News flash: This company actually makes physical stuff for businesses. Not social software, not a mobile app or backend system, not a retail website or aggregator. And it has been able to raise some new money to expand its product. Its goal: to provide automated kiosks (see image, right) for dispensing everything from loyalty cards and luggage tags to cell phones and iPods.

I’m talking about Cambridge, MA-based Vigix, which closed a $1.5 million Series A-1 round this week, led by Still River Funds, a venture firm based in Waltham, MA, that invests in hard technologies and life sciences. Vigix previously raised a smaller A round from investors including LaunchCapital, Launchpad Venture Group, and Race Point Capital. The company has taken in a little under $3 million to date, says CEO Steve Pytka.

Vigix has been around the block. The company started in 2004, founded by Eduardo Alvarez (who is president), and its product has been in development for years. Selling kiosks is a very challenging business, Pytka says, with a market full of entrenched competitors like Redbox, NCR, and ZoomSystems.

“We were able to survive two very difficult years. Nobody was investing in new technology,” says Pytka, a veteran of Streamware, Gazelle, Wang, and Xerox, who joined Vigix in early 2008. “We’re starting to see customer traction in a big way.”

The Vigix kiosk, designed by Cambridge-based Ideo, is roughly person-sized (six feet tall, under 200 pounds, takes up 2 square feet) and includes a video screen and a unique dispensing mechanism. Unlike a traditional vending machine, the kiosk has no moving parts; a special hook holds each item inside, and a pulse of heat melts the hook so the item falls through the dispenser.

The machine also includes software so it can be monitored and controlled over a wireless network; ongoing software licensing is an important part of the company’s revenue stream, Pytka says. And the kiosk uses a cartridge of products that can be restocked by a courier such as UPS. The goods are never touched by retail employees, so that could help stores cut down on theft (“shrinkage”), Pytka says.

Besides Ideo, Vigix has forged key partnerships with Flextronics for manufacturing, Kodak for installations, and IBM for software. These relationships have been instrumental in helping the small company gain traction, Pytka says. Vigix has five full-time employees and is now looking to expand its engineering support and sales and marketing team.

In the past year, the company has won a couple of $250,000 contracts, Pytka says. Its customers include Qantas, the Australian airline (which is using Vigix kiosks for self-service luggage check-in), and South Carolina-based wireless provider Clear Talk (which sells prepaid cell phones and accessories). The firm has 25 kiosks out in the field so far.

Vigix clearly has a long way to go, but its “rapid growth” has Pytka talking about putting its kiosks in all manner of retail stores (think jewelry, pens, watches, electronics), as well as in airports, train stations, hotels, movie theaters, and stadiums.

“It’s a classic hockey stick,” he says.

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With its $8.5 billion acquisition of Skype this morning, Microsoft (NASDAQ: MSFT) appears to be embracing one of the classic digs at Redmond: It’s grown too big to truly innovate.

According to the companies’ announcement, Luxembourg-based Skype, which has offices and investors in Silicon Valley, will be its own division within the Redmond, WA, software behemoth. Skype’s current CEO, Tony Bates, will report directly to Microsoft head honcho Steve Ballmer. If that kind of structure was something Skype fought for, the fact that it got it could be seen as an acknowledgment that swallowing Skype too fully could mess up a good thing.

Much is being made of the zillion different ways that Microsoft products and services could be integrated with Skype, but two of them are the most meaningful: Windows Phone and Kinect. The Windows Phone combination—if done right—gives Microsoft a killer answer to Apple’s FaceTime and Google Voice.

In a really interesting blog post on the deal, Skype investor Ben Horowitz of Andreesen Horowitz recounts how both of those products were central threats to Skype’s existence, and how Skype responded by growing its user base. (Horowitz also says the investors who bought Skype from eBay saw that the technical team working on Skype was committed to staying with and expanding the service, no matter who was signing their paychecks.)

Over at the Dallas Morning News, Victor Godinez wonders whether the combination will allow Microsoft to challenge the cell phone carriers to drop mandatory voice plans, and open up data-only mobile as a real possibility. It’s also worth noting that Microsoft said Skype will continue to develop apps for other companies’ platforms—but anyone who’s tried to use Google Maps on an iPhone, for instance, will tell you to wait and see how aggressively that happens.

The Kinect combination is intriguing as well. The motion-sensing camera is obviously Microsoft’s biggest consumer hit in quite some time, and has been showing all sorts of really off-the-wall potential uses, like manipulating surgery robots. The Skype combo brings a far less outlandish use to the forefront: powerful videoconferencing, especially for business.

As Todd Bishop at GeekWire pointed out last night, Kinect already had a video calling feature. With Skype’s horsepower and Microsoft’s track record of delivering products that big businesses want to use, the little Xbox add-on could become a major feature in boardrooms.

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The sale of Bellevue, WA-based T-Mobile USA to AT&T for $39 billion shook up the mobile world this weekend, both nationally and in the Seattle area. It’s unclear what the practical effects will be for T-Mobile employees in the Puget Sound region, and we might not know for some time: The companies say the acquisition process could take about a year.

T-Mobile’s sale does, however, clearly mark the end of another major era in the region’s longstanding leadership in the wireless field. Check out this really interesting interview that Xconomy’s Greg Huang did with venture capitalist Tom Huseby in 2008 for a sense of the history at play. Basically: AT&T’s wireless business came of age with the 1994 acquisition of Seattle’s pioneering McCaw Cellular. And McCaw veteran John Stanton started VoiceStream, which was purchased by T-Mobile in 2001.

As Huseby noted in that Xconomy interview, “Every time someone was bought, they actually didn’t move people out of Seattle. People would move here, and it just kept growing … We have more concentration of carrier presence here than anywhere else in the country. It’s unbelievable.”

That’s not the situation today. AT&T’s headquarters are in Dallas and will undoubtedly stay there. In Sunday’s press release, AT&T did say that “the combined company will continue to have a strong employee and operations base in the Seattle area.” An AT&T spokesman told The Seattle Times’ Brier Dudley that “any reduction we anticipate will come through natural attrition.” GeekWire also got ahold of the memo sent to T-Mobile employees, in which CEO and President Philipp Humm said that “AT&T’s leadership has said keeping [T-Mobile's] talented people through this transition is one of their top priorities.”

