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Almost everyday I read about yet another company that has raise another round which catapults the company into the billion dollar plus valuation club. The problem I have with this is that it seems like most of these startups are in the business of raising money rather than focusing on a business model or refining it to become profitable.

What would happen if these startups focused on the strategy, product, and generating revenue instead of raising money?

A recent example is Twitter that has an estimated revenue run rate of $85 according to Pascal. I recently read that Twitter was working on an $800 million dollar funding round which would yield an $8Bn valuation. There are too many similarities between professional athletes and valuations these days.

Specifically, professional athletes often care most about the press around their multi-year multi million dollar contract and becoming the highest paid. What most people and athletes don’t realize is that not all of that money is guaranteed especially if they get hurt. Similarly, startups seem to be focusing on the next round of funding instead of building a sustainable business and corresponding business model. The tragedy is that most professional athletes squander their money and a lot of startups wind up wasting the venture capital by cashing out and not focusing on building a sustainable business.Tweet

Kickstarter is brilliant because it facilitates creativity where typically money was a barrier. Additionally, it is another example of social commerce and funding that is disrupting the offline world. The true brilliance is that the average person cannot legally invest in a company as you have to be an accredited investor; only a small percentage of the population qualifies. The irony is that I feel that the qualifications of an accredited investor are flawed. Just because someone has a certain income over time and a certain amount of assets, does not mean that they are savvy. What if an accredited investor makes millions but spends millions and lives as if they made $100,000? Kickstarter circumvents the accredited investor laws by providing the people that fund the ideas with tangible products instead of equity.

If Kickstarter were able to scale and move beyond just creative projects, and Google were to adjust the commission I could see this becoming a billion dollar business that has an altruistic component to it.

Why should Google acquire Kickstarter?

• It would increase adoption of Google Checkout, replacing Amazon payments currently used by Kickstarter
• Notable funding includes ipod Nano Watch $624k, and Diaspora $200k
• If Google doesn’t acquire Kickstarter, someone else will such as Amazon
• It is a business that thrives on the network effect and margins are high
• May parlay Google is evil movement and add human element to Google’s products

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“Yodlee is committed to constant innovation in the financial services industry. Allowing third party developers to leverage our unique web platform and distribution capabilities will put innovative new products and services in the hands of financial institutions and the customers who need them at an even faster rate,” stated Joseph Polverari, Chief Marketing & Strategy Officer, Yodlee. “Our relationship with Y Combinator will enable a new generation of entrepreneurs and developers to create products that will help people manage and relate to their money.”

With this partnership, companies in each Y Combinator funded class can securely access financial account and transaction data on behalf of consumers through Yodlee’s Platform. This gives companies the flexibility to build a working product, conduct a beta test, apply user feedback and establish a solid launch pad for obtaining later stage investors. Four Y-Combinator-funded companies: Indinero, WePay, FutureAdvisor, and ReadyForZero are already leveraging Yodlee’s market-leading platform, a testament to the value of the platform for powering new innovation.

“We’ve noticed an increase in the number of startups applying for funding who are building products in the personal finance space and need reliable access to personal financial information,” said Harj Taggar, Partner at Y Combinator. “The financial services space is becoming an exciting area for startups, which is probably a result of consumers becoming more comfortable with managing their finances online. We’re excited about having Y Combinator work together with Yodlee to see what new kinds of innovative products can be built in this space.”

Yodlee’s developer program is really open to everyone, but I imagine that the partnership will have benefits above and beyond the regular developer relationship. Tweet

DotSpots is a service that enables anyone to update the news in real-time with dots, or distributed objects of thought: mini-blog posts containing text, videos, images, documents, perspectives from the blogosphere, or eye-witness accounts from the scene.

These dots appear as a stream of high-quality user-generated editorial content directly in-context of all relevant articles across the web, where they are rated and vetted for usefulness by readers — the wisdom of crowds.

As a result, news sites gain comprehensive coverage for each breaking story without incurring additional cost, readers get to see multiple perspectives and eye-witness media without extra effort, and worthy alternative view-points from the blogosphere are given the mainstream exposure they deserve, in near real-time.

How it Works
Users can signup for an account and then are prompted to download an addon for Firefox. Once installed users can browse the web and annotate and create DotSpots across the web. Members can also read what other users contributed and then further refine and contribute their own views, content and more. On the publisher side these crowdsourced contributions could be syndicated and provide real time and valuable layers of information on top of existing content. As for a business model, advertisements are in the future once it gains a significant number of users. See how DotSpots works in the video below:

Recipe for Success
Farhad is taking some of the lessons learned from his previous exit BizRate/Shopzilla. Specifically, they are focused on keeping equity in the hands of DotSpots employees and not VCs. All of DotSpots employees work from home and the company pays part of the employees mortgage in lieu of potentially a lower salary.

