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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The explosion in incubators for early stage tech companies has spawned a familiar startup storyline: A team of bright founders hits on a promising idea, builds a prototype, and applies to one of the big-name programs. After they get accepted (or sometimes even if they don’t), it’s off to the races for a few intense months of coding, meetings, demos, late nights, long weekends, and camaraderie.

And when it’s over, a big demo day where everyone shows off their hard work—and hopefully lands some investment to really get things going. Not as much ink is spilled about that day-after reality, when the wunderkind founders get to work actually building a business.

That brings us to Seattle-based FutureAdvisor, a startup that graduated from the summer 2010 batch of Y Combinator—biggest of the big-name startup incubator programs. Among the other companies produced in that group are Hipmunk, the travel-booking site, and Contagion Health, which has since merged with another company to form Habit Labs, also based in Seattle.

FutureAdvisor is a Web-based software service for individual investors who want help maximizing their retirement savings, but don’t have enough money to get the attention of a traditional financial advisor who typically focuses on bigger fish—all the better to earn fees.

FutureAdvisor focuses on index investing, a growing trend that eschews professional mutual fund managers in favor of pegging investments to stock market indexes compiled by financial firms, like the S&P 500 or the Russell 1000. FutureAdvisor is still in a beta phase, but says it’s now able to offer services to employees at the 15 biggest companies in the greater Seattle area, with many more in the pipeline.

The company was founded by Bo Lu, 28, and Jon Xu, 32, who met while working at Microsoft on a “skunkworks” project called Catalyst, which eventually became part of the new Windows Phone system—Lu worked on the technology that would become the all-in-one social networking feature on Windows Phone 7, and Xu helped build the system that tied together instant messaging and text messaging.

Once they knew they worked well together, and felt they’d been bitten by the entrepreneurial bug after working on a 40-person team inside the behemoth of Microsoft, Xu and Lu ran through some side projects until hitting upon the idea that would become FutureAdvisor. It’s actually based on a problem that Lu, an active investor since the age of 16, had seen with friends: People wanted his advice on how to allocate their money, but didn’t have the time, patience, or acumen to keep up with the homemade spreadsheet he’d been using since he was a teen.

“Immediately, Jon and I were like, ‘That looks like a software problem,’” Lu says. “So we made something, and we applied to Y Combinator with a super-ghetto prototype that, at the time, had my Fidelity credentials in the code base.”

“But at least it was fast,” Xu says with a smile.

That was the spring of 2010, and the idea that would become FutureAdvisor was just taking off on its wild ride. Fast forward to today, with a team of eight people pretty evenly split between financial and technical expertise, working out of a historic building in Seattle’s Pioneer Square.

They’ve landed financial backing from Silicon Valley venture capitalists, although the amount and investors haven’t been publicly announced yet, and are advertising on social and professional networking sites to recruit more customers.

And they’re still working to add more companies to their database—a painstaking task that requires importing all of the retirement account options available to any given company’s employees, so that when new customers log in, their options show up automatically. (As they note below, FutureAdvisor recently added a big fish to the collection in their old employer, Microsoft.)

Here are Xu and Lu’s lessons from the first few months of living out in the wild.

BUILDING A BUSINESS
BO LU: ”You spend a lot of time in the incubator building a product … once you’re out of the incubator, you spend a lot of time on scalable economics. Which is not something that we as hackers ever did. So rather than staring at code all day, we felt like we stared a lot more at spreadsheets. How much it costs to acquire a customer, how would this channel do, and all of those things.”

HELP WANTED
JON XU: “Shortly after Y Combinator … we were faced with, ‘Well, do we come back here? What do we do? And I think we’d always thought that this was a good area to start a company, but also, more importantly, we knew our technical networks were pretty deep up here, having been from Microsoft.”

BO LU: “This is a unique vein of talent. And we found … after comparing notes with our batch-mates who stayed in the Bay, that it was easier for us to recruit here. We had a much higher accept rate of offers, and it just wasn’t as nuts. So over PG’s [Y Combinator founder Paul Graham] strident objections, we moved.”

JON XU: “Really, you’ve got to get down to actually building a team. Building a machine that generates the actual products.”

BO LU: “No one learns how to hire during the incubator. They all learn how to hire afterward. And they all learn it on their own. … And when you compare notes, some teams do really well and some teams do really, really poorly.”

