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The latest news on Startups from Business Insider

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  • 12/14/12--08:05: The 22 Best New Startups
  • meredith perry UBeam

    A lot of companies launched this year. A few really stood out.

    We asked tech executives, founders, and investors about their favorite new companies.

    Here are 22 of the best apps and startups that launched in 2012. They're sure to do amazing things in 2013.

    SmartThings wants to make ordinary objects smart by connecting them to the Internet


    CEO: Alex Hawkinson

    Date Launched: January 2012

    Funding: $3 million from First Round Capital, SV Angel, Lerer Ventures, CrunchFund, Max Levchin, David Tisch, Chris Dixon, Vivi Nevo, Alexis Ohanian; $1.2 million from Kickstarter users

    What it is: Ambitious. SmartThings wants to connect everyday objects — from ovens to thermostats — to the Internet and make them smarter.

    Why we like it: Imagine a storm causing the power in your house to go out while you're out of town, and getting a notification on your smart phone. Or a woman in your household forgetting to unplug a hair straightener, and being notified before a fire starts.

    SmartThings is building a hub that acts like a bridge between everyday objects and a platform in cloud. It provides things like motion detectors and moisture sensors you can place around your house. Every SmartThings sensor and hub-connected object is also connected to a mobile app, where you can monitor your objects.

    "Once you connect everyday objects to the Internet, you can control them, but the bigger change is you can control them with software that any developer can write,” Hawkinson told AllThingsD.

    Here's more on how it works:

    Medium is trying to create a new type of media publishing platform

    Startup: Medium

    CEO: Ev Williams, Biz Stone (co-founders)

    Date Launched: August 2012

    Funding: N/A

    What it is: Medium is a publishing platform that organizes text and images into theme-based collections.

    Why we like it: Medium combines the best features from Pinterest, Tumblr, and the new Digg to let people express themselves in a medium-length format. It's incredibly useful and also beautiful to look at. 

    Sherpaa is making it cheaper and easier to see a surgeon

    Startup: Sherpaa

    CEO: Jay Parkinson

    Date Launched: February 2012

    Funding: $1.8 million from O'Reilly AlphaTech Ventures, Collaborative Fund, and First Round Capital

    What it is: Sherpaa provides companies with affordable health care and round-the-clock access to doctors. 

    Why we like it: Parkinson is a doctor who actually wants to help people save time and money. He completed his residency from Johns Hopkins, then started doing house calls in Brooklyn. Patients would book time on his Google calendar, he'd visit them, and they'd pay him through PayPal. Fast Company called him the "Doctor of the Future."

    The business he's starting could solve major pain points in hospital visits. He describes his mission more thoroughly here:

    "Say, for example, you cut your finger slicing a bagel a few minutes ago. You send us an email with a photo you just took with your iPhone. We look at it and then text it to our network of plastic surgeons in the area to see who has the bandwidth to sew you up in the next hour or so.

    "Our goal is to give you a great experience, and as a side-effect, also decrease your costs. Because it’s quite idiotic that triage has been allocated to the ridiculously expensive ERs and ridiculously inaccessible primary care doctors."

    See the rest of the story at Business Insider

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    interview, girl, selfie, mirror, reflection, smiling, happy

    Want to land a job at a small business or a startup?

    Many job seekers do: In the average small business there's usually less bureaucracy, greater opportunities to step outside defined roles... and if you someday hope to own your own business, a look behind the scenes at some of the realities of entrepreneurship.

    Great — but landing the job can require a different approach. While some business owners do have a corporate background, many are lifelong entrepreneurs. And many see the hiring process as a necessary evil; as a friend says, "I don't have time for this... I have a business to run."

    That perspective makes getting hired a lot harder for a job seeker who takes a conventional approach... and a lot easier for a job seeker who puts in the time and effort — and it will take time and effort — to understand their audience and really set themselves apart:

    1. Decide who you want to work for.

    Obvious, right? Not really. Many job seekers play the numbers game and respond to as many job postings as possible.

    That means the owner has to sift through dozens of potential candidates to find the right person. (Good luck emerging from that particular pile.) To show a small business owner that you are the right candidate, that means you have to do the work.

    Instead of shotgunning your resume, put in the time to determine a business you definitely want to work for, and then...

    2. Really know the company.

    Pretend I'm the owner. "I would love to work for you," you say to me; what I actually hear is, "I would love for you to pay me."

    You can't possibly know if you want to work for my company unless you know a lot about my company; that's the difference between just wanting a job and wanting a role in my business. Talk to friends, relatives, vendors, customers... anyone you can find. Check the owner and the employees out on social media; when you know the people, you know the company. Learn as much as you can.

    Then leverage what you learn and...

    3. Determine how you will hit the ground running.

    Most small business owners hate to train new employees. Training takes time, money, effort... all of which are in short supply. An ideal new hire can be productive immediately, at least in part.

    While you don't need to be able to do everything required, it helps if the owner is confident of getting some level of immediate return on their hiring investment. (Remember, hiring you is an investment that needs to generate a return.)

    Identify one or two important things you can contribute from day one. Then...

    4. Don't just tell. Show.

    Put what you can offer on display. If you're a programmer, mock up a new application. If you want a sales position, create a plan for how you'll target a new market or customer base, or describe how you will implement marketing strategies the business is currently not using.

    A show and tell is your chance to prove you know the company and what you can offer. Your initiative will be impressive and you'll go a long way towards overcoming concerns that you're all talk and no action.

    Is it fair you're doing a little work on spec? Should you have to create a mockup or plan in order to get the job? Not really and probably not... but doing so will definitely set you apart.

