Updated with new information from Dropbox: You don’t go into file backup and syncing for the fame and glory, but that’s what it seems to be yielding for 2-year-old Dropbox. Simply put, people — including my GigaOM coworkers and I — love Dropbox because it works. “We do have a rabid following,” Dropbox CEO Drew Houston admitted in a conversation today.

Over the summer Dropbox raised a $7.25 million Series A round from Sequoia Capital and Accel Partners, adding to $1.5 million in seed money it brought in from Sequoia Capital and Y Combinator in 2007. Accel’s Sameer Gandhi, who had previously led Sequoia’s investment has since become a partner at Accel, led the round. We found out about the Series A via an SEC filing; Houston confirmed the funding had closed but said that the filing was not the final amount. Houston said the company had not yet disclosed its A round because up until last month it was in the process of obtaining the URL dropbox.com from a domain squatter.

He later contacted us (after this article was posted) to share more details. Dropbox had raised $1.2 million in debt in 2007 from Sequoia Capital and that along with interest (on that amount) converted to equity as part of the Series A investment, which included a fresh slug of $6 million. That brings company’s total investment raised to date to $7.25 million. Houston claimed that the round was closed in October 2008, though the documents were filed with the SEC in July 2009. The round was led by Sequoia Capital with participation from Accel Partners.

Dropbox now has 3 million registered users, up from 2 million in September and 1 million in April. Nearly 1.5 million of them were active in the last month, including 300,000 using the company’s new iPhone app, according to Houston. And many of those folks identify themselves as Dropbox lovers, with more than 35,000 signing up to be Twitter followers and 23,000 as Facebook fans. A 2-week-old feature that allows the community to vote on new features has garnered nearly 10,000 votes for the top choice: selectively syncing certain files or folders rather than a whole account.

Alongside other lightweight web apps like Gmail infiltrating the enterprise, Dropbox customers (an undisclosed portion pay $10-$20 per month for additional storage) are now using the simple tool to do their jobs. In some ways, the migration is flowing in the opposite direction — a traditionally enterprise concept is now available to everybody. And Dropbox, as could be expected, says it will offer tools for corporate collaboration in a more formal fashion early next year.

San Francisco-based Dropbox has just 20 employees. The service currently stores nearly 1.3 million gigabytes of data.

The women-centric collection of sites is shaking up the web — and traditional media.

Lisa Sugar's celebrity blog morphed into an online empire. Photo: Sugar Inc.

The state of affairs in publishing is beyond depressing. Unless, of course, by publishing you mean the shiny new online-only startups who are behaving as if it were boom times for journalism. An example is Sugar Publishing, the 3 1/2-year old blogging company that focuses on young women. Run by the husband-and-wife team Brian and Lisa Sugar, the San Francisco company has 12 sites, 114 people, and boasts an online audience that’s approaching that of Time Warner’s (TWX) People.com (almost 8 million monthly visitors in October for Sugar versus 12 million for People, says comScore).

It gets better. According to Brian Sugar, his little company will be profitable this quarter as well as all of next year. What’s more, only half the company’s revenues come from advertising against the work of its journalists — a shocking figure given that traditional media companies get, well, all of their revenues from their scribbling. “Editorial is a marketing expense to drive people to something bigger,” he says.

Sugar started as former ad-agency media-buyer Lisa Sugar’s dream to be a writer. In 2005 she created a celebrity-oriented blog, PopSugar, which, once it started picking up steam, told her marketing-veteran husband that she was on to something. By this point the online world already was littered with sites that mimicked what trade publications have done forever. Sports sites also were plentiful. The “women’s” category was wide open. Sugar added additional sites, focusing on fashion, beauty, food, mommying, and the like. Along the way the company attracted a venture investment from Sequoia Capital — which is doing pretty well these days, despite what you might have read in a certain traditional business magazine.

Generalists, not specialists

Two broad themes define what’s cool and exciting about Sugar: the way it does journalism and how it makes its money. According to Brian Sugar, every staff writer is trained on how to do everything it takes to produce a  blog post, from writing and Photoshop to editing videos. That is so antithetical to how it works at big-time magazines, where specialization rules. Sugar’s money-making tactics also signal a break from the past. It recently bought a company called ShopStyle, whose site allows users to shop for products they like and takes referral commissions from retailers. ShopStyle is so popular that Sugar licenses it to other sites, creating a lucrative revenue stream for Sugar off the audience of other online publishers. Sounds like Google’s (GOOG) AdSense, right? Sugar calls the licensing product ShopSense.

More is in store. The company is rapidly building out its video capabilities. It plans to launch a video game on Facebook next year. (Shopping and gaming have similarly addictive qualities to them.) It has sites in the U.K., France, and Germany and plans to open in fashion-conscious Japan next  year. The company also provides a platform for its users to create their own blogs on Sugar’s sites. Brian Sugar says a quarter of the posts on Sugar’s sites are “curated” from blogs on its platform.

Not everything works for Sugar, but online it’s easy to thin the herd. Sites devoted to politics (CitizenSugar) and recommendations (SugarLovin’) flopped, so Sugar killed them.

Sugar is a nascent success and an example of what magazines may become. It doesn’t provide an answer to the question of what will become of long-form journalism, because it chose a segment that wasn’t exactly bubbling over with ponderous feature stories to begin with. All the same, that something is working in publishing these days, and that’s at least some hopeful news.

This morning news broke that MySpace, the second-largest social network that’s currently reinventing itself as a music destination, was buying imeem, a free online music service that has been remixed (and remade) more times that ’90s dance anthem “Keep on Moving.” TechCrunch, which reported on the news, didn’t reveal what the deal terms were. I have been dialing sources for information, and have found an interesting backstory behind this sale.

First, it was essentially a fire sale. Imeem, which in the past has been threatened into submission by large music labels, was feeling the heat from second-tier music labels wanting to get their pieces of flesh. On Oct. 21, The Orchard Enterprises, one of the largest independent record labels, sued imeem in U.S. District Court, Southern District of New York. According to the suit, imeem had to pay $150,000 per infringement. On those terms, for multiple infringements, the total could have run into billions of dollars.

Remember the billion-dollar lawsuit filed by Viacom against YouTube? Imeem, I’m pretty sure, knows how painful it is to fight the record labels in the courts. The company fought Warner Brothers, but had to eventually settle by giving up equity in the company. A long, bruising battle is something imeem couldn’t quite afford since it was running low on cash. And it couldn’t pay these guys off. By selling to MySpace, which already has arrangements with The Orchard Enterprises, some of these legal threats might go away. Interestingly, with this deal, record labels that owned a nice chunk of imeem could see their equity in MySpace Music go up as well.

At the same time, founder & CEO Dalton Caldwell hadn’t been able to rustle up more cash. I bet the investors who have pumped in more than $35 million (including $10 million in debt) got tired of putting more cash into what seems like a bottomless pit. Back in September, news emerged that Sequoia Capital, one of the long-time backers of imeem, opted out of funding the company. Back in May, Warner Brothers wrote off a $16 million charge, but gave imeem new money and forgave future royalty payments in exchange for more equity. Fat lot of good that did them.

I have been fairly skeptical if imeem and their ilk, mostly because I felt that they cut bad deals and had painted themselves into a corner. Frankly, I am not that hot on MySpace Music, either. MySpace earlier bought iLike, another free music service, for $10 million — a firesale price – mostly to get hold of the talent. The bargain basement sales of iLike and imeem once again shows that the online music industry remains as risky as walking through a minefield punch-drunk.

Well, I guess when the company had a choice between locking the doors or teaming up with MySpace, it wasn’t a hard decision to make.

Every once in a while a business deal gets done that ‘those in the know’ believe will have major impact on business in America and possibly worldwide.  The Bank of America/Merrill Lynch merger was one, the AOL/Time Warner merger was thought to be one, AT&T/BellSouth was another, Kraft/Phillip Morris was one that worked, Sony/Columbia and Walt Disney/ABC also seem to have worked.  This week, another was announced; this one is anticipated to have impact worldwide – first in the advertising industry, and then in the industries which will be affected by those changes in the advertising industry.  This week’s announcement is the purchase of Admob by Google. 

Below is a detailed analysis by Mobile Marketer on the anticipated impact this purchase will have on advertising in general, mobile advertising specifically, and overall business.  Those of you who have read this blog on a regular basis are well aware of our contention that mobile marketing is the next big growth area in marketing/advertising.  To us, this announcement further confirms our thoughts on this issue.  Read the article to see if you believe the same, we would love to have your comments.

November 10, 2009, Mobile Marketer

Google now has three out of four bases covered Google Inc. has signed a game-changing agreement to acquire mobile ad network AdMob for $750 million in stock in a move that validates mobile advertising as an effective marketing medium.

Google is hoping that this acquisition will enhance its existing expertise and technology in mobile advertising, while also giving advertisers and publishers more choice in this fast-growing area. The deal will help Google in its efforts to develop more effective tools for creating, serving and analyzing emerging mobile ads formats and expand beyond its traditional focus on search advertising.

