Time for an update on Boston’s marketing tech cluster. It’s one of the real strengths of the local entrepreneurial ecosystem. And it looks like it’s getting stronger, with a couple of leaders making news this week. Here is a tale of two companies that have become competitors:

—Constant Contact (NASDAQ: CTCT), the Waltham, MA-based online marketing firm, has seen its stock price jump nearly 30 percent—from about $24 to just over $30—since Facebook filed for its IPO last week (coincidence?). Constant Contact has been positioning itself as a leader in digital marketing for small businesses across e-mail, social media, and Web platforms—especially social campaigns. The company also released some promising stats on its revenues and profits for 2011 and its most recent quarter.

—HubSpot, the Cambridge, MA-based marketing tech firm, said it has hired J.D. Sherman, Akamai’s former chief financial officer (also a former IBM exec). The company says Sherman is being brought in partly to help it prepare for a future IPO. HubSpot has been hiring aggressively and working on new products, while it pares away others (like Oneforty.com, which it acquired last summer). It remains to be seen whether the company will actually make it to an IPO before getting snapped up by Salesforce.com or some other suitor.

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Over the last week, 10 lucky companies have been getting the calls from HAXLR8R: they’ve been admitted to the inaugural session of the startup world’s newest venture incubator. Following the popular model pioneered by TechStars and Y Combinator, HAXLR8R will provide teams with a stipend of $6,000 per founder and about three months of mentorship, in return for a 6- to 10-percent equity stake. At the end of the session in June, companies will pitch their businesses to investors at a “demo day” in San Francisco.

There are just two big differences between HAXLR8R and all the other incubators. First, the program isn’t admitting software or Internet startups. It’s designed for companies building real stuff, rather than the usual mobile apps or consumer Web services. Second, it’s not actually located in San Francisco or any of the other typical U.S. startup hubs, like Boston, New York, or Boulder. In fact, it’s not even in the same hemisphere. HAXLR8R will gather its first class of startups at the Shiling Industrial Park in the Nanshan district of Shenzhen, a high-tech manufacturing city north of Hong Kong.

A recruiting poster for HAXLR8R

The theory behind the new program is that successful gadget builders—whether they’ve developed a toy, an appliance, or some kind of consumer device for health, fitness, or travel—will eventually have to figure out where to mass-produce their products. And chances are the answer will be China. Despite the new scrutiny being applied to U.S. consumer electronics companies over labor conditions in Chinese plants, China still has the world’s richest supply of low-cost manufacturing facilities, along with the engineers who know how to get them tooled up to make new things.

But to get something built in China, you have to know who to talk to, and the program at HAXLR8R is intended to smooth the way. Startups in the program will be “coming into an environment where they can work on their product and figure out how to manufacture it,” says Cyril Ebersweiler, one of the program’s co-founders. “They will get instant access to relationships which would take a year or more to develop on their own.”

HAXLR8R finished its selection process last week and began notifying the admitted companies. Ebersweiler says the program received “way more applicants than we expected,” from all over the world. The majority of the applications came from U.S. startups, but the organization also heard from companies in Europe, Asia, and India. The mix of applicants included “startup entrepreneurs, hackers, makers, and [people from the] open source movement; social entrepreneurs as well,” Ebersweiler says. “Most of the applicants have a working prototype.”

The 15-week HAXLR8R program starts on March 1. Teams will spend the first 13 weeks in Shenzhen, building their prototypes and gathering feedback from potential customers. Then they’ll decamp to San Francisco, where they’ll … Next Page »

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Today’s West Coast announcement that Oracle is buying human resources management firm Taleo for $1.9 billion—yes, billion—puts some Boston-area talent and recruiting startups in a new light. Unfortunately, one of them is no longer in Boston…

—Take the Interview, the video-based recruiting startup and former Dogpatch Labs Cambridge resident, has relocated to New York City (SoHo to be more exact). It’s not a big surprise, as the company was part of the DreamIt Ventures startup program in New York last summer. Take the Interview, led by CEO Danielle Weinblatt, raised a seed funding round last September.

—Boston-based Smarterer, a skills-test startup that’s trying to reinvent the resume, has hit a possible inflection point. According to co-founder Dave Balter, the company had 800,000 skills questions answered online over the past year, but recently that figure increased by 250,000 in just five days. Chalk it up to focusing on who wants to use the product and then who has to use the product (employers vs. job seekers). Smarterer is led by CEO Jennifer Fremont-Smith; the company raised a seed round last year.

—Senexx, an expertise-management startup based in Cambridge, MA, and Israel, has collaborated with fellow Cambridge startup PowerInbox to build a Web application that runs in people’s e-mail systems and helps them find expertise and share knowledge within their company or organization. This is an interesting partnership between a couple of early-stage startups trying to do big things in social enterprise apps, using e-mail as the platform.

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In the nearly five years since we started Xconomy, I’ve looked forward to few events more than our Silicon Valley “Xconomy Xchange” forum last night with Evernote CEO Phil Libin, Sequoia Capital partner Roelof Botha, and Morgenthaler Ventures partner Gary Little. I’m a longtime power user of Evernote’s online notekeeping application—it’s installed on my Mac, my iPad, and my iPhone—and interviewing Libin and Evernote’s biggest investors in front of a live audience was a little bit like being a Trekkie on stage with William Shatner, Leonard Nimoy, and Gene Roddenberry. Except, Libin is funnier.