I wish Farhad all the best as I previously worked for BizRate/Shopzilla for many years and really enjoyed the experience.

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As part of Facebook’s incubator program frintro rebranded as Thread and is solely focused on online match making. From a design and usability perspective this site is top notch. Facebook recognized this company’s efforts with funding of $1.2MM.

Wisely leveraging Facebook’s Connect, users can easily begin finding their next partner. It enables users to leverage the wealth of information already on their respective Facebook profile to use on the Thread profile. Additionally, users can playmatch maker for others by perusing friends of friends and making connections that way.

What is left to be seen is how the company will generate revenues. I would imagine that in the near future there could be the implementation of virtual goods to enhance one’s profile to make it more attractive or differentiate it from other profiles. Additional questions also remain as to whether users are comfortable revealing so much information to prospective suitors. Stronger privacy controls may be in store for this site.

Existing dating sites such as Match.com and eHarmony have been laggards in adopting social media as part of their platform since social networking can almost be a free version of online dating. I could anticipate an acquisition in Thread’s future either from a media conglomerate like Barry Diller’s IAC.

Below are some screenshots that I took while testing the site. Full disclosure, I am happily married and just wanted to check out what I think is a promising startup.

Thread.com in less than a minute from Thread.com on Vimeo.

http://www.trendslate.com/?p=323 We recently reported that Google will be opening up their AdSense platform to third-party ad networks. Its a smart move for Google because it allows their publishers to run ads from third-party ad networks without the risk that they’ll leave AdSense. Its also good for ad networks who are looking for more distribution or to get rid of excess ad inventory.

But the elephant in the room is that Google is moving into an arena that Santa-Monica based Rubicon Project has been hammering away at since their inception two years ago. And having received over $30M in funding thus far, Rubicon has been on a rampant growth curve this year. In June they began expanding their operations internationally. For publishers wanting to get the most revenue for their inventory while not needing to constantly swap out code and manually crunch the numbers, Rubicon Project has emerged as a top contender. With one implementation it easily allows publishers to manage multiple ad networks and optimize them for the highest payout. And with so many networks competing for so many publishers, this is good for the ad networks too. Of course, Pubmatic, Hubpages and Yieldbuild have also been competing in this category, but the team at the Rubicon Project has executed better than anyone else in this space.

Some have suggested Google’s decision to enter this space is a bad thing for the Rubicon Project. I disagree. Google’s recent decision is the best thing that could have happened for three reasons:

First, it makes Google look defensive, which not only validates Rubicon’s model, but shows investors that they’re onto something. Even Google’s YouTube video on how the process works sounded a lot like Rubicon’s pitch from a year ago. This should make it easier for the Rubicon Project to raise a new round of funding (if they even need it) and/or gain the attention of potential acquirers. It is clear that Rubicon has made enormous traction in an area that a top player now wants a piece of.

Second, it gives the Rubicon Project a new platform from which to speak to ad networks. Let’s face it, Google deals directly with lots of top-tier advertisers and they just won’t be able to convince the networks that they’ll choose network ads over Google’s current blue-chip inventory. Google’s balance sheet would prevent it 9 times out of 10. But since Google is now stoking publishers on a new way to deal with ad networks, it gives the networks a choice: work with Google, continue spending lots of money to out-advertise your competitors, or work with a “network consolidator” like Rubicon. It plays very well into Rubicon Project’s goals to expand and bring more networks into their fold.

And lastly, Google’s momentum in this space only makes the Rubicon Project look more valuable to potential acquirers and large-scale partners (I’m looking at you Microsoft, Yahoo, CBS, CNET and AOL). The non-Google players definitely wouldn’t want to participate in Google’s new program, and the more successful Google is, the more these other players may start thinking about increasing distribution through either a partnership or an acquisition. This puts the Rubicon Project in an amazingly good position.

Of course, there are a few unknowns here. Its hard to say how much traction Google will make with the publishers, or how this might negatively impact an AdSense publisher’s decision to give the Rubicon Project a try. Its also difficult to know how this might help or hinder Rubicon’s ability to move up the value chain and work directly with advertisers (something Rubicon has made clear they won’t do, and understandably, since it would hurt relations with ad networks). Since Google is now working with both advertisers and networks via AdSense, will it change Rubicon’s prospects?