“We’ve been talking about the awesome opportunity that mobile marketing brings to the world,” said Mike Wehrs, president/CEO of the Mobile Marketing Association, New York. “Some people understand that, and this deal shows that the largest and best-known advertising company—Google—understands the awesomeness of the opportunity, and they understand where this is going.

“If anything, it’s absolutely proof-positive of the value of the mobile channel and it encourages brands to take a very hard look at their priorities,” he said. “If they’re not already increasing their mobile spend, this is a wake-up call.

“It sets to rest any questions as to whether mobile ad networks had a sustainable, profitable business model, and this will cause people to pay attention, wow, there is significant large-player interest, so it spells opportunity.”

Founded in 1998 by Stanford Ph.D. students Larry Page and Sergey Brin, Google is a top Web property in all major global markets, albeit largely monetarily successful in its search advertising business. It has recently made mobile an increasing focus of its business.

AdMob, San Mateo, CA, is one of the leading mobile ad networks specializing in banner ads for brands such as adidas, MTV, Land Rover and Toshiba that run on publisher sites such as CBS, AccuWeather, Cellufun, MovieTickets.com, Lonely Planet and Stitcher. These ads run across iPhone sites and applications, as well as those based on Google’s Android platform.

Founded in 2006, the 140-employee AdMob won $47 million in funding from investors such as venture capital firms Sequoia Capital and Accel Partners.  AdMob and Google share a common investor in Sequoia Capital, a well-known Silicon Valley eminence.

Google’s rationale

Mobile advertising is a rapidly growing and competitive space, and Google and AdMob are currently specializing in different areas. Though Google offers many forms of mobile advertising, its focus to date has been on mobile search ads, while AdMob’s focus has been mobile display ads and in-application ads.

Google dubbed AdMob the quintessential Silicon Valley startup and claims that it is generating impressive year-on-year revenue growth. Both companies have approved the transaction, which is subject to customary closing conditions.

As this ecosystem continues to grow, the company expects these new marketing media to offer significant benefits. Google believes that advertisers will be better able to engage mobile users with AdMob’s ad formats. The deal will bring new innovation and competition to mobile advertising and will lead to more effective tools for creating, serving and analyzing emerging mobile ad formats, per Google.

The company claims that, by improving the performance of mobile advertising, publishers and developers will be able to monetize their content more effectively, which will hopefully have benefits for the wider mobile ecosystem. Google also claims that users will see more relevant ads and ultimately get access to more free or low-cost ad-supported content and applications, improving their mobile experience. The mobile advertising space will remain highly competitive, with more than a dozen mobile ad networks. The deal is similar to mobile advertising acquisitions that AOL, Microsoft and Yahoo have made in the past two years.

Analysts abuzz

Industry analysts are buzzing about the news of the acquisition, and many were eager to chime in with their thoughts about the potential impact of the deal. “This definitely puts Google in a good position—it really helps them with display ads,” said Tole Hart, Philadelphia-based research director of consumer services at Gartner. “AdMob is definitely a large ad network, and this is taking a large competitor out of the market, but there are still enough ad networks out there to make it a fairly competitive market. “There is less competition, but still some competition in the market, Yahoo in search, and other mobile ad networks such as Quattro Wireless, Millennial Media, Jumptap and a few others still in the market,” he said. “It’s still going to be competitive.”

Many analysts believe that mobile advertising has nowhere to go but up, so there will be plenty of room for multiple players in the space. This definitely helps Google position itself well for strategic growth in the ecosystem. “We think the mobile advertising market is going to grow a lot, and to me it seems like a pretty good deal,” Mr. Hart said. “If it’s going to help you in this market going forward, it’s money well spent—the current revenues aren’t going to add up, but if it gets you going and gives you some assurance that you’ll be a leader, it’s worth it. “Five years from now, everyone will have a smartphone or a really good feature phone, so there will be a lot of eyeballs and a lot of revenue,” he said.

Gartner projects that the worldwide revenue for mobile advertising will be $13.5 billion in 2013, up from around $500 million in 2008. This includes mobile banner ads, SMS, text links, search and maps, ads in applications and games, ads in videos and TV shown on a mobile phone. Up until now, Google has focused mainly on search advertising, but this deal signals that it has its sights set on other areas as well.

“This one move underscores Google’s ongoing insistence that their strategy is to look at mobile and be a big player there, and this gives them one more piece of that puzzle, one more tool to pursue that strategy,” said Neil Strother, analyst at Forrester Research, Kirkland, WA. “They do OK with AdSense for mobile already, and this gives them a platform to go into display more and play in the smartphone space, because AdMob has leveraged that pretty well.

“Mobile advertising is still a fairly small chunk of the interactive marketing spend, it’s still relatively early, but now Google can get in and marshal their resources, and they will become a major player,” he said. “It probably solidifies them as the leader in the mobile marketing ecosystem.

“The potential is rather high to reach more mainstream users, because even mid-tier phones come with browsers and more people are signing up for data plans that come with Web browsing, so they can search and discover things that are entertaining and can have advertising in some way.”

Some analysts focused on the potential for integrating AdMob with AdSense to some degree, and the various synergies the AdMob acquisition could create for Google. “First off, this is a big deal, both in deal size and what it could mean for Google,” said Michael Boland, San Francisco-based senior analyst and program director at BIA/Kelsey. “Google is clearly keen on replicating its online dominance to the mobile world as growing smartphone penetration drives the growth of the mobile Web.

“What it’s done so far has mostly been text advertising on Google searches and throughout its AdSense for mobile network mirroring its online strategy,” he said. What AdMob brings is an extensive network of display ad inventory on 15,000 mobile Web sites and applications for iPhone and Android, according to Mr. Boland.

“It’s been the largest ad network for in-app ad inventory on the iPhone, which has important implications for demographic targeting and audience segmentation,” Mr. Boland said. “With AdMob, Google can now reach incremental mobile users and beef up its ability to serve mobile display advertising. “This is a strong position if you combine it with the fact that Google has so many existing online advertisers,” he said. “It can transition many into mobile marketing with a one-stop-shop approach. “This has implications for many more advertisers entering AdMob’s network—otherwise ad networks rely on a combination of direct sales and some self service, so in that respect, Google’s front door to advertisers gives AdMob an advantage over other ad networks.”

Self-service mobile advertising will grow in usage, which suggests Google’s approach will position it well, according to Mr. Boland. “We could see more and more mobile distribution options integrate with its existing AdWords dashboard, again, a one-stop-shop approach,” Mr. Boland said. “If you think about it, this again mirrors Google’s online approach. “Other mobile ad networks have meanwhile begun to ad self-service tools to reach more mid-market and SMB long-tail advertisers,” he said. “This will be a growing source of mobile ad revenue as mobile marketing reaches these segments of the market, just like they did online.”

Focusing on display, search and messaging-based advertising, eMarketer predicts that U.S. mobile advertising spending will grow from $320 million last year to $416 million this year to more than $1.5 billion by 2013. “Google’s acquisition of AdMob obviously gives a lot of legitimacy to mobile marketing in general and mobile display advertising specifically,” said Noah Elkin, senior analyst at eMarketer, New York. “It signals, as on the desktop, that the combination of display and search are going to be what drives the advertising ecosystem, including mobile advertising. “I’m sure that all of the mobile ad networks have been thinking about a combination like this, they’ve all received quite a bit of venture capital money over the past few years, and they’ve been contemplating something like this as a potential exit strategy,” he said. “This deal could help accelerate that timetable. “Google putting a lot of money into the space speeds things up a bit.”

Mr. Elkin would not rule out the possibility that this deal could lead to an acquisition by Microsoft or another Google rival. “Microsoft getting involved is certainly possible—AOL bought Third Screen Media and merged that into Platform-A,” Mr. Elkin said. “Microsoft has invested pretty heavily in voice search with the TellMe acquisition a couple of years ago, and I’m sure they’re looking pretty closely at mobile display as well. “This is the beginning of a dance or musical chairs, with everyone looking for a partner,” he said. “It’s all leading mobile ad networks to cater to slightly different constituencies, there’s not a lot of overlapping reach, so they are viable acquisition targets—AdMob is very strong with iPhone users, while Quattro and Millennial have different user bases, so there are lots of ways into this market. “We’ve pointed to display and search as the two main components driving the market, increasing smartphone adoption and the increase in mobile Web surfing and applications usage is driving that.”

Open letter from Omar Hamoui, founder/CEO of AdMob, San Mateo, CA, to publishers, advertisers and visitors to AdMob.com

This morning we announced that AdMob has signed a definitive agreement to be acquired by Google. I’m obviously excited, and not only for our customers, partners, and employees. I’m excited because I believe this will be an important moment for everyone involved in producing, consuming, or monetizing engaging products on mobile. The truth is that the mobile industry has had no shortage of creative energy, amazing products, and talented entrepreneurs. But until now, it has always felt like those of us involved in this space played second fiddle to our online brethren. I believe that time is over.

I’ve been working in mobile for over 7 years now. Before AdMob, I founded two separate mobile startups that never got significant traction. It was so frustrating to build what I knew was an incredible service only to find myself unable to distribute or monetize the product without a carrier or handset deal. Turns out, I wasn’t the only one. Talk to any veteran in mobile and they will tell you just how hard it was to get things done only a few years ago. I remember we used to have a cynical saying that summarized both the promise that mobile possessed and the monumental barriers we could not cross: “Mobile is the future, and always will be.”

