Monday, June 27, 2011

The Latest from TechCrunch

The Latest from TechCrunch

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Penn Students Leave School to Launch CourseKit With $1 Million Seed Round

Posted: 27 Jun 2011 09:21 AM PDT

Three students at the University of Pennsylvania—Joseph Cohen, Dan Getelman, and Jim Grandpre—are quitting school to launch a new education startup called Coursekit, and they’ve raised $1 million in a seed round to do it. (Peter Thiel would be proud). The New York City startup just closed a seed round from Founder Collective, IA Ventures, Shasta Ventures and some angels.

Coursekit is like Facebook or Yammer for courses. Like many other students frustrated with Blackboard, the current online course management standard, the Coursekit founders think they can do a better job. “It is really a Blackboard replacement with a heavy emphasis on social networking,” says CEO Cohen.

The service will launch later this summer in time for the Fall semester. It’s a place where teachers can post their syllabus, reading materials, grades, calendars, links, and so on. It is designed as a way for professors to manage their course and interactions with students.

But it is also a social messaging system for students to communicate with each other. “We want a 300 person lecture feel like a 20 person seminar,” says Cohen. Students can share links, videos, MP3s, and other files like PDFs. In this way, they can bring in relevant material from the Web to enhance the course and teach each other.



Meet The Sexiest Mobile Drive I’ve Ever Seen: Lacie’s Porsche Design P’9220

Posted: 27 Jun 2011 09:20 AM PDT

I got a chance to play around with Lacie's newly announced Porsche Design P'9220 mobile hard drive and one thing is certain: this little 5-inch hard drive is one sexy beast. If we're judging this book by it's cover, I'd give the Porsche P'9220 a ten, hands-down. It has this nice brushed metal aluminum finish, sharp lines, and even sharper corners (seriously, be careful), and is light/small enough to fit in a back pocket.

Read more…



Startup Wins Funding For iPhone App To Scan Skin For Melanoma

Posted: 27 Jun 2011 08:59 AM PDT

How would you feel about an iPhone app that claimed to be able to tell if that mole on your arm was not looking too healthy? That’s the claim of Skin Scan, an iPhone medical app available now on the Apple App Store. The startups has secured €50,000 Euro in seed funding from Seedmoney.

Either Skin Scan is going to get people to see a doctor earlier, thus potentially saving lives. Or it’s going to make hypochondriacs of us all. I can’t decide which. Suffice it to say this appears to be one clever app. Because it also asks for your location, Skin Scan is also producing a live map of how our moles are looking around the globe. The implication for the app are very interesting – Skin Scan could end up mapping skin cancer rate across the planet, if it gets this right.

The app takes a picture of a mole on the skin, then uses a proprietary algorithm to look at the fractal-like shapes which exist in human skin (have a look up close, you can see little triangles in normal skin, honest). It then calculates if the shape of the mole means it is is developing normally, or abnormally thus in a into a potential cancerous melanoma.



GSV Capital Buys Facebook Stock At $70 Billion Valuation; Its Own Stock Pops 21 Percent

Posted: 27 Jun 2011 08:16 AM PDT

Everyone is trying to get pre-IPO Facebook shares any way they can. Some investors purchase shares on secondary markets like SecondMarket and SharesPost. Others broker private sales. Today, GSV Capital, a publicly traded investment management company, announced that it has purchased a small number of shares (225,000) at a price ($29.28) which would give Facebook an implied $70 billion valuation.

Although GSV Capital doesn’t say, this most likely was a private sale. (Update: The company confirms the sale was through a “private secondary transaction”). Facebook passed $70 billion on the secondary markets in January, and hit $85 billion in March.

It’s such a small number of shares and a single trade, so you can’t make any generalizations about the implied market valuation of Facebook. What’s more interesting is what the trade did for GSV’s stock. It is trading up 21 percent this morning at $12.45. GSV’s stock is thinly traded, but it just became a way for public investors to get some exposure to Facebook. The Facebook shares now represent 15 percent of GSV’s portfolio. (It also made a direct $2.25 million investment in Kno earlier this month).

225,000 shares in social-networking company Facebook at an average price of $29.28 per share. The investment of $6,587,500 represents approximately 15% of GSV’s total portfolio.



Answers.com Gets Gutted By Its New Owner: Massive Layoffs, CEO And CTO Out

Posted: 27 Jun 2011 07:00 AM PDT

AFCV Holdings, a portfolio company of growth equity investor Summit Partners, is axing the majority of people working for Q&A site Answers.com parent company Answers Corporation, which it acquired earlier this year for $127 million in cash.

According to Israeli business paper Calcalist, 45 out of 65 employees in the company’s offices in Israel were fired, including founder and CEO Bob Rosenschein and CTO Jeff Schneiderman. Another 25 employees or so work out of the United States, but it remains unclear if all of them have also been given a pink slip.

I just spoke to Answers.com VP General Counsel & Corporate Secretary Caleb Chill on the phone, and he confirmed the layoffs. He wouldn’t go into too many details about the number of people being let go, but confirmed that it concerns more than half of the current workforce.

Asked about the number of people who worked for Answers.com last week, Chill said there were around 90. He also confirmed that Rosenschein and Schneiderman were let go, but refused to name the other executives who got cut because some have not yet been notified.

Rosenschein also got back to my request for comment and says he’s leaving “on good terms”.

According to Chill, Answers.com remains committed to its user community, but it will be discontinuing a number of products such as 1-Click Answers and AnswerTips, and in addition quit investing in a number of mobile apps.

Here’s how all this sounds officially:

AFCV today announced a restructuring of global operations to complete the integration of its April 2011 acquisition of Answers.com. As part of the reorganization, CEO Bob Rosenschein and certain executives will be stepping down as the company significantly reduces its workforce to sharpen focus on key product and community initiatives as outlined at the time of the acquisition.

The restructuring has largely been driven by the following factors: 1) Answers.com is no longer a publicly traded company and thus no longer needs the supporting infrastructure, 2) Answers.com will no longer support a number of independent product initiatives (such as 1-Click Answers, AnswerTips and Widget Gallery), and 3) Answers.com will discontinue investment in certain mobile applications.

Answers.com remains committed to supporting community of users through this transition process.

Answers.com was acquired by AFCV Holdings earlier this year after 6 years on NASDAQ, at a 33 percent premium over the company's average closing stock price over 90 days prior to the announcement of the deal. But shareholders were very unhappy with the terms of the deal, claiming it tremendously undervalued Answers.com, and tried to block the sale.

Shortly after they did, a U.S. court denied a motion for a preliminary injunction to enjoin the special meeting of stockholders to vote on the merger agreement, however, and thus the acquisition was closed on April 14, 2011. Now, roughly 11 weeks later, Answers Corporation’s brand new owner effectively gutted the company, raising doubts about its long-term viability.



Boingo Wireless Partners With Gogo For In-Flight Internet Access

Posted: 27 Jun 2011 06:47 AM PDT

Boingo Wireless is expanding its reach to the skies today with a new partnership with Gogo, a company that powers wireless internet connectivity on airplanes. With the new partnership, Boingo customers can now log in to Gogo using their existing Boingo account (as opposed to using or creating a Gogo account).

Boingo says that this Gogo internet access includes more than 1,100 planes. No on the Gogo home pages, users will be able to choose Boingo as their provider and log in with their existing Boingo username and password. Users who have Boingo’s Wi-Finder app can also log-in to Gogo as well by accepting the flight segment charge and entering a CAPTCHA validation phrase.

Of course, Boingo users (who pay a monthly or yearly fee for access), will also have to pay another fee for in-flight access. Users will be paid $4.95, $9.95 or $12.95 per flight based on the length of the flight. Smartphone users will pay $4.95 or $7.95, depending on the flight duration.

So the main benefit to Boingo’s million-plus users is that they can simply use their account to access the internet on flights, as opposed to creating a new account with Gogo (which I’ve had to do). The good news is that Gogo is powering wireless connectivity for most major airlines, including AirTran Airways, Delta Airlines, Virgin America, Air Canada, Alaska Airlines, American Airlines, Frontier Airlines, United Airlines, and US Airways.



Google NFC Partner ViVOtech Raises $24M From Motorola, DFJ, Citigroup And Others

Posted: 27 Jun 2011 06:21 AM PDT

ViVOtech, the near field communication (NFC) software and systems company, has raised $24 million in Series C funding from Singapore's EDBI, SingTel Innov8, Motorola Solutions Venture Capital, Alloy Ventures, Citi Ventures (the venture arm of Citigroup), Draper Fisher Jurveston, DFJ Gotham, First Data Corporation, Miven Ventures, Motorola Mobility, Nokia Growth Partners and NCR. This brings ViVOtech’s total funding to $80 million.

