Managing a venture fund is hugely different from running a startup. Eric Paley told me that last year at this time his primary responsibility was at dental imaging firm Brontes Technologies, the MIT spin-off that he co-founded and where he had served as general manager after its sale to technology giant 3M (NYSE:MMM) in 2006. Nowadays, as managing partner and co-founder of new seed fund Founder Collective, his much broader focus includes meetings with a whopping 30 entrepreneurs a week, he said.

Early this month Paley’s firm had an official launch after closing a first fund of about $40 million to invest in seed-stage startups, even though reports about the firm surfaced in June after its initial SEC filings became public knowledge. The firm is made up of a group of successful entrepreneurs who have been backing each other’s startups for ages before coming together as Founder Collective. David Frankel, the firm’s other managing partner along with Paley, was a seed investor in Brontes as well as partner Chris Dixon’s startups SiteAdvisor and Hunch, for example. Their experience as entrepreneurs who have raised venture capital and reached successful exits, along with their compelling investment strategy, could help them succeed in the struggling venture industry.

Founder Collective, which has offices in Cambridge, MA, and New York (where Frankel is based), is taking a much different tack than many funds have taken over the past decade. Paley says that the vast majority of funds closed over the past 10 years have been more than $100 million, while most of the funds were less than that in the previous decade. But the big knock on the venture industry is that it’s done a poor job of returning capital and returns commensurate with their risk profile to their limited partner investors. And large funds often aim to invest big amounts of capital ($10 million or more) in their portfolio companies, even when companies don’t really need that much money, Paley says. Founder Collective’s first fund is a lean $40 million or so, and that money is intended to be invested in capital-efficient businesses that aren’t taking on more investment capital than is needed to achieve their goals. Indeed, we’re seeing this movement toward smallish investments in lean teams, at least in software/tech, all around the country.

Another big downside of a startup raising more venture capital than it requires to execute its plan is the dilution of ownership for the entrepreneurs who founded the company. “We really created the fund out of frustration that there wasn’t a really good answer for the capital-efficient business in the early days to achieve major milestones and increase the value of the company before giving so much of it away to investors,” Paley said.

There are no banker-turned-venture capitalists at Paley’s shop. Many of the partners maintain operational roles at startups they’ve co-founded. Dixon, a founder of Web security firm SiteAdvisor (acquired by McAfee), is full-time CEO of his firm Hunch that provides an online decision-making tool. Also, Micah Rosenbloom, who co-founded Brontes with Paley, is now the general manager of the Brontes business for 3M. (Here’s a full list of the the Founder team on the firm’s website.)

The investment philosophy at Founder is to back startups led by committed entrepreneurs. And though Paley said the firm has no stated limits on sectors or geographic areas in which it invests, the firm will most likely invest, as it has done so far, in …Next Page »

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There’s lots of buzz in the startup community about agile software development; there are software programs, books, and seminars on the topic, and even huge firms like IBM are now touting their “agile development solutions”. The general idea is to create a team and a software process that is flexible, quick, and adaptive to feedback from the market. Put stuff out there, collect feedback on what works, kill what doesn’t, improve what does, rinse and repeat.

But there’s a parallel trend occurring in the early stage technology market that hasn’t been talked about much. Programs like TechStars, Y Combinator, and Founder’s Co-op have been pioneering what I like to call agile organizational development. These “initiator” organizations provide founding entrepreneurs with an incredibly compressed calendar of iterative feedback on all aspects of their company. The feedback comes from a broad network experienced entrepreneurs who serve as mentors in these programs, and it comes often, regularly, and relentlessly.

Mentors in these programs provide feedback on the startup’s team, 30 second pitch, fund raising pitch, positioning, product, pricing—on just about every aspect of the organization. Some of the feedback is contradictory—just like market feedback can be. The TechStars program even has a name for the confusion that results from conflicting advice: “mentor whiplash”.

The net effect of all this mentor input is a set of organizations that adapt to market feedback much more nimbly than startup organizations of the past. This feedback cycle and the entrepreneurs’ response is what I’m calling agile organizational development, and my bet is that the companies that embrace it are much more likely to succeed than those that don’t.

These programs are all relatively new, and there aren’t any books or seminars on the topic yet—but I’m betting there will be.

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There’s a new tech startup incubator in town. The Founder Institute is accepting applications for its four-month training program, which begins in Seattle on December 7. The program is designed to mentor very early-stage entrepreneurs, with the goal of creating new companies across a wide variety of tech sectors including software, social media, consumer electronics, e-commerce, medical devices, and cleantech.

The program fits with a trend of increasing resources for entrepreneurs in the Seattle area. The Founder Institute was started by Adeo Ressi, the founder of the venture capitalist rating site TheFunded. The incubator recently completed its first session in Silicon Valley, graduating 54 companies (three of which have since rustled up outside funding), and has also announced expansions to San Diego and Washington DC.

Chris Early is leading the Seattle program. He’s a game industry veteran who was most recently general manager of Windows Gaming Technology at Microsoft. He left the company earlier this year, and caught up with Ressi around a month ago over drinks. (The two had known each other for years from the game industry.) Early suggested that Ressi should expand his program to Seattle, and it sounds like it didn’t take much convincing. “It’s been a whirlwind month putting it together here,” Early says.

As he explains, the concept behind the Founder Institute arose from what Ressi was seeing with TheFunded. “A large number of people were coming through at a pre-company stage,” and they were looking for mentorship and money to get started, Early says. So the Founder Institute provides classes on every step of the startup process, led by experienced mentors, including Derrick Morton, the CEO of FlowPlay, and Bryan Starbuck, the CEO of TalentSpring. About a third of the mentors will come from out of town, including David Kidder of Clickable.com and Bryan Thatcher of Empressr (both from New York). The ideal students are entrepreneurs with new companies—less than two years old—or just promising ideas. The goal is for every student to have a business plan and a polished pitch for their company by the end of four months.

OK, so everyone knows entrepreneurs, especially first-timers, need a lot of mentorship. But what’s different about the Founder Institute compared with incubators like Y Combinator …Next Page »

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[Updated October 5, 2009---see below] Today was a good day for Boston area entrepreneurs, as Polaris Venture Partners announced the opening of a new startup incubation and geek hangout space, Dog Patch Labs Cambridge, which will open next week on Third Street not far from Kendall Square.

Dog Patch Cambridge, which I wrote about earlier today, helps fill a real hole in the Boston innovation landscape. But Polaris it isn’t the only group filling this hole. In fact, the Dog Patch announcement is only the latest in what can be called a mini-explosion of interesting new incubation spaces and programs for entrepreneurs, all of which have sprung up since January, when Y Combinator announced it would no longer spend the summers in Cambridge and would instead stay year round in Mountain View, CA. I’m not saying they all got going because Paul Graham’s famous incubator left town—they definitely didn’t—but Y Combinator’s departure surely influenced some thinking and left a hole that, in the true spirit of innovation, several players likely rushed to fill.

Here’s my chronological tally of new programs, incubators, and investment funds for early-stage entrepreneurs that have opened in and around Boston since Y Combinator announced it was pulling up its Cambridge roots:

—January 2009— Y Combo pulls out.

