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In this episode of Tech Confidential's Behind the Money online video show, we speak with Matthew Wurtzel, editor of Dealscape, about Friday's expiration date for Electronic Arts Inc.'s bid for Take-Two Interactive Software Inc.

Lazard Capital Markets analyst Colin Sebastian issued a note on EA, suggesting that new information regarding the offer will come Monday. There is no indication yet whether EA will extend the expiration, up its bid or simply walk away. EA has already extended the offer deadline from April 30 to May 16.

In March, Take-Two rejected a $26 a share, or $2 billion, offer from EA and said it would not negotiate with any prospective buyer until after release of its "Grand Theft Auto IV" video game on April 29. Take-Two said the crime-themed video game sold 6 million units globally in its first week with an estimated retail value of more than $500 million. - The editors

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Ning CEO and co-founder Gina Bianchini holds a position envied by other Web 2.0 entrepreneurs. Her social networking startup is growing at an astonishing clip; she just raised $60 million she doesn't need; and her business partner is Marc Andreessen, the legendary founder of Netscape (acquired by America Online Inc. for $4.2 billion in 1999). Oh, and she's on the cover of the current issue of Fast Company, which features a glowing profile of Ning.

Sometimes described as a white-label social network provider, Ning helps people create and customize their own social networks. The startup employs 86 people full-time. According to Bianchini, there are 1,500 new Ning networks everyday, for a total of 260,000 in early May. She says 70 percent of them are "active," meaning they have been used in the last 30 days. Ning's diverse customer list includes hip-hop artist 50 Cent, car maker Saturn and diabetes community Tu Diabetes. 

Investors are clearly impressed. Ning recently secured a $60 million Series D from unnamed large institutions, bringing the total raised to $104 million. It was seeded with $15 million from Andreessen.

Tech Confidential asked Bianchini, 35, about the company's strategy and what it's like to work with Andreessen.

Tech Confidential: How did you get to know Marc Andreessen and how did the two of you come up with the idea for Ning?
Gina Bianchini: Marc sat on the board of Harmonic Communications, the advertising analytics company I incubated with Mark Kvamme, my former boss out of CKS Group  who is now a partner at Sequoia Capital. When we sold Harmonic to Dentsu, we started thinking about the next thing. In the fall of 2004, we had the non-controversial passion to have the goal of helping people to create the exact right social network for them.

We thought we could bring the freedom of the Web to social networking, in the same way the Web created freedom and programmability that had been lacking in online services, like CompuServe and Prodigy. And of course, Marc played a big role in that. Freedom and programmability don't exist today in the context of MySpace, YouTube or LinkedIn. We wanted to build a platform for people to create their own social networking with their own features, their own brand, their own members. We envision a world where there are millions of social networks for every niche, need, location or language.

TC: Who is your competition?
Bianchini: There are three buckets of competition. There are the general one-size-fits-all social networks, such as Facebook, MySpace, YouTube and LinkedIn. You join their world, and it's a very narrow and fixed view of what people can do.

The second type of company provides large companies with custom development and system integration. They're going after enterprises. These are what I think of as white-label social networking companies. A big difference between them and us is that they have a direct sales force. Also, their development time is much slower, like from six to 18 months. Some companies in this category are KickApps, PeopleAggregator and Flux.

And then finally, there are companies who are seeing what we're doing and trying to compete directly with us, and we take that as a compliment that we're doing something right. One company in this category that is doing some interesting things with conferences is CrowdVine.

TC: What's your business model and strategy for growth?
Bianchini: We have two revenue streams. For free services, we run ads. If someone wants to take off the ads or buy the rights to serve ads or wants additional storage or bandwith, we charge fees. On growth, we're happy with our current growth rate and just want to maintain it. We're pretty certain that we will get big, and we're continuing to increase our performance.

TC: What will you do with the $60 million you raised recently?
Binachini: We hope to keep it in a bank account and not use it. In the next two years a lot may happen. We want to make sure we can continue to grow and accelerate our growth rate. We don't want to have to go back out into the market when these sources of funding have closed their shingles and are not open for business. Smart entrepreneurs raise money when they can. We want to control our own destiny.

TC: With all that money at your disposal, are you looking to buy other companies in the social networking space? We hear rumors that LinkedIn might be up for sale (and/or raising a fresh round of capital).
Bianchini: Never say never, and we're certainly in a situation to look at what we might do. But no, we're not in the market right now for anything.

TC: What is it like to work with Marc Andreessen?
Bianchini: We're co-founders and partners in crime. He's the chairman, and I'm the CEO. Ultimately, the decisions are mine as CEO, but I look to him for significant counsel and input. We work together very well. We share a lot of very similar philosophies, which makes our partnership strong. He's a great partner, and obviously he's smart and high-energy and has a lot of great ideas. It's been a lot of fun to work together.