    Never let "fair"— when the only person "disadvantaged" is you — get in the way of achieving your goals.

    5. Use a referral as reinforcement.

    Business is all about relationships. Everyone has made made bad hiring decisions, so a referral from someone we trust is like gold.

    You may have to dig deep into your network or even forge new connections, but the effort will be worth it.

    Knowing that someone we trust is willing to vouch for you is a data point that often tips the decision scale towards giving you an interview... and even giving you the job.

    6. Knock on the door.

    You don't have to wait for an opening to be posted; after all, you've identified ways you can immediately help the company you want to work for. Show up, ask to speak to the owner, and pitch away.

    Just make sure you go straight to the benefits of what you will do. You could say, "Your website is good but it could be a lot better. Here are changes I will make in the first month, and here is how those changes will improve conversions and SEO results. And here's a mock-up I created of a new site design."

    I promise people will listen. I don't know any entrepreneurs who won't drop everything to learn about ways to improve their business.

    7. Assert yourself during the interview.

    Many small business owners are terrible interviewers. As a friend of mine says, "I don't work in HR. I run a business."

    Be direct and to the point. Explain what you can do. Describe your background. Talk about how the owner will benefit from hiring you. Show you know working for a small business is different and you're excited by the challenge. Sell yourself, using what you know about the company and how you'll make an impact to back up your pitch.

    And never be afraid to run the interview. Many business owners will be happy to let you.

    8. Ask for the job.

    Business owners know how to close a deal, so most don't mind being closed. Plus a decision put off until tomorrow is a decision added to the to-do list; no one wants more on their plates.

    If you want the job, ask for it. You have nothing to lose and everything to gain. If you've worked hard to truly set yourself apart you might get hired on the spot.

    More For Job Seekers:

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    Fred Wilson, a Union Square Ventures partner and a prominent investor in companies like Zynga and Twitter, recently argued that it's harder for consumer startups to get VC funding because the industry has matured and is moving away from the web to mobile, and that late investors are no longer interested in that field.

    While many disagree, the question of whether there's still opportunity for new internet companies and trends is valid.

    We asked co-founder of AOL and current CEO of Revolution Ventures, Steve Case at our IGNITION conference, what he thought the next phase of the web was, and if he agreed with Wilson's assertions.

    Watch the video below to see why Case thinks there will be a second internet revolution and what it might look like.


    Produced by Business Insider Video

    Don't Miss:

    Ross Levinsohn: Here's Why No One Can Figure Out Digital Media Just Yet

    LinkedIn's Ultimate Plan Is To 'Map Out The Underpinnings Of The Global Economy'

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    Though progress is slow, women are starting to get more and more involved in the startup world. They're on more founding teams, and are joining boards of directors at a faster rate than ever before.

    Startup advisor and founder at PitchTo Wayne Sutton argues that we should also be investing in more women. Women tend to generate higher revenues with one-third less capital than men, and founding teams raised larger rounds if they were mixed gender teams. 

    Sutton depicts his whole argument in this infographic, designed by Piktochart:

    investing in women

    NOW READ: What Are The Odds Of Your Startup Succeeding? [INFOGRAPHIC]

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    meeting, working, business, coworkers, thinking, brainstorming

    A year ago, few would have predicted that a pre-revenue company could have been acquired for $1 billion, or that start-ups in the middle of the country would have access to Internet 100 times faster than the rest of the country, or that Groupon, once the world's fastest-growing company with the highest valued tech IPO since that of Google, is now valued at essentially nothing more than its assets. 

    In other words—and at the risk of stating the obvious—the future is difficult to predict.

    For example, BessemerVenture Partners, the 101-year-old firm with 104 IPOs under its belt and a premier reputation in the valley, famously keeps an "anti-portfolio" available for the public to see—the companies Bessemer said "pass" on, that, years later, have become massive companies. (A few you may have heard of—HP, Apple, Ebay, FedEx, and Google top the list.)

    Nonetheless, for venture capitalists, their business entails banking on a vision of the future. The best venture capitalists (that is to say, the ones that are actually making money these days) are constantly forecasting future trends and developing, redeveloping, and reshaping their theses around consumer behaviors, buying patterns, and how technology will affect our lives.  So Inc. asked several venture capitalists to talk about some trends they expect in 2013, what they're interested in investing in, and some general predictions of what might happen in the New Year. 

    1. We will see a $10 billion marketing company — Ajay Agarwal, managing director, Bain Capital Ventures

    One statistic in a recent Gartner report stuck out to Agarwal, who joined Bain in 2003 to focus on early stage mobile, internet, and software investments: By 2017, CMOs will be spending more on IT than CIOs. Driving this massive shift, Agarwal says, is the customer data that simply did not exist a decade ago.

    "There's so much data that exists, but now marketers can now actually measure its efficacy," he says.

    Bain has already funded a few companies that leverage big data for marketing purposes, including BloomReach, a cloud marketing platform, and TellApart, an innovative predictive customer analytics platform. 

    2. We will see a 16-year-old get funding — Patrick Chung, partner, NEA

    Patrick Chung is the co-head of venture firm NEA's seed-stage investing practice and the founding partner of NEA and Harvard's Experiment Fund, and he does not say this to be glib: He genuinely believes a 16-year-old will get significant funding for a company he or she is building.

    After all, it's not that much of a stretch. In November 2012, the 17-year-old founder of Summly, Nick D'Aloisio, picked up $1 million in seed financing, in part from Hong Kong billionaire Li Ka Shing.

    "For us, we had real-life and then we had a television or a computer," Chung says. "Technology is not a peripheral anymore—kids are growing up natively online and so it's natural for them to create something virtual, just as it was natural for you or I to build our own skateboards or tin-can walkie talkies. The brains are wired differently by technology."