HAND-TO-HAND COMBAT
JON XU: “A lot of times to get your business started, you need to do some hand-cranking. It’s not going to be a skyrocket all the way, but there’s definitely this grind of hand-cranking the engine to get it started.”

“Because we deal with retirement products, quite often it’s knowing what investment options are in people’s 401(k) plans. … So we’re hand-cranking, essentially company by company in the Seattle area, and we actually launched Microsoft—that was a big milestone for us.”

BO LU: “Every day’s just like every other day. You make your own progress, and you make your own headway. So there are great days, like when you launch to a new company, and there are not-so-great days, like when you launch to a new company and a bunch of bugs are discovered. So that’s where we are.”

STAYING CONNECTED
JON XU: “The way I’ve heard it put, from one of our friends who founded Posterous, was that quite often after the Y Combinator experience where you have such a deep network of like-minded entrepreneurs that you’re dealing with, you kind of go your separate ways to build your own teams, and you kind of have to establish a culture for your own team. So very much by design, you have to spend a lot of time building that up rather than being interconnected with various other companies.”

COMPETITION (OR NOT)
BO LU: “People are always like, ‘Oh, what’s it like competing against financial advisors?’ And the answer is, we don’t compete with financial advisors—financial advisors love us. Which I never thought—that was super-surprising.”

“We meet with a financial advisor, and they’re like ‘Oh my God, I wish that I could give some service to the people who come to me who don’t have enough money for decades. But I can’t do it, my friends won’t do it, no one will help these people, and so I end up doing pro bono work just to be nice and be part of the community.’ But he’s like, ‘Man, if somebody could help these guys cost-effectively, that would be awesome, because I don’t have a business model to do that with.’”

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A flotilla of fifteen startups from Atlanta presented their ideas in New York on Wednesday for a demo day at the offices of Union Square Ventures. Merrick Furst, director of the Flashpoint accelerator at the Georgia Institute of Technology, said the program helps entrepreneurs develop their concepts beyond their startup phase. “They are trying to figure out what the business opportunity is,” he said.

Flashpoint offers entrepreneurial education to startups, access to mentors, and opportunities for early-stage funding through the Flashpoint Investment Fund, angel investors, and other sources. Furst said the startups that presented at demo day are backed by the Flashpoint Investment Fund, which typically invests $15,000 to $25,000 at a time. The Atlanta startups presented ideas ranging from improving corporate data security in the cloud, to preventing phone scams that spoof caller ID systems, to a 3D scanning technology that runs on iPhones.

Furst said the Flashpoint startups visit cities to seek potential backers. Wednesday’s demo day was sponsored in conjunction with the Harvard Business School Angel Alumni Association and ff Venture Capital. Union Square Ventures provided space for the event. Flashpoint takes some of its inspiration from the Y Combinator accelerator program and plans to bring its startups to visit venture capital firm Andreessen Horowitz in Menlo Park, CA next.

Social Fortress, the first startup to present on Wednesday, offers technology to help companies in regulated industries such as financial services and health care use the cloud more securely. Adam Ghetti, co-founder of Social Fortress, said such companies view the cloud as a major security risk. “They have data that’s very important to them,” he said. “They have laws and regulations that say they can only do certain things with that data in certain places.”

Ghetti said Social Fortress’s technology abates some of that risk by encrypting data before it is shared on the cloud. Social Fortress’s technology can also track how data is used after it’s shared with a third party such as Salesforce.com. Ghetti says angel investors have committed about $1.5 million to back Social Fortress and the startup is talks to raise another $500,000.

Trimensional, another startup presenting at demo day, already has a bit of New York connection. Grant Schindler, founder of Trimensional, developed an iPhone app that captures objects and people in 3D. After his presentation, Schindler told Xconomy he connected with MakerBot, a Brooklyn-based maker of 3D printers, in January 2011 shortly after Trimensional’s app went live. “The day I released the app, Bre Pettis [CEO of MakerBot] emailed me,” Schindler says. The companies developed a way for users to export 3D images captured by Trimensional’s app for use with MakerBot 3D printers, which print objects layer-by-layer using thermoplastics.

