The amount of venture financing poured into Seattle-area companies didn’t keep pace with strong growth nationally last year—in fact, it was quite the opposite.

That’s according to the latest MoneyTree Report, from the National Venture Capital Association and PricewaterhouseCoopers, which shows venture investment in Seattle region dropping to $508 million in 2011. That’s the lowest figure notched in the report’s tracking since 2003, when venture deals reached $359 million, according to data provided by Thomson Reuters.

There’s a pretty clear link between those two periods, of course: In 2011, just as in 2003, the economy at large was still trying to recover from a recent financial meltdown. The average dollar amount of venture deals tracked by the MoneyTree Report was basically identical in both of those years, at just over $4.8 million per financing deal.

(MoneyTree provided Xconomy with data focused on the Seattle area, including the Eastside, to help us track this figure. Venture deals across the entire state were higher, at around $541 million.)

The Seattle area’s dropoff came as national VC investing was on the upswing, increasing by 22 percent over 2010′s figure to post the third-largest investment total in the past decade.

Mark Heesen, president of the NVCA, noted that the number of deals nationally didn’t keep up with the growth in dollars last year, reflecting larger fundraising rounds across most sectors.

“For some, the higher rounds are driven by the challenging exit market which requires venture capitalists to fuel their existing portfolios longer and at greater investment levels than in the past,” Heesen said. “This is particularly acute in the life sciences and clean tech sectors. In other sectors such as Internet, software and media, the higher rounds speak to increasing valuations.”

The number of venture deals in and around Seattle held steady in 2011 at 105, in line with the figures seen in 2009 and 2010.

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[Updated 1/5/12] The first week of the new year is a good time to take stock of where venture capital firms are in their fundraising progress. No question that unless you’re a top-tier firm—and even then, in some cases—raising a sizeable new fund has been very challenging.

Back in August, I ran a summary of a few Boston-area VC firms that were in the process of raising new funds. Here’s an expanded update on how said firms are doing. Some of my info might be a tad stale, because VCs are not exactly transparent about their funds in progress. Nevertheless, here’s where things stand to the best of my knowledge. (Let me know if you have any new information, or if I forgot anyone.)

—General Catalyst Partners has raised a $500 million sixth fund, according to a regulatory filing from last week. It’s not immediately clear if this fund is meant for investing in growth-stage deals as well as early-stage companies, or whether there will be a separate growth-stage fund (as was previously reported).

—Summit Partners said this week it has closed a $520 million venture capital fund, to go along with a $2.7 billion growth equity fund. [This item was added on 1/5/12---Eds.]

—Excel Venture Management is in the process of raising a $150 million second fund, according to documents filed last week.

—OpenView Venture Partners raised $99 million out of an unspecified total fund size, as of last month. (See an interview with founder Scott Maxwell from last fall.)

—.406 Ventures raised $95 million towards a target of $175 million for its second fund, as of late November.

—Flagship Ventures closed $137 million out of a targeted $250 million for its fourth fund, as of November.

—Kepha Partners closed $74 million out of a planned $100 million for its second fund, as of early last fall.

—And on the micro-VC front, ex-Polaris partner Mike Hirshland is looking to raise $25 million for his new fund, Resolute.vc.

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Seattle-based venture firm Voyager Capital is raising a new fund pegged at up to $125 million, according to a new filing with federal regulators. The VC firm, which also has offices in Portland and Silicon Valley, finished raising its last fund in 2007 at $107 million. Notable investments from that fund included Ontela, which acquired Photobucket, and Yapta, an online travel service.

Voyager officials didn’t immediately respond to messages seeking comment, but that’s not unusual, since VCs try to avoid the ire of regulators while they’re out looking for cash. It will be interesting to see how Voyager fares in raising this fund, which is its fourth, as the continuing economic downturn and somewhat spotty market for technology IPOs have left VCs feeling pinched recently.

The broader VC sector has also seen consolidation nationally, with fewer firms raising capital. And in Seattle, we’ve seen some decline in VCs overall, with Polaris Venture Partners closing up its Seattle office this summer in favor of a Palo Alto, CA office.

Voyager focuses on clean IT, digital media, software, and wireless—here’s the full list of its portfolio companies. Its most notable exit over the years is probably aQuantive, which was acquired by Microsoft for $6.4 billion in 2007. Voyager’s managing directors are Bill McAleer and Enrique Godreau III in Seattle, Erik Benson in Seattle and Portland, and Daniel H. Ahn and Curtis Feeny in Menlo Park, CA.

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They grow up so quick! Zulily, which offers daily “flash sales” on moms-and-kids items, easily led the field for angel and venture financing deals in Washington in August. That’s according to monthly data compiled by our partners at CB Insights, which tallied $79 million in overall financings across tech, biotech and cleantech companies for the month.

The new infusion of cash should help Zulily keep pace with its fast growth—after its public debut earlier this year, CEO Darrell Cavens told me, the startup rocketed from about 15,000 members to more than 4 million as of early August. The company also blew through four headquarters locations in about 18 months.

The August round, led by Meritech Capital Partners, brought Zulily’s total venture financing so far to $53.6 million.

Landing in second place was Vancouver, WA-based nLight Photonics, a supplier of high-powered semiconductor lasers. nLight said existing investors participating in the Series E round included Oak Investment Partners, Mohr Davidow Ventures, and Menlo Ventures.

That brings nLight’s total equity financing to $110 million—and the company hinted at an IPO in its future, saying in a press release that its investors have been with nLight for more than a decade and “have a strong record of companies achieving initial public offerings.”

The company also said it is growing in profitability, added more than 100 employees in the previous year, and booked more than $60 million in orders in the first half of 2011.

