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

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

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

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As you have read this week about the financial details of Facebook’s IPO filing, you have no doubt stopped to think about—or daydream about—what your own company might be worth.  While going public might be a distant or inappropriate goal for your own venture, Facebook’s IPO serves as a timely reminder that you should be calibrating your business and growth strategies to make your company attractive to investors or strategic partners.  After all, for most startup entrepreneurs, the eventual reward comes in the form of a merger or acquisition, rather than an IPO.

The good news is that the vast majority of technology CFOs (75 percent) expect M&A activity in the sector to rise in 2012, according to the fifth annual BDO Technology Outlook Survey, released this month by BDO USA, LLP, where I am a partner and national director of the Technology and Life Sciences Practice.  However, a word of warning: I’ve seen many deals derailed—with significant delays or value erosion—because of the management team’s undisciplined approach to presenting financial information.

Therefore, whether your own organization is in the market to acquire another business for strategic growth purposes, or you are working to position your company as an attractive acquisition target, there are two issues that are crucial to generating or maintaining shareholder value: Having an acute awareness of the motivating factors behind an M&A transaction, and providing an orderly financial snapshot that will answer the mostly likely questions from potential partners.

Motivating Factors Spurring M&A Transactions

In our survey, respondents predicted that the top three motivations behind M&A deals in 2012 will be revenue growth, enhanced market share, and the acquisition of new technology and intellectual property. In other words, a significant majority of CFOs believe that M&A transactions will mostly be offensive in nature. A company waging an offensive strategy isn’t necessarily engaged in hostile takeovers; rather, it means the focus is more on growth than cost-cutting. Therefore, companies are looking for acquisition targets that will fill in holes in product or technology portfolios, and are not necessarily angling to take a competitor’s product out of the market.

Financial Rigor

Understanding the motivations of other parties in a deal can put you in a more powerful position, either as an acquirer or a target. Equally important is meeting the due diligence requirements of an acquirer in an efficient and confident manner. By ensuring that reliable and accurate financial and operational information is available, companies can avoid roadblocks to the M&A process—roadblocks that can significantly erode shareholder value, if not derail the entire process.  For example, although the survey indicates a positive outlook for the industry this year, respondents foresee overall revenue increases of just 2.6 percent – significantly lower than the forecasted growth in last year’s survey (10.4 percent).  If you are experiencing a lower revenue forecast this year, be prepared to address how you intend to get your company back on track.

Beyond M&A Transactions

Even if M&As are not currently a part of your growth strategy, accessing capital remains a top of mind issue for technology companies. The good news is that—according to our survey—over three-quarters (76 percent) of respondents say they feel better about the ability to access capital in 2012. The hurdles to arranging debt financing remain high, but businesses with strong fundamentals and fiscal discipline are once again able to obtain credit. In fact, the majority of respondents who plan to raise additional capital this year intend to use debt financing. The key to making debt work for your company is to manage the process proactively, and avoid being forced into reactive mode.

Whether your business is planning to undertake a strategic transaction or simply needs to access capital through financing, careful planning is critical. A blend of fiscal responsibility, corporate discipline and the willingness to take measured risk are the keys to powering growth.

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Everyone wants to recapture pieces of the past these days. Facebook for example changed all profiles to the timeline format this year, and others in the social media space are pursuing ways of tracking the past. New York-based Timehop has developed its own technology to let individuals recall content from their personal histories, via once-day e-mails. Jonathan Wegener, CEO and co-founder of Timehop, believes the e-mails offer deeper looks into the past than its rivals in the market.

For the team behind Timehop, the technology also marks a major change from where they were one year ago. Back then, they were also working on a startup called FriendsList as part of TechStars’s inaugural NYC class. FriendsList is now defunct. And the tale of how the team scrapped FriendList and moved forward with Timehop provides an interesting case study on startup strategizing—with a dash of nimbleness.

Timehop sends its users e-mails each day that tell them what they were doing exactly one year ago, based on information gathered from their Twitter, Foursquare, Facebook, and Instagram profiles. These personal newsletters, Wegener says, offer more context than what the sources offer individually. “There’s a big opportunity in history, and no one is doing it well,” he says. Wegener says Timehop gives its users a picture of how they spent their time, whom they spent it with, and what they were thinking across the social sphere. “Effectively you’re writing a diary without really doing anything,” he says.

