—Consulting firm Deloitte has acquired Seattle mobile developer Ubermind, the companies announced Wednesday. Terms of the deal weren’t disclosed. Ubermind CEO Shehryar Khan and founder Donald Brady will join Deloitte Consulting as principals, according to Deloitte’s press release. On its blog, Ubermind says that Deloitte’s large footprint is a big opportunity for the smaller company, but “We are also focused on maintaining what was working. The key elements of our business that make us unique will remain the same: our people and culture.” Word of the deal was first reported by John Cook at GeekWire.

—Digital content licensing company iCopyright has raised $2.62 million of an equity round that could grow to $3.48 million, according to an SEC filing. Founder and director Mike O’Donnell says this was “an internal round, open only to existing shareholders.” Greg Lamm at TechFlash notes that iCopyright’s previous backers include Crosslink Capital, Menlo Ventures, and Times Mirror Ventures. iCopyright offers online publishers a way to protect and monetize their content, an area of great concern for many media companies. O’Donnell says the new money will be used to help broaden product offerings, including new content management system plugins and a new syndication system. The company was in the news in recent years for a legal fight with The Associated Press. [Updated from previous version to add company comment.]

—Portland, OR startup Vizify—a member of the 2011 Seattle TechStars class—says it has filled out a seed round at $1.2 million. Vizify, which is still in private beta testing, creates nice-looking Web pages that pull a person’s online activities and digital data together in one place. The simple example it’s showing off right now is called TweetSheet, which makes a sort of infographic out of a person’s Twitter activity. Investors include Jonathan Sposato, Geoff Entress, Dan Shapiro, Bill Bryant, and Bill McAleer. The startup plans to use the money for hiring designers and engineers.

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I don’t want to read too much into the arbitrary turn of the calendar, but it seems like we’re in the middle of a pretty interesting moment for Seattle’s technology scene.

One of our mega-companies may be on the wane, while the other appears to be headed for much bigger things. The startup scene is growing and gaining the connective tissue it needs to expand in the years ahead. And Silicon Valley companies big and small continue flocking north to grab high-tech talent, seriously diversifying the gene pool.

At the same time, this region hasn’t escaped national questions about the vitality of early stage fundraising and the market for new public companies—not to mention the generally stagnant economy and need for more higher education. To get a jump on the year ahead, we’ve put together this list of a dozen questions to keep your eye on. In no particular order:

How healthy is the VC sector?
Recent numbers for venture capital firms nationally were not very encouraging: The amount of money raised by VCs was low, and limited partners showed a preference for investing mostly with the biggest-name funds, according to reports from analysts and industry groups.

Here in the Seattle area, we saw Polaris Venture Partners close up its branch and head for Silicon Valley. On the positive side, Voyager Capital filed paperwork for a new fund that could be worth up to $125 million. Another notable trend was the volume of investments for Bellevue’s Ignition Partners in the cloud computing sector, particularly in the Bay Area—attributable in large part to the addition of Frank Artale, who brought his connections to the firm.

Some big acquisitions, or even a big IPO or two, would certainly cure a lot of the uncertainty for the VC sector overall. If that doesn’t happen, keep an eye out for firms fading away or having difficulty shaking the trees for new money.

Where will our big companies go for acquisitions?
Microsoft took the cake in 2011 with its $8.5 billion mega-buyout of Skype, helped along by a desire to keep some of its considerable offshore money out of Uncle Sam’s hands. Beyond that, there were a few smaller deals—Austin, TX-based game studio Twisted Pixel, San Mateo, CA video technology company VideoSurf, and enterprise software partner Prodiance, based in Pleasanton, CA. Will Redmond make more big buys in 2012 with its almost unfathomably big cash horde of $57 billion? Despite its protestations otherwise, there’s plenty of speculation that Microsoft might need to actually grab phone hardware partner Nokia to really make a dent in the mobile market.

Amazon wasn’t as prolific, with only Europe’s Lovefilm listed on its official acquisition roster this year. Amazon has typically made a handful of acquisitions a year in the recent past, but it was focused quite powerfully on ramping up the hardware side of the business this year with the Kindle Fire. That, of course, helps buttress reports that Amazon may be interested in HP’s Palm assets.

And of course, both companies have been rumored to be looking into buying Research in Motion, the struggling maker of BlackBerry smartphones.

Will we get more angels?
One of the most frustrating things for tech entrepreneurs in the Seattle area is the impression that a ton of tech-created wealth is sitting on the sidelines of the startup scene. The continued vitality of the TechStars program, big-company veterans jumping into early stage companies, and further efforts to develop the seedbed for angel investors will all help.

As we see more out-of-towners move north to poach talent, we are seeing some very interestingwatch connections take hold in the startup community. While technology and infrastructure keeps getting cheaper, the Seattle area probably needs to keep working to cultivate a larger group of early stage investors who can take advantage of this increasingly rich network of people and ideas.

What happens to T-Mobile?
The spectacular flameout of the $39 billion AT&T takeover might have brought some sighs of relief to folks working at Bellevue’s T-Mobile. But any calm was probably short-lived, since parent company Deutsche Telekom doesn’t want the company long-term.

So what happens to the No. 4 U.S. carrier? It looks like the near term could see a bit of refocusing on the core business—boosted by the spectrum assets reaped from AT&T’s breakup penalty—while waiting for new partners or acquirers to get their offers ready. It’s probably a good enough bet that another carrier won’t be making the buy, since Verizon would run into the same antitrust problems that doomed AT&T, and Sprint has a completely different technology stack—not to mention its own problems. Look for an interesting bid by TV providers, who have been trying to get their hands on the mobile phone market for some time.

When will we see another tech IPO?
This past year’s big IPO victory was Zillow (NASDAQ: Z) finally going public. But it’s hardly a new company, in startup terms, and it had been a long time since a truly home-grown company had hit the stock markets before then.

The IPO market has been seen as up and down through the rest of 2011. If it gets a little more solid in 2012, we’ve got at least three companies that are pretty close to getting their own ticker symbol: Traffic-data provider Inrix, semiconductor laser maker nLight Photonics, and RFID maker Impinj, which filed its preliminary paperwork this summer but hasn’t done much with it since then.