Schindler says his technology gives consumers access to scanning technology that might otherwise require expensive equipment. It may not be on par with the gear and … Next Page »

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New York-based startup Tutorspree revealed that its $1 million seed round was led by Sequoia Capital with participation from Founder Collective, Lerer Ventures, Thrive Capital, SV Angel, and individual investors.

Tutorspree is an online platform that lets tutors across the country post profiles to offer their expertise and receive reviews from the students they work with. Tutorspree raised the seed round after graduating last March from the Y Combinator business accelerator program. CEO and co-founder Aaron Harris says his company is using the funding to improve its platform, which matches tutors to students. “It largely will go to development of systems, how we build our infrastructure, and hiring people to make that a reality,” he says.

Tutorspree has a staff of six, and Harris says the company may hire up to two engineers.

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I didn’t know the full extent to which the Boston area has a thriving data and analytics startup scene.

I had always associated the city primarily with biotech innovation. My company, Chart.io, provides hosted business dashboards to help companies visualize their database data. We’re based out in San Francisco (we were part of the 2010 Y Combinator class), but our investors, Avalon Ventures, call Boston home. When my friends at Avalon-backed Kinvey (mobile backends as a service) and Boston-based SessionM (a platform to spark deeper consumer engagement with mobile content and ads) and I decided to co-host a data visualization and analytics meetup for the local community, we expected to get 20-30 RSVPs at most. Instead, we broke 100 in a flash and saw a steady torrent of emails from data enthusiasts pleading for admission.

In fact, a deeper look into the Boston tech scene reveals quite a rich history of data and analytics companies, including Netezza, Endeca, ITA, EMC, and other giants. And it turns out, the startup scene is equally rich, with companies innovating around NoSQL, data storage, search, healthcare, and a variety of cloud computing ventures. Here’s a quick tour of the Boston- data landscape. And this is only the tip of the iceberg.

As data volumes have exploded in the past decade, so have the number of companies building tools to store, retrieve, analyze, and generally manage the deluge of data.

Two Boston-area companies, Cloudant and Basho, are tackling the big data problem through non-relational databases (NoSQL), designed to handle hundreds of gigabytes and even terabytes of data and enable applications to elastically scale out to meet the demands of millions (or hundreds of millions) of concurrent users. In this vein, Cloudant offers tools to help companies use Apache CouchDB, while Basho developed its own data store called Riak.

Meanwhile, other local firms are focusing on the next generation … Next Page »

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In a grand test of whether the Silicon Valley startup accelerator model can help university scientists get promising new technologies to market faster, 21 teams hand-picked for the National Science Foundation’s new Innovation Corps (I-Corps) program converged on the Stanford University campus last week. The goal: to review the progress they’d made during an eight-week crash course in entrepreneurship, and share the details of their newly battle-tested business models with a panel of NSF leaders and venture capital partners.

I sat in for the first half of the review session, which took place Wednesday at Stanford’s School of Engineering, and listened to presentations on everything from hydrophobic materials for preventing ice buildup on airplane wings to a method for growing transparent sheets of graphene that could be used in next-generation computer displays. It’s too early to say how many of these innovations will turn up in the marketplace—but it was remarkable to see how thoroughly the traditional walls between academia and business had melted away in the minds of the program participants.

It all made for an event unlike any demo day I’ve seen before. The I-Corps teams—who hailed from Seattle, Tucson, Pittsburgh, Boston, and everywhere in between—were the antithesis of the hip, young, polished entrepreneurs you see coming out of venture incubators like Y Combinator or TechStars. Instead, these were geeks on a mission: bench scientists who are convinced that businesses can be built around the technologies they’ve invented, and who’ve decided to take the leap themselves rather than wait for a corporate licensee to wander along, as in the old model of university technology transfer.

For most of these scientists, the I-Corps program was their first real exposure to the startup mindset, and they had plenty of self-deprecating stories to share about the lessons they’d learned while talking with potential customers. One University of Connecticut team developing a nanocomposite material for explosives detection had pivoted not once but twice—from a landmine-detector product to an airport security product, then back to landmines. “The most important thing we learned from I-Corps is how important getting out of the building is,” principal investigator Yu Lei said.

