In the spring of 2010, at a small startup in Seattle, some online gaming veterans were ready to send their latest creation into the world. It was a blackjack game for Facebook, fully legal because players couldn’t cash out their virtual chips.

With much better production values and an ability to play with other users, they thought it would stand out among a sea of gambling-style games on the social network. But that was just a theory.

So the fledgling company, Double Down Interactive, turned on its marketing campaign with some ads on Facebook. It was like flipping a money switch—users started showing up, and dollars started flowing.

“Not just a return, but a positive return on our ad buy, in the same day,” Double Down co-founder and CEO Greg Enell says.

Greg Enell

The average Facebook game today, Enell says, makes about two or three cents per daily active user. Within just a few weeks, Double Down’s blackjack game was pulling in “upwards of 35 cents per daily active user,” he says.

“At that point we realized, ‘Wow, we’re on to something. This will work. And if we can aggregate a large enough audience, this will generate a ton of cash.’ It was incredible,” Enell says.

“We were hopeful and optimistic that we could generate positive cash flow from it right away, but did I really think that would happen? No.”

That first blackjack game cost right around $1 million to produce, money that came from Enell, co-founder Cooper DuBois, and one unnamed investor, who I’m still trying to track down. Last week, Double Down Interactive announced its pending acquisition by slot-machine maker International Game Technology in a cash deal that could be worth up to $500 million.

That’s one hell of a return on investment, in a short period of time, even in the world of high-growth tech startups. Enell notes that Double Down repeatedly poured money back into the development of new games and improving the infrastructure after the debut of blackjack, “doubling down” themselves several times (hence the name).

By the time the company sold, its app was attracting about 1.4 million daily active users and 4.7 million monthly active users, according to independent numbers from AppData. Revenue figures are hard to come by for the private company, but it appears to be raking in the dough.

AllThingsD reported in October that unnamed sources had pegged DoubleDown Casino’s daily revenue at $140,000. Those numbers are thought to be “much higher now,” Deutsche Bank Analyst William J. Lerner said on a conference call with IGT executives (IGT didn’t address the analyst’s revenue assertion directly).

Enell wouldn’t say how much Double Down is making now, and declined to answer when I asked if the 35 cents figure had held up with the app’s growth in daily active users. But Enell did point out that Facebook listed DoubleDown Casino as its No. 4 game of 2011, a ranking that took into account audience, revenue, and positive reviews from users. Those last two factors helped Double Down’s game come in ahead of other games with audiences two or three times larger, Enell notes.

“We believed in it and we wanted to control it and own it outright, and didn’t want to bring any significant external capital into it,” Enell says. “And we got lucky.”

Their next step could be even bigger. If the sale to IGT (NYSE: IGT) closes as expected, Double Down Interactive will lead its new parent company’s efforts in social games, which don’t put real money or prizes at stake because online gambling is still in a legal grey area in the U.S. But the ability to move into real-money wagering is a tantalizing one, particularly since the U.S. Justice Department recently dropped the legal basis for its previous objection to online gambling.

In a conference call discussing the Double Down purchase, IGT chief executive Patti Hart said there was money to be made either way—the quick rise of Facebook gaming leader Zynga into a money-generating machine is evidence of that.

“This acquisition was analyzed and entered into assuming no change in legislation in the U.S. around legalized online gaming, including poker,” Hart said, according to a transcript provided by SeekingAlpha.

“I don’t think the company would take a $500 million wager—no pun intended—on a change in U.S. law,” says Behnam Dayanim, a lawyer who specializes in Internet gambling regulations. “It has to be that they’ve determined that this makes sense regardless of what happens” with U.S. gambling regulations.

But at the same time, IGT sees a future where fake-money gambling exists alongside serious online wagering, and maybe some other business models. “The ability to come into your online gaming world and play with virtual currency, or real money, or playing a subscription model, is likely the model that will be successful going forward,” she said.

Double Down is happy to help make that kind of future a reality. The whole idea behind the company was that legalized online gambling was coming to the U.S. by 2014, Enell says, and that the first companies to amass a sizable audience on the Facebook platform would be the ones to reap the benefits.

“They have a tool here through our virtual currency system whereby we can aggregate a huge audience—arguably the largest gambling audience in the world. And then, as pockets of real-money [gambling] pop up, that audience can be essentially cross-sold into real money and be just incredibly valuable,” Enell says.

“We’re working with Facebook and hopeful that we can launch some Facebook real-money products that would be powered by IGT’s back end and our social front-end, if you will—kind of marrying our technologies to be able to go into real money gambling in Europe,” he says. “It’s a tremendous opportunity.”

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Heading into the holiday weekend, I thought I’d pull out a few highlights from recent discussions I’ve had with some Boston-area tech companies that are generating buzz. None of them will be taking the holiday off, I’m guessing.

So here’s a snapshot of five companies in different fields, and at different stages (with some common themes of communication, security, and location tech):

ByteLight
This is a new Cambridge, MA-based startup that’s heading to New York this weekend for the big annual National Retail Federation expo. ByteLight, led by founders Aaron Ganick and Dan Ryan (both Boston University grads), is developing technology for indoor positioning based on the circuitry in LED bulbs, together with smartphone cameras, for applications in sales automation, targeted deals, museum tours, and so on. “We view this as the next frontier in location based services,” Ryan says.