Which small company the next big (or even medium) thing?
Game developer PopCap’s purchase for up to $1.3 billion by Electronic Arts and mobile software startup Swype’s $100 million buyout by Nuance were among the biggest acquisitions in … Next Page »

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If you want a glimpse at the leading edge of tech startups, TechStars Demo Day is a fine place to go prospecting. In just 60 minutes of total pitch time, you’ve got a damn good idea of the industries, customers, ideas, and technologies that top entrepreneurs and investors think are ripe for innovation.

And the accelerator phenomenon itself is certainly part of that picture. Organizers say attendance at pitch day was up significantly this year, as was the number of applicants—700 startups vying for just 10 spots, compared with 400 in 2010′s inaugural Seattle class. That growth comes as we’ve seen a big spike in the overall incubator/accelerator scene nationally, with increasing competition for getting into the top programs.

I’ve already posted the most complete rundown anywhere of Seattle Demo Day 2011, and you can also find quick snapshots, links, and founder contacts at this handy page put together by the group.

Today, we’re throwing in some extra insight from the head honchos themselves: TechStars CEO and founder David Cohen and TechStars Seattle director Andy Sack, who we interviewed right after the pitches wrapped up Thursday night.

One clear trend in the companies presenting in this year’s class, Cohen said, is the use of social media as platforms to build businesses that could have some substance, coming up with “new and interesting ways to actually monetize” all that sharing.

“So companies like Bluebox or Vizify are taking advantage of this proliferation of consumer data and the sharing that’s going on to drive that value back to businesses,” Cohen said. “That’s certainly a trend that continues to be the case. I think four years ago, it was all the social stuff coming out. This is the actual application of it for business.

David Cohen

Another reflection of the mood of investors is the presence of “very real businesses that have very clear revenue models—things like EveryMove. There’s a lot of money being spent in health care. Those guys are tapping into that,” Cohen said. “I think what investors want today are businesses that have a revenue model that they can understand, but that take advantage of the cool, hot, new, and social to really leverage it.”

“The other trend that you’re going to see more and more of—I know TechStars is looking at it—is the area I would call human-computer interaction. Broadly, I would throw robots into that, which you saw with Romotive,” Cohen said.

“You take this guy,” he said, holding up a smartphone, “that we’ve all spent money on, and you figure out other cool stuff to do with it. Or you take the iTouch that your kid has and you figure out how to … Next Page »

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They finance some of the most innovative entrepreneurs on the planet, and foster inventions that make global business fast, cheap, and easy. So why do so many early stage tech investors still do a big chunk of deals in their own backyard?

Dan Rosen, chairman of Seattle’s Alliance of Angels, says it’s all about trust. And though angel investors banding together on deals is nothing new, many regional groups haven’t employed common due diligence standards that could speed things up for entrepreneurs and put the investors at ease.

That’s changing with the push for a national Angel Syndication Network, a new initiative spurred by the Irvine, CA-based Tech Coast Angels. The Alliance of Angels is joining the effort, along with Golden Seeds of New York and Band of Angels of Menlo Park, CA.

As Wade Roush reported last week, the Angel Syndication Network is a response to trends in the early stage investing scene, where the rise of super angels and micro VCs meets consolidation among venture capital firms, putting traditional angel investors in a bit of a bind. When angel-backed companies need more financial runway, they’re often pushed up to the VC level, where the money and equity dilution are bigger.

Dan Rosen

“As the number of VCs has shrunk and the size of the funds of the remaining ones have increased, it becomes harder for a company that needs a smaller amount of money to get institutional financing for it,” Rosen says. “And as angels now look at carrying companies through their life, not just through their A round, but through the B and C rounds as well, it stretches the resources of most angels and angel groups.”

A syndication of regional angel groups can help in that situation, Tech Coast Angels’ Richard Sudek said, because entrepreneurs won’t need to re-start their due diligence process, and angels will get to keep companies in their ecosystem a little longer.

Rosen says the Angel Syndication Network is a natural step for regional angel groups. They’ve been working together on deals for years, but it’s been much more informal.

One example is Banshee Bungee, an Eagle, ID-based seller of 10- and 20-foot braided-latex cords with handles, which act like giant rubber bands to launch snowboarders and skaters at speeds up to 35 mph. Alliance of Angels was able to point the startup toward Tech Coast Angels, where Mike Panesis became an investor.

“If we can establish that level of trust between groups so that we can trust the due diligence that another group has done then it works well,” Rosen says. “There have been various attempts to do it through the years, and while most of those attempts have been more informal than formal, this is just like another step in a continuing saga.”

Alliance of Angels also is looking for a new managing director, after Greg Huey left to become president and chief operating officer of Seattle-based Glassybaby, which sells high-end glass votives for candles. It’s a bit of an occupational hazard in the angel investing gig—as Huey told GeekWire, “It’s hard not to catch the startup/entrepreneur bug while working with startups on a daily basis.”

“We are looking for somebody with some amount of investment experience and somebody who likes to work with startups, to help coach them and mentor them. We see it as a service to the community as well as a service to our members,” Rosen says. “And hell, it’s a perfect job—for a couple of years, you get to see every startup in town.”

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Over the past few years there has been a revival in the technology sector, led by the expansion of the mobile, social, and Internet marketplaces. With this expansion, the number of entrepreneurs attempting to create a startup to capture their share of the market has also skyrocketed. These entrepreneurs face the age-old dilemma of how to fund their companies as they grow from early stage through post-revenue and onto mass market acceptance. Self-funding through revenue growth is often not an option and external investment in one form or another is required.

Depending on the stage of development of the company, entrepreneurs may consider going after venture capital firms, strategic partners, super-angels, angel investment groups, friends and family, or startup incubators. All of these groups primarily offer funding in exchange for equity in the company, and sometimes a board seat. If the company is lucky the board member can be hands-on in building the business. Often this is not the case.

For most startup companies, the VC route or strategic investors are just not feasible; they are at too early a stage to even be considered. The angel route also presents problems, as most of these groups do not have an established fund, but are collaborations of individual investors, which requires consensus building before a deal can be struck. Super-angels consolidate the process but they usually are only a monetary resource.