That frustration is what led me to found AdMob a few years ago while I was in grad school. Over the years I’ve been fortunate enough to gather a tremendously talented group of employees. Together we’ve been a part of helping to create a healthy and vibrant environment where developers and publishers, small and large, can both promote their services as well as benefit from the attention and usage their products attract. In our early days we were focused primarily on the mobile web, and gained immense satisfaction from each new business that our service made possible within the mobile browser.

Then came the iPhone. Suddenly, Apple solved so many problems that had plagued mobile for so long. They showed all of us the way forward and their efforts have led to a landslide of rapid improvements in our space. We were so excited by the promise the iPhone represented that we shifted a significant portion of our attention to that device in its very early days. We launched the first iPhone ad units focused on the web and quickly added the capability to run ads in applications. Now with the addition of excellent devices from Palm, Nokia, RIM, and plethora of Android powered smartphones, we have all the preconditions necessary for what will be a tidal wave of mobile browsing and app usage. But let there be no mistake. Our business, and the mobile industry in general, owes Apple a debt of gratitude.

We now operate in an environment that is much more advanced than the one we entered into a few years ago. There are literally hundreds of competitors, small and large, with different areas of focus and expertise. Lately, it seems that almost every week we hear about a new idea or company in the mobile advertising space. This has led to rapid innovation, and we’re excited about the positive attention this deal will bring to mobile advertising. We have no doubt this will bring even more players into the space and accelerate all the innovation that is already taking place.

There are so many people to thank for getting us to this point. We’ve benefited from the advice and support of the best investors and advisers in the world. We’ve had tremendous publishers, advertisers, and partners. We’re very excited by all the very real benefits this will bring for them. Our ads will become more relevant, our products more robust, and our monetization capabilities more significant. Most importantly, I’ve had the honor of working with a team of people that were all, top to bottom, completely committed to our mission. I’ve never in my career seen such dedication, excellence, and passion. This is a group that is smart, fun, and very focused on building and launching amazing products. We’ve been able to keep the bar so high that I often tell people that I’m very lucky to have founded the company in the first place, as I am fairly certain I wouldn’t have made it through the interviews. So let me be plain: None of this would have this happened without the team at AdMob, and I will be forever in their debt.

The best part of all this is what’s next. We are not going away. After our deal with Google closes, we will work together to accelerate the pace of innovation in this area. Our product and engineering teams will keep building great products for all of our customers. Our business development team will keep working to maximize ad revenue for the more than 15,000 mobile Web sites and applications that make up AdMob’s publisher network. Our sales teams will keep working with our thousands advertisers to deliver successful campaigns and our marketing group will keep pushing to get the word out about mobile. It’s just that now we will be able to do an even better job for all of our customers.

I have one important thank you left and it is for Google. We’ve been blown away by their entrepreneurial attitude, their speed, and their insight. My management team and I have been lucky enough to spend time with some key people at Google, and we’ve always walked away excited about our shared values and similar cultures. In all of our interactions we’ve felt their passion for innovation and new ideas. Obviously this transaction represents only a part of their overall interest in mobile but all of us at AdMob are looking forward to working with them to make sure that the future of mobile is no longer so far away.

Mobile industry’s two cents

With the deal sending shockwaves through the industry, many competing mobile ad networks and other players in the mobile ecosystem were eager to share their views about the potential impact of Google’s acquisition of AdMob.

Here is what they had to say:

Andy Miller, CEO of Quattro Wireless, Waltham, MA

I think it has a huge impact. We’ve been hearing rumblings, and I was hoping that it would be Google. It’s a huge validation point for the industry, as Google is the most sophisticated mobile player, and it wanted to accelerate on this with a mobile ad specialist like AdMob. Google said that the mobile Web is different and we need to accelerate in this space. It’s an exciting development for Quattro, as well.

Agencies are the ones putting it on the table in front of brands, and a lot them are partners with Google, so this further validates the space for them. It’s further justification to present mobile plans to their clients. This ups everyone’s ante. Hopefully we’ll lead the way with our targeting. It’s a pretty robust ecosystem of folks trying to move the market, and this will accelerate it and move it forward by years.

This is the first big domino to fall. When Google comes out and said mobile is different and we want to dominate it, people will take notice.

Paul Palmieri, president/CEO of Millennial Media, Baltimore, MD

What happened today is astounding. Google’s perspective has always been that mobile is just the Internet. Today Google validated what many companies including Millennial have thought for years—that mobile is a different market with a huge potential for advertising, possibly a bigger opportunity than online media. As the clear leader in mobile brand advertising, we are happy to see a player like Google bring economies of scale to the performance advertising space in mobile.

Millennial Media has generated our substantial lead in the market by focusing on the advertiser, delivering results, and has been rewarded with the largest reach of any media company large or small. Reaching 80 percent of the U.S. mobile audience, we look forward to working alongside the Google/AdMob pairing to fully realize the vast potential of the mobile advertising market. Congratulations to Google and to AdMob.

Paran Johar, New York-based chief marketing officer of Jumptap

The announcement is causing tremendous excitement as it validates the enormous potential of mobile advertising. We predicted consolidation in the industry and AdMob’s broad high-volume business model is highly synergistic for Google.

The industry frontrunner will be determined by who can deliver the most advanced targeting capabilities for better ROI for advertisers and publishers.

Patrick Moorhead, director of emerging media at Razorfish, Chicago

It’s obviously super-exciting—it’s obviously a landmark deal, not only the scale of it, but the fact that it’s Google. It’s a sign that mobile is no longer emerging media, because they bought scale, they bought the leader in the space. I’m a huge fan of those guys, we do a lot of business with them and with Google, and this is good news for everyone in the industry.

What it means for other ad networks is that there is a future for their business and it’s growing—a rising tide floats all boats. Other players shouldn’t be thinking ‘game over,’ they should be thinking ‘game on.’

If you take the model that happened with our company (see story), Google picked up DoubleClick and Microsoft picked up aQuantive, this signals that Google played their cards, bought a leader and, based on precedent, it won’t be long before Microsoft looks around and says ‘wow, we have to make a move.’

Brands are the only people who aren’t playing effectively in the mobile space, and this is a wake-up call to clients who says mobile is not a real opportunity, because it is. Google doesn’t get involved in anything it doesn’t think has scale.

Michael Chang, CEO of Greystripe, San Francisco

This is an unprecedented validation of mobile advertising and demonstrates the value of rapidly growing a mobile-only advertising platform.

It is also a clear sign that Google understands the value of the mobile channel and brought in a company that has created a mobile-specific solution. We congratulate all of our industry colleges over at AdMob on their hard work.

Gib Bassett, director of marketing at Interactive Mediums, Chicago

Upon hearing this news today, my initial reaction was ‘validation for mobile advertising,’ but definitely not ‘game over for ad networks as a competitive segment.’ Given the high valuation placed on AdMob, Google clearly sees what AdMob has created as very compelling and a strategic fit with its pre-existing ad program, AdSense.

I think the value of ads displayed in rich apps, such as ones served by AdMob, may have more value than AdWords served on search results pages and sites across the AdSense network, simply because an app user has so much more invested in the experience and therefore is paying a lot more attention to what’s being displayed for them.

I thought the news was especially interesting given recent word that AOL was likely exiting the mobile ad business despite a lot of investment and an acquisition [of Third Screen Media]. So although mobile advertising is a relatively new category, it’s matured a lot in a short period of time, having seen large efforts like AOL’s come and go, and a giant like Google coming in and making a statement like it has buying AdMob.

I’d also say that this is another indicator of the ‘mobile customer experience’ driving the smart moves in the industry. Google knows that to provide the best mobile ad offering, it needs to consider all the ways ads can be most effectively served to consumers on mobile devices—across mobile-optimized Web-search results through rich smartphone applications. They have done that exactly and now have a stronger offering which blends AdSense and AdMob.

For other ad networks, there is still room to move, but they need to more clearly differentiate their offerings. As the nature of the mobile channel continues to morph and lines among disconnected categories like SMS text messaging, the mobile Web and applications start to blur, there should still be room for other ad networks to come up with innovative ways of helping marketers connect with their customers in the most timely and relevant manner possible.

Gary Schwartz, president/CEO of Impact Mobile, New York

AdMob has done a tremendous job globally of positioning mobile as extension of the digital buy. Although display advertising on mobile is still relatively embryonic, digital standards bodies like the Interactive Advertising Bureau are actively positioning mobile as an extension of the more mature online cousin. There is no doubt that this Google deal will further legitimize the mobile display buy with brands and agencies.

Eric Harber, president and chief operating officer of HipCricket, Kirkland, WA

Given that Google is the buyer and the size of the deal is so large, this is certainly a milestone moment for mobile advertising and marketing. It provides additional validation to our firm belief and experience that mobile marketing has moved beyond the test phase and now has a seat at the table when the brand’s marketing mix is developed and dollars are allocated. However, mobile advertising isn’t an end-all solution for brand managers seeking to reach consumers via mobile. Oftentimes, SMS is the gateway to engagement because of its ability to reach the great majority of mobile subscribers who have text messaging capabilities on their devices. Calls-to-action and the resulting activity by consumers have proven to drive sales and give brands a valuable, permission-based ongoing relationship with consumers looking for ongoing information and offers. This personalized loyalty and relationship marketing aspect is uniquely driven via SMS mobile marketing and is growing in importance.

