Portland, OR-based research and publishing firm Clean Edge released a report today on job trends in the cleantech and energy industry. The highlights include a survey of salaries across a range of cleantech positions worldwide, performed in partnership with Seattle-based PayScale, the salary comparison firm. For example, the survey tracked median salaries for solar energy installers ($40,000), entry-level wind turbine technicians ($52,600), mid-level LEED-certified green architects ($58,700), and smart-grid hardware design engineers ($87,700). The survey also found that business analysts in green industries earned $61,500—13 percent more than non-green analysts—and senior accountants in green industries earned $67,300, or 16 percent more than their non-green counterparts.

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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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An interesting tidbit from the mobile industry: Film cameras are going out of style, while camera phones have become ubiquitous. But even as the popularity of things like mobile data plans and text messaging continues to grow in the U.S., people still have problems doing simple things with photos on their phones.

That’s according to an annual survey of wireless consumers conducted by Ontela, a Seattle-based mobile software startup. The latest results, from a poll of 414 U.S. residents, were released today to coincide with the start of the International CTIA Wireless I.T. & Entertainment expo in San Diego. Nothing earth-shattering here, but the results give some context for understanding certain segments of the mobile market.

The survey found that less than half of respondents (48 percent) this year owned a traditional film camera. That’s down from 61 percent in 2008, and 67 percent in 2007. By contrast, 87 percent of respondents said they owned a mobile phone with a camera—up from 78 percent in 2008, and 70 percent in 2007.

More than half of those surveyed (52 percent) had a text messaging plan, as compared with 28 percent last year. And 27 percent had a mobile data plan, compared to 16 percent last year. Despite the rising rates of mobile expertise, though, 61 percent of respondents said they are unable to upload a photo from their phone to the Web.

If these trends hold for the general population, they represent a big market opportunity for Ontela, which makes mobile software that automatically sends photos and other digital media from your phone to your inbox, computer, or photo-sharing site. The company sells its software to wireless carriers, who in turn bundle and sell the service to subscribers.

Ontela was formed in 2005, and is backed by about $15 million in venture funding from Steamboat Ventures, Oak Investment Partners, Hunt Ventures, Voyager Capital, and Eastven Venture Partners. Back in March, Ontela’s CEO, Dan Shapiro, noted in an Xconomist post that mobile phones are in fact poised to kill off point-and-shoot cameras, both digital and film, for good.

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It’s always good to hear about another small Seattle startup that’s bootstrapped and already profitable. Yesterday it was Appature, today it’s AppBank. They may share the first three letters of their names (and bootstrapped profitability), but after that they’re about as different as two Internet software companies can be.

AppBank is a six-person company focused on developing software to help Facebook users create social entertainment applications—and get paid for them. The company is rolling out the public beta version of its site today. The world of Facebook apps is very crowded, of course, but what AppBank is trying to do is give average Facebook users easier ways to make simple apps like quizzes, surveys, and games in their spare time, and more effective ways to make money from them by providing targeted advertising. “It’s the first time a company has paired relevant ads with crowdsourced social entertainment,” says Fred Hsu, AppBank’s founder and CEO.

Hsu started the company in April of this year, together with chief operating officer Joyce Chang. Hsu is the co-founder of Oversee.net, a Los Angeles company that holds Internet domain names and does domain marketing for the search, display, and lead-generation industries. Oversee did $200 million in revenue last year, and Hsu sold a minority stake in the company to private equity firm Oak Hill Capital Partners for $150 million. Chang, for her part, came from Seattle-based Tracento, which implements Facebook applications like Friend Hugs, Kisses, and Send Flowers. Both UCLA computer science grads, Hsu and Chang are based in Seattle, and the rest of the company’s employees are in the Los Angeles and San Francisco areas.

What AppBank offers is a quick way to create a Facebook quiz, for example—”What type of underwear are you?” or “Are you left-brained or right-brained?” or some such—and then free tools to …Next Page »

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Wondering how your startup stacks up with others in your sector? Or how consumer Internet companies, say, compare with mobile startups? Seattle-based nPost, a media and resource site for tech entrepreneurs, is preparing to launch a quarterly report on startups—that are based not just in Seattle, but everywhere—to help answer such questions. The program, called nPost Metrics, will report on trends in startup burn rates, revenues, growth, customer conversion, revenue per user, and other data, all kept strictly confidential.

It’s all part of nPost’s mission to promote startups and provide important information for entrepreneurs and the tech community, says nPost founder Nathan Kaiser. The idea arose from his meetings with hundreds of local entrepreneurs who all want to know if their business model will work in a particular market, and at what price points. “They want to know the metrics, the benchmarks. I had that data anecdotally, but nothing in a scientific way. This is data at an industry level,” Kaiser says. “As a media company, we’re all about the expertise, insights and data points that will help startups be more successful.”