We’ve got photos from the event in slide-show form below. Many thanks to Hanno Botha, newly wedded husband of Xconomy San Francisco’s director of business development Rachel Botha, for playing Peter Parker. (Hanno and Rachel are no relation to Roelof.)

While I’m thanking folks: I want to extend a special thank you to Microsoft Silicon Valley for hosting the event, especially to BizSpark evangelist Brett Laffel, operations manager Sherree Curtiss, and Paul the A/V technician. We’re also grateful to event sponsors Silicon Valley Bank and Turnstone (which showed off its forthcoming iPad app, complete with Evernote integration), event partners Dealmaker Media and Plug and Play Tech Center, design sponsor Mixtur, and Xconomy’s regular lineup of underwriters and venture members. Ching Wu at Morgenthaler Ventures, Andrew Sinkov at Evernote, and Mark Dempster at Sequoia Capital provided invaluable help spreading the word about the event.

Quite a few people tweeted from the event. You can get a look at the conversation by searching Twitter for the hashtag #xcevernote. One of the most tweetable gems of the evening was Libin’s formulation of Libin’s Law: “In a startup, you have to multiply Moore’s Law by Murphy’s Law. Every year, there are twice as many things that can go wrong.” On the final page in our photo gallery, you’ll find a Storify compilation of notable tweets from the event.

	NEXT IMAGE >>
	L to R: Wade Roush (Xconomy), Gary Little (Morgenthaler Ventures), Phil Libin (Evernote), Roelof Botha (Sequoia Capital).
	Photo by Hanno Botha

… Next Page »

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Plans for IPOs and venture funding dominated the New England deals news this week.

—A new seed fund, backed by venture firm New Enterprise Associates and hosted by Harvard, came out of the woodwork last week. The Experiment Fund will invest up to $250,000 in seed funding in selected startups, with a focus on technologies that come out of Cambridge, MA. The news broke just a few days ahead of Facebook—the one that got away—revealing its plans to go public.

—Radius Health, a Cambridge-based startup working on treatments for osteoporosis, filed paperwork indicating its plans to raise as much as $86 million in an initial public offering.

—A PricewaterhouseCoopers and National Venture Capital Association report shows a mixed picture for life sciences investing in 2011, my colleague Arlene reported. Biotech companies raised $4.7 billion, showing a 22 percent increase over 2010, but the deal volume for the sector dropped 9 percent to 446 transactions. Medical devices companies also showed an increase in funding dollars but a drop in number of deals.

—Cambridge-based Brightcove set the price range of its initial public offering at $10 to $12 per share, according to an amended filing with the SEC. The video hosting startup plans to sell 5 million shares, and give underwriters the option to purchase another 750,000 shares. Brightcove first filed paperwork last August indicating it intended to raise $50 million in an IPO.

—Synchroneuron of Waltham, MA, nabbed $6 million in Series A funding from Morningside Technology Ventures. The startup is developing treatments for movement disorders such as tardive dyskinesia.

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Perhaps you’ve been meaning to buy a ticket to our big Silicon Valley event with Evernote CEO Phil Libin tonight, but you keep forgetting. Well, now’s the time to take action. We still have some tickets available online for $50 ($40 if you work for a startup)—but a walk-in ticket tonight will cost you $95.

Of course, if you’re one of Evernote’s 20 million users, you’d be very unlikely to forget something like that. The company is all about remembering the important stuff in your life—hence the elephant logo.

Now, if your promise to customers is that you’ll protect their digital memories forever, then you sort of have to plan for the long term. But that’s not how most startups think—they’re usually focused on the next product release, not the next decade or the next century. So the message Libin has been sharing lately about wanting Evernote to last 100 years or more is logical, but at the same time pretty radical.

That’s why I wanted to get Libin on stage at an Xconomy event—so that I could ask him how a startup CEO manages to think about the long-term even as he deals with the here-and-now demands of employees, customers, and investors.

And when you have an entrepreneur who says he’s not too concerned about getting acquired or planning an IPO, it takes a pretty special type of investor to back him. That’s why I also wanted to bring in Gary Little from Morgenthaler Ventures, one of Evernote’s earliest backers, as well as Roelof Botha from Sequoia Capital, which recently acquired a larger stake in Evernote by buying out previous investor Troika Dialog.

It’s this very pattern of secondary trading—with newer investors buying out older ones—that could help Evernote get really big without having to worry about going public. Tonight, I’ll be asking Little and Botha how working with Evernote is different from working with their other portfolio companies—and whether Evernote’s serial fundraising strategy can work more broadly.

Of course, we’ll also geek out a bit about Evernote itself, which is one of my favorite online tools. So register now. Meanwhile, for your reading pleasure, here’s an archive of all of my major pieces about Evernote.

