It wasn’t so much the predictions as the discussion that was most interesting at last night’s annual predictions dinner, organized by the Washington Technology Industry Association. Will Twitter be acquired in 2010, and why? Who will have the dominant cloud computing platform in the next couple of years? What kind of startup are you looking to build or finance, and which areas are you staying away from?

A panel of Seattle-area tech entrepreneurs and investors gamely took the bait and had some lively exchanges over the course of an hour. OK, these guys all know each other, and we’ll take what they say with a grain of salt since it’s a public forum—but here were some of the most interesting points they made. (You can read more comprehensive recaps of the panel on Brier Dudley’s blog at the Seattle Times, and soon on TechFlash by moderator John Cook.)

The panel was split 3 to 2, with the narrow majority guessing Twitter will get bought next year. Andy Sack of seed-stage fund Founder’s Co-op predicted Twitter will make more money than Facebook in 2010 (surprising, given the current disparity in the other direction). Glenn Kelman, the CEO of Redfin, an online real estate firm, said Twitter should charge for search (as it has begun to do in partnerships with Google and Bing). Kelly Smith from Curious Office and the startup Pressplane argued that Twitter could be “absorbed by a big company,” but “it’s going to go nowhere.” By the end of the evening, Sack was predicting that Microsoft would buy Twitter next year.

There was a consensus that 2010 could be a big year for acquisitions. Bill Bryant of Draper Fisher Jurvetson boldly predicted that Amazon will buy Netflix, Blockbuster, and Hulu, while opening brick and mortar “Amazon media stores.” Greg Gottesman from Madrona Venture Group said Cisco might buy EMC (for VMware) and Seattle-based F5 Networks, while Microsoft might buy Research In Motion, the maker of the BlackBerry smartphone. Sack predicted Adobe would pick up Seattle photo-editing startup Picnik. Rupert Murdoch (News Corp.) would buy Seattle’s Cheezburger Network, and someone would buy Redfin.

Looking back on 2009 for a minute, the big deals that were questioned by the panel included Adobe’s acquisition of Omniture (Gottesman said it just didn’t make sense strategically) and …Next Page »

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I sat in on a good venture capital panel yesterday at Mobile Northwest 2009 in Seattle. No huge arguments or chair throwing to speak of (we’ll see what we can stir up at the next few Xconomy Forums). But some solid and useful observations from Geoff Entress of Voyager Capital, and also a prominent Seattle-based angel investor; Adrian Smith of Ignition Partners in Bellevue, WA, an expert in telecom and wireless; and Puneet Tandon of Bellevue-based T-Mobile USA, who is looking to sign partnerships with top entrepreneurs in digital media and social networking. (You can also see some comments from mobile VC Tom Huseby’s keynote here.)

The panel was moderated by Tricia Duryee, the Seattle-based correspondent for mocoNews, a website that covers wireless telecommunications. Here are my quick “top three” takeaways from the discussion of the local mobile industry:

1. The panic may be over, but caution rules. Entress says he’s added nine companies to his portfolio this year, out of a total of 32 he’s involved in (and six mobile firms, including TravellingWave, Swype, Dashwire, and Treemo). “We’re definitely not out of the woods yet,” he said. “But 2010 might be a good year for selling companies.”

2. It’s not all about the iPhone. Entress and Smith pointed out that Apple has only 17 percent of the smartphone market, so there’s plenty of opportunity on other platforms, like the BlackBerry and devices that use Windows Mobile. “Apple has a huge amount of mindshare,” Smith said, “but the critical thing is the development environment around [mobile applications].” Tandon agreed, saying, “Barriers to doing business with us [carriers] perhaps have been lowered.” Entress stressed the importance, especially for startups, of trying to avoid “getting locked into any one carrier, handset, or operating system.”

