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Posts Tagged ‘Startups’

Facebook, Tesla And Solyndra Dominate SecondMarket Transactions In January

Last month SecondMarket published data on private company stock sales that they helped complete in 2009. They’ve now released last month’s data as well.

A total of a little more than $13 million in sales occurred, with the average transaction size of around $2 million. There continues to be very strong demand for consumer products and services startups (which includes companies like Facebook, Twitter, LinkedIn, Digg, etc.). But the sellers are spread out more evenly across all categories, particularly consumer, IT, Healthcare, energy and cleantech.

36% of the transactions were sales of Facebook stock, and we’ve heard from independent sources that sales are being completed for as high as $40 per share (or a $17.6 billion valuation). That’s a substantial price increase from less than a month ago. Tesla took 29% of the transactions, and sales of Solyndra stock were 28% of the total. Gridpoint rounded the group out with 7% of the total.

The complete report is below, and you can download the pdf here.

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4Home gives you ultimate control over your electronics, appliances — snags $4.3M

4Home, maker of software that allows you to control all the appliances and electronics in your home from a central dashboard (spanning your television, computers and smart phones), has just raised $4.27 million in fourth-round equity, according to a filing with the SEC. Riding the trend toward greater household automation, the Sunnyvale, Calif. company is poised to become a Smart Grid contender as well as a major home media service.

Right now, its offerings are indirectly related to the Smart Grid, but the potential is there. You can use the software to control some appliances remotely — particularly programmable thermostats. In the future, 4Home’s software could allow you to turn off your clothes dryer, dishwasher or even pool filter from your smart phone when you aren’t at home. The system can also be set up to track how much energy is being used overall or at the device level. This brings it into competition with a bevy of home energy management startups like Control4, Tendril, EnergyHub, OpenPeak and many more.

Still, the product’s coolest capabilities are related to media organization. For example, it can serve as a hub for all of your family’s music, movies, web videos and more — both storing them and delivering them to televisions, computers and even mobile devices on-demand. No longer do 4Home customers have to worry about some music being on one computer and not on another. They can stream any content they want at any time via almost any entertainment device.

A third functionality for the 4Home software is home surveillance. If customers have security cameras installed, recordings can be fed directly to the dashboard where they are accessible from anywhere. Eventually, you could go on vacation and check in to make sure your sprinklers came on at the appointed time, no matter where you are. Home surveillance is also an area of increasing consumer interest, demonstrated by recent investments in RelTel and chip-maker Stretch, and the rise of Ugolog.

Recently, at the Consumer Electronics Show in Las Vegas, 4Home announced that it is partnering with Verizon Wireless to use 4G networks, which are set to be rolled out in 25 to 30 markets in 2010. This will give 4Home users even more choices about what and how they can control their household devices from remote, even more distant locales.

4Home has now raised more than $9 million to date. It previously brought in $4.88 million over three rounds of financing from Pond Ventures among others. Most recently, it landed $525 million in convertible promissory notes in September 2009.

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Ten-Year Venture Capital Returns Continue To Slide

Ten-year returns for Venture Capital firms continue to slide downwards for the 5 and 10-year periods ending on September 30, 2009 according to the Cambridge Associates U.S. Venture Capital Index, the VC performance benchmark of the National Venture Capital Association.

As investments in startups during the lucrative 1990’s tech boom are no longer included, ten-year returns slide to lower and lower levels, dropping by nearly half from the previous quarter. The 10-year return fell to 8.4 percent from 14.3 percent in the previous quarter and from 40.2 percent one year earlier. The 5-year returns also declined to 4.9 percent from 5.7 percent in the previous quarter and from 10.7 percent one year ago.

While returns are diminishing, investments continue to rise after a year when venture funding was in the doldrums. VC investments in fourth quarter of 2009 rose to nearly $15 billion, up 113 percent from a year ago.

These numbers aren’t surprising, considering the drought in IPOs over the past few years.But venture capitalists and tech entrepreneurs are hopeful that 2010 will be the year they rain down on the Valley once gain, with a handful of promising startups that could be ready to go public this year. In fact, Tesla just filed for a $100 million IPO on Friday.

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How the iPad is Changing Interaction Design

Applications that looked amazing on larger multi-touch experiences like Microsoft Surface may have a more affordable consumer-facing counterpart. While the iPad has been widely criticized, many startups are thrilled by its possibilities. In mid-November we featured Paris-based Pearltrees as a new design interface for remapping web information. We spoke to CEO Patrice Lamothe to hear his thoughts on the release of the iPad.

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Pearltrees is a new way of organizing information where users create mindmap-style visualizations of their favorite websites and web-based media. Each “pearl” or media node can have multiple branches and depending on how you want to arrange your pearls, you can drag and drop them to any branch point to suit your needs. Rather than scrolling through a linear hierarchy of bookmarks, users can delve into different branches of a pearltree. Naturally, this type of data visualization lends itself to the touch capabilities of the iPad.

Says Lamothe, “The idea of physically touching and moving items on a screen is in the DNA of Pearltrees. We won’t need to change much to the interaction design to make it suitable for the iPad.”