It was no accident that that phrase—”getting out of the building”—came up in every presentation I saw. It’s practically been trademarked by Steve Blank, the serial entrepreneur famous around Silicon Valley for his “customer development” methodology, which says that the highest priority for any startup is to gather feedback from potential customers and continually refine its product or its target market or both until it finds a fit. NSF officials tapped Blank to lead the I-Corps program after watching him teach customer development to students in his “Lean LaunchPad” course at Stanford.

The teams chosen for the I-Corps program—each of which consisted of at least one principal investigator with a history of NSF grant-getting, one younger “entrepreneurial lead” (typically a graduate student or postdoc), and one business mentor—first came to Stanford in October for a few days of startup bootcamp. They were then sent home with instructions to get out, talk to customers, and, if necessary, throw out their original business models and start over. Last week’s session was both an opportunity to share what they’d learned and an audition for Phase II of the program, in which a few of the teams will be selected for NSF grants to help them continue their commercialization efforts.

How well did the teams adapt to customer-development thinking? “I think they hit it out of the park,” Blank told me at the review session.

The evidence was in the before-and-after “business model canvases” that each team shared during their presentations. An invention of strategy consultant Alexander Osterwalder, a business model canvas is a template that helps fledgling startup teams envision who their most natural customers are, how they’ll deliver value to those customers, and how they’ll manage costs, revenues, and partnerships. With help from mentors, and with feedback from the more than 2,000 prospective customers they interviewed during the eight-week program, the I-Corps teams redrew their canvases … Next Page »

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Time for our irregular, data-driven roundup of recent deals news from around San Francisco Bay. From biggest to smallest:

$50 million—The amount that Sunnyvale, CA-based Proofpoint hopes to raise in an upcoming initial public offering, according to S-1 registration papers filed with the SEC yesterday. The cloud security company’s leading venture investors include Mohr Davidow Ventures, Benchmark Capital Partners, Meritech Capital Partners, DAG Ventures, and RRE Ventures.

$35 million—New funding from Swiss power giant ABB and Oak Investment Partners for GreenVolts, a Fremont, CA-based maker of concentrating photovoltaic systems. The company took the wraps off its technology yesterday, calling it “the industry’s first complete and fully integrated solar system, including modules, trackers, inverters, and energy management software.”

$30 million—A round of debt and option funding for Redwood City, CA-based Silver Spring Networks, a maker of advanced metering hardware and software for utilities. The lion’s share of the funding, $24 million, came from Hopkinton, MA-based EMC, which announced that Silver Spring’s system will tap EMC’s Greenplum analytics platform.

$17.8 million—New funding for TaskRabbit, the San Francisco-based service networking startup. Xconomy’s Greg Huang detailed the funding yesterday; participants included Lightspeed Venture Partners, Baseline Ventures, First Round Capital, Floodgate Fund, Collaborative Fund, and Shasta Ventures.

$14 million—A Series B financing round for Prezi, the Budapest, Hungary- and San Francisco-based startup offering a cloud-based presentation tool. Accel Partners led the round, which was joined by existing investor Sunstone Capital.

$10 million—Series A funding from IDG-Accel for BlueSprig, a new San Francisco startup offering utility software for iOS and Android mobile devices. BlueSprig’s first app, AirCover, combines cloud backup, security, and family safety features.

$7 million—Total venture financing raised by Rypple, the cloud-based human resources management company to be acquired by Salesforce.com for an undisclosed amount. With offices in Toronto and San Francisco, Rypple was backed by Edgestone Capital Partners, Extreme Venture Partners, and Bridgescale Partners. In a seeming dig at Rypple competitor SuccessFactors, Salesforce.com said it would relaunch Rypple as part of a new human capital management division called “SuccessForce.”

$3.5 million—A Series A funding round announced December 13 for San Francisco-based Life360, which makes a popular family safety app for smartphone owners. The new backers included Fontinalis Partners, Bessemer Venture Partners, 500 Startups, Kapor Capital, Venture51, Bullpen Capital, Social Leverage, and EchoVC Partners, as well as previous seed-round investors.

$1.725 million—The amount of a Federal Highway Administration grant for San Francisco- and San Diego-based peer-to-peer car sharing company Getaround. The startup says it will use the funds to expand service to Portland, OR, in the first quarter of 2012.