3. Watch advertising, input technologies, and connected devices. Tandon pointed out that by sometime next year, there are projected to be 3.3 billion Web-connected devices, and 70 percent of them will be connected via wireless operators. That means carriers will be willing to pay to know “who are the social influencers in your subscriber base,” he said. Smith and Entress said Google’s $750 million acquisition of AdMob signifies that mobile advertising is here to stay—but that the deal was the “first one out” (like YouTube for video), so don’t look for anything near that sort of valuation again. Entress added that he’s working with a number of startups selling new ways of inputting text on mobile devices (using speech recognition, touch-screen methods, and so forth). For all our fancy gadgets, it seems we still struggle to communicate.

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The second half of 2009 provided a good measure of optimism, easing some of the pain investors felt toward the end of 2008 and in early 2009. The stock market has been volatile but up significantly overall. There are signs of increased lending activity. Mergers and acquisitions have picked up. And there’s a pulse in the IPO market.

Yet despite indications of recovery, we shouldn’t be lulled into thinking we’re over the crisis. The labor, housing, and consumer markets are still struggling. And there’s still plenty of fear and uncertainty as we emerge from the longest downturn since the Great Depression.

Keeping that cautionary note in mind, what do the recent positive strands of hope in the IPO, M&A, and credit markets tell us?

To begin with, a potential increase in IPO listings isn’t necessarily a signal that capital markets have returned to normal. Why? Because the companies coming to market are the best of the best, the ones who have survived the past 24 months of havoc and have continued to build on sound business fundamentals.

And that’s the point—we’re not out of the woods yet; every company that wants to go public isn’t going to succeed. After the initial IPO backlog is worked down, the next wave of public offerings, if any, will continue to present a challenge and will come from specific sectors that investors see as the leaders in potentially expanding markets—for example, health care services and technology, financial services, and software and software services. Other, more traditional companies that can provide a compelling investor advantage and return will also be in the IPO mix.

Job growth in the health services and education sectors and annualized spending growth in the equipment and software sectors—ranging from 10 percent to more than 30 percent from Q3 2008 to Q1 2009, and evidenced by recent quarterly earnings growth by industry leaders—give some hint of recovery as well as an indicator of where the money may flow in the near future. Still, even though many institutional money managers need to invest and are waiting for the right opportunities—including IPOs—don’t expect to see a boom.

In fact, it may end up that growth will be fueled more by the credit markets than …Next Page »

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

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

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

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

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

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“People say if you fail in Seattle, you’re screwed,” said Marcelo Calbucci. “If you fail in the Bay Area, you just have a badge of honor.”

We were at the TechStars reunion event in Seattle last week, listening to early-stage investors Brad Feld, Andy Sack, Steve Hall, Greg Gottesman, Shawn Broderick, and Chris Sheehan speak about entrepreneurship and the tech startup scene in their respective cities. Calbucci, the founder of Seattle 2.0 and Sampa (which folded in August), was asking the panelists about how the tolerance of failure, whether real or perceived, affects a region’s culture of innovation.

It’s a deep question, and it continues the discussion of startup cultures in different cities that I highlighted last week. It’s also part of a debate on failure that has been going on since long before I wrote about it in Xconomy last January. There seem to be two camps. Most entrepreneurs I’ve talked to feel there is a stigma associated with having a failed startup in Seattle. Most venture capitalists, not so much. But it’s a much broader issue than just Seattle. My colleague Bruce talked with a Web 2.0 startup founder in San Diego last week who said his first failure, earlier this year, “was truly a painful experience, and I’m still not over it.” And meanwhile, Brad Feld, the co-founder of TechStars and Foundry Group in Boulder, CO, had some provocative things to say about the failure aspect of Boston’s culture.

But first, Andy Sack of Seattle’s Founder’s Co-op gave his perspective on having failed at his last startup, Judy’s Book, after having had three successes prior to that. “As much as you teach entrepreneurship, as much as there’s supply of capital out there, really when push comes to shove, entrepreneurship comes from within,” he said. “I couldn’t take a job at any of the big companies. We’ve been through the tech boom of the ‘90s. We’re just coming off of a major hiccup. I’d say right now, early-stage investors in Seattle have retreated some; venture capital has retreated some, they’re focused primarily on their portfolio. That said, you [Calbucci] failed and went out and started your own thing. I failed and went out and started my own thing. Because we didn’t know any better. The entrepreneurs that don’t know any better, they just go do it again.”