Can Evernote Make You Into a Digital Leonardo? (July 2008)

Online Notebook Smackdown: Evernote vs. Springpad (April 2010)

The Rise of Evernote: An Interview with CEO Phil Libin (June 2010)

Evernote Opens a Trunk of Goodies for Online-Notes Fans (July 2010)

Sequoia Leads $20 Million Round for Evernote—Q&A with CEO Phil Libin (October 2010)

Xconomist of the Week: Phil Libin, Evernote, and the Death of the Exit (October 2011)

“Independent of Exit”: Talking Evernote with Morgenthaler’s Gary Little (January 2012)

Evernote Wants to Make Your Memories More Magical (January 2012)

How to Be a 100-Year Startup (January 2012)

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In enterprise data centers, servers and storage go together like hot dogs and buns. One isn’t much good without the other. But if your specialty is baking buns, you probably don’t spend a lot of time thinking about how to improve the dogs. And that, in essence, is one of the limitations that Hopkinton, MA-based EMC has been trying to overcome lately.

The Hopkinton, MA-based company (NYSE: EMC) is one of the world’s leading vendors of storage arrays for enterprise data centers. Because it has always thought of itself as a storage company, it has never crossed the line into building components for servers. And that’s how, even though EMC was first to market with Flash-based memory technology for enterprises, a much smaller company, Utah-based Fusion-IO, was able to come out of nowhere in 2005 and take the lead in a burgeoning new market for solid-state Flash memory chips for servers. Today HP, IBM, and Dell all put Fusion-IO’s ioDrive cards in their servers; the company went public last year and is valued at around $2.1 billion.

But it’s a natural market for EMC, and it wants in, badly. At an event yesterday in San Francisco, EMC took the wraps off a competitor to ioDrive called VFCache. It’s basically a card full of Flash modules that fits into a “PCI Express” or PCIe slot in a computer server, where it provides an instant memory upgrade. That allows the CPU to get work done faster, without having to slow down to wait for data from the storage array.

EMC's Pat Gelsinger introducing VFCache, aka Project Lightning

How EMC came back from behind in the server-side Flash business is an interesting story of internal innovation. Pat Gelsinger, president and chief operating officer of EMC’s flagship Information Infrastructure Products division, told me yesterday that to help EMC catch up with Fusion-IO, he authorized an unusual skunk works project, with most of the engineering team isolated in EMC’s facility in Tel Aviv, Israel. “We hired the very best people and treated it like an internal startup,” Gelsinger said. “We set incredibly focused goals for the team. We told them not to go to corporate meetings,” but to concentrate solely on “Project Lightning,” the code name for the VFCache product line.

That was the only way to get the job done once EMC had determined that it had to build, not buy, its own alternative PCIe Flash product, Gelsinger says. “Organic innovation is very hard in a big, successful company,” he says. “There are a lot of antibodies saying, ‘No, you can’t do that, we can’t go that fast.’ There are a thousand reasons these things can slow down in a company. So having a very hands-on, top-down focus, combined with a very maniacal, senior, aggressive team, is really what’s required.”

Flash memory, a technology pioneered by Toshiba, is far more expensive than hard drive storage, but it also works much faster. Companies have begun to put extra Flash-based “tiers” of memory between servers and storage arrays in order to address the gap created by ongoing improvements in CPU speeds. Hard drives just can’t read or write data as fast as today’s multicore processors can suck it in and spit it out, which means CPUs are often sitting idle, waiting for data to arrive.

To speed things up, EMC has been adding Flash memory to its storage arrays since 2008—in fact, it has shipped more Flash memory to enterprise customers than all other vendors combined. But before Project Lightning, it hadn’t tried putting Flash into servers themselves, where the benefits are … Next Page »

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Applied Proteomics hasn’t exactly been operating in stealth mode since it was founded five years ago. Co-founders David Agus, a cancer specialist at USC, and Danny Hillis, the MIT-trained computer scientist, gave TedMed talks about the startup’s technology, which provides a 40-gigabyte snapshot of all the proteins circulating in a drop of blood. By pure coincidence, I watched John Stewart’s Feb. 2 interview with Agus last night on “The Daily Show.”

“Danny and David had the foresight to build the tool before trying to use the tool,” says John Blume, a molecular biologist who joined API in 2008 as chief scientific officer. “Although the company wasn’t in stealth mode, the first several years were spent in taking the time to make it right, and then to use it and avoid some of the stumbling blocks.”

Now Applied Proteomics is raising the curtain on several steps that mark its progress beyond a seed-stage startup that was incubating at Applied Minds, an industrial think tank that Hillis founded in Glendale, CA, with a colleague from Disney Imagineering. After moving the headquarters to San Diego late last year, Applied Proteomics is today naming a new CEO—Peter Klemm, a veteran in molecular diagnostics and the former CEO of Lexington, MA-based Predictive Biosciences.

Danny Hillis

The company known as API says it also secured $22.5 million last June in Series B funding from Domain Associates (San Diego partner Jim Blair joined the board), Seattle’s Vulcan Capital, and returning angel investors. Klemm tells me the company raised $4 million from angel investors (who prefer to go unnamed) in what amounted to API’s Series A round in 2007.