Meanwhile, AT&T President Ralph De La Vega tells Mobilized that the tie-up will improve the network, won’t be a distraction for customers, and should have a good chance at getting federal approval. Washington, D.C.’s The Hill interviewed AT&T policy executive Jim Cicconi, who indicated that one element of the regulatory case will be that consolidation in mobile was inevitable.

And finally, The Seattle Times’ Jon Talton saw no positives for the Seattle area in the T-Mobile news. I found particularly compelling Talton’s emphasis on the effect that losing a major standalone tech company will have on the entrepreneurship landscape in the region. Therefore, his take gets the last word:

“I believe there’s nothing like a major headquarters for well-paying jobs, civic stewardship, attracting talent and capital, and fostering executive talent that leaves the mother ship to start new enterprises. Back-office towns always languish.”

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Steve Manning saw some of the latest consumer electronics at the 2011 International CES confab in Las Vegas this month, and the CEO of Dexter, MI-based ReCellular was reminded how it takes before Americans who buy such nifty gadgets will want to trade in for new stuff. About 15 months.

“It was amazing, great neat technology displays,” Manning says, “but if you step back from that event, in 15 months, those products that they are announcing will become obsolete because newer technology and features are going to be introduced.”

The effects of Moore’s law have been kind to Manning and his company, however. ReCellular, which collects used mobile phones and refurbishes them for the resale market or recycles them, grew its revenue by about 45 percent in 2010 and rapidly added workers because of increasing domestic and foreign demand for its refurbished devices, says Manning, who joined the firm in May 2009. (The company is private and does not release specific sales and profit figures publicly.)

ReCellular is an important company to know about because of its rapid growth and prospects to boost the Michigan economy. In October, the Farmington Hills, MI-based venture firm Beringea endorsed ReCellular with an undisclosed investment in the company through its Invest Michigan Growth Capital Program. Since the deal was announced, the firm has grown its work force by more than 10 percent, according to Manning.

Founded in 1991 by brothers Charles and Allan Newman, ReCellular has had a knack for capitalizing on major changes in the multibillion-dollar wireless industry. In its early days, when new mobile phones cost several thousand bucks, the firm refurbished phones and leased them to customers. Now phones are much cheaper, making it easy to own them outright, and the time cycles for replacing them are much shorter. For instance, Americans’ rush to buy newer smartphones such as the iPhone has provided a surplus of older-model handhelds for ReCellular to refurbish and sell, Manning says.

ReCellular is now the largest cell phone refurbishing and recycling firm in the country. It processes between 400,000 and 500,000 phones per month. About three quarters of the phones are refurbished for the resale market, while the devices that are beyond repair are pulled apart. The plastic parts are recycled and the valuable materials, like gold from circuit boards and copper from battery chargers, are sold.

The firm makes profits on its resale business but, even after cashing in the gold and other precious metals, the recycling … Next Page »

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Most companies might consider reining in their loftiest ambitions after an IPO plan falls far short of expectations.. Then again, most companies aren’t run by Ryan Wuerch.

Wuerch is the founder and chief executive of Bellevue, WA-based mobile software company Motricity (NASDAQ: MOTR). The company, founded in 2001, filed for its IPO in January. At the time Motricity, which had generated more than $100 million in revenue in 2008, though it was not yet profitable, was expecting to raise as much as $250 million from investors in its initial public offering.

Instead, the company, met by a tough economic climate, was forced to lower its expectations. First, it sought to raise $85 million, then $62 million, before finally settling on a much lower $50 million to seal the deal. But a less than ideal IPO, Wuerch says, isn’t enough to speak to the well-being of the company, and won’t be enough to curtail its ambitions.

“Stock price doesn’t indicate the strength of a company,” Wuerch says, adding, “We were waiting for that window.” Timing certainly didn’t help Motricity. On the last day of the company’s road show in May, just when Motricity was trying to whip up enthusiasm among dozens of investors, the Dow Jones Industrial Average fell 1,000 points in a very scary 16-minute period. The window Motricity had been waiting for was suddenly gone, but Wuerch and the company decided to move forward with its plans regardless.

“It’s a very difficult market and we feel very fortunate that we did get out,” he says. “We didn’t have to go public.”

The reasoning for moving ahead with the public offering was three-fold. First, Wuerch was eager to have transparency with the customers that comes with the territory of being public. Second, there was an obvious opportunity for the company’s some 355 employees, as of March 31, to benefit from the transaction by enabling them to potentially cash out their stock options. Third, the company had some rigorous international expansion plans in the works that required extra capital.

Ryan Wuerch

Motricity had a number of prominent stockholders going into the IPO, including Advanced Equities (28.6 percent), billionaire investor Carl Icahn (13.8 percent), Technology Crossover Ventures (10 percent), and New Enterprise Associates (9.8 percent).

Although the public offering was no doubt humbling, Wuerch says the company has already bounced back. Motricity posted revenue of $113 million in 2009. And although they haven’t yet become profitable, the company’s revenues are climbing and losses are narrowing. In 2008, the company reported a loss of $78 million. In 2009 its loss was down to $16 million.

The company is ready to move forward—and aggressively so—with plans to ramp up its local presence, and expand to Asia and India. Citing the famous children’s fable, Wuerch says actions speak louder than words. His motto around the office is “maniacal execution against the plan.”

“My largest investors actually bought in the IPO, so if there’s any indication to the strength of the company, that’s it,” he says. “It has nothing to do with how much money you’re raising.”

And so far things are looking up. The company’s second quarter results—some $30.4 million in total revenues—exceeded expectations, Wuerch says. As the domestic market has improved for Motricity, Wuerch says it has enabled him to think more about international expansion.