—February: TechStars announces that it will bring its brand of entrepreneurial boot camp, providing seed funding and mentorship for early-stage technology companies, to Boston. The operation has since set up shop in Central Square in Cambridge, and is having its first Boston investor event tonight.

—April: Mass Medical Angels, a new angel group, forms to invest specifically in life sciences and medical startups.

—April-May: Xconomist Tim Rowe, president of the Cambridge Innovation Center, begins firming up plans for the Venture Café, which according to its Facebook page will be …Next Page »

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TipJoy, an Arlington, MA-based startup that created a micropayment system designed to allow Web users to reward content providers with small tips, announced on its blog yesterday that it is shutting down.

Launched through the Y Combinator startup incubator program, TipJoy collected a Series A venture investment of nearly $1 million less than a year ago. Founders Abby and Ivan Kirigin said in their blog post that the company had failed to gain enough traction to justify raising additional capital.

In fact, they questioned the practicality of TipJoy’s business plan to provide a third-party system that would use existing social networking platforms such as Facebook as a medium for reimbursing writers, artists, musicians, and other digital content creators.

“We strongly believe that social payments will work on a social network, provided that they’re done within the platform and not as a 3rd party,” the Kirigins wrote. “‘Simple, social payments’ is *the* philosophy needed to do digital payments right, but once a service groks that, they need only to implement it on their own. We’ve been the thought leaders in this space, we see the hype and excitement, and yet we know very intimately the difficulties in gaining actual traction. The only way to get around this is for the platforms themselves to control payments—then all people wanting to operate on that platform would have to play along. We believe that a payments system directly and officially integrated into social networks such as Twitter and Facebook will be a huge success.”

People who were earning micropayments through TipJoy can still log into the system and cash out their funds, but the collections side of the platform has been turned off.

TipJoy’s investors included New York-based seed stage investor Betaworks as well as the Accelerator Group, David Shen Ventures, and private investors Chris Sacca, Taavet Hinrikus, and Ron Bouganim.

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As a device for managing your e-mail, the Apple iPhone isn’t bad, but it does have a few quirks and limitations. This week, I want to write about two brand-new applications that work around those failings, making the iPhone into a far more powerful tool for staying connected.

The first app grabbed my attention because of my recent brush with almost-literal highway robbery. My drive to Michigan last week to visit my parents took me through southern Ontario. Soon after I crossed over Buffalo’s Peace Bridge into Fort Erie, this astonishing little SMS message popped up on my iPhone: “AT&T Free Message: International data rate of $15.00/MB applies. Unlimited domestic data rate plan does NOT apply outside the U.S.”

I immediately put my phone into airplane mode, fearful of receiving any more SMS messages or e-mails, which, at $15 per megabyte, would have cost me more than the gas I was burning. That meant I was effectively off the grid during the four hours it took to cross this little corner of Canada. I survived the hardship—but the experience did highlight the problem that outrageous roaming charges can pose for travelers who use mobile e-mail a lot.

As it happens, a new app called reMail can take some of the sting out of this dilemma. It went live in the iTunes App Store yesterday, and I learned about it from Jessica Livingston at Y Combinator, the California venture incubator where reMail got its start. ReMail stores your entire e-mail archive on your iPhone, which means you can read your messages without ever having to go online. You can’t do that with the iPhone’s built-in mail application, which only keeps the last 50 messages. ReMail also lets you search the full text of all your messages—which, again, the built-in mail app can’t do. (In a recent update, Apple added a search function to the mail app that can scan older messages stored in the cloud, but it’s limited to the subject line and the sender and recipient addresses.)

“I live in e-mail while I’m traveling—all my meetings are scheduled via e-mail,” says Gabore Cselle, the founder of San Francisco-based NextMail, the one-man startup behind reMail. “So I need access to my e-mails, all the time. Building an app which would let me take all my e-mail with me seemed like a good idea. And it’s saving me money.”

I’ve been testing reMail, and so far it’s working exactly as advertised. The app connects to your Web-based e-mail account—it works with Gmail and any IMAP-enabled e-mail service—and sucks down your entire e-mail archive. That process can take a while (reMail spent about eight hours downloading the 78,000 messages in my Gmail archive) but the upside is that you only have to do it once. After that, each time you start the app, it just grabs your most recent messages.

What’s amazing about reMail is that it uses a relatively small amount of your iPhone’s memory. My 78,000 Gmail messages are taking up about 4.3 gigabytes of space on Google’s servers. But the reMail database on my iPhone is about one-tenth that size: 432 megabytes. “Compressing your e-mails down to a size that people would find acceptable” was one of the three biggest technical hurdles to making reMail work, Cselle says. Exactly how he pulled that off is “a state secret,” he jokes, but part of the solution was to grab just the text of each message, not attachments, which take up about 70 percent of the storage space at Gmail, according to Cselle.

“We ‘lazy load’ attachments,” he says, adding, “We download them to your iPhone when you first click on them, and then keep it there permanently. Once open, you can be confident that you’ll have that PDF or JPG with you wherever you go.” Of course, the more attachments you download, the more space reMail will take up on your phone.

The only problem I’ve experienced with reMail is that it sometimes fails to connect with Gmail, but I suspect the problem is on Google’s side—lately I’ve been seeing all sorts of server errors and delays with Gmail on the Web, too. (What’s up with that, Google?)

Cselle says he got the idea for reMail because his parents live in Switzerland, and every time he visits them, he gets the same AT&T text message about …Next Page »

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Technology entrepreneurship can be a lonely road. Not only do you have to convince a few friends or colleagues to work hundred-hour weeks for the next several years in support of your wild idea, but you’ve got to make it past the elevator pitch with at least one funder, and then prove that your idea can gain a toehold in the marketplace.

But in the last few years, the process of launching a tech startup has become, if not easier, at least more social. That’s thanks to the flowering of a new class of startup schools that admit budding entrepreneurs, or teams of entrepreneurs, for a “semester” or more

To purchase a much expanded version of this guide, in PDF format, click the “Add to Cart” button. For $60 you’ll get information on each program’s focus, application deadlines and procedures, stipend and equity policies, notable graduates, and more. Click here to see a sample entry.

of intense product development, collaboration, and business mentorship. Y Combinator, a Mountain View, CA, venture firm founded by software entrepreneur Paul Graham, is usually cited as running the first such operation, but groups imitating or adapting the model have sprung up in cities across the country—and they’re graduating a growing pool of successful startups.

SCVNGR, a Boston-based startup developing mobile software that lets organizations build customized scavenger-hunt events, got its start in a Philadelphia startup school called DreamIt Ventures, founded by Philadelphia entrepreneurs David Bookspan, Michael Levinson, and Steve Welch. Michael Hagan, SCVNGR’s chief operating officer, says DreamIt was the perfect setting for the company’s founding team—initially, just him and 20-year-old CEO Seth Priebatsch—to get the scavenger-hunt idea off the ground.