One-year-old Timehop raised $1.1 million in seed funding in January from OATV, Spark Capital, and individual investors who include Foursquare co-founders Dennis Crowley and Naveen Selvadurai. Wegener says the seed funding will go towards … Next Page »

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

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

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

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

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

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

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Citizen Effect, the Washington, D.C.-based microphilanthropy organization that is perhaps best known for its work in India, has just launched a new initiative called Detroit4Detroit, which aims to fund 150 community-improvement projects using a strategy that’s heavy on social networking and other digital tools.

“Detroit4Detroit is based around the idea that anyone can be a philanthropist,” says Eric Moss, Detroit4Detroit’s project manager. “It’s about actualizing our power and actualizing our social networks.”

Citizen Effect organizers work with its partners—ACCESS, Brightmoor Alliance, COTS, Detroit Area Pre-College Engineering Program (DAPCEP), SER Metro Detroit, Wellspring, and Vanguard—to curate a list of viable projects, with each submitting five to ten projects for consideration. Once a project has been vetted, it’s posted to the Detroit4Detroit website for a citizen philanthropist, or CP, to adopt. Once a project has been claimed, Citizen Effect gives the CPs a digital toolkit that enables them to promote the project on sites like Facebook and Twitter, reach out to potential supporters through fundraising emails, and have an online platform to post blogs, videos, and photos related to the project.

The goal of Detroit4Detroit is to have 150 people raising $250,000 across 150 projects, though Moss says this initial target is a starting point for what he hopes will be “limitless” community philanthropy.

“I’m blown away by the enthusiasm and how many people want to sign up,” says Matt Bailey, who manages the tech and data side of Detroit4Detroit’s operations. Though the initiative just held its formal launch last month, 15 people have already signed on to be CPs and are in the process of being matched with the project that best suits their talents, interests, and networks. (One project has officially started fundraising.)

The Detroit4Detroit model was developed with the help of the Knight Foundation, and represents the first time Citizen Effect has launched a microphilanthropy initiative of this kind in an American city.

“This is a special moment in Detroit,” Moss says, noting that the city is alive with grassroots energy. “We want to fit into the revitalization and renewal efforts in a way where we engage each other about the idea of philanthropy. We all can make a difference, especially if we’re provided with the tools that level the playing field.”

Moss is himself representative of the kind of change that is rapidly taking root in the city, where people who grew up in greater Detroit but left to attend college or seek work are returning to the area with a sense of purpose. Moss grew up in suburban Detroit, went to college in D.C., and lived in New York and Los Angeles before making his way back home.

“I moved back two years ago and I came back willingly,” Moss says. “What brought me back was the soul of the city, which was missing in the other places I lived. There’s an electric energy going on here that none of us can deny. It’s a great opportunity to experience this very positive transition of order out of chaos.”

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Much like the New York Giants charging onto the football field, companies such as bitly, BarkBox, and Gilt Groupe—along with their backers—have upped the caliber of innovation expected from startups in New York. In response to this upswell of activity, Xconomy brought some 250 members of the local investor and entrepreneurial community together Wednesday to catch a glimpse of the city’s potential as a venture hub. (And to debate the merits of the Giants vs. the Patriots.)

Fred Wilson, managing partner of Union Square Ventures, and Todd Dagres, general partner and founder of Spark Capital, discussed the role media hype plays with some startups and the rise of social media, during a keynote chat moderated by David Rosenblatt, CEO of 1stdibs.

Admittedly, the media is notorious for picking its darlings when discussing innovation while barely mentioning some growing companies. Though Instagram, for example, makes headlines when it lands funding, Wilson said, Union Square Ventures has companies in its portfolio quickly building their businesses under the radar. “They don’t get caught up in a bunch of nonsense,” he said. “We have companies like Indeed.com and Return Path that will be public companies in three or four years—maybe less.” The management teams at those companies, Wilson said, are more focused on developing their products than building their media following.

Dagres said that some companies simply do not talk up their plans. He compared Twitter, a usual suspect on many blogs and news sites, with Tumblr, which until recently was not as vocal. “Tumblr couldn’t get arrested even though it was growing like crazy and was very substantial,” he said. “You didn’t hear anything about it. Now it’s starting to catch on.”

New York’s Tumblr could be on to something by shrugging at hype in order to endure in the social media arena, Wilson said. He noted that early players such GeoCities gave way to MySpace, Facebook, and now Foursquare and Pinterest. “People are figuring out how to make these services more useful and how to also make them businesses,” he said.