Dave Gwozdz, CEO of Mojiva, New York

The news that Google acquired mobile advertising player AdMob for $750 million confirms the legitimacy of the mobile advertising industry, and overcomes any skepticism of whether small screens can offer big opportunities to reach mobile consumers.

The fact that Google has placed a premium on owning a mobile ad network is very notable. The market has definitely matured to the point where it makes sense for online behemoths to try to combine networks, analytics and delivery technologies in the hopes of capturing a share of this growing market.

Zohar Levkovitz, CEO of Amobee, Redwood City, CA

The recent marriage between Google and AdMob is a clear indicator that the mobile advertising industry has a bright future. Industry innovation will also stand to benefit from Google entering the competitive mix.

However, Google’s recent financial commitment also signals to operators developing their own mobile advertising offerings that there is no time for complacency. While operators still own the mobile market in terms of reach and the subscriber in terms of trust, billing relationships, user demographics and targeting information, it is undeniable that Google’s recent acquisition is a game-changer.

Nevertheless, there are still challenges to overcome and fragmentation continues to be a stumbling block. In order for mobile advertising to have a strong, viable future, we believe that the solution must be more centralized around the unbeatable assets of the mobile operators. Major brands and media buyers want a one-stop shop solution and access to the operator’s premium inventory. An operator-centric approach will play a key role in making this possible and further accelerate adoption.

Ken Willner, CEO of Zumobi, Seattle

AdMob is a Zumobi partner and this is a great validation of the potential of the mobile advertising space.

Zaw Thet, CEO of 4Info, San Mateo, CA

Beyond our obvious joy for Omar, Tony [Nethercutt, vice president of sales at AdMob], Jason [Spero, vice president of marketing at AdMob] and all our friends at AdMob, there’s much more to this story, such as:

• Thus far, nobody has talked about what this means for Android/Droid – and whether this will hurt iPhone developers and/or help other mobile ad networks as Google influences AdMob to spend more time on Android.
• We believe this is great news for the mobile industry as it indicates the momentum and growth we’ve experienced over the past two years. That said, the rumor we’ve heard has Apple also bidding for the business – maybe one reason the price was so good.
• Lastly, we want to clear something up. It has been pointed out that 4Info’s primary short code [44636] is featured in the SMS ads picture on Google’s announcement page – this does not imply any kind of special relationship with Google or AdMob. We do work with both companies, but it does reinforce that SMS is a critical part of the industry, and that no mobile marketing/advertising program is complete without SMS. We also believe it speaks to our leadership position in the SMS space.

Susan Marshall, vice president of marketing at ChaCha Mobile, Indianapolis, IN

We think the acquisition validates the claim that we have all been saying: There is enormous opportunity in mobile advertising and we have just begun to see what’s possible.

There is plenty of room for innovation and competition in the mobile advertising space. Interestingly, AdMob only works well on less than 17 percent of the phones out there, including iPhones and BlackBerrys. So, there is big upside. SMS works on all phones, i.e. the overwhelming majority of 83 percent of the other phones out there.

In the end, it’s all about what the brand is trying to achieve with mobile advertising. We believe in a multichannel approach. Web, SMS and display make the most sense, with a heavy emphasis on conversational SMS when you are trying to reach youth.

Alec S. Andronikov, CEO of MoVoxx Inc., Los Angeles

I actually still think that when we come to mobile advertising, the industry is just starting to cross the “chasm” (per Geoff Moore’s analogy) between early adopters and not yet adopted by the early majority of advertisers. This acquisition allows AdMob to get into the “early majority” because of Google’s ad relationships.

I think it could potentially start what I call a second round of mobile “musical chairs,” as other big guys are going to start looking for acquisitions that give them similar capabilities but are cheaper plays, as not a lot of folks out there have nine figures to spend on mobile acquisitions.

Staff Reporter Dan Butcher covers ad networks, banking and payments, carrier networks, manufacturers, and software and technology Reach him at dan@mobilemarketer.com.

A storied financier of startups expands — but its new businesses have yet to take root.

A year ago, when venture capital firm Sequoia Capital ordered its portfolio companies to slash costs in the face of a sick economy, even healthy businesses, such as LinkedIn and Zappos.com, complied.

As word of the edict spread, many non-Sequoia startups also trimmed their budgets — a testament to the venture firm’s influence in Silicon Valley and beyond. In its 35 years in business Sequoia had nurtured the likes of Atari, Apple (AAPL), Cisco (CSCO), Yahoo (YHOO), and Google (GOOG). If it was bracing for the worst, the situation must be serious.

But just as Sequoia was commanding its upstarts to contract, the firm was plotting an ambitious expansion of its own. Throughout 2008 and into this year Sequoia tried entering entirely new businesses, hiring professional investors to build a hedge fund, as well as an asset-management group that would mimic the wealth-preservation approach popularized by major university endowments.

Sequoia has said little publicly about these new initiatives. Its preeminent partner, Michael Moritz, wouldn’t comment. He has good reason to remain mum: Both the hedge fund and endowment-like offering are off to exceedingly slow starts. The new initiatives have failed to attract a sufficient number of outside investors or even retain their initial high-profile employees.

More ominously, a nagging question lurks behind Sequoia’s entrepreneurial aspirations: What does it say about Sequoia’s commitment to the venture capital industry it helped invent if its partners are busy plotting entry into two corners of the financial services world in which Sequoia hasn’t the slightest bit of experience? In short, do Sequoia’s imperial ambitions confirm the venture world’s worst fears, that its best days are behind it?

Sequoia is hardly the only VC firm that is straying from its roots. Kleiner Perkins, which successfully seeded the public-private investment firm Integral Capital Partners nearly 20 years ago, has been busily focusing on “growth” and alternative-energy funds. New Enterprise Associates, a firm based in California and Baltimore, manages so many billions of dollars that it can’t possibly be considered merely a VC operation anymore. Sequoia itself had already broadened its offerings geographically with funds in Israel, India, and China.

What’s unique about Sequoia’s latest foray is the aggressiveness with which it has been expanding beyond the strategy that made it great. Sequoia began business in 1972 as a spinoff of Capital Group, the legendary fund management group in Los Angeles.

And for almost three decades Sequoia stuck mainly with venture investments. Even as its renown grew, Sequoia remained relatively small and focused. It put money into small, risky tech companies, and the size of its venture funds remained in the $400 million range, far below what competing firms raised. But this approach limited the fees Sequoia partners could earn — and the firm’s profit potential.

A few years ago, according to people in the know, Sequoia’s partners — chiefly Moritz and the other most senior active partner, Doug Leone — became convinced Sequoia needed to do more if it was to survive well into the future. Venture had passed through a golden age of relatively easy “exits” in the form of ubiquitous public offerings or sales to major tech companies. What’s more, the partners had accumulated immense wealth and weren’t satisfied with the various professionals offering to manage their money.

In 2008 Sequoia made its move. It hired Michael Beckwith, a seasoned hedge fund manager from Maverick Capital, a Dallas-based money management firm, and Eric Upin, the chief investment officer of Stanford’s endowment.

The plan was to raise two new pools of capital from Sequoia’s network — endowment investors in Sequoia’s venture funds, entrepreneurs whom Sequoia had helped become rich, and Sequoia’s partners themselves.

Its pitch? Sequoia’s existing funds would benefit from increased exposure to public-securities investments and the new clients recruited by the asset-management product, dubbed the Heritage Fund.

Sequoia’s timing couldn’t have been worse. Its expansion coincided with the worldwide financial meltdown — not a great time for a VC-turned-money-management-firm to raise funds. Without funds to manage, Beckwith and Upin left, the former back to his old firm and the latter to Makena Capital, an existing multibillion-dollar fund pursuing precisely the wealth-preservation strategy Sequoia coveted.

Sequoia hasn’t given up on its dreams, say people close to the firm. But it has scaled back its ambitions. Earlier in the year the firm abandoned swank office space in downtown San Francisco that was intended to house the Heritage staff, subletting the offices to a law firm.

The performance of Sequoia’s core business is a mixed bag. It has had some nice exits: Battery maker A123 Systems (AONE) went public in September and is now worth more than $2 billion. Earlier this year Zappos.com agreed to sell to Amazon.com (AMZN), and Cisco last year bought videocamera maker Pure Digital for $590 million. A potential home run is LinkedIn, whose investors have assigned it a billion-dollar valuation.

Yet in its most recent venture fund there isn’t one investment with the trademark Sequoia buzz. Some look promising, like mobile ad firm AdMob and Sugar Publishing, a producer of web content for women.

Others are duds, including online media companies Imeem and Joost. Sequoia notably isn’t invested in the hottest Internet companies of the moment, Facebook and Twitter, both of which seem, for now, to be gushers for their early venture backers.

