knows that it isn't easy, that there are huge number of variables to consider within each of these marketing areas. And that things change all the time. For example, Google changes it search algorithms on a regular basis and suddenly a top ranked site falls to page 92 on search results. You have to figure out what went wrong and try to optimize your site again.

"It took us more than two years but we now have a suite of software applications that automates most of the SEO, ad campaign management, keyword bidding, and landing page optimization that businesses need to do on a daily basis," says Mr Malden.

He demonstrates the product, which is delivered online, through any web browser. The user interface is well designed and the complexity of the underlying analysis data is simplified through color codes such as green for positive changes in marketing campaigns and red for warning signs, and the plentiful use of colorful graphs.

"We've automated most of the processes but there are things which users still need to do, such as creating different landing pages, etc. But we have simple to do lists they can follow, and we step them through each process, and where necessary, we even provide them with the code so that they can simply copy and paste it into their pages."

The SEO module is especially interesting. There are legions of SEO consultants and their ranks are growing daily because there is good money to be made. Businesses will pay $150 to $250 per hour to SEO consultants to make sure their web sites are optimized for the search engines. Then each time Google or one of the other search engines changes their algorithm they have to bring in the SEO consultants again.

The problem is that no one quite knows what the optimal amount of SEO is, and how best to implement it because Google keeps its algorithm secret. Google does tell web site owners what the best practices are, but SEO consultants make their money by promising to do more, to use tricks and techniques that boost a web page higher on the search rankings than a rival site.

If you hang out in the SEO communities there is a tremendous amount of what looks like folklore. If you do this, that, and the other, you'll rank higher. Then you have people that did do all those things, but suddenly their pages fall out of the top rankings, and they don't know why. And if you write about the snake oil in SEO, I can speak from personal experience, it is worse than the wrath of Apple fanboys.

PC Mag columnist John Dvorak recently provoked a hornets nest of SEO wrath when he wrote:

Search engine optimization (SEO) has turned into a big business, and from what I can tell it's the modern version of snake oil. The unproven nonsense spewed by so-called "SEO experts" simply doesn't work. And worse, it's screwing up the elegance of the Web.

Yield's software does away with a lot of the mythology and snake oil in the SEO community about what is important in raising the rank of a web page. The software analyzes each page and lists all the things that are done right and flags things that are missing, and spells out exactly what needs to be done. This alone is worth the monthly subscription price of $129.

"Isn't this going to reduce the need for SEO consultants? Isn't that a good thing?" I ask. Mr Malden laughs, and smartly veers away from possibly being seen as an SEO-consultant-killer application. But maybe that should be the new definition of a killer application: software that kills much of the need for a high priced expert.

Mr Malden says that Yield's software will allow companies to check the work of SEO consultants and weed out the weak ones. And SEO consultants can use the software themselves to help augment their work and manage a larger client load.

I can see PR agencies also using the service because many are adding digital marketing services in a bid to expand their value to clients.

It's not just SEO. There is also a module for managing the bidding for keywords, and another module for testing out the design of different landing pages, and also there are many varieties of reports that can be generated.

Derek Gordon, VP of Marketing at Yield, says that the target market is small and medium sized businesses spending between $2K and $20K per month on online ad campaigns. "Usually the larger organizations already have in-house systems and people that manage the various aspects of their online marketing."

The first month is free and then monthly subscriptions start at $129 and up, depending on how many sites are managed. And there is no long term contract.

What's to prevent someone using the service for a month, cleaning up and optimizing their sites, testing out their keyword and text-ad campaigns, and then canceling?

"Nothing," says Mr Malden. "But this is a dynamic environment, things change all the time. And our software learns and gets better all the time. It has to, because people can cancel at anytime. Plus the amount of money companies are spending on marketing, our subscription price is just a rounding error for most of them."

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Please see:

Yield Software Launches Complete Web Marketing Suite | Yield Software

Management | Yield Software

Investors | Yield Software

Frequently Asked Questions | Yield Software

SVW: Is Search Broken?

Why is it that we have to help the search engines do a job they are supposed to be doing by themselves?

It's as if these searchbots are blind, and we have to lead them patiently along the street and point things out to them, while they tap away at the world with white canes.

VCs have little spare capital to invest in new startups and are concentrating on their current portfolio companies. But some startups could qualify for various government programs.

A good example is the Small Business Innovation Research (SBIR) grants, and the Small Business Technology Transfer (SBTT) grants from five agencies: Defense, Energy, Health and Human Services, National Security Agency, and NASA. The first phase funding is $100,000 and second phase funding is even better at $750,000 per grant.