TC: What's next for Ning?
Bianchini: We've got a lot on our plate right now. We want to help people organize their social networks and make it easier to manage them. We're working on virtal features to make it easy for customers to do viral distribution and expansion and drive new people to the networks, such as invitations, sharing, groups, events, a branded video player and a branded slideshow. We have our hands full. We just keep our heads down, focus on improving social networking, helping people make it their own and make sure all the possibilities are there for them when the day comes when there are millions of social networks in the world. -- Mary Kathleen Flynn

For more on Ning and Gina Bianchini, see May 2008 issue of Fast Company
For info on why Web 2.0 entrepreneurs wish they had Gina Bianchini's job, see Tech Confidential's Mar. 28 video interview with Mahalo.com Inc. CEO Jason Calacanis
For more on Ning's $60 million Series D, see Marc Andreessen's Apr. 18 post 

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I spoke with Intel Capital president Arvind Sodhani today about the news that WiMax technology specialist Clearwire Corp. [CLWR] and Sprint Nextel Corp.'s [S] next-generation wireless broadband unit would merge into a new, $14.5 billion company.

It's an important step forward for  Intel Corp. [INTC], already a large investor in Clearwire and a staunch supporter of WiMax, with a chipset in the works specifically based on the technology. Intel will invest $1 billion into the new venture in exchange for a 12% stake, making it the second-largest investor after Sprint, which will own 51%.

Here's an excerpt (The full story will be available at TheDeal.com this evening):

Tech Confidential: Intel is obviously betting big on WiMax. How important is the deal announced today to the technology's future?

Arvind Sodhani: Clearly this is important enough for us to have put $1 billion in this deal. That should give an indication of how critical and important this is and how committed we are to making this happen. The magnitude of the deployment required requires a lot of capital, and our investment and engagement is consistent with that.
WiMax is faster, cheaper and getting deployed all over the world. No other technology comes anywhere near to WiMax in terms of speed or cost or ease of integration into laptops. It is global.

What were Intel's main concerns when the Sprint-Clearwire joint venture fell apart last November?

We had always realized that our initial investment was not sufficient to get deployment. We were instrumental and helpful in bringing the two parties back together. It clearly made sense for the companies to bring their complementary assets together.
This clearly increases the ease with which the nationwide network will be built. Between the two of them, there is sufficient spectrum to deploy high-speed wireless broadband because it does require fat channels and spectrum. Spectrum will determine how expensive the network will be.

Will Intel Capital sink more money into Clearwire in the future?

This new entity will be armed with sufficient capital to allow it to access the capital markets, either the debt or equity markets. We believe it is initially financed and funded so it can move forward very aggressively and tap the capital markets on its own in the future. Clearly this entity will need further capital down the road, but it is armed with a lot of capital upon closing this deal. -- Olaf de Senerpont Domis

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Benjamin Wolff's title may not be changing, but he's getting one heck of a promotion. As CEO of Clearwire, he headed a company valued at $3.9 billion before its merger with Sprint Nextel Corp., announced Wednesday. After the merger, he'll be at the helm of a company with a market capitalization of $14.5 billion, backing from some of the biggest names in technology, including Intel Corp. and Google Inc., and ambitious plans to stretch a super speedy wireless network from coast to coast.

Wolff joined Clearwire in 2004 as executive vice president and has served in the Steve Ballmer role to Clearwire founder Craig McCaw's Bill Gates ever since. In 2005, Wolff was promoted to co-president and chief strategy officer, then in 2006, to co-chief executive officer and finally in 2007, to sole CEO. He also serves on the board of ICO Global Communications, the mobile satellite services operator backed by McCaw, and is president of McCaw's investment firms, Eagle River Investments LLC, Eagle River Holdings LLC and Eagle River Inc.

Wolff's early career was as an M&A attorney with Davis Wright Tremaine LLP, where he represented clients, such as Allied Signal, Eagle River, Intel and Starbucks Coffee Company in various corporate and transactional matters.

McCaw will serve as chair of Clearwire's new 13-member board, and Sprint Nextel's current chief technology officer Barry West will act as president. -- Mary Kathleen Flynn

For more on the alliance between Clearwire and Sprint Nextel see May 7 story from TheDeal.com and May 7 post from PaidContent.org

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ClearCube Technology Inc., which makes desktop virtualization systems, Tuesday announced that it is spinning off its software unit into a new company named VDIworks.

"We started developing a rich set of tools to manage virtual assets and devices, but as we have grown up, people think about ClearCube as hardware more than software," CEO Rick Hoffman says. "We thought about how do we get visibility around this very good set of software tools we have and take advantage of the momentum in desktop virtualization."

The company makes so-called PC blades, which enable users operating from terminals to have the power and capabilities of desktop PCs operating on a centralized computing platform. The company's network hardware and software eliminates bulky desktop processing units and connects users to dense PC blades located in a central, secure location.

ClearCube will continue to offer end-to-end systems for centralized desktop computing, inluding the hardware.
VDIworks' product, on the other hand, will be the software platform for creating, deploying and managing virtual desktop systems. ClearCube will continue to offer what will now be VDIworks' software, using it via an OEM relationship with its former unit and continuing to market it under the name Sentral.