HeyWire
This Cambridge-based mobile startup makes an app for free texting and social messaging. But HeyWire has much bigger ambitions around creating a unified platform for social communications. Don’t want to give too much away here, but as engineering and marketing VPs Bill Gianoukos and Glenn Kiladis told me recently, an upcoming release from the company was inspired by the question, “How do we get Bieber to text us?”

Rapid7
This security assessment software company, based in Boston, recently raised a big $50 million venture round and is growing fast—and looking to make acquisitions. Rapid7 has well over 200 employees, and CEO Mike Tuchen says he is looking to add 100 more this year. One security tidbit he passed along: Many companies’ video conferences are surprisingly easy to hack into, because they put them directly on the Internet without security.

The Tap Lab
This Cambridge-based mobile gaming startup is working on its much-anticipated next release, which is still under wraps (but looks like it’s trying to reinvent the concept of location-based gaming—no pressure). In the meantime, CEO Dave Bisceglia is also working on a project to “increase the frequency and quality of hackathons” in Boston, he says. Stay tuned for more on this.

Vivox
This voice and communication software firm, based in Natick, MA, has been making strides through partnerships with T-Mobile and Facebook. Vivox, best known for its voice chat software that lets gamers and virtual world inhabitants talk to each other, is now applying its technology to the broader markets of social networking and messaging (see T-Mobile’s recent Bobsled voice chat app). CEO Rob Seaver told me that his company’s platform is “very scalable and stable for large-scale social interactions.” What’s more, he says, the fields of gaming and communication are “not that separate.”

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Been on vacation? Get back up to speed with our end-of-the-holidays roundup of San Diego tech news.

—Almost half of the top 50 venture-backed startups had at least one founder who was an immigrant, according to a study from the National Foundation for American Policy. Such findings led author Stuart Anderson, who also is executive director of the Virginia-based foundation, to conclude, “America gains a great deal when we’re open to talent, wherever that talent was born.”

—The FCC approved Qualcomm’s sale of some spectrum rights to AT&T for nearly $1.93 billion. Qualcomm (NASDAQ: QCOM) had spent $683 million acquiring the lower 700-megahertz band and UHF Channels 55 and 56 for its FLO-TV network for transmitting television programming to mobile devices. As we recently reported, Toronto’s QuickPlay Media acquired the network operation center that Qualcomm built in San Diego for its FLO-TV operations. Qualcomm said the FCC approved the spectrum sale after AT&T abandoned its proposed $39 billion acquisition of T-Mobile. AT&T plans to use the additional spectrum to improve its network capacity as it rolls out its 4G wireless network.

—In a separate announcement, Qualcomm disclosed that founding CEO Irwin Jacobs plans to retire from the company board at its annual meeting on March 6. The 78-year-old Jacobs will officially become Qualcomm’s founding chairman and CEO emeritus.

—Razer, the Carlsbad, CA-based maker of computer and video gaming peripherals, said it is raising $50 million in a Series A venture round led by the IDG-Accel China Capital Fund, a global investment fund established by IDG and Accel Partners. The 12-year-old startup’s funding previously came from … Next Page »

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Carlsbad, CA-based Razer bills itself as a maker of “professional gaming” hardware, which always struck me as an oxymoron, like “jumbo shrimp.”

Nevertheless, Razer just demonstrated how serious it is, raising $50 million in a Series A round venture round led by the IDG-Accel China Capital Fund, a global investment fund established by IDG and Accel Partners.

Razer was founded in 1998 by Min-Liang Tan and Robert Krakoff, and says its capital previously came from angel investors and the company’s own global operations. Over the past 13 years or so, Razer says its operations have grown to hundreds of employees in nine cities, including San Francisco, Hamburg, Seoul, Shanghai and Singapore.

“We took a long time raising our first VC round as games like Battlefield 3 kept us pretty busy recently,” CEO Tan says in a statement from the company. “More importantly, we took our time selecting an institutional investor as we wanted to find a partner that understood our commitment to gaming and our no-compromise attitude to designing products. Plus these guys didn’t freak out when we disappeared for a week in the middle of the deal when Skyrim launched.”

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The Boston ecosystem for tech startup investing just got a little more active. Boston Seed Capital said today it has hired Dave Balter, the CEO of BzzAgent, as a venture advisor (see photo, right).

Balter joins Peter Blacklow from Worldwinner, now executive vice president of digital for GSN, as a top advisor to the fund. Both are keeping their current roles in their respective companies as well.

Boston Seed Capital is run by Nicole Stata, the founder and former CEO of human-resources software firm Deploy Solutions, which she led for 11 years before its sale to Kronos in 2007. (If there’s one thing you get from this article, please learn how to pronounce Stata correctly: “STAY-ta.” Yes, she comes from a famous family.)

Boston Seed, which has offices in Newton, MA, is an early-stage investment firm that is about a year old. It invested in eight startups in its first year—most recently, Shareaholic, FitnessKeeper, and Relive (just last week). Other investments include Krush, Yottaa, EverTrue, Kinvey, peerTransfer, and Smarterer. Most of its startups are based around Boston, though Stata says, “We invest from Boston to pretty much anywhere.”