Maureen Farrell at Forbes has written a good article on this topic. How To Get Uncle Sam To Fund Your Start-Up - Forbes.com

While just 13% of Phase 1 proposals are accepted, the hit rate for Phase 2 apps jumps to roughly 45%, estimates John Mills, director of the SBIR assistance program in Georgia.

If you want to bag SBIR funding, you'd better be able to communicate precisely how the research is going to lead to a salable product. "Most entrepreneurs we work with find it's a challenge to discuss how their technology is commercialized," says Mills.

Tucked away in the garage of a house on a quiet San Mateo street is where MixMatchMusic is based and that's where I met two of the three founders -- Charles Feinn and Alan Khalfin.

This startup has developed a set of sophisticated online tools that allow bands to collaborate from remote locations, and also publish their music in a format that allows their fans to remix their songs.

MixMatchMusic is busy building a community of musicians and their fans, centered around its online tools and services. Its revenues will come from a share of royalties from the sale of remixed songs and ringtones; professional web services to musicians; and advertising support from an $18 billion global B2B industry selling instruments and related services.

The idea for the company started when the founders wanted to collaborate on creating music but they were scattered around the country.

"We are all musicians and we love playing together, and we were in bands when we were at school. But these days we live in different parts of the country. We wanted to come up with a way in which we could still make music together," says Charles Feinn, CEO.

Along with the third co-founder Derek Prothro, they incorporated in February 2007 and began developing a way of being able to upload individual tracks, called stems, and mix them online. They knew that their technology would be useful to other musicians, but they also believed that bands could engage their fans by offering them an easy way to remix their songs.

Great minds think alike. Last year, supergroup Radiohead launched a remix competition that was wildly popular, with more than 6 million visitors, that generated 2,200 remixes at $5 per entry.

That was excellent news for the MixMatchMusic founders because it confirmed that they were on the right track.

"Radiohead had to invest a lot of money to develop their own software and infrastructure for their remix competition. But with our technology, we've made it possible for any band to launch a remix competition for less than $100," says Alan Khalfin, CFO.

Bands publish a MixMatchMusic competition widget that can be embedded in web pages, or on MySpace and other social networks, taking advantage of the viral support of their fans. A simple user interface, similar to that of Apple's familiar Garageband application, lets anyone remix songs from a library of stems.

"Some of the remixes from fans are better than the originals," says Mr Feinn.

MixMatchMusic has also built the commercial infrastructure to support its community of musicians and remixers--a digital rights management system that lets everyone share in any sales.

"If someone wants to buy a remix it costs $1. We split 85 percent of that among everyone that contributed stems to that remix. This helps our community to continue to create new music," says Mr Khalfin. "And it also helps calm any paranoia that musicians might have about releasing stems -- we are able to track everything." It helps that Mr Khalfin is a lawyer and specializes in music industry legal issues.

The company also has plans to offer professional services to bands that would provide them with a private online remix studio where only they and their producers collaborate on projects.

And to help spread its remixes, or any musical content, it has launched a service similar to Tinyurl, called tra.kz, "the URL shortener for all things music." (The kz stands for Kazakhstan.)

MixMatchMusic has come far on bootstrap funding of around $400,000 and it is now looking for Series A funding to help it expand.

Mr Feinn admits that these are not the best times for raising money. "But we do have some interest from potential investors, hopefully we'll have some good news soon." And it doesn't hurt that MixMatchMusic was received a coveted DEMOgod award last year at the DEMO conference, a launch pad for many successful ventures..

With or without Series A funding, the team is moving ahead and rolling out new services over the next few months, and working hard to build up its online community.

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Please see:

MixMatchMusic :: About Us

MixMatchMusic :: Press Room

I come across a lot of travel sites or travel related startups. Here is an interesting one: Offbeat Guides from serial entrepreneur David Sifry.

I'm a big fan of Mr Sifry (Technorati founder, etc...) and very interested in his ventures because he tends to be on the leading edge on many trends.

Here is a 9 minute video of Mr Sifry describing his latest venture at the recent monthly meeting of SF New Tech. (I had to shoot in night-mode because it was very dark.)

http://www.youtube.com/watch?v=6rj1qo1hITI

I just came across this video of Morten Lund, a Danish VC speaking at the recent Le Web conference. In this brief presentation Mr Lund talks about how these tough economic times are great for being an entrepreneur, and he gives some great advice for startups.

Mr Lund's advice is all the more interesting because he recently lost all his money, some 30 million Euros, on a media venture in Denmark.

Foremski's Take:

I love Morten Lund's attitude. His advice is spot on. And like Loic Le Meur says, this is rare in an European VC/entreprenuer. But that goes to show that some of Silicon Valley's culture is escaping beyond Northern California.