The trouble with GeoCities, Wilson said, was in spite of the high hit counts on those … Next Page »

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For months, Aaron Greenspan, the founder of the now-defunct mobile payments service FaceCash, has been getting deeper into a legal battle with the State of California over the way it regulates money transfers. And he thinks the implications of his fight go well beyond his startup.

According to an open letter Greenspan wrote to Governor Jerry Brown, a new financial regulation enacted in the state last year “makes it nearly impossible for new companies to offer disruptive products and services. By virtue of the fact that Silicon Valley is in California, this means that innovation in the payments sector in this country has more or less stopped.” In November, Greenspan filed a civil complaint against the State of California, claiming that the new law, called the Money Transmission Act, is unconstitutional because it attempts to regulate interstate commerce, and because the burden of the law outweigh the benefits. Greenspan also claims that arbitrary enforcement of the law violates the 14th Amendment.

Greenspan, 28, founded his company with the aim of changing the traditional payment model, creating a system that allowed merchants to accept payments by scanning barcodes off of shoppers’ phones. The bar codes were linked to bank accounts and worked like debit cards, eliminating interchange fees that merchants pay credit card companies (FaceCash charged its own 1.5 percent fee). They also provided a measure of security for consumers, whose photos popped up with their bar codes.

But as Greenspan was getting pilot vendors and users on board in Silicon Valley, the state enacted the MTA, which requires that companies that work as domestic money transmitters within California obtain a license to operate. Under the new legislation, these companies are required to have a minimum net worth of $500,000, as well as bonds or securities on deposit of at least $500,000 or 50 percent of daily outstanding payments, whichever amount is greater. On top of that, companies like FaceCash that receive money to transmit have to have securities of $250,000.

Before the MTA, only companies that provided international money transfers needed to abide by the deposit requirement, and there was no net worth requirement

After seeing news about the change on the Internet, Greenspan set up an appointment with the state Department of Financial Institutions (DFI) to obtain a license so that he could comply with the law by the time it went into effect on July 1, 2011. Since he met the $500,000 net worth requirement—and could afford the bonding requirements—he was unconcerned.

But the meeting did not go well. Greenspan says he soon found that to ensure smooth sailing for his license application, he had to have more than $500,000 on hand. The problem was that the DFI couldn’t tell him exactly how much more—even though he had provided audited financial statements to the state before the meeting.

“It was a pretty epic disaster,” Greenspan says. “From his point of view I was undercapitalized, from mine I was fine, but I didn’t know the number they needed. It clearly didn’t matter what I told them, they still were not able to provide an answer.”

Following through with an application that might fail would cost Greenspan a $5,000 application fee, but it could also affect his ability to get licenses in other states, he says. If he moved on to apply in say, Pennsylvania, he would have to explain why he failed to get a license in California.

“It’s like car insurance,” Greenspan says. “It’s an important factor.”

Not only that, Greenspan also claims the department warned him that if he continued operating in other states where he already had licenses—Idaho and Alabama—he could face jail time in California for operating without a license. But the law was so new, they weren’t sure.

Greenspan wasn’t about to take chances. The day before the law was set to take effect, he shut down his operations, laying off a full-time programmer and six contractors.

The regulatory troubles have been particularly devastating for Greenspan, who was self-funding the company. The 28-year-old entrepreneur is a longtime programmer who created a precursor to Facebook at Harvard—a Web service he called … Next Page »

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There’s a new player in the seed-stage investment game in Boston. As of this week, the Experiment Fund is open for business at Harvard University, backed by the Silicon Valley venture firm New Enterprise Associates (NEA). The startup investment fund is being hosted by Harvard’s School of Engineering and Applied Sciences in Cambridge, MA.

The new fund is led by Hugo Van Vuuren (see photo above), a Harvard graduate student and entrepreneur, and two venture capitalists from NEA, Patrick Chung and Harry Weller (both Harvard alums). David Edwards, a Harvard professor of biomedical engineering, serves as an advisor to the fund. Van Vuuren and NEA did not respond to requests for comment in time for this article.

The basic structure of the Experiment Fund is that selected startups—mostly student-led teams from Cambridge—will receive up to $250,000 in seed funding over the next two years, presumably in exchange for a sizable equity stake in the companies. The fund is based out of Harvard but says it will operate independently of the university and will look at teams from other local schools—and, more broadly, from the East Coast. The sectors targeted are pretty broad as well; they include information technology, healthcare, and energy.