Stata (see photo, left) declined to give specifics about the size of her fund or how much she’ll invest in a typical startup. She did say she’s looking at seed-stage to Series A investments, is testing “the micro-venture model” while “keeping as close as possible to a traditional venture fund,” and is “eager to work with [other] venture firms.” In terms of sectors, Stata says Boston Seed focuses on “enabling platforms for Internet, mobile, and data.”

There is a question of how Boston Seed will differentiate itself from other local micro-VC funds such as NextView Ventures and Project 11 (not to mention angel groups). Stata herself has expertise in software as a service, human capital management, and business software. Blacklow brings plenty of gaming and marketing know-how. And the addition of Balter brings more leadership in marketing, social media, and company-building, as well as more contacts with entrepreneurs, investors, and thought leaders.

Indeed, the point of bringing in Balter is to provide “existing CEO feedback” to startups, says Stata. “It’s something I wish I had done when I was running Deploy,” she says. (Balter’s company, BzzAgent, is owned by Tesco/Dunnhumby after an acquisition earlier this year.)

So why does Stata want to do venture capital now, instead of starting another company herself? At Deploy, she says, “I was heads down, and quite myopic in my field. I wasn’t good enough at looking around at what was happening. I wanted to understand, what does the world look like today and where is it going?” As an investor, she says, “I can help a lot of companies instead of just one. That’s a big motivator.”

That brings her back to Boston Seed’s essence. “We really want to help startups,” she says. “That’s the reputation we want to get. We have to earn it.”

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Big video games studios are a bit old school, with everything from game design, production, execution, and financing done in house, says Boaz Sender, a JavaScript programmer at the Boston-based Web consulting firm Bocoup. But they’re about to go the way that the old Hollywood movie studios did, he says, by outsourcing many of the operations they once tightly controlled.

Sender says that’s all going to happen as a result of traditional video games moving to the open Web, which is a set of standardized, royalty free, HTTP- and HTML-based technologies for building network software. The software design principles and content policies behind it focus on consumer empowerment and third-party integration, he says.

“When you move to the Web, one thing that becomes a lot cheaper is distribution,” says Sender. This enables younger, scrappier startups to get involved in building games, and encourages other startups to sprout up that are developing related games software, for functions like game authoring, payment, advertising, and managing player identities.

Bocoup is looking to seed this trend via Game Lab, a small games incubator it’s running with Cambridge-based Atlas Venture with the “goal of funding companies that help the games industry move to the open Web.” It’s particularly focused on HTML5, the emerging new standard for programming Web pages and services.

Bocoup’s 15-person team has spent two years helping companies develop and adopt open Web technologies, through events, evangelism, and consulting for customers like Google, Microsoft, and Mozilla. Sender founded the firm, which consists of a group of (“especially elite,” according to Atlas) JavaScript programmers. They work closely with other Web design-focused consultancies.

Game Lab’s funding model varies from startup to startup, but it could potentially invest in seed rounds for existing companies, help new companies form and seed those, and participate in Series A rounds, says Sender. Atlas is supplying the capital and Bocoup is bringing its expertise in open Web technology to the teams. Entrepreneurs in the Game Lab also get close mentoring from Atlas, and the option of working out of Bocoup’s open source hacker space.

“It’s about how we’re going to fund the building blocks of the open Web games industry,” says Sender. Bocoup is also working with its … Next Page »

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Phil Beauregard is hungry. His scrappy startup, Objective Logistics, is hungry, too. Good thing they are in the restaurant business.

Actually, the truth is they want to turn the restaurant business upside down. But in a good way (if you believe them). OK, I’ve avoided the G-word for as long as possible. Beauregard and company are trying to add a “game layer” to the restaurant workplace. Before you reach for your “gamification” barf bag, know this: they are doing it to help restaurants improve their workforce and customer service, while also helping to reward top-performing employees.

The news today is that Objective Logistics is moving its headquarters from New Bedford, MA, to Cambridge (keeping the old office too), and that it has raised a $1.5 million venture round led by Atlas Venture and Google Ventures. NextView Ventures, Canary Ventures, and individual investors also participated in the round.

It’s a natural step for a young startup that has innovative technology and is still learning how to sell its stuff in an ultra-competitive industry. Beauregard, the company’s CEO and co-founder, says he had been thinking about raising a smaller bridge round (around $400K—he had previously raised a $750K seed round), but he talked to VC Jeff Fagnan at Atlas and decided to make the deal with him and Rich Miner of Google Ventures. (Seth Priebatsch of SCVNGR, no stranger to game layers, made the intro to Miner.)

“We want people [investors and partners] who can fill in tons of holes where we’re deficient as a company,” Beauregard says. “These guys are the ones we want to work with. They are so good for the city of Boston.” He adds, “We want to prove ourselves.”

Reached for comment, Fagnan touted Objective Logistics’ “pure perseverance and relentless drive” and said its founders “executed like crazy” over the past year. The five-person company says it is looking to grow to 10-12 employees by mid-2012. Beauregard says he is looking mostly for engineers to join the team.

When I first talked with Objective Logistics back in May, the company sounded like it was pretty set with its technology. Its basic idea is to provide software as a service so that restaurant managers and waitstaff can see exactly how each employee is performing on each shift, relative to others—who sold the most drinks or desserts or got the best tips, for example. The system encourages competition among employees through a game-like leaderboard interface (see left).