The best way for many startup companies to go is the route of the accelerator or incubator. Though accelerators do not offer the greatest amount of funding, they are most easily accessible and cater to niche offerings, perfect for low market cap startups. In addition to funding, most accelerators bring hands on experience, a collaborative environment, shared services, entrepreneurial business experience, and personal mentoring. Each accelerator has a unique personality, so entrepreneurs need look at a few to find the environment that they would flourish in. Some people prefer a large accelerator such as Y Combinator, which has a specific formula to determine if you qualify for funding and accepts many startups under their wing, while others may prefer a smaller shop such as my organization, Voivoda Labs, which caters to a smaller group of companies.

Many accelerators host their portfolio companies in collaborative, shared office spaces such as RocketSpace in order to put them in an environment conducive to creativity. RocketSpace offers shared office space where startups can collaborate amongst themselves and hosts events such as their JumpStart days where startups can present their pitch before a panel of judges and get advice and comments on their company.

At Voivoda Labs we have seen how these collaborative spaces are beneficial and have taken heed. We offer a wide array of resources such as development work, office space amongst other startups , access to a number of angel networks and super-angels, and mentoring by industry experts. As at other accelerators, the investment we make varies based on the specific startup and includes everything from capital to development resources. Consolidating all of the resources a startup needs under one roof greatly increases the odds of a successful exit, with fewer hiccups along the way.

The current boom in the tech industry has loosened the purse strings of investors and has allowed for many accelerators, both large and boutique, to actively seek out new prospects. This explosion of funding in the tech industry will not last forever, the most important thing for a startup to remember is to seize the day and work toward getting funded while the moment is still ripe.

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Cleantech startup Flux Drive has raised $1.5 million to develop its energy-saving magnetic drives for electric motors. The company, based in Sumner, WA, says it can cut the daily energy consumption of pump and blower motors by up to 75 percent. Flux Drive’s product attaches to electric motors, like the ones that power big ventilation systems, and uses a magnetic system to speed them up or down depending on how much output is needed. The investment was led by Northwest Energy Angels and the Alliance of Angels.

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If Michigan’s angel investor tax credit died an early death and no one was around to notice, did the program ever exist?

Come December 31, we’ll find out.

The would-be three-year, $27 million program designed to stimulate early stage funding of startups, will end at the end of this year, the victim of Gov. Rick Snyder’s tax reforms and budget wrangling. The program began this past February.

That means investors have less than six months to grab a piece of $9 million in credits.

Last call folks!

You’d think there were would be a stampede towards the proverbial bar. But so far, the numbers have been less than impressive, suggesting potential angels, wealthy individuals who invest anywhere from $25,000 to $200,000 in a startup, are taking their sweet time.

The Michigan Economic Development Corp. (MEDC), which administers the program, has awarded a mere $370,000 to 26 investors in six startups. The agency is also reviewing applications for another 27 investors seeking to fund seven startups.

Applicants who miss the Dec. 31 deadline are out of luck and any unused money disappears in fiscal 2011. “I certainly hope [investors] use all of the $9 million,” says Mike Flanagan, MEDC’s Capital Markets Team Leader.

The lackluster numbers are somewhat puzzling. We know there’s no shortage of startups seeking funds. And there’s not a whole lot of people who will pass on free money.

Like college students who start writing their papers the night before they’re due, Flanagan suspects angel investors will rush forward with applications as the deadline approaches. Due diligence also takes time, he says.

In any case, the program has already accomplished one crucial goal, Flanagan says: the creation of more organized angel groups who will presumably stick around long after the credit expires. Before the program began, there were five angel groups in Michigan; today, there are close to 40.

And the angels, usually inexperienced, unpolished investors, are showing signs of increasing sophistication.

For example, Grand Angels in Grand Rapids, MI and BlueWater Angels in Midland, MI, said Monday they will join forces to fund AzulStar, a Grand Haven, MI-based startup that provides WiMAX broadband Internet and voices services to residential, business, and government customers.

The deal, terms which the angels did not disclose, marks the first time two Michigan angel groups have agreed to co-invest in a startup. Grand Angels has invested over $980,000 alone this year.

One only hopes that other angels will follow Grand Angels’ example by the end of the year.

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Last week we published the first half of an extended interview with Mike Maples Jr. and Ann Miura-Ko, the co-founding partners at Palo Alto, CA-based seed stage investing firm Floodgate. The focus in that part was on big issues like how Internet technologies are accelerating startup innovation, how investors have to adapt in response, and what types of entrepreneurs and business ideas attract the firm (Maples and Miura-Ko say they’re looking for “F-16 pilots” who can observe and adapt to changing conditions more quickly than the competition).

In the second part of the talk we got into some more concrete, nut-and-bolts questions—among them, the merits of the Y Combinator-style venture incubator model for launching startups and the difference between a true startup pivot and what Maples calls a “mulligan.” Maples also talked about why he wanted to grow his investing practice beyond angel scale and create a firm that would be “the absolute standard-bearer of early stage investing in a new innovation environment.” Here’s an edited transcript.

Xconomy: Sometimes investors say that they invest in teams, rather than ideas, or that they’re looking for great serial entrepreneurs rather than great product ideas. Y Combinator seems to put out that message a lot. How does that fit with your approach?

Ann Miura-Ko: A lot of people say they just bet on good teams, but I don’t think we’ve ever invested in a company that was just primarily a good team. There is always something about the insight they have that’s proprietary in nature.

Mike Maples: And we don’t necessarily look at being a serial entrepreneur as a positive. Just like some people try to convert it into a science, this idea that you can be a professional entrepreneur is a little bit suspect. Some people have shown they can do it, but the truly great companies get created by first-time entrepreneurs, and great entrepreneurs very often only have one great company in them.

You get some examples where that is not true. You can point to Evan Williams, who started Blogger, then Odeo [which grew into Twitter], but even those were both on the same vector—they were both about sharing and democratizing Web 2.0 content. Very few entrepreneurs are successful in multiple generations of technology or multiple eras of the technology business. It’s authenticity that we look for. Is this entrepreneur truly an authentic match to the opportunity?

X: What about this notion of the startup “pivot”? So often these days, that seems to be a euphemism for, “Oops, our first idea was wrong, and we still have some angel money in the bank, so we’re trying something completely different.”