    Chung also believes that education has changed as well, and kids today are more focused on "learning to do,"  rather than "doing something to learn."

    From a young age, you're pushed ever more into this mode of creation and business building in a way a generation ago you never would have been," he says.

    3. We will see a successful start-up that reaches 10 million users without having taken a dime of venture or angel money — Patrick Chung

    "If there's one thing that we've seen at NEA, it's that the costs of starting a company are asymptotically approaching zero," Chung says.

    In other words, you (technically) need little more than an Internet connection and some coding skills to start a consumer Web company. Chung calls it the "Zuckerberg effect"—the idea that a young person starting with absolutely nothing is able to create something massive simply out of his or her dorm room.

    "Because the tentacles of social networks are so deep into everyone's consciousness and brain and every day life, it's possible that once you've built the company to go out there and  build a brand and acquire customers for almost no money," he says. "We've seen amazing brands be built for essentially no marketing expense whatsoever. If you get a name and it catches you can have that name propagate over large swathes of the population."

    See the rest of the story at Business Insider

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    In 2012, the funding pendulum swung away from consumer Internet companies and back toward startups that serve businesses—enterprise technology, as it's known in the business.

    The focus will stay there in 2013, say four venture capitalists from Kleiner Perkins Caufield Byers, the storied firm that backed Amazon and Google, among other world-changing companies. But that's only as long as startups can tap into some crucial shifts in what businesses are spending moeny on.

    KP made investments in almost 20 new enterprise companies in 2011 and 2012, to the tune of more than $300 million. As with other tech investors, the emphasis has been on companies working in the areas of cloud, big data, software-as-a-service, mobile, security, and networking. The portfolio includes investment in companies like Nebula, Jive, Datameer, PuppetLabs, Egnyte, Aerohive, AppDynamics, Clearstory.

    We gathered four partners together to tell us what's hot and what's not in the enterprise startup world and where they see their money going in the upcoming year. They are:

    • Security guru Ted Schlein
    • Former Amazon Web Services exec Ray Bradford
    • Mobile app guru Matt Murphy
    • Twitter's former head of engineering Mike Abbott

    How will enterprise startups fare with funding in 2013?

    Ted Schlein: Venture funds are going to continue to allocate more to the enterprise space than they have, if we are an indication of where venture funds are going.

    In the last two and half years or so, we've probably invested close to $300 million or more across 20-something companies.

    That is up. I wouldn't say it's up significantly but it's certainly higher than it was in previous years. 

    That coupled with the few major trends in the area of cloud,  mobile, big data all hitting at the same time, will lead to greater investments.

    Beyond Apple and Android, is there room for a third smartphone player?

    Matt Murphy: You've got Android and iOS as the kings and BlackBerry and Symbian disappearing — no one really cares about them.

    But I do think you'll start to see Windows get a wedge into the market. I'm not predicting it will be huge, but I think they'll be a player. Certainly carriers will distribute devices and there will be enterprise interest.

    So I think you'll see them emerge in 2013 from not-on-the-map to 10%–15% market share.

    Enterprise will be important to all of them. Windows will be more successful in the enterprise than 10%–15% but maybe not much more given [the bring-your-own-device trend] that individuals are making those decisions.

    In 2012, big data was a big buzzword—which meant CIOs had to learn to speak Hadoop, NoSQL, and social media. What's next?

    Ray Bradford: Enterprises all get they need to have a big-data strategy as a core technology. 

    They know they need Hadoop, but don't know how to deploy it and to get value out of it. So there's an opportunity in things that make it easy to deploy without a lot of expertise in-house because there's a big talent shortage on these kinds of new technologies. We're believers in that with our investment in Clearstory.

    An interesting trend is more in-memory analytics. There's a lot of large, commercial proprietary vendors like SAP with Hana and now there's a lot popping in the open source communities like Shark and Spark.

    See the rest of the story at Business Insider

    Please follow SAI: Enterprise on Twitter and Facebook.

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    andrew boz facebook

    At Facebook, Andrew Bosworth is just known as "Boz." With his shaved head and tattoos, he looks pretty badass.

    When he's not coding new features like News Feed, a once-controversial ticker of updates that's now the core of the social network, he's serving as the hardcore drill sergeant behind the appropriately named Bootcamp, Facebook's program to get new programmers up to speed.

    But he has a generous, nurturing side, too: In his spare time, he advises entrepreneurs, like the founders of hyperlocal startup Spindle.

    We got the chance to ask Boz a few questions about Facebook, Spindle, and his amazing career.

    Business Insider: How do you balance advising companies with your duties at Facebook?

    Boz: The way I think about this is that if I wasn't excited to put in extra effort above and beyond my schedule at Facebook then I wouldn't accept the role. I take advising really seriously and since I put Facebook first I end up being very selective about the companies I advise.

    BI: How did you get connected with the guys over at Spindle? What inspired you to advise them? What do you think Spindle has that other apps don't?

    Boz: When Pat was still at Microsoft, he and I worked together on the integration of into Facebook Messages. That was a fun project and I was pretty impressed with him so we stayed in touch.

    Later on, after he left Microsoft, he came by for lunch and we started talking about his new project. I was actually pretty skeptical that they would be able to build a relevance engine or that it was even an important thing to focus on that early on in the project. When he showed me a demo, though, I was really impressed.

    I think that is a pretty serious competitive advantage for them and they were right to invest in it as early as they did. I had a few ideas about the presentation and a few possible pitfalls and we just started a dialog about it and later they asked if I would officially advise them.

    pat spindle BI: What did you learn during the early days of Facebook that you shared with Spindle so they would do things similarly or different?