But like many startups, it decided to “scrap the whole first version” of its interface, Beauregard says. At least the game-layer part of it. That was partly because of co-founder Matt Grace’s experience waiting tables for several shifts a week in a Watertown, MA, restaurant over the past few months, and using his own software as a customer. (Beauregard also has previous restaurant experience.) “Creating game layers and motivational leaderboards is extremely nuanced and a lot harder than people think,” Beauregard says. “It’s extremely difficult to make something look so simple. We’ve learned a ton.”

In the meantime, he says, the company has gotten lots of interest from restaurants and other businesses—and it is focusing exclusively on restaurants for now. “The pipeline is absolutely beyond full,” he says. “We’re in late-stage talks with chains of all sizes.”

Besides making good hires, Beauregard says, the company’s biggest challenge now is “a matter of focus.” He adds, “There’s a tipping point where you’re receiving so many e-mails, and everyone has a really well-informed opinion.” The key is taking all those disparate opinions and turning them into something productive, he says.

What’s more, the company’s product itself is very polarizing. “The people who really dislike it or rebel against it are the people that aren’t the top performers and who feel they’ve earned a certain status within the [restaurant],” Beauregard says. “That’s what we’re looking to vacate, I suppose, and it’s 5-10 percent of any given company. They’re in jeopardy of being displaced in their lucrative shifts. But that’s also what it’s really meant to do.”

Did I mention Beauregard is hungry? “There’s still a mountain to climb,” he says. “We’re creating a meritocracy through technology.”

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Take a former D.C. lobbyist who’s now the owner of a chain of liquor stores, mix him with some security software engineers and you get Cambridge, MA-based Tru.ly. The startup’s software enables users to verify that they are who in fact they say they are online.

Web users can apply for credentials via Tru.ly, with information like their full name, date of birth and zip code. Tru.ly pulls some of these basic credentials from a user’s Facebook account and matches it up against government records, offering a credential to the user if it’s accurate. (The verification works: some of my Facebook data doesn’t match up to my official government records, so I got denied clearance a few times before correcting it.) Once a user has gotten clearance with these particular credentials, no one else can get clearance with them. Check out the demo of how it works.

So if Internet users are already fighting for privacy in an age of big data, why exactly would they want to confirm their official identity online, you ask?

For one, it lends more credibility to the Internet users for services like online dating sites, says CEO and co-founder David Gordon. The Tru.ly verification shows that the potential dater is who they say they are (and how old they say they are). It’s the first release of Tru.ly technology on the market, and focuses largely on validating user’s name and date of birth. “We really want to go to the market with a lightweight age verification product,” says Gordon. And it is less intense than going through, say, a background check.

Tru.ly, founded last February, plans to keep the credential process free for Internet users, but will charge websites that wish to plug it into their interface for different use cases, and will create custom white label verification products depending on business needs, says Gordon.

Tru.ly’s first release also has applications for alcohol brands’ websites and gaming. That’s where founder and Gordon’s experience as a liquor store owner comes into play. Beer sites, for example, have required users to “verify” their identity simply by inputting an age into the dropdown menu. No other measures are taken to ensure that kids aren’t getting access to … Next Page »

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Giordano Contestabile started working in mobile gaming before it was cool. Way before.

Back then, the only available mobile games were based around sending and receiving text messages—something that brings in nice profits for mobile carriers, of course.

“I’d go out and pitch this game, and the game was an SMS fishing game. Already it doesn’t sound very exciting,” he says with a laugh. “But basically, the game was this: You had to send an SMS to a premium number—you paid a dollar or whatever, probably less—and you sent an SMS: ‘I want to fish.’”

Then, players were supposed to whip their arm forward in a casting motion—it’s a fishing game!—”and then you received another SMS with the fish that you got, which was basically random. And that was the game.”

“Pretty much every game was like that,” Contestabile says.

These days, Contestabile is on the lookout for much bigger fish. As the senior director of mobile product and business strategy for Seattle’s PopCap Games, he leads efforts to deliver a portfolio of games for smartphones and tablets. Mobile accounts for more than a quarter of the business for PopCap, which is being acquired by Electronic Arts (NASDAQ: ERTS) for up to $1.3 billion.

And, by the way, he’s one of our all-star panelists for Mobile Madness Northwest, Xconomy’s half-day forum on mobile innovation Dec. 6 at F5 Networks in Seattle. Get your tickets now—the special Early Bird rate is available until Nov. 12.

Contestabile took the lead on mobile at PopCap’s Seattle headquarters at the end of 2010. He previously worked for PopCap as senior business development director in Asia, spending three years based in Shanghai. It turns out that experience was perfect preparation, because Asian consumers were already accustomed to playing games for free, largely because of piracy. But they would pay for in-game extras and premium add-ons. That model was still seen as kind of weird back in the U.S., however.

“In 2007, the attitude here was a bit of, ‘Well, here we do those games and we sell them for 20 bucks,’” Contestabile says. “‘You guys out there in Asia do this crazy thing, and then maybe one day we’ll be interested for the U.S.’”