The third-largest financing for August went to Infinia, a Seattle-based developer of solar power generators. The company raised just over $6 million in equity financing, and could eventually raise a total of $25 million in the round, according to this SEC filing. The company’s listed investors include Black Pearl Capital, Foxconn Technology Group, and Seattle’s Vulcan Capital.

Coming in fourth for the month was Airbiquity, which raised $4 million in debt financing. Seattle-based Airbiquity supplies software and platform services for “connected car” features, with customers like Ford, OnStar, and BMW. Its investors are listed as Acorn Ventures of Bellevue, WA, Ignition Partners, Kirnaf Ltd., and Shell Internet Ventures.

The fifth-largest financing went to Medify, which reported in August that it had raised $1.8 million to date from angels and Voyager Capital, where the company was incubated. (The exact timing on that round is not exactly clear to me, because I couldn’t find it in the SEC filings).

In any case, as CEO Derek Streat told me, the idea behind Medify is to make information about healthcare much easier to navigate for patients and doctors. The team is stocked with veterans from Farecast, including co-founder Jay Bartot.

Rounding out the $1 million-plus financings for August is Presage Biosciences, which added nearly $1.6 million from unidentified investors. The company, which spun out of the Fred Hutchinson Cancer Research Center, has developed a tool that drugmakers are using to get a better sense of which drugs are likely to succeed in clinical trials.

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Rand Fishkin is not what you’d call a shy person. As the co-founder and CEO of Seattle search-marketing firm SEOmoz, Fishkin is a near-constant presence on almost any content channel you can think of. It’s good for his company, but unlike some other Internet oversharers, Fishkin also puts a premium on high-quality content.

So, when it was time for Fishkin to consider whether he should entertain investment offers, there was really only one choice—he’d basically live-blog the process.

Well, that’s a bit of an overstatement. It’s not like Fishkin set up a running tally of his pitch meetings or term sheets. But in a series of posts around the Web, Fishkin has laid out a detailed statement of his personal thoughts, analyses, doubts, dreams, and fears, along with SEOmoz’s revenues and profitability, and even his own household finances.

You can trace the entire saga below in an interactive timeline of Fishkin’s public discussions, which I put together with Storify, a new tool for curating and aggregating content from around the Web. And you’ll see he doesn’t leave much out. (Here’s a link to the Storify in case the embed gives you problems.)

“It’s very similar to the way that I learned how to do SEO: by writing about it publicly, by writing about my experiences, the projects that we were taking on, the successes or failures that we had,” Fishkin says. “We got feedback from hundreds of different sources.”

Fishkin’s openness has generated some really interesting, in-depth responses, something you might expect in the technology industry, where showing your work and sharing knowledge is a core part of the culture. Transparency also happens to be a key element of SEOmoz’s values as a company.

Entrepreneur Dharmesh Shah, co-founder of HubSpot and a friend of Fishkin’s, was one of those who replied publicly on his own blog. Shah says he’s never seen anyone lay all of their business out in the open like Fishkin has: “Never. Not even close,” he wrote in an email. (Disclosure: Shah is an investor in Xconomy, but that played no part in me interviewing him. I actually didn’t find out he was an investor until I began Googling around to see if we’d interviewed him before.)

Shah said he sees three big advantages for a business or entrepreneur in aggressively embracing transparency:

—Trust: “When you are hiding very little, people tend to trust you more. In addition to the community at large, my guess is that Rand’s employees, partners, and investors have great trust in him. They should.”

—Smarts: “Being out in the open forces smarter-decision making. Stupid things happen behind closed doors, in secret. If your actions and approach are out there in the open, you’re less likely to do stupid things.”

—Feedback: “Transparency allows you to get great feedback from the world at large. They have more context.”

“And, of course, there’s also the ‘greater good’ benefit,” Shah wrote. “Rand’s articles help thousands of entrepreneurs and would-be entrepreneurs know what it’s really like. This kind of “insider information” is priceless. I wish more people were this transparent.”

Even though people are now discussing the size of his checking account in blog comments, Fishkin seems content with the way things have played out so far. The major downside, he says, could be the tougher task of discussing why it didn’t work out, should that happen.

“Transparency becomes an issue when it’s not all roses,” Fishkin says. “And in a startup, it’s never all roses.”

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Here in Boston, we like to tout our universities, our faculty, our students. The academic community is one of the crowning strengths of the New England economy, not to mention a major driver of its global impact. But what have universities done for the local startup and business innovation community lately?

I’m not going to give a full answer here—it’s one of the broader themes I’m exploring around town—but I’ll give you a piece of the puzzle.

Harvard University’s Office of Technology Development has what it calls an “Accelerator Fund” that has been chugging along for four years now, and it has achieved some notable results. As of last month, the $10 million fund has given out $5.2 million in grants, which have supported more than 30 projects over five annual cycles. It’s still early to add up the returns on this investment, but already it has led to more than $10 million in partnership money for the university, and several startups that have received outside venture funding. (The Harvard office declined to give specifics on licensing revenues to date.)

What’s more, the model apparently has proven successful enough that the team is about to begin raising a much bigger fund, in the $20 million to $30 million range. And unlike in the past, when Harvard developed a laggardly reputation when it came to commercializing its research, universities around the country are starting to look at the school as a possible role model for technology transfer and startup development practices.

The Accelerator Fund, which Xconomy wrote about in early 2008, was created to help Harvard scientists commercialize their inventions by forming industry partnerships, licensing technology, and starting new companies, primarily in life sciences and biomedical fields. As technology development head and senior associate provost Isaac Kohlberg puts it, “The pipelines of Harvard were empty.” The school “suffered from a branding issue with stakeholders about the role of technology development,” he says.