Nevertheless, while Lamothe sees the potential in the tablet’s touch interface, the fact that the device does not currently support Flash is a problem for the CEO. While many argue that Apple’s omission of Flash support is in favor of HTML 5, there’s no denying that lack of Flash would hinder the consumer experience. The plethora of pre-existing Flash apps and sites are inaccessible save for Adobe’s workarounds.

Says Lamothe, “I believe tablets can open up an entirely new field, something I would call ‘casual browsing’. It’s a really simple way to get information, browse the Web, enjoy content, play games and communicate with friends. It’s something you will do at home, in cafes, during your holidays – basically when you have a bit of leisure time. To be the perfect casual browser, the IPad would need a more open architecture, Flash, a camera and a few other features…In any case, it’s an exciting new way to enjoy the Web.”

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In The Limelight: An American Entrepreneur In China Talks About Startup Culture

Calvin Chin is an American entrepreneur who lives in Shanghai. He founded Qifang, a P2P lending site for Chinese student loans. You can read more about Qifang here. He attended the World Economic Forum in Davos, Switzerland this last week, where China was the center of attention. We asked him to write this guest post and share his unique perspective as an American building a startup in the heart of China.

Here at Davos it seems China keeps coming up in two ways – neither of them positive. One, with the worst of the crisis behind us, people are turning from last year’s hopes of China as economic savior to China as free-rider keeping its currency cheap, bullying its minorities and shirking its responsibilities in Copenhagen. Two, in the tech community, seems everyone is talking about Google, Chinese government hackers and censorship.

My view, and I think it’s one that many in China would probably share, is that while free access to information and the rest of the world is inherently a good thing, so is political stability. The Chinese government has earned a lot of slack for raising hundreds of millions of people out of poverty, and if things did go out of control a heck of a lot of people would get hurt. So even if they want China to be plugged in to the rest of the world to encourage innovation and Chinese tech entrepreneurship (which I think they do), they’d put that priority after getting most Chinese people better lives.

It’s kind of the same deal that Chinese startups all make, to try to do build cool stuff but while working within the system. So Tudou and Youku screen their videos and the fastest growing microblogging service is run by a portal that has the infrastructure from screening blogs to be able to screen tweets. All these companies are making the same decision that Google made to enter China in 2004 too (and stay for now), but for Chinese entrepreneurs they don’t have the option of not being in the China market. It’s what they know and where they have their best shot at success. And I’m sure if you’d ask them, they’d sincerely agree that eliminating poverty and keeping things stable comes way before access to a few articles in a foreign language about events that don’t mean much to them. I don’t think many non-Chinese would like the aggressively patriotic and self-important China that would probably be the outcome of democracy there today anyways.

The Chinese market for startups is growing so fast, is so competitive and is characterized by so many unfair advantages for the big players, that local entrepreneurs just keep their heads down and roll with the political and market changes. Take Digu for instance, they launched as a pretty simple copy of Twitter that focused on celebrity accounts, then pivoted to a social game model when all the startup microblogging platforms got shutdown and Sina (with a lock on celebrity blogs) launched Weibo, and are now back to straight microblogging with a better ability to keep the tweet streams “harmonized.” Digu didn’t whine, they just sucked it up and forged ahead.

This is typical for Chinese startups. Whether they are localizing an international hit, copy-2-china style, at a much cheaper price and a better UI like Kuukie. Or they’re a fit for Chinese net culture with a product that you don’t see elsewhere like Douban’s social network for talking about books (and now other media).

The thing is while the majority of Chinese netizens really don’t care that much about what’s going on outside of China, the ones who do care, people who would start companies, people who want international news, all know workarounds to use services they like or read about sensitive topics from other perspectives. They use Twitter clients like Bage or free (http://hotspotshield.com/) or paid VPNs. So much so that Twitter won in the grassroots Chinamode awards.

So actually, the Chinese government kinda gets the best of all worlds: most Chinese netizens are sufficiently inconvenienced so they’ll never stumble into places they shouldn’t, motivated innovators still find out about, get to, and can track any going on globally, and international companies that would otherwise compete for local market share get locked out.

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Is the Real Revenue in Printing Money and Trading Sheep?

While many large communities continue to chase ad revenue and subscription models, I can’t help thinking the real money is in virtual currency and goods. Yesterday we featured an article about Beijing and the fact that TenCent (one of the country’s most successful social networks) makes 90% of its revenue from virtual goods. With China alone representing a $4 billion dollar market, many are looking to gaming and virtual goods as the next emerging space.

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Few investors know the gaming space as well as Benchmark Capital’s General Partner Mitch Lasky. In addition to sitting on the board of Riot Games, Lasky’s firm invested in both Gaia and Linden Lab. Linden in particular has built an incredibly lucrative economy. The company’s in-world currency trades at about $250 Lindens to the US dollar with 2009’s revenue estimated to be $100 million dollars. With last Spring’s rumors that Facebook was considering a virtual currency, we asked Lasky to imagine what a Facebook dollar would do to casual gaming.