The data will be free for participating startups—defined as any company in the tech space that’s younger than five years old—and will cost $2,500 per quarter for everyone else. That includes venture capitalists, angel investor groups, accounting firms, large tech companies, and law firms.

If you’re a startup, you can enroll here and fill out the initial survey, which asks for things like number of employees, tech sector (e.g., consumer vs. enterprise), and platform (e.g., Web vs. mobile). Then, the idea is you’ll share information about your own startup, confidentially, in return for monthly updates and quarterly reports on the aggregate data from all respondents.

Kaiser says he expects strong startup representation from the San Francisco Bay Area, the Northwest, the Northeast, and other pockets of innovation around the country, as well as abroad. In conjunction with the reports, nPost, which has four employees, is also launching a consulting services firm that will work one-on-one with startups to analyze the industry data within their specific market. Kaiser has already signed up an undisclosed number of startups and customers, and plans to release the first report in November.

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FLO TV, San Diego-based Qualcomm’s (NASDAQ: QCOM) satellite-based mobile TV service and Portland, OR-based Rentrak Corp. (NASDAQ: RENT) say they are collaborating on a system that will provide comprehensive data on mobile TV viewership and advertising. Using Rentrak’s TV Essentials media measurement system, the partners plan to deliver reports to provide a basis for setting advertising rates on FLO TV and insights into audience viewing patters without “divulging any individual subscriber’s personal information.”

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Are you smarter than Paris Hilton? If you could know the exact time, date, and location of your death, would you want to know? Which Harry Potter character are you? If you could only have one home gaming system for the rest of your life, which one would you pick?

It wouldn’t be hard to spend your whole day responding to online polls focused on burning questions like these. Indeed, answering the polls, surveys, and quizzes that have spread across sites like MySpace and Facebook is one of the most popular pastimes on the Internet. But quick—can you name the company that provides the technology behind most of these Web-based polls and quizzes? Don’t worry if you can’t. It’s a low-profile startup in Watertown, MA, called Pangea Media.

Named after the massive proto-continent that began to break apart 250 million years ago, Pangea is far better known through its network of Web properties, including Quibblo, Quiz Rocket, and SnapPoll, which together serve up more than 50 million quizzes and polls a year. These sites contain hundreds of quizzes built by Pangea, but they also bring in traffic by letting users design their own quizzes, which they can then embed in their blogs or social-networking profiles for their friends to try.

The company also has a lucrative business creating specialized polls and quizzes for advertisers around their brands. Instead of a regular banner ad for a BMW, for example, imagine an ad with a quiz offering the chance to find out “What model of BMW are you?”

These “adverquizzes,” as Pangea founder and CEO Seth Lieberman calls them, try to turn advertising from an annoyance into a form of entertainment. They earn higher rates than typical display ads, and their yield for advertisers goes beyond simple exposure—the adverquizzes also bring in e-mail addresses and other information that companies can use to build relationships with individual consumers down the road. Some adverquizzes are also customizable, meaning users can mix their own content in with the branding message and embed the new material on their own sites or profiles.

“Quizzes are actually an amazing framework for engagement and connectivity between advertisers and users,” Lieberman told me during a recent visit to Xconomy’s offices. “They’re highly engaging. They’re part self-discovery and part entertainment, and they’re highly viral.”

Lieberman says that after his success with Focalex, a Boston-based e-mail marketing and lead generation company that he sold to Intermix Media (then the parent company of MySpace) for $4 million in 2004, he wanted to try building a content-oriented Web 2.0 company. But it had to be something that would scale up naturally, with a large market, and that wouldn’t take a whole lot of capital to get underway. “We really wanted a model that was content-rich, but content-agnostic—we didn’t care whether it was focused on health or parenting or careers or casual entertainment,” Lieberman says. “That’s why we liked quizzes, because they can be written about anything.”

The company concentrated on building a single quiz platform, called QuizEngine, that would be able to handle everything from quiz creation to quiz taking to advertising and the Flash-based widgets that quiz builders can embed in their own sites. (For an example of a Quibblo widget, see the quiz at the end of this story.) The whole service is hosted at Pangea’s site QuizEngine.com. “Running it all off of the same code base, the same technology, is the only way to scale multiple sites and make it manageable,” says Lieberman. “That’s one of the things I learned at Intermix—they made a lot of acquisitions, and you can’t effectively run seven sites on Python and three on PERL and six on Ruby.”