$1.5 million—A seed funding round for MixRank, a Y Combinator Summer 2011 startup offering a Web display ad intelligence platform that helps advertisers track how well their own ads and and competitors’ ads are performing. Contributors to the round include 500 Startups, Mark Cuban, Rich LeFurgy, Peter Bordes, Robert Afshar, Larry Braitman, David Beyer, Tom McInerney, Matt Ocko, and Zachary Bogue.

1 million—The number of iPhone and iPod touch owners who downloaded the new Flipboard iPhone app during the first week after its launch, according to an announcement yesterday from the Palo Alto company. We took a look at the new Flipboard app last week.

766,000—The number of unique visitors to tech news site ReadWriteWeb in November. San Francisco-based vertical advertising network Say Media said yesterday that it’s acquiring the site for an undisclosed sum. Xconomy examined Say Media’s niche-publishing strategy in a May 2011 profile.

100—G-Pad‘s ranking in the iTunes list of most popular free iPad apps as of last night, just 24 hours after its launch. The app, from the same San Francisco startup that makes the Facebook app MyPad, is designed to help people manage their Google+, Gmail, and Twitter accounts.

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Into the lair of beasts strode Adam Goldstein. Armed only with his wits and a mean set of slides, he descended on the Boston area on a warm, early winter day. He was no stranger to the premises. Goldstein had been an MIT undergrad before moving to San Francisco to participate in the Y Combinator startup program with his online travel company, Hipmunk.

Goldstein, the startup’s CEO and co-founder, spoke at Xconomy’s “6×6: Six Cities, Six Big Tech Ideas” conference earlier this month, representing the Bay Area. I say he was among beasts because Boston is the land of heavyweight travel firms such as ITA Software (now part of Google), Kayak, and TripAdvisor, and upstarts like Hopper, WaySavvy, and SilverRail (now based mostly in the U.K.). And Goldstein has been on record saying other travel sites “have really dropped the ball on flight search.” (On the other hand, Hipmunk formed a licensing partnership with ITA about a year ago.)

Indeed, the whole culture of Hipmunk is about coming “into an established industry with a focus on usability,” says Goldstein, in a polite-but-firm jab at the big players who don’t seem to care as much about being user-friendly. (As for the company’s name, let’s just say the cute-animal logo is its main justification.)

I must confess, I was skeptical at first. Since part of me still lives in the ’90s (the early to mid-‘90s, mind you), any bluster from new travel sites tends to fall on numb ears. Most travel sites seem pretty much the same, and even the worst ones are still more convenient than what people like me used to do, which is call up travel agents and individual airlines, get some options, and repeat until settling on a purchase. Hipmunk is about making the whole search process simpler, more intuitive, and more visually interactive.

But there’s only so far that can take you as a business, as my colleague Wade probed a few months ago. What stood out to me most about Hipmunk is its strategy of building a business by focusing first on getting lots of loyal customers—not trying to cash in on every eyeball.

“The entire world, especially in the world of travel, has become sort of addicted to the idea of making as much money as possible from each time someone visits their website,” Goldstein said. “What that’s led them to do over time is bombard their customers with advertisements and pop-up windows and all sorts of other things that just distract them.” Conclusion: Hipmunk won’t make money from ads, just referral fees when people book trips. But it does need to gain users—lots of users.

Here’s a short video interview with Goldstein, conducted by my colleague Lilly O’Flaherty. I like the part at the end where he references a talk by Northrop Grumman’s Bill Walker, also at 6×6, on high-altitude UAVs (unmanned aerial vehicles). Heck, maybe someday an entrepreneur will pitch an idea for a company that’s a “Hipmunk for UAVs.”

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In a segment featured Tuesday night on the PBS NewsHour, correspondent Hari Sreenivasan brings an outsider’s curiosity to the strange, wonderful world of startup accelerators. The eight-minute report features Sreenivasan’s interviews with entrepreneurs and mentors at TechStars, AngelPad, and Y Combinator—archetypes of the venture incubator wave (or is it a bubble?) that we’ve been chronicling here at Xconomy for the last four and a half years.

This is a must-watch piece, for at least four reasons:

1) It’s the best short summary of the startup accelerator concept you’re likely to find—and a great example of mainstream media interest in what’s long been a fringe phenomenon, unknown to middle America.

2) Sreenivasan talked with celebrities of the startup world like AngelPad’s Thomas Korte, TechStars’ David Cohen, Blackbox Ventures’ Max Marmer, and Duke University’s Vivek Wadhwa. It’s fun to see them all on camera.