David Agus

API’s goal, Klemm says, is nothing less than to “elevate molecular diagnostics to another level beyond the genome” by measuring the proteins made by genes—a long-sought technology that is expected to help doctors improve medical care for individual patients. Because proteins carry out most cellular functions, the company says a snapshot of all the proteins circulating in the body at a given moment represents “the most powerful source of information” in terms of understanding a patient’s health status.

Quantifying all the proteins in the body, Klemm says, can help doctors optimize the course of treatment for individual patients by making it easier to identify the specific drugs that would have the greatest effect on blocking specific proteins or signaling pathways, which can vary dramatically from person to person.

In a statement from the company, Hillis says, “For the first time, we can look at all the proteins in the body with remarkable specificity and sensitivity and use proteomic technology to create … Next Page »

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We’re starting to see fresh signs of life among the Internet software startups in San Diego. Check out this news.

—During a visit last week, TechStars CEO David Cohen talked with the leaders of San Diego’s grassroots Web startup community about the factors that help to create and sustain entrepreneurial communities. One crucial issue confronting San Diego is a crying need for savvy and experienced Internet entrepreneurs who are willing to “pay it forward” by mentoring a new generation of startups.

—A dozen seed-stage companies moved into the new EvoNexus incubator in downtown San Diego. EvoNexus, which was founded by the CommNexus non-profit industry group, will continue to operate its original incubator in University City, where eight startups are taking root. In both locations, EvoNexus provides office space, utilities, and other services free of charge and with no strings attached.

—Sigma Partners led a $10 million round in venture funding for San Diego-based MOGL, a Web startup that has developed a comprehensive customer loyalty program for restaurants and bars, to fuel its expansion into San Francisco and New York. San Diego’s Avalon Ventures and Austin, TX-based Austin Ventures joined in the round.

—San Diego’s MicroPower Technologies named two new board members after raising $6.5 million in Series C funding in a deal that was led by Motorola Solutions Venture Capital and joined by an undisclosed private fund. MicroPower Technologies, which uses wireless networking technologies to create low-cost surveillance capabilities, named PacketVideo CEO Jim Brailean and former DivX CEO Kevin Hell to its board. Hell, who is now chairman of San Diego’s EvoNexus incubator, will join as MicroPower chairman.

—San Diego’s StockTwits said it has established a partnership with Toronto’s Q4 Web Systems, which provides … Next Page »

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How are companies spying on each other these days? One of the surprising ways I’ve heard about recently is through the webcam in boardrooms.

That’s right, apparently it’s easy to hack into some companies’ video conference systems, because they lie outside typical security measures. Companies sometimes set up video conferences so they can be accessed directly on the Internet—leaving the door open for eavesdroppers to listen in on meetings, or even remotely monitor a conference room via the camera.

One local software company is helping organizations guard against this threat—and many others. Boston-based Rapid7 is one of the leaders in the growing cluster of IT security companies around town. Rapid7’s approach is complementary to firms like NitroSecurity (recently acquired by Intel/McAfee) and Q1 Labs (bought by IBM), which help organizations guard against security threats in their computer networks and systems.

What Rapid7 does is help organizations find security flaws throughout their IT infrastructure, and then test whether they’ve been corrected. To fuel its growth, the company raised a $50 million Series C round from Technology Crossover Ventures in November—one of the largest tech venture rounds in the Boston area lately. (Rapid7 has raised $59 million to date.)

“There’s a lot of cyber-espionage going on in business,” says Mike Tuchen, Rapid7’s CEO (see photo, left). The activity ranges from stealing sales plans, financial information, and intellectual property, to the aforementioned boardroom eavesdropping, he says. And, of course, it’s not just companies spying on each other; it’s governments and nation states as well, all trying to get their hands on everything from Citibank credit card numbers to the special sauce in Apple’s iPad design.

What’s a CEO to do? If you’re Mike Tuchen, you take a promising company and try to make it better. Tuchen joined Rapid7 as chief executive in 2008. (The company has been around since 2000.) Previously he worked at Microsoft as a group program manager and general manager of SQL server marketing. An engineer by training, he also worked at Sun Microsystems and co-founded Paramark, a dot-com-era online advertising startup.

When he arrived at Rapid7, brought in by Bain Capital Ventures (the firm’s original VC investor), Tuchen saw a company that had “a great engineering and sales team” but not much else. He says he didn’t have to tear up the company, just bring in some key additions: marketing, channel partners, new processes, and a broader product roadmap, including a more international market focus.

So far the effort seems to be paying off. The company has grown to about 240 employees (about half in Boston), and Tuchen says revenues … Next Page »

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…or really just one great one: Xconomy needs your help. We’re busy cranking out terrific tech and life sciences journalism and putting on stellar events across the six cities in our network, and we’re looking for a kick-ass marketing coordinator to help us get the word out about all of it.

Full details are here, but in a nutshell: This is a full-time position in our Cambridge, MA, headquarters, ideal for somebody who is happiest when juggling a bunch of diverse projects. We need a person who enjoys figuring stuff out as s/he goes along, and has just enough of the old OCD to pull it off without too many embarrassing typos. Some main areas of focus will include marketing our events, managing our social media efforts, and marketing reprints and premium products.