Like most spinoffs, the complexity of the agreements that had to be arranged between the now-distinct companies was the trickiest part of the spinoff, Hoffman says. Another challenge was making sure that VDIworks was prepared to work with other hardware vendors, he adds.

"We were getting requests from customers to decouple our software from the hardware," Hoffman says, adding that some customers had already chosen other server vendors for their hardware needs.

The spinoff news follows a $5 million investment from Paladin Homeland Security Fund LP, announced in February. Since it was founded in 1997, ClearCube has raised a total of $120 million. It announced a $25 million Series D in 2004, which then-CEO Carl Boisvert said would be the company's last private money. 

But the company attempted, in part because of its close relationship with IBM Corp.'s [IBM] widespread global services unit, to expand into too many geographies, Hoffman says.

"We tried to do too much too fast," he says. "Because we didn't invest enough in each of the groups, we struggled."

ClearCube has since trained its focus on North America, Europe, the Middle East and Africa. It still has an office in Tokyo, Hoffman says, but "doing business in Japan is a real challenge," and consequently ClearCube is winding down its operations there.

The latest funding will enable ClearCube to reach cashflow break-even in the fourth quarter of 2008, Hoffman says. Part of the investment will provide seed funding for VDIworks. Hoffman will take the reins of VDIworks, while ClearCube chief operating officer Randy Printz will become ClearCube's CEO.

See May 6 press release from ClearCube
See August 2004 story from TheDeal.com

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Online video startup Vusion Inc. (code-named Jittr Networks) is emerging from stealth mode Monday. Vusion, backed by an undisclosed Series A from Blue Run Ventures in 2006, aims to deliver instant-on, full-screen high-definition streaming video.

Vusion's technology is capable of scaling to tens of millions of concurrent users, with network usage and bandwidth fees being one-fifth that of traditional video delivery, according to the company. The reduced bandwidth requirements mean that media companies will be able to provide HD video for the same price they previously paid for low-quality flash video.

Vusion founder and chief technology officer Aaron Crayford, 26, was a researcher in residence at the San Diego Super Computer Laboratory, where he realized that the principles of advanced distributed computing could be applied to some of the fundamental problems with online video delivery.

"Our technology is ideally suited for media companies looking to move from delivering short format, low-quality video to longer-play, high-definition video in order to better monetize their assets, differentiate their online
presence and generate increased Web traffic," says Crayford.

Island Def Jam Music Group will use Vusion's technology to create a portal where fans can view premium versions of music videos in DVD quality from artists, such as Rihanna, Kanye West and Mariah Carey (pictured). - Mary Kathleen Flynn

For more on Vusion, see May 5 press releases

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When is it time to quit your day job? If you're Someecards Inc. co-founders Duncan Mitchell and Brook Lundy (pictured, left and right), the answer is when your Web site starts drawing 1.5 million unique visitors a month.

Last month, the pair raised a modest but significant Series A, propelling them to leave behind their careers as online ad creative directors. Now they're looking for a first-class Web developer to help them make the rest of their dreams come true and transform their clever e-card site into a full-fledged Internet business.

Someecards, launched about a year ago when Lundy worked at Avenue A/Razorfish and Mitchell at MRM Worldwide, has quickly found a following among Facebook regulars, who use the off-beat e-cards as a medium for flirting, bantering, debating and apologizing.

In addition to users, the Manhattan startup has attracted influential Internet investors. Betaworks, the innovative New York Web 2.0 incubator recently profiled by Tech Confidential, is leading the $350,000 round.

Also participating is Chris Sacca, Google Inc.'s former wireless chief. Sacca met Lundy and Mitchell through mutual friend Nancy King, an ad exec who is currently a senior brand strategist at Naked Communications in New York and an investor in Someecards.

Mark Bailey, the founding partner of "hyper-local" site Outside.in, which is backed by Betaworks, is also an investor. It was Bailey who introduced Lundy and Mitchell to Betaworks founders John Borthwick and Andrew Weissman. Another backer of Outside.in, Hollywood producer Andrew Karsch ("The Prince of Tides"), is also supporting Someecards.

Someecards is clearly still in its infancy. The next step is "to hire a tech lead who can take the site to the next level," Lundy tells Tech Confidential.

"We've got a 12-page development list of things we've been wanting to do for seven or eight months," says Lundy. "It's been frustrating the hell out of us."

Lundy expects the initial funding to make a big dent in the to-do list. High on the priority list are integration with Facebook and the development of tools that will "maintain the voice of the brand but also allow users to create their own Someecards."

Additional funding is also likely. "We may be raising more relatively soon," says Lundy. "It depends on how quickly we can get momentum going in advertising and merchandising. It's possible we would do another round in six to eight months."

Betaworks is betting that Someecards will evolve into something far more innovative that its current incarnation.