“What happened was, basically Facebook made free-to-play overnight a sensation in the U.S. So now a lot of what we do is based on that,” Contestabile says. “When people in the U.S. think that this is a new phenomenon and it’s a change that’s being initiated here, I like to remind them that it’s been the case in Asia for 10 years. And a lot of what’s happening here is actually replicating stuff that happened in the Asian markets.”

Ubiquitous, powerful mobile devices are one of the major forces shaping the future of the games business today. Along with the rise of games on Facebook and other social networks, the industry is seeing a near future where games will become always-on, connected services. That’s a big change from the traditional model, where gamers would plop down in front of a PC screen or TV to play.

Like so many other sectors of consumer tech, mobile gaming was revolutionized by the introduction of the iPhone. And Apple’s tight control over the device, software, and apps was a huge reason, Contestabile says.

Before Apple seized the lead, wireless carriers held the keys to … Next Page »

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New Boston-area startup Bozuko is working at the intersection of a lot of big trends. Mobile. Gaming. Location-awareness. Software-as-a-service. Marketing promotions. Sound crowded? Company co-founder Jake Epstein says that people would rather play for a smaller chance to win something big than a guaranteed slim discount, and that’s what makes his business different from what’s out there.

Medford, MA-based Bozuko offers a software platform enabling businesses to create mobile game promotions. Customers can play virtual scratch ticket or slot machine games on their smartphones to win prizes like free dinners, $25 gas cards, and baseball tickets from businesses offering those promotions.

And no, this isn’t a gambling startup. The only currency for playing the Bozuko games is some type of engagement with a particular business on Facebook. So, something like a “like” of a business’s Facebook fan page or mobile check-in to their location gives players entry into the games. Bozuko’s mobile app interface displays all the games going on near a consumer’s given location.

The aim is to tackle an area dominated by group buying and traditional paper coupons, says Epstein.

“This is a market that’s dominated by really boring coupons that no one cares about and really steep discounts that are very expensive to businesses and potentially damaging to their product or services,” he says.

Damaging? Epstein explains that businesses offering the massive discounts that come with group buying deals are basically reducing the value of their product and causing consumers to be less willing to ever pay full price for that product. “Bozuko has the opposite effect. It raises their own product as a prize you can win,” he says. Players also have the chance to win each time they walk into a business and play, so Bozuko has a better shot at driving customer loyalty for these businesses, says Epstein.

Bozuko will operate on a software-as-a-service model, requiring businesses to pay a monthly fee to use the platform. It will offer free access to the platform to smaller pools of consumers, but plans to charge a flat monthly rate once the volume of consumer players at a given business hits a certain level. Monthly rates will also increase for Bozuko to customize games and additional features in the games.

Businesses determine the win probability they want their Bozuko games to have. That way, handing out prizes is a “controlled cost for businesses,” says Epstein, unlike group buying promotions which are criticized for sometimes costing businesses dearly when one-time customers pour unexpectedly through their doors chasing a steep discount.

In August Bozuko kicked off a free pilot involving eight area businesses across 10 Boston-area locations. Among them, a car wash, a minor league sports team, a few bars and restaurants, and a parking garage. So far the app has seen 2,000 downloads and 60,000 unique plays, and has helped award about $5,000 in prize money. Bozuko announced last week that it had opened its platform to all interested businesses. The three-person company raised $346,000 in angel funding in the spring.

Bozuko obviously isn’t the first startup to offer discounts through mobile gaming or location tech. (Hello Foursquare, SCVNGR.) Epstein says what sets it apart is the fact that its games are “addictively simple” (even more so than Angry Birds, he claims), and that offering a chance to win bigger, more tangible prizes is more enticing than the small percentage discounts often offered through things like check-ins. We’ll have to see if he’s right.

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San Mateo-based social game maker Digital Chocolate said this week that it has acquired Bothell, WA-based Sandlot Games, a casual game studio known for Web and mobile titles such as Cake Mania, Super Granny, Tradewinds, and Westward. Financial details of the acquisition were not disclosed. “Sandlot has built a great reputation in casual games,” Digital Chocolate founder and CEO Trip Hawkins (an Xconomist), who also founded Electronic Arts, said in a statement. “We love their development teams and we can now expand further in Seattle.”

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What do running a farm, being a mobster, and taking orders at the drive-through at Dunkin’ Donuts all have in common?

They’re all experiences simulated on Facebook, thanks to game developers Zynga (maker of Mafia Wars and Farmville) and a much newer startup, PartingGift, which operates in a Massachusetts area not exactly known as a tech hub: Hyannis on Cape Cod.

Haven’t heard of the Dunkin’ Donuts game? Called On Your Mark, it debuted on the first of this month and lives on Dunkin’ Donuts’ Facebook fan page. The game interface pushes an image of a coffee cup along a virtual coffee assembly, with stations for flavor, sweetener, milk, and brew, with a virtual customer’s order. The player is responsible for correctly filling the order in the allotted one minute. The orders become bigger and the cups move faster as the players hit higher levels of the game. Ten players a day have the chance to each win $10 gift cards to Dunkin’.

On Your Mark does more than waste hours of the players’ time and earn the game developer money in the process, though, says PartingGift founder and CEO Brad Crowell.