If doing all that in an extremely collegial, slightly wacky startup environment sounds like your idea of a good time we want to hear from you at jobs@xconomy.com.

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Boston startups should be focusing more on creating strategic partnerships with big companies.

An “if we build it, they will come” mindset appears to dominate the Boston startup scene. Too many startups also rely mostly on a pricing and plans revenue model combined with implementing the latest inside sales and marketing 2.0 tools to “get found” while driving demand. A complementary and proactive approach in targeting big companies for strategic partnerships is needed.

Wake up… Most big companies have realized that their current set of technology providers lack the innovation and speed to deliver new competitive solutions. There are new sets of problems that need to be solved that may not have existed even a few years ago. As a result, new innovation programs and budgets have been established, led by senior executives. Their motivation is to fund pilots with emerging technology providers that most times lead to a much larger transaction and partnership strategy. Interesting areas include mobility, social, analytics, and cloud computing.

Take advantage of these customer-funded opportunities as these dollars may also complement your angel and VC funding efforts. Plus, for those leveraging lean startup principles, incorporating a big company “voice” to validate your product development roadmap may commit them to buy additional products and enhancements in the future.

If big companies are approached correctly, senior executives leading innovation programs will make swift decisions. Unfortunately, there are major challenges I see within the startup community to take advantage of these budgets. These include:

• Little focus on proactively targeting big companies. Also, the startup team and their mentors may not possess the sales skills or experience to effectively connect with and relate to big-company senior executives.

• Boston startups are too focused on the product and technology. Big companies are also evaluating their ability to work and collaborate with the startup team. Chemistry is important to these executives.

• You are not the center of the universe. There may be additional value in extending and leveraging existing ecosystem investments.

What I am describing here is not an outdated sales process where the cost to acquire a customer is high and the sales cycles are very long.

Keep in mind that big companies would rather … Next Page »

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When it comes to tech startups—especially in Internet software and app development—San Diego has been adrift in the horse latitudes. That’s the term Spanish mariners had for the waters where the trade winds died out for days and even weeks at a time. Becalmed sailors desperate to gain some headway would heave their horses overboard to reach the New World.

It hasn’t reached that point yet in San Diego, but you would never know that software was once a thriving entrepreneurial community here. Even now, the software sector accounts for more than a third of San Diego’s private technology companies. But as I’ve written previously, it feels as if the local software companies speak different languages. In contrast to the flourishing tech hubs in Seattle, Boston, and New York—not to mention Silicon Valley—San Diego’s software scene is sleepy and indifferent.

Still, there are signs of a freshening breeze.

David Cohen last week at UC San Diego

Scores of new seed-stage startups have begun to emerge throughout the region, including a dozen that just moved into the new EvoNexus incubator in downtown San Diego. These emerging companies are led by young entrepreneurs who view San Diego’s innovation establishment as old-school and irrelevant. They are turning out instead for informal “hackathons” and “meetups.” They tell me they’re yearning for real mentoring by real tech entrepreneurs, and for access to real tech investors who are really investing.

Last week, more than 200 people turned out to hear David Cohen talk at U.C. San Diego about TechStars, the early stage fund and accelerator program for Internet startups that he co-founded with three partners in Boulder, CO, six years ago. Cohen is the CEO, and by any measure, the startup program has been wildly successful.

TechStars enrolled its first 10 Internet startups in 2007, providing as much as $18,000 in seed funding and an intense, three-month mentorship program for each company in exchange for a 6 percent stake. Since then, TechStars has expanded to … Next Page »

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Snapette was supposed to be an unusual way for Sarah Paiji to spend the summer between her two years at Harvard Business School. It was a mobile app idea she started working on last winter with Harvard alum Jinhee Ahn Kim, aimed at enabling women to better share and find fashion products in brick-and-mortar stores.

Then, two days before school was set to wrap up that first year, a Twitter interaction with the colorful Silicon Valley investor Dave McClure more or less changed all that, Paiji says. She tweeted an infographic about local shopping, which McClure then retweeted. He also directed his Twitter followers to sign up for the Snapette fashion app. The resulting traffic clued Paiji in to the fact that McClure was someone important in the startup world.

At the suggestion of friends, Paiji reached out to McClure, who runs the 500 Startups seed fund and accelerator in Mountain View, CA, to share some more information on her company. “He liked the idea but said he doesn’t know anything about fashion,” she says. So McClure passed Snapette along to his 500 Startups partner Christine Tsai and Jess Lee, founder of fashion tech startup Polyvore, to take a look at the company. Snapette got the OK, the 500 Startups fund invested an initial $50,000, and Snapette left its digs at Boston’s MassChallenge program to join McClure’s accelerator—three weeks after it had already started.

Now, Paiji is working full-time on Snapette and has no foreseeable plans to return to business school. The 500 Startups demo day in August put Snapette in front of 700 investors.”If they’re interested, it’s hard to say you’re going to back to school and will do this on the side,” says Paiji.

“It was very thematic of the whole journey: unexpected,” she says.

(And this isn’t the first startup I’ve written about whose Twitter interactions with McClure ultimately led to inking an investment from him. The other one would be Cambridge, MA-founded and now San Francisco-based Baydin.)