He explains, “I actually think Facebook could be good for Zynga and other casual gaming groups. Having the Facebook brand behind this type of monetization could help dispel any Scamville-related issues and create some certification of quality. There would likely be some attacks, but rallying behind a central currency could definitely be beneficial.”

While a Facebook dollar feels like a far off dream, how can startups profit from the emergence of new virtual economies? Let us know your ideas in the comments below.

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U.S. virtual goods revenue expected to hit $1.6B this year

Virtual goods are expected to hit $1.6 billion in revenue in the U.S. in 2010, according to a report from Inside Network.

The most interesting part of that number is that social gaming startups — which didn’t exist three years ago — will account for about $835 million of that total, said Justin Smith, founder of Inside Network and co-author with Charles Hudson of the Inside Virtual Goods report.

Virtual goods are digital items that don’t exist in the real world. They’re often used to monetize free games available on social networks such as Facebook. In Zynga’s FarmVille game on Facebook, for instance, you can buy a hot rod tractor that can help you grow your crops faster. While FarmVille is free, you pay for the tractor using real money via credit cards or other payment systems.

The virtual goods business model took off in South Korea more than a decade ago, and virtual goods businesses are generating an estimated $4 billion in revenue now. But things have been slower to take off in the U.S. Last year, however, games on Facebook, MySpace and other social platforms finally started generating a lot of revenue. Inside Network estimates virtual goods revenues in 2009 were $1 billion.

“2009 was the year that casual games like Zynga’s popular Farmville took over the major social platforms and changed the way millions of people socialized with friends online,” said Smith. “Casual games introduced a rich, new way of interacting with friends on social networks, and saw the highest engagement numbers that the online entertainment industry has ever witnessed.”

The revenue numbers are growing fast because of the fast growth of social networks such as Facebook, which has more than 350 million users now. The 2010 social game revenue is expected to be concentrated in the hands of companies such as Zynga, Playdom, Playfish (purchased by Electronic Arts for up to $400 million), and a relatively new player, Crowdstar International.

About half of the revenue from virtual goods comes from traditional games, including stand-alone web site games, massively multiplayer online games, mobile games, traditional virtual worlds, and even game consoles. Among those, Linden Lab’s Second Life is generating a lot of virtual goods revenue.

This year, Smith is predicting that social games will become more mainstream. And while big companies will likely make acquisitions in the space, Smith believes that a lot of small developers will continue to prosper as the market takes off.

The report details how social game developers organize their teams and publish on a frequent update schedule, with numerous iterations aimed at getting more users to play and share the games. It also describes the mechanics and designs of social games and what makes them unique, as well as monetization trends.

The report includes a discussion of Facebook’s platform changes and what is in store as Facebook launches its Game Dashboard and rolls out its Credits currency for games. The 150-page report is available for $995 or as part of an annual subscription for $2,495.

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How To Find a Great Startup Mentor

If you’re an early-stage entrepreneur and this is your first startup company, you are not alone. Thousands are toiling over code in the hopes that their product will gain users and revenue. The problem with being someone who can build a great product is that you might know more about your core technology then you do about the business of startups. In the past few weeks ReadWriteWeb has covered emerging tech hubs in Israel, Austin and Boulder and the common thread amongst them is that each community encourages mentorship. Today we’re looking at what you need to know to find a great mentor.

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Says Union Square Ventures VC Fred Wilson in a recent blog post, “The young entrepreneurs who are starting companies for the first time are best served by seeking out and getting experienced serial entrepreneurs as angel investors, board members, and mentors. We encourage all of the first time entrepreneurs we work with to do this.”

In a perfect world, launching a successful product would simply equate to building something phenomenal. But in reality, an isolated phenom can get buried beneath the noise of thousands of other startups. Wilson and a number of other investors ask first-time entrepreneurs to bring on trusted advisors in the hopes that newbies will broaden their social graph and avoid making the mistakes that others have already made. Below are some of the things you should consider before choosing a mentor.

Success: Just because someone speaks at conferences and has been in the industry for 10 years, does not mean they are qualified to be your mentor. Look at the individual’s past successes and find out exactly how they’ve contributed to them. Check with others to gauge this person’s visibility in the industry and determine whether or not that success is directly related to the type of business you want to build.

Connections: A good advisor/mentor will open doors in the places you need doors opened. If you’re a music content provider and you need help with licensing, find someone who knows the legal and business development side of major labels. If your revenue model is based on advertising, find someone who can help broker deals with ad networks and agencies. If you’re building your business on a 3rd party platform, get an advisor with friends on the inside.

Personality: Determine whether or not your potential advisor is famous or infamous. Sites like The Funded allow entrepreneurs to share their good and bad experiences of investment groups and individuals. While these reviews should be taken with a grain of salt, you want a mentor that is present to answer your questions, engaged enough to offer suggestions, patient enough to explain some of the basic tenets of startup life, and finally, mature enough to have their suggestions occasionally rejected.

Let us know how you chose your mentor/advisor in the comments below.

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