    Boz: The biggest challenge small organizations face is choosing what to work on. A new product is a blank canvas but with limited time and money how you choose to focus your energy is really the most important thing. I've really just tried to provide perspective to the team about what things ended up being really important in the long run for us and what things seemed important but weren't. Some of this advice won't be too surprising, like really focusing on growth and optimizing those flows. Other advice is a little more subtle like how to balance putting energy into relevance vs performance or other trade offs.

    BI: You've been involved with big products like the News Feed and Facebook Messages. How are those going today, and what's the takeaway from your experiences? Have there been any specific lessons from those products that now form part of the wisdom you're sharing with Spindle?

    Boz: I've been fortunate to work on a huge range of products here at Facebook and they have pretty much all grown beyond my expectations and just kept on growing. At one level I have learned a lot about actually building products; when you build and iterate on something used by so many people you start to develop a feel for design patterns and anti patterns that you can pretty readily apply to new products. On another level, I have learned a lot about the process of actually building things like how to balance speed and quality or how to prioritize features.

    facebook news feed

    BI: You've been a key part of bringing new engineers up to speed at Facebook. When you look at the Spindle guys, are you thinking in the back of your head, "I wish these guys worked here at Facebook?"

    Boz: The team seems really stellar and I've definitely been impressed with their work, but I think they are pretty happy in Boston at the moment, as they should be! One thing we think a lot about at Facebook is not just hiring great engineers but also building a platform that enables engineers across the world to create great social products. Spindle is a great example of that. 

    BI: A lot of startups sign people up as advisors because they really want to recruit them onto the team. Have you discussed a larger role at Spindle?

    Boz: We've never even discussed it.

    BI: What's the biggest lesson you've learned working at Facebook?

    Boz: I think the biggest lesson I've learned is to get excited about ideas and not implementations. Implementations always have problems and if you are too attached to what you've built, instead of the idea you were pursuing, you won't be able to see those flaws and make it better. Keeping an open mind and being self critical is really hard but it is the only way to build truly great products. 

    BI:Where do you find inspiration to continue innovating in your work?

    Boz: Generally speaking I think people who are successful at building products are just very mindful as they go about their day. They are more acutely aware of annoyances or desires others might reasonably ignore. If you combine that with an engineering mindset sometimes we can figure out ways to solve those problems. In those scenarios it never really feels like you are innovating, it just feels like common sense.

    Don't Miss: Spindle, The Hyper-Local Brainchild Of An Ex Microsoft Employee, Turns The Heat Up On Yelp And Foursquare >

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    Nostradamus PropheciesDow Jones and the National Venture Capital Association surveyed 600 venture capitalists and CEOs, and came up with these eight predictions:

    • Enterprise and healthcare startups will see more investment, consumer startups less. "Consumer IT is most often predicted as ripe for over funding in 2013 with 62 percent of all VC respondents citing the sector."
    • CEOs will still try to fund raise, despite greater VC reluctance."65 percent of VCs and 56 percent of CEOs believe terms will favor VCs in 2013."
    • US VCs will invest more in Latin America."Latin America is cited by 55 percent of VCs as an area of increasing U.S. investment in 2013 followed by China (40 percent) and India (37 percent)."
    • Startups will be acquired instead of going public. "VCs and CEOs agree that acquisitions will be more prevalent in 2013 with 62 percent of both respondent bases predicting volume increases next year."
    • VC firms will face challenges as their industry contracts. "42 percent believe the market will concentrate with more dollars raised by fewer funds."
    • VCs investment returns will grow next year. "49 percent of VCs expect returns will improve next year."
    • Jobs will come back."83 percent of CEOs surveyed expect to increase headcount in 2013 and 46 percent feel this hiring is achievable based on supply and demand."
    • But otherwise, economic progress will slow."Forty-nine and 42 percent of CEOs and VCs respectively expect the U.S. economy to improve in 2013."

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    Cloudant co-founders

    Four years ago, three scientists and friends were working on one of the world's greatest mysteries: the search for the God particle.

    They didn't know they would soon leave physics and become cofounders of a hot young startup, Cloudant.

    This summer the God particle (also known as the Higgs boson particle) was found, validating  five decades of physics work and about $10 billion dollars spent to build the Large Hadron Collider in Geneva.

    The guys from Cloudant cheered when they heard the news. All three had worked at the LHC at one point so they helped to discover this particle, which is proof of an invisible field that causes other particles to stick together and form everything physical in the universe from cells to stars.

    "We were certainly very excited. We had friends in the auditorium when they made the announcement," Cloudant cofounder Alan Hoffman told Business Insider.

    But they also felt "deep disappointment," explained cofounder Mike Miller. "Higgs was the last piece of puzzle and it was a corner piece. The hope was that would link to another puzzle or some kind of hint of where to go next but it just kind of ended the puzzle."

    But Hoffman and Miller know exactly what their future holds: growing their young database-as-as-service startup.

    They had created a database that helped thousands of collider scientists to share data with others around the world, built on a popular open-source noSQL database known as Couch.

    They had no plans to turn it into a for-profit business until December, 2007, when BusinessWeek ran a cover story called Google and The Wisdom of The Clouds. It was an introduction to the explosion of data now known as "big data."

    "Oh my God, this is what we do," Miller said when he saw the article. "We all saw this as a chance."

    A few months later, in 2008, the three friends left science to launch their startup. Cloudant was accepted as into the Y Combinator Boston accelerator.

    Today, it has about 40 employees, serving about 12,000 customers with its freemium cloud, with about 3% as paying customers. In 2012, it grew 10 times bigger over 2011.