AMK: That’s not what a pivot is. The whole concept of a pivot is to keep one foot grounded and move the other foot.

MM: I think people have dumbed down the term to mean “We failed the first time so we get a mulligan, let’s try again.” The real reason to pivot is when a great startup starts out saying, “I want to be one of the 15 awesome companies of this year.” And such a company is willing to continually ask themselves if they are on the path to greatness. If I am not on the path to greatness, then it’s axiomatic that I have to pivot. That is the thing that people miss. A lot of companies could be fairly successful in their current business, but the founder has the presence of mind to say that “Merely being successful is not enough, I have to be great.”

AMK: A pivot, for me, is taking one component of your business model and changing it somehow. There will be ripple effects on the other parts, but it’s really just … Next Page »

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If you’re the founder of a new Internet or mobile startup and you’re looking for Silicon Valley investors who can contribute some star power and hands-on guidance along with their capital, sooner or later you’ll probably send your business plan to Floodgate Fund. Headed by Mike Maples Jr. and Ann Miura-Ko, the Palo Alto, CA-based firm has $74 million under management, which makes it more super than a super angel fund but much smaller than most traditional venture funds; “micro VC” is probably the most used and most accurate label for this category, which includes firms like First Round Capital, Founder Collective, Felicis Ventures, and Harrison Metal. Floodgate’s investments, which range from $150,000 to $1 million, are also in the middle range for early stage startups—-not enough by itself to get most companies off to a secure start, but enough to bridge the gap between angel funding and a more serious Series A venture round.

Maples’ investments in Silicon Valley wonders like Chegg, Twitter, and Ngmoco (acquired by DeNA last fall for $400 million) catapulted him to number 17 on this year’s Forbes Midas List, the publication’s lineup of influential tech investors. Maples tends to portray his investing success as one big lucky break. And indeed, there’s some truth to that. His background is in business software rather than consumer-facing Internet services—he worked at Silicon Graphics and Tivoli Systems before co-founding Austin, TX-based broadband software company Motive in 1997—and he got into Twitter mainly because he’d invested in Evan William’s previous company Odeo, which folded. But he has also paid his dues, working at August Capital and Foundation Capital before embarking on his own investing career.

Mike Maples

Maples’ firm was known until March 2010 simply as Maples Investments, but it rebranded itself that month as part of a bid to become more of a fixture in the Valley, where it regularly invests alongside other micro VC funds, angel investors, and even traditional Sand Hill Road firms. The change also reflected the fact that there was more to the firm than Maples. Miura-Ko, who got her PhD in computer science from Stanford University and still lectures at the School of Engineering, joined as a co-founding partner in 2008. She’s a Yalie and a former McKinsey consultant who learned the investing ropes at Waltham, MA-based Charles River Ventures; Forbes has called her “the most powerful woman in startups.”

I’ve profiled so many of the companies that Floodgate has funded—Chegg, Okta, PayNearMe, Stipple, TaskRabbit, and Vook, to name a few—that I figured it was time to meet Maples and Miura-Ko in person and find out how they think. So back in April, I spent a couple of hours with them at the firm’s eco-conscious new offices on Ramona Street in downtown Palo Alto. I’ve boiled down my notes on the conversation into the abridged Q&A below. We covered so much ground that I’m going to break the interview into two parts: today’s part covers Floodgate’s picture of the startup world today and how the firm singles out promising entrepreneurs and business ideas. Part 2, coming in a few days, looks at specific startup trends such as incubators.

Xconomy: Let’s start at the beginning. What’s Floodgate’s basic investing philosophy?

Mike Maples: Sometimes it helps to start even before the beginning. Ann and I have this really strong belief system that there is a fundamental change underway in the way innovation is happening. People talk about “lean startups” and people talk about the low cost of going to market, but we think it’s even more fundamental than that. We think the Internet has a constellation of things that have developed around it—offshore labor, search engine marketing, ubiquitous broadband penetration, variabilized-cost Web servers—that have fundamentally democratized the process of innovation. So what it costs to prove or disprove an idea has been fundamentally altered. When you project forward what this really means, we think it’s as important as Eli Whitney and the cotton gin, or Frederick Winslow Taylor and the birth of manufacturing, or Alfred Sloan and the invention of the modern corporation with General Motors. Our view is that the people who understand this shift are going to win in the next 20 to 25 years. That is not just a statement about entrepreneurs. That is a statement about the people who capitalize their companies.

Ann Miura-Ko: That is a trend I saw coming out of Stanford, where I was doing a PhD [starting] in 2003. When I first got there, there were students starting companies based on blade servers and open source software. It was fairly expensive. But by 2007 and 2008, I had students who were leveraging Amazon Web Services and other increasingly commoditized technologies. You literally had kids starting companies out of their dorm rooms. Before that, it was figurative but not literal. This commoditization of entrepreneurship is truly profound. Now any undergraduate at Stanford or any other university can … Next Page »

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On Tuesday, May 10, 2011, I had the opportunity to participate in a hearing convened by the U.S. House of Representatives Committee on Oversight and Government Reform. This was an incredible honor as an entrepreneur to sit on a distinguished panel and speak directly to leaders in the House of Representatives and from the Securities and Exchange Commission on matters that impact startups.

The hearing was called “The Future of Capital Formation” and was designed to discuss ways that the government could reform existing rules and regulations to help entrepreneurs, small businesses and startups better gain access to capital. As a former startup lawyer that worked with lots of entrepreneurs and startups, and a current entrepreneur here at Zaarly, I know firsthand how important this issue is. And that’s why I felt it was important to share some lessons from the front lines of the startup world.

One of the most important lessons that Zaarly has taught me is how crucial it is to have access to funds in order to build a business and build it quickly. I consider us extremely fortunate to have presented our idea at Startup Weekend Los Angeles and quickly used our success that weekend to raise funding to help build the business. That initial capital helped Zaarly build its prototype for South by Southwest, make our first hires, open an office and ready our product in record speed. All of that fast-success is thanks to having available funds to grow the business and not to have to spend time and energy fundraising.