“The camaraderie of the teams was fantastic,” Hagan says. “We were all working really long hours, grabbing lunch, socializing, sympathizing with each other and sharing in the challenges and successes. With some of the tough decisions or the things I couldn’t figure out with Seth, I’d walk over to another team and say ‘What do you think of this, how would you approach this?’ David and Mike and Steve are all really mentor-oriented individuals, and that was a really strong, positive experience from the whole program.”

At most startup schools, participants are accepted for a limited time—typically 3 months to 2 years—and the team members receive mentorship and/or a small amount of seed funding. Often, the schools provide temporary work space as well as Internet access, office support, and legal and accounting advice, along with access to outside angel or venture investors. Some programs provide these benefits at no cost to the teams. Others require that teams sign over a small amount of equity in their companies (usually less than 15 percent).

The programs go by various names, such as “venture incubators,” “startup boot camps,” “seed programs,” and “growth accelerators.” The confusing terminology, plus the fact that most of the organizations were founded in 2008 or 2009, can make it hard to track down all the various programs accepting startups these days—hence this Xconomy Guide.

For this list, we have deliberately omitted the hundreds of “business incubators” around the country, such as the Cambridge Innovation Center in Cambridge, MA, that exist primarily to provide rental space and infrastructure for young companies. (For a list of business incubators by state, visit the National Business Incubators Association at www.nbia.org.) To meet the criteria for Xconomy’s venture incubator, startup programs have to provide their accepted entrepreneurs or teams with some benefit beyond office space and infrastructure support, and they must charge (if they charge at all) in the form of equity, not cash—the two exceptions on our list being Better Labs, which structures its deals in equity and cash, and TheFunded’s Founder Institute, which has a $450 course fee.

And speaking of fees, a much expanded version of this list, in PDF format, is available for a modest one. For $60, you’ll get information on each program’s focus, application deadlines and procedures, stipend and equity policies, notable graduates, and more. Click here to see what a full entry looks like, or click the “Add to Cart” button below to buy the PDF now using PayPal or your credit card. (If you choose to pay by credit card, first click the yellow PayPal checkout button, then look for “Don’t have a PayPal account?” on the next page and click the “continue” link beneath that.)

We intend to expand and update this list over time. Additions and corrections are welcome at editors@xconomy.com.

The Xconomy Guide to Venture Incubators: The List

Betaspring
Location: Providence, RI
Founded: 2009

Better Labs
Location: San Jose, CA
Founded: 2008

Bizdom U
Location: Detroit, MI
Founded: 2007
…Next Page »

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If you want to build a program to nurture early-stage startups in New York City through regular meetings with investors, legal and financial advisors, and experienced CEOs, where do you turn for mentors and sponsors? To Boston, naturally.

Of the 11 founding members of the new First Growth Venture Network, five—Battery Ventures, Charles River Ventures, Flybridge Capital Partners, Highland Capital Partners, and North Bridge Venture Partners—hail from the Bay State.

The network, unveiled today, will admit a handful of New York-based startups each year—the exact number has yet to be determined—and connect them with mentors, and potential investors, through a series of social and team-building events. Each startup will also be matched with a team of industry-veteran advisors that includes at least one venture capitalist, one angel investor or successful senior executive, and one legal/financial advisor, according to the group’s chair, Edward Zimmerman.

The big Boston contingent in First Growth is a reflection of the fact that so many Boston-based venture partners already consider New York an important fishing grounds, says Zimmerman, who created the Tech Group at New York-based law firm Lowenstein Sandler and is an active angel investor. (He’s the founder of both AngelVineVC, a consortium of East Coast venture funds and angel investors, and GrapeArborVC, a New York-based team of 12 angel investors.)

Over the last 18 months, Boston-based venture partners have been “spending more time in New York looking for backable companies,” Zimmerman says. That’s partly because of the digital media explosion—traditionally one of New York’s strengths—and partly because the economic crisis has stimulated young businesspeople who might otherwise have pursued careers on Wall Street to try entrepreneurship instead, he says.

“The golden handcuffs have come off,” says Zimmerman. That’s led more Boston-area VCs to swoop in looking for talented startup executives—so in a sense the new mentoring program is “just a way to help what’s already happening,” he says.

But there are also other interpretations. Jeff Bussgang, a general partner at Boston’s Flybridge Capital Partners who is also a founding member of First Growth, puts it this way: “The deals we see in Boston typically center around MIT or Harvard, which have created this really nice ecosystem and mentorship network, between all the business plan competitions and things like the Deshpande Center. So we’ve seen the formula in Boston work really well, and we want to recreate it in New York.”

Also, there’s simply more capital in Massachusetts, chasing a finite set of backable entrepreneurs. (In fact, venture firms put $10,257 per worker into infotech-related companies in the Bay State in 2007, according to the University of Massachusetts’ Donahue Institute; only California attracted more investment on a per-capita basis, with $11,361 per worker, compared to a national average of $2,780 per worker.) New York is “not as crowded at the early stage,” Bussgang says. “So a lot of people have been taking the Acela back and forth.”

The First Growth network is already accepting applications for the program’s first year, which will begin in September and will consist of two semesters, September to December and January to June. According to Zimmerman, the group will meet four times per semester for roundtables, networking, and cocktails. Participating startups will also be in frequent touch with their advisory teams outside of these formal meetings.

For startups, there’s no cost to apply or participate in the program, and the network’s sponsors won’t require startups to hand over an equity stake in the companies, as is common among venture incubator programs such as Y Combinator in Mountain View, CA, TechStars in Boston and Boulder, CO, and Dreamit Ventures in Philadelphia. “This is not so that [startups] will get funded by someone in the network; it’s not about …Next Page »

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Here’s a minor setback for the venture capital industry in Boston. Greylock Partners is relocating its headquarters from the Boston area—where it got started 44 years ago—to Silicon Valley, the firm announced this morning.

Does this mean that the Hub is losing its edge as a haven of entrepreneurial activity? That was the question raised in this piece today about the Greylock move in the New York Times tech blog Bits. At least for Greylock, Silicon Valley was a more appropriate place for its main office, because three quarters of the firm’s portfolio companies are on the West Coast, Greylock partner Bill Helman tells Bits.

(The Bits piece also points to Xconomy’s recent interview with Paul Graham, who revealed in January that Y Combinator will stay in Silicon Valley year round and no longer divide its startup incubation activities between Mountain View, CA, and Cambridge, MA.)

“Silicon Valley is a hotbed of entrepreneurial activity in Greylock’s two key areas of focus: enterprise software and systems and consumer Internet,” David Sze, a Greylock partner in Silicon Valley, said in a statement.

Greylock says it plans to keep an outpost in Waltham, MA, and continue to invest in startups in the Boston area. But its back office, administrative functions, and planned growth will be at an office under construction in Menlo Park, CA. The firm began operating in Silicon Valley in the early 1980s and has an office in San Mateo, CA.

Greylock’s planned move may be another vote for social media activity in Silicon Valley. The firm’s portfolio of West Coast-based social media firms includes Facebook, LinkedIn, and Digg, to name just a few.

There’s no debating that Silicon Valley has a clear lead over Boston on the social media front, but Bob recently pointed out in his new column The X Factor that there are signs of viability in the social media ecosystem in and around the Hub.