“The whole game platform was designed with research in mind; there’s a strong data-collection component that’s part of our platform,” Crowell says.

See, On Your Mark starts off by asking the player to input their favorite Dunkin’ Donuts beverage to make at the virtual drive-through.

“We are looking to figure out what people’s preferences are in terms of beverages—that’s sort of the starting point of being able to understand what we can do with those preferences,” Crowell says. “We’re working with Dunkin’ on multiple games, building on that sort of information.”

He says he got the idea for the company four or so years ago, after automakers like Ford released online apps where consumers … Next Page »

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Zipline Games, the Seattle startup behind the Moai platform for mobile games (and its own forthcoming casual game titles), is adding a game-industry heavyweight. Shane Kim, the former corporate vice president of Microsoft Game Studios, is now a Zipline board member. CEO Todd Hooper also confirms that Zipline has added $400,000 in angel financing from existing investors, who include Founder’s Co-op, Benaroya Capital, and Groundspeak. The funding news was first reported by John Cook at GeekWire.

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6waves Lolapps—the entity formed from the July merger of San Francisco-based social game developer Lolapps and Hong Kong-based game publisher Six Waves—has raised $35 million in an offering of equity and options, according to a regulatory filing. The investors included Tokyo-based Nexon, a maker of microtransaction-based online games, and Insight Venture Partners of New York, according to a company announcement. Thanks to the new funds, “We are able to aggressively scale the company and continue our mission of offering developers the best possible publishing platform together with developing quality games through Lolapps which will combine to give consumers an unparalleled gaming experience,” Six Waves CEO Rex Ng said in the announcement.

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Bellevue, WA’s Sucker Punch Productions is heading to the mothership. After a longtime partnership developing games for Sony’s PlayStation consoles, Sucker Punch will become Sony Computer Entertainment’s 16th studio. Terms of the acquisition weren’t disclosed, but Sony says Sucker Punch will keep its current headquarters.

Sucker Punch, founded in 1997 by former Microsofties, is known for its big successes for the PS3—inFamous and inFamous 2, about a bike messenger turned reluctant apocalyptic superhero. The bigwigs at Sony and Sucker Punch managing partner Brian Fleming did the day-before tour of big media outlets to prep for the news—here are the big takeaways I saw in those scattered interviews.

Sucker Punch Went to Sony
Fleming told Tricia Duryee at All Things Digital that the indie studio approached Sony with the acquisition idea. One reason that stood out was “an enormous sense of risk,” Duryee writes, in hanging the entire 75-person company on its dedicated one-title-at-a-time philosophy. Partnering up with Sony gives the smaller company a safety net, and lots of resources.

“It’s not that I want to take wild and foolish risks, but we feel this is the right partner for us, and it was time to seal the deal and get back to making great games,” Fleming said.

Others Were Sniffing Around
Not terribly surprising, given the the heat behind the gaming sector overall in recent months, but Scott Rohde with SCE’s Worldwide Studios America told Winda Benedetti of msnbc.com that Sony had some competition in bringing one of its own on board.

“I’d be lying if I said other groups weren’t interested in a group like Sucker Punch,” Rohde said. “The bottom line is, when you’ve got a group that’s been as successful as Sucker Punch, we want to ensure that we keep them in the fold. It’s that simple. It’s hard to find high quality developers like these guys.”

No Worries
Sony’s Online Entertainment division shut down its separate Bellevue development studio in March, canning the undelivered game “The Agency” as part of a broader cut in that division. Fleming told The Seattle Times’ Brier Dudley that didn’t worry him: ”Having a good, proactive management team that is always looking to improve their business is a good thing.”

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If you’re like most people, you do a lot of your personal communicating via Facebook and text messages, but you handle most of your business matters over e-mail. In fact, you probably spend far too much of your workday on e-mail (some estimates say 30 percent), and you wish you could be more efficient and productive with that time.

Well, what if you could do a lot more stuff directly from your inbox? Instead of clicking on e-mail links that take you somewhere else, for instance, what if you could watch videos, comment on people’s updates on Facebook and Twitter, and browse daily deals, all from the friendly confines of your e-mail account?

That’s the idea behind a young Cambridge, MA-based startup called PowerInbox. OK, maybe it won’t make you more productive at work or cut down on time spent in your inbox just yet. But the idea actually leads to something bigger, involving the future of e-mail as a unified platform for social apps.

First, some news. PowerInbox is rolling out its private beta platform today—you can try it out here using our access code. The free download works across Gmail, Hotmail, Yahoo Mail, and Outlook. Basically, it lets you do things like comment on Facebook, view photos, see and send tweets, and get information about local deals from Groupon (see screenshot below)—all without leaving your inbox.

The core idea behind PowerInbox, as founder Matt Thazhmon explains, is “let’s make e-mail interactive.” What he means, really, is adding social features to e-mail that will connect users more efficiently to the services they use every day.

PowerInbox was co-founded last year by three Electronic Arts veterans (including Thazhmon, who worked on Madden football and other games). The startup raised a $1 million seed round earlier this year from Atlas Venture, Longworth Venture Partners, Correlation Ventures, and angel investors. The four-person team, originally from Orlando, FL, by way of the San Francisco Bay Area, recently moved to the Boston area. The company has found office space for the coming year near Central Square in Cambridge.