No word yet on the size of the fund or how many companies it will invest in. But Van Vuuren, a recent fellow at Harvard’s Berkman Center for Internet and Society, said in a press release that he and his partners are looking for “smart and resourceful people, zealous full-time teams, and experiments in need of seed funding and hands-on help to get off the ground.”

Not to beat a dead Zuckerberg, but the overarching goal here is to keep the next Facebook in Boston—and, preferably, affiliated with Harvard. “It’s continued growth of the ecosystem for Harvard and beyond,” says Gordon Jones, director of the Harvard Innovation Lab, which is collaborating with the Experiment Fund to provide office space and resources, but is separate from the new fund. Jones calls the Experiment Fund “extremely complementary” to the i-Lab.

One of the first Harvard teams to receive an investment from … Next Page »

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I’ve been taking in Google’s recent release of “Search, plus your world” (or SPYW as the cool kids say) over the last several days, reflecting on what it means for Wetpaint and other media companies; but perhaps even more importantly, deeply understanding what it indicates about Facebook and Google themselves. As we all know by now, these most recent changes are meant to make its search more personal by up-weighting social activity in its algorithm, and using each person’s own position within their circles to determine relevance.

You might think that I would be one of the first to jump in the game with Google. After all, my company Wetpaint has been making a massive investment in distributing our content via other social channels, particularly Facebook. We’ve been seeing massive returns. And, I’ve even gone on a limb to predict that Facebook should be implementing its own Web-wide search this year.

Still, when it comes to playing Google’s social games, so far I’ve advocated staying on the sidelines of all their social venues—even their recent business pages. That’s been because even though the stadium lights are on, no one is on the field. More specifically, even though Google has 90 million registered users of the service, we see very little activity of significance among our target audience. But with its new SPYW changes, the question is: Has Google indeed forced companies’ hands?

Unfortunately, they have. And, in doing so, it marks a milestone in the changing mentality of Google. The search company’s great innovation—using the signals of the Web to best determine what the audience really wanted—has now been subverted. The company’s originally unshakable-seeming ethos of mechanistic neutrality has slowly, slowly, slowly, and now all of a sudden given way, and the new precedent is to favor its own business interests over those of the audience.

The result, like it or not, is that companies that rely on search for traffic must hear and obey loud and clear Google’s message that Google will favor those that favor it. It’s a dirty truth, and one far more chilling than the other more technical biases of its algorithm before.

Google has already started infusing search with the content that’s been blessed via Google+. Do a search for “New York Times” and you’ll probably find the New York Times plus.google.com page as the second search result. Search for “Mark Zuc” and you’ll likely see Zuckerberg’s Google+ page (despite the irony) populate as an option in the Google Instant choices.

I haven’t seen this bleed over to news stories yet, but I believe that it’s coming. Soon you’ll do a search for the latest headlines and your search results will be chock full with musings from your friends and non-friends inside Google+.

Google+ may not take off as a real social network, but Google has indicated that it’s throwing its full weight behind it anyway to make the best of what it’s got. Even if consumers don’t adopt it en masse, whatever activity is present will pepper the famous algorithm’s search results.

The irony here is that Google’s pivot toward a social search belies how important that social data is. The company is putting its lock on search at risk to gain a chance at a foothold on social. But what really comes through to me is that a great social search can be a winning product—if it’s populated with the right social data. So far, Google’s is not.

The question is—if that’s what I’m after—won’t I still just go to Facebook, where all my friends actually are (and which Google has adamantly cut out of SPYW)?

While SPYW does force publishers to support Google’s social network, fortunately it will be a temporary sacrifice from publishers during this period of transition from these days of search to a socially wired world. And that forthcoming world looks increasingly like it will be wired not by Google, but by its arch-enemy Facebook. Indeed, by corrupting the quality of their search product, Google may have just opened up a clear product entry into search for their rival as well.

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With a kind of candor that speaks of the motivation in the startup and investment communities, angel investor Jerry Neumann talked bluntly Tuesday evening about the companies he backs. “All of my entrepreneurs are irritating,” he said jokingly during a panel discussion at the Digital Media Center event held at Times Square in New York. “They need to be smarter than me, they need to be more driven than me, they need to be people who can go the distance,” he said.