Lieberman says Pangea has “a very West Coast mentality” about the content of its websites—most content creation is left to users, for example—but “a very Northeast mentality” about revenue and money. In other words, it wouldn’t have rolled out its free quiz creation tools without having a plan for monetizing QuizEngine through the branded adverquizzes—such as a quiz last year that invited users to see which cast member from the MTV musical film American Mall they most resembled, or …Next Page »

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The clouds may be parting for cleantech startups. Venture capital funding for renewable energy and cleantech startups (which plunged from last October through March) rebounded in the second quarter—but the $1.2 billion invested in 67 countries is still down 44 percent from the same quarter in 2008.

Cleantech venture investments were strongest in transportation—specifically, vehicles ($236 million invested), biofuels ($206 million), and advanced batteries ($165 million), according to the Cleantech Group, the San Francisco, CA, research and advisory firm, and Deloitte, the financial services firm. Researchers say the $1.2 billion total was invested in 94 companies, with an average round size of $12.9 million. A spokeswoman for the Cleantech Group says the results reflect VC deals in areas where the Cleantech Group has established offices with local researchers, and therefore represents the most accurate and comprehensive global survey of cleantech investing trends.  Roughly two-thirds of the deals were in North America, mostly the United States.

Brian Fan, the Cleantech Group’s senior director of research, tells me the biggest cleantech deals in Xconomy cities during the quarter that ended June 30 occurred in San Diego, where V-Vehicle got $100 million, and suburban Boston, where A123 Systems also got $100 million. The biggest financing in Seattle was $6 million for Powerit Holdings.

Things continue to look gloomy in the solar sector. Venture investment in solar technologies fell to its lowest level in three years, with just $114 million invested. VC funding in solar startups peaked at $1.2 billion during the third quarter of 2008. “We don’t see solar as dead,” says Brian Fan, the Cleantech Group’s senior director of research. “Solar has strong support in the venture community and among investors. What they’re doing is taking care of their existing portfolio companies. So they’re not making new investments and adding to their portfolio companies.”

The researchers say the largest deals in each sector were:

—Vehicles: San Diego-based V-Vehicle, which is building a fuel-efficient and environmentally friendly vehicle in Northeast Louisiana, raised $100 million from Kleiner Perkins Caufield & Byers and T. Boone Pickens. Fisker Automotive of Irvine, CA, raised $85 million from Eco-Drive Partners and Kleiner Perkins to fund development and manufacturing of its Karma plug-in hybrid. Norway’s Think Global raised $39 million, and Israel’s ETV Motors raised $12 million.

—Biofuels: Agri.capital, a European developer of biogas plants, raised $82 million from TCW Group and others. Solazyme, a renewable oil producer based in South San Francisco, CA, raised $57 million from Braemar Energy Ventures, Lightspeed Venture Partners and new investor VantagePoint Venture Partners.

—Advanced Batteries: A123 Systems of Watertown, MA, raised $100 million from GE and others. Deeya Energy of Freemont, CA, raised $30 million from new investor Technology Partners and existing investors BlueRun Ventures, DFJ, Element Partners and New Enterprise Associates.

—Solar: Cobol Technologies, an Indian solar developer, raised $30 million from Pangea Capital. Ausra, a Mountain View, CA, startup developing technology that concentrates solar energy, raised $25.5 million from Khosla Ventures and Kleiner Perkins, among others. Infinia, a Kennewick, WA, vendor of technology that combines a Stirling engine with concentrating solar dish, raised $14.1 million in convertible debt, as part of a plan to raise $50 million.

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“Tweet, tweet,” chirped the robin outside my window yesterday. Given the Wall Street Journal’s report last month that 32.1 million people now have Twitter accounts, it seems like much of humanity is poised to join the robin and his avian cohorts in tweeting.

Not everyone who has a Twitter account is using it though, according to the second “State of the Twittersphere” report, published yesterday by Cambridge, MA-based HubSpot. The Internet marketing company looked at more than 4.5 million Twitter accounts over nine months and found that they are not as lively as might be expected, with more than nine percent of users owning inactive accounts and almost 55 percent never having tweeted at all. What’s more, about 53 percent of users have no followers (as if my red-breasted pal were singing in a sound-proof room).

Twitter has expanded at an astounding rate (see chart below), having had 1.6 million users just a year ago. But the HubSpot report reveals that much of that growth may be illusory. Even with celebrities like Ashton Kutcher and Oprah Winfrey gushing about Twitter and acquiring millions of followers, the report shows that more than 55 percent of users aren’t following them, or anyone else.
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“Like many new technologies, part of the challenge is helping users understand how they might use it and why it’s important,” said Dharmesh Shah, chief technology officer and founder of HubSpot in an e-mail interview. “It’s extremely simple in its execution, but leaves a lot up to the users to come with how they might use it.”

Just owning an account does not, it seems, a tweeter make. Those who actually use it do tweet an average of once a day. The problem, according to an informal survey I conducted of about 15 Twitter users, is that most people don’t do (or think) much of interest, so even if they constantly tweeted their lives, it wouldn’t attract more followers. There is also confusion over whether Twitter should be used for personal events the way Facebook usually is, or treated more professionally like LinkedIn or other professional social networks.