True to form, Sequoia isn’t panicking. In September it gathered a group of friendly entrepreneurs and investing partners to update them on the firm’s progress. Moritz told the group that Sequoia remains committed to financing small, risky technology companies, with nary a mention of the new funds. Who would have thought Sequoia’s chanciest venture would have been its own?

Shawn: My career journey has spanned over a decade in several Silicon Valley technology companies.  In both high school and my college studies at Princeton, I had a fervent interest in math and quantitative economics.  Silicon Valley drew me to companies like upstart procurement software maker Ariba and database giant Oracle.  I continued my studies by returning to get a Master’s in Management Science at Stanford before going on to lead core storage systems for nearly 5 years at NetApp and subsequently Aster.

Science (whether it is math, physics, economics, or the hard engineering sciences) provides a solid foundation.  It teaches you to think and test your assumptions – those are valuable skills that can lead to a both a financially lucrative and personally inspiring career.

Shawn: Let’s start with the database guys – Oracle and Teradata.  They focus on structured data – data that has a logical schema and is manipulated via a standards-based structured query language (SQL).  Oracle tries to be everything to everyone – it does OLTP (low-latency transactions like credit card or stock trade execution apps) and some data warehousing (typically summary reporting).  Oracle’s data warehouse is not known for large-scale data warehousing and is more often used for back-office reporting.

Teradata is focused on data warehousing and scales very well, but is extremely expensive – it runs on high-end custom hardware and takes a mainframe approach to data processing.  This approach makes less sense as commodity hardware becomes more compute-rich and better software comes along to support large-scale MPP data warehousing.

SAS is very different – it’s not a relational database. It really offers an application platform for data analysis, specifically data mining.  Unlike Oracle and Teradata which is used by SQL developers and managed by DBAs, SAS is typically run in business units by data analysts – for example a quantitative marketing analyst, a statistician/mathematician, or a savvy engineer with a data mining/math background.  SAS is used to try to find patterns, understand behaviors, and offer predictive analytics that enable businesses to identify trends and make smarter decisions than their competitors.

Hadoop offers an open-source framework for large-scale data processing.  MapReduce is a component of Hadoop, which also contains multiple other modules including a distributed filesystem (HDFS).  MapReduce offers a programming paradigm for distributed computing (a parallel data flow processing framework).

Both Hadoop and MapReduce are catered toward the application developer or programmer.  It’s not catered for enterprise data centers or IT.  If you have a finite project in a line of business and want to get it done, Hadoop offers a low-cost way to do this.  For example, if you want to do large-scale data munging like aggregations, transformations, manipulations of unstructured data – Hadoop offers a solution for this without compromising on the performance of your main data warehouse.  Once the data munging is finished, the post-processed data set can be loaded into a database for interactive analysis or analytics. It is a great combination of big data technologies for certain use-cases.

Aster takes a very unique approach.  Our Aster nCluster software offers the best of all worlds – we offer the potential for deep analytics of SAS, the low-cost scalability and parallel processing of Hadoop/MapReduce, and the structured data advantages (schema, SQL, ACID compliance and transactional integrity, indexes, etc) of a relational database like Teradata and Oracle.  Often, we find complementary approaches and therefore view SAS and Hadoop/MapReduce as synergistic to a complete solution.  Data warehouses like Teradata and Oracle tend to be more competitive.

Shawn: Aster was the first-to-market to offer In-Database MapReduce, which provides the standards and familiarity of SQL and databases with the analytic power of MapReduce.  This is very unique as it offers technical developers and application programmers to write embedded procedural algorithms once, upload it, and allow business analysts or IT folks (SQL developers, DBAs, etc) to invoke these SQL-MapReduce functions forever.

It is highly polymorphic (re-usable), highly fault-tolerant, highly flexible (any language – Java, Python, Ruby, Perl, R statistical language, C# in the .NET world, etc) and natively massively parallel – all of which differentiate these SQL extensions from traditional dumb user-defined functions (UDFs).

Shawn: Aster has dozens of production customers including big-names like MySpace, LinkedIn, Akamai, Full Tilt Poker, comScore, and several yet-to-be-named retail and financial service accounts.  We have quantified proof points that show orders of magnitude improvements in scalability, performance, and analytic insights compared to incumbent or competitor solutions.  Our highly referenceable customers would be happy to discuss their positive experiences with the CEO.

But taking a step back, there’s a fundamental concept that this CEO needs to first understand.  The world is changing – data growth is proliferating due to the digitization of so many applications and the emergence of unstructured data and new data types.  Like the book “Competing on Analytics”, the world is shifting to a paradigm where companies that don’t take risks and push the limits on analytics will die like the dinosaurs.

IDC is projecting 10x+ growth in data over the next few years to zetabytes of aggregate data driven by digitization (Internet, digital television, RFID, etc).  The data is there and in order to compete effectively and understand your customers more intimately, you need a large-scale analytics solution like the one Aster nCluster offers.  If you hold off on experimentation and innovation, it will be too late by the time you realize you have a problem at hand.

Shawn: Very important.  I hang out with my wife most weekends – we do a lot of outdoors activities like hiking and gardening.  In Silicon Valley, it’s all too easy to get caught up in the rush of things.  Taking breaks, especially during the weekend, is important to recharge and re-energize to be as productive as possible.

Shawn: We’re always looking for smart, innovative, and entrepreneurial new college grads and interns, especially on the technical side.  So if you are a computer science major or recent grad or graduate student, feel free to contact us for opportunities.

What makes Aster exciting is 2 things –

first, the people.  Everyone is very smart and innovative so you learn a tremendous amount, which is personally gratifying and professionally useful long-term.

Second, Aster is changing the world!

Distributed systems computing focused on big data processing and analytics – these are massive game-changers that will fundamentally change the landscape in data warehousing and analytics.  Traditional databases have been a oligopoly for over a generation – they haven’t been challenged and so the 1970’s based technology has stuck around.  The emergence of big data and low-cost commodity hardware has created a unique opportunity to carve out a brand new market…

what gets me pumped every day is I have the ability to contribute to a pioneer that is quickly becoming Silicon Valley’s next great success story!

Biography-

Over the past decade, Shawn has led product management for some of Silicon Valley’s most successful and innovative technology companies.  Most recently, he spent nearly 5 years at Network Appliance leading Core Systems storage product management, where he oversaw the development of high availability software and Storage Systems hardware products that grew in annual revenue from $200M to nearly $800M.  Prior to NetApp, Shawn held senior product management and corporate strategy roles at Oracle Corporation and Ariba Inc.

Shawn holds an M.S. in Management Science and engineering from Stanford University, where he was awarded the Valentine Fellowship (endowed by Don Valentine of Sequoia Capital).  He also received a B.A. with high honors from Princeton University.

About Aster

Aster Data Systems is a proven leader in high-performance database systems for data warehousing and analytics – the first DBMS to tightly integrate SQL with MapReduce – providing deep insights on data analyzed on clusters of low-cost commodity hardware. The AsternCluster database cost-effectively powers frontline analytic applications for companies such as MySpace, aCerno (an Akamai company), and ShareThis.

Running on low-cost off-the-shelf hardware, and providing ‘hands-free’ administration, Aster enables enterprises to meet their data warehousing needs within their budget. Aster is headquartered in San Carlos, California and is backed by Sequoia Capital, JAFCO Ventures, IVP, Cambrian Ventures, and First-Round Capital, as well as industry visionaries including David Cheriton and Ron Conway.

According to VentureBeat’s report on 31 Jul 2009, Kleiner Perkins Caufield & Byers has backed its first water-related cleantech company, Applied Process Technology (APT). This is a significant milestone for the firm and a sign that floodgates may finally open in water investing in the US. APT makes water remediation technology that removes agricultural nitrates from well water.

Apart from VentureBeat’s report, there’s no other news related to this investment. Websites on both Kleiner and APT did not have any press release on it. Furthermore, Kleiner is the first major firm to take interest in the private company APT, reported by VentureBeat. It previously raised $1 million and hoping for $7 million more, according to a regulatory filing with the SEC. APT claims it has already brought in $10.5 million in equity.

Europe has been leading the pack in the water space while US focuses on cleantech investing on renewable energy, transportation applications and smart grid. Few firms in the same tier as Kleiner have invested in water. Mayfield Fund and Sequoia Capital do not invest in cleantech outside of the energy space.

Comment: It is significant for more VC firms to be involve in the water industry and invest in water infrastructures and technologies. Water crisis, as many doomsayers say, is more acute than energy crisis. We can live without electricity, although somewhat more primitive, but we can’t live without water. Water is really underpriced and underappreciated in the US (hence less attention to the water space there?). The fact that such a big VC firm like Kleiner starts to take notice of the water industry speaks about either its foresight of the good investment in the industry or the severity of the water problems in the US.