Founded in 2001, ViVOtech develops payment software, NFC smart posters, contactless readers/writers, and over the air card provisioning, and transaction management infrastructure software. ViVOtech has installed more than 800,000 NFC systems in 35 countries. The company’s readers are found in big-name retailers and stores such as McDonalds, Home Depot and Whole Foods as well is in taxi cabs.

For background, NFC enables people to make transactions, exchange digital content and connect electronic devices with a simple touch. As we've seen with Google, Android phones such as the Nexus S are being built with NFC chips, making your cell phone a mobile wallet. It's unclear if Apple will add NFC technology to the iPhone 5.

The company says that new funds will be used for further international expansion of ViVOtech’s NFC software and systems in Asia and other markets.

ViVOTech’s technology is frequently licensed by other companies and merchants to enable mobile payments. The company got a pretty big boost recently when Google used ViVOtech’s technology for their recentt NFC push, Google Wallet.

For merchants that want to accept Google Wallet payments, ViVOtech is providing NFC point of sale readers. In addition, ViVOtech has worked with Google, merchants and POS software vendors to provide integration between NFC POS readers and current POS software.

ViVOtech has also reportedly been looking at an IPO in 2012. According to Bloomberg BusinessWeek, the company has 80 percent of the U.S. market for NFC readers, and the company sales are in "double-digit millions." And the NFC market is expected to reach $50 billion by 2014.



Tasty! Meredith Launches Recipe.com, Acquires EatingWell Media Group

Posted: 27 Jun 2011 03:42 AM PDT

Publisher Meredith is expanding its food media business with the launch of Recipe.com, a site that pairs – you guessed it – recipes with digital coupons and the acquisition of EatingWell, a multichannel brand focused on – you guessed it – healthy eating. Terms of the EatingWell purchase were not disclosed.

To learn why launching Recipe.com and buying EatingWell Media Group makes sense for Meredith, look no further than this statement from chairman and CEO Steve Lacy:

“Meredith already produces great food content across our brands, and food is our top advertising category. In acquiring EatingWell and launching Recipe.com, we’ve added two anchor brands to serve the 75 million American women we engage every month, and the marketers that want to reach them.”

In other words, more eyeballs to sell to their top advertisers, across multiple channels.

The company’s portfolio includes a bi-monthly magazine, a mobile app and website featuring healthy recipes, food and shopping tips, articles, blogs and nutrition advice, a series of cook books and a content licensing and custom marketing program providing diet and nutrition articles, how-to cook information, recipes and meal plans to over 75 clients.

Currently, more than 60 percent of EatingWell’s revenues are said to come from digital sources, licensing and custom marketing.

EatingWell CEO Thomas Witschi is joining the Meredith National Media Group as EVP and President, Women’s Lifestyle, with responsibility for Meredith’s More, Fitness, EatingWell and Diabetic Living brands.

As for Recipe.com: the website and associated mobile apps will feature more than 20,000 trusted recipes, digital coupons, how-to videos, recipes from cook books and partners as well as an online shopping list. There’s also going to be a quarterly magazine.

Brands like Betty Crocker, Campbell’s and Kellogg’s are among the marketing content partners participating in the launch of Recipe.com.



LivingSocial Expands Daily Deals Empire; Buys Ensogo, GoNabit And DealKeren

Posted: 27 Jun 2011 03:21 AM PDT

Looks like LivingSocial is employing the same strategy for international expansion as its rival Groupon: by acquiring local daily deal sites to serve as a foundation for discount distribution on a global scale.

According to DailySocial, the company has moved to purchase DealKeren (operational in Indonesia), its parent company Ensogo (which offers daily deals in Thailand and the Philippines) as well as GoNabit (which operates in Dubai, Abu Dhabi, Lebanon, Jordan and Kuwait).

LivingSocial hasn’t (yet) formally announced the acquisitions, but the report is corroborated by news site CPI Financial (although the article, which you can find using Google News, is unavailable at this moment).

Update: the deals were just confirmed (see press release below)

Clearly, the fresh logos confirm the purchases of Ensogo and DealKeren (but not GoNabit).

We have no knowledge of the terms of the deals, but we’ll update as soon as we learn more.

Also read:

LivingSocial Financials Exposed: $2.9B Valuation, $50M In Revenue Per Month

LivingSocial Pulls A Groupon … And $200 Million Off The Table

LivingSocial Acquires SocialMedia For $3 Million

WASHINGTON, June 27, 2011 /PRNewswire/ — LivingSocial, the online source for handpicked experiences at a great value, today announced it has acquired Ensogo, the market-leading deal site in Thailand and the Philippines; DealKeren, an Ensogo company based in Indonesia; and GoNabit, a daily deal pioneer with a presence in four Middle Eastern countries. LivingSocial also introduced Daily Deals in the Netherlands.

These three acquisitions and the Netherlands launch bring the total number of countries in which LivingSocial operates to 21. The company’s reach now spans six of the seven continents. Ensogo, with members in the Philippines, Thailand and Indonesia, marks the first LivingSocial acquisition in Asia.

“As with previous acquisitions, LivingSocial has again chosen to align with local companies that possess similar values and ways of doing business,” said Tim O’Shaughnessy, CEO and co-founder, LivingSocial. “We are excited to enter the dynamic Asian market and our presence in the Middle East and the Netherlands further strengthens our strategic global efforts to bring LivingSocial values to members across the globe.”

Officially launched in June 2010, Ensogo is known as the No. 1 social shopping website in Thailand, Philippines, and Indonesia and currently serves more than 800,000 members. It continues to gain massive popularity and trust among Asian consumers as the market share leader, and Ensogo members have saved more than $25 million USD in the past year. Ensogo is backed by Rebate Networks, a leading international VC specializing in the social commerce space.

GoNabit was co-founded by Dan Stuart and Sohrab Jahanbani in January 2010 and is currently the leading daily deal provider based in United Arab Emirates. The site also presents mom- and dad-approved offers, suitable for children and parents alike, with Dubai Family, as well as travel-specific deals through GoNabit Getaways. In addition to being the first group-buying site in the Middle East/North Africa, GoNabit is the first company of its kind to offer deals in Arabic.

Members in Abu Dhabi, Amman, Dubai, Beirut, Cairo and Sharjah Ajman have saved more than $5 million USD in the past year.

Ensogo, DealKeren and GoNabit users will enjoy the same deal-buying experience to which they are accustomed.

Terms of the deals were not released.



Startups Don’t Die, They Commit Suicide

Posted: 27 Jun 2011 12:56 AM PDT

Justin Kan is the founder of Justin.tv and Socialcam. You can follow him on Twitter here and read his blog here.

Startups die in many ways, but in the past couple of years I've noticed that the most common cause of death is what I call "Startup Suicide", a phenomenon in which a startup’s founders and its management kill the company while it's still very much breathing.

Long before startups get to the point of delinquent electricity bills or serious payroll cuts, they implode. The people in them give up and move on to do other things, or they realize that startups are hard and can cause a massive amount of mental and physical exhaustion — or the founders get jobs at other companies, go back to school, or simply move out of the valley and disappear.

I’ll let you in on a dirty little secret: while building and iterating on Justin.tv (long before launching Socialcam), there were many times I came to the brink of packing it up and moving on from the company that bears my name. Shameful? Perhaps, but I know the same thoughts have occurred at times to my co-founders, who are still with the company to this day. The reasons? Take your pick: we need more traction, we need hockey-stick growth, we need more revenue, we need more buzz, we argue about management issues, we have diverging interests. In the past five years I have personally experienced all the startup failure cliches that exist.

But, every time the "suicide" specter reared its head, I turned away and stayed the course. And every time, I would be vindicated. Arguments were worked out, problems solved, revenue generated, traction gained, buzz created. So I’ve struggled on, and every day we’ve continued to win the most important battle for any company: existence. Even more, we’ve been able to grow all the metrics that matter: users, revenue, and team.

When startups commit suicide, often the root problem can be traced back to a lack of product traction — it’s rare to find people willingly quitting companies with exploding metrics. But one thing that many entrepreneurs don’t realize is that patience and iteration are critical in achieving product market fit. Overnight successes might happen fast, but they never actually happen overnight. Facebook lagged Myspace for a couple years before being crowned the top social network. Groupon had to iterate through being ThePoint. If the teams had given up after a single failure (or even many failures), they would never have created the massive companies that capture the public eye today.