Motricity relocated from North Carolina to Bellevue in December 2007, coinciding with the company’s $134 million acquisition of the mobile division of Infospace. But Wuerch had other reasons … Next Page »

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Jason Hartlove has a name and a rakish mug worthy of a soap-opera star, a resume that any Silicon Valley engineer would envy, and a bit of swagger as a turnaround CEO. He co-invented the optical mouse at Hewlett-Packard, ran a 3,000-employee manufacturing operation for HP spinoff Agilent in Malaysia, and set South Korea’s struggling MagnaChip Semiconductor on its current path to an IPO. “One of my investors said this—so I won’t claim it for myself—but I am a technology MacGyver,” Hartlove says. “If you give me some piece of technology, I can really figure out what to do with it.”

But at Palo Alto, CA-based Nanosys, where he took over as CEO in October 2008, Hartlove may be facing his biggest challenge yet. With an impressive portfolio of patents based on work at MIT, Harvard, UC Berkeley, and other institutions, the nine-year-old company has repeatedly been described as one of the most promising in a batch of nanotechnology startups that emerged around the turn of the millennium. In its early years, it investigated areas like solar cells and display electronics where it was thought that nano-engineered materials could lead to higher power output or greater efficiencies. But real commercial applications for nanotechnology insights have been slow to emerge, and Nanosys has yet to bring a single product all the way to the market (the first is set to appear in the fourth quarter of this year, if all goes according to plan).

“The clock is ticking for Nanosys…since its financial backers are counting on a return on investment in another three to five years,” wrote Technology Review magazine. That was in 2004—just a few months before Nanosys called off a planned IPO that still hasn’t happened.

Nanosys CEO Jason Hartlove

After the pulling the plug on the IPO, “the company sort of struggled a little between 2005 and 2007 about what exactly its mission was,” Hartlove told me earlier this week. “It continued to do some directed research but didn’t really have an eye toward commercialization.” The shakeup year was 2008: CEO Calvin Chow was let go, former Symyx Technologies CEO and Venrock partner Steve Goldby became the company’s interim leader (he’s still chairman today), and the board recruited Hartlove to find Nanosys some real products.

It wouldn’t be a stretch to call Hartlove’s tactics since 2008 MacGyveresque, and so far, he hasn’t even used a Swiss Army knife. He has focused the company on the two research programs that seemed most likely to produce marketable products in the near future. And he has pushed forward one of them, a “QuantumRail” component that increases the brightness and efficiency of LED backlights for mobile device displays, to the point that the company is earning “real revenue from real paying customers,” in Hartlove’s words. The first customer is LG Innotek, which plans to use the QuantumRail in 5 million phone-sized displays by the end of 2010; its purchases recently contributed to Nanosys’s first break-even month.

Demand for the nanocrystals that go into the QuantumRail, as well as the high-capacity anode material that Nanosys is developing for the lithium-ion battery industry, is growing fast enough that the company will soon need to find larger quarters outside Palo Alto, Hartlove says. And within 18 months, he says, the company hopes to be in a position to restart the IPO process. “We’ll have display products on the market, battery products on the market, a track record of revenue and profitability,” he says. “Those are the milestones.”

At least one Nanosys investor, Lux Capital, seems to buy into Hartlove’s optimism. “Things have really accelerated and they’re on a rapid path to success,” says Josh Wolfe, a managing partner at the New York-based firm, which contributed to a … Next Page »

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A new law is about to go into effect in San Francisco requiring sellers of mobile phones to post the “Specific Absorption Rate” (SAR) levels of the devices. How will conveying this information to consumers affect sales of mobile phones and devices—and which manufactures will feel the burden of this new stigma?

The Cellular Telecommunications Industry Association defines SAR as “a way of measuring the quantity of radio frequency (RF) energy that is absorbed by the body.” For a mobile phone to be sold in the United States or Canada, its maximum SAR level must be less than 1.6 watts per kilogram. In Europe, the highest allowed SAR level is 2 watts per kilogram.

I should state now that currently there is no concrete evidence that current SAR levels affect humans in any detrimental way. Some studies have shown that cellular radiation has no affect on the human body and does not cause cancer, while others say that higher levels of radiation with continued usage can have an impact on human physiology.

But it is likely that people’s fears of “radiation” will lead consumers to view higher numbers as negative, even if only subconsciously, which will affect mobile device sales.

By requiring sellers of mobile devices to post SAR numbers, the manufacturers on the low end of the scale would have an additional tool in their marketing arsenal to convince buyers that their device is the better choice for you. The numbers will probably not affect the buying decisions of brand loyalists, in the same way that nutrition facts don’t stop many consumer from buying food that may not be the healthiest of choices.

San Francisco may be the first city in the country to require SAR number to be posted, but will other jurisdictions follow suit? If more cities and states start requiring SAR levels to be posted along with the device, it may indeed begin to affect sales of devices in the upper range of “acceptable” limits. If manufacturers jump on the low-SAR band wagon and reduce their SAR levels by either lowering the power of their handsets or inserting shielding, we may see less reliable phones and more dropped calls.

What do you think about having the SAR numbers displayed with the mobile device? Will a higher number affect your buying decision? Do you have a phone in the “high” risk area, and how does that make you feel about continued use of the device? Let’s get a discussion going.

Data sources for charts: Environmental Working Group (http://www.ewg.org/node/2839, http://www.ewg.org/cellphoneradiation/Get-a-Safer-Phone?allphones=1)

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This week gadget reviewers got their first hands-on look at Microsoft’s much-discussed Kin One and Kin Two phones, which are designed from the ground up to support young hipsters’ social media and content sharing habits. So far, the pundits are raving about the phones’ novel operating system and the cloud-based “Studio” feature, a flashy private website where all of a Kin user’s photos, videos, text messages, voicemails, news feeds, and contacts are collected and displayed. They’re mostly panning the hardware itself, as well as the prices on the Verizon data plans needed to make the phones useful.