Greg Gottesman of Seattle-based Madrona Venture Group is one of those VCs who says he doesn’t see failure as a black mark. “My sense in this community is, to people who matter most, I don’t think failure is a huge negative,” he said. “There are certain types of failures, like failure of integrity—that’s hard to recover from. But failure of a startup, just speaking with all my partners, that’s not a negative. We talk about that as a learning experience. It’s just another piece of the puzzle.”

So how does Seattle’s tolerance of failure differ from, say, Boston’s or Silicon Valley’s? Feld, who has been investing nationally for 15 years, said, “I actually believe that the shtick of ‘failure as a badge of honor’ is really great shtick. I’ve failed a lot. It’s hard to fail. Failure impacts a person in …Next Page »

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I was chatting with a couple of local investors at the TechStars (seed fund and mentorship program) event in Seattle on Wednesday. They thought the VC panel discussion of the startup climate and culture in different cities around the country was boring. If you’re an entrepreneur or investor, they said, that’s just where you are, and you deal with it.

But au contraire, mon frère—as a journalist and outside observer—I view those comparisons across different innovation clusters and their respective histories as a way to generate some good stories and insights. On the panel, there were certainly some constructive (and at times controversial) things said about the entrepreneurial climate in Seattle, Boston, and Boulder.

Here are a few edited highlights from the panelists, several of whom bring an outside perspective to their current cities:

Brad Feld of TechStars and Foundry Group gave a brief history of the startup scene in Boulder, CO—useful for any city with entrepreneurial aspirations. “When I showed up in ’95, what I found was on the software side you had a lot of smart engineering talent but you didn’t have much else. A handful of entrepreneurial companies in storage and cable infrastructure. Not much in the way of entrepreneurial executive leadership other than from these pockets. In the mid-90s, because of the counter-culture community—and the Internet was purpose-built for places like Boulder—you had a lot of people who were independent, very smart, doing their own things suddenly intersecting with a medium that allows you to be anywhere. It’s 100,000 people plus 25,000 college students. A pretty small town, but it has the largest percentage, per capita, in the United States of computer scientists and PhDs. Yet there wasn’t a broad wave of entrepreneurial experience,” Feld said.

“In the mid-to-late 90s, there was huge activity around the Internet. Anybody with a pulse could get a company started. The predictable thing eventually happened, there was a lot of wreckage. But from ‘95-2001, Boulder had imported a lot of executive talent—CEOs, VP sales, engineering leadership. We also had a lot of entrepreneurs who had one or two companies in that cycle. So by 2003, people were starting to come back and get re-engaged in entrepreneurial activity. There were probably 50-plus people that made $10 million or more, so there was enough of an angel community. There was critical mass around this. But what was missing was something that tied the community together. There was the endless cocktail party circuit of entrepreneurs. Eventually people got bored and stopped going.”

That led David Cohen, Feld, and others to form TechStars in Boulder. “It cemented this notion of first-time entrepreneurial activity is the core of the ecosystem. What was needed was fresh meat into the system. We got a lot of new, young people into the community,” Feld said. “The other thing was that one of the hardest things for first-time entrepreneurs is to have an engaged relationship with an experienced entrepreneur. We found we were creating this thing that integrated the whole value chain of entrepreneurs. It really energized the existing entrepreneurial activity around a thing.”