Kohlberg and his team, which includes Curtis Keith, chief scientific officer of the Accelerator Fund, were brought in to overhaul Harvard’s tech transfer and development offices. Kohlberg joined … Next Page »

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Maybe the better question is who isn’t raising a new fund? Venture fundraising seems to be picking up around town after a bleak couple of years. At least for a few prominent VC firms.

We reported back in March that Bessemer, Greylock, and Summit Partners were on the fundraising trail, and now all of them have closed, or are closing, sizable new funds. So it’s no big surprise that a number of Boston-area venture firms are following in their footsteps. Word on the street is that everyone from Flagship Ventures to Sigma Partners has been out pounding the pavement—and having some success.

There is still a lot of talk about VC contraction, though. The consensus seems to be that the top-tier firms will stay strong (and maybe get bigger), and the micro-VCs will continue to attract investors for their small funds. It’s the mid-tier venture firms that are gradually shrinking and might not be able to raise new funds. We’ll be keeping an eye on that, especially around Boston, the birthplace of modern venture capital.

Here are a couple more local firms that are out raising money:

—Cambridge, MA-based General Catalyst Partners is talking to investors about raising a $750 million sixth fund, according to WSJ’s VentureWire. The report, based on unnamed prospective fund investors, says General Catalyst’s proposed new fund will include $500 million for early-stage companies and $250 million for growth-stage deals. That is slightly larger than the firm’s fifth fund, raised in 2007, which totaled $715 million (with a similar breakdown between early-stage and growth-stage). GC’s portfolio companies include Backupify, CyPhy Works, HubSpot, iWalk, Jumptap, Kayak, and Yottaa.

—Waltham, MA-based Kepha Partners has received a commitment of up to $15 million for its second fund from Massachusetts Pension Reserves Investment Management Board (Mass PRIM), as reported by VentureWire. Kepha has targeted a $100-110 million fund, similar in size to its first fund (raised in 2007-08), according to the report. Kepha’s portfolio includes Azuki Systems, Clovr Media, Goby, and OwnerIQ.

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Startup Weekend, the create-a-company cram session that has spread worldwide in just a few years, is branching out in a big way. The Seattle-based nonprofit tells Xconomy it is creating a sister organization called the Startup Foundation, aimed at establishing a permanent hub for local entrepreneurial communities around the globe. The new project has backing from the Kauffman Foundation, and full-time staffers in seven cities who officially start work next month.

Startup Weekend CEO Marc Nager says the Startup Foundation is a natural outgrowth of the Startup Weekend phenomenon, which gives entrepreneurs 54 hours to organize themselves into teams and develop proto-companies that are ready to pitch investors for possible seed money. The nonprofit organization, headquartered in Seattle, has taken its events to nearly 200 cities in 65 countries since 2009, and is on pace to hold 200 Startup Weekends this year alone.

Nager and Startup Weekend CTO Franck Nouyrigat say that all those entrepreneurial bootcamps have shown that, while there are motivated entrepreneurs everywhere, there’s often not enough community infrastructure to keep momentum going after the weekend is over. Instead, the scene tends to be somewhat fragmented—held together by several key players, but not always fully united. “The startup community in general doesn’t really have that much of a voice,” Nager says.

The Startup Foundation hopes to grow that voice by building each city’s organization from the bottom up. The Foundation “fellow” in each city will start by conducting a high-level study of the entrepreneurial community: Identifying the institutional and individual players, surveying influential community members, and compiling a list of the area’s strengths and weaknesses.

That leads to a big summit, in which members of the entrepreneurial community vote to elect an advisory board of leading people to help guide the Foundation’s work. They also come up with recommendations for what the Foundation should pursue—improving outreach with government, building stronger ties to university students, training developers, reaching out to the media, and so on. The local staffer is then charged with raising money in their area to fund those activities, and making them happen.

The first wave of Foundation cities, starting work July 1, will be Seattle, Boston, Los Angeles, New York, Detroit, Des Moines, IA, and Sao Paulo, Brazil. In Seattle, the effort will be led by Jennifer Cabala, the former Seattle 2.0 CEO who is currently Startup Weekend’s chief marketing officer.

“The greatest validation is, we started having these conversations two moths ago with all the seven people, and they all said ‘Great idea,’” Nager says. “And we came back two months later and offered … Next Page »

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I had the pleasure of sitting down with David Hauser recently to talk about his Boston-area company, the Grasshopper Group.

David is the CTO of the company and co-founded it with Siamak Taghaddos in 2003 when they were both students at Babson College. From its beginnings as a virtual phone system, the Grasshopper Group is now the parent company of multiple Web-based products all focused around the company’s core purpose of empowering entrepreneurs. Grasshopper employs about 50 people, continues to grow, and has never raised any capital from VCs.

The first part of our conversation (see video on YouTube) was focused on the origins of the company. How did two college students decide to start a telecom company out of their dorm room? As is often the case, it originated from an authentic need that the founders encountered through their own experiences as entrepreneurs.

We also talked about mentorship and role models. Grasshopper was started in the tech doldrums. David and Siamak admit to having very few role models in the ecosystem to look up to. During this part of the talk, David gives excellent advice on being bold and resourceful about seeking people out and sharing your story to get people (partners, customers, and mentors) to become advocates of your cause.

But the real magic of the Grasshopper story is the way the entire company is anchored around a core purpose and core values. As David says, “We are not just selling some stupid phone system.” Everyone in the company and everything they do is anchored by a vision of supporting 1 million entrepreneurs with products they love that help them achieve their passion, he says.