But whether or not the Kin phones have what it takes to win over today’s teenage and twenty-something Facebook/Twitter/MySpace addicts, it seems likely that they’ll reignite interest in the idea of “lifelogging”—the attempt to create a comprehensive digital record of one’s daily experiences. Up to now, lifelogging enthusiasts have been forced to handle most of their data-capture and archiving tasks consciously and deliberately: if you came across a Web page you might want to consult later, you could manually bookmark it or save it to a service like Evernote or iCyte; if you wanted to share or store a photo you snapped, you could put it on Flickr or Photobucket or Tweetphoto.

The Kin phones’ big redeeming feature, according to the reviewers, is that this sort of stuff all happens behind the scenes, automatically. Within five minutes of snapping a photo on a Kin phone, for example, the picture is wirelessly transmitted to Microsoft’s servers and added to your Studio, where it stays forever, adding to a running timeline of your life. “The implications here are huge: This is how cloud stuff is supposed to work,” writes Gizmodo’s John Herrman.

The Kin phones offer a taste of what may be coming sooner than anyone expected: a world full of cheap, portable sensing devices that document every interaction, every experience, and every perception we have, continuously uploading the information to vast server farms in the sky where the cost of storage is only a tad above zero. As it happens, this is exactly the world portrayed in Total Recall: How the E-Memory Revolution Will Change Everything, a 2009 book by Microsoft researchers Gordon Bell and Jim Gemmell. But even Bell— who began perhaps the world’s most ambitious lifelogging project back in 1998—might be surprised by how quickly his vision is growing into reality.

Soon, Bell and Gemmell wrote last year, everyone will be able to keep a digital diary recording everything about their lives that’s recordable:

If you choose, everything you see can be automatically photographed and spirited away into your personal image library with your e-memory. Everything you hear can be saved as digital audio files. Software can allow you to scan your pictures for writing and your audio files for words to come up with searchable text transcripts of your life. If you choose, you can save every e-mail you send and receive and every Web page you visit. You can record your location and path through the world. You can record every rise and dip in your heart rate, body temperature, bloodsugar, anxiety, arousal, and alertness, and log them into your personal health file.

All that will be needed to achieve this vision of “total recall,” Bell and Gemmell wrote, is an array of cheap, wearable hardware—”unobtrusive cameras, microphones, location trackers and other sensing devices that can be worn in shirt buttons, pendants, tie clips, lapel pins, brooches, watchbands, bracelet beads, hat brims, eyeglass frames, and earrings” or even implanted inside the body. Bell, who helped design Digital Equipment Corporation’s giant PDP and VAX computers in the 1960s and 1970s, is himself a walking laboratory for … Next Page »

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Thomas Thurston is a startup predictor. Tell him about your company, and he’ll tell you whether it will survive or fail.

No, he’s not an investor, or a psychic. By day, Thurston is a mild-mannered researcher and consultant whose training is in law and business. He’s the founder of Portland, OR-based Growth Science International, a research firm that works with entrepreneurs, investors, and corporations on their business strategy. By night, though, he’s testing every possible angle of a theory that could change the way a lot of people think about startup strategy.

Here’s the upshot of Thurston’s recent research, and why it’s important. Pretty much every startup you’ll ever meet will say it is better than its competitors. However you want to measure it—speed, technology, revenue model, whatever—a young company will say it outperforms others in its class. What’s more, it’s smaller and nimbler than the big companies, so it will be able to innovate faster and stay ahead of the curve.

Just one problem: That’s exactly why it will fail.

What a startup should do instead—to give itself the best chance of surviving—is enter the market at the low end of performance, Thurston says. That is, offer a product that’s not necessarily as good as its competitors, but is cheaper and more accessible. “Lower cost, lower performance, and gets better over time,” is how Thurston puts it.

If this sounds familiar, you’ve probably read Clayton Christensen’s books on business innovation. Christensen, a Harvard Business School professor, is the author of The Innovator’s Dilemma, The Innovator’s Prescription, and Disrupting Class, and he is coming to Seattle on May 17 to give the keynote at the Technology Alliance’s annual State of Technology Luncheon. The connection to Thurston is that he and Christensen have collaborated on testing predictions about startups and other companies.

In 2005, Thurston was working at Intel Capital when he got interested in whether a mathematical model could predict startup success or failure better than chance. He plowed through obscure academic papers and popular books, tried different things, and settled on building a sophisticated model based on Christensen’s principles of “disruptive innovation” (more on this definition shortly). Thurston got a hold of 48 business plans from within Intel—new businesses that had corporate funding—and checked how they did (survive or fail) against what Christensen’s model would predict. To his surprise, the model made accurate predictions more than 85 percent of the time, and the results were highly statistically significant.

Thurston decided to take a year off from his job in 2007 to continue the research with Christensen in Boston, co-sponsored by Intel and Harvard. They expanded their analysis to include all new businesses Intel has supported (roughly 100), as well as hundreds of outside companies across different industries and geographies. The result was the same: 85 percent accuracy.

Skeptics would say the model was tested by its own proponents, so it’s not surprising they would find it accurate. But Thurston maintains he is an independent researcher; he would happily switch to another model if it worked better, he says. He has since returned to Portland and continued the work at Growth Science, where doing the modeling is part of his consulting gig. He says he’s been getting lots of interest from companies and venture capitalists seeking advice.

So here’s how the predictions work, in a nutshell. First, a company is classified according to whether its market strategy is “sustaining” or “disruptive.” Sustaining means it is positioned as … Next Page »

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It’s been seven years in the making, but we might be looking at the biggest new text-input technology for mobile phones since T9 predictive texting. At least that’s what Swype is hoping. The Seattle startup is releasing its software for the first time today, on the Samsung Omnia II, an advanced smartphone with a touch screen and plenty of nifty features (some call it an iPhone lookalike).

Swype’s software is the most novel of these features. The technology lets you type quickly by sliding your finger, or a stylus, across the screen keyboard without tapping or pausing on the letters. The company says novices can learn to type 30 words per minute within just a few days of use. Swype tries to address one of the biggest complaints about touch screen devices—that they’re slow and frustrating to type on with existing methods.