Chris Sheehan of CommonAngels then gave his thoughts on the Boston innovation scene. [Disclosure: Chris is on Xconomy’s board.] “In the IT ecosystem in Boston, there are a number of things going on,” Sheehan said. “It’s a wonderful place for universities and colleges. MIT has been the granddaddy in terms of the entrepreneurial ecosystem. But what I’m seeing is a fresh set of energy coming …Next Page »

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Greylock Partners, a Silicon Valley venture firm formerly based in the Boston area, announced today it has hired Reid Hoffman, the co-founder and executive chairman of LinkedIn, as a partner. Hoffman, who has also been an angel investor, will focus on early-stage consumer Internet and software investments, as well as advise entrepreneurs from Greylock’s portfolio companies. Greylock also announced it has closed a new $575 million venture fund. The VC firm has previously backed companies like LinkedIn, Facebook, Data Domain, Farecast, and ZipCar.

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[This post also appears on OVP's blog---Eds.] The University of Washington’s Computer Science and Engineering (CSE) department’s Affiliates day is one of the most fun and rewarding days of the year for me as venture investor and geek. It involves a showcase of projects and research areas by professors and students and is a festival of creativity, new ideas, and engaged smart people. It is a day my colleagues and I look forward to every year.

Last Thursday’s meeting ended with a panel on “The Changing Face of Venture Capital” moderated by UW’s Ed Lazowska, who prompted us with a series of provocative questions. On the panel with me were Greg Gottesman of Madrona Venture Group, Ron Howell of WRF Capital, Bill McAleer of Voyager Capital, and Cam Myhrvold of Ignition Partners.

One of the first topics was the impact of the recession on startups and venture capital. Most VCs expressed the opinion that money was harder to find but that if you could get funded, it was a great time to start a company because skilled people were available, cloud computing providers such as Amazon have made it possible to do with less capital, and there were fewer competitors being funded. There was recognition that it has to be done with less, given the exit markets. But if anything, Greg Gottesman said Madrona is sticking to its model and not changing given a one-year blip.

Cam Myhrvold made the point that there were a lot of entrepreneurs using Amazon Web Services and open source to quickly bootstrap companies with much less capital than prior years. My comment was that if you play at the application layer using open source and AWS, you better think hard about marketing and customer knowledge since there are few technical barriers to entry.

One topic that was raised was why should entrepreneurs go for VCs over angels, money aside. I disagreed that money could be ignored and said that the quality of money was critical in these times. The recession has meant that almost all companies have needed more cash and, given that outside funding is tough, insiders had to step up. Many investors have not stepped up, which has made all VCs more conscious of the quality of their co-investors.

Ed asked what areas were particularly attractive for Seattle, and we got a consistent set of answers. Digital media, gaming, software, and the emerging areas of IT applied to green tech and IT applied to biology are core areas of interest. Each firm had its own areas of interest—for instance, Bill McAleer liked mobile apps and the application of social networks to the enterprise as one of his areas. Bill related a story from a recent trip to NYC where the cab driver was touting his favorite iPhone app—a map of all the public bathrooms. When asked about really innovative new ideas, Greg Gottesman mentioned 3-D printers and how his son was willing to empty his bank account to get one.

At OVP, we like the investment thesis that green tech and biology are becoming more compute-intensive, and that companies that can bring a view of IT applied to these areas are particularly attractive.

My conclusion from the evening is that Seattle is a great place for innovation and has a set of dedicated VCs who want to see a vibrant, risk-taking community. Each firm had its own areas of focus, some overlapping, but all were focused on creating great companies and skilled entrepreneurs here in Seattle. I left feeling that we were lucky to have UW CSE, a great research department generating innovative ideas, and a VC community very committed to fostering growth.

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Bellevue, WA-based Onehub announced it has raised $1.3 million in Series A financing from Bellevue-based Ignition Partners and angel investors. Onehub makes cloud-based software for collaboration and file-sharing, and was founded in 2007. Back in April, we reported that Onehub had raised $600,000 from undisclosed investors, and in September we mentioned the company was part of Ignition’s portfolio.