"Brook and Duncan will make content more dynamic and more distributable," says Weissman. "They'll break it apart a bit and build community around that content."

Describing Lundy and Mitchell as the "funniest guys I've ever met," Weissman says, "They are twisted -- in a good way, in a product way. They're going to come up with twisted ways of doing what they're doing." (Photo by Lee Miller Design.) - Mary Kathleen Flynn

For more on Someecards, see April 10 post from Tech Confidential
For more on Betaworks, see May 2 profile from Tech Confidential
For more on John Borthwick, see his blog
For more on Andrew Weissman, see his blog and his tumblelog
For more on Chris Sacca, see Jan. 29 post from Tech Confidential

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Betaworks might be the most influential early-stage investment firm no one's ever heard of. If it's take on Web 2.0 is right, that's sure to change. Tech Confidential takes an in-depth look at the innovative New York firm and the business model co-founders John Borthwick (pictured) and Andrew Weissman are experimenting with.

After Internet stocks crashed in 2000, certain words synonymous with that era of irrational exuberance became taboo. One was "dot-com"; another "incubator." Eight years later, while the former has still not regained its currency, the latter is staging something of a comeback. Yet, as in that earlier era, Internet incubators, or "accelerators," mirror the startups they nurture and, more broadly, the Web itself, which is altering technology financing as it changes the technology.

Epitomizing that approach is a low-profile, seed-stage investment firm called Betaworks. Obscure even among Web insiders, the New York firm is experimenting in how to build companies that, like Facebook Inc., MySpace.com and YouTube LLC, exploit the Internet's power to connect people online.

Betaworks functions neither purely as a venture capital firm nor as an incubator. Instead of raising money from limited partners, as VCs do, the firm is structured as an operating company that shareholders own. And Betaworks is itself a tech developer, building "light" Web applications that might benefit its portfolio companies and catalyze further innovation. In short, it's a hybrid whose organizational structure effectively encodes the dynamic shaping the Internet today.

Betaworks co-founder and CEO John Borthwick (pictured) views the Web's changing ecology in biological terms. "We're seeing the organisms spread across the petri dish and add value to one another," he says. "As investors, we're starting to see the incremental value to us, but the proof will be in the pudding."

Since September, Betaworks has quietly invested in 15 of the most notable startups specializing in social networking and other so-called Web 2.0 technologies, often alongside prominent VC firms. Despite the buzz around these startups, which include Covestor LLC, Iminlikewithyou and Tumblr Inc., Betaworks' founders have deliberately stayed out of the spotlight as they tinker with its business model.

One reason for Betaworks' long incubation may be that the approach is notoriously hard to get right. Incubators have a mixed record. " 'Incubator' is a loaded word reminiscent of the previous bubble," says SoftTechVC's Jeff Clavier, an early-stage Internet investor in Silicon Valley who co-invested with Betaworks in Songkick.com Inc., a startup that lets users track concerts. For Clavier, the term connotes "requiring a lot of money and doing a lot of stupid things."

The first business incubator started as a real estate play. When agricultural equipment maker Massey Ferguson of Duluth, Ga., closed its Batavia, N.Y., plant in 1956, it left behind unemployed workers and an 850,000-square-foot complex of multistory buildings, according to the National Business Incubation Association. The Mancuso family, which owned businesses in the area, bought the site and asked family member Joseph Mancuso to find a way to use it profitably. Unable to find a single tenant, Mancuso divided the building into individual spaces. His genius was to provide not only space to businesses, but also advice, office services and help raising capital. Within five years, the Batavia Industrial Center was full. Mancuso, 88, died in April.

Taking up the concept, Xerox Corp. in 1970 opened Palo Alto Research Center, or PARC, which brought together researchers in information sciences and physical sciences to create "the architecture of information." While PARC has focused on developing technologies rather than startups, it claims credit for helping create more than 30 tech companies and famously spawned innovations such as laser printing, distributed computing, Ethernet and the now-ubiquitous graphical user interface.

Incubators sprouted in the U.S. in the 1980s and spread to the U.K. and Europe. Today the NBIA estimates there are roughly 5,000 incubators worldwide. During the last decade, however, the model fell into disfavor -- at least publicly -- as formerly high-flying Internet companies backed by dot-com incubators such as CMGI Inc. of Andover, Mass., and Idealab Inc. of Pasadena, Calif., crashed to earth.

"An incubator is a very, very hard thing to make work," says Bill Gross, who founded Idealab in 1996 and who has since expanded his investment focus beyond the Internet into clean technology and other sectors. "A lot of our companies did not succeed, but we learned from ones that did."

Despite the challenges, a new generation of incubators has emerged to focus on seed-stage Web startups. Many have a fairly set method of operating. For instance, Y Combinator of Mountain View, Calif., and Cambridge, Mass., expects founders to move to its offices for three months, during which the entrepreneurs get assistance with everything from naming the company to filling out incorporation papers. The firm hosts weekly dinners with entrepreneurs, VCs, lawyers, bankers and executives from large tech companies. Ten weeks in, Y Combinator hosts a day when startups make presentations to potential investors.