Despite being penniless (Euro-less) you and I know that Mr Lund will be back in the lolly. Because it's not about the money - that's the secret (...that everyone knows but few have the courage to grasp).

Please see:

As raw as it gets - Skype legend Morten Lund bankrupt

"I've never been associated with a product that has had so much positive feedback," says Gregg Brockway, a serial entrepreneur and President of Tripit - an online service for organizing travel plans. Although the service is still in beta, it has quickly built a cult-like following especially among road warriors.

The service is simple to use, you make your travel arrangements wherever you want and email your confirmations, etc to Tripit and the service puts together a master itinerary, which can be shared with colleagues or family.

"If people had to manually enter their information we would have six users. Our technology understands the content of an email and extracts the right information. This is not an easy thing to do, there are many different email formats, email clients, and travel service vendors."

Mr Brockway is a co-founder of Hotwire, one of the most successful online travel booking sites. But he has not always been successful, his first venture, after leaving the world of private equity funds, was a startup that tried to automate doctor's offices. "That experience taught me a lot of great lessons," he says.

Tripit's revenue model is lead generation and other services. "There is a long list of things that we could do, for now, we're concentrating on improving the service and providing people with great tools."

Tripit can automatically provide information on plane delays, it will provide directions from the car rental place to the hotel, and there are more services in the future. For example, Tripit hopes to integrate its service into a large social network "so that your social graph knows that you will be in Boston, as an example."

[Personally, I'd prefer not to tell people where I'll be because I don't want to upset them and explain why I didn't have time to visit with them.]

Tripit is currently "pre-revenue" but the future is bright. Mr Brockway points out that Tripit is the only company that can provide a complete view of a person's travel, where they stay, cars rented, etc.

"Travel sites usually only have a partial view, from what a person booked with them--it is a fragmented view."

As users spend more time with Tripit, the technology learns and accumulates a better view of the travel habits of each person. That can produce significant revenues from lead generation and related services.

Tripit is being used by travel agents to compile itineraries for clients, and by travel departments within businesses.

"We thought that consumers would be our largest users but its is 80 per cent business travel," says Mr Brockway. "Business users like the report features and they also like using our mobile service. About 80 per cent of people accessing our mobile web site are iPhone users." I expressed surprise that it wasn't 80 per cent Blackberry users. "I was surprised too but the Blackberry has such slow web access that people don't use it access the Internet."

There are hundreds of online travel sites but Tripit is managing to stay neutral. "We don't take bookings so we don't compete with a lot of sites, they see us as a value add."

Tripit has raised $6m and despite the current tough times, the company is well positioned. Mr Brockway says his team is lean and well financed. "Most of the money is still in the bank."

I'm hearing VCs telling portfolio companies to cut their spending significantly, by at least 25 per cent, because of the financial crisis and its impact on the economy.

The goal is to extend a startup's "runway" its time between financing events. Most of those cuts will come from payroll by eliminating jobs and in cutting outside services such as marketing and PR.

"I wouldn't want to be in the position of raising money for a startup venture right now," said Gregg Brockway, a serial entrepreneur and President of Tripit, a startup based in San Francisco. Mr Brockway said Tripit is well financed and doesn't need to raise money. "We raised $6m and we still have most of it in the bank."

Om Malik at GigaOm yesterday reported that Sequoia, one of Silicon Valley's leading VC firm, held a meeting Tuesday with its portfolio companies.

. . . The gathering was addressed by at least four speakers, including a brief introduction by Mike Moritiz. Doug Leone was another speaker. I am still trying to nail down more details of the two other speakers. A person who handles Sequoia’s public market investments is said to have talked to the startups. The message delivered to those in attendance was that things could get a lot worse than people think, and it will be a more protracted downturn.

. . . They want the companies to cut costs, to figure out way to survive and emerge at the other end of this downturn, which could last years. The speakers went through each functional area of the business and told the companies how to cut costs. By holding this special meeting, Sequoia is telling its companies to put survival strategies in place and figure out ways to outlast the broader market troubles.

. . . Sequoia isn’t the only one advising its startups to tighten their fiscal belts and prepare for a gut-wrenching ride. Ron Conway, a well-known angel investor in the Valley who has invested in companies like Google, offered very sobering advice to his companies via an email earlier today.

Raising capital will be much more difficult now. You should lower your “burn rate” to raise at least 3-6 months or more of funding via cost reductions, even if it means staff reductions and reduced marketing and G&A expenses. This is the equivalent to “raising an internal round” through cost reductions to buy you more time until you need to raise money again; hopefully when fund raising is more feasible.