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Beaverton, OR-based Prolifiq was named winner of the day at the annual Oregon Entrepreneurs Network (OEN) Venture Northwest investor forum in Portland, OR, today. Eleven companies, including three from the Seattle area, presented to an audience of investors and entrepreneurs. Prolifiq makes mobile marketing software that helps companies distribute sales materials to customers in the technology, media, and life sciences industries.

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TechStars, the startup incubation and seed investment fund based in Boulder, CO, and Boston (as of this year), is holding its annual reunion event in Seattle on November 4. (See a couple of local VC blogs here and here.)

As part of the event, a number of TechStars companies that are raising money will make pitches to investors. There will also be a panel discussion on angel and venture investment trends, featuring Brad Feld of TechStars and Foundry Group; Andy Sack from Founder’s Co-op; Steve Hall from Vulcan Capital; David Cohen from TechStars; Greg Gottesman from Madrona Venture Group; and Chris Sheehan from CommonAngels. (Full disclosure: Chris is a member of Xconomy’s board of directors.)

Last February, when Brad Feld spoke to a crowd of tech entrepreneurs and investors in Seattle, there was some hopeful speculation in the crowd about whether TechStars might set up operations in the Northwest in the future. Nothing new on that front, but this reunion event in two weeks can’t hurt for down the road.

It sounds like the event is invitation-only, and meant for local angel investors and VCs. We’re looking forward to a stellar gathering, and will see what comes of it.

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Seattle-based Zino Society has announced the winners of its 2009 Zino Zillionaire Investment Funds. Bellevue, WA-based Enroute Systems, a maker of analytics and transportation management software for parcel-shipping businesses, received $60,000. Arlington, WA-based MicroGreen Polymers, a company focused on making plastic products more environmentally sustainable, also took home $60,000. The companies presented to investors back on September 17.

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It was a light week for deals in the Northwest, but there were still some big investments in online advertising and social business software. (Not to mention we’re all trying to confirm the rumors of an Ontela acquisition of Photobucket.)

—Venture capital stats for the quarter ending Sept. 30 were released from multiple sources in the past couple of weeks. The latest report, from MoneyTree / PricewaterhouseCoopers / National Venture Capital Association / Thomson Reuters, says $242 million was invested in 30 Northwest companies. That marks a bit of a recovery for the region, as Seattle-area investors Andy Dale (Buerk Dale Victor), Thomas Hodge (Frazier Technology and Healthcare Ventures), and Scott Jacobson (Madrona Venture Group) told me about on Monday.

—Portland, OR-based Jive Software raised $12 million in Series B funding from the Silicon Valley venture firm Sequoia Capital. Sequoia had previously invested $15 million in Jive back in 2007. Jive Software makes social business software that helps companies and employees collaborate more effectively using social networks, as well as monitor and interact with online communities.

—Bellevue, WA-based AudienceScience confirmed it has raised $20 million from existing investors Mayfield Fund, Mohr Davidow Ventures, Integral Capital Partners, and Meritech Capital Partners. AudienceScience (formerly Revenue Science) makes software for targeted online advertising. Luke broke the funding news last week based on a regulatory filing.

—Bellevue, WA-based Visible Technologies, a maker of software that helps companies monitor social media and manage their reputations online, formed a strategic partnership with In-Q-Tel, the investment firm run by the CIA. Financial details weren’t announced, but the deal includes a technology development agreement. Last week, Visible Technologies said it had raised $2 million more from existing investors, bringing the company’s total funding to $23.5 million.

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Bellevue, WA-based Visible Technologies has formed a strategic partnership with In-Q-Tel, the investment firm run by the CIA. The deal includes a technology development agreement, but financial terms were not given. Visible makes software that helps companies and organizations monitor the social media landscape (and Web sentiment towards specific topics and brands), as well as manage their online reputations. Last week, Visible said it had raised an additional $2 million from existing investors, bringing its total funding to $23.5 million. The company also said it had achieved more than 60 percent year-over-year revenue growth, and signed up 24 Fortune 1000 customers in the third quarter of 2009, including Xerox and Autodesk.