    Cloudant raised about $4 million in venture capital from Avalon Ventures in 2010. Plus, in October, the CIA's venture funding arm In-Q-Tel also took a stake of an undisclosed amount.

    The best part of being a startup founder compared to a physicist?

    "I love how easy it is to get money as a startup compared to the grant process," Miller laughs. As a startup,"you can walk into a room and get a handshake when things go right."

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    Jay Bhattacharya Zipmark

    After seven years helping Citigroup launch new financial ventures, Jay Bhattacharya got the itch.

    A veteran of the first dotcom boom and bust, he'd found a safe perch at Citi. But he found he wanted to launch his own company again.

    At Citi, he'd worked his way up to a senior vice president job, responsible for funding startups, with all the salary and perks afforded to a senior banking executive. He was a family man now, with a wife and two kids.

    Then his latest venture, Mobile Money Ventures, a startup backed by Citi and SK Telecom, was acquired by Intuit in 2011 for an undisclosed sum, after a "whirlwind two years," he says.

    Bhattacharya's stake wasn't enough to retire on, but it was enough to bootstrap a new company—if he could get his wife, herself a banker, on board.

    He was on the first week of a monthlong vacation after the Mobile Money sale when he met Jake Howerton. Howerton wanted Bhattacharya to vet his idea for a new payments startup based in New York. Bhattacharya loved Howerton's idea for what became Zipmark—so much so that he wanted to sign up as a cofounder.

    "I spent another three weeks of my month off convincing my wife that it was the right thing to do," Bhattacharya says. In the end, she agreed on the condition that Bhattacharya take on consulting work to help pay the bills while he got Zipmark off the ground.

    Zipmark offers an alternative to paper checks, credit cards, and PayPal. It lets people pay for stuff from their checking accounts though mobile apps. It also lets small businesses take personal checks without assuming the risk of bounced checks.

    "We act like credit cards but for paper checks, with an authorization or decline," he explained. Businesses like it because it charges It charges a 1% transaction fee. Square, for instance, charges 2.75% for credit-card swipes, while PayPal charges 2.9% plus a 30-cent transaction fee, even for low-cost payments from checking accounts.

    Businesses can also use Zipmark to pay their invoices instead of writing paper checks or setting up electronic fund transfers, Bhattacharya says. 

    A year ago, Zipmark raised $3 million in seed financing from a handful of New York investors and was on its way. It now has nine employees. Its beta app processes $1 million a month in payments thanks to partnerships with cloud services like Zuora and Apptivo, as well as with RentShare, an online service for accepting rent payments, and some utility companies.

    The app will leave beta testing early next year, with an official version going live in January.

    Bhattacharya often speaks to college students and young entrepreneurs on what it takes to found a startup. "I tell these guys, it's okay to take the risk," he says. "There are ways you can find the incremental income."

    The real challenge: Figuring out how "to program your brain" to work outside the "structure" of a regular job, he says.

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    There's been a lot of talk lately about a "Series A Crunch" with new startup funding. But according to CB Insights, the real problem is startups being abandoned after raising a seed round.

    Here's a look at how CB Insights projects 2013 will look for these orphaned startups.

    chart of the day, orphaned startups, december 2012

    Follow the Chart Of The Day on Twitter: @chartoftheday

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    andreessen horowitz, marc andreessen

    Top early-stage venture-capital firm Andreessen Horowitz is sooo over traditional audience metrics.

    The firm, also known as A16Z, is not impressed by a startup's monthly pageview or unique-visitor count anymore. It doesn't particularly care about the number of downloads an app has either.

    So A16Z wants to end 'bullshit metrics." It has backed a company called Mixpanel that shows sites their engagement and retention numbers instead.

    "We and other investors need to get more vocal,” Marc Andreessen, one of the firm's partners, told AllThingsD. “Pageviews and uniques are a waste of time.”

    "Companies still pitch investors with a cumulative-user-signup graph, sell advertisers on how many pageviews they get, and bamboozle reporters with the biggest numbers they can find regardless of whether they correlate to success," Mixpanel's CEO Suhail Doshi writes on the company's blog. "We can do better as an industry. We should do better because collectively we’re not benefiting–we’re all just fooling each other."

    Instead of sharing pageviews and uniques with the world, Doshi thinks startups should boast about three more useful things:

    Engagement: Each company measures engagement differently, but Doshi feels it's a much stronger success indicator than pageviews. Yelp, for example, measures the number of reviews it has. YouTube should be promoting the number of views its videos receive.

    Retention: It's important to show how many people actually use the product or visit the website repeatedly. In other words, how many of an app's 1 million new users actually come back after their initial signup? If it isn't more than 10%, Doshi thinks the product isn't very good.

    One Key Metric: Doshi says it's important for every company to track "a single actionable metric that they can literally bet the company on." He calls this the OKM, or one key metric. For Instagram, the OKM could be the number of photos uploaded. Instagram could examine the metric further and discover what percent of its users upload multiple photos, how frequently they upload photos, etc.

    This all sounds great in theory. But there's a reason it's popular to report these metrics: Advertisers want them and startups need them to survive.

    No matter what A16Z says, investors and advertisers still want to see pageviews, user counts, and uniques. To date, investors have cared a lot about how many users or pageviews a company has. Showing strong growth numbers almost ensures funding. And running out of cash is the No. 1 reason most startups fail.

    Take, for example, Upworthy. It raised $4 million this fall after growing from no traffic to nearly 9 million uniques in seven months. It uses social media to reel readers in, and few people visit the site directly through its homepage. Investors coughed up millions anyway. 