There is even the question of when to reply to tweets. My friends, and Shah, seemed to agree that Twitter is not the best system for talking with people. “Having actual conversations is actually pretty hard,” Shah said.

It may just be a matter of quality. If people write more interesting tweets, more people may follow them and be inclined to improve what they post themselves. Perhaps I’ll ask my feathered friend for some tips on how to tweet as well as he does.

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We keep hearing there’s no better opportunity to start a company than during hard times, but a survey of venture capitalists shows that doesn’t necessarily translate into increased investment activity.

In fact, results of a survey of VCs around the world being released today show that just over half (51 percent) of 725 VCs who responded say it is currently “a terrific time” to invest in entrepreneurial companies. But the survey also reveals that 51 percent of the VCs also say they are decreasing their investment activity. Only 13 percent are increasing the number of companies in which they plan to invest, according to the 2009 Global Venture Capital Survey by Deloitte Touche Tohmatsu and the National Venture Capital Association.

That might seem self-contradictory, but NVCA spokeswoman Emily Mendell says a terrific time for investing in startups may simply reflect the VCs’ view “that valuations are low and entrepreneurs are hungry. It doesn’t necessarily mean that they’ll invest in more companies.”

The survey, which was conducted during the first three months of 2009, uncovered some other interesting trends and sentiments:

—The financial sector’s willingness to invest in venture capital funds is collapsing. Instead of measuring that directly, however, the survey only reflects what VCs are anticipating will happen over the next three years. Still, their expectations are grim: 88 percent say the recession will affect the willingness of commercial banks to invest in VCs as an asset class, and 87 percent say the same for investment banks—although banks generally are not major investors in VC funds. But college endowments are, and 59 percent of VCs expect their willingness to invest will be affected, along with insurance companies (65 percent), private pension funds (51 percent), and public pension funds (55 percent.)

—Perhaps as a result of the anticipated pullback among U.S. institutional investors, VCs anticipate that their investor base will become more global. In the United States, 52 percent expect the number of limited partner investors from foreign countries will increase.

—According to the survey, 50 percent of respondents believe that VC investment will increase in Asia (excluding India); 43 percent in India; 36 percent in South America; 25 percent in Europe and the UK; and just 17 percent see investments increasing in North America.

—With a couple of notable exceptions, most VCs (79 percent) say they expect investment levels to remain stable across all industry sectors. But investments are rising in cleantech and declining in the semiconductor sector, which includes electronics. The survey shows almost two-thirds of VCs (63 percent) expect to increase their investments in renewable energy and other clean technologies over the next three years, while only 6 percent expect their cleantech deals to decline. Conversely, 50 percent of VCs expect to decrease their investments in semiconductors, while only 6 percent anticipate an increase.

Summarizing the results, NVCA chairman and Polaris Venture Partners co-founder Terry McGuire says, “Innovation is abundant on a global basis today and opportunities are alive and growing everywhere. Any country that is prepared to nurture its venture capital and entrepreneurial ecosystem is poised to benefit economically and not necessarily at the expense of another region. The game is one for everyone to win.”

The survey respondents are general partners of venture capital firms with assets under management that range from less than $100 million to more than $1 billion. The 2009 survey must have touched a nerve because 725 VCs responded—almost double the number compared to last year. Of the total, 44 percent are based in the United States, 21 percent in Europe (excluding the U.K.), 16 percent in the Asia- Pacific region, 10 percent in the Americas (excluding the U.S.), 7 percent in the U.K., and 2 percent in Israel.

Complete survey results can be found here.

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Seattle, the Washington D.C. area, and Orange County have moved up in Milken Institute’s ranking of top high-tech center areas in North America. From 2003 to 2007, Seattle passed Boston and became America’s second-ranking high-tech metro area. San Diego is at seventh place. (These are Xconomy’s network cities.) The number one spot belongs to Silicon Valley, which “continues to lead all other metropolitan regions in North America in the breadth and scope of economic activity it creates through technological innovation,” according to the study.

According to Milken Institute, the Top Ten North America high-tech centers are:

2007 Ranking (2003 Ranking) Metro Area Total High Tech Score

1 (1) San Jose-Sunnyvale-Santa Clara, CA 100.0
2 (3) Seattle-Bellevue-Everett, WA 46.4
3 (2) Cambridge-Newton-Framingham, MA 45.2
4 (5) Washington-Arlington-Alexandria, DC-VA-MD-WV 41.8
5 (4) Los Angeles-Long Beach-Glendale, CA 40.2
6 (6) Dallas-Plano-Irving, TX 21.8
7 (7) San Diego-Carlsbad-San Marcos, CA 19.3
8 (11) Santa Ana-Anaheim-Irvine, CA 17.7
9 (9) New York-White Plains-Wayne, NY-NJ 16.8
10 (8) San Francisco-San Mateo-Redwood City, CA 16.1

The study was done with 2007 benchmarking data. The report, called “North America’s High-Tech Economy: The Geography of Knowledge-Based Industries,” was presented by Milken Institute director Ross DeVol at the 2009 IEDC Technology-Led Economic Development Conference on Tuesday.