Sequoia Rings the Alarm Bell: Silicon Valley Is in Trouble - GigaOM

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Please see:

Silicon Valley and Wall Street: We're Not Immune - Here's Why

The Largest Risk in Silicon Valley is Taking No Risk - Why the Economic Downturn Will Spawn Hundreds of Startups

Will East Coast Flood West Coast in Search of Jobs?

I'm lucky, I find an empty parking spot right outside the Thai restaurant where I'm meeting "EJ" (Evert Jaap Lugt) the CEO of Nimbuzz it's a company I'm starting to hear a buzz about.

I've no idea what EJ looks like but there's a guy waiting outside. He says "Hello Tom, there's a tall blonde guy inside looking for you."

I walk inside and sure enough a tall blonde guy bounds up and introduces himself as EJ. "I asked some guy outside if he was Tom he said he wasn't but he said he knew you." I sit down with EJ slightly embarrassed that I can't quite remember who the other guy is.

We start talking about Nimbuzz. It's a mobile VOIP and IM company founded in early 2006, HQ in Rotterdam, plus a development center in Cordoba, Argentina.

"Argentina is great, we've got about 40 people there, it's a university town, we got a lot of them from Motorola. But it is a different culture, they tend to like being told what to do by a boss but we've retrained them to think for themselves, and we give them interesting work to do rather than the boring stuff Motorola used to give them. In Holland we have a flat hierarchy, nobody likes to have a 'boss' we have a "manager' and we figure things out by ourselves."

EJ is a serial entrepreneur, which is unusual in Europe, especially in Holland. "If I was going to do a startup again I'd do it here in Silicon Valley, or Israel or in Asia - India or China. It's difficult to get motivated people in Holland, they don't want to work for a startup, they want job security and they are too comfortable."

He tells me about one Dutch guy that wanted Thursday afternoons off and to go home at 5 p.m. to spend time with his family. EJ told him he loves his family too (3 daughters) but in a startup you can't do that, you have to work hard for a few years then you can pull back.

We talk about the differences in the mobile VOIP business. "There are nearly 200 other companies in our market. The Americans don't understand the mobile market they think it is like the Internet with its standards etc. But mobile is different, with hundreds of handsets, many operators, and multiple operating systems. It's complex and you have to hash out agreements with many different parties and support many different handsets etc."

Part of the Nimbuzz strategy is to partner with social networking sites because they offer a viral distribution network. Nimbuzz offers a white label solution to the social networking sites for the web component part of their services but a branded Nimbuzz mobile component. "They get to keep the web part, which is theirs, and we have our brand on the mobile part of the service."

Nimbuzz allows mobile phone users to place free VOIP calls over their data plans, they can call call next door or across the world. They can also call users of other VOIP services such as Skype users. "VOIP and regular calls can coexist easily because if I'm calling a business partner I will use the cell phone service but if the quality is not as important I will use VOIP. Quality is dependent on how many people are using the data service at the same time."

I ask about Skype getting into the same market. "I know, you'd think they would be there already but they're not. Same with Google, I wonder why they aren't more aggressive in the mobile space."

It all comes down to focus and Nimbuzz is very focused on what it does, and so far it seems to be working, it has about 1m users worldwide. Are you making money?

"No we're burning money. We need to build up a large enough regional market and then we will do lead generation. I strongly believe lead generation is the future for what we do and eventually all mobile calling plans will be free, supported by advertising or lead generation. You buy the phone but the rest is free. We are already seeing the beginnings of that in some European markets."

What about funding? "We have some great investors, we have a new round we are announcing but Techcrunch already did it, they broke the embargo." I tell EJ that Techcrunch is becoming notorious for breaking embargoes, he shakes his head.

"We're very lucky with our investors. One of them is a large South African media company, MIH Group, which nobody has heard about but they are one of the most successful Internet investors around. About 15 years ago they decided not to invest in print anymore and they now own large shares in major Internet companies in China, Russia, Poland and elsewhere." Another key investor is Mangrove, the European VC firm which funded Skype. "Even though we had offers from other VC firms, our original investors said they wanted to do all the new funding."

EJ is in town to do some deals with some local companies, I can't say who but I did guess a couple of them. More news will follow.

After we finish the iced Thai coffees we walk outside to say goodbye. EJ heads off to find his wife who is shopping in nearby downtown San Francisco. "I like this town," he says.

- - -

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Tuesday evening I ran into Talkshoe, a Pittsburgh startup offering free teleconferencing services for up to 250 consumers at a time, over a regular phone.

