Max Ciccotosto has entrepreneurship in his blood. A native of Italy, his parents ran a business in the old country. While in college at the University of Bologna, Ciccotosto ran a “junior enterprise” company (the system no longer exists in Italy) that handled networking and IT for small companies. He came to Seattle in 1999 to do his master’s in electrical engineering at the University of Washington. Microsoft offered him a job the day after he graduated, to work in the Microsoft Exchange Server division, which develops messaging and collaborative software products.

After six and a half years at Microsoft, the last three in mobile technologies, Ciccotosto decided to go back to his entrepreneurial roots. His eureka moment happened at a Barnes & Noble. He was browsing a book and thought, “This looks good, but can I get it cheaper? And is it the right book [on the topic]?” He realized this sort of thing happens frequently—he calls it “transient wishes,” when you see or hear about something interesting but don’t close the deal then and there, and end up forgetting about it. (I won’t let that happen with Ciccotosto’s recommendation for best Italian food in town, Pian Pianino.) He thought, why not set up a service that keeps track of things you like and might want to buy, and make it social, so your friends and family can be part of it and see what’s on other people’s wish lists?

That’s the idea behind Wishpot, a Seattle-based startup founded by Ciccotosto and fellow Microsoftie Alexis Campailla. Their social-shopping service is coming out of beta in the next few weeks, and is currently available as a browser plug-in and a Facebook application. They already have many thousands of users, says Ciccotosto. Yesterday, I stopped by the new Wishpot digs near Pioneer Square (they moved this summer from Lower Queen Anne) to get more of the company’s story from him.

In terms of getting off the ground, Ciccotosto recalls a pivotal lunch meeting with Seattle-based Alliance of Angels in 2006. Although Wishpot didn’t get capital then, he says, they got “fundamentally solid feedback” and after that their pitch was “20 times better.” “We were two guys from Microsoft, nobody knew us, so they weren’t going to throw money at us,” says Ciccotosto. By early 2007, the startup had a prototype, and in March 2007, they were able to secure seed money from angels. They followed that up earlier this year with a $1 million round led by Monster Venture Partners, with Curious Office Partners and the Italian “startup designer” H-Farm also participating (more on the latter soon).

Ciccotosto showed me a demo of the latest Wishpot features and how it works. The service helps you “discover, save, and share the stuff you want” in an easier way, he says. Going to Nordstrom’s website and browsing some fashionable suits, a Wishpot window pops up, stores a particular suit in his wish list, and allows him to set up an alert when the price drops by a certain amount, or when another store has it for cheaper. But the most popular applications so far, he says, are baby and wedding-gift registries. The business model is based on transactions—Wishpot has relationships with vendors (like Nordstrom) so that when users buy items, Wishpot gets paid.

Wishpot competes with Amazon’s product wish lists—which Ciccotosto points out are not social or interactive—and a slew of startups (mostly from the San Francisco Bay Area) like Kaboodle, StyleHive, and ThisNext. Time will tell which comes out on top, but Wishpot is now up to seven employees and is gearing up for marketing promotions, a full product launch, and international expansion. “With the holiday season coming, we want to make sure we have the right content and the right product in place,” says Ciccotosto.

“I love working on products, that’s my thing,” he says. “Once you’re an engineer, it’s hard not to go back and build things.”

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Last week, we reported that Amazon is acquiring Seattle-based Shelfari, a literary social networking site. We also noted that Cambridge, MA-based LibraryThing (which Amazon also owns 40 percent of) had some harsh words for its West Coast rival. John Cook of the Seattle P-I provided some useful insights and comments here (e.g., the deal is less than $10M, not a home run). But the acquisition left me wondering about more than just the future of these two startups, and whether it was a good exit for Shelfari. It made me think about Amazon’s strategy, and how the deal fits into the larger context of social sites built around books and other consumer goods.

For starters, some of the technology in the deal sounded similar to a new feature of Borders’ online bookstore that we profiled a few months ago. In June, I reported on Borders breaking away from its competitor Amazon’s services and launching its own “magic shelf” user interface—a “virtual” bookshelf, designed by Cambridge, MA-based Allurent, that lets you browse book covers as if you were in a real store. My first thought when I looked at the Shelfari site was that, superficially at least, it resembled Borders’ magic shelf. So I wondered: did Amazon’s acquisition of Shelfari have anything to do with the Borders move?

I first contacted Shelfari to get its side of the story, and was met only by world-class PR-speak, in an e-mail from an Amazon official: “Shelfari and Amazon’s common goal has been and will continue to be to deliver the best product and services to customers. Both companies are dedicated to building great communities that celebrate books and will work together to create enhanced experiences for members. As always, our joint focus is on customers not the competition.” (This is what happens when you get bought.)

Not surprisingly, the co-founder and CEO of Allurent, Joe Chung (an Xconomist), sees things a bit differently. “I think Amazon probably is responding at least somewhat to the magic shelf,” Chung says. But he explains that Amazon is “probably buying the innovation and team more than the specific property and they probably figure they are better off picking these things up to keep them out of competitors’ hands.” Fumi Matsumoto, Allurent’s co-founder and chief technology officer, adds, “It’s just really great for us to see these rich user experiences going mainstream.”

I also reached Tim Spalding, founder and CEO of LibraryThing, but he declined to be quoted. He did point me to his blog, in which he highlighted Zoomii, another online bookstore with a novel cover-browsing interface, and also an older post about Borders’ magic shelf (which got mixed reviews from the commenters). About the most recent Amazon deal, Spalding writes that he has “the greatest contempt” for Shelfari, and that “once the Amazon/Shelfari deal goes through, we are competing against Amazon.” Which is a challenge he seems to be taking on with gusto. “The good news from the Shelfari deal,” he writes, “is that when startups get acquired, they tend to stagnate.”

Given that Amazon owns a good portion of LibraryThing as well, this would seem to be a thorny situation for Spalding, to say the least. But whether his company or Shelfari ends up on top, the Amazon deal appears to bode well for the business of online communities built around books and other products. After all, a big player getting involved—and a little bad blood between competitors—never hurt innovation.

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Bellingham, WA-based Tatango, a mobile-applications startup focused on text-messaging to groups, rose 77 spots to #91 in this month’s edition of the Seattle Startup Index. Other big gains were made by Frugal Mechanic, an auto-parts shopping site, and Smart Desktop, an office-software maker, according to Marcelo Calbucci, who compiles the monthly list.

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