Vision and values are pretty soft stuff. Many great companies have value statements that don’t mean much (most employees couldn’t recite them if asked) and many startups want to stand for something, but fail in the process. What you hear from David is the way the vision and values of the company permeate through all aspects of the company. For example:

• Establishing culture and maintaining culture as a company scales
• Raising (or not raising) money
• Sending dead insects to 5000 thought leaders
• Staying creative in PR and Marketing
• Searching for companies to start

The whole interview is really meaty, but if you only have 5-10 minutes, watch the second segment, below, where this is all discussed. Also, you can keep up with David by following him on Twitter or checking out some of his presentations on entrepreneurship and Culture, Purpose, and Values.

Thanks to Xconomy for helping to make this interview happen, and to Sean O’Connor who helped me significantly upgrade the production quality of these videos.

[Editor's note: Rob Go blogs at www.robgo.org.]

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The Startup America Partnership wants to make sure the little guy doesn’t get forgotten. That’s why San Francisco-based IndieGoGo turned up on a new list of companies contributing to the high-profile national job creation initiative last week. One of the first “crowdfunding” platforms, IndieGoGo helps individuals and organizations raise non-equity funding for their projects online. The company said it would contribute to the cause by cutting its fees in half to help these fledgling businesses get off the ground.

It’s an interesting tactic, given that when companies raise money through crowdfunding, they don’t usually think first about hiring people. Most crowdfunded organizations rarely collect more than $30,000 through this method—which makes it hard to hire people for anything other than occasional part-time work. I was curious about the jobs connection—so I contacted IndieGoGo CEO Slava Rubin and Startup America Partnership CEO Scott Case last week to get their perspective on crowdfunding’s role in creating jobs.

Slava Rubin

“It’s just a matter of time” before the first Facebook-scale company emerges from a crowdfunding platform, Rubin argues. “Three years ago, people used to say ‘No one will ever fund a small, for-profit business this way.’ Now, not only are they raising funding but you’re seeing it across every part of America, in many different industries.”

Building on the buzz over President Obama’s town hall meeting last week at Facebook headquarters in Palo Alto, the Startup America Partnership held a livestreamed panel at Facebook to announce it has obtained commitments from U.S. companies to provide an additional $400 million in services to American entrepreneurs. That’s on top of the roughly $360 million in commitments announced when the White House, the Kauffman Foundation, and the Case Foundation first unveiled the partnership in late January.

Case says the point of assembling these resources—which range from training programs to venture investments—is to increase the number of entrepreneurs who are able to take their businesses from the idea stage to the startup stage to the exponential growth stage, with the ultimate goal of creating more jobs. But when you look at the list of services being offered, most are geared toward established companies. Intuit (NASDAQ: INTU), for example, said it would pitch in $37 million in discounts on its financial software, while Microsoft (NASDAQ: MSFT) offered free access to its cloud computing platform, and Silicon Valley Bank said it would hold an “exclusive event” designed to bring the “America’s most promising entrepreneurs” together with venture capitalists and business mentors.

That’s why IndieGoGo stood out on last week’s list. Anybody can join IndieGoGo to raise cash for an idea. It could be an attempt to commercialize an invention (like the AlphaSphere, a futuristic musical instrument with 48 tactile pads) or realize a dream (like a concert tour for the Bucky Walters String Band from rural Humbold County, CA) or sustain a small business (e.g., Atlantis Books, a bibliophile’s haven on the island of Santorini in economically distressed Greece).

Crowdfunding is a model that dozens of organizations, such as new New York-based Kickstarter, are now pursuing. But IndieGoGo, backed by New York-based Penny Black and a number of individual investors, says it is still the world’s largest open funding platform. And the startup says that for the next three years, it will … Next Page »

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Last summer, our company AppMakr raised a $1 million angel round over 14 weeks and learned some big lessons in the process. Luckily, Brendan Baker, an MBA student at Oxford University, took an interest in our raise and documented the process, creating a visual infographic of our efforts (see below). His infographic illustrated pertinent trends in the raise period and allowed us to draw some inferences that would’ve otherwise gone unnoticed, which I’ll describe here in detail.

One of the most striking facts to emerge from Brendan’s infographic was what I call “Daniel’s Rule of 10.” It turns out that I could sniff out eager and willing angels only through connectors who made at least 10 introductions. Or to put it another way: Don’t waste your time talking to anyone who offers to make an introduction to only one angel. Focus on people who can make at least 10 solid introductions. The visual representation of this is especially striking because it’s impossible to know ahead of time who will follow through for you, so applying a rule like this could radically change the way you raise a round.

For the entrepreneur, every lead you get is golden. Follow up on every opportunity as thoroughly as possible, but keep in mind the Rule of 10. Passing on what appear to be great leads because you haven’t gotten enough introductions from the referrer may seem crazy, and I’d guess that my data set is too small to be statistically significant. But having spoken to hundreds of potential angels, and seeing as how only 8.47 percent of the angels I spoke with ended up funding us, what I can say for a fact is my Rule of 10 held true for our raise, and that’s a powerful enough inference for me to minimize my efforts on referrers who only make one intro, so I can focus on those who are willing to make at least 10 intros. Having said that, use my Rule of 10 at your own risk!

Additionally, the data showed that timing was a key component. We originally started our raise over the summer, though I heard it wasn’t an ideal time. It’s not. The season is a poor choice primarily because it’s difficult to get on the calendars of prospective investors in between their vacations. That long lead time proves incredibly distracting and has a compound effect: I was never able to be as focused as I wanted to be on the more immediate meetings because there was always a meeting with a prominent prospective investor scheduled for several weeks in the future.