Metro areas were ranked by “their ability to grow and sustain thriving high-tech industries.” The study compares wages and employment in the metropolitan areas, and adds a location quotient, which measures the concentration of high-tech employment or wages in the area.

In the separate Life Sciences Small Business Vitality Index, the Top Five ranking was 1. Greater Los Angeles 2. Greater San Francisco 3. San Diego (tie) 3. Boston (tie) 5. Greater Raleigh-Durham, according to DeVol’s presentation.

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Here’s a question that CEOs might be able to relate to: What should you do when the purring financial machinery under your control just doesn’t feel right (and the anecdotal evidence suggests something has gone haywire) but your outside auditor is saying, “Nope. Everything is looking pretty normal to me.”

In this particular case, the purring financial machinery is San Diego’s venture capital community and the auditor is Bill Molloie, a venture industry veteran and the new head of PricewaterhouseCoopers’ emerging life sciences practice in San Diego. Before landing in San Diego earlier this year, Molloie spent three years in China, where he led PwC’s venture practice in Shanghai.

When I met Molloie  for lunch a few weeks ago, along with PwC’s Brian Caisman, we talked at length about the unusually weak showing in first-quarter venture capital investments for the San Diego region. A survey done by PwC, the National Venture Capital Association, and Thomson Reuters counted just $87 million invested in 15 local deals. The amount invested was down 57 percent from the previous quarter and 80 percent from the first quarter of 2008.

The data reflects the effects of the worst recession in decades, of course. But beyond that, I told Molloie it appears that several of San Diego’s homegrown venture capital firms no longer appear to be actively investing—although the principals would never publicly acknowledge it.

I showed Molloie some VC industry data I had collected from the National Venture Capital Association. The Virginia-based NVCA found that in 2008 there were 17 venture capital firms with headquarters in San Diego, an increase from 10 homegrown VCs in San Diego that the NVCA counted a decade earlier. But I’m skeptical of the data. Several of the VCs on the 2008 list might still be paying their NVCA membership dues, but they have not been investing. What may be more relevant is a list from the NVCA that shows just seven San Diego-based VCs have raised new funds since 2005: Avalon Ventures, BSD Venture Capital, Finistere Partners, Mesa Verde Venture Partners, Mission Ventures, Revolution Ventures, and TVC Capital.

I also showed Molloie data from Dow Jones Venture Source that shows VCs headquartered in San Diego were involved in just 8 percent—13 of 158—of the venture-backed deals that were counted in the region last year. That’s almost half the number in 2003, when San Diego-based VCs were involved in 15 percent (27 of 177) of the venture deals in the local region.

After absorbing all this, Molloie promised to do his own analysis of …Next Page »

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Focus groups are such a standard part of our market-driven culture that they’ve long since become the subject of parody. Decision-makers are seen as being afraid to act without consulting them; surely, no political party would pick a candidate, no legislator would introduce a big policy initiative, and no movie studio would green-light a big-budget film without focus-grouping it first.

But while they may be ridiculed, the truth is that business organizations—especially consumer product companies—still spend quite a bit of money on focus groups. Such ensembles are considered a crucial way to identify products people will buy and weed out bad ones before they’re brought to market.

The rise of the Internet, however, has created faster, cheaper alternatives to the classic eight-people-around-a-table-and-a-whiteboard scenario. Since 2000, Waltham, MA-based Invoke Solutions has been one of the companies running online surveys that, in effect, let market researchers assemble focus groups that are hundreds or thousands strong.

Until recently, Invoke’s surveys were still real-time affairs, conducted at scheduled times. Groups of researchers huddled in control rooms, administering questions, interacting with participants directly, and watching the data pour in. Last year, though, Invoke introduced a new “asynchronous” survey system called Engage that allows volunteers to participate in market studies at any time they choose. And in January, it enhanced the system with new reporting and analytics software that lets Invoke’s clients view and explore the results, via instant PowerPoint presentations and other types of visualizations, as they come in.