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Seattle-area startup Findood, an online marketplace for specialty foods, took first prize at the Northwest Entrepreneur Network’s First Look Forum on Wednesday. The other four finalists were Dibspace, DigitalScirocco, Geedra, and HeatFlow Technologies. Also presenting to investors were Aurumis, CoCollage, Glue, Greenbridge International, PodCurry, Re:Source Fitness, and Serra Media. Findood won a package from Swift HR, office furniture, and a year of free office space from WRF Capital.

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The Oregon Entrepreneurs Network (OEN) has announced its lineup of 12 presenting companies for the Venture Northwest 2009 investment forum, to be held on Oct. 29 at The Nine’s Hotel in Portland, OR. The Seattle-area companies are Calidora Skin Systems, Doxo, Lucid Commerce, and MicroGreen Polymers, while the Portland-area companies are Advanced Inquiry Systems, Cularis, DesignMedix, Elemental Technologies, Giftango, Prolifiq, Second Porch, and Wicked Quick.

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[Updated 9/30/09 2:15 pm. See below.] Seattle-based Founder’s Co-op, the seed-stage fund run by Andy Sack and Chris DeVore, has been busy as of late. The peer-to-peer angel group has made two startup investments that have come to light this month. The financial details of the deals haven’t been announced, but something interesting may be brewing here.

Here are the two Seattle-area startups that have been funded:

—Nearlyweds, led by Porter Bayne and John Scrofano, is a maker of “social wedding software.” The company, which has been in business since 2007, designs personalized wedding websites for couples for a flat fee. DeVore announced the investment on his blog yesterday. The amount wasn’t disclosed, but Founder’s Co-op typically invests $250,000 or less.

—BigDoor Media, led by Zango founder Keith Smith, is still under wraps, but its website says it’s “building a completely new, automated content monetization platform for online publishers.” According to a regulatory filing on Sep. 1, BigDoor received $250,000 in equity funding, and Andy Sack (a former Zango board member) is listed on the form as a director. Smith, reached by e-mail on Sep. 1, declined to comment, saying the company is still in stealth mode.

I’m wondering if these latest investments represent a new kind of early-stage venture funding. I haven’t confirmed this yet with Sack or DeVore (neither would comment on the deal structure for this story), or with the startups in question. But earlier this summer, DeVore posted some intriguing thoughts on his blog about a type of investment model called royalty based financing (RBF).

DeVore described the model as “secured lending, but rather than requiring a fixed coupon and repayment period, the lender obtains a claim on a fixed percentage of gross revenues until an agreed-upon multiple of invested capital (typically 3 – 5x) is returned. RBF investors trade steeper default, timing and rate of return risk for richer potential returns than those offered by traditional business lending.”

So it sounds like the idea is to trade equity in the company for a certain amount of revenue per year—of course, this approach only works for post-revenue startups. DeVore went on to talk about “bringing the RBF approach to riskier, earlier-stage investing, where investors retain an equity position as an option on a future liquidity event, while receiving a portion of the expected return in the form of cash flows.”

Back in June, a related post in GigaOm said of such an approach, “In the middle ground between bankruptcy and an IPO, where millions of small businesses reside, it would provide a return for investors. That compares with today, which finds them stuck, waiting for a big payout that may never come.”

In DeVore’s post, he said his group was looking into the new investment model. “We’re trying it on for size, and—at least for some of our investments—this model may wind up being a better fit than the traditional venture approach,” he wrote. “Most of all, we love the idea of breaking the mold in our industry—early-stage investing—in the same way we hope our companies shake up the status quo in theirs.”

I could see this model working with Nearlyweds, which offers a paid service and has been in business for a while. But BigDoor Media is pre-revenue, so the fit isn’t as clear. I will have more on royalty based financing soon, as it pertains to the broader investment community, so watch this space.