    Chris Dixon, who's now a partner at Andreesseen Horowitz, recently wrote that standards of success were tightening for consumer Web startups, declaring that 10 million users is the new 1 million users to investors. Showing fast growth is paramount, he says. But that sounds an awful lot like a vanity metric.

    Pageviews and uniques are what advertisers base their spending on. Sure, advertisers care about user engagement, but they also want to get their messages in front of a lot of people. They still care about reach and frequency so, if a site wants to make money from advertisers, they have to report these metrics.

    Competitors also pressure startups to report these metrics. No one wants to see their competitor get a lot of press because they're boasting about high numbers, then report much smaller (but more important!) engagement numbers.

    It seems unlikely that anyone will stop caring about pageviews, uniques, and downloads altogether. But if engagement numbers are paired with growth metrics, then Mixpanel could be on to something.

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    Fred Wilson

    Fred Wilson, the most influential venture capitalist in New York, sounds frustrated with some of his startups.

    In a post on his site A VC, he tells startups (and everyone, really) to quit screwing around and just deliver results in 2013.

    Here's the relevant bit:

    I would like to tell a story. The company in this story will go nameless. It is not material to the story. We met the team a year ago as they were just launching. They had huge ambitions for 2012 and we thought they were delusional. We passed on the investment even though we really liked the team and the market. They came back in a month or two ago. And not only had they accomplished everything they said they would do, they got done a few things that were not even in their plans at year end 2011. We committed to lead their next round at a full valuation. There will always be money for teams and stories like this.

    But as I look around the broader startup market (and certainly in our portfolio too), I don't see a ton of those stories in 2012. I see delays in getting important new product initiatives out. I see revenues coming in well below plan. I see new ankle biter competitors emerging and taking share causing a loss of focus and missed numbers. I see "black swan" events that could not have been predicted causing short term disruptions.

    None of these are fatal to a startup but in the environment we are in they will not help you. Investors are not giving the benefit of doubt in markets like this. And your employees aren't going to be patient forever either.

    So if I can give entrepreneurs a single piece of advice for 2013 it would be to deliver on your promises. Not just to your investors but also to your team and ultimately to yourself. This is no time to be in denial. That is a lethal attribute in times like these.

    Read it all at A VC >

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    Alexis Dormandy, LoveThis

    Today's advice comes from Alexis Dormandy, founder of the social recommendation sharing startup LoveThis:

    "What I usually see is you tend to fire people for attitude and hire people for skills. When you’re hiring people, you always end up looking at the CV and see if this person has the skills you need. But the basic point here is that attitude is the most important thing in a business, and that you should hire for attitude, not just fire for it. You’d probably be firing fewer people if you did."

    Dormandy says that it is absolutely critical to hire people who will fit well with your company. Especially at a startup, you need employees who will be on the same page as you about the goals and mission of the business.

    Most people fire for attitude, says Dormandy. It's very rare that they would fire for skill. But while skills can be learned and improved, it's a lot more difficult to get someone to adopt a better attitude.

    "Hiring more for the can-do attitude and approach gets more done and is more important than the CV. What I learned at Virgin is that if you don’t put attitude at the top of the list, then actually that person tends to get themselves rejected by the system as soon as they’re hired."

    Want your Want your business advice featured in Instant MBA? Submit your tips to Be sure to include your name, your job title, and a photo of yourself in your email.

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    These days, a lot of money and work in Silicon Valley goes into building mundane things like sharing apps and social games.

    Australian aerospace engineer Stuart Kearney and his friend Eric Stern created a Website to mock this trend.

    It's called, and its catch-phrase is "Need a first-world problem solved? Silicon Valley has got you covered."

    Go to the site, and you'll see a drop-down list of problems. Select one, and you get taken to a startup's app, Website, or product page.

    For example, select "My house's mood lighting doesn't match all of my moods," and you get whisked away to a Kickstarter page for LFIX, which is "The Light Bulb Reinvented…a WiFi enabled, multi-color, energy efficient LED light bulb that you control with your iPhone or Android."

    There is also:

    • "I need entertainment, but deciding which link to click is difficult."
    • "I need to use both of my hands to unplug my $400 cell phone."

    Kind of funny, right?

    Or at least a good way to kill 30 minutes.

    Here's the list of first world problems, which is a humorous quick read itself:

    First World Problems

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    Intel is a global mega-corporation with $50+ billion in revenue, 100,000 employees, and a $100 billion market cap.

    It has been a fixture of the tech industry for so long that it seems as though it has been here forever.

    But in 1968, it was just an idea.

    In 1968, Intel's two co-founders, Robert Noyce and Gordon Moore, quit Fairchild Semiconductor to start Intel. Before starting the company, they produced a rudimentary business plan. Pioneering venture capitalist Arthur Rock then used the plan to raise $2.5 million in convertible debt financing, and Intel was born.

    The folks at Ideas Lab recently unearthed a page of the business plan, which Andreessen Horowitz partner Chris Dixontweeted around a couple of days ago.

    What did the business plan for the now-legendary massive corporation look like?

    Not much.

    In fact, if ever there was a document that illustrated that success is less about ideas than execution, this is it.

    Intel Business Plan


    SEE ALSO: Investors Have Now Lost More Money In Apple Than In HP and RIM Combined

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    michael arrington

    Technology's loudest, and most entertaining, blogger, Michael Arrington has been pretty quiet all year.

    Arrington, as you may recall, was forced out of TechCrunch, the tech site he founded, when he decided to be a full-time venture capitalist. There was a lot of noise from Arrington, and others in the tech press, about his ouster.

    When he was forced out, we assumed he was going to continue making noise at his own site, Uncrunched. Instead, it's been pretty tame. He's been relatively removed from the spotlight.