Company overview:
Applied Process Technology, Inc. develops and manufactures water treatment technologies for drinking water, industrial process water, wastewater, environmental remediation, and homeland security markets. Its products include HiPOx that performs multiple treatment functions, such as disinfection, taste/odor/color removal, and volatile organic compounds or micro contaminant destruction; PulseOx that injects oxidizing agents directly into a subsurface formation to treat groundwater and saturated soils; and Membrane Bio-film Reactor that removes oxidized contaminants from water through microbial catalyzed reduction. The company provides preliminary engineering analysis, laboratory/bench scale testing, pilot/field testing, equipment installation and start-up, and operations and maintenance services. Applied Process Technology, Inc. was founded in 1996 and is based in Pleasant Hill, California.

www.aptwater.com

Key Personnel:
Terry Applebury, Co-Founder, President & CEO
Dr Reid Bowman, Co-Founder, VP of R&D & Chief Technology Officer
Douglas Gustafson, Co-Founder, Director of Field Development
Douglas A. Liddie, Executive VP & COO

About: Founded in 1995, Foundation Capital is a venture capital firm committed to supporting entrepreneurs and their companies, targeting innovative opportunities in cleantech, consumer Internet and infrastructure; telecommunications and networking; and enterprise software and on demand services. Foundation Capital funds total more than $2.4 billion. Based in Menlo Park.

www.foundationcapital.com

Key Personnel:
General Partner: Bill Elmore, Adam Grosser, Paul Holland, Paul Koontz, Charles Moldow, Rich Redelfs, Mike Schuh, Ashmeet Sidana, Warren Weiss

Portfolio:
Cleantech – Azure Power, Calstart Products, eMeter, EnerNOC, Naverus, Purfresh, Serious Materials, Silver Spring Networks, SunRun

News: In April 2008, Foundation Capital, a venture capital firm committed to early stage company building, announced that it has closed a $750 million venture capital fund, Foundation Capital VI. The fund will allocate roughly $250 million to expanding the firm’s thriving cleantech practice which began in 2003. Foundation Capital has since built a comprehensive portfolio of investments in cleantech sectors including energy efficiency and intelligence, green building materials and industrial processes, food quality and clean water.

In Feb 2008, Foundation Capital was selected as an Inaugural Partner of the US Department of Energy’s Entrepreneur-In-Residence (EIR) Program, working closely with the Department’s Oak Ridge National Laboratory to help sponsored entrepreneurs bring the most promising of the Lab’s energy technologies to the private sector.

On 28 July 2009, SunRun, the leading provider of home solar power, announced it closed a Series B round of funding for $18 million led by Accel Partners and joined by existing investor, Foundation Capital. SunRun plans to use the funding to meet strong demand for its popular residential solar service, expand into new markets, and build on the Company’s recent successes.

On 22 July 2009, eMeter Corporation, the global leader in Smart Grid management software, announced the close of a $32 million private financing led by Sequoia Capital and joined by existing investor, Foundation Capital. The funds will be used to accelerate eMeter’s sales and marketing in new markets, enhance services to current customers and continue investing in new products.

See Forecast Earth video interview with Paul Holland here.

About: DAG Ventures is a venture capital partnership investing in and helping outstanding entrepreneurs create leading, long-term companies across a range of markets. With roots from the 1980’s in cable TV, infrastructure, media, and wireless industries, the partnership today is privileged to work with world-class entrepreneurs as they build tomorrow’s leaders in the information technology, energy, and life science sectors.

www.dagventures.com

Key Personnel:
John J. Cadeddu, Managing Director
Young J. Chung, Managing Director
John M. Duff, Managing Director and co-founder
R. Thomas Goodrich, Managing Director and co-founder
Nicholas K. Pianim, Managing Director
Kendra H. Ragatz, Venture Partner
Greg Williams, Managing Director
Joseph Zanone, CFO

Portfolio:
I have to select the cleantech companies from its portfolio:
Altra Biofuels, Agrivida, Amyris BioTechnologies, Bloom Energy, GreatPoint Energy, GreenRoad, Lilliputian Systems, Luxim, Miasolé, Solexel.
I will also add Oorja Protonics to this list (see news below).

News: In previous blog, it has been mentioned about GreenRoad securing $15m in additional financing led by new investor DAG Ventures, with participation from existing investors Benchmark Capital, Virgin Green Fund, Amadeus Capital and Balderton Capital in May 2009.

In December 2008, Biofuels Digest broke a story that “In California, Altra Biofuels announced that they have shut down production at their two ethanol plants formerly operating in Cloverdale, Indiana and Coshocton, Ohio. The Altra plant in Cloverdale commenced operation in May, with an initial capacity of 84 Mgy that the company had announced it would expend to 100 Mgy. The complete staff of the plant were laid off indefinitely. The company did not reveal the reason for closure, but low ethanol prices and the continuing credit squeeze are likely to have been the key factors in the shutdown, according to observers.”

A WSJ Blog wrote that Altra Biofuels, an Omaha, Neb-based ethanol producer, later described the layoffs as a “furlough” and it aimed to re-start production in January 2009. Ethanol nearly hit $3 a gallon in June 2008; today in December 2008 it trades just under $1.40 a gallon. That spells zero or even negative margins for most ethanol makers. Altra is a poster child of sorts for the corn ethanol business, attracting investment from Vinod Khosla and Kleiner Perkins. Former vice president Al Gore touted Altra as an example of the alternative-energy companies that could underpin a green revolution in the U.S.

However, this Indiana paper Banner Graphic reported Altra Biofuels was knocking on the door of bankruptcy in February 2009 and describing the process of disposing the waste at the Cloverdale plant which has fallen into receivership. I could not find other reports to verify this bankruptcy statement.

In Mar 2008, Oorja Protonics, the Fremont, Calif.-based developer and manufacturer of ultra-powerful fuel cells, stepped out of stealth mode to announce its public launch and patented direct methanol fuel cell (DMFC) technology. The startup touts its fuel cells as being 10 to 100 times more powerful than existing methanol fuel cells, and believes the use of the readily available fuel gives it a strong advantage over hydrogen technology for forklifts, tuggers, and automated guided vehicles. Backed by nearly $21 million in funding from Sequoia Capital, DAG Ventures, McKenna Management and Spring Ventures, according to regulatory filings, the company planned to announce a major contract for its fuel cells later in the week.

About: Khosla Ventures offers venture assistance, strategic advice and capital to entrepreneurs. The firm helps entrepreneurs extend the potential of their ideas in both traditional venture areas like the Internet, computing, mobile, and silicon technology arenas but also supports breakthrough scientific work in clean technology areas such as bio–refineries for energy and bioplastics, solar, battery and other environmentally friendly technologies. Based in Menlo Park.

www.khoslaventures.com

Key Personnel:
Vinod Khosla, Founder and Partner
David Wieden, Partner
Samir Kaul, Partner
Ford Tamer, Operating Partner
Alex Kinnier, Partner
Pierre Lamond, Partner

Portfolio:
Renewable Portfolio – Stion, Ausra, Infinia, PVT, AltaRock, GreatPoint Energy, Sakti3, Firefly, Ramu, Seeo, Kaai, Soraa, Lumenz, Topanga, GIV, Gridshift, PAX Streamline, EcoMotors, Transonic, Tula, Hybradrive, Amyris Biotechnologies, LS9, Gevo, KiOR, Mascoma, Range, Coskata, Lanza, Cilion, Draths, Segetis, Soladigm, Calera, NanoH2O, Nanostellar, Codon.

News: A Forbes article on 20 July 2009 reported that Vinod Khosla is near to closing $1 billion in new funds. He is on the verge of announcing 2 new funds with money from outside investors: $250m vehicle for seed-stage investments and a $750m fund called “KVIII” for larger deals. California pension giant CalPERS said several months ago it had committed $200m to a new Khosla fund. Khosla reportedly wants to use some of the $750m fund for “follow-on” investments in his existing portfolio but to allay the concerns of some investors, Khosla would set up a “conflicts committee” to review “follow-on” investments that didn’t have outside lead investor. Company with another lead investor wouldn’t be reviewed because they’d already been endorsed by another VC firm, not just Khosla. (see Cello fraud case earlier here).

Vinod Khosla was formerly a General Partner at Kleiner Perkins and founder of Sun Microsystems. Vinod has been labeled the #1 VC by Forbes and Fortune recently labeled him as one the nation’s most influential ethanol advocates, noting “there are venture capitalists, and there’s Vinod Khosla.” Vinod Khosla founded the firm in 2004 and was joined by partners David Weiden and Samir Kaul, as well as chief scientific officer Doug Cameron in 2006. Doug Cameron left Khosla in 2008 to join Piper Jaffray as managing director and chief science advisor and will work with the firm’s industry-leading clean technology and renewable energy investment banking team in the origination and diligence of global opportunities.

Khosla has recruited Pierre Lamond in March 2009 after retiring from VC firm Sequoia Capital where he worked for the past 27 years. Khosla said that Sequoia is one of Khosla Ventures’ most frequent co-investors. Lamond, founder of National Semiconductor, will focus on investing in clean technology companies, which produce environmentally friendly technologies, as well as more traditional high-tech companies. In the article, it stated that “Khosla Ventures appears to be raising its first fund with institutional investors; the California Public Employees’ Retirement System recently disclosed it would commit money to the fund. Khosla declined to comment on a fund. Up till now, Khosla Ventures had only invested the money of its partners.” Comment: Khosla has been very active in the cleantech space, is the statement true that “Khosla Ventures had only invested the money of its partners”? That’s awful lot of money!