[Update, May 19, 2009, 11:35 a.m.: Scott Kirsner of the Boston Globe spoke with Greylock's Bill Helman and has posted interview outtakes on his blog. "We have a responsibility to our limited partners," he told Kirsner---meaning, presumably, a responsibility to be headquartered closer to the center of gravity of the firm's portfolio companies.]

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[Updated with interview material from Spark Capital general partner Bijan Sabet, see below.]

It’s almost the equivalent of the “microloans” phenomenon for the venture world: the profusion of startup schools, bootcamps, incubators, and seed funds that give teams small amounts of money—from a few thousand dollars to a few hundred thousand—to get their ideas up to speed and test them in the market before they need more serious capital. Boston’s Spark Capital, whose portfolio focuses on social media, entertainment, and network infrastructure companies, is the latest to join this trend.

Spark announced this morning that it’s launching Start@Spark, a program that will offer seed-stage investments of up to $250,000 to promising early-stage startups in the New York and Boston areas. And by mid-afternoon it had already received a “slew of e-mails” with proposals, according to Spark’s Bijan Sabet.

“In this economic environment, continued innovation and entrepreneurship are as important as ever,” Spark founder and general partner Todd Dagres said in this morning’s announcement. “Looking back at previous recessions, some of the greatest technology companies were created and achieved market success during turbulent times. We view Start@Spark as an opportunity to not only buck the trend of investors retreating from new early stage funding but also to capitalize on what may be a perfect storm for the next great technology company to take root.” (We’re working on contacting Dagres directly.)

Spark said the seed investments will be available to companies working on technologies at all stages of the “media and technology value chain”—content, applications, platforms, and infrastructure. In that respect, Spark seems to be looking to help create more hot startups along the lines of its current portfolio companies Eqal (the multimedia studio behind the “lonelygirl15″ Web series), Twitter (the famous microblogging service), Tumblr (a simplified blogging platform), Kickapps (a builder of white-label social networks), and Verivue (a broadband video delivery company).

Spark is already a supporter of the incubator model: it provides support for TechStars, a Boulder, CO-based startup bootcamp that will operate a parallel Boston session starting this summer. But while Start@Spark doesn’t sound like a full-scale incubator on the TechStars or Y Combinator model, the firm says companies that win seed funding will have access to Spark partners and legal counsel. Spark hasn’t said what the terms of the seed investments will be—for example, whether the funded startups will somehow be obliged to offer Spark equity.

Startup builders can apply for the Spark program online at www.sparkcapital.com/start. The firm says applicants will be judged on “creativity, thought-leadership, wide-reaching but focused ideas and the qualifications of the founding team.”

Update, 3:30 p.m. March 25, 2009: I just spoke with Spark general partner Bijan Sabet about Start@Spark. Here are the key quotes.

On why Spark is doing this:

“By and large, we mostly do early-stage investing. We’ve done later-stage investing as well, but typically we are part of the first institutional round for our companies. The investments range from the $350,000 we put into Tumblr to get it going, to something close to that for Oneriot and Admeld, to other Series As that are larger—we did $1 million with OMGPOP a year ago. So we’ve done a bunch of early-stage investing. And in this market we continue to see a few trends that are clear to us. Many funds are getting bigger and bigger, and in the Northeast in particular, there is nothing like this that we’ve seen. On the West Coast they have some of these programs, but we don’t see them done here. A very active angel and seed investing community is an important part of the ecosystem. So we felt it was the right time to do this…This is very much focused on New York and Boston, at least for now.”

On Spark’s larger efforts to reach out to early-stage startups:

“One thing that we’re trying to promote is that this is one component of a larger initiative that we’ve termed Start@Spark. The seed part is the newest part of that offering, but we include in this thing the Alliance for Open Competition, which is our effort to get rid of non-compete agreements, and our investment in TechStars, and some community things that we’re trying to do that really focus on entrepreneurs.”

On the response to the seed investing program so far:

“It’s amazing. Just today, I’ve gotten two public comments on my blog with proposals, and a slew of e-mails that have come in just since this morning. We are going to have a lot of evening reading. I haven’t gone through them, so I can’t tell you whether any of the day-one applicatnts are going to get capital from Spark. But I just feel that angel and seed-stage investments play a very important role. Even before the economic collapse, the Northeast didn’t have the strength of the angel network that the West Coast has. We have some very good angel investors, but they aren’t nearly as active and comprehensive as the angel network on the West Coast.”

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Many of my friends and neighbors may have noticed that I haven’t been in town as much lately, and that I’m spending more and more of my time in Kansas City. So why would a hardened MIT denizen who used to think that distant travel meant going to Porter Square now be flying back and forth to Missouri every week?

It’s because the Ewing Marion Kauffman Foundation, which is headquartered in Kansas City, is pioneering new ways to advance our entrepreneurial economy. Kauffman’s president Carl Schramm inspired me the other day when he noted in a CNBC interview that all net job creation over the past thirty years has come from companies less than five years old. So what can we do to keep startups flourishing? I am delighted to be joining the Kauffman Foundation team as a senior fellow as we look out over the economic future and embark on a new approach for increasing both the number of new companies formed and the chances of success for these ventures.

This new initiative is called Kauffman Laboratories for Enterprise Creation. The mission of Kauffman Labs is to create more large-scale, high-growth firms. As someone with a combination of practical experience building companies, and academic experience teaching innovation and entrepreneurship at MIT—not to mention a passion for helping people build great companies—I’m very pleased to be a part of this initiative. It’s a perfect way to continue the work I started at MIT’s Deshpande Center for Technological Innovation.

Bad times are when good people spring into action. Today, more than ever, it’s important to catalyze and accelerate the tremendous inventive spirit of the American entrepreneur. As many have said before, we’ve got what it takes to innovate our way out of the current crisis.

Many budding entrepreneurs today face an unfortunate choice between going to school, or going to the school of hard knocks. In one circle, entrepreneurs can join MBA programs, fellowship programs, or business bootcamps. In another circle, they can dive in and get their hands dirty by starting a company, trying to raise venture capital or angel funding, or moving into an incubator. For the most part, these circles have not overlapped.

The idea behind Kauffman Labs is to create a new hybrid model. In the 2009 Kauffman Thoughtbook, the Foundation’s vice president of entrepreneurship, Bo Fishback, talks about the model of a conservatory, where students not only learn music theory but also play music. This is emphatically not the model most business schools follow today, as the New York Times noted in a well-reported March 15 article. B-schools are still trying to shake their legacy DNA of training the future CEOs of General Motors or the next generation of bankers and consultants. No self-respecting entrepreneur would think that he or she can learn how to run a startup by getting an MBA. Schools of Engineering are still struggling to understand their approach to teaching innovation, a discipline that runs contrary to traditional funding and tenure models.

Academic institutions, to be blunt about it, are the stodgy old incumbents in today’s innovation economy—and I say this as a faculty member at a school that is a hotbed of entrepreneurship. Don’t get me wrong—there are plenty of wonderful things that will always happen at MIT and could only happen at MIT. I am thrilled to continue my role at MIT in parallel with my Kauffman work. But there are many things that cannot happen within the walls of MIT, nor should they. I want to help make those boundaries easier to understand and navigate. It’s time for a disruptive new model, a hybrid between education and company creation.

