As we come down the home stretch of 2010, I wanted to take another look back at our most recent Boston event—“5×5: Five Cities, Five Big Tech Ideas.”

Not at the program or the public discussion, which I already summarized briefly here, but at some of the side discussions that were caught on camera. One of our event sponsors, Turnstone, took aside some of the 5×5 participants—entrepreneurs and startup experts—and asked them questions about their experience in building their businesses. Here’s the link to the videos.

And here are a few highlights from the entrepreneur interviews (you should watch them, they’re brief and to the point):

—What was the best business advice you’ve ever received?

Craig Labovitz, chief scientist at Arbor Networks: “Be careful about accepting advice. When you’re doing a startup, you’re going against the grain, you’re trying things that haven’t been done before. You really have to trust your own instincts and your own technical knowledge.”

Sarah McIlroy, CEO of FashionPlaytes: “Network, talk to every single person you know, and take every meeting that comes your way.”

—What was the biggest mistake you made, or lesson learned, along the way?

Dug Song, co-founder of Arbor Networks (now with his new startup, Duo Security, in Michigan): “To think that we had to have exactly the right idea before we approached a customer. I think many times customers know what they want, or at least have some idea what their need is, and can be pretty explicit about that, versus us having to guess at what a market opportunity might be.”

Bettina Hein, CEO of Pixability: “I thought we would be selling to families and now we sell to small businesses. So along the long journey that you go on as an entrepreneur, you always have to be flexible and pivot when it’s necessary.”

—How do you stay current?

Ken Zolot, entrepreneurship expert and senior lecturer at MIT: “I have access to a pipeline of great students and great ideas, and hearing who they talk to, who they’re pitching to, and who they’re partnering with, gives me a good sense. So the advice I would give to people who want to stay current is to find a source of innovation at the earliest stage—young people working on new ideas, university inventors—and try to stay connected to that source.”

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Susannah Malarkey, the executive director of the Technology Alliance in Seattle, spent three days earlier this month in Boston with a group of Seattle civic and business leaders as part of the 2010 Intercity Study Mission. These annual trips, organized by the Seattle Chamber of Commerce since 1983, enable Seattle business leaders to pick the brains of civic leaders from around the country and bring the lessons back home to the Northwest on venture capital, urban planning, and education.

In the 27 years the program has been around, this was the third time Seattle representatives have looked to Boston for tips on how to foster community, growth, and local industry. There’s a reason why we keep coming back. Boston has a comparable population to Seattle with just half the landmass and a long history as a standout cluster for academia, innovation, and startup culture. Boston has a lot to offer Seattleites as we are planning for our own city’s future, Malarkey says. I dropped by Susannah’s office last week and spoke with her about the trip. Here are a few of the most important lessons she took away from our sister city to the east:

Reconnecting to the Waterfront

In 2006 Boston completed the most expensive highway tunneling project in the country, the “Big Dig,” which rerouted the city’s Central Artery, Interstate 93, through downtown and away from the waterfront. The project, which went billions of dollars over budget and six years past its initial completion deadline, is often compared to the proposed deep-bored tunnel to replace the Alaskan Way Viaduct along Seattle’s waterfront. And though the two projects are  different, according to Malarkey, there is much to be learned from both the Big Dig and its aftermath. What were the biggest hiccups in the project? How do we ensure that we don’t make the same mistakes? What can we do once the project is completed to help our city reconnect to its waterfront?

Former Massachusetts Secretary of Transportation Fred Salvucci, often referred to as the “godfather” of the project, told the visitors from Seattle about the major road bumps Boston experienced during the Big Dig. On the top of the list: inconsistent management. He emphasized the need to have a clear vision, measurable objectives, and strong and consistent leadership to successfully complete a project of this size, Malarkey says.

“It was an enormous project, they had switched management, and it was so huge and so complex that not having consistent management was really key to not having it finish on time,” Malarkey says.

In Boston’s case, finishing the project was only the first part of the equation. The second part was reviving the city’s waterfront, even when little resources remained. Instead of using taxpayer dollars, … Next Page »

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AdReady is one of those startups that everyone talks about but no one really understands. At least not most lay readers, whose eyes glaze over once they get past the words “online advertising.” I can’t really blame them. After all, can most people explain why Seattle online ad firm and local success story aQuantive was worth $6 billion to Microsoft in 2007?