3) The piece featured a bunch of cool startups that you may not have heard of yet but probably will, including Order.In, LendFriend, and Tapviva.

4) There’s a one-minute segment featuring me. It starts at 4:45 mark in the video; in the clip Sreenivisan used, I’m talking about the technological changes that have made it so much cheaper for mobile and Internet startups to get off the ground, and the bubbly conditions this change seems to be fostering in the Silicon Valley startup scene.

PBS NewsHour Shoot at Xconomy San Francisco

Sreenivasan does a thorough job of explaining why startup accelerators exist and how they work, and he conveys authentic flavor by talking to real entrepreneurs. It’s all framed in a way that will make the accelerator phenomenon clear to TV audiences in Idaho or Vermont who’ve never heard of Y Combinator. But there’s also a savvy to the reporting that’s a clear legacy of Sreenivasan’s days as an anchor and correspondent for CNET during the first Internet boom, from 1996 to 2002.

My only role in the NewsHour report was to spend an hour talking on tape with Sreenivasan, here at Xconomy San Francisco back in early October (the photo above shows the KQED crew setting up for the shoot). Another couple of minutes from our conversation made it into a supplement to the broadcast report, published on the PBS NewsHour website under the title “What is a Startup Accelerator?” Both the main report and the supplemental clip are embedded below.

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It’s an exciting time to be an entrepreneur. There are no shortage of problems to solve, ever-lowering barriers to entry, and near-ubiquitous access to low/no-cost technologies, which makes damn near anything possible. I adore working side-by-side with those who also see the world as an experience in which to participate rather than just consume. I am constantly energized and inspired by their works. These are my people, ambitious and proud.

My business being invention and intervention during a company’s earliest stage, I spend a good deal of time in different American cities working with entrepreneurs and those who advocate on their behalf. Having the opportunity to serve these folks while experiencing their local entrepreneurial networks firsthand, I have observed a number of too-disparate, closed-loop entities along the way that are effectively guiding startup community members towards market viability. Historically, entrepreneurs have existed at one end of the ecosystem with investors at the other. A startup has to leap the chasm of proving their business scalable and, as such, investment worthy. The accelerator model pioneered by Paul Graham with Y Combinator disrupted that century-old model, moving down the chain halfway closer to budding entrepreneurs and providing them with sustenance in the form of small investments, as well as mentorship and a community of fellow entrepreneurs off which to bounce ideas.

It is my contention that the proliferation of startup accelerators and the subsequent realignment of early-stage capital behind the best of them to serve as a pipeline and viability filter has revealed a kink in the overall process of starting up for an overwhelming majority of entrepreneurs. As a result, thousands of would-be founders are currently mired in the “dead zone” that exists between ambition and minimum viability. The accelerator model, while certainly a net-positive for entrepreneurship, only serves the small minority of today’s entrepreneurs—those with technical expertise or a co-founder with the same who can clearly and concisely convey an idea. In aggressively cultivating the large majority, you direct the flood of ambitious folks waiting to be guided toward viability to existing early-stage market filters, fundamentally changing the landscape of entrepreneurship while simultaneously realigning the existing network of capital behind filters even further down the chain and closer to entrepreneurs.

Most every market—be it thriving, dormant, or beginning to burgeon—has more than enough resources to catalyze and drive a fertile startup community, including Detroit. You all have the raw ingredients: advocates, entrepreneurs, and investors. It’s not a question of resources, but how they are directed or, in this case, misdirected. Who you consider to be an entrepreneur or, more specifically, what your allocation of attention and resources would suggest, is fundamentally flawed. After engaging with hundreds of entrepreneurs on the subject, I find that for a city and its investment community, there are actually five types of entrepreneurs, and that acting passively … Next Page »

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

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

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

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

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

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

David Cohen

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

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

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

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For startup people, the 714 seats inside Dinkelspiel Auditorium at Stanford University were the hottest ones in the country on Saturday. That was the day of Startup School, the invitation-only event produced by Stanford’s student entrepreneur group BASES and Mountain View, CA-based venture incubator Y Combinator. For the seventh year in a row, a cast of famous entrepreneurs and investors assembled to dispense equal parts advice and inspiration to the audience of young entrepreneurs and proto-entrepreneurs.