Entities like Puretech Ventures, led by Daphne Zohar (an Xconomist like myself), are perfect examples of what we at the Kauffman Foundation would like to see more of. Puretech is not trying to be a classic life sciences venture capital firm, but is in the business of creating companies. That may include sprinkling in a little money, but it’s also about validating the science, identifying market needs, and building great leadership and advisory teams. Xconomy has already written about a new Kauffman program that will place “Entrepreneur Fellows” at Puretech and other organizations, and Lesa Mitchell, Kauffman’s vice president for advancing innovation, has spoken prolifically on this topic.

If you take the best of what entrepreneurs might get out of Puretech, the best they might get out of an MBA, and turbo-charge it by adding the best they might get out of accelerators and incubators like Y Combinator, TechStars, DreamIt Ventures, The Foundry, Bizdom U, or the Cambridge Innovation Center, that’s where we’re trying to go. If you connect all of these things through a coordinated mother ship, you get a new level of scale, quality, institutional memory, patience, and also a certain silo-busting neutrality. The Kauffman Foundation is in a unique position to make this happen.

There’s a movement in the philanthropic world to touch the people you’re trying to help directly, rather than giving money to others and hoping they will do it. By creating a new entity to focus on high-growth companies, the Kauffman Foundation will be going directly to the customer, and doing it with its talented people and its quality control. But we’ll also be practicing what we preach; we will be figuring out how to grow and create a high-scale model for fostering entrepreneurship as we go. As my mentor Desh Deshpande likes to say, this is a contact sport. Rather than developing a stagnant formal curriculum for an aspiring entrepreneur to be on the receiving end of, we want entrepreneurs to have a setting in which they can live the messy process and be able to draw on vital resources and kindred spirits. This involves getting in there and living the process with the entrepreneurs. It is real-time, iterative, and immerses us all in action-learning.

With the economy crippled, venture capitalists running from risk, and startup exit opportunities nonexistent (at least for the foreseeable future), somebody needs to create a new world order for high-growth companies. By weaving together many of the initiatives that the Kauffman Foundation already has underway—and building a few new ones from scratch—we will be following a natural progression. In short, we will create the sorts of companies that Mr. Kauffman wanted his foundation to spawn.

And that’s why I’m developing an appreciation for Kansas City, and why my wife is the one out walking our dog these days.

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In January, Paul Graham announced that Y Combinator would no longer operate in the summers out of Cambridge, MA, but instead would stay year round in its other home of Mountain View, CA. The reason he put forth was the impending birth of his new child and the decision that California was the better place to raise his child.

Today, though, Graham divulged another factor—that Y Combinator has been negotiating since December with legendary Silicon Valley venture firm Sequoia Capital for an infusion of capital that will allow it to invest in more startups than ever. All told, Sequoia and a group of prominent angel investors are putting $2 million into Y Combinator to allow it to boost the number of companies it backs by some 50 percent—from about 40 per year to 60. As Graham explains on his website, this expansion makes more sense if Y Combinator is in California: “It’s easier to expand in Silicon Valley, because the startup community is so much larger here,” he wrote.

To me, the interesting part of the announcement wasn’t the added insight into why Y Combinator left Boston—it was Graham’s view of the recession. As he also wrote on his site: “Y Combinator is celebrating the recession by expanding. We’re so convinced recessions are good times to invest in startups that we’re increasing the number we fund…”

And as he added in an e-mail to me: “We have a hunch 2009 will later be seen as a turning point for startups, in the sense that an unusually large number of good ones got started during it. There’s a lot of evidence things are changing. Founders are still founding, and investors are still investing– much more than either did in the aftermath of the Bubble, even though the actual state of the economy is so much worse.

“We’re hoping that by expanding YC when the rest of the world is running for cover, we’ll be able to send a message to would-be founders to go ahead and do it. And of course fund a significant fraction of these new startups.”

This is a great attitude to have during a recession—and more people should have it. It comes from having confidence in what you are about. At Xconomy, we see this same attitude in a fairly large fraction of the companies we deal with—off the top of my head, I would say maybe 20 percent. They have the attitude that there is more to be gained than lost during hard times, and that innovation will be the way out of the recession. They want to take an active part in that transformation—growing their business and separating from the competition in the process.

In more classic psychological terms, it’s a desire for success outweighing a fear of failure. Y Combinator won’t be here in Boston to impart that lesson directly, but entrepreneurs and big companies alike should heed the message.

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For entrepreneurs and investors alike, it was a sad day back in January, when Y Combinator founder Paul Graham announced he would stay in Silicon Valley year round and give up splitting his startup incubation activities between Mountain View and Cambridge, MA, where Y Combinator has traditionally held forth each summer. On his website, Graham explained that the change had “nothing to do with startups,” but that he had decided California was the best place to raise his about-to-be-born child. That didn’t stop him from a candid assessment of the Boston innovation scene, however. “Boston just doesn’t have the startup culture that the Valley does,” Graham wrote. “It has more startup culture than anywhere else, but the gap between number 1 and number 2 is huge.”

Since that time, I’m happy to report, Graham’s wife Jessica Livingston (a Y Combinator partner) has given birth to a healthy son, George. And Graham himself is back at work, at least to the point that he hosted an angel investor conference last week. He also took time to answer some questions I had e-mailed him earlier, asking for a more detailed view on the differences between the New England and Silicon Valley innovation cultures. As you will see, he cleverly outmaneuvered me on my last question, about raising kids to be themselves and not to constantly compare themselves with others. But far more important than that, his answers hold some hard truths for Boston area investors and students. He called Cambridge “the intellectual capital of the world,” brimming with ideas. But when it came to Internet investing, entrepreneurship, and even the mindset of students, well, that was another story.

So here are the questions, and Graham’s e-mailed answers, unedited except for clarifying questions, correcting minor typos, and the like. “Sorry if these answers are rather long,” Graham writes. “These are questions I’ve thought a lot about.”

Xconomy: You mentioned in your post that there was a vast difference between No. 1 (Silicon Valley) and No. 2 (Boston). Can you describe some of the specifics behind this observation–how so, why so?

Paul Graham: The biggest difference between Boston and Silicon Valley is the way
startup culture pervades the Valley. The Valley is for startups what LA is for movies. It’s the main thing people care about here. Boston is for startups what New York is for movies. People do make some movies there, but it’s not the city’s main focus.

A lot of other things follow from this. The startup community is much larger in the Valley, large enough that it makes a qualitative difference. Among other things, this makes it much easier for us to run YC [Y Combinator] here. The 4 YC partners aren’t the only ones who advise the startups; we also bring in all kinds of experts from the community to advise them; and it is much easier for us to do this in Silicon Valley because that’s where most of the experts are. When we were in the summer in Boston we were always trying to talk people from the Valley into visiting Boston for a vacation. We managed to talk Paul Buchheit into it. And fortunately Mitch Kapor sometimes comes to Boston in the summer, so we were able to get him. But it was always a stretch.