[This paragraph added after speaking with Founder's Co-op.] Reached by phone about Nearlyweds, DeVore confirmed the investment was less than $250,000. He couldn’t comment on the deal structure, but it sounds like Nearlyweds has a compelling offering in the wedding software space that fits well with Founder’s investment strategy. “It doesn’t feel like existing free products have hit the nail on the head,” DeVore said. “They can create a step function in quality, and in what share of the market they have.”

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If you spend much time in the business or legal world, “due diligence” is a phrase you hear a lot. It’s the polite term for the time you have to spend figuring out whether a potential client, vendor, investment, acquisition, or partner is legit or phony, smart or just slick.

Part of the process involves discreetly (or not so discreetly) calling around, trying to find people who know the person or entity you’re “diligencing.” But what if due diligence weren’t such a guessing game? What if there were a central marketplace where you could declare which type of information you need, pick an expert, and—for a reasonable fee—get an hour of private telephone consultation?

That’s the whole idea behind Zintro, a Web-based client-expert matching service being rolled out in beta form by serial entrepreneur Stuart Lewtan. The founder of Lewtan Technologies, a maker of financial analytics software sold to UK-based DMGT in 2004, Lewtan believes there’s a problem with existing professional-networking services such as LinkedIn. They’re great for staying in touch with your acquaintances, he says, but they aren’t really designed to bring about conversations between people who don’t already know one another.

“LinkedIn is an excellent tool, but it doesn’t’ really provide a good mechanism for reaching an agreement to talk,” Lewtan says. “Everything Zintro does is built around trying facilitate introduction, qualification, payment, and all the other aspects of connecting two people and creating a safe environment for them to communicate and exchange information for a fee.”

Here’s how Waltham, MA-based Zintro’s Web service works: Say you’re an investor and you’re thinking about buying a big chunk of stock in A123Systems, the Watertown, MA-based battery maker that went public last week, but first you want to know more about lithium ion batteries. You sign up for a “client” account at Zintro.com and fill out a form describing your information needs. Zintro uses what Lewtan calls “fuzzy search” algorithms to comb its database of experts, who all fill out detailed profiles when they sign up for the service. Zintro sends your inquiry to appropriate experts who indicated they know something about batteries, electric cars, or material science.

These experts are then free to respond with a brief proposal outlining their rates and their qualifications for talking about A123. From your Zintro dashboard, you can sort through their proposals; if you need more details, you can request them from the experts via Zintro’s internal e-mail system.

Once you settle on an expert, Zintro helps you schedule a phone call, and charges your credit card or PayPal account for the amount of the expert’s fee, plus Zintro’s 30 percent introduction fee—say, $100 for the expert plus $30 for Zintro. The funds go into an escrow account, and Zintro provides a dial-in number that both parties can call at the agreed time.

Once the call is over and both parties confirm how much time was used, the fee is released to the expert. There’s also an escape hatch: if you …Next Page »

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Now that the media craze around cloud computing seems to have died down just a bit, I thought it would be a good time to take a considered look at what one of the Northwest’s most prominent venture capital firms is working on in this space, which is having increasing influence in every area of software and information technology (IT).

Over the past couple of months, I’ve had a chance to talk with a number of VCs at Bellevue, WA-based Ignition Partners, and they’ve shared a great deal of knowledge and insight into how they think about cloud computing and virtualization. What follows is not a comprehensive look at the firm’s strategy, but rather a few thematic highlights that struck me as important to those interested in cloud-based technologies and business models. To an outside observer at least, what Ignition does in this area will go a long way towards determining its long-term success—and to some extent, it already has.

First, a couple of definitions. Cloud computing, as most see it, is about using remote servers run by vendors like Amazon or Google to store and process data over the Internet, instead of buying and maintaining your own local machines. In fact, Amazon’s chief technology officer, Werner Vogels, has a more industry-focused definition, one that Ignition Partners agrees with: cloud computing is “IT as a service,” delivered in a scalable way to multiple customers via the Web.