Invoke’s president and CEO Ben Cesare, who came by Xconomy’s office a couple of weeks ago, says the response to the new reporting software has been “thrilling.” Within 60 days after Invoke rolled out the Engage Analytics tool, 120 Fortune500 clients were already using it, says Cesare, who joined the company in 2005 and became CEO a year later. The veteran of Apple Computer, Psion, and Agile Software says he’s “not a research guy”—meaning he isn’t steeped in the strategies of giant market-research firms like TNS or Ipsos. But he says he does understand “innovation that works, capturing the information that matters. That’s what I really care about, and that’s what attracted me to Invoke.”

Cesare (pronounced like “Caesar”) argues companies need to embrace market research systematically, the same way they’ve embraced enterprise resource planning (ERP) or customer relationship management (CRM). In fact, he’s got his own three-letter term for what Invoke does—RDM, for research data management.

During his visit, Cesare gave me the basic download about the venture-funded, 55-employee company (which raised a $7 million round one year ago) and its latest accomplishments in the young discipline of RDM. But I started out asking him about the competition—the old fashioned focus group. A greatly abridged version of our conversation follows.

Xconomy: What’s wrong with focus groups?

Ben Cesare: The problem with focus groups is that they are time-consuming and expensive and they give you a small sample size. You could spend a month and a half flying around to six cities and talk to eight people in each city and then find that only three of those eight do all the talking. Are you going to make a call based on the opinions of 18 people? We’ll put you in front of 1,000 people over a week at a fraction of the cost, and all the answers will be believable. There’s no groupthink, no bias in the room. You’re not traveling.

X: So why do companies keep doing them?

BC: You know the old saying—nobody ever got fired for buying IBM. There’s a lot of safety in the same old stuff. People will say, “I have to do my focus group, I have to look those eight people right in the eye.” I submit the opposite. My point of view is that people will …Next Page »

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Have you ever talked to someone who really knows technology, and really knows how to sell it? It’s a potent combination. I got that feeling from Luis Salazar, the chief marketing officer of Bellevue, WA-based GMI, an international market research firm. Salazar moonlights as an entrepreneur-in-residence (EIR) at Voyager Capital in Seattle, where he advises Voyager’s portfolio companies and helps evaluate new investments in terms of their go-to-market and monetization strategies. (He’s Voyager’s sole EIR.)

Salazar spent 11 years at Microsoft, starting in Venezuela in 1997 and progressing to become general manager for marketing in Redmond, WA, and co-founder of Microsoft Office Live. He left in October, and has been working with Voyager since last spring. As an advisor, he specializes in the consumer side of Internet companies, and one of his guiding themes is that online market research and online advertising are one and the same. For example, as an avid photographer, Salazar says companies like Canon need to put ads in front of him—but they also need to know his product preferences so they can develop a better camera. Marketing and advertising should help each other.

But the problem is how to get the right survey to the right sample of people. That’s where technology comes into play, and that’s where Salazar thinks Web 2.0 software—everything from user-generated content to targeted ads—will have its greatest impact. In particular, he sees Web 2.0 starting to reinvent health care, online market research, and energy management.

We didn’t get into all those details yet, but I asked Salazar to pull out his top lessons in marketing and product strategy from his career. He responded with three:

1. “The product is the go-to-market.” It sounds obvious, but companies often forget the most important thing is make a good product and retain customers. A big part of that is “getting marketing more involved in product engineering,” Salazar says. “Marketing and engineering are so entwined…You need to code in such a way as to engage ad networks.” As opposed to the common view (especially among engineers) that marketing is just promotion.

2. “Design does not equal user experience.” Don’t forget that the user experience is very subjective, he says. “It’s not how it looks, it’s how it works.” Sometimes just the wording of a phrase in the click-to-buy box, or the color, or where you put something on the page, can have a big effect on sales. The key is to find out what that effect is, and build it into the design.

3. But perhaps the best advice Salazar had is what he told his 11-year-old son, whom he helped start a bookmarks business to pay for a Nintendo Wii. (His son has already learned the ropes of Google ads, print ads, radio promotion, and price points, and now donates his proceeds to United Way.) “It doesn’t matter what you do in life as long as you do what you love. The money will come.”

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OK, no big surprise here. In the fourth quarter of 2008, venture capital investment in Washington and Oregon fell to $142 million, down 45 percent from $260 million in the previous quarter and a 68 percent drop from $450 million in the fourth quarter of 2007. For the year, venture investment in Washington state dropped below $1 billion for the first time since 2005, with $906 million invested in 93 deals—down 35 percent from the $1.4 billion invested in 124 deals in 2007.

That’s according to a Dow Jones VentureSource report released over the weekend that seems to confirm that VC firms are getting hit hard by the economic downturn, along with everyone else. What’s more interesting, though, is to look at which companies landed the top investments, and which venture firms were most active.