My favorite example of persistence is Airbnb. I first met the founders, Brian Chesky and Joe Gebbia, after SXSW 2008, where they had bumped into my co-founder, Michael Seibel. They had launched their site as a marketplace for temporary housing rentals during conferences twice already by that point: once for a design conference in SF, and then again at SXSW in Austin.

These were guys with very little knowledge of the tech industry, two designers who had a programmer working with them part time. Michael was advising them, and every couple of weeks they would come by the office to talk with him (while the rest of us alternated between watching casually, mildly annoyed that Mike wasn't working, and actually trying to provide helpful advice). The one thing I remember vividly was the time when they first demoed their payment flow to us. It was built on top of Amazon payments, and was quite frankly atrocious and we told them as much (I think it required multiple redundant fields).

That summer, they launched a third time for the Democratic National Convention and achieved some traffic, which promptly went away soon after the conference was over. By fall, almost anyone could have justified throwing in the towel. They had tried to make the product work multiple times, had accumulated tens of thousands in personal credit card debt, and were literally printing cereal boxes to try to make money. Even their lead (and only) engineer had moved back to Boston. As a casual observer from the outside, they appeared isolated and discouraged.

But they didn’t give up. They kept at it. At the end of the year, they were accepted into YC, and immediately started trying to generate revenue and hit profitability. Two years later, Airbnb has a great product, a huge userbase, great revenue and is the the toast of the town in Silicon Valley. They are even a contender for the most valuable YC company created to date.

Persistence isn’t just key — it is everything. Getting in the ring is hard, but staying in the ring is even harder, especially when you feel beaten down, tired and alone. Successful entrepreneurs will readily tell you about the good times, their secrets to success, and even their mistakes (with a ready helping of how they overcame them), but they will rarely mention the times they were ready to throw in the towel and do something else. The truth is that everyone has those moments, and the guys you read about on the cover of Fortune were the ones that didn’t quit at them.

I can’t promise you will succeed if you stick with your startup. What I can promise is that if you give up, you won’t possibly succeed.



Write for TechCrunch Europe @TCEurope

Posted: 27 Jun 2011 12:55 AM PDT

TechCrunch Europe is an interesting gig. There are 27 members of the “European Union”, 48 geographical European countries and territories, and… 51 participating countries in the Eurovision Song Contest (surely, the ultimate gold standard of a chaotic definition of Europe). But we love them all. Whether you are working on startup in Romania, or a VC in Mayfair, London, or a teenager in a Berlin bedroom in building the next Google, TechCrunch Europe is interested. Plus, we are also looking for a news writer.

So we’d like to hear from:



Fanvibe Signs A Letter Of Intent To Be Acquired By beRecruited

Posted: 27 Jun 2011 12:20 AM PDT

As popular as sports are, and as popular as the Internet is, it’s always been a bit odd to me that the two haven’t intertwined in a completely successful way just yet. That’s why it’s always nice to hear about mergers between the two sides. And that’s exactly what beRecruited and Fanvibe have apparently just completed.

As of tomorrow, beRecruited will officially acquire Fanvibe, we’ve learned. With the deal, Fanvibe’s Vishwas Prabhakara will become the new CEO of beRecruited, and Art Chang and Joe Pestro will come over in the deal, we’re told. Prior to their current roles, Prabhakara was at ESPN and Digg, while both Chang and Pestro were at Yardbarker.

BeRecruited is the web’s largest sports recruiting network, with some 81 percent of all U.S. high schools signed up on their network. They also count 68 percent of NCAA coaches among their ranks. Athletes pay a month subscription fee for premium features, which has led to seven-figure quarterly revenues, we’re told.

“I’m excited to take on the CEO role at beRecruited, and Fanvibe co-founders Art Chang and Joe Pestro are pumped to be leading product and engineering for beRecruited.  We’re big believers in using technology to improve people’s lives, and beRecruited is doing just that, helping millions of high school students pursue higher education.  The traction, solid business model and great investors made our decision to lead beRecruited pretty easy,” Prabhakara says, in confirming the deal.

He notes that Fanvibe (which was previously called Fanpulse) will continue to operate with its roughly 100,000 users. “We also plan to leverage the Fanvibe platform to the extent we can in improving the beRecruited platform,” Prabhakara says, also noting that the impending NFL and NBA lockouts make things a bit cloudy at the moment.

“beRecruited is far and away the largest recruiting network on the web — and it has consequently become a really great business. With the Fanvibe acquisition, we are thrilled to move headquarters to San Francisco and have Vish, Art and Joe lead the business into its next phase. They are perfect fits as they all have strong backgrounds in sports, product and social web,” beRecruited founder Ryan Spoon says. He currently works for Polaris Venture Partners, though they were not involved in the deal.

Terms of the deal are not being disclosed, but Prabhakara says that “we are very happy with the outcome for ourselves personally and for Fanvibe’s investors.” The service had previously raised money from individual investors as well as Y Combinator.



The Celebrity Moment

Posted: 26 Jun 2011 11:58 PM PDT

Earlier this week Turntable.fm crossed a milestone. No, it wasn't hitting a reported 140K users one month after launching, nor was it being added to the list of portfolio companies for First Round Capital (granted it was just a logo refresh from the company’s previous product incarnation, StickyBits).

In fact, the ultimate sign that the crowdsourced music service had arrived was more subtle than a milestone metric and ran under the radar for anyone who isn't finely attuned to these things; On Tuesday the artist Sir Mix A Lot (of "Baby's Got Back" fame) DJ'd a set on Turntable replete with a custom hacked avatar that differentiated him from the available cookie cutter options.

Paying tribute to celebrity may seem like a superficial and pointless endeavor in the tech realm, where most of the real work happens behind the scenes. But as anyone who's built a startup knows, the narrative of how web services get and retain users is serious business, and is punctuated and proliferated by "celebrity moments" like Mix A Lot on Turntable, JJ Abrams on Quora or Ashton Kutcher's race to a million followers with CNN. There are countless examples.

Like any other community milestone, these "celebrity moments" define certain web services. This Quora thread does a pretty good job of outlining some of the more notable ones like Ben Folds playing Chatroulette, Larry Summers asking questions about economics on Quora, Conan O'Brien hopping on Twitter (and only following one person), John Mayer abandoning Twitter for Tumblr, Snoop Dog on Instagram, Barack Obama setting up a LinkedIn profile and Ashton Kutcher on, um, everything.

Any startup founder with half a brain realizes that a celebrity user signifies mainstream acceptance. But as silly as they sound these milestones should be viewed almost as monumentally as anything hitting one million users — after all they both make headlines.

A celebrity arrival signifies that your service can be used for self-promotion, or for democratizing communication, or both. In the most basic sense it's like having the cool kids show up at your party.

And it's no joke; Celebrity usage was so critical to Twitter's eventual scale that the company used to blog about celebrities joining back in the day. Now, in a post @CharlieSheen world, it's news if a celebrity hasn't joined Twitter.

Bre.ad founder Alan Chan, who boasts both Britney Spears and Lady Gaga as users (and Lady Gaga's manager Troy Carter as an investor), explains, "Celebrities using your product is the ultimate testimonial for your product.  It proves that there is demand and need for what you’ve built and that your product is a level higher then other companies in your space."

And yes it shouldn't be surprising that celebrities, some of whom make careers out of endorsing products, would be first to hop on the bandwagon of innovative products. But the interesting factor in this equation is that they're doing it for free.

So what's in it for Ashton?

Well first of all these tools are definitely vehicles for self-promotion. In an age where so much media coverage originates on Facebook, and Quora and Twitter, it seems like celebs increasingly need to have a strong online presence in order to stay relevant. @-mentions and mutual follows have become a new sort of fame replicator, so basically it's a symbiotic relationship; The celebrity gets the same publicity as the startup.

And the mass distribution aided by technology has redefined the concept of celebrity — Being attractive is no longer enough, and you actually have to be intellectually engaging via text on these platforms. Ashton Kutcher talking about what it's like to kiss Natalie Portman on Quora is exemplary of this.

Former Twitter engineer and newly minted Foursquare employee Benjy Weinberger puts it best, "People now expect more from celebrities than just passively reading about them in magazines. Cultivating a direct relationship with your fans over the web is fast becoming the way not just to maintain fame but to create it in the first place."



RunKeeper Adds New Integration To Its Health Graph In Hopes Of Building ‘The Facebook Of Fitness’

Posted: 26 Jun 2011 10:41 PM PDT

You may have heard about the social graph and the interest graph, but what about the health graph? Thanks to RunKeeper, this term may soon become an oft-used part of your vocabulary. RunKeeper, for those unfamiliar, was founded three years ago as a simple iPhone app and a small online fitness community designed to help runners and other fitness enthusiasts employ smartphone technology to better track, measure, and improve their fitness. Since then, RunKeeper has expanded across mobile platforms, growing into a community of 6 million strong.