I spoke with Aaron Sheedy, Swype’s chief operating officer, about the significance of today’s product rollout, as well as the broader strategy of the startup. First, some background. Swype was started in 2002 by engineers Cliff Kushler and Randy Marsden. Kushler had co-invented T9 at Seattle’s Tegic Communications (which has been installed on some 4 billion mobile phones), while Marsden developed the on-screen keyboard software installed in Microsoft Windows. The two got together after Tegic was sold to AOL in 1999 (it is now owned by Nuance), and they started working on alternative text-input systems, motivated in part by disability research.

Swype went through a rebirth of sorts in 2008, when Sheedy and CEO Mike McSherry (both former Microsofties) came on board. The company presented at last year’s TechCrunch50 conference, and announced a $1.3 million funding round from angel investors and company management in April of this year. It currently has 18 employees.

Samsung, which just announced it has sold its 50 millionth full touch screen phone, is a key partner in Swype’s product strategy. The prominent handset maker was also an early adopter of T9. “They’ve taken a good, aggressive approach to bringing new technologies to market,” Sheedy says. “We’re looking to deploy more devices with them next year, and with a few other partners.”

The Omnia II is available through Verizon Wireless, and it runs on Windows Mobile 6.5. Which raises the question of how Swype plans to expand its customer base. Swype gets paid by original equipment manufacturers (OEMs)—handset makers like Samsung—but it also has to have deep knowledge of the wireless carrier ecosystem. (Dan Shapiro of Seattle-based Ontela recently talked about how viral distribution is difficult in the mobile sector because of all the different platforms and carrier relationships.)

“We spend a lot of time outreaching to the carriers, as well as OEMs. The trajectory is fairly similar to T9. It’s very good business for us to make sure the carriers have a good handle” on what Swype’s value proposition is for their subscribers, Sheedy says. “To the extent you’re trying to deliver software to end users, you need to have relationships with both carriers and handsets.”

In any case, it sounds like Swype has solved an important problem for mobile phones (and other devices without keyboards, like tablet computers). What remains is to see how much consumer demand there is for what amounts to a new and better way of typing. I also asked Sheedy whether we’ll see Swype on the iPhone anytime soon. If so, he didn’t let on. “Right now we need to make sure our Samsung partnership is executed very well,” he says. “We need to stay focused on that aspect of our business.”

Lastly, I asked whether Sheedy sees the competition as primarily other text-input technologies—offerings from ShapeWriter, Dasur, and Nuance, for example—or things coming down the pike like speech recognition systems. Sheedy says it’s definitely the former. But he emphasized the bigger picture in terms of consumers. “Our goal is to be there as more and more people migrate to touch-screen phones,” he says. “[Swype] takes a frustrating experience and turns it into a fun one. It’s in line with the feeling of what a touch-screen phone should be.”

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Sony Ericsson, the London-based mobile handset maker, is shutting its Seattle-area office, as first reported by Engadget and Triangle Business Journal. Sony Ericsson is cutting about 2,000 out of 9,900 jobs globally, including closing offices in Research Triangle Park, San Diego, Miami, Kista, Sweden, and Chennai, India. The moves are part of a company-wide restructuring that includes moving its North American headquarters from Research Triangle Park to Atlanta, GA.

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[Corrected 9/28/09: Chase Jarvis is based in Seattle, not San Francisco. I regret the error and apologize to our Seattle readers!] Seattle-based commercial photographer Chase Jarvis is known for his arresting, color-saturated images of people in motion—skiing, swimming, somersaulting. He’s also known for (literally) trademarking the phrase “the best camera is the one you have with you.” His point is that you don’t an expensive SLR to take great pictures. You can do a lot with the camera in your pocket or purse—which more likely than not is a camera phone.

This week, Jarvis took his slogan to the next level, launching a trio of products—a book, an iPhone application, and a photo-sharing community on the Web—intended to encourage all photographers, pro and amateur alike, to get more creative with their camera phones. This cross-media campaign is a brilliant concept—both as a digital-arts-education project and as a piece of self-promotion for Jarvis and his studio—and it also happens to fit in really well with the theme I’ve been writing about in this space throughout September in “Seven Projects to Stretch your Digital Wings,” Parts 1, 2, and 3. So, if you’ve got an iPhone, go spend $2.99 on Jarvis’s app, called “Best Camera,” and consider today’s column Project #8.

Original

Jewel

Paris

Slate

Candy

There are more than 1,300 photography-related apps in the iTunes App Store, but as far as I know, Best Camera is the only one that comes with a dedicated community of other iPhone users. The app allows you to take a picture with the iPhone’s built-in camera, apply a range of cool digital filters and effects, and then upload your finished photo to a gallery that’s constantly being updated, in real time, with new photos from other Best Camera users. You can give the photos you like best a thumbs-up, and browse photos either by popularity or recentness.

In addition to introducing you to a bunch of other creative souls, Best Camera will let you play with your own images and perhaps invent your own new styles. That’s thanks to a surprisingly flexible interface for applying various filters to your raw images and changing the order in which the filters are “stacked.” The filters themselves go well beyond the typical gray-scaling, contrast-enhancing, or redeye-reducing algorithms you’ll see in other iPhone image editing apps: working with Übermind, a Seattle software development firm that specializes in photography-related applications for desktops and mobile phones, Jarvis dreamed up a dozen effects altogether, including four “signature filters” inspired by his own photographic styles.

It’s hard to describe the signature effects in words, but one filter, called “Jewel,” gives photos a warm, rich, almost antique look, while another called “Candy” creates an intense, high-contrast, caffeinated feeling reminiscent of Jarvis’s advertising photography. At left, I’ve lined up examples of the same photo from my own iPhone album, altered using the “Jewel,” “Paris,” “Slate,” and “Candy” filters, respectively.

As someone who loves to spend time looking at other people’s photos and trying to understand their styles—I could spend hours using the “Explore” feature at Flickr—I think the community feature of Best Camera is especially fun. It’s a nice feeling to upload a picture and then see it appear in the public gallery, which is accessible right from the app. You can browse the gallery from a desktop browser, too, at www.thebestcamera.com; the bonus, if you go there, is that the “recipe” used for each photo—that is, the combination and order of digital effects the photographer chose—shows up right alongside the image. (You can see all of my Best Camera photos here.)