If anything, the story of Zaarly is a perfect example of why streamlining the rules and regulations for raising money is so crucial. And that’s why I’m so thankful for this opportunity and passionate that it is our duty and responsibility to help others in the startup ecosystem.

My Recommendations to Congress and the SEC

I don’t begin to say that I’m an expert on anything, but I have spent a significant portion of my career helping entrepreneurs think about raising capital. And what I know is this: raising money is not easy; rules governing raising money are complicated and working with a lawyer to decipher them is expensive; and we need to rethink the rules that limit the ability of startups to raise money.

With those things in mind, I came up with four key recommendations for Congress and the SEC that I presented to the leadership. While these are not a silver bullet nor will they necessarily help all entrepreneurs, I think that these are part of a package of reform to help:

—Private Company Fundraising and Financing Regulations:

In general, I believe that regulations governing private company financing be thoroughly examined with an eye to decrease the regulatory scope, simplify procedures, and ensure that the cost-benefit of regulations for raising funding for small investments be met. Investors continue to be in the best position to protect themselves in their investment decisions. This may include contractual requirements for audits of financial statements, seats on a board of directors, or the receipt of regular financial statements.

First, I encourage the removal of the Ban on General Solicitations, which limits the ability of private businesses to locate and identify prospective investors.

Second, I encourage the creation of regulations to extend/expand the concept of accredited investors to individuals that are deemed to be sophisticated based on their knowledge, experience, … Next Page »

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Oh angel investment tax credit! We barely knew ye!

Michigan’s new and improved three year, $27 million angel tax credit, signed into law just last fall by then Gov. Jennifer Granholm, will likely not survive contentious budget negotiations, according to sources close to the state legislature.

Last week, the Michigan House passed a budget that will end the credit this year. If the House prevails, investors and startups will only have about six months to receive a share of the $9 million in credits the program allows for Fiscal 2011.

So far, seven startups have applied for the credit and are expecting investments, according to data from the Michigan Economic Development Corp. (MEDC), which administers the program. The agency is currently reviewing 22 more applications. All told, 32 investment groups have already registered with MEDC.

“It’s unfortunate,” says Chris Moultrup, associate director for Blue Water Angels in Midland, MI. “At a time when we need jobs, it’s kind of discouraging. We viewed the tax credit as a great vehicle to get new investors involved in safer, entry level deals, to take a chance and really invest in Michigan’s future. To see it end without giving it a try is quite discouraging.”

Ending the angel credit puts Republican Gov. Rick Snyder in a tough spot. A former venture capitalist, Snyder largely campaigned on his business experience and ties to investors and entrepreneurs. However, Snyder may have unwittingly put himself in this position.

Earlier this year, Snyder unveiled a budget to close a $2 billion shortfall by cutting spending and fundamentally reforming Michigan’s tax system.

Under his proposals, the state would eliminate a hodgepodge of tax credits, including the popular Michigan Film Credit, in favor of a flat corporate tax of six percent.

Snyder’s budget essentially says this: only a favorable, broad-based tax structure will key an economic recovery versus using tax credits to support so-called special interests. He did, however, recommend $50 million in general fund support for “business retention activities.”

However, the House and Senate proposed cutting the budget even further. Of that $50 million from the general fund, the legislature earmarked only $25 million.

If passed into law, the budget would be a bitter blow to angel groups that have long lobbied the state for the credit.

“We put a lot of time and effort into it,” says Jody VanderWel, president of Grand Angels in Holland, MI. “We finally go there and it might not stick.”

In 2010, angel and pre-seed investments in Michigan totaled $4.9 million, down 42 percent from two years ago, according to the annual report of the Michigan Venture Capital Association.

David Weaver, chair of the Great Lakes Angels, says the credit could be salvaged if investors could show results.

The goal of the credit was to encourage new investors to enter the game and perhaps also encourage the formation of new investor groups. Indeed, of the 32 investment groups registered with the state, several appear to be new, including Burns Park Angels, Swift Angels, and Windy Ridge Angels.

“It created a lot of buzz among the angels,” VanderWel of Grand Angels says. “It created the mindset of wanting to invest.”

The program has also attracted outside investors like DJF Mercury in Texas and Patronus Capital in New Jersey.

Moultrup of Blue Water Angels expects to have 70 members by the end of the year, up from 45.

The credit “really did change the dynamics of angel investment,” he says.

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As chief technology officer for the Obama administration, Aneesh Chopra has been heavily involved in efforts to expand access to huge amounts of government data, and encourage techies and entrepreneurs to help solve public policy problems using that data. Xconomy’s Wade Roush talked with Chopra last year, producing this in-depth Q&A that included discussions about healthcare innovation, the government’s role in baiting entrepreneurs with competitions, and big data feeding commercial solutions.

Since then, President Barack Obama announced a new initiative called Startup America, a public-private partnership that aims to boost the economy by improving the conditions for entrepreneurs. Chopra has been among the key evangelists of this effort, which he described as “the national call to arms, so to speak, around the opportunities to promote high-growth entrepreneurship.”

As a preview to his appearance tomorrow at the Technology Alliance’s State of Technology Luncheon, I spoke with Chopra about the administration’s efforts, the role of the private sector, and what it takes to produce results that last beyond the next State of the Union speech.

One of his big messages includes a strong dose of economic optimism: “It is my thesis that there’s never been a better time to be an innovator than today, especially when tackling the big challenges that are in front of us.” Specifically, he calls out the nation’s systems for healthcare, education, and energy.

In healthcare, the focus of Obama’s signature domestic policy initiative for his first term, Chopra says there are “three forces that are coming into play that we believe will act as rocket fuel for innovators.”

The first is changing the way society pays for health services.

“In this country, you get what you pay for. And if Medicare pays people more if they perform more procedures, schedule more visits, then what you see is a pretty healthy growth in both of those areas. If you incentivize value, which is making sure people stay healthy, we believe that shift in payments will open up a new market for a range of IT-enabled services that do not exist today,” Chopra says.

The second trend spurring healthcare innovation, he said, is the modernization of health records and information, allowing better sharing among providers and other actors in the system.