Neumann took the stage with Benjamin Wolin, CEO and co-founder of Everyday Health in New York, and moderator Dennis Kneale, senior media and technology correspondent for FOX Business Network. Wolin and Neumann spoke about the startup and investment scene during the third and final panel of Tuesday’s event, hosted at the Nasdaq Marketsite by Digital Media Center, a New York group formed in late 2011 that brings together investors, digital media startups, and other industry players.

Digital Media Center was formed by Cooley, CTPartners, Deloitte, Nasdaq, and Silicon Valley Bank.

The night kicked off with representatives from Facebook, Samsung, and EMC’s data storage division Isilon Systems discussing trends in social, local, and mobile technology—then continued with a look at the future of digital content through the eyes of Verizon and Heart Television. Wolin and Neumann later engaged in a lively conversation about funding and building up startups in the current clime.

“It’s a lot easier to raise small amounts of capital,” Wolin said, “certainly to get started it’s a lot easier than it was ten years ago.” Everyday Health operates websites for brands such as South Beach Diet.

“It’s a great time to be an entrepreneur,” said Neumann. He has been investing in … Next Page »

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Finland’s Playmysong said in a press release it raised a seed round, $350,000 according to a spokesman, led by startup accelerator Lifeline Ventures and opened a New York office this month. The company plans to also set up shop in San Francisco in February. Playmysong’s Apple iOS and Web app lets users request songs to play at participating bars, nightclubs, hotels, and cafés, and simultaneously checks in their locations via Facebook and Twitter. The venues let the app’s users connect over WiFi or 3G wireless with the in-house iTunes playlists to make their choices.

Playmysong charges venues for premium services, which include the option to send messages with discount deals to users of the app after they request songs. Playmysong says its New York office will handle business development and marketing in the region.

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

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

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

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

Greg Enell

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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From cloudy Seattle to the vast suburbs of Silicon Valley, we covered a lot of ground on MIT Sloan’s recent technology trek, which concluded with a leg in Boston.

The first stop was Seattle where it was predictably raining. Visiting Amazon, Microsoft, and Adobe, we came away with an appreciation for how much tech activity is actually going on in that city.

At Microsoft, we got to talk to alumni about what it’s like to work there. Yes, it’s a large company and therefore bureaucratic, they confessed. But, the huge plus is that they have the resources to work on some very innovative projects. Amazon also was big, but the theme there was its quirkiness. In addition to all of the desks being made out of doors, they also have whiteboards everywhere, even in the elevators. I made sure to leave an “MIT Sloan was here” tag in one of the elevators!

Adobe seemed like a more typical office where they provide a pleasant work environment with lots of exposed brick and wood. Overall, I could really see myself enjoying working in Seattle.

Moving on to Silicon Valley, it was noticeably sunnier and warmer. It was also a lot bigger. In Seattle, you could probably get by with just a bike and public transit, but good luck to anyone who tries that in Silicon Valley. Here, you definitely need a car. Being settled with a family might help too, as the area is comprised of endless suburbs punctuated by large office parks where the tech companies are located.

If you want to live where the action is, you’d need to get a job in San Francisco or do the 40-minute commute each way and hope for no traffic. I guess I should point out that Palo Alto does have a downtown, but it’s just two or three streets and most people would still have to drive there.

As for the tech companies, most of the ones we visited were in Silicon Valley and all offered quite a lot of amenities compared to what we saw in Seattle. Free food, gyms, yoga classes, dry cleaners, and acupuncture were just some of the perks you get at most of these companies. I guess they need these things to entice people not only to live away from the city, but also to work some pretty long hours.

For example, the employees at Facebook—who all seemed to be in their 20s—joked that working at some firms in the Valley is like working in a sweatshop. Employees are expected to work extremely hard, but they also provide an endless amount of food that includes a rotating candy of the week. Facebook keeps its employees well fed, caffeinated, and hydrated with the largest cafeteria of all the tech companies we visited.

Google had a similar environment with lots of … Next Page »

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Though the North American International Auto Show just opened to the public Saturday, I was able to preview it last week with other reporters from around the world. Unlike the past few years, which were dominated by austerity and green tech, the feeling I got this year is that the car companies are seeking to reignite our love affair with automobiles through sleek designs and endless connectivity features. Essentially, they want to make it fun to drive again.

