Author: Chris Cameron

It’s not every day you get the chance to hear a half dozen executives from successful startups speak openly about how their companies managed to get to where they are. In fact, its most likely that to get that kind of access in one day, you’d have to be at some high-priced convention that costs several hundred dollars to attend. This isn’t the case, however, with Starter Day, an event hosted by software makers Atlassian that will showcase six CEOs and founders from various startups, including Boxee, Aardvark and Pandora.

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The event takes place on June 9th in San Francisco and will only cost $50 for anyone to attend. Atlassian’s products help companies collaborate on software development projects, and the executives participating in Starter Day hail from companies that have experienced this first hand. But Starter Day is not a chance for them to blab on about how amazing they think Atlassian to be; instead, the guests will speak on a variety of topics centered around building a successful startup.

Steve Ginsberg, vice president of technical operations for Pandora, will speak about his company’s operations and issues with scalability, while Aardvark co-founder Nathan Stoll will discuss how he and his colleagues incorporated user centered design and advanced algorithms into their engineering. Avner Ronen, CEO and co-founder of Boxee will also give a speech he has titled “Underdog 101: Question Everything” which will teach you “everything you need to learn by listening & not listening to anyone else.”

The other speakers include Glenn Kelman of real estate startup Redfin, Mike Volpe of marketing software makers HubSpot, and Jochen Frey, CTO of Scout Labs, which makes tools for social media metrics. Atlassian co-founders Mike Cannon-Brookes and Scott Farquhar will kick off the event with a discussion about bootstrapping a startup, and a surprise speaker yet to be unveiled is also slated to speak.

Atlassian’s marketing VP Jay Simons says the event spawned from the company’s surprise that so many small businesses and startups were using their software. Atlassian provides a $10 starter licence for their products, and Simons says that since its inception, over 40,000 starter licences have been sold. Since they recognized a large group of their customers were small businesses, Simons says they created Starter Day as a way for startups that may not be able to afford attending their larger customer conference, which begins shortly after the event, to participate in the weekend’s activities.

This is a fantastic opportunity for young companies and entrepreneurs to hear from the leaders of some of the most successful startups of the last few years. As prominent as these companies are, they all began as startups at one point, and the advice they will undoubtedly provide at Starter Day is sure to be a wealth of information to any startup or entrepreneur looking for an edge.

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Looking for that next booming trend in the tech industry to sink your entrepreneurial teeth into so that you might come up with a great product to receive funding for? Well perhaps you need to look no further than music, as reports show that first quarter investments in 2010 for music tech startups nearly doubled from 2009 and 2008 figures – an upward trend entrepreneurs could take advantage of in the near future.

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Duncan Freeman, author of the site Indie Music Tech and founder of Band Metrics, estimates that around 25 investment deals in the music tech space were inked in the opening months of this year. Compared to 13 and 14 approximate investments in the first quarter of 2008 and 2009 respectively, Q1 2010 is off to a great start with huge early investment growth.

Among the largest and most notable deals of the year so far include Spotify‘s undisclosed amount of funding from Founder’s Fund, $20 million which when to startup Guvera, and speaker manufacturer Sonos which received $25 million from Index Ventures. Other well known startups, such as SeatGeek, Songbird, TuneWiki and BlogTalkRadio all received various amounts of VC investment in the first quarter of this year.

While there was nearly twice as many investments this year than in 2008, the amounts of those investments were much smaller. Freeman’s estimates put 2008’s 13 first quarter investments at a value of around $90 million, an average of nearly $7 million per investment. This year’s 25 investments managed just around $110 million, or just over $4 million per investment, which is no better an average than from Q1 2009 which saw around $62 million. So while more deals are going down in the music tech industry, only slightly more cash is being doled out.

It seems like the market for music startups is slowly warming and gaining traction with investors as companies like Spotify are thriving while others like Lala, which was acquired by Apple, are being snatched up by large corporations. Music could be an interesting industry to watch over the course of 2010 as these Q1 estimates suggest it could be a busy year of investments, so entrepreneurs may want to take a look at how they might provide a valuable service in this sector.

Let us know what you think about the music tech space and where you think trends may lead this year by posting a comment below!

Chart from Indie Music Tech.

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Though rising numbers from the final quarter for 2009 had many hopeful that 2010 would see a rebound of venture capital funds, new data from the Nation Venture Capital Association (NVCA) is bound to disappoint as Q1 2010 saw the lowest first quarter numbers (PDF) in 17 years. According to the NVCA, just $3.6 billion has been raised so far this year by VCs compared to $5.2 billion in 2009 and $7.1 billion 2008.