Anatomy of a Seed Round - Graphic by Brendan Baker. For a full-size PDF version go to http://go.danielodio.com/seed_infographic

As it turns out, spring is the absolute best time to go out for a raise, with fall ranking second best. The summer and the holidays are very difficult and not worth the delays and distraction. It’s better to hunker down and shoot for spring if you can control your burn, or better yet, raise the spring before you have urgent cash needs, if you can plan that far in advance.

Nailing your pitch is just as important as timing. Our pitch was still in flux in our first round of meetings, but with many of these investors, you only get one shot. We iterated quickly (as startups tend to do) and hit on some core concepts that have since become key to our business, but iterating during your pitching process is far from ideal. You want to have your pitch down cold and supplement that with supporting data and a deep understanding of the competitive landscape before you start pitching.

We ended up raising our $1 million through a convertible note (a loan that only converts into equity when you do a future raise), as many entrepreneurs are doing these days. Convertible notes have become popular due to their supposed speed and ease of execution. But I don’t recommend them, and if I were to raise our seed round again, I’d do it as a priced equity round.

Some may see this as a pretty bold statement, as convertible notes are seen as very entrepreneur-friendly. However, there is a cost to everything, and notes are no exception. It’s a bit hard for me to imagine what our world would look like had we done an equity round, but I know a few things are certain: There are open-sourced seed round legal documents that can minimize or eliminate any … Next Page »

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Can a company truly do well by doing good? That’s what San Francisco’s Experience Project hopes to find out with the official launch today of BroadCause. The site offers nonprofit groups free software tools to help with fundraising and administration, and makes money by selling marketing opportunities to corporations looking to promote awareness of their charity work.

BroadCause has been online in beta form for a few months now, and includes pages for more than 1,800 non-profits where supporters can broadcast comments to their Facebook friends or Twitter followers. If non-profits register and claim ownership of their pages, they get access to software that handles payment processing for donations, contact management and e-mail marketing, event promotion and ticketing, and support for fundraising events such as auctions.

At the same time, brands like American Express, Nestle, Paramount Pictures, and Sony are using BroadCause as a platform for their own initiatives. AmEx, for example, used the site to generate buzz on Twitter for its Members Project, which matches American Express card members with volunteer opportunities. The company’s BroadCause page promoted its pledge to donate $1 to DonorsChoose.org, an education charity, for every retweet of its volunteering message.

Such messages have a built-in audience at BroadCause thanks to ties to ExperienceProject.com, a 5-million-member community site focused on group discussion of life issues such as health and parenting. That site was itself born around a cause—the very first discussion group on the site back in 2005 was an online support group for patients with multiple sclerosis—and many of its members “have an incredible need to be part of some form of fundraising,” says Peter Jackson, CEO of Experience Project (who is no relation to The Lord of the Rings filmmaker).

Another case in point: When the Lifetime TV show “Army Wives” wanted to raise money for Blue Star Families, an organization of military spouses, Experience Project promoted the campaign on the pages of Experience Project groups like “I Am An Army Wife.” “We have the largest collection of military spouses online, and they raised $10,000 in the first hour,” says Jackson.

The “sweet spot” for BroadCause, according to Experience Project founder and “chief experience officer” Armen Berjikly, is “that area where a brand cares about its audience and its products deeply and is willing to give back, and wants to make awareness rise about that.” This awareness, he says, often comes back to benefit the companies’ bottom line—which is, of course, part of the point. “We see same-store sales, intent to try, intent to buy, all of those metrics go up positively when we start to promote a brand’s philanthropic efforts, which are often aligned closely with the products they sell,” Berjikly says.

BroadCause is an outgrowth of Twitcause, a service the Experience Project launched in 2009. At first, the company simply used the Twitcause account on Twitter to … Next Page »

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Far too much has been written about Boston versus New York City. Sports rivalries and cultural differences have a way of coloring our world view to include startup companies and venture capital. However, the past few years tell about a much closer relationship. The real story is Boston and New York City, particularly versus Silicon Valley.

This week, we welcome Xconomy’s most recent addition to its coverage, New York City! While having started in Boston and expanded across the country, Xconomy’s newest addition reflects the growing ties and teamwork between New York and Boston.

Let’s start with a few data points. It’s always been easy to think about Boston and New York as separate worlds. After all, it’s 225 miles between downtown Boston and Manhattan—a journey that takes typically takes 3 ½ hours. In contrast, the trip from San Francisco to San Jose is only 48 miles along the 101, which in the middle of the night is under an hour. With traffic, well, that depends and can take as long as the Boston-NYC trip.

Somewhat ironically, the technology created by entrepreneurs and the VCs that back them have been shortening these distances. Wi-Fi on the Acela and 3G mobile networks let entrepreneurs and venture investors stay productive on the Boston-NYC journey, making the trip seem a lot shorter. Personally, I love working on the Acela. It’s some of my most productive time, and I feel like I’m in the office. I can even have meetings, particularly if I secure the seats facing each other with the table between them. Web networking and collaboration tools make sharing information and coordination much more effective as well, not only between these two cities but across the world.

Venture capitalists and angel groups are expanding and coordinating financing activities between Boston and New York City. “New York is clearly on a roll here. If anything we’ve seen the presence of several Boston firms either opening offices or having affiliations,” said long-time New York venture capitalist and founder of Greycroft Partners, Alan Patricof. Matrix Partners recently opened an office, headed by Nick Beim. New firms like Founder Collective operate fairly seamlessly between the two cities. TechStars’ recent expansion to New York has been a great success. The Golden Seeds angel group several years ago opened chapters in New York City, Boston, and Philadelphia that systematically collaborate. Syndication among angel groups more broadly in New England and New York got started around 2005 and has been going through various iterations and improvements.