“We will have an unprecedented transformation in the healthcare sector to digitize healthcare information that today is locked up in a file cabinet. And we have put in place the technical foundation for that data to be liberated with full respect to patient privacy and security,” Chopra says. “It’s not just the fact that the information is now digital, it’s that it’s now more liquid and accessible.”

The third force boosting entrepreneurship in healthcare, Chopra says, is throwing open the doors to vast troves of government data. The Department of Health and Human Services, he says, … Next Page »

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Updated 4:15 pm with new photo. Anytime you get a few hundred people in a room and add a couple of drink tickets, there are bound to be some interesting moments. And when that crowd is comprised of the techies, entrepreneurs, risk-takers and rich people from the startup scene, you’re starting from some pretty fertile ground for quirkiness.

Last night’s Seattle 2.0 awards didn’t disappoint. From organizer Marcelo Calbucci’s exasperation at the crowd noise to a friendly faceoff between a couple of mascots, these are the moments that stuck out to me. Check out the Seattle 2.0 page for the list of actual winners, along with a few other thank-yous and tidbits that Calbucci called out.

—Rand Fishkin threatens to strip: When it was time for the mingling to stop, Calbucci had to plead—and almost threaten—the crowd to detach itself from the main bar, quit chitchatting, and sit down for the show. It still hadn’t quite settled down when SEOmoz CEO Rand Fishkin—a sponsor of the event—took the stage for a few remarks, so he took matters into his own hands. “I’m about to start taking off my clothing, unless–unless!–you sit down and be quiet,” he said. “This is a threat.”

The tactic may have had the opposite effect, however, because once Fishkin tossed his dress shirt toward the crowd and stood there in a white v-neck T-shirt, someone rushed the stage and appeared to try to tuck money into his waistband.

—Soul-searching: The overall tone of the program was a mix of boosterism and self-criticism that you encounter constantly in Seattle’s tech startup community—on one hand, the town’s instigators are beating the drum about why Seattle is good and how it can be great. On the other, there’s plenty of hand-wringing about why this next-level evolution hasn’t happened yet, and what else could be done to ignite people.

Calbucci hit this sentiment early on with a heartfelt speech in which he compared his Seattle 2.0 website to a community restaurant—it doesn’t make money, and in fact can be a drain on personal resources. But the owner clearly sees that it has value to the community, and worries what would happen otherwise. “If I close it, I fear that no one is going to do what I’m doing right now,” he said.

—Mark Suster, from crowd control to inspiration: Suster, a Southern California entrepreneur-turned-VC, was the keynote speaker. He created a bit of anticipation for the speech by publishing this Seattle-themed piece about building a startup community, and the talk itself didn’t disappoint. It started with Suster over by the bar area, wearing a Tony Robbins-style headset, telling Calbucci that he was going to take another run at shutting up everyone who was still mingling and refreshing their drinks.

Then he waded into the crowd, and gave them a once-over that was broadcast over the PA system: “I was standing right next to Marcelo and it was so fucking hard to concentrate with you guys talking,” Suster said to the surprised patrons.

His speech detailed what he felt was needed to build capacity for more entrepreneurs and startups in a place like Seattle: Get “wantrepreneurs” off the sidelines, get would-be investors off the sidelines, pull the trigger on your big ideas, be cheerleaders for your community, but also don’t believe the hype of what’s hot now (complete with Public Enemy album cover shot).

“Do we need another fucking check-in application for restaurants?” Suster asked. “I like Foursquare—I’m not critical of it. But do we need another deal site?”

—Mascots: Promotional hackery, yes. But mascots do the job (I’m writing about them, aren’t I?). The team from Deal Springer—offering a kind of reverse-Groupon engine that allows local businesses to set and promote their own online discounts—hauled out a blue lycra full-body suit that some unnamed fellow rocked along with all-white sneakers. He startled at least one lady who was not expecting to encounter a shimmering, shrink-wrapped dude, but also got his picture taken plenty of times.

Not to be outdone was the group from Giant Thinkwell, which is building a way for celebrities to engage their fanbase with online and mobile games. They brought a giant squid mascot, complete with glowing orange eyes, that bobbed ominously in front of the stage as Kyle Kesterson accepted his award for best designer.

I didn’t see it happen myself, but Deal Springer’s Nick Huzar sent along the photographic evidence that the pair accepted my earlier Twitter challenge for a mascot confrontation. No word on who dominated.

Update: Giant Thinkwell’s Kesterson sends this additional photo (also shown at top), which may be showing some sort of mascot dance-off in progress.

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What’s the secret to a successful angel investor group?

“No assholes,” John May, chairman emeritus of the Angel Capital Association, told the Great Lakes Angels Thursday.

People laughed, but May was perfectly serious.

“The group has to treat entrepreneurs well,” says May, the co-founder and managing director of New Vantage Group in Vienna, VA. “You can’t afford to have one member with the group that messes up the chemistry.”

I looked around the room. I didn’t see any assholes, but rather somewhat wealthy, white men–lawyers, distributors, former executives–gathered on a 23rd floor conference room in downtown Detroit, hoping to vet some deals and brush up their investing skills.

Angel investing has traditionally been a low key affair: well-to-do, often anonymous individuals investing $25,000 to $250,000 in early stage startups. Some do it for money. Some do it for fun. Some do it for some sense of civic duty.

“We need psychic reward while we wait for financial reward,” May says.

But as many venture capital firms pull back from early stage/seed deals, angels are being asked to fill the void. That’s a tall order for group of investors that’s not really a group at all but rather of bunch of part-time investors doing their own thing.

Of those, May says, only five percent really know what they’re doing. The remaining 95 percent are “just winging it,” he says.

One solution is to, well, organize. Formed in 2002, the Great Lakes Angels, the first such angel group in Michigan, hopes to provide structure and training to would-be investors, says chairman David Weaver. An organized group allows investors to pool their money and expertise and spread the risk.

On Thursday afternoon, a group of experts took the angels through a “due dilligence checklist,” the factors angels must consider when evaluating a deal.

For example, entrepreneurs tend to downplay the competition, so angels must either question them more … Next Page »

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Hi Mike,

I’m one of your customers.

We don’t really know each other. We’ve chatted at a few events, you’ve covered some of my antics, but I’m mostly just a guy who reads TechCrunch a lot. I find it’s a pretty good place to see what’s important in the industry. And you and your team do some damn fine reporting on things the world wouldn’t know about otherwise.