Jarvis certainly isn’t the only professional photographer singing the praises of camera phones. Shawn Rocco, a staff photojournalist at the News & Observer in Raleigh, NC, shoots with a long-since-obsolete Motorola E815 mobile phone. In fact, the American art world seems to be developing a bit of a fetish for … Next Page »

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After just a couple of weeks, Ryan Morel was hooked on Bumper Stars, a free game on Facebook. He and his co-workers were but a few of the tens of thousands of people playing the game, a mixture of ping-pong, pool, and shufflepuck, every month. Morel only wished someone would make a mobile version of the game so he could play it even more. Then he remembered that, as vice president of business development at PressOK Entertainment, based in Seattle, he could make that happen. After a few months of negotiation and six months of development, PressOK and Large Animal Games, the game’s original developer, rolled out Bumper Stars Mobile for the iPhone last week.

Translating games from one format to another is not new, but in the rapidly changing world of smartphone applications, it is an emerging trend. PressOK is one of the first mobile gaming companies to import a game in this manner, although it is rapidly becoming popular among game developers. “Developing a new game is much more difficult than translating a game,” Morel explained.

PressOK was born last September in a merger between mobile game makers Mobliss and Reaxion. Reaxion still exists as a development company based mainly in Russia and Belarus. PressOK is a publishing unit, with the combined game catalog and intellectual property of both companies before the merger, Morel said. Bumper Stars was created by New York-based Large Animal in 2007.

Bumper Stars, which is available for $2.99 in the Apple app store, “is the first real PressOK release,” Morel said. Mobliss had focused on games distributed by AT&T and Verizon to traditional cellphones. The new focus of PressOK is on games for smartphones like the iPhone and the Android, which will be getting its own version of Bumper Stars Mobile soon. Some of the games will be original, and some will be new versions of games in the PressOK catalog. About 80 percent of PressOK’s focus will be on smartphone games from now on, Morel said, including ports, original games, and translations of games in other formats. Morel said there is a revenue-sharing plan with Large Animal, although he could not provide any details.

Morel isn’t concerned that people might hesitate to buy a game that can be played for free online. The company plans on doing advertising and marketing for the next few months, at least, to boost the popularity and sales of the game even as they start working on the next one.

PressOK is one of many companies that sees new opportunities in smartphone games, where possibilities are not available to more old-fashioned mobile games. “In traditional mobile games, there’s a little bit of a sink or swim mentality,” Morel said. If a game does not succeed immediately, it tends to disappear from easily accessible options for games to play on the phone. In contrast, he said, there’s a lot that can be done to boost the profile and sales of iPhone and other smartphone games.

Success would be to get Bumper Stars into the top 25 of paid apps, but it doesn’t have to happen overnight. “The good news is that your success can be built over time,” Morel said. “Once it’s developed, it costs us really nothing to keep it in the app stores.” An existing Facebook version of the game helps, as there are only a few phone games with online versions. “It already has a substantial user base. We can tap into the existing group of people who enjoy the game,” Morel said.

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Seattle-based Internet retailer Amazon today announced the launch of a new website focused on selling mobile phones and phone plans. AmazonWireless is limited to AT&T and Verizon plans but will expand as beta testing goes on. Currently, over 120 types of phone are available for sale. The main purpose of the site, according to the announcement, is to ease the process of buying or upgrading a phone or plan by getting rid of the paperwork and rebate mailing that an in-store purchase engenders.

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Nokia CEO Olli-Pekka Kallasvuo says San Diego plays a key role in the Finnish mobile phone giant’s plans to stage a comeback in the U.S. market. Kallasvuo was questioned by Wall Street Journal columnist Walt Mossberg at the All Things Digital D7 conference in Carlsbad, CA, about Nokia’s (NYSE: NOK) decline with U.S. carriers. Nokia operates a handset engineering facility in San Diego specifically for the U.S. market and Kallasvuo said, “I’ve been working on this for a long time. And it’s kind of interesting, the idea that we’re in San Diego now; we have about 2 or 2.5 years ago started to make U.S.-market-specific products right here in San Diego.”

Back home in Finland, Kallasvuo famously said in 2006 he wouldn’t sleep until Nokia had improved its position in the United States. Nokia lost its No. 1 rank in the U.S. after missing the trend for clamshell phones and thinner designs. The Finnish company now has approximately 9 percent of the U.S. market, while globally the company’s market share is 35-40 percent. This week Nokia took flak after the debut of its Ovi application store flopped. (Ovi is Finnish for ‘door’)

Nokia cut its workforce in San Diego from 1,100 to 500 in late 2006 when the company retreated from its CDMA operations. Nokia’s San Diego operation focuses only on North America, so there would be handsets designed for the U.S. that exist nowhere else. That is an exception in the company’s global strategy. Last year, Nokia and San Diego’s CDMA giant Qualcomm settled their legal disputes, and in January the two former rivals announced they were cooperating in the development of U.S. mobile devices.

Kallasvuo was showing Nokia’s new flagship phone, the N97, at the D7 conference yesterday. But the N97 does not have a U.S. carrier, and it costs $699.

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Seattle-based Dashwire, a mobile-Web software startup, has closed a $1.6 million round of financing (out of a $2.3 million offering), according to a regulatory filing. The round was led by Seattle-area investor Geoff Entress, who has previously backed the company and serves on its board, and Best Buy Capital, who has added Ying Zeng to the board. Best Buy looks to bring some important expertise and insight into consumer preferences to what this startup is doing.

Dashwire makes software that runs on your cell phone and automatically uploads content like pictures, videos, contacts, phone records, and text messages to its servers, which you can access through a Web dashboard. The service lets you do things like share photos to Facebook or Flickr, manage your cell phone minutes online, send mobile text messages from your desktop, and migrate content from one phone to the next.