Talkshoe just launched a widget that can be used within many types of established groups such as those at Yahoo, Google, Facebook, MySpace and more.

Dave Nelsen, the CEO of Talkshoe, said business is great, and that the company has been growing at over 100 per cent per quarter since the service was launched 18 months ago. It reached 3 million users in the most recent quarter.

http://www.youtube.com/watch?v=Nl61b4VL-U8

TalkShoe Company Blog

More info here...

LinkedIn works wonders as a social networking site for business professionals- especially if you are LinkedIn founder Reid Hoffman.

Groupscope is a company that loves to map money relationships between investors and companies.

It applied its lens to answers to a question LinkedIn founder Reid Hoffman posed on LinkedIn:

What are the three hottest companies companies in Silicon Valley currently?

The answers were analyzed by Groupscope. And what did Brad Cohen from Groupscope find? Reid Hoffman is closely connected to many of the hottest companies in Silicon Valley:

It is interesting that Reid posed the question and was linked to the most common answers. I find this somewhat ironic...

...(and the people responding may or may not have known that Reid was involved in the companies they mentioned). The hottest company answers nonetheless underscore the extent of Reid’s connections in SV startups.

capitalBLOG »

This is either a superb testament to the networking prowess of Mr Hoffman, or it's a testament for LinkedIn as a truly useful business networking site. I'm sure it's a bit of both.

....

BTW, please link in to SVW on LinkedIn, I'd like to find out more about my readers (tom at foremski.com).

Link to capitalBLOG » Blog Archive » Searching for the Hottest Silicon Valley Startups - Network Analysis

http://en.wikipedia.org/wiki/Reid_Hoffman

By Tom Foremski for Silicon Valley Watcher

It's Tuesday night and I'm at Bimbo's nightclub in North Beach talking with serial entrepreneur Bill Nguyen about his latest venture Lala.com--a music sharing site with a twist, or rather several twists.

Mr Nguyen is animated, relaxed, and looks like he is having way too much fun. He clearly revels in what he is doing: launching another startup, being a doting father of a two year old, taking time to surf, and being able to indulge his love of music.

"Music is so important, it is how we see ourselves and how we define ourselves to the world," he says. I ask him what music was seminal in his life. He pauses, then laughs and says heavy metal. But these days his musical tastes are omnivorous and his appetite ravenous.

He mentions a band he recently discovered. "You have to listen to them, "Architecture in Helsinki" they are amazing. I've got plenty of other recommendations too."

Finding out about little known Australian bands is one of the perks of his job. Lala is a clever way to monetise the incredibly huge store of music CDs sitting in millions of living rooms.

I, like many people, am bored with my collection of CDs, I'd like to hear music I don't have. Lala lets me swap and sample other people's collections--an astounding 1.8 million titles registered by Lala users.

Through Lala I send my disks to others who find my collection potentially fascinating, and I can do the same--request their CDs. All for just $1, plus 75 cents shipping in prepaid envelopes.

For the price of one new CD I can refresh my collection ten CDs at a time. And 20 per cent of revenues are donated to the Lala created Z Foundation supporting working musicians.

Lala has been branching out into some interesting areas. It recently purchased a radio station, WOXY in Cincinnati, a cult station mentioned in the movie "Rain Man," saving it from closure. This led to the launch of "citizen radio" allowing Lala users to create their own streaming Internet radio shows. This drives CD exchanges because listeners can then send out requests if they hear something they like.

And from there, Lala is moving into streaming live performances, which is why we are talking in Bimbo's. Aimee Mann is about to come on stage and her performance will be captured by Lala.

It's a sweet deal for the venues, says Mr Nguyen because it helps them to attract hot acts. The clubs can tell performers that they have streaming capabilities automatically tied to revenue sharing of music downloads. That's attractive to performers seeking wider distribution and a share of online music revenues.

Lala is also establishing locations where local bands can come in and stream their music through Lala's network.

Soon, Aimee Man comes on, along with several special guests. Special guest John C. Reilly, the prolific movie actor comes on several times and steals the show--and doesn't give it back. Here is another person that is having way too much fun...

- - -

It was also good to connect again with John Kuch, Lala's hard working bus dev and marcoms chief,  and also a doting father of a two year old. John, like everyone else at Lala is a huge music enthusiast and constantly discovering new bands. Here is a link to his Lala radio station.

Additional info:

Some of Bill Nguyen's previous ventures: Seven Networks, Onebox.

Lala.com How lala Works

Lala.com About lala

Phil Harvey, news editor at the always excellent Lightreading has compiled a list of 61 video hosting/sharing sites.

Phil asked me:

Can you lead me to some thoughts as to why there are so many Web video sharing companies being funded now?