How does this then play out in the numbers? Silicon Valley may have had the lead for many years, but looking at emerging companies, the Boston-New York team looks like it’s been running a fast break. According to the most recent PwC MoneyTree data, the gap between New York/Boston and Silicon Valley for seed and early-stage companies has closed, whether looking by total deals or by dollars.

Five years ago, Silicon Valley did nearly twice the number of seed and early-stage venture deals compared to Boston and New York combined, 338 versus 178 in 2005. For 2010 the two regions are essentially tied with 400 for Silicon Valley and 392 for New York/Boston. Dollars tell a similar story. For 2005, the ratio was 1.3:1 in favor of Silicon Valley, growing to 2.2:1 by 2007. By last year, that gap had closed to 1:1 with $2.16B invested in Silicon Valley seed and early-stage companies and $2.05B invested in those in New York/Boston (see charts above.) “The startup and entrepreneurial environment in New York is the strongest I’ve seen in the past 40 years,” says Patricof.

But it’s not just adding numbers. The rapid growth of consumer-oriented, ad-tech, and fin-tech ventures makes Boston and New York City highly complementary and drives increasing … Next Page »

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Entrepreneurs get younger every day.

Jeremy Levine was born one month after the ball rolled through Red Sox first baseman Bill Buckner’s legs on that fateful night in Shea Stadium, 1986. Levine probably doesn’t remember the painful 1-15 Patriots of 1990 either. He says his first sports memory was watching the great Larry Bird with his dad. And his best memory was Adam Vinatieri kicking the Raiders out of the Snow Bowl in January 2002.

If you’re a Boston sports fan, you know that kick (actually there were two, a 45-yarder to force overtime, and a short kick to win it) changed sports history in these parts. In the decade that followed, the Patriots won three Super Bowls, the Red Sox won two World Series, and the Celtics returned to prominence with a championship of their own.

Why am I telling you this in a publication about tech innovation? Because Levine, 24, has turned his passion for all things sports into an innovative company. It’s what drives him and his startup, Cambridge, MA-based StarStreet, an online market for sports fans to buy and sell “shares” of their favorite players. StarStreet graduated from the TechStars Boston mentorship program last year, and has raised an undisclosed amount of financing from SV Angel, Jarr Capital, and angel investors including Don McLagan, Andrew Blachman, and Ben Littauer.

StarStreet has gotten its share of national press, so I won’t rehash its story or why it’s different from previous attempts at alternative stock markets. Suffice to say the company is still small (two full-timers), but it has more than 400 traders as customers and is looking to ramp up for the upcoming NFL football season (assuming there is a season—tricky because of the potential lockout). StarStreet’s markets, where people invest real money, are currently active in March Madness basketball teams, NBA players, and major league baseball players. The company takes a 4 percent cut of every stock sale.

What might be more interesting is Levine’s personal story, and what he embodies. He is one of a new breed of young tech guns around Boston. Fan Bi of Blank Label, Michael Raybman of WaySavvy, and Seth Priebatsch of SCVNGR also come to mind; all are in their early 20s. Sure, these guys are distressingly young to be running companies (40 feels like the new 50 to me), but it’s refreshing to see a new generation of Web entrepreneurs coming into their own and trying to change the world.

OK, that’s a long windup to tell you about some simple takeaways from Levine. First of all, like most entrepreneurs, he’s just wired differently. From a young age, he dreamed of being … Next Page »

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The big guys are getting bigger: Three prominent venture and private equity firms with Boston representation are in the news this week about raising big new funds.

How does this affect startups and innovation? Probably not all that much, other than being part of the natural cycle of money flow. But it’s interesting, and possibly encouraging, to see big investors having some initial success in what remains a very difficult fundraising environment. Perhaps the IPO and exit markets are heating up.

I’m reminded of what micro-VC David Beisel (whose quarterly Web Innovators Group meeting is this Monday) said, when he predicted that over the next 10 years, big venture firms will raise even larger funds. (As a corollary to that, Bob Nelsen from Arch Venture Partners remarked last fall, in response to the notion of VC contraction, that “it’s hard to kill a venture fund, but it’s easy to kill a venture partner.”)

OK, here’s the news around town:

—Bessemer Venture Partners is planning to raise a new fund in the neighborhood of $1.5 billion, according to a report in Bloomberg this morning (based on unnamed sources). The firm’s last fund, completed in 2009, was about $1.35 billion, the report says. Bessemer is known for its investments in companies like Skype, LinkedIn, Yelp, American Superconductor, Endeca, Sirtris, VeriSign, and Vertica.

—Greylock Partners announced this week that it has expanded its present fund to $1 billion (up from $575 million in late 2009) and has formed a growth-stage fund to focus on more established companies. Greylock’s later-stage investments—about 40 percent of its dollars since early 2006—include Constant Contact, Zipcar, Pandora, Redfin, Facebook, and Groupon.

—Summit Partners is raising a $500 million venture fund and a $3 billion growth equity fund, according to a report in Mass High Tech this morning, which cites SEC documents filed for a growth-stage fund and a venture fund. Summit closed a $300 million venture fund and a $3 billion growth fund back in 2005, the report says. The firm’s investments have included Casa Systems, Innov-X, Winshuttle, and Cloudmark.

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Anyone can say they want to be “Boston’s super angels.” But Chris Sheehan and James Geshwiler are trying to back that up with some action.