    Yesterday, Arrington fessed up to why he's been so quiet: "It’s just about 2013 and I gotta say, I’m a little bored... I just don’t see the tons of crazy new ideas that I did a few years ago."

    He says that as an investor, "things are just peachy," and there are plenty of investment options. But as a blogger, he's feeling let down by the tech scene: "Yeah, the iPhone and Android are great. But seriously, look at the top headline grabbers in tech news in 2012. Apple. Google. Facebook. Microsoft. Christ. It might as well still be 2007."

    Arrington isn't the only one feeling bored by the tech scene.

    Since the Facebook IPO, there's been an enormous vacuum in the consumer web. In August, we wrote that startups have gotten very boring.

    The problem seems to be that entrepreneurs aren't pursuing many audacious ideas. Everything feels slightly incremental right now.

    My personal theory is that the big world changing stuff requires massive amounts of capital at a truly high risk. For instance, something like Google Glass, or Tesla's electric car, would require massive investment and it might not work out.

    Investors have been spoiled by lean startups that have soft landings at Google and Facebook. If you really want to work on an outrageous idea, you probably can't lean on established mobile platforms. You need to create your own, which is really expensive and doesn't have an obvious/simple exit plan.

    Look at Kleiner Perkins. It went after audacious ideas when it started funding green tech ideas. Those almost all blew up in its face and it missed out on the rise of the social web. This led to the cool-kids in tech snickering at Kleiner for having whiffed. Now it's back in the consumer tech game looking for the next Facebook.

    There's a reason Arrington is bored. It's because we've created an environment that rewards boring startups.

    At least, that's my theory. What's yours?

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    looking in the distancetl;dr: Fuck, I don’t know. I’m not in the prediction business. But plan for it. And behave accordingly.

    A lot of people have been talking about how 2013 will be harder for startups and fast growing companies.

    Tiresome things like the endless discussion about the Series A crunch, more conservative behavior from VCs due to the performance of Facebook, Groupon, and Zynga in the public market, and overall concerns about the economy dominate. Counterarguments prevail as different people try to predict and justify what’s going to happen.

    All I know is that I have no idea what is going to happen. The macro is exogenous to me – I can’t impact or control it. So rather than try to predict what is going to happen, I’m going to assume a tougher 2013 for startups until I have evidence that it’s not.

    I sent Fred Wilson’s post Advice for 2013: Deliver On Your Promises out to our CEO email list. I felt like Fred’s punch line was powerful.

    “So if I can give entrepreneurs a single piece of advice for 2013 it would be to deliver on your promises. Not just to your investors but also to your team and ultimately to yourself. This is no time to be in denial. That is a lethal attribute in times like these.

    That generated a response on the email thread about actionable advice. So, I responded with two examples:

    1. Recognize that your expense plan will be linked to your promises. Tighten the time frame – do what a lot of successful companies have done in the past. Rather than having an annual 2013 plan, have a 1H13 and 2H13 plan. Lag your headcount growth behind what you need by a quarter, running “hot” on all fronts as you try to get the growth you expect. Hire only when this growth materializes. Then, replan 2H13 and 1H14 at the end of 1H13.

    2. Make sure you know exactly how much money your EXISTING investors have reserved for you and are willing to fund you in 2013 independent of any new outside investors. Don’t ever be in a position where you need a new outside investor to continue operating your business.

    I’ve got a bunch of others, but I’m curious what you think. Operate under the hypothesis that 2013 will be harder for startups than 2012. What are you going to do different in 2013?

    Read more posts on Feld Thoughts »

    NOW READ: 10 Ways To Maximize Your Professional Impact in 2013

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    Fred Wilson

    Venture capitalist Fred Wilson, of Union Square Ventures, has helped his firm post some of the best returns in the entire VC industry over the past five years.

    The firm's performance has been nothing short of spectacular, and Fred Wilson's reputation has justifiably soared.

    And yet, in 2012, even though USV had some amazing exits that coined money for the firm, its partners, and its clients, Wilson said in a recent blog post that he feels like it was a "shitty year."


    Because Wilson did not make a single investment in 2012.

    In fact, Wilson has not made a single investment since the summer of 2011--more than 18 months ago.

    For a firm that has made dozens of investments over the last five years, and has been on a tremendous roll, that is highly unusual.

    Usually, when firms and investors get on a hot streak, the partners get giddier and more aggressive as the streak continues.

    They begin to feel like they're playing with "house money," boatloads of it, and they start throwing that money at whatever strikes their fancy.

    They also feel pressure to continue to justify their reputations (and fees), and keep the momentum going.

    So when they're not making investments, they feel like they're "doing nothing"--resting on laurels based on past accomplishments having nothing do to with what they are doing right now.

    And yet, for those who have been around long enough to understand the ebb and flow of investment cycles, it is clear that "doing nothing" is often the smartest investment decision of all.

    Every great investment opportunity goes through this investment cycle.

    In the beginning, when the opportunity is truly "speculative"--when most people think investing in the opportunity is obviously stupid--a few brave souls make brave bets and then cash in on extraordinary early returns.

    Then, everyone else sees those returns, and the money rushes in.

    Soon, all the investment money bids up prices and creates a wave of competitors vying for the same opportunity, and investment returns begin to drop.

    Eventually, the "fools" rush in, bidding prices up to truly silly levels, and dozens of competitors fight over the tiny crumbs of opportunity left on the table.

    Then returns collapse and the cycle ends.

