Seattle-based TeachStreet, a software startup that helps students find local teachers and helps teachers manage their businesses, announced today it has raised $1.2 million in new funding from existing investors. TeachStreet also announced it has expanded to Chicago (its sixth U.S. metro area) and will be expanding to Philadelphia in the coming weeks. TeachStreet was founded in 2007 and is backed by Madrona Venture Group.

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Everything is moving faster in the Internet age, it seems—including startup incubators. At incubators that follow the traditional model, like Idealab or Biogen Idec’s Innovation Incubator, young companies get to spend a leisurely year or two getting their first product out the door, while benefiting from the financial and administrative support of a larger parent organization.

But at newer incubators like Y Combinator, that time scale is compressed to a few months. The teams of entrepreneurs who participate in entrepreneur-investor Paul Graham’s startup school in Mountain View, CA, come in with an idea in January and had better have a product by March—because that’s when the funding runs out. (Y Combinator also runs a summer session here in Cambridge, MA, from June to August.)

The micro-incubator model—in which a dozen or so competitively selected teams per session get living expenses, work space, and mentoring in return for a small amount of their companies’ founding equity (usually around 6 percent)—is catching on around the country. Graham’s three-year-old venture now has at least two imitators: a Boulder, CO, organization called TechStars, which got underway in 2007, and an even newer Philadelphia incubator, DreamIt Ventures, that just graduated its first class of startups in August.

One of those was DreamIt graduates was SCVNGR, a Boston-based company I profiled last week. The company’s 19-year-old CEO Seth Priebatsch, a Princeton undergraduate, gushed about his summer with at DreamIt in our interview, saying it offered more support—monetary, administrative, and advisory—than he would have gotten from the other incubators he considered applying to. (DreamIt provides $30,000 in seed funding to each team, compared to Y Combinator’s $5,000 plus $5,000 per founder.)

Curious to learn more about how DreamIt’s model compares to the incubators I’m more familiar with—especially Y Combinator—I contacted one of DreamIt’s founders, Philadelphia-based angel investor Michael Levinson. A graduate of the University of Pennsylvania’s Wharton School, Levinson founded a corporate computer training company called PTS Learning in 1986, grew it to 250 employees and $30 million in annual revenues, and sold it to Global Knowledge Network in 1999. He explained how he and his co-founders at DreamIt wanted to create new reasons for young innovators from Philadelphia to stay in Philadelphia—and for those outside the region to consider relocating. Indeed, while SCVNGR has moved back to Priebatsch’s hometown of Boston, most of the other companies that exited DreamIt in August are staying in the City of Brotherly Love. And judging from Levinson’s description, DreamIt’s regional focus is one of the major factors differentiating it from Y Combinator. Our interview follows.

Xconomy: How did DreamIt Ventures come together?

Michael Levinson: The three partners at Dreamit—myself, David Bookspan, and Steve Welch—all had companies, and we each sold them. We were continually coming up with ideas for new enterprises. But we didn’t necessarily want to dedicate ourselves to running a specific company full time. So we talked about the more traditional incubator models a number of times, then we started to become a little more attuned to the new paradigm—you know, the fact that it is so much less expensive to start new companies now, and you can really make a lot of progress in a short amount of time. We found that Y Combinator and TechStars had already done that, and as we looked at that model further we came to the conclusion that not only would it work in Philadelphia, but there were probably three or four things we could do to improve it.

X: What sorts of things?

ML: First of all, we felt strongly that we wanted to give back to the local community. We wanted to help other startup businesses be successful. Also, there’s been a lot of conversation around the Philly area for a number of years about the fact that we’ve got a tremendous amount of talent coming out of Penn and Drexel and even Princeton, but there was really no champion, if you will, for kids coming out of local colleges or folks who have good technical ideas. And while the cost of getting a technology business off the ground has gone down, a lot of the venture funding in the Philadelphia area has moved upstream [to larger companies] in the last five to seven years. So there was a gap that we felt we could fill.

We wanted to make sure that the local tech community was going to be behind us and support us. So another thing we did that is a little different from what Y Combinator does is that instead of planning on having the teams rely on us, the founders, we reached out and identified mentors for each team. We found folks in the community who had been there and done it, and who were willing to mentor teams through the summer.