Ford Davidson, Dashwire’s founder and chief executive, says he’s excited by the new funding and the market opportunities it will open up. “We’re growing our business right now,” Davidson says. “We will hire a few more developers. We’ll have some new things released later in the year, and we’re cranking away on it.”

Dashwire currently runs on Windows Mobile and Symbian operating systems—and on handsets ranging from Nokia, Samsung, and LG to Motorola, Sony Ericsson, and HTC. A BlackBerry product is slated to come this fall, followed by a product for the Google Android platform. Davidson succinctly describes his company’s offering, which is actually pretty complex, as a way to “synchronize your mobile content, synthesize your data on a private website, and socialize it with your friends.”

Davidson started the company in 2006 with the goal of integrating mobile phones with personal computers and the Web. Before that, he was a Windows Mobile product manager at Microsoft for three and a half years, and says he was frustrated that Microsoft wasn’t focusing on the consumer market. “People were asking me questions. I sat through meetings with [wireless] operators and device manufacturers complaining to Microsoft about how hard it was to set up their phones. They were saying, ‘Listen guys, we’re seeing device returns larger than we’d expect, and trouble with users getting up and running with their devices.’ These phones have amazing capabilities, and I knew corporate customers were set, but consumers were going to hit problems.”

Indeed, those problems have driven the growth of a whole new mobile sector. In the past year, big companies like Google, Microsoft, Nokia, and Apple have been investing heavily in “connected services,” Davidson says, which is shorthand for software to help make mobile devices more user-friendly with the Web. “Look at those giant software companies investing in services for their particular phone platform. The space has gotten way more exciting for our business. We are cross-platform. I’m even more bullish about the market to support what we’re doing.”

Dashwire currently employs six full-time staff and five contractors, and Davidson says he’s looking to hire three or four more people. In terms of the competition, Microsoft bought the Portuguese software firm MobiComp last year, and has released a mobile Web service called MyPhone that’s in early days. Locally, Dashwire also sees some overlap with Seattle-based Ontela, a mobile photo uploading and sharing service, and Ovi Share, the Nokia-run service based on the former startup Twango’s technology (though the latter is closing its Kirkland office).

But the crowded space doesn’t seem to faze Dashwire. “We’ve learned quite a bit from usage,” says Davidson, a Bellevue native and Harvard University alum (who says he’s going to a Red Sox-Mariners game this weekend). “We hope to keep being nimble and stay ahead of the pack.”

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One of the great pleasures of being a journalist is listening to influential leaders discuss where they come from and how it affects their strategy. Luke and I recently sat down with Tom Alberg, co-founder and managing director of Seattle-based Madrona Venture Group. In addition to sharing his thoughts on the future of newspapers and online media, Alberg spoke extensively about his career and how he has witnessed, and participated in, the rise of the technology industry in Seattle.

Let’s take a big step back here. At Xconomy, we’re about delivering the most important breaking news and in-depth analysis of tech and life sciences innovation. But it’s hard to fully appreciate all the latest trends unless you understand the perspectives of the top players. In our interview, Alberg touched on the early days of his career as a lawyer at Perkins Coie in the late ’60s, his later stints as president of LIN Broadcasting and executive vice president of McCaw Cellular, and the birth of Madrona in the mid ’90s. Along the way, he built notable relationships with leaders in wireless, medical devices, and e-commerce—people like Craig McCaw, Jeff Bezos, and Gordon Kuenster of ATL (and more recently, Asemblon).

Maybe you know all the history already, maybe you don’t. Certainly the story of Madrona’s involvement with Amazon has been told many times. But I bet the broader story of Alberg’s career and his observations from the local scene will give people a deeper understanding of Seattle-area innovation and Madrona’s role in the business community.

Here is an edited account of our conversation:

Xconomy: So tell us about your early days in Seattle.

Tom Alberg: My career has paralleled, a little bit, the growth of the technology industry. I started off as a young lawyer in 1967. In those days, there were a few high-tech companies. There was Fluke Manufacturing, and Physio-Control was about to start. There wasn’t much. Seattle had Boeing, and it would go through phases of being less about airplanes, more about computer services and other things. But there were little companies, and there was starting to be more entrepreneurship. When I joined Perkins, I’d been in New York a couple of years, so I was an expert, I thought, in securities law and raising money. But I’d been dealing with hundreds-of-millions-of-dollar deals, not startups. For some reason, I always had a technology interest.

One of the early things that happened was a guy came in named Gordon Kuenster. He’d been a Boeing executive and had been hired to run this startup called ATL [Advanced Technology Laboratories], an ultrasound company out of the University of Washington. He comes into Perkins because Perkins handles The Boeing Company. I’m the low man on the totem pole, so the partner in charge of Boeing has me come and meet with this guy. The partner said, ‘I don’t know, we don’t really do startups.’ I had to plead, ‘Let’s try it!’

X: How did ATL play a role in the rise of the Seattle tech scene?

TA: ATL became a major success at the same time as Physio-Control. Physio went public, and ATL got bought by Squibb for $60 million—big money in those days [1979]. And then what happened was, Hunter Simpson at Physio-Control and Gordon Kuenster at ATL, they invested in some other companies. People who made money in those companies invested in some companies. And then the biotech thing started. I represented Immunex when it first started [in 1981]. It went public, the stock crashed, it survived all those years somehow. So on the biotech side, a bunch of stuff started happening. There was quite a bit of activity, but nothing like it is today.

And then, of course, there was Microsoft. So in 1990, I was still at Perkins. It was a good technology practice. I went over to McCaw Cellular, partly because I was interested in technology. McCaw was sort of a secret company in Seattle. It was in the cell phone business; nobody had cell phones. There was that phone in some people’s cars, sort of like a radio phone or something. Nobody knew much … Next Page »

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Audience, a Mountain View, CA-based company that makes voice-processing software to reduce noise in cell phones, announced it has closed a $15 million Series D round of financing from existing investors, including Seattle-based Vulcan Capital. Other investors in the round were New Enterprise Associates, Tallwood Venture Capital, and VentureTech Alliance.