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Back in January, we postulated that the uptake in fundraising by VCs during the final quarter of 2009 could lead to increased VC spending in 2010. The first quarter did see record breaking merger and acquisition numbers, but as NVCA president Mark Heesen points out, the IPO market continued to struggle – a fact he says may have contributed to the new low numbers for VC funds.

“Over the last two years, alternative asset allocations have declined and the exit market has suffered, putting venture firms in the unenviable position of communicating their value in an extremely challenging environment,” says Heesen. “Many firms have been waiting until the exit market improves before embarking upon their fundraising efforts.”

Heesen does, however, expect that these numbers will improve over the course of the year following the lead of the M&A and IPO markets which have already shown signs of improvement this year. The NVCA believes that most VC firms will be able to continue to raise funds in 2010, especially as the year continues, but also warns that the industry is headed towards an era of consolidation with smaller firms merging with larger funds or shutting down all together.

For startups, the recent numbers are certainly disconcerting, but there is still plenty of venture capital out there, just not as much as there used to be. Right now the VC industry seems very shaky, as analysts attempt to read the tea leaves to make predictions about the future, but entrepreneurship still has its room for opportunity. Quality companies will still find funding, so for startups, the main goals to focus on when seeking funding are building a quality product and ensuring your investors of a profitable future.

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For most startups in the early-stages of development, much of the building process includes repetitions of prototyping, testing, receiving feedback and iterating the product several times over. The toughest part of this process isn’t building or making changes, it’s getting that valuable feedback on where your product could be improved. Concept Feedback, a simply named online service, wants to help your startup with constructive criticism from its quickly growing community of over 5,000 designers, developers, marketers and entrepreneurs.

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The process at Concept Feedback is pretty simple: users can upload their concept work for the community to view, other members comment and provide their opinions and feedback for the concept, then the original user can upgrade their product, and even resubmit for further feedback. Companies can choose to post a “premium concept” which will be more visible on the Concept Feedback homepage and for which they can offer cash rewards for the most constructive comment or piece of advice.

Most of the items are site are full web or logo design mockups, but there were a few rough wire-framed sites scattered through the concepts. Other, less popular entries, include films, posters, business cards and a whole lot more. For a small startup team looking to get some fresh sets of eyeballs on their latest project, Concept Feedback could be an excellent resource to do so.

With most of the feedback based around design and aesthetics, startups may still need to look elsewhere for direct usage and feature feedback for their product. The truth is, with this type of feedback, you want people taking a deep dive and playing around with your product for some time before providing their opinion; Concept Feedback seems geared at providing mostly visual feedback, so usability and functionality reviews are much less common.

There are several ways of gathering feedback from actual users of your site; one such service we mentioned in January allows companies to automate phone surveys and displays the results as charts and graphs. But if your goal is to show off the latest design iteration of your site, Concept Feedback is a great place to unveil it and receive some educated opinions to make it look its best before launch day.

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While there aren’t nearly enough, there are several incubator programs out there for startups in most of the major cities with thriving startup cultures. These programs provide early-stage companies with funding, mentoring, and workspace among other aid, but there are very few programs that help college students looking for internships in the startup space to get connected with the companies that need their help. One incubator program, StartupRoots, is looking to change this trend with a brand new program aimed at brining students and startups together, and they’re starting in startup mecca: Silicon Valley.

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For computer science and business students who are looking to cut their teeth with a young startup, or for early-stage startups in need of some bright interns to help kick things in gear, the deadline to apply is this Thursday at midnight, so here are the details on the program. StartupRoots is a 10 week program running from June to August that consists of three main parts for students: a non-paid internship with a startup, mentoring from weekly speakers, and networking with company execs and fellow interns.

StartupRoots already has several notable speakers lined up to participate in the program, including Steve Blank, Jeff Clavier, Robert Scoble, Ann Miura-Ko, Hiten Shah and Vivek Wadhwa. Last week I spoke with Gagan Biyani of StartupRoots who says that the program helps to level the playing field for students smaller companies competing with larger companies with recruitment budgets.

“College students don’t really have a way of finding internships at startups. Microsoft and Google have huge internship programs for which they hire recruiters to go college campuses and find college interns, but you can’t do that as a startup because you don’t have the resources,” Biyani told ReadWriteWeb. “We’ve created a program that solves both of those problems by enabling both startups and interns to apply, and we’ll match the best ones out of those categories.”

Both undergraduate and graduate students are welcome to apply, and they need to be attending an accredited 4-year university during the fall of 2010. Biyani did say, however, that the program would consider recent graduates, though he said he hadn’t seen any apply since the internship is likely to be non-paid. The payment of interns is at the discretion of the startups, so no payment is guaranteed through the program.