    The consumer Internet cycle that drove Union Square Ventures' returns over the past 5-7 years began to wind down a year or two ago. So many investors had jumped into the game, so many companies were attacking the opportunity, and valuations had gotten so high that expected returns for small startups had begun to drop. There was massive excitement in the sector, of course--and huge "buzz" (in part because so many people were in the game)--but the fundamentals were no longer attractive. So the smartest investors began to scale back and look elsewhere.

    Or, in the case of Union Square, they just began to say "no."

    It's hard to imagine how many serious business plans and opportunities Union Square has said "no" to over the past 18 months. If I had to guess, I'd say it was on the order of 10 per day, or about 500 over the period. And that's just the serious ones.

    Saying "no" when the rest of the industry (and your competitors) are in a feeding frenzy is difficult.

    You often look and feel like an idiot.

    No matter how confident you are that the cycle has played out, you know that you might be wrong, and that you'll end up with your reputation in tatters, looking like a fool.

    So saying "no" is extremely hard to do.

    But, in investing, it's occasionally the smartest thing to do.

    So, even though Fred Wilson feels like he had a "shitty year" in 2012 because he didn't make any new investments, it's possible (likely, even) that he will end up having had a much better year than almost every other VC in the industry.

    In other words, Wilson may have demonstrated again that the performance Union Square has delivered over the past 5 years is no fluke and that he and his partners Brad Burnham and Albert Wenger deserve their reputations as one of the most talented investment teams in the industry.

    SEE ALSO: FRED WILSON: 2011 Was A 'Shitty Year'

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    mikkel svaneCustomer service is absolutely essential for businesses, especially small ones. If they have any hope of surviving, they have to get customers to come on board and stay. Great service is the key to that.

    More and more small businesses are looking to build a strong online presence, which brings a whole array of new challenges. Remote or digital customers have the same expectations of service as anybody else, and it's essential that small businesses know how to deliver.

    We spoke to Mikkel Svane, the CEO of Zendesk, the leading provider of cloud based customer service software, on the role of technology in customer service and what he's learned while building his business

    How has customer service changed  in recent years? 
    When we set out to build Zendesk (in 2007), the world of customer service was very different. There wasn't the same level of attention or the same amount of focus on customer service as something essential for your long term customer relationships.

    It was very much about costs, it was all about how could you pay less for customer service. It was something you kind of needed, but the less you spent on it, the better. It wasn't about engaging with the customer and I think, and that in many ways, that was all background for our growth, we simply wanted to create a product was beautiful, that was simple and then enabled people to really focus on the customer.

    We talk about how it's a subscription economy now. Businesses are changing their revenue models from being very transaction based to being much more about buying over time, or a subscription. It's not about per-transaction numbers, it's about the lifetime numbers. To nourish that relationship, customer service is essential. That’s another kind of big trend that has defined this industry and has helped us tremendously. 

    How does a focus on customer service inform your management and leadership philosophy?

    We use some of the same principles in building our company that we do in our product, trying to remove the exotic, trying to remove all of the friction in the business processes so its easy to engage and communicate. We try to have a simple elegant structure in our company and product.

    We’ve tried to live up to the idea of great customer service for some time because we try to reflect it in the product. We tell our customers about it, and we try to live up to it ourselves. In all relationships between people, and I think that a customer service relationship is very much a person to person relationship, It’s all about trust and it’s all about talking to each other at eye level. Being, open, transparent, and being honest. I think that we try very much to live up to these standards ourselves and in our business.

    It's where the name Zendesk itself came from. I always compare it to that feeling that when you clean up your desk. You have all these piles of papers and unpaid bills and statements from the school and your insurance company and all these different things and they just start to pile on your desk. You remember most of it, but you there are some urgent things in there. It's that feeling and sitting down and organizing all these things and dealing with what needs to be dealt with urgently, archiving all the other things and putting  together a to-do list of all the things you still need to do. The kind of peace of mind that comes with that, we try to reflect that in the work of Zendesk.  

    Those are the values that we have in our company and also in our product.

    What's something you wish you knew back in 2007 when you started out?

    I think that most of our customers have realized that customer service is really really hard. It’s hard to put together relationships when customers are in a lot of different regions and countries and time zones. You have treat each of them respectfully and try to make the best out of any situation.

    All of these different things are really tough, and it's not something you can go out and learn, like studying for an exam.

    I like to compare it to starting running. For most people, it’s not super pleasant getting up at 6 A.M. in the morning in the rain and running for 10 kilometers. It’s not the most pleasant thing, but once you get into it, once you get into the rhythm, and start kind of enjoying it, you kind of get addicted to it and it becomes part of your DNA. You understand how it makes you better, how it helps your body and your soul, and I think that customer service is also something that is really tough and really complicated. But by getting up every morning and embracing your customer relationships, I think you could build a culture where you understand and appreciate the value of spending time with your customers.

    How do you succeed in a difficult business environment?

    Even though the company’s only five years old, I think we’ve seen enough world crises to realize that things go up and then things go down. You know, after autumn comes summer and business finally has its season.

    I think that new companies like ours are and much more agile, much more flexible in terms of dealing with the new economy. There are so many good technologies out there. Building an infrastructure in the cloud, pulling that new generation API and your business application to your browser or mobile device, it’s relatively cheap and to do that today, and you can work with an organic workforce spread across the continent and across the world. I think it has never been a better time to build this kind of company.

    You’re a company that focuses its business on customer service I’m curious about whether you apply those lessons to your own clients?

    I thinks that's critical. We don't go out and preach, we don't out to our customers and say, "this is how you should do customer service." But we try to give them tools and enable them to take their customer service to a totally different level. When you bring technology into your house, a home entertainment system or something like that, good technology enables you not to spend time on the technology, but on the actual experience. We just try to make it really easy for our customers to focus on their customers.


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