There are plenty of e-mail-related companies out there, of course. They include—just to name a few—Baydin, Gist (now part of RIM), Help Scout, Mimecast, Rapportive, Taskforce, Senexx, SMTP, Sonian, and Yesware, to go along with Constant Contact, HubSpot, and a whole host of marketing tech companies. Some of these are trying to make your inbox more productive and efficient, while others use e-mail as a platform for other applications. And each e-mail system, like Gmail or Outlook, has its own add-ins and gadgets. But where PowerInbox is different is in its vision for the future.

The company’s long-term goal is for developers to create new apps on top of the PowerInbox e-mail platform. Anyone from Facebook to travel and deals sites (left) to video services (Netflix, anyone?) to recruiting, dating, or meeting-scheduling sites—indeed, any entity that interacts with customers by e-mail—could conceivably build an app that helps people interact with content through an inbox.

One emerging focus is on forming partnerships with gaming companies—such as social-network game giant Zynga, but also smaller developers—to let users play games within their e-mail, and make it that much easier to start playing. “We think this is going to be huge,” Thazhmon says.

But making big changes to e-mail tends to be hard because it’s an open platform, … Next Page »

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This morning was a busy one for Eric Gastfriend, but he made time to chat about his Cambridge, MA-based startup’s coming out of beta. Its goal: to make high-quality PC video games as fast and easy to access as the social-network and casual games that have swept the country over the past few years (think Zynga, Playdom, and increasingly Electronic Arts, which owns Playfish and now PopCap).

The Happy Cloud, if you can get past the name (OK, it’s actually fine), has opened up its on-demand game store to the general public today, with 10 PC games from three publishers—Warner Bros. Interactive Entertainment, Paradox Interactive, and Frictional Games. The games themselves range from first-person shooters (F.E.A.R. 2) to adventures (LEGO Harry Potter, Amnesia). They are free to demo, says Gastfriend, the company’s general manager, and if people buy the full version of a game, the startup splits the revenue with the game publisher.

Happy Cloud tries to drastically cut down the amount of time it takes to download PC games—from around six hours (or overnight), which is the status quo, to just a few minutes. Gastfriend, a recent Brown University grad, has probably been thinking about how to do this for a long time. He’s been playing and working with video games since he was five (and making websites since 5th grade).

“If you make games easy to access, frictionless, and simple and easy to learn, then it turns out everyone and their grandma wants to play a video game,” he says. “Hopefully, Happy Cloud can bring a high-quality experience to a more casual audience.”

Unlike other approaches to streaming games, Happy Cloud works by buffering the first few moments of the game and tricking the system into thinking the game is fully installed, when in fact Happy Cloud’s browsing and caching algorithms are constantly figuring out what parts to download next. The company says this approach gets rid of time lags (because the game runs locally on your PC) and poor resolution issues (because there’s no video compression) that come with streaming.

The two-year-old startup has been in private beta trials since May. In its first month, Happy Cloud logged more than 2,500 unique visitors, Gastfriend says, and half of them signed up for e-mail blasts. The company has since found that half of its traffic comes from outside the U.S. (mostly Europe and South America). So although the public launch today is only for U.S. consumers, the startup is looking to add more countries.

Happy Cloud currently has 10 employees, split half and half between Cambridge, MA, and Israel. It previously raised about $1 million in angel financing and will be looking to raise another round, Gastfriend says. The company was founded by Jacob and David Guedalia, serial entrepreneurs who sold their last company, iSkoot, to Qualcomm last fall.

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New England biotechs helped make some deals headlines in the last week, while other startups have been a bit quieter surrounding the holiday weekend.

—Boston-based cancer drug developer Acetylon Pharmaceuticals nabbed $27 million in Series B financing from individual investors, bringing its funding pot $40 million, including a mix of federal grants, private financing, and money from nonprofits. Acetylon was founded based on work done at Harvard University and the Dana-Farber Cancer Institute; Dana-Farber supporters Marc Cohen, the tech entrepreneur, and New England Patriots owner Bob Kraft are among Acetylon’s backers.

—Cambridge, MA-based Lotus Tissue Repair pinned down $26 million in Series A funding, led by Boston-based Third Rock Ventures, to put toward developing its treatment for a rare, genetic disease called dystrophic epidermolysis bullosa.

—Chiasma, a Newton, MA-based biotech focused on protein drug delivery technology, secured $5.1 million in equity- and rights-based funding.

—Spirus Medical, a Stoughton, MA-headquartered endoscopy technology developer, was acquired for an undisclosed sum by Olympus Medical, which plans to incorporate its own endoscopic systems with Spirus’ technology.

—San Francisco-based social and mobile game developer Zynga, which has a presence in Cambridge via its acquisition of Conduit Labs last year, filed paperwork with the SEC indicating it is preparing for an initial public offering, Zynga, whose largest shareholders include firms such as Kleiner Perkins Caufield & Byers, Institutional Venture Partners, Foundry Group , Avalon Ventures, DST Group, and Union Square Ventures, hopes to raise $1 billion in the initial sale of its common stock.