Betaworks' style is looser. Mentoring is informal, with the most structured element a monthly brown-bag lunch with no agenda. Thoughts are exchanged, products dissected and reassembled.

This improvisation reflects Borthwick's own style. In conversation he can come off as deceptively light, even whimsical, which obscures the depth of his observations about the Internet and how it's changing business.

Borthwick has had ample experience launching startups and working in business development acquiring them. He sold WP Studio, a Web site developer he formed during the Internet boom, in 1997 to Digital City Inc., a joint venture of America Online Inc. and Tribune Co. After a stint at AOL, he served as senior vice president of alliances and technology strategy at Time Warner Inc. He left the New York media giant and became CEO of photo-blogging site Fotolog Inc., in which he had invested; Fotolog was acquired last year by Hi-Media Group, a French Web publishing and services company, for $90 million. He also invested in blogware company Blogger, whose parent Google Inc. bought in 2003 for undisclosed terms.

Betaworks co-founder and managing director Andrew Weissman worked in business development at AOL while Borthwick was there. The two met in the mid-'80s at Wesleyan University and started Betaworks in 2006, taking more than a year to refine their investment thesis and strategy. What they came up with -- creating a platform for developing seed-stage businesses that marry social networking with content produced by Web users -- showed auspicious timing. By 2007, Web 2.0 companies such as Facebook and YouTube that combine social networking and user-generated content were full-fledged Internet phenomena, with valuations to match, and the shift toward online advertising was accelerating.

For his part, Borthwick rejects the label of incubator in characterizing Betaworks. "The whole incubator concept was about sharing services that are mostly peripheral," he says. "Your lawyer or your accountant should be gotten from the market. Any entrepreneur who exchanges a desk for equity is probably not a good entrepreneur to bet on."

Rather than sharing business services, the companies Betaworks invests in and the products it develops share common features. Its portfolio consists of three "buckets." The first contains companies that build communications platforms for distributing user-generated Web content. New York's Tumblr, for example, lets people publish short, mixed-media blogs.

The second consists of startups such as Outside.in that extract and add value to information in user-generated content, such as blogs. The New York company -- a provider of "hyperlocal" Web services that has raised $2.4 million from Union Square Ventures, Milestone Ventures Partners, Village Ventures and individual investors such as Esther Dyson -- structures blog content around zip codes, enabling users to, say, get bloggers' recommendations for a neighborhood coffee house.

The third bucket consists of social media companies, such as online ad firms focused on behavioral targeting. One of these, Lotame Solutions Inc. of Elkridge, Md., analyzes how Internet users interact with, among other things, online video sites, noting whether the person posts, comments on or simply watches videos, key data for advertisers. In February Lotame closed a $10 million Series A round, led by Battery Ventures, bringing total funding to $13 million.

"My belief is that companies who are in our network, both companies we've invested in and technologies we're building, have a common DNA set," Borthwick says. "By having a common entity at the center who can help define and continue to grow that base of DNA, they'll profit, and we'll profit, and everybody will grow a little bit faster, better and cheaper."

Betaworks helps introduce its founders to entrepreneurs and investors with a shared Internet vision. Not only can that mean access to institutional funding, but strategic counsel from those who have faced similar challenges. David Karp, the 21-year-old whiz kid who founded Tumblr, credits Borthwick with guiding him through the initial fundraising and providing critical advice about how to turn the microblogging service from a flashy Web service into a commercially viable company. 

"John has the most accurate perspective on product of any early-stage investor I've ever met," says Karp, whose company has raised $775,000 in seed money from Betaworks, Spark Capital of Boston, Union Square Ventures, and angel investors.

Karp is also benefiting from Betaworks' business model. These days, Tumblr occupies Karp's attention full-time, which means he hasn't been able to focus on Senduit, a Web utility that helps users share large files over the Internet that he developed before Tumblr. Rather than let Senduit languish, he's handing over development to Betaworks, while retaining partial ownership.

Another Betaworks investment is Someecards Inc., for which the firm led a $350,000 Series A funding in April. Launched about a year ago by two former creative directors for online ad agencies, Brook Lundy and Duncan Mitchell, the provider of irreverent e-cards has become an underground hit, drawing 1.5 million unique visitors to its Web site a month. The unconventional, often edgy startup has become especially popular with Facebook users, who send cards to fellow network members just as people use e-mail to stay in touch by trading jokes or news articles. "Their content is being used as a jumping-off point for conversations, with a lot of activity on Facebook," Weissman says. "The two-way communication form is more interesting to me than the content, and the traffic is insane."

Chris Sacca, the former Google wireless chief turned full-time investor, also invests in Someecards. "Watching folks interact with the site, it's clear that these cards are really a way of outsourcing communication when we want to be wittier than we naturally are or when a subject might otherwise be hard to address," he says.