Karl Siebrecht can. He spent eight years at aQuantive, including time as president of the Atlas technology division. He then spent two-plus years at Microsoft as a general manager in online services after the acquisition. After all that experience, he’s learned how to explain online advertising in plain English, and show why Seattle-based AdReady is a big deal. Siebrecht joined AdReady as president and chief operating officer three months ago, and was just named the startup’s new CEO this week. He succeeds co-founder Aaron Finn, who is staying on full-time as chairman of the board and chief strategy officer.

In a nutshell, AdReady has developed tools that make display ads (banner ads, as opposed to search-engine ads) faster, cheaper, and more efficient to produce and monitor for a broad class of online advertisers—especially small businesses. The company started in 2006 and raised a total of $12 million from investors including Madrona Venture Group, Bain Capital Ventures, and Khosla Ventures. Its customers and partners include advertisers, ad agencies, and publishers like the New York Times, ESPN, and Yahoo.

Siebrecht talked with me yesterday about AdReady’s broader strategy and his new role. He declined to comment on whether the privately held company is profitable yet—but media reports have said it’s doing more than $10 million in annual revenues. He did say the company is up to 50 employees, and is looking to “grow very aggressively” this coming year.

Here are just a few highlights from our conversation, edited for length and clarity:

—On AdReady’s big opportunity: “In the online ad category, I believe there’s significant untapped potential in display advertising,” Siebrecht says. “Search advertising is fantastic, it works well, it’s a very large business. But what we see in display is very, very limited in terms of the number of advertisers that can do it effectively. There are only a few thousand advertisers in the U.S. who do it, as compared to the 1.4 million search [ad] customers that Google says they have. Yet there is a tremendous amount of supply of display advertising inventory. The largest and most sophisticated advertisers … Next Page »

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It’s one of the great mysteries of the modern Internet. How can Web publishers make more money from their content? For everything from blogs and journalism to games and entertainment, publishers and software companies alike have been trying to solve this problem for many years.

Now BigDoor Media, a six-person startup in Bellevue, WA, thinks it has found the right approach, at least for a certain market. Its basic idea is to provide a revenue stream for entertainment publishers that bridges the gap between traditional advertising and subscription models. BigDoor, which is emerging from stealth mode today with a beta version of its software, provides an “offer platform” that acts as a gateway to a website’s premium content. Instead of paying for a game by credit card, say, a consumer can opt to fill out a survey, sign up for a newsletter, or buy an advertiser’s product (like Fiji Water, for instance).

This is not an entirely new idea. And in fact, BigDoor operates in a similar space as many other Seattle-area startups we’ve reported on, including AppBank (for social entertainment applications), DevHub (for creating and hosting websites), Mpire (for online-ad optimization), Wetpaint (for social publishing), and Others Online (for behavioral profiling of audiences), which was acquired this summer by the Rubicon Project. These companies have different customers and revenue models, but they are all fundamentally trying to help Web publishers make more money from their content.

What seems to set BigDoor apart is the experience of its founders. Keith Smith and Jeff Malek spent about 10 years in the online advertising world with Bellevue-based Zango, the controversial “adware” company that closed down earlier this year. Smith was CEO and co-founder of Zango, while Malek was vice president of engineering and products. Zango had success but eventually ran into problems, in part because adware in general—software that tracks which sites you visit and delivers targeted ads—became widely reviled by people who felt it violated their privacy or was just plain annoying.

The key is that Smith and Malek seem to have learned from their mistakes as well as … 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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On Friday, there was a really good talk by the noted tech entrepreneur and investor T.A. McCann at a Northwest Entrepreneur Network breakfast in Bellevue, WA. The topic was how to get a startup off the ground: he called it “0-25 mph.” What with the economy these days, advice from someone like McCann seems more valuable than ever. For those who may have missed the talk, here are a few highlights and a link to McCann’s slides.