First, some more context. On the national front, venture funding for new companies declined by 30 percent in the last three months of 2008, with $5.5 billion in 554 deals. That’s as compared to $7.9 billion in 718 deals during the fourth quarter of 2007. For the year, there was an 8 percent decline, with $28.8 billion being invested in 2,550 deals across the country.

There were still bright spots in the Northwest. Using the survey data, here are the five biggest tech and life sciences venture deals in Washington during the fourth quarter. They span Web marketing, software, energy and cleantech, and drug development:

—BlueKai, an online marketing firm based in Bellevue, WA, received $10.5 million from Battery Ventures and Redpoint Ventures.

—EnerG2, a Seattle-based energy storage startup, secured $8.5 million from OVP Venture Partners and Firelake Capital. Xconomy broke the news of the deal here.

—Qwell Pharmaceuticals, a Seattle developer of small-molecule drugs, raised $7 million from Arch Venture Partners and the Wellcome Trust. Xconomy broke the story here.

—Datacastle, a Seattle information-security startup, raised $5.3 million led by the Australian venture firm CM Capital Investments.

—Kashless, a Seattle startup focused on “recommerce” software, raised $5 million led by RRE Ventures.

As for local venture firms, the most active in the fourth quarter were OVP Venture Partners and Madrona Venture Group—each with three investment deals in Washington—according to Dow Jones VentureSource. Next was Arch Venture Partners, with two deals, and then a large number of firms with one deal each.

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Fund-raising by private equity firms slowed dramatically during the last three months of 2008, so much so, in fact, that an analysis shows an 18 percent overall decline among fund-raising by U.S. firms compared to 2007—all of it due to the Q4 meltdown.

An analysis published today in the Dow Jones Private Equity Analyst newsletter found that 99 funds raised about $43 billion during the fourth quarter, a roughly 57 percent decline from the nearly $100 billion raised by 208 funds during the same period in 2007.

Fund-raising by private equity firms in 2008 had been running at a pace slightly ahead of the industry record set in 2007 until the fourth quarter—when fund-raising by private equity firms slowed to a virtual standstill. Based on statistics from the LP Source database, the analysis found that 363 U.S.-based private equity funds raised $265.6 billion in 2008—18 percent below the $325.8 billion raised by 506 funds in 2007. The analysis focused on private capital invested with venture capital firms, buyout and corporate finance funds, mezzanine funds, and secondary funds, also known as funds of funds. No hedge funds were included.

“While 2008 was still easily the second-best year on record, the decline we saw in the most recent quarter may steepen in the coming months,” newsletter managing editor Jennifer Rossa said in a statement. The economic crisis triggered by the Lehman Brothers bankruptcy in early September hit the buyout industry particularly hard, as fund-raising declined 26 percent to $181 billion raised among 143 buyout funds—a level comparable to 2006. At the nine-month mark, the buyout sector was down just 3 percent compared to 2007.

Overall venture capital fund-raising, which was up about 4 percent at the nine-month mark, fell by 25 percent for the year in 2008, with $24.7 billion raised across 150 funds nationwide. It was the lowest fund-raising total for the venture industry since 2004.

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OK, this isn’t all that surprising. In the early days of the fourth quarter of 2008, the majority of Washington state’s venture capitalists see the national economy as the top issue facing their portfolio companies, and they’re predicting lower revenue growth and lower valuations for all companies—and no exits.

That’s according to the latest quarterly venture capital outlook survey from the Washington Technology Industry Association (WTIA), which was released today. The survey asks local VC firms about their deal quality and quantity, expected exits, and the financial status of their portfolio companies.

Here are a few lowlights from the survey:

—76 percent of venture capitalists view national business conditions as one of the top challenges facing their companies. That’s up from 43 percent heading into the third quarter of this year (which began July 1).

—One-third of VCs expect revenue growth for their companies to be moderately or substantially lower in the fourth quarter, compared to 14 percent who felt that way heading into the third quarter.

—VCs expect lower deal valuations for companies, regardless of whether they are early, mid, or late-stage. For mid-stage companies, for instance, 88 percent of respondents expect valuations to shrink, compared with 14 percent just three months ago.

—75 percent of respondents expect no growth in hiring of Washington workers between now and the end of the year, with 13 percent expecting a hiring increase. Just three months ago, 57 percent predicted a hiring increase.

—38 percent of VCs expect deal flow to actually increase moderately in the fourth quarter, but 38 percent also expect that moderately to substantially fewer deals will close by the end of the year.

—No exits (IPOs) are expected between now and the end of the year.

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It’s what everyone is talking about: the global financial crisis, and its impact on business and markets. But more specifically, what is its impact on local-area tech businesses and innovation, and how will people respond to it? Here at Xconomy, we’ve posed those important questions to some of our distinguished network of Xconomists—leaders in technology, business, and science who serve an advisory role for us—and we’ve published their thoughts here.