Despite the promise, Betaworks has an uphill climb. Skeptics question its ability to flourish both as an early-stage investor and as a tech developer. Betaworks' practice of joining deeper-pocketed VCs, including Spark, SoftTechVC, Union Square and Y Combinator, in backing startups can produce lower early-round valuations, alienating entrepreneurs. It also can hurt its returns through dilution as larger investors pile in.

Meanwhile, developing cheap Web tools to plug into Facebook is one thing, but building a real business takes time, money and, of course, customers, no mean feat given the explosion of Web 2.0 companies. Among tools Betaworks is developing is a SwitchAbit, which lets users send digital content from one Web service to another, enabling them to, say, transmit online photos stored in Flickr to Twitter, a microblogging service. Also under development is fichey.com, which lets people flip through the Web like a magazine, and firef.ly, which allows users to chat with others visiting the same Web site.

"Data is moving and wants to move much more loosely across the Web than the vertical silos of Web sites have permitted," Borthwick says. "As data moves, it becomes more valuable because people add to it and algorithms add to it."

Another question: Does Betaworks have enough capital to survive the failure of some of its companies or even the collapse of what many see as a Web 2.0 bubble? Borthwick declines to say how much capital the firm has nor how much it's invested. But he's confident that Betaworks' capital base is scalable. "These people are not Sunday investors," he says, alluding to his shareholders. "They're professionals who understand what we're doing and the business we're trying to build here."

Betaworks' shareholders are some of the most astute, and well-heeled, Internet investors around, including Ron Conway, an early investor in Google and among the world's most prominent angel investors; Kenneth Lerer, co-founder of media blogging company HuffingtonPost.com Inc.; Tim Armstrong; Google's president of advertising; Scott Heiferman, co-founder of Fotolog and social network MeetUp Inc.; and former Yahoo! Inc. lead designer David Shen. Another shareholder is BV Capital, the San Francisco venture firm that backed Fotolog and social "bookmarking" startup Del.icio.us, which Yahoo! acquired in 2005 for $30 million.

Not all the ramifications of Betaworks' approach are understood yet, the founders admit, or its success assured. Meanwhile, Borthwick savors the experiment itself. "In six months' time, I think some of the pieces will be a little clearer. It's still early days." - Mary Kathleen Flynn

Mass Appeal
Betaworks invests in Internet startups specializing in user-generated content and in social media technologies
Company	What it is	Who it's for	How it pays
Carmun	Social network that helps students organize academic research, connect with peers and form study groups	College students	Advertising
Covestor LLC	Social network for public market investors to track and benchmark stock performance, exchange information with other members and earn financial rewards	Serious investors	Advertising
Dizzywood (Rocket Paper Scissor LLC)	Virtual world for children that offers games and visits to online environments	Kids	Subscriptions, item sales
Goodrec	Recommendation platform for restaurants, movies, bars, pubs, etc.	Twitter crowd	Local advertising
Ideeli Inc.	Members-only shopping network for women that offers discounts on designer fashions and luxury accessories	Trendy women	Advertising and paid memberships
Iminlikewithyou	Casual online gaming and social network that lets users create games and invite people to play	Young adults, casual gamers	Advertising, item sales
Lookery Inc.	Provides demographic marketing services to social networks	Social networking companies	Revenue-share
Lotame Solutions	Provider that helps publishers and advertisers devise ways to monetize social media and enhance advertising	Publishers, advertisers	Service fees
Outside.In	Social network that lets users compile, publish and access information about local communities and communicate with other members	Web users	Advertising, revenue share with publishing partners (eg: Washington Post)
Someecards	Online provider of caustic electronic greeting cards	Younger adults, urbanites	Advertising, e-commerce merchandise sales and content syndication
Songkick.com Inc.	Service that lets music fans automatically keep track of upcoming concerts and track a band's tours as tickets and other information appear online	Music fans	Advertising, ticket sales, and e-commerce
Summize Inc.	Site that aggregates user-generated reviews from around the Web on books, movies, electronics, music and other products	Web users	Advertising, licensing
SwitchAbit	A "switchboard" that lets you plug content from one service to another	Twitter, Flickr, etc., fans	Service fees and data analysis
Tumblr Inc.	Short-form blog that enables users to publish brief, mixed-media posts	Bloggers	Advertising, pro tools
Tsumobi Inc.	Makes programming tools that let software developers build mobile Internet applications	Software developers	Service fees
Source: Betaworks, portfolio companies, The Deal

For more on John Borthwick, see his blog
For more on Andrew Weissman, see his blog and his tumblelog 
For more on Idealab, see Apr. 22 post from Tech Confidential
For more on Covestor, see Apr. 7 post from Tech Confidential
For more on Tumblr, see Jan. 18 post from Tech Confidential and Nov., 2007, post from Tech Confidential
For more on Outside.in and other hyper local sites, see April 11 post from The Local Onliner,
Oct., 2007, post from VentureBeat, and Oct., 2007, post from Silicon Alley Insider
For more on Lotame Solutions, see Feb. 11 posts from Lotame CEO and founder Andrew Monfried, Tech Confidential and Silicon Alley Insider
For more on Someecards, see Apr. 10 post from Tech Confidential
For more on Chris Sacca, see Jan. 29 post from Tech Confidential

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When it comes to transformative consumer Internet technologies, mobile payments are a little bit like online and wireless electronic books: people have talked about them since the earliest days of the Web, but somehow they've never become the kind of things you routinely see fellow commuters using -- always a good measure of broad adoption.