Snapette officially launched its app in late August in conjunction with demo day, and Kim and Paiji finished up the year at Dogpatch Labs in Palo Alto, CA. The company also continued to be a part of the MassChallenge program remotely, Paiji says.

Just last month, it made the move to New York City (to Dogpatch Labs, again) to be near the “high shopping density of boutiques and users,” says Paiji, who I caught up with in Boston this week.

There’s plenty of buzz around social, local, mobile, and even fashion tech startups. So what makes Snapette different? Most of the plug-ins and apps and platforms aimed at better tailoring shopping to consumer preferences exist in the online world. Not so much for the physical world. “Our idea was, we would love to help women find great products in stores using crowdsourcing,” Paiji says.

Snapette’s iPhone and iPad interface provides a stream of product pictures that have been uploaded by the user community, with information on the brand, price, and store that carries it. Users can search streams near them, and get directions to the store selling the products nearby. They can also interact with and follow others in the Snapette community, share products to other social media outlets, and view a stream of what products are hot and trending based on likes and comments on Snapette.

“It feels like Pinterest for the real world,” says Paiji. (The comparison had to be drawn.)

Snapette has since expanded beyond this crowdsourced content, and is explicitly partnering with brands and boutiques looking … Next Page »

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Cambridge, MA-based Flagship Ventures, a $900 million fund known for its successes with companies such as Accuri Cytometers and Acceleron Pharma, is planning to open an office in Michigan in the next six months, says Sean O’Donnell, VP at Credit Suisse’s Michigan office.

The move comes after Venture Michigan Fund II (VMF II), a fund-of-fund which is managed by Credit Suisse, made a $15 million investment commitment in Flagship Ventures Fund IV, which invests in early-stage companies. As part of the agreement, Flagship will invest that $15 million in Michigan companies. Flagship has already found success in local companies with Accuri Cytometers, which is based on technology spun out of the University of Michigan.

“Flagship Ventures is a much larger fund than is typically involved in our program,” O’Donnell says. “We hope they’ll exceed that amount.”

The Venture Michigan Fund II was established in February 2011. Like the first Venture Michigan Fund, VMF II exists to primarily invest in early- and seed-stage Michigan companies. VMF II has $120 million in capital to invest in funds that target high-growth and emerging industries. The commitment to Flagship was the fourth investment it has made.

And what can we expect Flagship to invest in? O’Donnell admitted that Michigan continues to feel the effects of a difficult national fundraising environment, though he says there is actually an increased amount of capital available to Michigan companies compared to years past thanks to programs like VMF II. He pointed to the success of homegrown entities like Arboretum Ventures and HandyLab as helping to persuade investors that Michigan is a viable place to invest.

O’Donnell also says that, though Michigan’s life science sector will remain robust, he predicts movement away from therapeutics and devices in favor of anything that saves money. Where he expects to see increased investment is in the IT sector, particularly in software development, mobile apps, and social media, and the reason is simple: Those kinds of companies are cheap to start.

“I feel Michigan is on the right track,” O’Donnell says. “We’re always going to have gaps, but good deals will still be able to find capital.”

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We’re just a few hours away from the start of Xconomy Forum: New York’s Venture Emergence. But there’s still plenty of time (relatively speaking) to get your tickets. We have nine left and up for grabs, which you can get by clicking here.

We have a great lineup of speakers planned, including Fred Wilson, founder and managing partner of Union Square Ventures, Todd Dagres, founder and general partner of Spark Capital, the Gilt Groupe startup team, and representatives from Armgo, BarkBox, Simulmedia, and other great New York success stories.

New York’s Venture Emergence happens today from 2 p.m. to 6:30 p.m. at the Apella Event Space at Alexandria Center for Life Science at 450 E. 29th Street. There will be plenty of time for networking, too. We hope to see you at this exciting event.

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After previewing its expansion plans last summer, San Diego’s EvoNexus, the free startup incubator established by the non-profit technology group CommNexus, has opened a newly renovated downtown office space. A dozen early stage companies began moving into the incubator Monday.

CommNexus founded EvoNexus in 2009, when San Diego’s innovation economy was reeling from the Great Recession. The incubator has taken in 14 companies so far, including six that have moved out of the EvoNexus incubator in University City. Office space, utilities, and other services are provided to startups free of charge, and companies leave with no obligations to EvoNexus or CommNexus.

“As far as we know, we’re the only pro bono incubator in the country,” EvoNexus chairman Kevin Hell says in a statement issued late yesterday. “The goal is to grow sustainable tech companies and expand the industry here in San Diego.”

When the EvoNexus incubator first opened in Sorrento Valley, organizers said they wanted to host startups developing advanced communications technologies, including wireless life sciences and smart grid networking.

Since then, CommNexus moved EvoNexus to University City and broadened its criteria. The industry group established the new downtown EvoNexus to host startups that are focused primarily on developing Internet software, Web services, gaming, social networking, and cloud computing technologies. The privately held Irvine Co. made the 15,000-square foot space available to EvoNexus at no cost. The incubator takes up an entire floor of the building at 101 W. Broadway, known locally as the AT&T building.