The managing directors of Lexington, MA-based CommonAngels announced last week they are adding a key new component to their firm’s financing strategy: the ability to invest in a greater number of startups at earlier stages, and in smaller amounts. Those types of investments—intended to be part of total financing rounds of less than $1 million per startup—will complement the firm’s larger and more traditional angel investment rounds (typically around $1.5 million total), which it will continue to do. And they will enable the angel fund to act in some cases more like an individual angel investor. [Editor’s note: CommonAngels is an investor in Xconomy, and Sheehan is a member of Xconomy’s board of directors.]

It’s a potentially significant development for CommonAngels—and for the Boston startup community. These days, it seems like every tech investor in America (well, Silicon Valley especially) is trying to get involved at an earlier stage with promising entrepreneurs, mostly in Internet software. That’s because it’s far cheaper and faster to test out different Web interfaces and business concepts than it was just a few years ago, and so both startups and investors need to have more of a “fail fast” mentality to get to something that works. (The deeper impact of all this remains to be seen, but in the meantime it has generated lots of entrepreneurial buzz, and investors are jockeying for position.)

Instead of going through the CommonAngels committee process, Sheehan and Geshwiler alone will make decisions about their firm’s earlier-stage investments. The two have been busy raising a new fund, but can’t talk about it yet. (The fund will not be exclusively devoted to the new kind of seed deals.) To be clear, they say, CommonAngels has been making what people would call seed-stage investments for 10 years; what’s changed is that the target companies will be at even earlier stages of development (alpha versus beta software, say), and the investors essentially are paying the founders to build out their first product and get it to market, rather than betting on a certain amount of revenue growth, say.

“Early on it’s about backing the team and the idea, and you don’t need months to do testing,” Sheehan says. What’s more, the success of these fast, early-stage investments will probably depend more on the business model, marketing, and distribution than the companies’ technology per se.

So what will these new investments look like? CommonAngels will continue to … Next Page »

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It’s shaping up to be a busy week for Michigan venture capital and angel investment news.

—Dexter, MI-based ReCellular, an electronic waste company focused on collecting and recycling mobile phones, cameras, and other devices, said yesterday it has received an investment from Beringea. The amount of financing was not disclosed, but it was made through Beringea’s $185 million InvestMichigan Growth Capital Fund (this is the fund’s 17th investment). ReCellular has 280 employees in Michigan and is led by CEO Steve Manning. The company says it collects more than 400,000 mobile phones per month, of which 70 percent are resold and the rest are recycled. Farmington Hills-based Beringea is Michigan’s largest venture firm; it has more than 70 portfolio companies in the U.S. and U.K.

—The Michigan Women’s Foundation, a statewide organization focused on supporting female-focused programs, said yesterday its board of trustees has approved the formation of a Women’s Angel Fund that will provide investments in early-stage businesses owned or run by women. The program also will provide mentorship and professional support for female founders. Xconomy’s editor-in-chief Bob Buderi had the scoop on the angel fund news in this in-depth profile of the Michigan Women’s Foundation back in August. Financial details including the size of the fund and the size of individual investments have not been formally announced yet, although foundation CEO Carolyn Cassin told Bob investors will be asked to commit $20,000 a year for five years to the fund.

—With all the gloom and doom around the venture capital industry, it’s refreshing to see Michigan being among the 12 states having VC firms that raised money in the third quarter of 2010. That’s according to a Thomson Reuters study put out yesterday by the National Venture Capital Association. Ann Arbor-based Resonant Venture Partners has a modest haul so far (a reported $500,000 on its way to a targeted $10-$20 million). Last month, Bob posted a more complete list of Michigan venture firms that have recently closed funds or are raising funds now.

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The MassChallenge global startup competition is in full swing. The 110 chosen companies have been pitching their wares over the past few days, trying to make the cut down to the 26 or so that will advance to the next round and compete for a piece of the $1 million prize.

Architexa, a three-year-old company led by ex-Microsoftie and MIT alum Vineet Sinha, was slated to present yesterday at the competition. I caught up with Sinha beforehand to get a quick snapshot of his company and its progress through the program. Architexa’s story is not necessarily representative of all MassChallenge entrants, but it provides a window into the proceedings—and a look at how much work goes into a company before it even enters such a competition.

First, some background. In the early 2000s, Sinha was working at Microsoft and wishing he had better software design tools—better than IBM Rational software, at least, which has become the industry standard but which Sinha says can be “useless” for developers. He decided to work on building better software tools by going back to school as a PhD student in MIT’s Computer Science and Artificial Intelligence Lab. By 2008, he had graduated and also had been a semifinalist in the MIT $100K business plan competition. Over the next couple of years, he and a small team bootstrapped Architexa, did consulting work, and built out their product using technology based on his PhD research. The product has been commercially available for just over three months now.

I won’t get into the technical details, but basically the tool gives developers a new way of “understanding” how software works at a deep level, instead of being focused on code generation and design, Sinha says. It’s all part of the burgeoning field of “unified modeling language,” which is a method developers use to visualize and construct code using diagrams and other tools for managing complexity. The sector took off with IBM’s purchase of Rational Software in 2003 for $2.1 billion, and Borland’s acquisition of TogetherSoft in 2002 for $185 million. But, according to Sinha, there’s still plenty of room for innovation.

Architexa currently has four employees. Sinha says it has been getting a lot of interest from big companies—Disney, Google, Motorola, and VMware are some of the ones trying out Architexa’s software. He says the product has more than 900 users, but wouldn’t say who’s actually paying for it yet. The company’s revenue model is subscription-based, which is different from competing software products that have perpetual licenses. “We want to make sure the developer benefits on a day-to-day basis” and therefore will renew his or her subscription regularly, Sinha says.