So it is with great interest that we note that the Washington Technology Industry Association (WTIA) is launching a survey of its own today, with Xconomy as its exclusive media partner. According to Ken Myer, the president and CEO of the WTIA (and an Xconomist), the goal of the survey is to get feedback from members of the technology community on the following broad questions:

—What is their view of the financial crisis?

—How has their been business affected, or how do they anticipate their business to be affected by it?

The survey, which consists of about 10 specific questions, is going out to the roughly 10,000 people in the Washington technology industry who receive the WTIA’s monthly e-mail newsletter. The link to the survey is here:
http://wtia.informz.net/survistapro/s.asp?id=409

The plan is to keep the survey open to responders through October 17. Then, a summary of the results will be available to the public the week of October 27.

Because Xconomy is the WTIA’s partner for this survey, we’ll have early access to the results—and will be able to report on the important trends and figures that it reveals. So I urge our readers, wherever you are located, to take part in the survey—and to watch this space for analysis.

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Wilton, CT-based Greenfield Online (NASDAQ: SRVY), which owns a network of Internet-based consumer survey and comparison shopping sites, announced a complex sequence of changes today. The company is backing out of a previously announced merger with New York-based Quadrangle Group. Simultaneously, it’s selling its Internet survey business to an as-yet-unnamed buyer from the financial services industry. And biggest of all, it has agreed to sell the remaining parts of its business—consisting principally of Ciao, an online comparison shopping service popular in Europe—to Redmond, WA-based Microsoft for $468 million, some $42 million more than Quadrangle had offered.

Founded in 1994, Greenfield Online has nearly 800 employees and raised $58 million in a 2004 IPO. It acquired Ciao in 2005 as part of a buying spree that also brought in OpinionSurveys.com, Rapidata.net, and Zing Wireless. Ciao runs a classic comparison-shopping site—with localized versions in Germany, France, Spain, Italy, the United Kingdom, the Netherlands, Sweden, and the United States—that offers price comparisons, product specifications, and consumer reviews for more than 4 million products. The company earns money on click-through advertising and commissions on referred purchases.

Tami Reller, corproate vice president and CFO for Windows and online services at Microsoft, said in an announcement that acquiring Ciao would “further extend Microsoft’s search and e-commerce services in Europe,” where the company already runs localized versions of its MSN and Microsoft Live Search portals. “The team at Ciao has built a passionate consumer community based on intuitive technology and extensive merchant relationships that we believe will deliver incremental benefit to the Microsoft Live Search platform,” Reller said.

The sale to Quadrangle had been valued at $426 million, but Greenfield said in an announcement Tuesday that it had received a superior offer from a “Fortune 100 strategic buyer,” which turns out to be Microsoft. Under the previous merger agreement, Quadrangle had three days to make a counter-offer—which, apparently, it did not. Greenfield will now have to pay Quadrangle a $5 million termination fee.

Microsoft was apparently uninterested in Greenfield’s original core business—its Internet Survey Solutions division, or ISS, which recruits paid panels of consumers who respond to surveys commissioned by consumer products companies. The software giant was involved in finding an outside buyer for that part of the company, according to Reller. “We are pleased we could find the right strategic partner for ISS to continue its growth,” she said.

One of Greenfield’s investors, Connecticut-based Mesco Ltd, is also an investor in uTest, a software quality assurance outsourcing house we profiled last week. Utest executives said they wanted to work with Mesco because of its familiarity with businesses that gather feedback online.

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As if its sports teams’ bragging rights weren’t enough, Massachusetts has now topped the state rankings in science and technology prowess. Meanwhile, Washington placed a respectable #5.

That’s the word today from the California-based Milken Institute’s 2008 State Technology and Science Index. The rankings are based on 77 indicators across five broad categories: R&D inputs, risk capital and entrepreneurial infrastructure, human capital investment, technology and science work force, and tech concentration and dynamism. (You can get the full state list here, and the full report here.)

A whopping four New England states placed in the top 10, with Connecticut, New Hampshire, and Rhode Island also represented—and all three have improved their positions from 2004, the year of Milken’s last state survey. Washington is up one spot from sixth place, while Massachusetts maintained its dominance at the #1 position.

The report notes that Massachusetts scores “well ahead” of the competition, and attributes this to its world-class research institutions, cutting-edge firms, and ability to attract and retain a highly skilled work force.

Everyone loves a Top 10 list, so here it is, with notable changes in parentheses. The release said these states are “in the best position to succeed in the technology-led information age.”

1. Massachusetts (held position since 2004)
2. Maryland (up 2 spots)
3. Colorado
4. California (down 2)
5. Washington (up 1)
6. Virginia
7. Connecticut (up 3)
8. Utah
9. New Hampshire (up 3)
10. Rhode Island (up 1)

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