Over the years, the startup has integrated with various gadgets and accessories, like a WiFi body scale tracker, sleep monitoring devices, and heart rate transmitters — all as part of an effort to give people a unified resource to aggregate the various health and fitness services, devices, and apps they use on a daily basis — before blasting this information out to friends, family, and competitors over various social channels.

All the while, the startup has quietly been building a “correlation engine”, because simply aggregating fitness and health data from a few devices wasn’t enough — RunKeeper users had been clamoring for a way to make sense of all the data integration from third parties. And so, the “Health Graph” was born to do just that. But what is this “Health Graph”, exactly? RunKeeper CEO Jason Jacobs wants you to “imagine a system that can identify correlations between a user's eating habits, workout schedule, social interactions and more”, that has the sole purpose of delivering an “ecosystem of health and fitness apps, websites, and sensor devices that really work, based on a user's own historical health and fitness data”.

But what’s a good health graph without an open API, am I right? Two weeks ago, RunKeeper announced that it was opening up its health graph to third party developers, so that these outside parties can tap into users’ FitnessFeeds, which are basically akin to Facebook wall feeds, to build cool clients and apps, a la Facebook and Twitter clients.

FourSquare, Zeo, Withings, Polar, Wahoo, and BodyMedia were among the early partners looking to take advantage of the new, open RunKeeper health graph, and this week RunKeeper has announced three additional partners: Swimsense, an advanced monitor that allows swimmers to track performance information, distance data, etc., Earndit, which lets users earn points and collect trophies during workouts that can be redeemed for rewards, and Runstar, an Android app that enables users to track their running progress and share results with friends.

While it may seem counterintuitive for RunKeeper to be partnering with sites like Runstar, which ostensibly offers a competitive service, Jacobs said that the ultimate goal of building a robust and open framework for the fitness community is more important than nominal competition.

Though RunKeeper has raised $1.5 million to date, Jacobs recently told Wired that the company hasn’t touched any of that money, focusing squarely on scaling. And scaling they have, as RunKeeper has more than doubled its user base since November.

And though the app was originally selling for $10 on the app store, and selling quite well, Jacobs and team have declared that the RunKeeper app will be permanently free.

Now, I may not be the fittest guy on the block — I prefer to get my heart rate up by thinking about when the next big IPO is coming and by consuming large quantities of coffee — but that doesn’t mean I can’t appreciate a good fitness idea when I see one. The ambitiousness of RunKeeper’s open Health graph and API, along with a free app, fitness feeds, and the ability to compare metrics in FitnessReports, share achievements with friends — and the fact that any time one uses an integrated device or app, the corresponding data posts both on the third party’s site and RunKeeper’s feeds — all makes for one terrific service.

And, what’s more, with Google Health recently closing its doors, RunKeeper has one less Goliath to worry about during its quest to aggregate the world’s health information.

Developers that would like to learn more about the Health Graph API should check out the landing page here.



The Math of TechCrunch, Part 2: Does It Play Favorites?

Posted: 26 Jun 2011 08:27 PM PDT

Editor’s note:  Previously, in “The Math of TechCrunch, Part I: Is TechCrunch Still About Startups?” guest author Mark Goldenson analyzed more than 20,000 TechCrunch stories to find out how much we actually cover startups versus big companies.  In this post, he drills down by investors, authors, and market segments.  Goldenson is CEO of Breakthrough.com, a startup that helps people find a therapist and get online counseling. His email is mark@breakthrough.com.

In my last post, we learned that TechCrunch now covers ten times more startups than in its first year, but over half its coverage is now on large companies.  In this post, I look at how the coverage breaks down by investors, authors, and markets.

These findings are based on the CrunchBase API and TechCrunch's 23,547 stories on 6,308 companies from June 11th, 2005 to May 11th, 2011.  Here is what I found.

1.  Companies funded by a prominent investors get covered twice as much

Investors often pitch that their value is more than money. Among the 2,596 covered companies with investor data in CrunchBase, there is support for this:

Rank

Investor Startups Covered

1

Y Combinator 121

2

Sequoia Capital 103

3

Accel Partners 102

4

First Round Capital 93

5

Draper Fisher Jurvetson 87

6

Ron Conway 80

7

Benchmark Capital 70

8

Intel capital 70

9

Kleiner Perkins 70

10

Index Ventures 70

11

New Enterprise Associates 62

12

Charles River Ventures 57

13

Bessemer Venture Partners 55

14

DAG Ventures 54

15

Founders Fund 52

16

Greylock 51

17

Redpoint Ventures 51

18

True Ventures 50

19

500 startups 50

20

SV Angel 49

 

Companies backed by these top 20 investors get an average of 2.3 more stories than companies backed by other investors. Though Y Combinator benefits from making more investments than most firms, its halo effect is especially strong: YC has 20% more companies covered than Sequoia.

Yet, the amount of money raised does not increase coverage:

Top 10 Most Covered Top 10 Most Funded
Company Total raised Stories Company Total raised Stories
Google  $25,100,000

3069

Clearwire  $5,620,000,000

5

Facebook  $2,335,700,000

1961

Facebook  $2,335,700,000

1961

Twitter  $360,166,000

1675

DeNA  $2,208,000,000

15

Apple

1656

Solyndra  $1,643,200,000

1

Microsoft

1007

Terra-Gen Power  $1,200,000,000

1

Yahoo

912

Groupon  $1,137,000,000

172

Android

563

Sirius  $1,055,750,000

4

MySpace

494

Fisker  $1,018,000,000

1

YouTube  $11,500,000

448

AOL  $1,003,000,000

327

Only one of the most covered companies – Facebook – is also one of the most funded. When all covered companies are graphed against their funding, the R-squared value that measures the correlation between coverage and funding is only 0.04 out of 1, indicating that the amount of funding does not strongly affect coverage.

(Funding of Apple, Microsoft, and several other top companies was not readily available but reportedly less than a billion dollars. This does not include public financing from IPOs; because CrunchBase has hundreds of public companies that are rarely covered, the results would probably not be significantly different.)

2.     TechCrunch writers do play favorites

Over its six years, TechCrunch has quintupled its number of writers. These are the most prolific writers over time (some no longer work at TechCrunch):

Writer

Stories

Michael Arrington

4079

Erick Schonfeld

3076

Leena Rao

2705

MG Siegler

2649

Robin Wauters

2502

Jason Kincaid

2261

Duncan Riley

838

Alexia Tsotsis

827

Mark Hendrickson

479

Nick Gonzalez

344

TechCrunch readers sometimes complain that writers favor certain companies. Does the data support this?

Somewhat.

All TechCrunch writers publish the most stories about the same ten or so large companies, with one story often covering multiple companies. Within these top companies, some writers do have favorites, and one data point stands out: two-thirds of MG Siegler's posts are about Google, Apple, and Twitter. MG covers Twitter twice as much and Apple three times as much as any other writer. (The percentages in his chart add up to more than 100 because multiple companies are often tagged in the same post).

3.  TechCrunch covered Chatroulette more than five billion-dollar enterprise startups combined

CrunchBase categorizes the markets of companies and not surprisingly, TechCrunch's most covered companies are tagged as general consumer web. This includes portals like Yahoo and AOL, browsers like Mozilla and Chrome, and other non-specific markets. The next most popular markets are social networks, search, and mobile. CrunchBase's category data is messy and most large companies like Apple could be classified several ways so this data is not precise (see pie chart at top).

One finding is notable: only 2% of TechCrunch stories are about enterprise companies. Many of the web's high-fliers are sexy consumer plays, but TechCrunch's combined coverage of five separate billion-dollar enterprise startups—Atlassian (9 stories), Palantir (7), ExactTarget (7), Workday (5), and Service-Now (1)—is less than its coverage of Chatroulette's penis garden (36).

I think that's unfortunate. These companies have good stories. Atlassian was funded on $10,000 in credit card debt. Palantir is using data analytics to catch terrorists. Workday founder David Duffield, the billionaire founder of PeopleSoft who adopted six kids, lost PeopleSoft in a hostile takeover by Oracle.  Workday now competes against his former venture and has become a billion-dollar company in less than five years.

I know these products are seen as boring, but boring businesses are often better businesses and part of journalism's art is making the boring sexy.

Disclosure: Breakthrough.com is headquartered in the incubator at AOL, TechCrunch's parent company.



OMG/JK: The iPhone Empire Strikes Back?