So far, around 90 students have applied and StartupRoots is looking to accept anywhere between 7 to 15 applications for the internships. The program is divided into two groups, or tracks: one for business students or anyone interested in entrepreneurship, and another more in-demand track for engineers.

As for companies, the program has already announced the first six that will be invited to participate, and they plan to accept as many top quality startups as they can. They’re goal is to have a 1-to-1 pairing of interns and startups, though some have asked if they can reserve two or three; Biyani says they aren’t sure whether they will allow this or not.

If your startup already has interns and wants to leverage the networking and mentoring provided by StartupRoots, your company can apply to be included in the program as well. Biyani says that by incorporating existing interns into a larger group, the interns will be able to have a more full educational experience they may not have received by working in one office with one company.

More information is available at StartupRoots.com and on the program’s blog where they’ve posted lists of reasons why working for startups is fun, and why summer startup internships are valuable for students.

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While this week’s entry in the Weekend Reading series is an established book from 2008, it is still a highly touted read for aspiring entrepreneurs with little time and resources that are looking to get a business started. The Toilet Paper Entrepreneur: The Tell-It-Like-It-Is Guide to Cleaning Up in Business, Even If You Are At the End of Your Roll, by Mike Michalowicz is an entertaining hard-edged read mixed with valuable business lessons from an experienced entrepreneur.

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In 1996, at the age of 24, Michalowicz started his first company Olmec Systems, where we was recognized as Young Entrepreneur of the Year by the Small Business Administration. On New Year’s Eve 2002, he sold Olmec Systems, and on New Years Day 2003, he launched his second company, PG Lewis & Associates, which quickly grew until being sold to Robert Half International. Michalowicz’s current company, Obsidian Launch, is a business growth accelerator specifically aimed at young entrepreneurs.

In his book, Michalowicz provides advice for the up-and-coming entrepreneurs of the world on how to get a business started with the bare essentials, including some tips for taking advantage of little-known resources to get ahead quickly. But above all, Michalowicz knows that starting a business takes more than planning and acting on that plan; it takes the entrepreneurial spirit, and passion.

“What makes you lose track of time, complete tasks almost effortlessly, and come out even more energized? When you are talking with friends, what is the one subject you can just go on and on and on about, until they are rolling their eyes? Answer these questions and you’ve found your heart’s desire,” writes Michalowicz. “And when you have found you insatiable thirst, your passion, you will have taken the most important step to launching a company that will excel.”

Throughout the book, Michalowicz provides “TPE Tips,” which are small, but valuable nuggets of information that will help a small business gain ground on-the-cheap. An example from the first chapter of the book explains how while every business needs a web presence, not every business needs a website.

“You can establish a web presence by sing Facebook.com, MySpace.com, Squidoo.com or a million other social sites,” says Michalowicz. “Spread the word about what you are doing through these social sites and set up free email. Supplement your social networking site with a free blog at Blogspot.com. That’s more than enough to get some business rolling in.”

This echoes similar advice we’ve discussed from other books, such as Gary Vaynerchuk’s Crush It! which focuses heavily on building your personal brand. Author of the Personal Branding Blog, Dan Schawbel, says Michalowicz has built his brand quickly and efficiently and suggest that entrepreneurs pick up the book in order to “stop wasting time and start building your entrepreneur brand today.”

The title alone should tell you that this book is lighthearted and easy on the brain, but don’t take its outward appearance at face value. The Toilet Paper Entrepreneur is full of great advice for entrepreneurs – advice that still holds true in 2010. Be sure to also visit the TPE website where Michalowicz regularly blogs and posts videos of updated advice.

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I am a huge fan of podcasts and podcasting and one of my favorites to listen to each week is Leo Laporte’s This Week in Tech (TWiT). Now and then, angel investor and Open Angel Forum founder Jason Calacanis is a guest on TWiT, and not long ago he launched a podcast network of his own borrowing the “This Week in” name (with Leo’s blessing, of course). After success with his first podcast This Week in Startups (TWiSt) which Jason hosts himself, he is now creating a brand new podcast that is a perfect resource for startups and entrepreneurs: This Week in Venture Capital (TWiVC).

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Venture capital is a big part of what we discuss here at ReadWriteStart, and Jason’s new podcast is sure to become an excellent source of VC news straight from the horse’s mouth. The premier episode is available now and features two-time entrepreneur turned VC Mark Suster, who authors the Both Sides of the Table blog, and who was previously a guest of Jason’s on TWiSt.