This year’s speakers included Marc Andreessen, founder of Netscape, Opsware, and Ning, and partner at Andreessen Horowitz; James Lindenbaum, co-founder of Heroku; Jim Goetz, founder of VitalSigns and partner at Sequoia Capital; Ashton Kutcher, the TV and movie star who is increasingly ubiquitous as a Silicon Valley angel investor; Matt Mullenweg, founder of Automattic, makers of WordPress; Mark Pincus, founder of Tribe and Zynga; Mark Zuckerberg, founder of Facebook; Stephen Cohen, co-founder of Palantir; Max Levchin, co-founder of PayPal and founder of Slide; Ron Conway, leader of seed-stage investing firm SV Angel; and Drew Houston, co-founder of Dropbox.

Startup School attendees outside Dinkelspiel Auditorium

Most speakers focused on lessons they’d learned from their own experiences building or investing in startups. The reminiscences included a few interesting bits of never-before-shared news and opinions. Zuckerberg, for example, voiced second thoughts about having moved Facebook to Palo Alto in 2004. “Honestly, if I were starting now I would just stay in Boston,” Zuckerberg told interviewer Jessica Livingston, the co-founder of Y Combinator. “There are aspects of the culture out here [in Silicon Valley] where it is still a little short-term focused in a way that bothers me…There is a culture here where people don’t commit to doing things. There is nothing wrong with experimentation; you need to do that before you dive in. But a lot of companies built outside Silicon Valley seem to be on a longer-term cadence.” (That sentiment sparked some interesting controversy on Twitter, with some commentators asserting that Boston-based investors still wouldn’t see any reason to support a social network for college students with no revenue.)

Another tidbit: Pincus revealed that after the failure of Tribe.net, the social networking site he co-founded in 2003, he “spent a year trying to buy CNET” as part of his strategy to find an audience large enough for testing new consumer services. “The problem I was frustrated with [at Tribe] was that you couldn’t fail fast. By the time you built a product and built a big enough audience to see if it’s a good idea, you are on your Series B and you have 30 people. So I thought, wouldn’t it be great if I had a large captive audience first. And if I had a big enough audience, I could come up with a good product.” Ultimately, of course, Pincus started Zynga, which found its captive audience at Facebook.

Paul Graham interviewing Marc Andreessen

And one more shocker: Mullenweg said that in 2007, when WordPress was beginning to surpass rivals content management systems such as Six Apart/Movable Type, “We were entertaining an acquisition offer that would have personally netted me nine figures in cash.” That’s nine as in at least $100,000,000. Mullenweg said he couldn’t reveal the name of the suitor, but that he turned down the sweet offer in part because he realized he was already happy. “If I had a bajillion dollars I’d still want to be doing what I was doing, working on WordPress,” Mullenweg said. “The opportunity to change the way people interact on the Web and finally get a majority of the Web onto open-source and to stop being embarrassed about the product I was shipping was too much. So we raised a Series B.”

If you weren’t there, or you didn’t catch the live webcast on Justin.tv, here’s a rundown of some of the other insights from Startup School that I thought were the most interesting, surprising, or eye-opening.

Marc Andreessen said he regretted not having built some kind of Web-based payment system into Netscape back in the mid-1990s. “The biggest missed opportunity was payments,” he told interviewer Paul Graham of Y Combinator. “We had 800 other things we were doing, and it seemed like it would be hard. There were a few big companies that dominated the payment infrastructure. But had we done it, had there been payment right there in the browser for anything, you can argue that it would have … Next Page »

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Bizdom U, the Detroit incubator backed by Dan Gilbert, will now be nurturing even more local entrepreneurs thanks to a change in its business model.

Starting with the fall session, which began on October 17, Bizdom switched to a model similar to that of TechStars or Y Combinator: After undergoing a rigorous screening, 30 startups will each receive $10,000 in seed money, plus $4,500 per founder, in exchange for an 8 percent equity stake and a promise to locate their business in Detroit. While at Bizdom, the entrepreneurs will spend three months in the collaborative Launch Lab, where they’ll receive training in marketing, sales, and business, as well as intenstive coaching and feedback from serial entrepreneurs and other business experts. At the end of the Launch Labs program, entrepreneurs will be put in a room with multiple investors, where they will have the opportunity to pitch for the necessary funding to take their business to the next level.