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You may not realize it, but your mobile phone is a cold-blooded killer.

Its assault began with little fanfare—the first victim, the phone booth, wasn’t particularly well-loved, and nobody was expecting a complete extermination. Yet here we stand in a world where Clark Kent couldn’t find a place to pull on his Supersuit if the fate of Metropolis depended on it.

The next victims were just “accidents.” Seen anyone whip out a paper address book lately? And who would have thought that a little thing like the clock on the phone’s home screen could cause so many business professionals to stop wearing watches? Just who, exactly, is next?

For those looking over their shoulder, here are the three keys that will lead us to the next genre killer:

1. Every phone’s got it. Until a feature is a part of every phone, mainstream, non-tech-savvy America won’t notice that it’s there—camera phones only penetrated everyone’s consciousness when they were everywhere.

2. The user experience really works on a phone. Mobile TV is coming, but 50″ plasmas aren’t going—the 2″ experience just doesn’t compare. SMS remains the definitive mobile success story, but don’t wait for the end of email—at least not until someone solves the keyboard problem.

3. It crosses the Good Enough Threshold. The “GET” is the point where the best phone experience exceeds the minimum consumer bar for the feature. For example, the camera GET is two megapixels, autofocus, and flash. It’s no coincidence that this is about the quality level of a cheap disposable camera.

Following these rules, let’s break down the likely victims:

Point-and-shoot cameras—The writing’s on the wall.
There’ll always be a place for high end single-lens reflex models and the like. Enthusiasts will want the very best, regardless of cost or size. Most consumers, however, ask for two things from their camera: make it small and make it cheap. The GET for camera phones is being crossed as we speak, and then comes the end of the mass market digital camera. Who’s going to pay $250 for “just a camera” when their carrier just put one in their pocket for free? Danger level: critical.

Landline phones—The signal is still keeping busy.
The latest innovation often destroys its predecessor—CDs killed records, and DVD decimated VHS. The most obvious target for the phone, then, is the landline. But while the dial tone is clearly in decline, a tradition of reliability and security in case of emergency are keeping it alive. Burglar in the backyard? Hope you can get signal for 911. Extended power outage? Your touchtone telephone will be up and running, even as cell sites go offline and your phone battery dies. Installing an alarm for your house? Neither cellular nor VoIP are approved alternatives for trusty old copper. The GET for landline replacement is high reliability, and until carriers can guarantee it, the wires are safe. Danger level: moderate.

E-mail—Just a flesh wound.
SMS has revolutionized the way we communicate, but it’s still hard to beat … Next Page »

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Seattle mobile startup Ontela is announcing today that its photo-sending service for camera phones is now available through T-Mobile, via a partnership with the photo-sharing website Photobucket. The news comes on the heels of Ontela’s software going live on Verizon Wireless phones in November (also through Photobucket), as well as being pre-installed on four of the top five handset manufacturers—Nokia, Motorola, Samsung, and LG—as of last month.

Together, these deals could represent a tipping point for Ontela, which in the past year has been signing up wireless carriers and social websites en masse in an effort to become a mainstream service for sending and uploading pictures from mobile devices. Its software automatically sends photos from your camera phone to your e-mail inbox, computer, or photo-sharing site. Ontela sells its software to wireless carriers, who in turn bundle and sell the service to subscribers as part of a monthly package. The company was formed in 2005 and is backed by some $15 million in venture funding from Steamboat Ventures, Oak Investment Partners, Hunt Ventures, Voyager Capital, and Eastven Venture Partners.

To get the story behind the T-Mobile deal, I visited Ontela CEO Dan Shapiro at his company’s digs in the historic Smith Tower in Pioneer Square. We strolled up to the famed “Chinese Room” on the 35th floor, which is filled with intricately carved decorations and wood furniture, a gift from the Empress of China to tycoon L.C. Smith. The outdoor deck gave us a great view of downtown Seattle, Elliott Bay, and the surrounding mountains (that day was a bit drizzly, though). Back in the office, Shapiro gave me a demo in which he installed the photo-uploading software on a random phone in about a minute, took a picture, and e-mailed it to me. Most other mobile applications are “freaking impossible to install,” he pointed out.

The T-Mobile deal brings the total number of carriers offering Ontela’s software to 30, Shapiro said. All the top handset manufacturers except for Apple now offer the service, and this is the first time it’s available on smartphones and BlackBerries. No Android G1 yet, though—and apparently the iPhone is not a very good fit for Ontela. Nevertheless, Shapiro said, “We’re really excited. About half of U.S. subscribers can get our service now.” He added that T-Mobile’s subscriber demographics are a really good match with Ontela. “T-Mobile users take a lot of pictures,” he said. “With the launch of their new applications store, they’re poised to do amazing things with this product.”

Shapiro also told me about how the latest deal came about. “It took two and a half years of having thoughtful conversations with carriers about what’s important to them,” he said. “‘Here’s what we think you’re doing, and here’s how we think we can help move the needle on your business.’” Whether it’s reducing costs or providing a service that customers really want, Shapiro said, a deep understanding of the carriers’ needs is crucial. “Listening as well as telling—that’s important. ‘Here’s how we can help you build your business.’ That takes a long time.”

Lastly, I asked Shapiro whether the close proximity of T-Mobile’s headquarters (Bellevue, WA) played any role in the deal-making. He replied that the key meetings actually took place outside the Seattle area—typically at big wireless conferences in places like Las Vegas, San Francisco, and Barcelona.

It reminded him of how he originally met venture capitalist Tom Huseby, the mobile guru who is chairman of Ontela’s board. It was February 2006, and they were all in Barcelona for a 3GSM World Congress meeting. Just milling around, Shapiro happened to spot Huseby’s nametag on his shirt and introduced himself. The two hit it off, and Shapiro ended up giving Huseby a photo-uploading demo. Having their first meeting in Barcelona was kind of funny, seeing as Huseby’s office was just a couple blocks away from Ontela. But it fits with the notion that in the mobile world, it doesn’t matter where you are, as long as you have a connection.

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