Another difference is that because the Valley cares so much about startups, people here are always half a step ahead. All the lawyers know what the latest standard terms are for various types of deals. The investors are less frightened by new ideas, because the ideas are less new to them. The founders feel less lonely, because there are three other groups of guys in the same building starting startups.

I love Boston as a town. If I didn’t have kids I’d rather live in Cambridge than anywhere else. Cambridge is the intellectual capital of the world. Really. In fact, a large part of the reason Boston is weak in startups is probably that it’s good at other things. The focus of Boston is ideas, and it seems hard for a city to have two foci.

X: Do you think Silicon Valley’s advantage is more true for the Web-based sector you focus on? Are there areas, perhaps life sciences or medical devices, where Boston might be better for startups?

PG: Boston may well be a better place for biotech and medical startups. Or not; I have no idea. That is a completely different world from the one YC operates in. There’s no room for seed firms there, because the startups are so expensive to start.

X: Even when it comes to Internet startups, are there some things Boston investors or entrepreneurs are better at, or are strong at—maybe more conservative management, say?

PG: Honestly, nothing comes to mind. Occam’s razor says the reason Boston founders …Next Page »

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With the departure of Paul Graham’s Y Combinator startup school, Boston-area entrepreneurs have one less local source for seed funding and mentorship. With the advent of a Boston clone of Boulder, CO-based TechStars, they have one more—so things have evened out. But Highland Capital Partners‘ “Summer@Highland” program has been a constant in the area throughout those transitions. And the venture firm said this week it’s accepting applications for the third iteration of the program, which matches university-affiliated entrepreneurs with access to stipend money, partners at Highland, and work space in Lexington, MA or Menlo Park, CA.

According to Michael Gaiss, a senior vice president at Highland, the company is looking for student entrepreneurs (or small teams of them) with business ideas in the areas of advanced materials and semiconductors, cleantech, digital media, information and communication technology, and life sciences. The program is open to undergraduates, graduate students, postdocs, and recent graduates. As usual, Highland will lean toward applicants whose ideas address big markets with disruptive products or services. But this year, more than in past years, the firm will be looking for applicants who have already achieved some momentum in their industries or markets, Gaiss says.

Highland provides the individual entrepreneurs it selects with stipends of $7,500; teams can receive up to $15,000. Unlike TechStars or Y Combinator, Highland doesn’t require that participating teams hand over equity in their companies in return for the stipend. But if Highland likes what it sees, there might just be some capital available for outstanding teams. To quote from a notice Gaiss sent out today: “Advanced initiatives/companies may qualify for seed financing and/or additional involvement by the Highland team to help accelerate company growth.”

Applications for the Summer@Highland program are due April 9. Details and application materials are online at www.hcp.com/summer.

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You lose some, you win some. Less than four weeks after Paul Graham’s unceremonious announcement that his formerly bicoastal startup school Y Combinator would be taking up permanent residence in Mountain View, CA, ending a tradition of summer sessions in Cambridge, MA, a new startup program is coming to town: Boulder, CO-based TechStars.

Founded in 2006 by software entrepreneur David Cohen, venture capitalist Brad Feld, entrepreneur and education advocate Jared Polis, and David Brown, founder and president and CEO of Broomfield, CO-based ZOLL Data Systems, TechStars is an investment fund and “entrepreneurship boot camp” that provides seed funding and mentorship for early-stage technology companies—mostly Web companies, so far. The operation selects 10 companies each year for its summer sessions in Boulder, and starting this year, it will pick an additional 10 startups for a concurrent session in the Boston area.

Like Y Combinator and Philadelphia’s Dreamit Ventures, TechStars is an intense, three-month program (I’d call it an “incubator,” but Cohen says the group avoids that term—see below) that provides participants with dinners and talks, meeting and working space where teams can collaborate, and one-on-one mentorship from established investors and entrepreneurs, in return for a small slice of the founding stock in each company. It’s a 6 percent slice, in TechStars’ case, in return for which companies get $6,000 in financial support per founder, up to $18,000. (Teams interested in applying need to move fast: the deadline is March 21.)

In short, for the companies that get in, the TechStars program is a pretty sweet deal, and a powerful stepping stone to commercial success. The founders say that 12 of the 20 companies that went through the program in 2007 and 2008 have obtained angel or venture backing. Two are profitable, and two have been acquired.

Shawn Broderick, the founder of Waltham, MA-based reputation broker TrustPlus (which I profiled last April), has been named to direct the TechStars Boston session, which will run from May 26 to August 21. As Boston-based mentors, TechStars has signed up a who’s who of local entrepreneurs and investors, including Colin Angle, co-founder and CEO of iRobot; Don Dodge, director of business development for Microsoft’s Emerging Business Team; Eran Egozy, co-founder and CTO of Harmonix Music Systems; Chris Heidelberger, CEO of Nexaweb; Will Herman, founder of Viewlogic; Nabeel Hyatt, founder of Conduit Labs and former COO of Ambient Devices; Warren Katz, founder and CEO of VT MÄK; John Landry, managing director of Lead Dog Ventures; Rich Levandov, general partner at Avalon Ventures and Masthead Ventures; Bijan Sabet, general partner at Spark Capital; Ronald Schmelzer, founder and senior analyst at ZapThink; and Bill Warner, founder of Avid Technology.

According to Cohen, TechStar’s executive director, it was Warner who provided both the inspiration and the funding behind the cloning of the Boulder program in Boston. Cohen says TechStars has been in talks with Warner about expanding to Boston since last October—it was “the next logical step” after the program’s success in Boulder, given the Boston area’s wealth of entrepreneurial activity and high-profile universities, Cohen says. But the plans were laid well before Graham announced Y Combinator’s departure, so it’s just coincidence that TechStars will be helping to fill that vacuum.

In an e-mail interview this morning, Cohen filled out more of the story. (See the very end of the interview for his thoughts about Boston versus Silicon Valley as environments for startups.)

Xconomy: Why expand to Boston?

David Cohen: The decision to expand and create the Boston program was promoted by Bill Warner, founder of Boston-based Avid Technology and Wildfire Communications, who had been interested in the TechStars model for some time because of the community-oriented mentorship-driven model that it employs. He visited the TechStars’ Boulder operation last year, got involved, and ultimately invested in one of the companies. Coupled with Bill’s enthusiasm Boston became the logical next step for TechStars.

Those of us who started TechStars here in Boulder have deep East Coast roots as well. Brad Feld is a MIT graduate who built, operated, and sold his early businesses in Boston. David Brown and David Cohen sold their first company to ZOLL Medical Corporation in Chelmsford, MA in 1999. [Subsidiary ZOLL Data Systems, which Brown now leads, is in Colorado.---Eds.] Many TechStars mentors such as Howard Diamond, David Hose, Neil Robertson, Eric Marcoullier and Seth Levine are also very connected to the Boston entrepreneurial community.

X: What are some of the practical changes involved in doubling the size of the program? Did you have to line up more funding?

DC: We’re essentially mirroring the approach and program we have in Boulder to Boston. TechStars is unique in its mentorship-driven approach—check out our list of mentors. Yes, we took on new funding—the majority of the funding comes from Boston-based investors such as Bill Warner who pushed to bring the program to town.