According to research data from Polk, the average age of U.S. vehicles is a record 10.8 years, which means there’s huge pent-up demand. But in this shaky economy, consumers still expect their cars to justify their price tags by saving them money at the gas pumps; playing the songs off their iPods; and telling them when they’re about to back into a shopping cart, which is forcing auto manufacturers to become ever more innovative and cost-conscious. At the same time, manufacturers are feverishly trying to improve efficiency through advances in engine and materials technology in order to comply with the looming 2025 emissions-standard deadline. So what are automakers doing to capture the hearts of consumers?

As hybrid cars whizzed almost soundlessly around the adjacent test track in the basement of the Cobo Center, the Wall Street Journal hosted a panel discussion last week about the future of the business as it pertains to the environment, urbanization, and mobility.

The challenge that exists, agreed speakers Jim Farley, Ford’s group vice-president of global marketing, sales, and service, and Tom Bologna, BMW’s vice-president of engineering, is to get consumers to like and pay for the features that will be necessary to meet tough government standards.

“To get people to accept new technology, you need to give them a heads up so they can absorb it,” Bologna said. “People don’t like surprises.”

Bologna was discussing BMW’s Start Stop engine technology, which has been used very successfully in Europe among drivers with manual transmissions. BMW is … Next Page »

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It’s time for our irregular, data-driven roundup of high-tech fundraising, M&A, and IPO news from around the San Francisco Bay Area.

$100 billion—The potential valuation of Facebook in an IPO tentatively planned for late May, according to a story yesterday from Kara Swisher at AllThingsD. Facebook hopes to raise $10 billion in the offering, according to Swisher’s sources.

$125 million—The amount San Francisco-based Splunk hopes to raise in an upcoming initial public offering, according to the startup’s S-1 filing last week. The main venture backers of the big-data analytics startup include August Capital, Sevin Rosen, JK&B Capital, and Ignition Partners.

$115 million—The amount Symantec is paying for LiveOffice, the Torrance, CA-based maker of cloud-based e-mail archiving systems. Mountain View, CA-based Symantec said yesterday that the acquisition “will extend Symantec’s intelligent information governance offering to the cloud, providing customers choice between on-premise, cloud or hybrid delivery of Symantec solutions.”

$75 million—The amount Mountain View, CA-based Audience hopes to reap in an upcoming initial public offering, according to S-1 papers filed last week. Audience makes noise-suppression chips for mobile phones that improve the quality of voice calls. Its biggest venture backers include Tallwood Venture Capital, New Enterprise Associates, and Vulcan Venture Capital.

$20 million—A Series C funding round for AppDynamics, the San Francisco-based maker of software that monitors the performance of enterprise applications. New investor Kleiner Perkins Caufield & Byers (KPCB) led the round, with existing backers Greylock Partners and Lightspeed Venture Partners also participating.

$13 million—New funding for PivotLink, the San Francisco-based maker of retail analytics software. Trident Capital, Emergence Capital, and Starvest Partners led the round. PivotLink also announced the acquisition of Salt Lake City, UT-based Acteea, a maker of e-commerce analytics software.

$11 million—New funding for Fremont, CA-based disaster recovery startup QuorumLabs. Airtek Capital Group led the round, which also included QuorumLabs’ existing investors.

$6.7 million—A Series B financing round announced last week for Senova Systems, a Sunnyvale, CA-based maker of solid-state pH sensors for the food, water, medical, and agricultural industries. Phoenix Venture Partners and Harris & Harris Group led the round.

$5 million—New funding for Affine, the San Francisco-based startup offering targeting software for online video ads. Crosslink Capital and Highland Capital Partners led the round. Former Quattro Wireless CEO Andy Miller, the chief of Apple’s iAds program, has joined Affine’s board.

$2.5 million—Seed funding for PandoDaily, a new San Francisco-based technology blog founded by ex-TechCrunch writer Sarah Lacy. Institutional backers, according to Lacy’s introductory blog post, include Accel Partners, CrunchFund (founded by ex-TechCrunch editor Michael Arrington), Greylock Discovery Fund, Menlo Ventures, Lerer Ventures, Ooga Labs, and SV Angels. Individual investors include Marc Andreessen, Andrew Anker, Matt Cohler, Chris Dixon, Tony Hsieh, Jeff Jordan, Saul Klein, Josh Kopelman, and Zach Nelson.

$990,000—New equity-based financing for San Francisco-based AllTrails, according to a regulatory filing. An alumnus of the AngelPad startup accelerator in San Francisco, AllTrails offers maps and reviews of hiking, biking, and camping trails.