Posted: 26 Jun 2011 02:27 PM PDT

and after a bit of a h I happened, including WWDC, a billion Facebook leaks,all this other stuff so let's dive into it. I wrote a post a few days ago talking about Android and iPhone sales.

And basically why I believe the gisApple was letting Android win, and now it doesn't want to do that anymore.

This was my post from a year ago, which was very popular and unpopular with some people. Like a tit 's polarizing. I basically, and this wasn't my idea alone. There was an Android developer actually who had written a post saying, "If Android whatsoever." This was a year ago when he said this. And so I wrote a post rhappens when, if and when, Verizon does get the iPhone.

It wasn't a done dealSo, it happened a quarter has pass since the Verizon iPhone came out so we have some actual datI think that it's fair, I mean they sold something like 2.2 million over the first 2 months, something like that. But at the same time people were a little bit concerned about buying it because the anticipation was that the iPhone 5 would be coming out soon, because it's always come out in the summer.

I mean, it's always been released in June or July, and that's not the case this year. But that was hard to know at the time, no one knew for sure, and Apple of course wouldn't give any guidance to that.

So the point that's the point of view of your post. You can basically say that there have been, over the last month or two, a handafter the initial launch.

There have been some market reports discussing the market share of Android versus the market share of iPhone, and Android.

In the United States.

In the United States. This is all about United States and that's actually one of the points of this segment. But in the United States, Android growth hasNo, no, no, it's not that high.

Yes, it is.

It depends on the report was doing really well and now the massive growth may have flight for a little while. So you think that this is because that the Verizon iPhone exists, that Android is ahead, I'm not a year ago.

So this is why windows phone is signing off.

Yeah. But windows phone sucks.

No it doesn't.

Yeah bdo better when thago the iPhone was on one carrier with basically two devices that you could buy. You could buy the new version or the older version for cheaper of the iPhone. Now, fast forward a year later, two carriers, the two biggest ones in the baiting that the new ones iPhone is coming up, and two phones are able to compete indicate that there has been some change in the last couple months that may or may not continue over the course of the nextnd the other thing, you talk a little bit about people holding off until the new iPhone they thought may have come out in June, like I was just

But, there was also pent-up demand prior to the launch of the Verizon iPhone.

Of course, of course. But, to your point, there's much more pent-up demand for the iphone and it's going to be on ATso excited right now, you don't understand it.

I mean, it just...

I'm
a little nervous.

...want to say that I really do think that there's going to be a, like, The downfall of android, it's upon us. No, it's going to at least happen temporarily.

The green robot is falling.

I don't think you'll even dispute that, that when the iPhone 5 hits.

I think you're absolutely, I think the Verizon iPhone, there's plenty of demand for it, and I do think that when the iPhone 5 comes out and it comes out and it's on VerizonAt the sSome Android users, definitely will. Some of them wish they wereas wendroid coming out, Android 4.0.

Ice cream sandwich.

Yeah. Ice cream sandwich which may or may not be good. I don't know.

Well supposedly a little bit more like the Honeycombprobably not.

If it doesn't, I think your argument is totally, really gone.

You think people don't really care about 4G. People don't care about 4G because they haBroadband, because they are used to dial up. turn off 4G because the battery sucks on it...

OK.

...and it's not everywhere yet so, like, it's not even worthwhile to Well that's because the Samsung devices are terrible.

But you are ich is noticeable, In a few places.

The arost people have their phones for years at a time.

Unless you are an Android user and then they come out with the new best phone, three months later.

Exact same aand yet people still bought them and still buy them.

Yeah but that was a mistake.

Okay.

But what about the battery life. That's a legitimate thing.

I think they're obviously working on improving the ven if the battery isn't that great and we'll see, I would, for the option to be able, like in the moment when ll right", shrug my shoulder's, hit the little widget which Android has, and say I'll switch over to 4G then I switch back.

I think that what we're getting into now and this kind of leads in to what we'll . What we are getting in4G eb page, that's going to be pretty toughyeah Coke vs. Pepsi taste testing something like that. Okay, your welcome marketer peoplso the notification bar. Actually, of all the things that I saw, I saw whose eriously.

Android sucks be perfectly honest it looks like iApple It's not like the idea was new.

Well they wanted to perfect it and it's going to just work.

I really doubt it took them that long to perfect about, you know, but there's a few big selling points here, one of them is, yeah, notifications are great and everything, also the ability to sync wiredownloaded the iCloud stuff is going to be the big selling point. If it works, just works...

Right.

...as Apple says it does I think you're totally right. I think Apple's approach to this is the right approach for most people. I think the nhaving this drive in the Cloud.

Right.

I mean, it's all ready an idea that's hard for most of us to grasp in the first place and then telling them to manage where their files are.

Right. Another place to store my documents? Right.

Assume they understand what this is.

Right.

I think Apple's approach w, or maybe didn't sync quite right.

Right. In most part, people never have to think about it.

And I think Google sort of is starting to get that. I mean, I wouldn't be surprised if they start to tweak their wording a bit on how they've been talking about it with Android, and move away from kind of like, talking about kind of a backyour address show up there. Because they did talk about that a little bit last year at IO.

So the key, of course, we haven't seen how Apple's going to do it either. It's all about the execution. And there's reason to believe that they're, you know, they've been working on this long enough and that's why they've held it back, that they'll get the execution right. No guarantee that it will be right but I don't know, I'm pretty bullish on this stuff right now.

I absolutely am too. I think Apple their I Cloud stuff looks really compelling and I think Google needs to immediately copy, I mean, frankly Google has all this technology all ready done. Right?

Right.

They're masters of the Cloud. Right. And it's just their execution is not designed to...

They don't have a good front end for it.

Right.

Apple's the master of front end and Google's the master of back end and it's likargument with Google Docs, you don't necessarily have to been thinking about where you're saving your files, you just go to the site and it's there.

Right.

But at the same time, it doesn't feel like a native app.

No, because the tried to replicate what everyone has been doing on Window's PC's for all those years to try and convert those users over. And that's worked to some extent and it's been good for them but that really the way of the future, I mean, this is just like it worket rid of the stupid font in Honeycomb that looks In any case, I mean, I just think in going to the honeycomb tablet the Galaxies have, which I don't know if were actually going to have time to talk about it too much.

Yeah.

I 've been using that for several weeks now and it's just the device itself is really solid and so much unpleasantness compared to the iPad.

I mean, the browser is really the only thing that I use it for. Like, when I do, you know, take it out to try and get into it a little bit, it's like G-mail great, G-mail and it's just like, And so I downloaded, I also downloaded, we got it with Honeycomb the regular and then we got 3.1 came a few weeks later.

I downloaded that. I didn't real difference.

You can now re-size your widgets.

That's great. That's a great feature.

And it's also now not incredibly buggy, it's just somewhat buggy. It used to be like, you literally it was like fingers crossed, launching this app, is this going to work me off so this videos app that let's you rent movies.

Right.

It's only available on the Zand it's actually on sale to the general public since earlier this month and as far as I can tell, you can't get that applicationo it's stuff like I mean there's always been this prices that are running similar as this one.

What's the newest on OK, so you sort of like to begin with, I know you didn't like the web interface but you liked the idea of Google Music because this is the other big area where these two sides are going to compete with one another, because we doesn't seem that great.

it 's obviously there's different rights to all that kind of stuff.

So, when I heard what Apple is launching I didn't think it was, I mean, with no streaming.

At the same time they did get the matches.

Right, so you don't have to upload your entire...

I mean
that's number one killer feature that you have to have.

People are not going to upload gigabytes of music.

I mean, even if it doesn't have streaming, provided you have a fast data connection.

Yeah, you can pull out whatever song you want to listen to.s far as my streams at Google Music, I've been using it on my phoneleft it running in the background for a while, and after like a week, it was done. I think it was probably done after 3 days, but I have more music than most people anyways. As far as hI use it on my phone all the time, go to the gym.

It does this caching stuff, so it saves songs you've already listened to.

Right. There's some issues if that's even legal.

Well it's just sort of like a matter of semantics. They're storing a file lawfully, it's not like you are being told it's there. It's just you don't have to stream it.

Right . But you know that they're arguing in the background, of course, with the music industry.

Don't think about it. Don't think about it. I'm sure the label's probably, like, wait, what's the difference between this on that file.

Yeah.

The main thing is though Google still doesn't have a music store.

Yeah, that's actually kind of frustrating we're, like, oh, I I don't know.

Let's move on to the next topic caa week ago. And it iswar now, you know, war.

You're at war. I just shrug my shoulders and go, like, same old same old.

I'm at war with Facebook because they seem to think that when we write something oh, we're just kind of I heard about this thing and you know it's like, "I've seen the dumbassed project. I know exactly what it is."