If Amazon.com Inc. [AMZN] is to be believed about the popularity of its new Kindle, the wireless e-book is finally reaching the mainstream. And, judging by the recent interest in mobile cash transfer startup Obopay from venture capitalists and corporate partners, mobile payments are finally having their day in the sun as well. Three-year-old Obopay recently raised $20 million in its third funding round, bringing the total it has raised to date to $66 million. The company has also had a flurry of international expansion, corporate partnership and improved service announcements and will introduce its service in India and to people here in the U.S. who bank with Citibank.

Companies and analysts offer different explanations for the slow adoption  of mobile payments and many blame consumer behavior. Obopay CEO Carol Realini (pictured), however, said the problem is not so much with consumers , but with the technology itself, which is enormously difficult to develop in a way that will work on all different kinds of cell phones.

"It is quite a challenge to provide a great experience over any kind of phone from the most basic mobile phone to a blackberry," she said in a recent interview, adding that her background in mainframe computing had not adequately prepared her for this challenge of building technology for an "eclectic mobile platform."

Having successfully developed a cash transfer service that is intuitive and easy to use on any cell phone -- including easy-to-remember account numbers that are also the users' cell phone numbers, Obopay is poised to capture a surge of interest from consumers, she said. While the company does not disclose its total number of customers, Realini said she is encouraged by the breadth of the user base it has reached in the U.S., which ranges in age from 13 to 75. And she said it is poised to take off in other cultures where it is often more common to have a cell phone than a checking account. If fact, Realini said she first got the idea for the company while traveling through Africa and noticing that many of the people who were not carrying wallets were carrying cell phones.

"We are starting to see early implementation in markets around the world," she said. To stave off consumer concerns about transfering money from their phones, Obopay has appealed to those users who want to use the service for casual cash transfers between family members, effectively creating a new market for transferring money rather than getting them to change the way they currently pay bills. While Obopay does allow customers to use its service to pay bills (even without a checking account, they can set up a debit card linked to their Obopay account), its main use today is for tranfering money between family members, an application that the average user likely associates with fewer security concerns. But given that even in the U.S., some 80 million people are what she called "underbanked," meaning they make little or no use of a checking account, Realini said she sees broad potential in online bill paying.

The potential is even greater in places like India, which Obopay just entered in March.

"In urban India, 90% of the adults have mobile phones, but only 16% have debit cards," she said.

In February, Gartner Inc. issued a report suggesting that mobile payments were on the brink of a hockey-stick growth curve. Gartner projected that the number of mobile payment users in the U.S. would rise from a little over one million to day to about 7.1 million by 2011. It said that the ranks of Asia-Pacific users would rise from 28 million today to 67.4 million in 2011. -- Andrea Orr

 

 

 

 

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WorkLight Inc., a so-called Enterprise 2.0 firm that brings the look and feel of popular online consumer interfaces to business users, is announcing Wednesday that it has secured a $12 million Series B, led by Israel's Pitango Venture Capital. Also participating are the original backers who invested $5.1 million in the startup's Series A in the spring of 2006, including Genesis Partners, Index Ventures and individual investor Shlomo Kramer, the CEO of security software maker Imperva and the co-founder of Check Point Software Technologies Ltd.

"The vision behind WorkLight is that the kind of computing experience we have at home has become much stronger and more compelling than the kind of IT we have at work," WorkLight co-founder and CEO Shahar Kaminitz tells Tech Confidential. "It's not just a matter of feeling good about the software you're using, but it also inflates to hard dollars. The ability to collaborate and share knowledge and information with our friends on Facebook were completely missing in the workplace." 

Today, WorkLight, which has offices in Israel and Boston, supports more than a dozen Web services and technologies. For example, WorkLight's software lets customers' employees use Facebook as a social network for collaboration at work.

"We're building a company's intranet based on popular consumer technologies, rather than building it from the ground up using proprietary products," says Kaminitz. "We're a bridge between a company's information systems and security infrastructure and popular consumer tools."

Kaminitz's background includes creating a business unit at Amdocs [DOX] in 1996 to replace client-server applications with Web-based technologies.

WorkLight "has made significant progress in a nascent Enterprise 2.0 market, having proven its ability to execute on the technology side and on the sales side," Rona Segev, general partner at Pitango Venture Capital, tells Tech Confidential. "We are bullish on the market and on WorkLight's potential for a huge success in owning this space."