I'm keeping a list of them and, frankly, I don't get it. My readers ask me and I haven't got a clue. But my readers are used to that.

Anyway, here's the latest list:

http://www.lightreading.com/document.asp?doc_id=112147

My reply:

Phil, at valuations such as that gained by YouTube, the VCs are willing to roll the dice and maybe win a similar deal. Remember, GOOG has competitors that have to compete along similar markets, and time to market is more important now than ever before. Buy it so that you don't have to build it. Yes, most of those funded will fail so that the VCs can get a small number of winners. Too bad for all the people toiling away in the future failures so that a few can win, but that's the VC way.

Great list! Thanks for putting it together.

-Tom

PS

Also, VCs move in herds, not in packs like wolves. Like herd animals they find safety in numbers :-)

Earlier this year I met with the Maxtor/Seagate data storage folks plus their partner Fabrik, Inc. And got a very early look at a new online service that blurs the line between storing your digital assets out in the cloud, or on local storage.

MyFabrik is a cool application that manages consumer media online or offline. In fact, the data storage costs online are very close to your data storage costs off-line--if you were to buy a Seagate drive.

That's an interesting revenue model. And by offering a nifty media management application, it allows a hard drive maker to add value and pull some revenues from above the (brutal) commodity marketplace of that sector.

This strategy also plays to all types of storage customers: from the hard drive huggers who need the assurance of a physical entity, to the ones that are comfortable with having their stuff in the cloud, and the ones that don't care or even want to know.

Those interested in trying out the new myfabrik online storage and sharing service can register for access to the final public beta release beginning on Monday, August 28. Following the public launch of the final service in September, access to the new myfabrik service is priced beginning at 99 cents/month, which includes 1GB of online storage space. Additional storage space may be purchased incrementally for 49 cents per GB.

Link to Fabrik

The city of London wants Silicon Valley tech companies. It wants their European headquarters as part of a push to create at least 2500 new jobs this year in emerging technology sectors; and further boost the city's multi-cultural tech community.

I spoke with David Riches, Director of North America for Think London, a semi-private organisation representing the Mayor of London and local businesses. It has the resources to enable companies to set up business operations in London in as little as six weeks.

"California companies are by far the largest US investors in London. It's because we already have a large tech community of developers, with strong ties to our universities. It is a much larger tech and research community than Oxford or Cambridge. Plus we have a great market that is young, urban, and tech savvy," says Mr Riches. In other words, lots of hipsters and first adopters.

Mr Riches says that his team will help companies quickly find offices, places to live, set up the basic infrastructure of bank accounts, etc. Introduce lawyers, accountants, help in recruitment, and introductions into the local business community. He laughed when I asked if an old school tie comes with the package.

Paris is London's largest competitor for European HQs, however, French employment laws raise business costs, says Mr Riches. It should be noted that London based companies have to comply with far stricter employment laws than in the US.

London is expensive, he admits, but then again, so is Silicon Valley. What you get for your money in London is a gateway into Europe, a business culture that is more American than in other countries; and access to a talent pool that is attracting tech firms from around the world, including our own giants, Google, Yahoo, and EBay.

Mr Riches also said that there are large Indian tech firms setting up in London, and tech firms from other countries too.

This might seem like a type of cultural technology melting pot being created by the newly arriving companies--but it is more the other way around. London already has a large, culturally diverse pot on the stove and, unlike in the US, the burners are full on.

The arriving companies become part of one of the world's most ethnically and culturally diverse cities in the world. It is estimated that more than 300 languages are spoken by sizable populations in London. This means unique access to a multi-lingual/multi-cultural workforce; some companies are already using that workforce for multi-lingual call centers.

I can see how there could be many other ways to benefit from such a diverse talent pool. That's because businesses exist within a society, which means that their cultural interface is very important otherwise they, and their products/services, won't be successful. They won't hit their mark.

If you don't understand your communities you will not succeed as a business. That's why Silicon Valley Watcher reports on the business and culture of Silicon Valley. And London potentially offers businesses an understanding of many cultures in one place.

London certainly looks appealing as a business center. And its ambitions to replace its hard hit financial services sector with more enduring and rapidly growing industries is a smart move. What will determine its success will be if it can become a development center that spawns great companies. Right now, its most obvious advantage is as a marketing/sales center for tech companies.

For London to attract Silicon Valley tech companies, the Think London organisation needs to do more work with the venture capital community and stress speed to market. The VCs are the ones that are pushing the startups to outsource as much as they can, and to speed to market by globalising operations as quickly as possible.

For London to attract the emerging Silicon Valley companies, however, there also needs to be more of business environment that doesn't punish success.