I am product guy, not a media critic. But I’m a big believer that economic incentives shape behaviors in subtle and unmeasurable ways. And I think your decision to make investments in startups is going to make TechCrunch a worse product.

I can’t tell you exactly how. Are you going to be a little more likely to ignore competitors to your companies? Cover them, even when they’re not newsworthy, to show you’re not biased? Feel compelled to pull or throw punches, either to support or prove you’re independent of the companies you deal with?

I don’t know. But I think it’s going to happen, it’ll be subtle, and it’ll make TechCrunch worse.

I’m not making demands or threatening to leave. Just making a request, from one product guy to another: journalistic independence is a great feature. Please don’t cut it.

Best wishes,

Dan Shapiro

[Editor's note: This post originally appeared on Dan Shapiro's blog.]

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Washington state companies collected about $53 million in equity financing from venture capitalists and angels in March, led by an $11 million VC round for Vancouver, WA-based semiconductor laser manufacturer nLight Photonics, according to data compiled by research firm CB Insights.

nLight still had another $4 million left to sell from the offering, according to last month’s SEC filing. The investors in nLight’s March financing round weren’t disclosed, but the company website lists Mohr Davidow Ventures, Oak Investment Partners, Menlo Ventures and Adams Capital Management as its backers. nLight has been around since 2000 and has manufacturing facilities in Hillsboro, OR, Finland, and China. Along with lasers, the company also supplies optical fiber products.

The second-largest investment in March went to Tier 3, the Seattle-based cloud-computing provider. It was the company’s first publicly announced investment round, with Ignition Capital and Madrona Venture Group supplying the money. Microsoft is among nearly 100 customers for the expanding company, which was founded in 2006.

Coming in third for large equity investments was $6.9 million for Physware, a Bellevue, WA-based provider of software for designing the circuitry in computer systems and other electronics. The company was founded by Vikram Jandhyala, an electrical engineering professor at the University of Washington. Physware also has an office in Mountain View, CA. Investors were not disclosed.

Another Bellevue company, Visible Technologies, was among the top investment hauls for March with a $6 million infusion from Investor Growth Capital, Centurion Holdings, Ignition Partners, WPP Group, and In-Q-Tel, according to CB Insights’ data. Visible provides social media monitoring for businesses—a growing field that helps companies sort out what customers are saying about them online. Visible has offices in Seattle, London and New York, and relationships with companies like Microsoft, Xerox, and Boost Mobile.

Rounding out the top five equity investments was Powerit Solutions, a cleantech company that provides energy management and conservation for industry clients, which landed a $5 million investment led by Black Coral Capital. Powerit’s Seattle branch is part of a larger company, which includes an office in Sweden. Powerit also announced last month a new CEO for its North America and Northern Europe divisions— Matthew Schiltz, formerly of Seattle-based DocuSign.

You can check out the rest of the March financing data here, including several more deals less than $5 million and one debt financing.

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The Seattle tech scene got its first entrant in what looks like a coming wave of initial public offerings when Zillow made its intentions official, filing paperwork with federal regulators Monday for a future stock sale. In its filing, the online real-estate listing and mortgage database said it would seek about $52 million from the stock market—not a huge sum for an IPO, but significant for the area’s entrepreneurship and investing community nonetheless.

Zillow has seen increasing competition in the online real-estate sector, including vocal San Francisco-based startup Trulia, which recently boasted that it was assembling an “IPO-ready management team.” HitWise reported that Zillow’s traffic ranked No. 3 among real estate websites, one spot ahead of Trulia and just behind Yahoo—where Zillow’s listings appear under a partnership.

There was plenty more action elsewhere on the Seattle tech beat:

—PopCap looks like it’s also ready to hit the public markets. The Seattle casual game company recently went on a media and investor blitz in New York, talking up its growth, revenue, and position in the hot gaming market. We gleaned a lot of interesting bits from the various interviews that PopCap gave, including an assertion that it generated $100 million in revenue last year, an increase of about 20 percent from the year before. The company’s leaders also discussed difficulties in getting investors to understand the difference between its development compared to a console game publisher, and the attractiveness of hitting the public market before social-game giant Zynga.

—Speaking of Zynga, I headed over to the San Francisco company’s new Seattle office to look at the digs and hear some remarks from founder and CEO Mark Pincus on the company’s plans for its new Northwest beachhead. In one word: Hiring. The maker of addictive Facebook-based games like “FarmVille” and “Mafia Wars” was not shy at all about inviting techies in the packed crowd to send in their resumes—Pincus gave out his e-mail address and spent quite a bit of time talking one-on-one with people afterward about jobs.

—Microsoft co-founder Paul Allen continued drumming up interest in his new autobiography, “Idea Man,” with an interview on 60 Minutes that delved into some of the early Microsoft stories and Bill Gates arguments detailed in the excerpt published recently in Vanity Fair. For a guy who hasn’t … Next Page »

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A really interesting variety of startups made their initial pitches to the broader investing crowd yesterday at the Northwest Entrepreneur Network’s First Look Forum. The 12 presenters represented a wide array of sectors, from food to retail to software services and—seriously—nuclear fusion power. “I don’t think we could have imagined a more diverse slate, in every sense of the word, than what we have today,” NWEN executive director Rebecca Lovell said.

The event itself was the culmination of a long coaching process that readies a select group of companies and entrepreneurs for their turn in front of the investor audience. And there’s a real emphasis on showcasing many different kinds of businesses—which is notable in an investing scene (and media landscape) that can seem dominated by techies.

Each of the 12 companies on display had five minutes to give a pitch (with slides), and then five finalists were grilled by a panel of venture capitalist judges: Mark Ashida from OVP Venture Partners, Michelle Goldberg from Ignition Partners, and Bill McAleer from Voyager Capital.