Hell says he sees parallels in the downtown San Diego locale with San Francisco’s SoMa, the downtown neighborhood South of Market Street that has become a magnet for social media startups and mobile app developers. The nightlife, housing, and amenities available in San Diego’s city center should appeal to young entrepreneurs, Hell says.

CommNexus plans to continue to operate its incubator in University City. The 12 companies in the new downtown space are:

Antengo: Real-time mobile classifieds.

BigSho: Social webcam game show.

Chatmeter: Online reputation management.

Fashioning Change: Shopping experience for eco-friendly apparel.

Saambaa: Social media app for finding things to do.

SwoopThat: Online textbook shopping by course.

TapChow: Cloud-based restaurant experience manger.

Taphunter: Mobile app for locating places that serve craft beer.

UgliApps: Mobile apps focused on food.

Voluware: Saas healthcare information software.

Xpenser: Web-based tracking of business expenses, time, and mileage.

Zambig: Web-based service that provides online outlet for radio ads.

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Here’s a quick update on the agenda for Mobile Madness 2012: Total Mobility, the annual half-day mobile conference we are organizing here at Xconomy Boston. The event is taking place on the afternoon of March 14 at Microsoft NERD in Cambridge, MA. We are looking forward to a packed house and some outstanding talks, discussions, and networking.

I’m pleased to announce a few more startup participants:

—Apperian founder and chief strategy officer Chuck Goldman will join us for a discussion of mobile business strategies, along with Mobiquity founder and CEO Bill Seibel. Goldman is a former Apple exec who leads Apperian’s strategic and business development efforts in enterprise mobile apps. Seibel, for his part, was a founding partner at Cambridge Technology Partners and went on to lead ZEFER, Demantra, and Gumball; he currently leads Mobiquity’s efforts to help businesses develop mobile strategies.

—Fiksu CEO Micah Adler joins us to talk about his company’s approach to marketing mobile apps. My colleague Erin recently wrote about Fiksu’s consumer-facing service, which lets people try out apps from various brands and stores for free.

—Paydiant co-founder Chris Gardner will be on hand to discuss his vision for the future of the mobile wallet—banking, shopping, and e-commerce via your smartphone.

Other confirmed speakers include Jason Jacobs of RunKeeper, Chris Lynch from Vertica/HP, Chuck Kane from One Laptop Per Child, and Seth Priebatsch from SCVNGR. We’ll also have a special panel of Boston’s “mobile mafia,” including Lars Albright (Quattro Wireless, Session M); Mike Baker (Enpocket, DataXu); Tom Burgess (Third Screen Media, Linkable Networks); Jeff Glass (m-Qube, Bain Capital Ventures); and Ryan Moore (GrandBanks Capital investor in Enpocket, Where, and Nexage, now with Atlas Venture).

There are more announcements to come, and I will be posting the detailed agenda soon, so stay tuned. Meantime, you can still grab the early bird rate if you register today.

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When Long Island, NY-based Kemp Technologies revealed on its blog on January 24 that it had raised $16 million in venture capital, it might have been easy to overlook the funding as just another sign of the latest tech boom. But this was no ordinary funding: Kemp is an 11-year-old company with revenues and profits that’s entering the venture capital market for the first time. The company, which makes equipment to help small and medium-sized businesses manage traffic on their computer servers, was funded by Edison Ventures, with participation from Kennet Partners, and Orix.

Why did Kemp’s founders jump into the VC game now when their company was fully self-sustaining and on a fast growth path? Peter Melerud, Kemp’s co-founder and executive vice president of product management, got on the phone recently with Xconomy to explain the reasoning behind the funding round and to provide insight to other business owners who are weighing an entry into the VC game.

Xconomy: As a profitable, self-sustaining company, why did you feel you needed to raise venture capital?
Peter Melerud: We started the company in 2000, and in 2003 we launched our very first product. Our revenues and profitability started to happen not too long after the time we launched our first product. We were able to quickly start re-using the profits for seeding growth. But obviously it was slow and deliberate, with an eye towards the bottom line, because we were self-funded.

Over the past three years, we experienced dramatic growth. In 2011 we saw 116 percent growth in revenues and we have 8,000 deployments worldwide. We realized that in order to take advantage of that growth and keep up with it, we needed to aggressively step up every area of the company, from R&D to tech support, to marketing and sales. To do that, we realized, we needed external funding.

X: What made you optimistic it was a good time to raise capital?
PM: The relative environment for VCs and fundings didn’t really have a big impact on our decision. We are a New York-based company—not a Silicon Valley-based company. Even though there was VC activity happening in this area, we were a little off the beaten track. We got engaged in the process with the current investors a pretty long time ago—almost a year and a half ago. It was definitely a getting-to-know-you process between us and the investors. We needed to be comfortable that we were really going to be working with good partners, not just VCs.

X: What will your group of VCs bring to the table, beyond the money, of course?
PM: Our roots are in product R&D and marketing. That’s what our expertise is. What the investors bring to us is more of a strategic growth-management capability that we’ll certainly be able to leverage.