McCann is a former Microsoftie who has experience at Polaris Venture Partners and Vulcan Capital. He has been involved with a number of tech startups, most recently Evri and Gist, the latter of which he currently leads as founder and CEO. I thought McCann’s comments in his blog about the talk were particularly telling about his approach to entrepreneurship. “I always learn something when I do these kinds of events, both about what I have done right/wrong in the past and how I can be better in the future,” he writes.

At the bottom of his talk slides—which covered everything from strategy and operations to fundraising and hiring—McCann listed “lessons learned.” A few points stood out to me:

—Know your own space, pick customers you want to embrace, and make sure they pay.

—Strategy should not be complicated.

—A team’s value is 5 parts passion, 2 parts brains, and 1 part experience.

—Outsource routine tasks, hire for thought leadership.

—Deliver status updates every two weeks to your investors/board/advisors.

McCann closed with the following five-point summary for entrepreneurs. Points #2 and #5 are really key, I think:

—If it were easy, everyone would do it.

—Love your customers more than your idea.

—Use the right tools, timing, and discipline.

—Know where to spend and save.

—If you were rich, would you still be doing it?

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You usually only hear about startups when they’re successful, but Seattle-based ClayValet is an exception. Two weeks ago, founder Mikhail Seregine announced that he was shutting down his four-person company, an online shopping service that allowed customers to ask questions about products and get personal recommendations. He followed up this week with a really informative post on his blog (and on Seattle 2.0) where he explained what happened with ClayValet, and what he’s learned from the experience.

It’s an example of the willingness of Seattle startups to help one another through difficult times. And, as Tony Wright of RescueTime recently pointed out, it’s sometimes easy to forget that most startups close down. (Usually, the founders just keep it quiet and find other jobs.) You should read Seregine’s original post, but what happened was that ClayValet, which was built on top of Amazon’s Mechanical Turk, simply didn’t get enough traffic and users. Towards the end, Seregine talked with three potential acquirers who were actively interested, but no deal could be structured.

I called Seregine yesterday to chat about lessons learned. The Stanford University and Amazon.com alum sounded fairly upbeat as he plans the next stage of his career. I learned that he was the first engineer on the Mechanical Turk project (he was at Amazon from 2002 to 2006). He started building a private alpha site for ClayValet in early 2007, and got funding from an angel investor. But he ran into several major obstacles. The company lacked expertise in a number of critical areas, such as consumer websites, enterprise sales, and promotion. So it struggled to create an interactive site for a new audience, and to engage customers, who often found generic Google searches to be good enough.

The most important lesson for next time (he plans to stay in the same general space), Seregine says, is to find a co-founder—and the right co-founder. “That’s important. There’s a lot of important decisions that need to be made. You can make better decisions if you have time to research them and have people who have the right experience.” It may sound obvious, but to start a company, you really need someone to bounce ideas off, someone to own parts of the business, and someone just as motivated and invested in its success, he says.

Next up would be to find the right company advisors, and meet with them every month. At least for Seregine, one advisor would be a serial entrepreneur—one who has seen successful exits. Another would be a business advisor with lots of sales contacts in the industry. And another would be a technical person to provide feedback on software and design.

Rounding out his list of lessons learned are things like working out a more targeted revenue model with specific customers in mind and a specific distribution channel for reaching them, and getting the planning balance right—not so much as to impair flexibility, but enough not to magnify inherent risks in the technology and the market.

I couldn’t help but ask Seregine about his experience with Amazon, and cloud computing technology. “I learned a lot,” he says. “They give you a lot of responsibility, even when you’re starting out.” ClayValet used cloud computing facilities, he says. “The less you worry about the hardware, the more time you have to worry about other aspects of the business.”

Lastly, I got his thoughts on the Seattle startup scene in the wake of ClayValet’s closing. “The community is really good in that it’s supportive,” Seregine says. “It’s not as big or diverse as down in the Bay Area. You can know a lot of the people here, there are fewer cliques, and not as much competition. On the other hand, the disadvantage is if you’re doing something specific, there’s fewer people to collaborate with or evolve ideas together and team up. The feedback I’ve gotten is useful, and I’m very grateful for it…I don’t think startups are dead.”

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