Note: Khosla’s press releases on the website are very outdated, the last was in 2006 (I’m not sure why this tech-savvy firm do not update their press releases). To find out their latest investments, you probably need to look at other sources, eg Cleantech Group:
1H09 investments: Ausra, Cello Energy, HCL Clean tech, Transonic Combustion (4 deals)
2008 investments: Ausra (2), Coskata (2), AltaRock Energy, NanoH2O, Neersorb, Amyris Biotechnologies, EcoMotors, Firefly Energy, Gevo, Range Fuels (2), Sakti3, Codon Devices, Infinia Corp, Lumenz, Mascoma, PAX Streamline, SJS Technology, Transonic Combustion (21 deals, the most deals of the year 2008)

See a video by Vinod Khosla at Google here or on vodpod.

Sequoia Capital, the venture firm that helped launch the likes of Cisco (s CSCO), Apple (s APPL) and Google (s GOOG), has taken a cautious approach to investing in cleantech — a year and a half ago it had only announced four energy-related investments, and most of those were older, established firms. Since then, Sequoia has been ramping up its energy portfolio, and here’s the latest: eMeter, an 11-year-old firm that makes software for smart meter systems. On Wednesday eMeter announced that it has raised $32 million in a third round of funding led by Sequoia and including existing investor Foundation Capital.

eMeter fits into Sequoia’s cleantech investing strategy of funding companies already selling products and bringing in revenue. The smart meter software maker has made deals with large utilities like Texas-based CenterPoint, which will use eMeter’s back-end data management system for a rollout of 2 million smart meters starting in March and finishing up in 2013. eMeter also recently launched consumer-facing energy management software that CEO Cree Edwards says will eventually deliver a substantial portion of the company’s sales.

For eMeter, the investment will likely be the last from private funders, according to Edwards, who also said that eMeter has now raised about $57 million in total. The funding will allow eMeter to build out its consumer energy management platform and potentially develop platforms to incorporate electric vehicle charging and distributed energy storage. The Sequoia investment is also a recognition that eMeter likely has one of the strongest products and business models on the market, since, as we pointed out, the firm does few investments in the space. Edwards said Sequoia did “so much research and due diligence” on eMeter before making the investment.

For Sequoia, the eMeter investment represents one of its first forays into the smart grid, although it  has invested in several energy efficiency plays, including lighting efficiency startups Luxim, Changelight and SynapSense, which has built a wireless energy-efficiency system designed to cut down the carbon footprint of energy-hungry data centers.

While Sequoia’s cautious approach is a diligent one, the VC firm did lose one of its oldest and most well-known investors to Khosla Ventures earlier this year: National Semiconductor (s NSM) co-founder and former Sequoia partner Pierre Lamond. The 78-year-old Lamond told the New York Times that he made the switch to invest in cleantech for Khosla partly because he appreciates Khosla Venture’s focus on growing companies from scratch. Sometimes safer plays aren’t always the most exciting.

In this 21 Feb 2008 report by Xconomy, the 2 leading New England VCs investing in India are Matrix Partners and Canaan Partners. A report from Dow Jones VentureSource shows that venture capital investment collected by entrepreneurs in India nearly tripled in 2007, totaling $928 million across 80 separate deals, as compared to just $349 million for 36 deals in 2006. It was “easily the highest total on record for the region,” according to the Dow Jones report. Some 48% of the funding went to information technology companies, and two IT-focused New England firms, Waltham, MA-based Matrix Partners and Westport, CT-based Canaan Partners, were among the top 10 venture firms sending money to India, closing five deals between them.

Here’s the list of the top 20 investors placing equity-based venture investments in Indian companies in 2007. (All data courtesy of Dow Jones Venture Source.)

Comment: Since quite a significant number of the VCs invested in IT-related companies, we’ll need to look at the details of the investments which are in cleantech sector later. DFJ is definitely one of the cleantech VC players in India, having established an office in Bangalore. What to invest in Incredible India?

Joost, a much-vaunted online video startup, today announced that it will offer a white-label video hosting platform, thus entering a crowded market littered with the carcasses of other failed video hosts. The company is also losing its famous chief executive, Mike Volpi, whom it’s replacing with Matt Zelesko, the current vice president of engineering. And it plans to cut a portion of its workforce — between about 70 of its remaining 90 employees, according to Advertising Age. It also shut down its office in the Netherlands.

When I read about all the planned changes at the company earlier today, the first thought that crossed my mind was: Stick a fork in it; Joost is done. After all, this whole white-label video strategy is like a leaky lifeboat in the middle of the Pacific Ocean. The NewTeeVee crew sums up the situation very succinctly: “Becoming a white-label video provider was what a business did when all other strategies failed.”

As someone who has followed Joost from its very inception, when it was known as The Venice Project, I’m amazed at how badly it’s stumbled. It shouldn’t have.

It had everything going for it, including:

• Successful, Celebrity Founders: Niklas Zennstrom and Janus Friis started the company in 2006 after palming off Skype to eBay (s ebay) for billions of dollars.
• Proven Technology: Joltid formed the basis for music- and file-sharing service Kazaa and later Skype.
• Substantial Funding: It raised $45 million in funding from the who’s who of the tech world: Sequoia Capital, Index Ventures, Viacom, CBS and Chinese tycoon Li Ka-shing.
• Incredible Buzz: The company had incredible pre-launch buzz that helped it to convince thousands of users to download its P2P video client — something that doesn’t happen all that often on today’s web.
• Big, Famous Partners: It managed to gain early traction with content providers such as Viacom and CBS, which were also investors in the company.

So what went wrong? Quite a few things, actually. Other startups should learn from the mistakes of Joost and avoid repeating them, such as:

• Too Big, Too Fast: Joost hired too many people, too quickly. It never behaved like a startup but instead always felt like a grown-up company with too many bureaucratic layers.
• Too Geographically Spread Out: The company was based in multiple geographic locations — New York, London and The Netherlands — and as a result, each location became somewhat of a silo.
• Not Enough Focus: Remember what your mom used to say when you took too big of a bite? If you’re not careful, you’re going to choke. Startups are just like that. Unless you focus, you’re going to choke. Joost couldn’t focus on one single market — and startups need to focus on one market at a time in order to win.
• Too Much Hype Too Soon: Like many, we were one of the early fans of this startup. Its founder pedigree generated a lot of pre-release interest. Nearly 250,000 folks signed up for the beta version of the software. But when technology problems hit, the pre-release buzz turned into buzzkill.
• Slow to Fix Its Technology Problems : Joost’s P2P network had technical problems early on that resulted in user defection. The company didn’t move to address those concerns fast enough. These technology problems have continued to nag the company throughout its life, even when it switched to a browser-based focus.
• Client vs. Browser: The company took too long to realize that the client-based strategy was going to lose out to browser-based video services. Its legacy of building clients became its Achilles’ heel.
• Didn’t Press Its Early-Mover Advantage: Joost had correctly identified that it needed the blessing of the content owners, but it failed to move aggressively enough to convince them to work with its platform. The client and technology problems didn’t help matters, either.
• Big Media Dis-Connect: Its big media investors were never willing to give Joost a content edge over the competition, prompting users to tune it out in favor of other services.
• Too Many Internal Problems: The company had some serious management problems, some of which led to the firing of its CTO in January 2008.
• Hulu: It started with a simple, easy-to-use interface for its browser-based video service, offered higher-quality video and used content from its backers, NBC and Fox, to become a household name, which in turn allowed Hulu to convince other content owners to sign up for its platform. Now it owns 10 percent of online video traffic.
• Chasing Its Own Tail: Joost also made some basic mistakes, such as not having a good SEO strategy. It never quite figured out a social media strategy in order to garner viral growth, either. It was like a tech company from the 1990s — out of sync with today’s web environment.

The dark cloud of doom started to settle over the company last year, as the team at NewTeeVee noticed time and again. NewTeeVee writer Janko Roettgers offered a recipe to fix Joost last fall, but apparently it was too little, too late, even then. The company consistently failed to gain any traction, even after unveiling new APIs and a browser-based offering. In the end, however, it all boiled down to a lack of content.

Photo credit of Mike Volpi pic: Eirikso via Flickr.

Here is a good excerpt for Mercury News.

“One of the world’s pre-eminent venture capitalists, Michael Moritz of Sequoia Capital, has picked winners like Flextronics, Cisco Systems, Yahoo, PayPal and Google by focusing on small teams or individuals that on first glance might appear to be unfundable. In a rare interview, Moritz spoke with the Mercury News about one of his latest long-shots, a call-center company founded in India, how he picks companies to back, and the silver lining in the financial meltdown. Following is an edited transcript.

Q How has the financial crisis reshaped the economy and affected the way you pick winners?

A I think tougher circumstances just serve to shine a brighter light on everything. The manner in which we pursue the business hasn’t changed.

Q Has it affected the way you view your portfolio companies?