We’re planning significant international growth. In the past, we relied on developing a channel network internationally. In 2010, we established a subsidiary in Ireland. We’re definitely looking to staff that up, but also to expand into other European territories, perhaps Central and Eastern Europe. We’re also going to be growing our support infrastructure. Support is a very key element of our business model—we don’t outsource it. We have to grow support capabilities internally, and we can do that more aggressively now. We’re going to be increasing our marketing and sales capabilities, too.

X: The poor IPO market makes exit strategies difficult, but now that you have VCs on board, it’s something you have to think about. How are you looking at the exit strategy at this point?
PM: Looking forward, we see our technology as becoming more and more core to a lot of other parallel areas, certainly in the cloud space. Being in the position to take advantage of those opportunities as they come up makes sense.

Looking at potential exits, I think there’s a broader set of options than just an IPO. It’s not something that we’re looking at short term though. It’s more of a three-to-five year plan. How will the market look at that stage? No one has a crystal ball, but certainly everybody thinks it can only get better.

X: What advice would you pass along to other late-stage companies thinking about raising venture capital for the first time?
PM: My first suggestion is to be clear with yourself as to why you’re doing it. There are lots of reasons to bring VCs in, so you need to understand the market, the opportunity, and where you fit within your space. How will the additional capital help the organization grow, assuming growth is driving the decision? Having that clarity is very important.

Also you have to match yourself to the right investor. Investors can vary dramatically based on their investment criteria. Make sure there’s a match, and make sure there is a match in personalities, as well. An investor is someone you’ll work very closely with, so you need to be sure that’s something you can do. Hopefully the two of you together will make a much stronger entity.

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No journalist can resist a good horse race. That’s why most stories about Trulia, the San Francisco-based real estate search company with 17 million users per month, also mention Seattle competitor Zillow (NASDAQ: Z).

After all, both companies were founded in 2005, and both offer fancy map-driven interfaces for canvassing rental listings and houses for sale. Trulia is a bit larger than Zillow (300 employees versus Zillow’s roughly 275). But Zillow beat Trulia to the public markets. It raised $69 million in its IPO last July, while Trulia continues, for the moment, to make do on the $33 million it has raised from venture investors like Accel Partners and Sequoia Capital.

But from my perspective, there isn’t much point in trying to pick a winner in the real-estate search business. The truth is that it’s big enough for both companies. The real prize in this market is an ongoing share of the dollars real estate agents spend on advertising. There are more than a million licensed real estate professionals in the U.S., who earn about $50 billion in commissions annually. Traditionally they’ve plowed about 10 to 20 percent of that income back into marketing and advertising. Do the math, and that’s a $5 to $10 billion industry.

Before companies like Zillow and Trulia came along, the vast majority of this spending went to offline channels: newspapers, classifieds, billboards, direct mail, grocery cart advertising, and the like. But both companies have built thriving businesses selling online ads and related services, with real estate agents now waiting in line to get their glamor shots and phone numbers on the sites’ listing pages.

What really interests me, then, is how quickly the real-estate startups have changed the way people buy homes—and the way agents sell them—even in the midst of the worst downturn in the housing market in generations.

I’ve had a couple of conversations on this theme recently with Pete Flint, Trulia’s co-founder and CEO, and it sounds to me as if both companies are using roughly the same playbook. It involves identifying the most common frustrations plaguing house buyers and real estate agents, and easing the pain by changing the way information gets delivered—whether that’s information about available homes, which was traditionally hard for consumers to find, or qualified leads on home buyers, which is what agents always want more of. “What we are trying to solve for is not only a consumer problem but an industry problem,” says Flint (he’s the one on the left in the photo above). “We not only needed to get smart on consumer needs, but also on how the real estate industry operates-the economics, the personnel, the legal aspects, all of those things.”

British-born Flint got a master’s degree in physics at Oxford and spent five years as a business development executive at UK-based travel site Lastminute.com before arriving at Stanford Business School in 2003. There he met a Finn named Sami Inkinen, who had also studied physics and had done his own spin in the startup and consulting worlds before deciding to pursue an MBA. “We became pretty fast friends,” says Flint. “We had a similar passion for high-tech, and we spent the first year at Stanford bouncing around entrepreneurial ideas.”

As second-year students in 2004-2005, Flint and Inkinen had spend time searching for off-campus housing in Silicon Valley, which is when “the light bulb went on,” Flint says. “At the time there were a handful of regional brokerage sites, but they were not really consumer destinations, and there were some very disappointing national sites, like Craigslist. It hit us that this was a big opportunity that seemed completely obvious, and it was remarkable that no one had done anything that was particularly strong.”

Before they even got their Stanford diplomas, Flint and Inkinen had founded Trulia and built a five-person office in San Mateo, CA. Flint took the CEO role and supervised product development, while Inkinen became president and hit the sales trail, selling realtors on the system. (Six years and about 200 employees later, the company moved to its current quarters in the historic Rialto Building in San Francisco; as one of the only big downtown office buildings that survived the 1906 earthquake and fire, it’s a real estate landmark in its own right.)

Inkinen and Flint figured that if they could bring lots of consumers to their site, they would be able to start siphoning real estate advertising dollars away from newspapers. But it was a chicken-and-egg problem. To attract consumers, Trulia needed actual real estate listings, but the … Next Page »

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