X: Will the program run the same way it does in Boulder? What’s the basic shape of the curriculum?

DC: It won’t be identical for logistical reasons, but it will work fundamentally the same way. Again, we’re replicating our great experience in Boulder. You can expect it to be very similar. Obviously, the mentor set in Boston will be focused more locally with the great new mentors we’ve added such as Colin Angle, Dan Bricklin, Don Dodge, Eran Egozy, Chris Heidelberger, Will Herman, Nabeel Hyatt, Warren Katz, John Landry, Rich Levandov, Bijan Sabet, Ronald Schmelzer, Bill Warner, etc.

We run about 30-40 “sessions” per summer which are intended to closely connect our founders with the mentors. Beyond that, the mentors work hands on with the companies for the summer. At the end of the summer, we organize Investor and Demo day and typically hundreds of investors show up.

X: How long has this been in the works? If it wasn’t a response to Paul Graham’s decision to leave Cambridge, how do you think Y Combinator’s departure changes the environment here for TechStars?

DC: Bill Warner first approached me in October of 2008, and continued to be the instigator when he first came out to TechStars in December of 2008. However, we always thought Boston would be a great next logical step just because there’s so much going on there, and so many great schools and entrepreneurs around. TechStars co-founder Brad Feld went to MIT and …Next Page »

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Viaweb founder Paul Graham and his legendary startup incubator Y Combinator, which is arguably the most vibrant, innovative technology startup school in the country, are no longer going to be part of the summer scene in the Boston area. In a message posted on the Y Combinator website (I think last night sometime), Graham has announced that he will no longer alternate between Mountain View, CA, in the winter and Cambridge, MA, in the summer, and instead will stay in Silicon Valley year round.

Graham says the reasons are mostly personal, having to do with the impending birth of his child and the desire not to try and be a bi-coastal parent (Graham’s wife, Jessica Livingston, is a Y Combinator partner):

The reason has nothing to do with startups: it’s because Jessica Livingston and I… are expecting our first child any day now. We used to think we’d continue to alternate between coasts after we had kids. But as soon as the prospect became real, we knew we wouldn’t. We had to choose, and Palo Alto seemed a better place to raise kids than Cambridge, so we chose that.

But that said, Graham’s post still contains what some might consider a pretty devastating assault on Cambridge and Boston. For instance:

We never tried to claim to the startups in the summer cycles that it was a net advantage to be in Boston. The most we could claim was that we could mitigate the disadvantages sufficiently well—for example, by flying everyone out to California to present to investors at our Mountain View office. But we did worry that the Boston groups were losing out. Boston just doesn’t have the startup culture that the Valley does. It has more startup culture than anywhere else, but the gap between number 1 and number 2 is huge; nothing makes that clearer than alternating between them.

But while Silicon Valley is a better place for startups than Boston, that isn’t why we chose it. If Cambridge seemed a better place to raise kids, we would have stayed there year round instead.

I e-mailed Graham to learn more, but he had not responded by the time of this post. I was a little surprised by his reason for leaving the Boston area, though. I’m  from Northern California myself, and Silicon Valley certainly has better weather and lots going on for kids. But I happen to believe that if you want a truly diverse and multi-dimensional cultural environment for your kids, Cambridge is a far better choice. (My wife, Nancy Walser, was on the Cambridge school board for eight years, so I have had a first-hand view of the educational system here.)

In any event, the full-time departure of Graham and Y Combinator is a real loss for the New England innovation community. But the area is rich in innovation—and now there is now a wide open opportunity for something new and different to take their place.

You can read Graham’s full post here.

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New England tech and life sciences firms have cut many a deal since last we rounded up. Here are some of the most interesting ones.

—Cambridge, MA-based Semprus Biosciences, a spinoff from the famed Langer Lab at MIT, closed an $8 million Series A round of venture capital co-led by 5AM Venture and Pangaea Ventures. Semprus is working on long-lasting polymer surfaces to help combat the microbes that like to grow on medical devices.

—Y Combinator startup Posterous, a developer of tools for “dead simple blogging” raised $750,000 from Zimbra CEO Satish Dharmaraj, former Netscape CTO Eric Hahnof, Guy Kawasaki, Mitch Kapor, and other high-profile investors.

—Archemix of Cambridge, MA, inked a deal with pharma giant GlaxoSmithKline worth $27.5 million upfront and potentially another $200 million in milestone payments for each of the seven of Archemix’s “aptamer” drugs covered by the agreement. The deal will not affect a planned reverse merger with Lexington, MA-based NitroMed (NASDAQ: NTMD), according to Archemix’s CFO.

—EMC (NYSE: EMC) acquired some of the assets and personnel of Seattle’s SourceLabs. The Hopkinton, MA-based firm plans to integrate the new assets and staff into its cloud computing business.

—Lexington, MA-based Indevus Pharmaceuticals (NASDAQ: IDEV), which is developing several drugs for hormonal disorders, said it will be acquired by Endo Pharmaceuticals (NASDAQ: ENDP) for $370 million, with another $267 million on the table if regulatory and sales goals are met.

—Forma Therapeutics, a Cambridge, MA-based startup co-founded by scientists at the Broad Institute of Harvard and MIT, raised $25 million from the Novartis Option Fund, Bio*One Capital, and others. Forma aims to turn new knowledge about the genetic underpinnings of cancer into new treatments for the disease.

—Needham, MA-based ClickSquared, a provider of a software-as-a-service system for direct marketing, raised an $11 million Series B round led by JMI Equity, ABS Venture, and Flybridge Capital Partners. The round brings ClickSquared’s total raised to $46 million.

—RatePoint, ClickSquared’s Needham neighbor, also completed a Series B round, this one worth $10 million. Castile Ventures led the deal, and .406 Ventures and Prism VentureWorks joined in backing the developer of online surveys and widgets.

—Satori raised $22 million in venture capital from InterWest Partners, Prospect Venture Partners, New Enterprise Associates, and others. The Cambridge, MA-based startup, founded by Boston-based PureTech Ventures, which also joined the funding round, is aiming to develop small-molecule drugs that can be safely taken on a chronic basis to block the production of toxic proteins that cause Alzheimer’s disease–hopefully halting it in its early stages.

—Waltham’s Polaris Venture Partners participated in a $7.5 million Series C round for JibJab, the online parody maker that has recently begun making e-cards. Overbrook Entertainment and Sony Pictures Entertainment led the deal.

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This past summer, I had a great time at the Y Combinator Demo Day, schmoozing with guests and watching some altogether fascinating demos from the incubator’s latest batch of startup companies. One of those that made my list of favorite demos was Posterous, which today announced a $750,000 funding round from a group of high profile investors that include Zimbra CEO Satish Dharmaraj, Eric Hahn, former CTO of Netscape, Guy Kawasaki, and New England’s own Mitch Kapor. Posterous also announced a cool new product: group blogs.

Posterous’ shtick is “dead simple blogging.” Its software automatically converts anything you e-mail into your Posterous account—be it a video clip, text snippet, photos, PowerPoint, Word document, or virtually any other type of attachment—into a downloadable blog post. As Michael Arrington wrote in TechCrunch today: “Just start emailing text and files (images, video, whatever) to post@posterous.com and you’ve got a site where it all goes. And they’ve steadily added features. You can, for example, repost all the stuff you email in to Twitter, Facebook, Flickr, Tumblr or wherever.”