A I think the managements of companies all across America understand that the sooner they don’t have to rely on the kindness of strangers to support their operations, the better off they are going to be. Again, I don’t think that is a startling new insight. It’s just when money is harder to get and credit is tight and investors are less giddy, I think companies and managements become much more disciplined. It means the people who start companies in times like these are people who are genuinely interested in starting companies. You have to be very determined to venture out into atmospheric circumstances like the ones that we’ve been through in the past nine months. Which means that the pretenders and posers and people who are really much more interested, if they are honest about it, in becoming rich than starting a company — those sorts of people will stay on the sidelines and wait for the weather to improve.”

Read the full interview by Elise Ackerman at at SiliconValley.com here.

Others covering this story: Reddit, Trading markets, MATR.

Did Techcrunch’s Michael A. receive a call from Sequoia??

Saturday, 5/15, this URL http://feedproxy.google.com/~r/Techcrunch/~3/JbnzBSlUhhc/

showed an article about Sequoia China being allegedly in trouble. Today a 404 tells you more riveting details.

This was the post by Sarah Lacy:

BEIJING, CHINA– Starbucks is a franchise in China that worked. The company opened locations at the bottom of all the major tourist hotels and downtown areas where returning Chinese, expats and business people traveling to China would pop in for some familiarity and to hold meetings, much like they do in the U.S. For people hoping to mix with that crowd, Starbucks became something of an aspirational brand in China. Tea was what your parents drank; a latte was something exotic and western.

No one thought Starbucks would work in China, but it did. Sequoia Capital, however, is not Starbucks.

There are a few ways to set up venture activity in China. One is to become a limited partner for a local firm. Another is to relocate an existing partner to build an office. The most common is to hire well-known, connected investors already in China, and Intel Capital, which has been investing in China longer than almost anyone, is one of a few farm systems for that. Typically this is known as  the “franchise model.” The hired China partners operate under the Kleiner Perkins or Sequoia brand name and typically share the same limited partners, but the funds themselves are separate. In exchange for that name and fund raising advantage, the Valley firms take a healthy chunk of the carry.

It seemed like the best of all strategies a few years ago. These firms want experts but don’t necessarily want to slow down or meddle in their deal making. But the cache of the top Valley brands only goes so far over here. In 2008 Kleiner Perkins’ China partnership exploded, with two of its four partners quitting in a dispute that was far more contentious than a lot of Valley mediareported at the time. In a week of touring China’s start-up scene, I’ve barely heard the KPCB brand mentioned at all. Now, it seems it’s Sequoia’s turn for some humble China pie.

It’s no secret Mike Mortiz has been traveling back-and-forth to China a great deal, and he’s fond of telling reporters that’s because of all the opportunity. I asked him at Kenshoo’s recent US launch party about the unique challenges of investing in China versus the US, Europe or Israel. He said he wasn’t trying to stonewall on the answer, but that all venture investing was just hard, no one place more than another.

Really? Several sources in China and Silicon Valley have confirmed Moritz has been in China this week addressing Sequoia’s so-called “China Problem.” In February, one of Sequoia China’s founding partners, Zhang Fan, resigned due to “personal reasons.” I’ve now talked to close to twenty sources in the venture scene in Beijing and Shanghai who say those “reasons” were that Zhang was well known for taking bribes, kickbacks and other unethical behavior. People are fond of pointing out that Zhang’s biggest hit was Asia Media Company, which later had to de-list from the Tokyo Stock Exchange under a scandal. Whether it’s true or not, he certainly didn’t do Sequoia’s brand any favors here.

That left the other founding managing director at the helm, the highly respected Neil Shen, who founded Ctrip.com, the so-called “Expedia of China,” and Home Inns & Hotels Management. I’ve talked to several VCs and entrepreneurs in China who say Shen is a prickly guy but his deal judgment is unparalleled in the country. He’s even a bit of a hero to some entrepreneurs. But unfortunately, Shen too is in hot water. U.S. firm Carlyle Group is suing Shen for more than $200 million in damages for allegedly blocking a Carlyle deal in a Chinese medical research firm. Said one person close to Sequoia in China, “Moritz will have to fire him. He has no choice.”

If that’s the case, it may not be obvious at first. Venture capitalists tend to fire partners gradually and quietly. Frequently they’re still given offices and assistants as they phase out of decision making.

Even the widespread speculation could be a big blow for Sequoia, which at one point seemed to be one of the better-adapted Valley names here. It still employs two other managing directors and several more vice presidents and associates in China, but for many Chinese entrepreneurs Shen represented the brand as much as Moritz does in the U.S. There are few China investors with solid operating experience, particularly in the Internet.

And it can’t be good news for Sequoia’s limited partners who haven’t taken to kindly to Sequoia’s pressure to make them invest in not only China, but in other unproven Sequoia funds aimed at India and later stage U.S. companies, according to very wide-spread reports and my own reporting.

Player hating is part of human nature, so it’s no surprise that other Valley investors have whispered with glee that the once-dominant Sequoia seems distracted by all this. The competition’s biggest fear: Moritz solves the problems and Sequoia starts to focus on what it does well again.

(Sequoia did not respond to a detailed request for comment or clairification of this story and has a long-standing policy of not commenting on the firm’s internal matters.)

[qi:090] Tokbox, a San Francisco-based start-up that offers browser-based video chat, has lost its CEO, Nick Triantos. He has been replaced by Ian Small. We had heard about this change, and Tokbox confirmed it to me. Small’s bio hasn’t been added to Tokbox’s web site just yet. Triantos had replaced co-founder Serge Fauget in somewhat mysterious circumstances in March 2008. Tokbox has raised $14 million in two rounds of venture financing from Sequoia Capital and Bain Capital.

The company launched in October 2007 by spamming me and others who were invited to test out Tokbox. The company’s video chat service has struggled to find the super-growth that a consumer-oriented company such as Tokbox needs. Tokbox says it has a “user base of over 1 million people who are making over 1.5 million video calls everyday.” According to web-traffic measurement service Quantcast, Tokbox is  getting about 62,000 visitors a month, roughly in line with the user metrics reported by Compete.com. I have always been a little skeptical of Tokbox, and frankly, I haven’t seen anything that has made me change my mind.

I’m not sure of what to make of recent activity in certain quarters of the VC community but some VCs are delving into the messier and murkier business (at least in terms of traditional VC activity) of early stage risk capital, Spark Capital being the latest with their new seed fund.  I know there are numerous reasons why they tend not to get involved in seed and early stage investing (VC and angel funding are two totally different beasts and require divergent business skills to undertake) but I think it totally makes sense. I liken it to the situation in the football Premiership whereby many of the top clubs have lower league feeder clubs nurturing talent for them. 

I think it shows that some VCs are very aware of current activity and gains to be had in the digital and TMT (technology, media and telecoms) sectors and with last week’s news of the latest foray into seed funding coming from Spark Capital, those with both the funds and foresight know that if you are in a position to invest now, then it is a great time to sow ‘your own‘ seeds for the future. There’s a world of difference between VC and angel/seed investing, so why not just buy into a group who operate at the seed level, an outfit that has the potential to spot the Google, Facebook, Twitter etc of tomorrow.

Previous moves of a similar nature have been from Sequoia Capital investing $2m into Y-Combinator and (I believe but am not quite sure) Index Ventures into Seedcamp. Here’s a bunch of articles on the Sequoia and Spark buy-ins:

• Technorati on the Sequoia investment.
• XConomy on the Sequoia investment.
• TechCrunch on the Sequoia investment.
• Paid Content on the Sequoia investment.
• Y-C’s Hacker News on their new investment.

• Tech News on Spark’s buy-in.
• TechCrunch on Spark’s buy-in.

One of the granddaddies of venture investing, Pierre Lamond — the National Semiconductor co-founder and partner at Sequoia Capital for almost 30 years — has opened up a new, greener door. At the spry age of 78, Lamond has joined Vinod Khosla’s firm Khosla Ventures, where he will focus on different sectors in cleantech, the New York Times reports and we’ve confirmed. Lamond tells the Times that he joined the firm instead of retiring this year (“I don’t feel that I’m 78,” he says), and that he appreciates Khosla Venture’s focus on “growing companies from scratch.”

Lamond is an affable guy, and I interviewed him last year for an article looking at Sequoia’s small but compelling cleantech portfolio. Sequoia has invested in only a handful of cleantech firms, and they would have a fantastic batting average for the sector if one of their plays, lithium ion battery darling A123Systems, goes through with plans to go public. However, those plans emerged before the downturn, and we’re still waiting to see if the battery maker will — or can — go public.

But it’s interesting that Lamond told us back then that Sequoia’s cleantech strategy was to “not invest in concepts,” and that “the company has to have a real product and a competitive advantage” to attract his investment. While that’s not necessarily mutually exclusive with wanting to invest in companies from scratch, it’s a somewhat different strategy. Perhaps Lamond is looking for some more risk-taking investment fun in his almost-octogenarian years.

Lamond also told us that he and Sequoia decided to take a less-risky cleantech approach after watching the big hits and major misses in the dotcom boom, and that he didn’t want to recreate some of the hype-induced failures of the late ’90s. On that note, he told us that he had looked at many ethanol companies and passed on all of them . . . Hmm, wonder if he mentioned that to aggressive ethanol-backer Khosla in the interview process.