Dumbassed project? Take that, Facebook.

It 's not dumbass. It's smart. This is absolutely what they have to dotrying to pitch this. It's like, we're not trying to compete with Apple. They're only saying that because they're scared shitless of Apple. They are trying to compete with Apple and the thing is they should be trying to compete with Apple because what are they going to do when both Google and Apple are in control of basically the entire mobile ecosystem and they have no offeringthey do it.

What are they going to do? They have to figure out a way to get onto these phones, because this is really thehere everything is going.

Right.

The way that they do that is through the browser, through the the mobile browser.

So let's talk about what it is. A over the mobile browser. And right now they're targeting IOS, which you can imagine, Android and all the others.

So the idea is that you've got an HTML5 application.

Yes.

But it uses Facebook log in and payments.

Yes. It's basically like, so you know, right now you are on Facebook and you are playing one of the Zight now you can't do that on mobile. Noneone of the partners and asked them to write some of their games, or at least a demo game or something like that, in HTML5, and theyhe mobile big, big thing that they are going to be pushing, like, for the rest of this year.

For what it's worth, I actually heard someone, from spretty bad at this point.

Yeah, I think they are mostly demo apps. I saw one that was very rudimentary. I think it was actually a chess app. I think Facebook made a pirate chess app and that one of the things. I don't think I actually said anything about that but that is one of the thingsthe future of Facebook and to their making money and everything this is all done over the web and this away from Flash, get HTML 5 games on the iPhone and that's great.

But the thing they won't like is the credit system because that bypasses using the ipeople are still going to use the native apps versus going to this. But still, that's Facebook trying to get around and use their own credit system within these games.

I think it's the same reason why Apple finally relented when you're talking about the whole subscription modelalready being trained, like, you pay usingnow if Facebook keep hearing about this and we'll see whether or not it pans out. You often hear that in the future you're not going to be able to tell the difference between native and web apps.

Right.

And so, Apple probably recognizes tI think that they do, and that's why they've done a lot of work on mobile also uses, of course, for Chrome.

I think that they do recognize it. At the same time, like with some of the stuff they're doing with iCloud, it just seems like they're trying to make a new layer of things going on.

It's called lock Well, Apple's very good at itsome of these leaks that we got last week, some of thebecause they are the number one t's there because the feature had to be there.

Right.

But, it's just something you do when you're trying to waste time or whatever. And, I think this Facebook going after the ou take a quick picture, you can apply a filter, one of the screen shots showed. You can tag a location to it. You tag your friends into it which is big, obviously, because you have all the graphs already right there.

So, you're able to do that.

And it looks really nice. Whether or not they release this as a standalone app or, more recently, we've heard that it will just be within, because it's an iOS version we saw. It will be within the Facebook app itself. Still, it looks great. I don't know if it's the end all, be all Facebook Photos killer, but Apple's photo app will be that.

Right, sure.

Photo stream.

But it's interesting in the context of Twitter iOS, which is also announced during WWWC. Huge partnership.

That's such. I mean, Twitter lucked eally big deal.

It's integrated deeply into the iOS itself. They don't have the app installed by default, but you have a little button to install it if you want to. And you can just login from the settings screen with your credentials. And then basically any app you download can then use hooks to easily integrate within Twitter.

So, to pull all your followers, and pull the social graphs.

Which basically, it's sort of like with Facebook Connect. I mean...

Yes.

Everyone's talking about how Facebook got shunned or whatever by AppleTwitter, not just because most people are goI don't know who wouldn't. I mean their apps, just immediately populate over Twitter. Like, I mean, you could share easily; they have the built-in sharing mechanism right in there.

nd, so Facebook Connect has obviously been a really powerful login system.

Right.

And they've had sort of a swap between the Facebook app and the other application that's been there for a while.

Yes. Single sign-on.

Single sign-on, exactly. But I feel like a lot of developers were integrating Facebook, and not necessarily because they needed the social arena.

Yeah. because they need an easy login, right?

Yes. So now they can dothis...

Twitter wins that.

Twitter wins.

So obviously some applications are still going to do Facebook, because there is value in knowing who the friends are, And popubecause it'll be so easy to integrate. And out there, and a video even, that Facebook was originally going to be a partthat it was going to be part of iOS4, that obviously didn't happen.

Right.

So that relationship there with Apple, a little bit, and what does that mean for the Twitter and IOS relationship. It's just like it's all kind of paying into the same thing. So let's talk about the last thing, alright one You've had one.

Yeah, I've had a demo unit from Samsung for a few weeks. It's, you and I both saw it at the event right after IO. We went to a Samsung event and played around with it and shot some video with it. I wrote an initial reaction post, I think a few days laterPretty good, but a lot of the early reviews have been trashing it.

Right.

So I guess the first thing we s we got CR4impression of the real Chromestill not nearly as good as a Mact 's not that great. It's workable though. It Finally. So overall, it's a lot better. But the question is now why should you buy this thing? I mean it's five hundred dollars for the low end version for consumersYes .

I mean, there are netbooks out there that run all of windows ut I think that's the target audience,I mean, they need to make this thing, likeYes, subscription seem to make sense. And I think tUniversity, and they sayhen the University has the advantage of knowing that all their freshman have a notebook that they are able to bring to class, and they can put courses, or whatever online for it.

es, so it makes since from the subscription perspective, I don't think a lot of consumers are going to buy this thing, though, on Amazonlower, just actually using the deviceBut as far as like using the applications, I hathey don't feel like applications. They feel like links.

They're links to web apps.

I totally get offline access. Thatears which they were using for all that time so that's gone now. That not like and you don't even get them right now. So that is what they need to add and Its not that. I mean, even with the Google apps o iving anything, until you have offline accessure .

I'd imagine it's offline storage through these, HTRight .

...several months.partners , supposedly, that they're working with, but its gonna be rough going. They need to get the price down and they really need selling point for people. You get, whatever it is, 200 Mb free a month? Which isn't very much.

I mean, I think it's a matter of time until, say Apple's laptops and Windows Start shipping with wireless.

Right, I mean

This week’s episode of OMG/JK is a long one — the longest yet, in fact, at 30 minutes. Jason and I apologize for going on and on but we had a lot to talk about. It’s been roughly three weeks since we last recorded an episode and a ton of stuff has happened.

And while we don’t even come close to getting through all of it, we do go pretty in-depth on some of the major things: iPhone vs. Android sales, WWDC, iOS 5, iCloud, Galaxy Tab 10.1, Google Music Beta, Facebook’s Project Spartan, dining in hell with Facebook’s PR team, Facebook’s new Photos app, Twitter/iOS, and Chromebooks.

Below find some relevant links to stories we talk about, and enjoy the episode above. A small programming note: since Jason is packing up his things and moving to New York City, this may be the last in-studio episode we do for a while. But hopefully our weekly schedule will continue uninterrupted thanks to the miracle of Skype — assuming that company doesn’t run itself into the ground before the Microsoft deal closes.

Subscribe to us on iTunes!



The Case for Silver Lake Not Being Evil Incarnate

Posted: 26 Jun 2011 01:48 PM PDT

When an employee cries foul against a big tech company or its greed-driven investors, it’s easy to take the side of the employee, especially when an employee comes forward on the record to state his or her case.

A wronged employee is inherently more sympathetic than a big, greedy private equity firm or a faceless corporation, and it’s rare that an employee will actually publicly take a stand. In the cozy, relationship-driven world of Silicon Valley no one wants to make a public stink about a perceived or even real injustice. The temptation is to just suck it up and move on.

But as this Skype story has continued to dominate another weekend of headlines many bloggers and tweeters are missing important facts in our zeal to defend wronged employees and demand that private equity firms– especially ones profiting off of an $8 billion deal– just do the right thing.

Behind the real story lies an important lesson about the dramatic ways compensation is changing in the Valley. Employees should never assume each employment contract is the same as the one they had before. That’s especially true now, as companies take longer to go public and new forms of liquidity like secondary markets emerge, compensation models are changing dramatically in the Valley. The importance of actually reading whatever it is you are signing is paramount, especially when you are joining a company that doesn’t fit the traditional venture-backed mold, which Skype most definitely did not.

Here’s the background on the Skype thing, as explained to me last night by a member of the investing syndicate. When the new CEO Tony Bates was hired, naturally there were staffing changes he wanted to make. The decision was made to terminate several executives and Bates started the proper process to do so. Investors had zero involvement with that decision, in fact there was never even a discussion of it at the board level. The timing coincided with the awkward period between announcing Skype’s acquisition by Microsoft and the deal actually closing.