We also got 13 local law and accounting firms to agree to donate services to the teams. And we knew of some pretty bright MBA types in the area who wouldn’t necessarily start their own companies but who might fit in well with companies coming out of the incubator, in a strategist role. That is what happened with Seth [Priebatsch] and Mike Hagan, who is one of those strategists. I think it added a lot of value, because Seth was able to really focus on the technology and Mike really went out and focused on the revenues.

So, with the help of the strategists and the professional firms we were able to throw a few more resources at the teams. We got a local marketing firm to donate some strategizing help. We wanted to set up an infrastructure for each team that they could potentially build around. And it worked out really, really well. I know that some of the DreamIt companies ended up getting … Next Page »

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At 10:00 a.m. on Saturday, October 18, 500 couples will fan out across Philadelphia in search of a $25,000 diamond ring hidden by a local jeweler. Equipped only with cell phones, the couples will receive text-message instructions directing them to an array of local landmarks, where they’ll have to complete puzzles and other challenges to earn points and get directions to their next stops. The first team to earn 100 points will be sent a riddle whose solution is the key to the diamond’s location.

It’s called the “Robbins Diamonds Scavenger Scramble,” and it will be the biggest test yet for a new Boston company called SCVNGR. Led by 19-year-old Princeton undergraduate Seth Priebatsch, the company is one of the first startups to emerge from DreamIt Ventures, a Philadelphia-based incubator similar in conception to Paul Graham’s Y Combinator, the well-known “startup camp” based in Cambridge, MA, and Mountain View, CA. SCVNGR’s shtick is running text-message-based interactive games for corporations, associations, and non-profits, using proprietary algorithms designed by two Princeton professors to efficiently direct large numbers of game players (or museum visitors, or anyone moving in space) through a series of checkpoints.

You might not think it would be very difficult to set up a scavenger hunt using text messaging, which is, after all, a 20-year-old technology. But the hard part isn’t sending out the messages, says Priebatsch; it’s knowing where to send the players. If you’ve got 500 teams competing, after all, you don’t want them all rushing to the same spots in the same order. That’s where the routing algorithms come in.

“Once you finish a question and send in the right answer, the system dynamically picks your next location and clue based on how far away the other locations are, how many people are there already, and how important the clues are,” Priebatsch explains. “You can’t know where you’re going to go ahead of time. If you played the same game 100 times you’d never take the same path.”

SCVNGR has already hosted demo scavenger hunts for organizations like the University of the Arts in Philadelphia and for Dreamit Ventures itself—where Priebatsch was in residence from May to August—and it has other events coming up at Princeton, MIT, Tufts, two museums in Boston, and one museum in Philadelphia. (A major hunt in downtown Boston, planned to coincide with Boston Arts Festival in early September, was scrubbed due to bad weather.) In just its first few weeks out of Dreamit, the company booked $25,000 in revenue, Priebatsch says.

The Boston native would be starting his sophomore year in Princeton’s Operations Research and Financial Engineering (ORFE) department right about now, but he’s on a one-year leave from the university to get his company off the ground. ORFE is a section of Princeton’s engineering school where students are drilled in both the technological and management skills needed to become entrepreneurs. Which sounds like the perfect place for Priebatsch; even at 19, he’s already a serial entrepreneur, having started out with the obligatory lemonade stand (albeit on Boston’s posh Newbury Street), then followed up with PostCardTech, a Boston-based startup that produces CD-ROM-based “interactive postcards” for tourists.

SCVNGR is half events company, half platform provider: at the same time that it’s mounting scavenger hunts for individual clients, the five-person startup is polishing a free, Web-based interface that allows anyone—from a mom organizing a teen’s birthday party to a museum administrator planning an innovative way for guests to explore a new exhibition—to write a series of clues and assign them to a network of locations. The company may try to monetize free games by sending out location-based advertising messages along with clues.

It all adds up to a busy schedule: “I’ve been running at 600 miles an hour and having a great time doing it,” says Priebatsch. That was certainly the case when I visited SCVNGR’s offices at TechSpace, a renovated loft in Boston’s SoWa neighborhood that’s home to dozens of small startups. In the 30 minutes I was there, Priebatsch had to excuse himself three times to deal with urgent phone calls and text messages about a scavenger hunt that was getting underway that morning at Drexel University.

The concept for the hunts came together last winter. “I was messing around with some ideas, and I thought it would be cool to build an easy-to-use, high-tech, cell-phone-based scavenger hunt that could be played from any phone,” Priebatsch says. “I thought, wouldn’t it be great if … Next Page »

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