—The Boston Globe reported that Cambridge-based Brightcove signed a deal for a new 10-year lease in Boston’s seaport neighborhood, which has also attracted the likes of Vertex Pharmaceuticals and Heartland Robotics. Brightcove, a digital media and video hosting firm, has 280 employees and plans to bump that number up to 400 to fill out the new 82,000 square foot space.

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The Supreme Court today released its opinion regarding California’s attempt to ban the sale of so-called violent video games to those under 18. My company, Vindicia, filed an amicus brief in the case, Brown v. Entertainment Merchant’s Association, to make sure the Court was aware of the ramifications of the California law in the digital gaming world.

The decision is being widely reported as 7-2, which is true enough on the merits of this law. But looking closer, the decision is really 5-4 when it comes to the question of whether the First Amendment categorically protects the sale of video games to minors.

As I noted in a blog post after attending oral arguments in the case, Justice Alito and Chief Justice Roberts both seemed willing to allow states an ability to restrict the sale of violent video games. The Chief Justice seemed to miss the point that Postal 2, the game in question in the case, appears designed specifically to make white middle-aged conservative fathers like him angry. Justice Alito’s concurrence, with which the Chief agreed (bringing the two additional votes in the 7-2 vote), argues that some other law that better defines “violent” could pass constitutional muster.

Justice Thomas wrote a dissent in which he continues to take the position that kids really don’t have any free speech rights as an originalist matter. The flip side being that game creators have no right to sell to them if they’re under 18 (and as an original matter, probably under 21). Justice Scalia rightly points out in the majority opinion that Justice Thomas’s theory may support a system where parents could put their kids on a state-wide “do not sell video games to” list, but Scalia asserted that game makers’ free speech rights are violated when all kids are banned from buying their games.

Justice Breyer continues simply to believe that everything is a balancing test, regardless of the fundamental enumerated right in question, and that therefore judges should be allowed to use political arguments about what is best for society to balance laws against their harms. I’m reminded of Justice Scalia in another recent opinion replying to an almost identical Breyer argument with, “the very enumeration of the right takes out of the hands of government—even the Third Branch of Government—the power to decide on a case-by-case basis whether the right is really worth insisting upon.”

Today’s decision is good news in that the Supreme Court has found that states attempting to severely restrict the sales of video games have been going about it using unconstitutional methods. What’s still frightening is that we appear to be only one vote away from a state finding a way to restrict sales of video games to minors. Luckily, most of the methods that legislatures who really just don’t like video games would want to use would fail other constitutional tests. However, the “do not sell” list concept combined with the existing rating system does leave open a path for legislation that may not burden video game makers much. (That concept, however, faces the difficulty of the changes the digital revolution is bringing to the game industry’s business models, as we outlined in our Amicus brief.)

For adults, this opinion reaffirms something many of us knew. The fact that some people don’t like the content of video games is no basis for curtailing or choking them off at what many consider to be the beginning of a revolution in creativity, realism, and storytelling.

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Whether it forges ahead with previous hopes for an IPO, or jumps at an acquisition, it’s clear that Seattle-based PopCap Games is unlikely to leave 2011 without being transformed. The question is, which outcome is better for PopCap?

Just a few days ago, the storyline seemed pretty clear. Profitable for years and with few investors to please, PopCap had finally reached $100 million in sales. Now, with the market for technology IPOs coming back to life and competitors like Zynga and Rovio pushing interest in casual games to new heights, leadership told virtually anyone who would listen that it was time to test the waters for a public sale.

Then, as happens frequently amid deal-making, a juicy rumor hit the tech press: TechCrunch, close to the sources of many Silicon Valley deals, reported that PopCap was in talks for a $1 billion-plus buyout from Electronic Arts. PopCap dismissed it as rumor and speculation, but didn’t deny. It could be true, half-right, or just somebody trying to hang a bigger price tag on the company.

So while we wait to see what actually happens, let’s step back and look again at the information at hand.

PopCap has laid out plenty on its own. The company went on a “we might IPO” tour earlier this year, meeting with bankers, analysts, and reporters to lay out selected financial information and talk about the company’s culture and plans for the future.

PopCap’s leaders said that hitting the public market was driven by a desire to ramp up long-term growth plans, not about cashing out. Even just before the rumors of a buyout at a $1 billion price leaked this week, the company’s line was still strongly about doing the thing that would allow it to maintain its vision and pace.

And why not? PopCap has been profitable since its inception, only raising outside financing once, when it took $22.5 million from Meritech Capital Partners and angels in 2009. The company’s revenue growth has been solid, and cash in the door was about $100 million last year.

Of course, that’s the kind of thing every company says. Nobody’s going on a road trip to New York and telling the press that they can’t wait to finally buy a big boat, a Tesla roadster, and a new house on the water. But PopCap is also no trend-of-the-moment startup: The company has built its portfolio methodically, and now has some 400 employees worldwide, with offices on three continents. It has been praised for managing the transition to online and mobile games without going too wild or losing a grip on its franchise titles.

“They had good foresight and have been aggressive in getting into new regions and onto new platforms, I think, ahead of other people on the causal side,” says Billy Pidgeon, a senior analyst at M2 Research. “They really stand head and shoulders apart form the rest of the casual games universe.”

That story seems to argue for a public sale—the executive team and core talent are fairly likely to be happy and stay in place, and although you have to answer to a whole bunch of new bosses, at … Next Page »

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