A key benefit of participating in MassChallenge has been the mentorship, Sinha says. “It’s been great to get feedback to refine our pitch,” he says. The kinds of lessons that have helped most: branding, intellectual property, customer development, and, more generally, being inspired. Mentors like James Woodward, Alec Karys, and Michael Shumann have helped Architexa with its priorities and timing—things like “you’re not ready at this time for this, focus on these other things,” Sinha says—as well as understanding customers and sales channels.

It’s still early days for Architexa. The company doesn’t need venture capital yet, for instance. As it heads down the home stretch in the startup competition, what it needs is to gain traction, and to raise a little bit of money so it can afford to hire experienced sales and marketing people.

“We’re trying to do it slowly and carefully,” Sinha says. “We’re working hard, we’re building a company, and we’ve made a huge amount of progress.”

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There’s some interesting personnel news today in the world of mobile software apps for companies. Boston-based Apperian, a mobile development and platform startup, says it has appointed a new CEO as of last week. He is David Patrick, a veteran of Lotus, Sun, Novell, and a number of cutting-edge tech startups on both coasts. He succeeds founder Chuck Goldman, a former Apple executive who is staying on as chief strategy officer and will continue to run the company’s services, sales, and business development.

I took the opportunity to get to know Patrick a bit, and to get an update on Apperian’s business. The company has about 20 full-time employees plus a number of consultants; there were three new hires last week, and more will come soon. Patrick says the firm’s revenue “has grown very dramatically” and could be on pace to increase by 300 percent this year over last year. Nevertheless, one of his first objectives as CEO is to raise a Series A financing round. To date, Apperian has been supported by $1.5 million in seed money from CommonAngels, plus services revenue from its mobile-app development work.

“I’ve looked at a lot of startups, and this is the first one I’ve seen as healthy as it is after 18 months,” Patrick says.

Founded in January 2009, Apperian has developed consumer iPhone apps for companies like American Greetings (electronic cards), Intuit (tax forms), and Timberland (retail marketing). It also counts Estee Lauder, Rue La La, Progressive Insurance, and Warner Bros. among its customers, for whom it has developed 55 apps so far. But an even bigger opportunity may lie in creating a platform for companies to develop their own internal mobile apps—what would amount to an “enterprise app store” for iPhones, iPads, and Google Android-based devices.

That’s what Apperian announced it was working on this spring, as my colleague Wade detailed in an interview with Goldman. The software platform is still in beta mode, Patrick says, and he has been studying it for the past couple of months (before officially starting with the company), thinking about issues such as how to ensure the security of confidential data and users’ identities on mobile devices. In the meantime, the company seems to be gaining traction, particularly around the iPhone and iPad.

Challenges aside, it’s clear that being an early player in the emerging mobile business … Next Page »

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It’s been three months since Angel Boot Camp in Cambridge, MA—a seminal event in the local ecosystem of angel investors and entrepreneurs. I’m curious to follow up on what progress has been made since that meeting, so I’ve been getting to know some of the local angel investors in technology who were there, and/or who regularly attend startup events around town.

One of them is Joe Caruso, who has invested in more than 100 startups, including notables like Bitpipe, Boston Micromachines, Carbonite, Constant Contact, Dexrex, HubSpot, i2Chem, Localytics, Marginize, Nantero, Nimbit, SCVNGR, SiCortex, Skyhook Wireless, Terrafugia, and Vela Systems. Caruso has been an advisor and advocate for entrepreneurs for the past 20 years, after working at companies such as Teradyne and Autex, and serving as CEO of Cyborg.

In his spare time, Caruso is coordinating a weeklong series of events next month called BREW (Boston Region Entrepreneurship Week). The series, which will run from October 13-21, includes a joint open house from Mass Challenge and Mass Innovation Nights; a Mass Technology Leadership Council event on the state’s innovation future; and VC office hours at Cambridge Innovation Center.

The main goal of BREW is to put a spotlight on the greater Boston area as an epicenter for startups, and the hardy souls who conceive, launch, and build new companies, Caruso says. In terms of measurable outcomes, one hypothetical goal he has mentioned would be having 10 fewer MIT students leave Boston for Silicon Valley this year—that might be a start, anyway. (As for BREW, anyone can host an event and list it here.)

I recently had a chat with Caruso about the street-level trends he’s seeing among early-stage technology companies. In his role as an advisor to startup CEOs, here are two quick nuggets of advice (neither of them very surprising, but good for entrepreneurs to keep in mind):

—On fundraising and getting customers: “I don’t know if it’s just been a drum I’ve been beating, or financial realities, but more and more entrepreneurs are bootstrapping it and doing it with no dollars,” he says. Not surprisingly, Caruso says he spends a lot of time talking to early-stage entrepreneurs about the effort they put into raising money. “If they put the same effort into getting a customer, they’d be better off,” he says. “Why not get $50K worth of orders, and then the $100K will come chasing after you. When people start a company, I would rather they think, ‘Now I’d rather go get a customer’” than go raise money.

(All of this fits with what I’m hearing on both coasts about the relentless need to focus on customers—and to bootstrap if you can, at least in the early days.)

—On startup exits: “I still see a little too much emphasis on the exit strategy. I’d like to see more entrepreneurs have a big vision they’re off pursuing, rather than, ‘How do I sell this in three years?’” Caruso says. Still, he notes, entrepreneurs have become more grounded in the past five to 10 years. “Compared to ’99, we look phenomenal. I think we’ve progressed tremendously,” he says.

But from an investor perspective, he says: “Some entrepreneurs have been slow to adjust their thinking on valuations. A company that 10 years ago would sell for $500 million, today would only sell for $100 million—there has to be an adjustment to what investors will pay.”

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