One thing is clear… Google saw Rubicon’s growth as a low-end disruptor as a threat and they responded on Wednesday by opening up their AdSense program to third-party ad networks. For the Rubicon Project this creates new investment opportunities, a stronger proposition to the ad networks, and new value in the eyes of potential acquirers and partners. Especially now that AdSense has crossed the rubicon…

(disclosure: I used to work with Rubicon’s VP of International)

(another disclosure: Three weeks ago, TrendSlate applied to Rubicon’s publisher program. We were denied. )
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]]> http://www.trendslate.com/2009/08/28/google-opening-adsense-to-networks-is-a-very-good-thing-for-the-rubicon-project/feed/ 2 http://www.trendslate.com/2009/08/27/myshape-raises-additional-10m-adds-new-features/ http://www.trendslate.com/2009/08/27/myshape-raises-additional-10m-adds-new-features/#comments Fri, 28 Aug 2009 03:45:12 +0000 Tim Schulz http://www.trendslate.com/?p=303 MyShape, the Pasadena-based personalized fashion retailer run by Louise Wannier, has raised $10.5M in equity funding.

MyShape.com is basically an automated, internet-based fashion consultant. Users enter their personal measurements, body shape and style preferences, and the system recommends clothing based on this data. No dressing rooms, no long lines, etc. MyShape reports that they recently relaunched the website with new socialized shopping features, measurement systems, and various other features. The site has a video explains their service.

The filing says the fundraising is part of a nearly $12.1M round and the company is already backed by a list of blue-chip firms: Draper Fisher Jurvetson (who led this new round), Lehman Brothers Venture Partners, the Pasadena Angels, and the Tech Coast Angels. Update: Barry Schuler, managing director of DJF Growth Fund, has joined the board.

What is most surprising is that their monthly-unique visitor count is only at ~200k (via Compete.com). With the amount of funding they’ve raised it must mean that either MyShape has bright prospects on the horizon, or they’re pulling in a lot of revenue already. And it would be no surprise. After adding a dress, handbag, and necklace to the shopping cart, the price came to over $1,300.

Insight from Compete shows the company is still in customer acquisition and growth mode:
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]]> http://www.trendslate.com/2009/08/27/myshape-raises-additional-10m-adds-new-features/feed/ 0 http://www.trendslate.com/2009/08/27/incubator-comes-to-la-not-y-combinator-but-launchpad/ http://www.trendslate.com/2009/08/27/incubator-comes-to-la-not-y-combinator-but-launchpad/#comments Thu, 27 Aug 2009 07:00:24 +0000 Tim Schulz http://www.trendslate.com/?p=299 A new seed-stage funding “incubator” has formed to help entrepreneurs build more successful companies in Southern California — Launchpad LA. At first glance this firm seems to be modeled in a similar fashion to Y Combinator, Seedcamp and the many other incubators that exist around the world. Incubators provide seed money, advice, and connections through a structured program (usually 2-3 months).

An incubator like Launchpad LA is important for tech startups in the Southland. There hasn’t been as much access to capital in LA as in Silicon Valley, which means that SoCal startups often need to be boot strapped with a strong focus on generating revenue early on. An incubator can change this by enabling entrepreneurs to build disruptive companies that don’t necessarily have have immediate revenue potential. In the long run, this will bring more industry diversity and talent to Southern California.

Launchpad LA is founded by Marc Suster, a former entrepreneur with two successful exits under his belt and a resume that spans two continents. Also joining Suster are Michael Schneider from MobileRoadie, Ryan Born from AudioMicro, and Abdul Khan from iBeatYou.

According to Launchpad LA’s website they intend to:

“…help young talented startup entrepreneurs get funded and grow while remaining in Southern California. The idea came from Mark’s frustration of seeing too many companies receive funding by Northern California VCs and then relocate their teams. Mark was further inspired by the aims and initiatives of John Morris, the former head of the Tech Coast Angels. The Launchpad LA initiative is a true collaboration amongst Los Angeles’ best VCs who have a shared interest in seeing a robust tech community continue to thrive in Los Angeles. Launchpad LA runs a series of educational meetings and discussions designed to share experiences between serial entrepreneurs and newer CEOs.”

The initial roster of CEOs is impressive:
* Alec Andronikov of Movoxx
* Rob Angarita of Cramster
* Clark Benson of Ranker
* Ryan Born of AudioMicro
* Michael Broukhim of Totspot
* James Citron of MoGreet
* Michael Fisher of ElephantDrive
* Abdul Khani of BeatYou
* Ari Mir of GumGum
* Michael Schneider of MobileRoadie
* Ian Swanson of Sometrics
* Kerry Trainor of FlipGloss
* Jade Van Doren of TechForward

Here’s a panel that Mark Suster participated in at Twiistup 6 in July. Its a discussion about the LA-startup ecosystem with panelists Mark Suster, David O. Sacks, Mike Jones and James Montgomery.

Update: Allen Hurff, former SVP of Technology at MySpace, is rumored to be launching an incubator as well.
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