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

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

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

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

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

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

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

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Turns out gambling with digital money can pay off pretty big, too. Seattle’s Double Down Interactive, maker of casino-style videogames for social networks, is being purchased by slot-machine giant International Game Technology for up to $500 million.

Rumors of the sale started trickling out this afternoon, and IGT (NYSE: IGT) confirmed the purchase just after markets closed. The price includes $250 million in cash, $85 million in retention payments over two years, and $165 million in performance incentives over the next three years.

Like many of the top Facebook games, DoubleDown Casino is free to play. Once they get hooked, players pony up for virtual currency to keep their streak going. They can’t cash it out, since that would be actual gambling—but rules on that front are changing quickly, which helped push IGT to grab the startup.

For years, the federal Justice Department has forbidden online gambling under an interpretation of the federal Wire Act. But the DOJ recently flip-flopped on that stance, opening the door for the possibility of regulated online gambling in the near future. That brings us to today’s Double Down deal.

Even without those regulatory factors, the startup was doing pretty well. Double Down’s sole game, which has several casino-style games inside it, was named by Facebook as its No. 4 most popular game of 2011. Independent tracking from AppData says the DoubleDown Casino had 4.7 million monthly active users. Earlier this year, Tricia Duryee of AllThingsD reported from unnamed sources that Double Down was on a path for about $50 million in annual revenue.

It’s a big win for Double Down, which was founded in 2010 and has about 80 people—including a pair of executives lured away from fellow Seattle casual game company BigFish Games. But it’s not a jackpot for the area’s VCs—Double Down was started with the profits from founders Greg Enell and Cooper DuBois’ previous gaming company, along with one other (unnamed) investor, but that’s it.

In its release, IGT says Double Down CEO Enell will remain in charge of the operation in Seattle, and that it will run the property with “the appropriate level of independence needed to continue to foster exceptional growth.”

We expect to hear more on this deal, and the dramatic rise of social gaming, tomorrow as the executives give interviews. But it’s safe to say that one of the Seattle area’s traditional tech strengths, gaming, is leading the pack these days—take a look back to 2011′s megabucks sale of PopCap Games to Electronic Arts, and a group of smaller acquisitions along the way.

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Some big-company-related news to report in the Boston area. Let’s get right to it.

—Microsoft Research New England has made three new hires in its social media research group, joining danah boyd. They are professors Nancy Baym from the University of Kansas (specializing in personal connections and online communities); Kate Crawford from the University of New South Wales (mobile media and youth culture); and Mary Gray from Indiana University (youth sexuality and digital media).

—Speaking of Microsoft (NASDAQ: MSFT), the software giant is working with Ford Motor Company (NYSE: F), Watertown, MA-based BlueMetal Architects, and Boston mobile-health firm Healthrageous to do research on extending health management to people’s vehicles. The companies are building a prototype system that collects biometric data and sensory information from a car that can be uploaded to a person’s health and wellness database.

—PayPal, the subsidiary of eBay (NASDAQ: EBAY), is looking to add staff in the Boston area, according to a report by the Boston Globe’s Scott Kirsner. The report says Scott Thompson, formerly president of PayPal and incoming CEO of Yahoo (NASDAQ: YHOO), visited Boston last fall to discuss PayPal’s expansion in the area. PayPal, which may or may not get spun out by eBay (I’ve heard rumors), acquired Boston mobile firms Where and Fig Card last year. Thompson, a Raynham, MA, native and Stonehill College alum, was also a board member of Vertica, the Boston-area big-data company acquired by HP (NYSE: HPQ) last year.

—My colleague Curt Woodward spoke with Facebook engineering director Jay Parikh about the social network’s ongoing upgrades to its technical infrastructure. If his name sounds familiar, that’s because Parikh is an eight-year-plus veteran of Cambridge, MA-based Akamai (NASDAQ: AKAM). He served as a vice president of engineering for the Web content-delivery firm from 1999-2007. No word on why Facebook hasn’t set up an engineering center in Boston yet.

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First things first: Yes, Facebook engineering director Jay Parikh has some thoughts about Google’s move to boost Google Plus above other social sources in its search stream. And no, he can’t say anything about it.

Twitter has been out front in criticizing Google’s newest social-signals revamp—named Search Plus Your World—and Facebook Seattle adviser Hadi Partovi said on his personal Twitter feed that he “used to love new @google search improvements with joy and even a bit of awe. This new social-results rollout is the opposite.”