I caught up with Garry Tan, one of the Posterous co-founders, this morning around 8 am EST, when he was just about to go to sleep in San Francisco, where the company has moved. Tan says they’d been up all night with the launch (at midnight West Coast time), Arrington’s interview, and so on. “Just a regular night,” he quips.

Tan says that Dharmaraj and Hahn led the new round, Posterous’s first aside from the typical small Y Combinator infusion. Also joining was XG Ventures, an angel group formed by a bunch of ex-Googlers, as well as the likes of Bill Lee, Tim Ferriss (of “Four-Hour Workweek” fame), David Sloo, Aydin Senkut, Peter Barrett, Kapor and Kawasaki (who’s involved in a blog-aggregation venture called AllTop). Another New England investor is Bill Warner, who founded Avid Technology.

Tan had nothing but good things to say about his Y Combinator experience here in Cambridge this summer. “A really amazing experience. Definitely prepared us well for raising money and iterating on the product and growing the user base,” he told me. Compete lists Posterous as having about 130,000 unique visitors per month already. “That’s U.S.” Tan points out, though he would not confirm any numbers.

The group blogs feature announced today takes Posterous’s ease of use to a wider context—your friends, family, softball team (in my case, it would be fantasy team), and the like. “You don’t even have to create an account for people,” says Tan. “All you have to do is enter their email address, which is one field.”

For example, my family site might be buderisite.posterous.com. So family members would e-mail whatever they wanted posted to post@buderisite.posterous.com. “It really is as easy as telling your mom to e-mail this thing, and you could have a family blog,” says Tan. (Posterous isn’t the first blogging tool to take a retro, back-to-basics approach—that’s also the pitch at Tumblr, which raised a $4.5 million B round two weeks ago led by Boston’s Spark Capital.)

If you want to learn more about Posterous’ new group blogging feature, here is the company’s own post about it, with examples.

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Waltham, MA-based Charles River Ventures is the lead investor in a $9 million Series B financing round for Scribd, a San Francisco startup and Y Combinator graduate whose “iPaper” document reader allows users to upload documents such as Word, PDF, and PowerPoint files to the Internet and share them by embedding them in Web pages. In its announcement today about the Series B round (which also included Redpoint Ventures and Kinsey Hills Group), Scribd said it has hired former Bebo COO George Consagra as its new president.

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If you’re trying to decide where to build your new tech startup, California obviously has a lot of attractions. You’ll be close to the heart of the venture capital community. Non-compete agreements, which are said to slow innovation in states like Massachusetts, are illegal in the Golden State. The weather is beautiful year-round. And let’s face it, it’s where all the cool kids live.

But now there’s a reason to rethink going to California. If you do, you’ll be sending your employees to a state where a majority of the voting population says gay people aren’t entitled to equal rights under the law.

On Election Day, 52 percent of California voters approved a ballot measure called Proposition 8, which adds a single line to the state’s constitution: “Only marriage between a man and a woman is valid or recognized in California.” The proposition overturns a State Supreme Court decision this May that gave gay and lesbian couples full rights to marry. As far as I know, it’s the first time a group of citizens has fought for and won the right to marry, only to have that right taken away.

So, despite the fact that some 18,000 gay and lesbian couples have married in California since June without incident, residents have decided that only heterosexual couples are entitled to have their unions recognized and protected by the state. That means Massachusetts—and, as of this week, Connecticut—are now the only two U.S. states where gay people have full marriage rights, forming the country’s strongest bastion against one of the last acceptable prejudices, homophobia.

I am gay. It hasn’t come up here before, but it’s no secret. For almost 10 years, California was my adopted home state—but boy, am I happy that I came back to Boston last year to work for Xconomy. It makes a huge difference to live in a place where I feel welcomed—to know that if I had a life partner, all of the public and private benefits of marriage (except those still denied under Federal law) would be available to us automatically, just as they are to straight couples. This, after all, is the place where the state’s highest court, in the 2003 decision that legalized gay marriage, declared that “without the right to marry…one is excluded from the full range of human experience” and that the state constitution “forbids the creation of second-class citizens.”

It’s time for Massachusetts and Connecticut to turn that recognition into a marketing advantage. As we reported a few days before the election, a group of 22 biotech executives in San Diego teamed up to urge their regional trade-industry group, Biocom, to oppose Proposition 8 as a drag on recruiting. “The governor of Massachusetts has made it very clear that he recognizes this is a competitive and lucrative industry and he’d do everything he can to attract companies,” Laurent Fischer, CEO of Ocera Therapeutics, told the San Diego Union-Tribune. “And this is a sure opportunity for Massachusetts to feature its benefits that are not available in California should Proposition 8 pass.”

Fischer was absolutely right. And now the ball is in New England’s court. The Commonwealth of Massachusetts’ Office of Business Development, which does a great job of pitching the benefits of locating in the state, should stress the state’s gay-friendly credentials to technology and life sciences companies in its brochures and PowerPoints, and maybe even take out a few ads in places like the Los Angeles Times and the San Francisco Chronicle. Governor Deval Patrick—whose 18-year-old daughter came out as gay this summer—should go on a trade mission to California and see if he can lure a few progressive companies away from places like San Francisco and Silicon Valley. And Boston’s venture capital firms and angel investors should lean on their portfolio companies to pick a home state where all of their employees will be treated equally.

Now, one can make the argument that if technology companies left or avoided California and the other states that discriminate on the basis of sexual orientation, it would simply drain those states of the liberal voters who will eventually be needed to help reverse measures like Proposition 8. But all I’m saying is that company founders who have a choice of locations—and this includes most of the young entrepreneurs coming out of incubators like Y Combinator or DreamIt Ventures—should think about what kind of environment they want to provide for their employees. If they want to send a message of inclusion and equality, they should either set up shop in Massachusetts or Connecticut, or join the legal and political battles to overturn same-sex marriage prohibitions in the states where they do locate.

What makes the passage of Proposition 8 and similar gay-marriage bans in Arizona and Florida all the more mystifying, of course, is that it came on the same day that Americans turned the corner on centuries of racial prejudice by electing an African-American as President.

Like many others around the world, I’m inspired by Barack Obama’s historic victory. But inspiration aside, it’s hard for me to understand how Obama himself can be in favor of separate-but-supposedly-equal civil unions for gay people, as opposed to full marriage rights. Obama came out against Proposition 8, but he did little to campaign against it. What particularly puzzles me is how someone whose own parents would not have been allowed to marry under the anti-miscegenation laws still in force in many states in the 1960s can take the position Obama has; I can only surmise that it’s an act of political pragmatism.

Eventually, I have no doubt, Americans from the White House on down will stop differentiating between civil rights for racial minorities and civil rights for gay people. Meanwhile, Californians and people in the 28 other states with constitutional gay-marriage bans need to learn that there’s a price for their prejudice. Progressive entrepreneurs and investors should vote with their feet and their dollars—and send their startups to Massachusetts and Connecticut.

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