With its previous business model, Bizdom U invested more seed money, but took a 60 percent share of the startup. Ross Sanders, Bizdom’s CEO, says they made the switch to “open up the funnel.”

“We realized we were missing a lot of great startups who didn’t feel comfortable giving up majority ownership right off the bat,” Sanders says. “We decided we’d offer less money in order to get more applicants.”

Bizdom U offers a separate program called the Idea Generator for those who have a business idea they want to explore, but who aren’t ready to devote their lives to pursuing it yet. The Idea Generator is an eight-week, part-time program held at night designed to show aspiring entrepreneurs how to break down their idea, research it, and turn it into a business.

“With the Idea Generator, you don’t have to quit your day job,” Sanders says. “It allows people to play with their idea before making the full-time leap.”

Bizdom U was established in 2007, when the atmosphere in Detroit was pretty bleak. Comerica Bank had just packed up and left town, and some once-thriving auto factories were vacant buildings.

“Dan was one of the first to say that Detroit needs to transform from a muscle economy to brain economy,” Sanders says. “He wanted to take empty buildings and fill them with work spaces for entrepreneurs.”

The challenge back then was that there wasn’t a one-stop shop where entrepreneurs could go for training, coaching, funding, mentorship, and access to clients and investors. Gilbert founded Bizdom U as a sort of factory to meet those needs.

“But instead of building cars, he wanted to create successful entrepreneurs,” Sanders says.

Today, Bizdom U sustains operations through proceeds received from its share of ownership in the businesses it incubates. Its goal is to be self-sustaining while creating waves of entrepreneurs and new businesses, all while adding to the general buzz in Detroit.

“Dan Gilbert is passionate about the role of entrepreneurs in urban revitalization,” Sanders says. “He’s a man on a mission.”

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Y Combinator has a brilliant franchise. It is called Startup School.

This year it is at Stanford University on October 29 and co-hosted with BASES, the Business Association of Stanford Entrepreneurial Students.

Some of Silicon Valley’s elite used to poo-poo Startup School as being too basic. I have always been in the camp supporting it. By “supporting,” I mean crashing. Remember, I only crash the best stuff. And I have been to every Startup School at Stanford University.

I don’t like when blog posts come out after an event, so I want to crystal-ball this event by examining and revealing what happened in the past. I hope this prepares you for Saturday at Dinkelspiel.

Here are the best morsels learned from Startup Schools of Yesteryear.

1. Just Ask

Garry Tan posted about asking for stuff after you are turned down for venture money. There are numerous case studies that document entrepreneurs failing forward after getting turned down for VC money.

Garry’s blog articles relating to Y Combinator are here. Almost any speaker at Startup School is a good candidate for an ask. Asking is the tough part of executing all the knowledge that volcanoes out from Startup School. So just ask, and ask some more.

2. Pre- Networking Involves Reaching Out Via E-mail

How do you email a person when you don’t know them or their email address? Well according to Evan Reas, CEO/founder of LikeALittle, the first step is just to guess at their address. You hack the email algorithm. “There are only so many combinations of email addresses. First name only. First initial, last name. Initials only.”

Reas is a master at guessing an email and hammering it until there is interaction. For example, he e-mailed an industry titan 30+ times before he got interaction. Evan is a GSB alum and a computer scientist who codes and codes.

3. Be a Cockroach

You only die if you choose to die.

Paul Graham values people who stick with it. “We know that startups only die when the founders give up,” he says. He said of the AirBnb guys, “You guys are like cockroaches. You will never die.”

4. Learn from OPE (Other People’s Experience)

Y Combinator has legendary office hours for its startups, and make them public during TechCrunch Disrupt in New York and San Francisco. There are blog articles and video available that contain over 60 minutes of entrepreneurship content, mentorship, and tips. I paid over $4k cash, but you can have them free if you use some Google smarts. Or just e-mail me.

5. Be Young. Or Inexperienced. Just Start.

Max Swisher is 12. He is getting mentored by Spencer Schoeben and they were at Cory Levy’s Stanford Next Generation conference. At last year’s YC Startup School, Max started to execute entrepreneurship and asked Ron Conway to fund him.

Welcome to Startup School and the wild ride that is entrepreneurship.

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