But Facebook itself, which has a separate search arrangement with investor Microsoft’s Bing search engine, hasn’t made any sort of public pronouncement about the Google changes. When politely reminded about that by a public relations guy, I prodded Parikh a bit: Surely you must have some thoughts about it?

Jay Parikh

“Possibly,” he said, with a bit of a smile. “He wiped my brain. I know nothing.”

That particular brain-wipe would probably be a big job. Parikh, who joined Facebook in 2009 from Ning, heads up the social network’s infrastructure team, which spans everything from software that keeps more than 800 million users tied together to the nuts-and-bolts datacenter designs of the Open Compute Project.

Parkih was visiting Facebook’s Seattle engineering office to give a technical talk on the company’s projects—the kind of appearance that serves as a recruiting tool for engineers that Facebook might want to woo away from Microsoft, Amazon, or Google’s own sizable Seattle-area offices.

We’ve previously heard about some of the more user-facing projects that Seattle engineers have worked on, including messenger features, the iPad app, and the integration of Skype. But Parikh notes that there’s a good contingent of infrastructure engineers in Seattle too.

“We do have a growing presence up here for our infrastructure engineering team,” with about four groups who have a presence in Seattle of “a couple to a lot of engineers.”

That continued growth is the driver behind the Facebook office’s impending move to new, more spacious Seattle digs—double the size of the office near Pike Place Market, which held about 60 last time we heard. “We’ve been aggressively trying to build the set of projects and thus the set of engineers up here working on those projects,” Parikh says.

And perhaps counter to the Silicon Valley cliché of twentysomethings working all hours and passing out at their desks, Facebook is looking for a range of experience in its hires, Parikh says. That’s partly a necessity, since there aren’t enough new computer science graduates to fill all the technical jobs available, and an enormous number of digital startups are … Next Page »

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Google is changing its mind about what’s relevant.

In a sweeping technical overhaul that will start to go into effect today, the search giant is altering the way it ranks search results to highlight content that users have shared, or that has been shared with them. If you’re logged into Google (NASDAQ: GOOG), links to this personal and social content—such as photos you’ve uploaded to Google+ and posts shared by the people in your Google+ circles—will now appear at or near the top of search result pages for the appropriate keywords.

For example, if you’ve ever shared photos of your cat Mittens on Google+ and you type “Mittens” into the Google search box, those images are likely to be among the top results, alongside links to Web pages about winter wear.

The personalized results won’t include information users have shared outside of Google’s ecosystem—say, status updates on Facebook or photos on Flickr (or, notably, tweets on Twitter). And users will have the option to turn off the new personalized results if they find that the information is getting in the way of their routine Web searches. But with the changes, Google is betting that most people who use its flagship search engine will prefer to see information they or their friends have created or shared over pages published by faraway people they’ve never met.

“Relevance is what we do,” says Sagar Kamdar, group product manager for search at Google’s Mountain View, CA, headquarters. “It’s our bread and butter. We are blending this content to optimize what we see as relevance.”

A mock preview of personalized search shows results both for chikoo, a fruit that grows in India and Pakistan, and Chikoo, a dog belonging to Google Fellow Amit Singhal.

Which is to say that if Google’s new algorithms have some reason to think you’re actually looking for mittens rather than Mittens, your kitty might get demoted. “If you have a personal result that is not as good as the Web result, the personal result will be visible in the appropriate place on the search result page,” Kamdar explains.

Alongside the personalization features, Google is making it easier to find information about people you know, in part by changing Google Instant to show links to the profiles of people in your Google+ circles. Google Instant is the technology rolled out in 2010 that predicts the search keywords you want as you type a query. With today’s changes, entering the first few letters of the name of someone in your Google+ circles will be sufficient to surface their Google+ profile in the autocomplete list.

In addition, Google will do more to direct users to content from people they may not know personally, but might like to follow via social media. The names of prominent Google+ users will be included in the Google Instant autocomplete predictions—type “Trey R,” for example, and you’ll see a link to the Google+ profile for Trey Ratcliff, a professional photographer who has made extensive use of Google+ photo albums. And in the right column of Google search result pages—the area normally reserved for keyword-based advertisements—the company will begin promoting the profiles of prominent Google+ users associated with certain search queries.

In the example Google Fellow Amit Singhal shared in a blog post announcing the changes today, a search for “music” summons Google+ pages for Britney Spears, Alicia Keys, and … Next Page »

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