For example, a year ago I met with Rob Hull, business development manager at BT, the giant British telecom group. BT is investing about $16 bn in a next generation Internet infrastructure, and it dominates the telco market. BT will help web services companies, provide billing services, etc, and split the revenues giving them 80 percent and BT keeps 20 percent.

However, there's a catch... From SVW: Silicon Valley startups told: Come to London ... BT wants your business

...should your wireless service become hugely popular, BT reserves the right to "port" the service to its machines and reverse a 20 percent / 80 percent revenue split in its favor(!)

Mr Hull says that this provision is rarely implemented. But then why have it? Seems a discouragement to me...

I cannot see how such a business arrangement would be attractive to Silicon Valley's Web 2.0 companies, net neutrality issues pale in comparison. Think London might do well to ask BT to think again on that provision.

- - -
Please also see: Why is there no British Google? A top British politician asks...

Also: Think London case studies.

I popped into the Museum of Modern Art Wednesday evening for the launch party for Genius, a startup that is grabbing buzz by the armful. So much buzz that a TV crew from one of the local stations was at the party, wondering if it was an example of dotcom mania making a come back.

No, it was not, but Genius has a savvy team, led by CEO and founder David Thompson, former chief marketing officer at WebEx. Mr Thompson knows his business very well, he's one of the most astute marketing executives (and I hate that term normally...) that I've met in a long long time.

The Genius product is also very clever, the way that it bypasses the the IT department and encourages users not to tell the geeks in the glass room about using the SalesGenius web service--the first in a planned suite of enterprise apps.

Smart use of proxy servers allows SalesGenius to monitor a company's best sales leads. They can view behavioral data on who visits their web sites, and help determine which sales prospects are hot. Hot leads get bumped up to the top of phone list.

I met with Mr Thompson and Heather Mosley from PerkettPR more than a week before the launch, and the more I think about the product and the business strategy I'm more impressed. It looks like a useful product and a very very smart business strategy.

And it was during a discussion with David Thompson that I had an interesting and blindingly obvious realization. I had asked why he had chosen to develop SalesGenius, as the first in a suite of enterprise apps?

He said the focus on sales is the most important part of any company and that's where the most benefit occurs from investment in the automation of the sales process.

A simple answer and it made me realise how often organisations forget this blindingly obvious fact. And I realized why CRM is probably the only enterprise software application that could ever justify its ROI and that's why CRM companies have been very successful.

But new web services threaten the old CRM stack because users can start using them instantly. And users can customize these apps without requiring IT departments and consultants.

Mr Thompson said that his experience at WebEx showed him how salespeople were using online meetings to sell products and services. Using the WebEx technology they could make 10 times as many pitches, and sell much more than before.

Since the interview, I've realized that the SalesGenius product is a crafty way to bring sophisticated web analytics into an organization, through grassroots users. And then once you get viral recognition within the company you get a shot at corporate license revenues, and sales of other online modules for other departments--all tied together for a one-view business console for the CEO.

Internet commerce is going to grow in importance, therefore strong web analytics is going to be the foundation of every company. Because web analytics determines how you sell your products, how you reach your best prospects, and the many other gazillion online interactions that future corporations will have to monitor. Web analytics is a way to get into the core of future businesses, that's the sweet spot because without strong web analytics you will not be able to run your business effectively. I have to hand it to the company, its name might turn out to be accurately descriptive rather than just hopeful ... :-)

I wouldn't be surprised if within a year WebEx or Salesforce acquires Genius. In fact, they should all join together, and they probably will at some point.

By Tom Foremski for SiliconValleyWatcher

LaLa.com launched today--an interesting business that seeks to monetize your CD library. Think of it as monetizing your long tail collection of CDs you rarely play anymore...

For a buck each you can exchange each one for a CD you'd love to hear.

The people behind LaLa are led by Seven co-founder and chairman Bill Nguyen. I popped in to see Mr Nguyen and John Kuch, in business development, a couple of weeks ago to get the prebrief.

LaLa is in downtown Palo Alto in an interesting building and in a spacious office setting that has tons of natural light and high ceilings. When I walked in, Mr Nguyen was escorting out family members who had dropped by to surprise him on his birthday.

We walked into a cooler, darker conference room and sat down on foldable wenge-colored Rex chairs, and switched on the LCD projector. Up comes a user interface that is friendly and intuitive.

"We wanted to be able to give people access to a much larger library of music than ITunes or anybody else. And we have some great search algorithms that can recommend music that you didn't know you might like," said Mr Nguyen.