The winner was Guide Analytics, a mobile-connected bracelet and monitoring system that keeps track of edema, a swelling that can lead to hospitalizations, particularly in heart patients. Chief executive Deborah Kessler’s previous work includes time at Rosetta Informatics and NASA—”My advisers tell me I’m supposed to say, ‘I am a rocket scientist,’” she quipped. The device itself boasts low manufacturing costs, even though it has a battery, transmitters, and sensors. Investors did question whether relying on elderly heart patients to have a new smartphone for transmitting critical medical data was asking too much. Kessler said it was possible, however, to work with patients who have a lower-end cell phone. The company won a year of free office space from Martin Selig Real Estate.

I put together these snapshots from the four other finalists, and you can check out the longer list of participants over at NWEN.

—Snuggle Cloud is a private, one-on-one social network for couples—especially those in long-distance relationships. Co-founders Emily Marshall and Kiran Gollu were actually in separate long-distance relationships themselves. Their idea is that, although Facebook is hugely popular, people are not going to post a bunch of lovey-dovey stuff in the wild where anyone else can read it. Snuggle Cloud is … Next Page »

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Last summer, our company AppMakr raised a $1 million angel round over 14 weeks and learned some big lessons in the process. Luckily, Brendan Baker, an MBA student at Oxford University, took an interest in our raise and documented the process, creating a visual infographic of our efforts (see below). His infographic illustrated pertinent trends in the raise period and allowed us to draw some inferences that would’ve otherwise gone unnoticed, which I’ll describe here in detail.

One of the most striking facts to emerge from Brendan’s infographic was what I call “Daniel’s Rule of 10.” It turns out that I could sniff out eager and willing angels only through connectors who made at least 10 introductions. Or to put it another way: Don’t waste your time talking to anyone who offers to make an introduction to only one angel. Focus on people who can make at least 10 solid introductions. The visual representation of this is especially striking because it’s impossible to know ahead of time who will follow through for you, so applying a rule like this could radically change the way you raise a round.

For the entrepreneur, every lead you get is golden. Follow up on every opportunity as thoroughly as possible, but keep in mind the Rule of 10. Passing on what appear to be great leads because you haven’t gotten enough introductions from the referrer may seem crazy, and I’d guess that my data set is too small to be statistically significant. But having spoken to hundreds of potential angels, and seeing as how only 8.47 percent of the angels I spoke with ended up funding us, what I can say for a fact is my Rule of 10 held true for our raise, and that’s a powerful enough inference for me to minimize my efforts on referrers who only make one intro, so I can focus on those who are willing to make at least 10 intros. Having said that, use my Rule of 10 at your own risk!

Additionally, the data showed that timing was a key component. We originally started our raise over the summer, though I heard it wasn’t an ideal time. It’s not. The season is a poor choice primarily because it’s difficult to get on the calendars of prospective investors in between their vacations. That long lead time proves incredibly distracting and has a compound effect: I was never able to be as focused as I wanted to be on the more immediate meetings because there was always a meeting with a prominent prospective investor scheduled for several weeks in the future.

Anatomy of a Seed Round - Graphic by Brendan Baker. For a full-size PDF version go to http://go.danielodio.com/seed_infographic

As it turns out, spring is the absolute best time to go out for a raise, with fall ranking second best. The summer and the holidays are very difficult and not worth the delays and distraction. It’s better to hunker down and shoot for spring if you can control your burn, or better yet, raise the spring before you have urgent cash needs, if you can plan that far in advance.

Nailing your pitch is just as important as timing. Our pitch was still in flux in our first round of meetings, but with many of these investors, you only get one shot. We iterated quickly (as startups tend to do) and hit on some core concepts that have since become key to our business, but iterating during your pitching process is far from ideal. You want to have your pitch down cold and supplement that with supporting data and a deep understanding of the competitive landscape before you start pitching.

We ended up raising our $1 million through a convertible note (a loan that only converts into equity when you do a future raise), as many entrepreneurs are doing these days. Convertible notes have become popular due to their supposed speed and ease of execution. But I don’t recommend them, and if I were to raise our seed round again, I’d do it as a priced equity round.

Some may see this as a pretty bold statement, as convertible notes are seen as very entrepreneur-friendly. However, there is a cost to everything, and notes are no exception. It’s a bit hard for me to imagine what our world would look like had we done an equity round, but I know a few things are certain: There are open-sourced seed round legal documents that can minimize or eliminate any … Next Page »

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The explosion of faster networks, connected crowds and mobile computing has made millions of Americans into astonishingly fast and efficient consumers. But when the weekend’s over, too many of us walk back into a technological time-warp of email chains, conference calls and endless meetings.

Bellevue-based LiquidPlanner is among the companies trying to break down that wall. Founded in 2006 by two veterans of Expedia and Microsoft, the startup is trying to make productivity software sexier—and just plain better—by incorporating elements of social networks and app-based computing.

It’s one example of an emerging trend in business software. Author and venture capitalist Geoffrey Moore, the guy behind the classic business text “Crossing the Chasm,” describes the change as a migration from “systems of record” like databases to “systems of engagement,” allowing workers to collaborate and share more information.

“The next big wave of investment in enterprise IT will be around this consumerization of enterprise IT,” Moore told us in an interview last month. “And it’ll be around, in particular, helping companies communicate, coordinate, and collaborate across company boundaries.”

Charles Seybold, the co-founder and CEO at LiquidPlanner, couldn’t agree more. The company is trying to overhaul boring old business software by including the features and visual language that people already use in their private lives—and that younger workers will increasingly demand.

“Our whole design was built around this concept of social management. It’s about people working together to get things done,” Seybold says. And he says that is a big change in the world of project management, a multibillion-dollar market where software has traditionally focused on technical rather than social solutions.

“A lot of our competitors are involved in what I like to call the kitchen sink wars—they’re trying to add more features. But it’s not really about adding more features. It’s about making them easier to use,” Seybold says.

LiquidPlanner’s story is a classic: Techies frustrated by the bureaucracy of a larger company set out to solve a nagging problem. Seybold and co-founder Jason Carlson both worked at Expedia before it spun out of Microsoft, and were with the company as it grew into “one of the Four Horsemen of the Internet,” as Seybold puts it.

“From an insider’s perspective, this was a company that grew really fast,” Seybold says. “And its process, inside the company, became quite a challenge.” Seybold got to see that firsthand as he worked to set up Expedia’s first project management system. After spending millions on consultants and … Next Page »

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