Kaminitz plans to use the funding to penetrate into new markets, such as Europe and Asia Pacific, and into mid-size companies. -- Mary Kathleen Flynn

 

 

 

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While gearing up for a proxy fight to win Yahoo! Inc. [YHOO], Microsoft Corp. [MSFT] CEO Steve Ballmer might be looking for some last-minute insight into the making of the man whose company he is trying to acquire. Recommended reading for Ballmer includes Friday's San Jose Mercury News, which ran a well-timed, detailed profile of Jerry Yang, reaching back to when he emigrated from Taiwan in 1978 when he was 10.

With his widowed mother and younger brother, Yang moved into a modest one-story house in San Jose, Calif. Despite initially knowing only a single word of English ("shoe"), he quickly became a star student, playing on the tennis team, getting elected president of the student council and eventually winning scholarships to top universities, including Stanford, which he accepted.

At Stanford, he met fellow electrical engineer David Filo, and the pair created "Jerry and David's Guide to the World Wide Web," eventually turning a hobby into a hugely successful Internet company.

When Yahoo! went public in 1996, Yang became an instant millionaire. Today, he is 39 and worth about $2.3 billion, and his wife is expecting their second child. While admired as an Internet icon, Yang is widely blamed for not acting more quickly and more decisively since re-taking the CEO job last June. Among other issues, some argue that Yahoo! should have been much more aggressive about social networking.

Until now, Yang's life has certainly been the stuff that American dreams are made of. Yet it's unlikely that Yahoo! is about to come to Microsoft's table and negotiate a deal amicably by tomorrow. Many view a hostile -- and eventually successful -- bid by Microsoft as the most likely outcome. So much for fairy-tale endings.  -- Mary Kathleen Flynn

See April 25 story on Yang from The San Jose Mercury News
See April 25 post on Yahoo! and social networking from Tech Confidential
See April 24 post on Microsoft's bid fro Yahoo! from from Tech Confidential
See March 14 post on Yang's negotiating skills from Tech Confidential

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A year ago, Dave Schappell, a former marketing executive at Amazon.com Inc. [AMZN], was searching for a motorcycle safety class so he could ride a scooter around town. Today, he's the founder and CEO of TeachStreet, a Seattle startup that helps students find local teachers through its Web site and is backed by some of Schappell's former colleagues, including Amazon founder Jeff Bezos himself.

This week, TeachStreet announced a $2.2 million Series A round of funding led by Madrona Venture Group, with participation from Bezos Expeditions and several Seattle angels, including current Amazon execs Jeff Blackburn and Mike George; former Amazonians such as Jason Kilar (now CEO of Hulu LLC, the online video joint venture of News Corp and NBC Universal); and others, such as Erik Blachford (CEO of TerraPass Inc.) and John Musser (founder of ProgrammableWeb.com).

"The process of finding a motorcycle school was like it was in 1990," Schappell, 39, tells Tech Confidential. The information turned out to be in a form as low-tech as it gets--handwritten cards on bulletin boards inside motorcycle stores.

"It's one of those experiences that hasn't gotten any better over the last 15 years," Schappell says. "There was nobody out there aggregating local school content."

At Amazon, where he worked from 1998 to 2004 (beginning as a summer intern while he was enrolled at the MBA program at The Wharton School at the University of Pennsylvania), Schappell became an expert in how to hook up buyers and sellers. As director of product development, he led a team that launched new stores and services, most significantly Marketplace, where used books are bought and sold and which became the model for how Amazon works with other merchants. He left the online bookseller in 2004, took some time off, worked for a non-profit (Unitus), then a startup (JibJab Media Inc.) and then got the idea for TeachStreet.

In funding the startup, he initially held off reaching out to Amazon, preferring to bootstrap it himself last summer. An angel round of $600,000 in the fall did not include Bezos, although other executives from his former employer did participate.

"I didn't want to go to 'Dad' first," Schappell jokes. "I'm sure Jeff gets asked for money 14 times a day. I wanted to prove that we could raise money, build the company and have a demo-able product before going to him."

Schappell waited until he was confident Seattle's early-stage VC firm Madrona would participate before pitching Bezos. Then after emailing his former boss, he recalls, "Within about 20 seconds I got pinged back by his investment folks" at Bezos Expeditions, Schappell says.

At TeachStreet, Schappell's goal is to "create a great experience for customers who are looking for classes and to keep satisfying the needs of teachers and small schools to make it easy for local teachers to find motivated students." The startup also helps instructors have a permanent presence on the Web and take advantage of online innovations, including blogging and calendaring. The service launched in the Seattle market this week, with a guide to 25,000 local teachers, classes, instructors and schools. The business model includes contextual advertisements and fees for advanced services to instructors, such as increased storage.

TeachStreet is doing data collection on a second city now. Says Schappell, "Our goal is to roll out additional cities every month or two."  -- Mary Kathleen Flynn

For more about Dave Schappell see his NoSnivelling.com blog