Basically, the service works this way: you list your CD collection and you mark each one with a "I want" or "I have" and others can browse your CD collection and request your CD(s). You get an email saying that a member wants your CD and you pop it into a pre-paid envelope, as in Netflix, and off it goes.

Similarly, you receive CDs you've requested from others. Each transaction costs just $1. And the artists get a royalty.

You get rid of a CD you weren't listening to, and you get a CD you want, and the artist gets paid about the same as if they had sold a new CD. It is win-win-win.

Clearly, the temptation is to rip the CDs and then move them on. But, should such abuse of the system take place, the artists are getting paid each time. The record companies are missing out on their cut, but hey, they already got their cut...

Check it out and let me know what you think. We have betas available for SVW readers! But sign up quickly because there are a limited number available...

http://www.lala.com/invite/siliconvalleywatcher.com

Here is the official announcement:

By Tom Foremski for SiliconValleyWatcher

About a year ago I was in Palo Alto, trying to get back home but I had promised to stop in early evening to Il Fornio and meet with Become.com--a shopping portal.

I remember that Tim Dyson the CEO of Next Fifteen was going to be there, and I wanted to touch base with him, but I wasn't that interested in meeting with one of many shopping search sites such as Become.com--I was determined to make it a short meeting.

You can tell where this story is headed: I ended up staying for dinner and I was very impressed with the team behind Become.com (and that's when I also met Jason Dowdell(!)) I ended up staying well past my bedtime but it was worthwhile.

Wednesday I got to catch up with Michael Yang, the CEO of Become.com--not that we haven't bumped into each other many times since last year. What continues to impress me about Become.com is the discipline and the focus of the management team.

This is a company that is very single-minded about the ecommerce opportunities that lay in its lap. And this is also, a very experienced management team, having built up My Simon.com, the shopping portal, which was sold to Cnet.

This time, Mr Yang and his partners, know how to avoid the mistakes of their first go around--and that's what makes this company and this team very interesting. They know what to do and they are executing near perfectly on a business plan that they laid out to me more than a year ago.

So stick around, an interview with Michael Yang, CEO of Become.com is on its way.

By Tom Foremski for SiliconValleyWatcher
[There has been a lot written recently that Silicon Valley is back--here is part of a post I wrote in mid-November 2004.]

I've had lots of chats about Silicon Valley lately and I’m of the Bachman Turner opinion that you ain’t seen nothing yet.

When I arrived here November 8, 1984, Silicon Valley was going through the down cycle following the PC boom. A hundred PC companies wanted just 10 per cent of the market, wanting to strike it rich, as rich as the Apple IPO—the Google celebrity IPO of its day.

Hundreds of Apple staff became millionaires, including secretaries and the guy that ran the parking lot. The media coverage was massive. VCs rushed in like a herd and funded a huge number of PC companies and when the bubble popped, the down cycle was harsh. Stories about Silicon Valley’s death were constant and grinding for several years. I’ve seen several business cycles and the same thing happens in each down cycle, endless speculation about Silicon Valley’s future. What future does Silicon Valley have?

I think I can answer that question very easily—and I’ll accept any size bet on this call: when Silicon Valley comes back, it will be bigger than before. (Actually, it’s been back for a while--hence this venture.)

[I was chatting with Ron Piovesan, from Cisco on this topic recently, and he says has also seen signs of improvement. He laughed when I said I own the dotcom name: SiliconValleyIsBack.com. I said I’m serious, I do own it!]

Silicon Valley is very much like a fairground slurpy -- big chunks of ice with most of the juice at the bottom.

And there is a lot of juice accumulating, the laptops are discretely reappearing in bars and restraunts, and there are many signs of bubbly behavior.

Silicon Valley is going to have a larger impact than before. I’ve been through several business cycles and each time Silicon Valley has come back stronger.

In the shadows of Tuesday's Oracle-Sun enterprise system bundling partnership, and news from MacWorld, was some news about Ingres--an open source database company.

The news about Ingres was that Jim Finn joined the company as senior vp and head of communications--leaving a very high profile job as head of IBM Americas communications.

It was just over a year ago that Mr Finn departed from Oracle, where he headed worldwide communications. This was one of the most challenging jobs in Silicon Valley if you consider all the M&A deals Oracle was doing; not to mention working with Larry Ellison, one of Silicon Valley's top business leaders.

Ingres is assembling a stellar executive team and it's ambitions are to challenge the enterprise market leaders with open-source enterprise software. Given the high license and maintenance fees enterprises pay today, Ingres has a nice price umbrella to work under. But enterprise software is a hard sell. Here are some more of my thoughts on the company:
Ingres: Is this the dark horse of the enterprise software pack?