Virtualization is a related but different animal; it can be thought of as enabling cloud computing, among other things. Ignition defines virtualization as separating software from hardware—and applications from operating systems—so it lets you run multiple operating systems on a single server, for example, or multiple applications on your desktop, all with minimal setup and security hassles. Big companies like Microsoft, VMware, IBM, and Citrix compete heavily in this space.

But back to Ignition. The firm was founded in early 2000 by ex-Microsoft and McCaw Cellular executives, and now has more than $2 billion under management. It invests in both early-stage and growth-stage companies in the U.S. and China, focusing on consumer tech, communications and wireless, and business software and infrastructure. Ignition has received its fair share of criticism in the press, stemming from incidents like the closure of Sotto Wireless earlier this year, and last fall’s accounting scandal at Entellium—both companies it backed.

Yet Ignition is strong enough in cloud computing and virtualization that, given how central these issues have become to most aspects of IT, it seems like a key differentiator for the company. Especially at a time when most if not all venture firms are going back to basics and thinking about where their most valuable expertise lies. Indeed, Ignition’s biggest win to date was in virtualization: XenSource’s $500 million …Next Page »

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The results of last Thursday’s investment forum organized by the Zino Society are still wafting through the Seattle business community. Six finalists were chosen for two $50,000 investment prizes—Photon Machines, Enroute, and Giftango in the “tech” category, and MicroGreen Polymers, Harbor Wing, and Zero Crossing in the “non-tech” category. Zino founder and CEO Cathi Hatch tells me her team will have to select the two winners more quickly than expected, probably by the end of this month, because some of the finalists are getting ready to close outside investment rounds.

The Zino Society has invested close to $13 million of angel financing in startups over its four-year lifetime as a business-social network that connects investors with entrepreneurs. Investor members vote on the companies, and the fund makes investments from a common pool. Hatch says one of her key takeaways from last week’s investment forum is that the passion of entrepreneurs is crucial to a broader economic recovery. “Innovation is really what’s going to help drag us out of the doldrums,” she says. And the 28 presenters from the Zino forum are the “poster children” for innovation, she adds.

Hatch also told me some intriguing tales from Zino’s history. Having a nose for this sort of thing, I thought a few of the piquant tidbits could be turned into somewhat unconventional lessons for any startup venture. In fairness to Hatch, she did not lay them out as lessons in entrepreneurship, so these takeaways are strictly mine:

1. Don’t be afraid to change course.

Hatch says she originally started Zino with the idea that it would be about wine investments. People could invest in wineries, software involved in tracking wines, and so forth. Hatch asked one of her angel investors to help develop a logo, which to this day has a grapevine running through it (see image above). “Before we got to our first investment meeting, I decided this makes no sense,” Hatch says. “If someone invests in a winery, they’re not going to invest in a second winery. They’re going to want to diversify.” At Zino’s first investment forum, only one pitch had to do with wine. Since then, the group has been open to all kinds of startups—though wine remains a peripheral theme to Zino’s events (more on that below).

2. Don’t label yourself prematurely.

At last year’s Zino Zillionaire investment forum, presenting companies were asked to sort themselves by “tech” versus “non-tech.” One company gave itself a non-tech appellation, and didn’t win an award—but Hatch says the investors would have voted for it had it been in the tech category. So at this year’s forum, Zino uncorked the categories and let the investors decide for themselves. There was no hard-and-fast rule, but “non-tech” ended up including companies focused on materials technology and physical products.

3. Do choose your name wisely.

I asked Hatch where the name Zino came from. She says she used to be in the restaurant business, where names are particularly crucial. Names that start with “Z” are good because people remember them, she says. Hard vowels are preferable as well. Lastly, Zino rhymes with “vino,” which takes us back to the original idea behind the group. At its forums, receptions, and dinners, Zino often invites wine makers to attend and serve their featured vintages. At last week’s forum, the attending wineries (all from Washington state) were JLC Winery, 428 Wines, and San Juan Vineyards. As David Brent would say, el vino did flow.

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