It’s unfortunate timing for the executives in question, because they won’t get the full amount of the payout they would have gotten, had they not been fired. But Skype has argued it has to continue to run the company as if there isn’t a deal on the table, and Bates deemed that included firing these executives. Oh, and lost in the initial hysteria was the fact that they’re getting 75% of the payout anyway, so the amount of money Skype investor Silver Lake Partners was supposedly going to these lengths to screw them out of was pretty niggling.

This weekend, the allegations got worse. Former employee Kuo-Yee Lee has come forward saying he’s leaving and unlike those earlier executives, he isn’t retaining 75% of his payout. Indeed, his already vested shares are being taken away from him. The outrage is understandable. As Mike explained in his post, this runs a foul of how 99.9% of venture-funded startups’ employment contracts are structured in the Valley. Many people being quoted in the press have never seen a deal like this before, and any startup journeyman executive wouldn’t have known to expect it.

But there are two big distinctions that are getting missed in all the outrage. The first is that Silver Lake — Skype’s investor in question who structured the contract and is being called evil– isn’t a venture capital firm. It’s a private equity firm. And there is a difference between how option contracts are drawn up in the venture world and the private equity world.

As standard as getting to keep vested options if you quit before an investment is closed is in the venture capital world, it’s equally as common that you have to stay through the close of acquisition to keep them in the private equity world. Indeed, our source says the Skype contract is a boilerplate agreement for all the companies Silver Lake invests in. And all of this was in the paperwork the employee signed. He just didn’t read it carefully, at his own admission, because he assumed it was like other option contracts of venture-backed companies. That’s not really Silver Lake’s fault.

A big reason private equity firms have this clause– from what I’m told– is they think it’s mercenary and disloyal for employees to join a firm that’s on a clear path towards a buyout, wait until a year and then leave with a quarter of their shares vested for another company before that deal is done.

Typically private equity firms are buying turn-around properties, not growing a new business from scratch. When you’re building a business from nothing, the company changes dramatically in short periods of time. It’s culturally acceptable that certain people are good at the early stages and those roles need to change as the company grows. That’s not the case with more mature targets of PE firms.

It’s simply a different mentality and a different culture. Mike’s analogy of “What if Facebook did this?” is irrelevant, because a company like Facebook, as a classic venture-backed startup, would never do this. Comparing someone joining Skype in the past year to joining Facebook when it had three employees is about as similar as comparing me joining TechCrunch a few years ago to me joining the New York Times. Both Skype and Facebook are Internet companies the same way TechCrunch and the New York Times are both media companies. But that’s pretty much where the similarity ends.

This cultural disconnect is a big reason you can count PE deals in high-growth tech companies on two hands. The two worlds historically don’t understand one another.

The other huge distinction is that Lee wasn’t fired like the executives we wrote about earlier, he voluntarily quit. It says that in his letter we reprinted earlier, but many reports are still lumping him together with the terminated employees, furthering the insinuation that the board fired him and yanked away options. As far as I can tell, that insinuation is still as incorrect as it was a week ago.

More to the point: Lee chose to quit just months before the acquisition would close, at which point he would have kept the full value of the shares. The terminated employees did not have that choice. “Private equity firms view a buyout as a journey from a purchase to a sale and when employees leave along that journey there are good leavers who get fired and bad leavers who quit during the middle of it,” our source said. The “good leavers” or the people who got fired are getting paid out 75% of the total they would have made had they stayed through “the journey,”  because they didn’t leave voluntarily. If you chose to quit in the middle of that journey, it’s another story. “The call option isn’t something you would see in a normal VC deal, but that’s what he signed. By signing a contract you are verifying that you understand it,” our source said.

This clearly sucks for Lee. Obviously, he didn’t understand the agreement, otherwise he probably would have waited a few months to quit. I’ll admit I didn’t have a lawyer look at my TechCrunch option paperwork when I signed it, and I had no idea what the terms were from reading it myself. If something like this happened, I’d be furious.

But I also wouldn’t have held TechCrunch accountable if it said something different than I assumed. It’s a bit like those 34-page terms of service agreements you have to opt into to buy something from the Apple store. I doubt anyone has actually read the whole thing. But that doesn’t mean I can sue Apple if they try to enforce it.

Mike’s argues that an attorney could argue “fraud” because the contract was so rare for a venture-backed startup and it was natural that someone was confused. Possibly. But again, Silver Lake isn’t a VC firm and if this is their standard contract as our source says, that’s a lot harder to prove.

Originally we reported the amount lost by the fired executives “wasn’t even worth the phone call.” This new amount lost by employees who quit is even smaller according to our source: The total in dispute is between $750,000 and $1 million, across all employees who voluntarily quit. The idea that Silver Lake is spending time concocting Machiavellian schemes to save $1 million of an $8 billion deal makes people who say 9/11 was a hoax look rational.

If the amount is so small, why not just give him the vested shares? Because this is their standard contract, Silver Lake can’t without opening themselves up to lawsuits from all the other buyout deals where employees have to live by the same agreed-upon contract, engendering a full-on LP revolt. Meanwhile, Skype is balking at the coverage, because this was a guy they hired, promoted, gave raises to, and would have given a decent payout, had he stayed a few months for the deal to be completed, our source says. “The company feels they treated him really well,” the source said.

Regardless of how this plays out for Lee, this should be a wake-up call to employees, because compensation among startups and tech companies is changing dramatically. Increasingly, there’s not going to be any case that happens 99.9% of the time. While private equity deals may continue to be rare among tech companies, the switch away from standard option packages is becoming more pronounced, typically in lieu of larger cash compensation or restricted stock units.

Most of this has occurred at large companies, and it was sparked by Microsoft in the wake of the 2000-era bust when so man employee stock options were deeply underwater and never coming back to the late 1990s heady highs. Suddenly what had been a great tool to engage employees in the growth of a business became a depressing daily reminder that the company wasn’t going anywhere. This weighed heavily on corporate cultures in a way it hadn’t in the pre-option era. At one point Yahoo’s stock price was even displayed on the digital readouts of printers in the headquarters. Try looking at that one every day. Not very inspiring. There was– and still is in some quarters– a “show-me-the-money-style” backlash against options.

While Google has turned toward huge cash awards to compete, Microsoft and others have turned to RSUs. With RSUs you get the full value of the shares when they mature, not the value of the share minus the common share price when you were granted the options. In other words, RSUs don’t go underwater no matter how poorly a company’s stock performs; you just make less, but you still make something. Private companies have started issuing them too– mostly because they don’t count against the 500-shareholder rule.

But there are downsides to RSUs too. One is employees are frequently getting fewer of them, and culturally some people think they make a company culture less aggressive, because employees aren’t incentivized to push the company’s share price higher.

No doubt there are other unintended consequences of this shift that will come out later– just like they did with options after the year 2000 crash. Remember the shock of employees being held hostage by the alternative minimum tax on the spread of their options, regardless of whether the shares had now lost all their value? Scandals like these abounded in the early 2000s where employees argued the same thing that Mike argues in the case of Lee: That people didn’t understand the full implications of what they were signing.

Well, now you’ve been warned. Get a lawyer to look at your contract or beware. Because no company– evil or not– is going to do it for you.



Please Hacker Don’t Hurt Us: The Media’s Coverage Of LulzSec Has Been Cowardly and Pathetic

Posted: 26 Jun 2011 11:48 AM PDT

"There can be no higher law in journalism than to tell the truth and to shame the devil " – Walter Lippmann

So, that’s it. The hacking group known as LulzSec has called off its vandalism spree, three days after releasing its one meaningful “payload”: a batch of documents from the Arizona Department of Public Safety. Bold promises of similar data dumps, including “five gigabytes of government and law enforcement data from across the world“, were apparently just that; promises.

Still the Arizona release was serious enough on its own, comprising details of police use of informants and the names and home addresses of police officers and their families. The hack, we’re told, was in retaliation for SB1070, the Arizona immigration law which many have (rightly) argued encourages racial profiling. This despite the fact that blaming individual Arizona officers (and their families) for a state senate law is as wrong-headed as holding a single US army private accountable for the entire Iraq war.

But digging too deeply into LulzSec’s motives is like wrestling with a pig. What we’re dealing with here — with LulzSec, and with groups like Team Poison who released details of Tony Blair’s dentist in “protest” for the former British prime minister’s foreign policy — is a small group of angry, technologically savvy post-adolescents rebelling against authority. Post-adolescents who, as I wrote in the Guardian earlier this week, “in previous generations… would organise protest marches or start angry magazines or accidentally blow themselves up trying to make a pipe-bomb from The Anarchist Cookbook“. The only difference is that in previous generations those kids rarely had the resources to pose a danger to anyone other than themselves. Today the Internet gives them the ability to do real harm, and to risk actual innocent lives.

But, still, kids will be kids and by the time they limp out of federal prison, twenty years hence, they’ll be older and wiser. What’s far harder to comprehend is why so many fully-grown adults are happy to publicly support even the hackers’ most criminally-negligent activities.

Across the Internet, LulzSec’s Arizona hack and the morally incoherent justification that followed was met with an alarming amount support; applause even. “Who represents us in government? We have no voice, and it’s time to take it back.” wrote one commenter here on Techrunch; “I love these guys, good job :) I think we need a little revolution ala middle east in the US: Less government regulations, pro immigration laws, legalize drugs” said another. Meanwhile, over on the snappily titled “How the Media Gets it Wrong On Infosec” blog, LulzSec supporter ‘Laurelai Bailey’ added to the chorus of praise, suggesting that if the authorities really want to stop hackers then rather than arresting them “they would work to defuse the anger and outright hate people feel toward the government these days, they would take steps to show people that they are not the bad guys and stop taking such a hard approach. “

Yes, because if only the government were nicer, then teenagers would stop being so damn angry. And if only the students and teachers at Columbine hadn’t been so mean to those two nice boys then all that unpleasantness could have been avoided.

Please.

One might expect more measured coverage of the attacks from members of the professional media. Indeed, my former colleagues at the Guardian published a series of critical articles about LulzSec, including  logs from one of the group’s IRC channels and an account of the events that lead to the arrest of alleged Anonymous member Ryan Cleary. The LA Times’, too, did some solid reporting, including Salvador Rodriguez’s interview with Jimmy Chavez, president of the Arizona Highway Patrol Association, who argues “our guys are out there doing what they’re supposed to be doing, and they put themselves in harm’s way every single day. They don’t need any additional pressure on them from a — let’s just call it what it is — a terrorist organization.”

Incredibly, though, most journalists were all too happy to hop aboard the “Lulz Boat”. On Friday, the BBC’s Susan Watts conducted an interview with a spokesperson for the group, publishing a transcript that was almost indistinguishable from a celebrity fluff piece, with questions like “What is Operation Antisec in your own words?” and “Why are they (other hackers) attacking you and claiming to expose you?” The closest Watts got to challenging the group was to point out how their stated aims — to destroy copyright, and to oppose Arizona’s immigration law — seemed a bit broad. Faced with the baffling incoherence of the spokesperson’s answer — “Cannonballs will fire at banks, police, and entire governments until we (the internet) are satisfied” — she simply moved on to the next question.

And if the performance of traditional reporters was bad, that of online journalists and bloggers was downright shameful. The majority of online publications chose to take — at best — a morally ambivalent position over the hacks or — at worst — a supportive one. Boingboing happily republished chunks of text and imagery from the Arizona documents without any consideration of the morality of how they were obtained; Gawker’s Adrian Chen provided another spokesperson for the group with a self-promotional platform; while PCWorld’s Tony Bradley even argued that “We Owe LulzSec a Thank You” (for exposing holes in security). Even today, when the group made the frankly ludicrous claim that they had always planned to disband after fifty days (despite telling Susan Watts to expect more leaks on Monday), most reporters simply repeated the statement as fact rather than making any attempt to discover the real cause of the volte-face.

I’d love to say that we at TechCrunch provided a refreshing exception to this media trial-by-handjob; but we didn’t. Every LulzSec release was faithfully and uncritically reported on these pages, and in one case we even helpfully provided a link to the stolen Arizona documents that gave the home address of police officers (the link was later removed).

I mean, I get it. I really do. A lot of reporters covering the tech beat, particularly those writing online, are barely out of high school themselves and are naturally inclined to be generous towards their peers — they read LulzSec’s claims of sticking it to the man and they think “yeah, fuck the man”. That’s why young journalists need experienced editors, and why a lack of professional editorial control is the greatest hurdle to the maturation of online reporting.

But naivety is just the minor factor in the lack of critical reporting of LulzSec. The major factor is fear. Journalists are terrified that if they make so much as a murmur of criticism against cyber-criminals then they might find themselves the victims of a hack. It’s far safer just to report the most basic facts, perhaps along with a positive quote or two from the criminals, and then dive back behind the barricades; a display of moral and physical cowardice parodied rather wonderfully this week by the Daily Show’s John Hodgman.

Of course, no-one wants to see their personal emails splashed all over the Internet, or their website DDOS’d — it’s embarrassing, annoying and potentially costly. The few publications who dared to criticize LulzSec are doubtless aware that they risk retaliation: particularly the Guardian who took a similar risk earlier this year when they started to report critically on their former source, Julian Assange. But news is news and crime is crime and, when lives are put at risk by criminals, it’s the responsibility of a professional journalist to hold those criminals to account without fear or favor.

Students of journalism might recall that Irish journalist Veronica Guerin was shot in retaliation for her reporting on organized crime and drugs. In Pakistan, American journalist Daniel Pearl was beheaded by Al-Qaeda while reporting a story on shoe bomber Richard Reid. According to the Committee to protect journalists, since 1992 615 journalists have been murdered for doing their jobs.

Given how many of their colleagues have made the ultimate sacrifice in pursuit of truth, any “journalist” who gives an easy ride to a group of kids risking innocent lives “for the lulz”, just because they’re scared of having their Amazon account hacked or receiving a barrage of late night pizza deliveries, might want to consider an urgent change of career.



Foursquare and seven years ago

Posted: 26 Jun 2011 11:46 AM PDT

Sitting in the gallery of the House of Representatives the other day, we saw the Speaker accept the report of the resignation of the gentleman from New York, as Boehner called Weiner. Yet another knee-drop to the power of Twitter in a city that produces laws like the Valley does startups. Security forbids cameras and therefore phones, and with them our ability to check in and out the comings and goings of what has been called Hollywood for ugly people.

In a hamburger joint six blocks and 20 Lincolns away, the House proceedings are displayed on one of several flat paneled HDTVs on the wall. The cameras in both the House and the Senate are placed to constrain the image to just enough information but not too much to reveal the yawning empty seats. In the Senate chambers we watched a court reporter with a laptop-like device around her neck stand next to a backbencher as he awaited his turn. On TV she was cut out of the frame.

The two houses of Congress straddle the central rotunda, where JFK lay in state before making the trip across the Potomac to Arlington. From his gravesite and the Eternal Flame, you turn around and notice how the site lines up perfectly with the Washington Monument and the Lincoln Memorial. Just as the White House and the Capitol dome are bisected by the Monument. The symmetry defines the power relationships.

At the Lincoln Memorial he sits like some grand couch potato watching Netflix, ringed by his words on flanking walls. The Gettysburg Address feels somehow modern in its 140 character-like brevity. The reflecting pool was empty, as a Martin Luther King memorial rises in the dusk. For the people, by the people, retweeted throughout the land.

Back in the Capitol we climbed the low-ceilinged stairs beneath the Rotunda, pausing as our guides pointed out a round white tile in the center of a room known as the Crypt. The spot represented the location where George Washington was to buried, had he not refused to go along with the plan in his last will. He was said to have been unwilling to lead a war of liberation from a monarchy only to be installed as a new king. He remains buried in Mount Vernon despite a Congressional attempt backed by his wife Martha to move him to the Crypt in 1832.

Upstairs in the Rotunda pools of people clustered around a spot in the left center of the room while a tour guide turned his back and bent down across the way. Eerily, his voice materialized as though amplified by a microphone in the middle of our group. Turns out a legislator would lie with his head down on his desk while eavesdropping on the opposition from the other side of the aisle. An early form of IM and direct messages, the technology came full circle when the gentleman from New York forgot the “d” years later.

Riding back to the Senate office building where our tour began, the underground tram echoed with the ghosts of Senators and spies and lobbyists and generals and staffers. You could hear the humor of the irreverent in the halls as we wound through the various security perimeters, the request to be quiet so as to not discourage the congressmen and women from showing up. A family listening while a father replayed Boehner’s comment that the House now numbered 432. The security guard adding iPads to the pile of devices to be impounded along with phones, earphones, and even car keys with remote controls.

It felt odd to surrender our newfound social freedom at the door to the center of democracy. Even so, the security was comforting in this age of insecurity, but it won’t be long before we’ll be voting for free WiFi in the people’s house. Not long before we confirm the Secretary of Social Media by direct message. Not long before we’ll virtualtour the Capitol and share our experiences in realtime with family, friends, and followers. Foursquare and seven years ago…



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