In the episode the pair discuss the recent collection of obnoxiously high valuations for startups like Foursquare and Quora, as well as the resurgent IPO market, an issue we mentioned earlier this week after the Nation Venture Capital Association released some record breaking numbers. Suster even discusses how his blog, mentioned above, has changed the way he does business as a venture capitalist.

TWiSt usually runs over an hour, and this first episode of TWiVC thankfully comes in around 45 minutes, a much more digestible length for a video podcast. Hopefully they will stay true to this length, as brevity and density is often a more enjoyable listen. Either way, I know I’ll be tuning in each week to catch Jason’s and other’s opinions on the latest VC happenings, and I think any early-stage startup or first-time entrepreneur should do the same.

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One of my favorite blogs to peruse now and then for amazing advice on web design is Webdesigner Depot which produces excellent in depth guides for various design related issues. Monday they produced an excellent in depth post that provides a step-by-step breakdown of best practices for creating a screen-cast for a Web page, a feature many startups like to include on their homepage to familiarize new visitors with their product.

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This article focuses on the creation of live screen capture videos of someone demoing the website, but I think a lot of this same methodology can go into creating any sort of introductory video a company uses to explain their site. The first step, as with any project, is to plan, and the first questions you need to ask yourself before you even start to storyboard include “What do we want to accomplish with this video?” and “How detailed do we want to get?”

Once you figure out the content, length, tone, and medium of your video, then move on to storyboarding. Storyboarding is an important step in creative processes such as these because it is much easier to visualize the end product before putting any real technical effort in. Filmmakers don’t just storyboard as a way to outline their plot, they use it to do early edits to the film before wasting any time shooting stuff that will never make it past the cutting room.

By getting a storyboard of your production down, you may realize it’s too long, too boring or not informative enough; you can determine these flaws by showing the storyboard to anyone unfamiliar with your product and then use their feedback to make alterations.

“The more detail in your storyboards, the easier the editing stage will be,” writes Stu Green, author of the post on Webdesigner Depot. “Your storyboard will help you stay organized throughout the whole process, and if you ever get lost while producing the video, the storyboard will get you back on track.”

If you plan on doing a straight screen-capture demo, don’t just wing it; make sure you script out what you’re going to say as you demo the site. Additionally, spend a few extra bucks on a nice microphone to record your voice – quality audio goes a long way in video production. Of course there are options that don’t include a voice-over, but as Green points out, having one provides that human aspect to your video that will better connect with viewers.

Green provides a healthy list of options for software to record you screen-capture videos with, including Screenium, Jing, CamStudio, iShowU and Captivate. One nice option that I find is overlooked these days is the screen capture abilities included with the standard version of Quicktime on Mac OS X Snow Leopard. For a low budget product, Quicktime can get the job done, but if you wan’t something a little more pro looking, one of the aforementioned applications will help also.

As the article continues, Green goes over techniques and methods for creating an interesting and captivating video, including things like pacing, editing techniques, and how to promote the video on the website. But if you’d rather not go through all this trouble on your own, there are a number of production houses that specialize in these types of videos.

One I always come back to when talking about these types of videos with friends is Common Craft, which you may know for their “In Plain English” series of videos. While they make videos to explain complex ideas “in plain English,” the artists at Common Craft also will create custom videos for companies. A visit to the homepage of Dropbox displays a video explainer of the product created by Common Craft in their easy-to-grasp paper cut-out stop-motion style. Other clients of theirs include Google, Microsoft, LinkedIn, Meetup and Intel.

Another production studio that makes similar videos is Epipheo Studios, which I learned about through watching a video explaining how Yelp’s review filter works. Epipheo is also responsible for some of the Google Chrome OS and Google Wave videos you’ve seen, as well as videos for doubleTwist, and Zoho to name a few.

Videos such as these can go a long way in helping to rope in new visitors to your site. These can also be useful for an early stage company looking for a quick and unique way to explain their concept to potential investors, though I sometimes think it is better to be able to explain things through words as well. That being said, don’t rely too heavily on these videos as pitch material, but rather as a link you can forward to hopefully garner interest in your idea.

Be sure to check out the full Webdesigner Depot article by Stu Green, as it is brimming with useful information regarding screen-cast production.

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New York-based online video management company whistleBox has developed a new browser-based augmented reality (AR) experience geared directly at children by integrating it with the one thing every kid loves: cartoons. The project, dubbed Do Crew, is a series of animated stories for kids that include interactive AR games and challenges that the kids can play with using a webcam attached to a desktop or laptop computer.

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In examples shown in videos on the Do Crew site, kids can control cartoon vehicles by jumping or leaning side-to-side, and can play other games by waving their hands in front of the camera. Think Project Natal but in a web browser, and integrated within kids’ cartoons. This is an excellent use of augmented reality technology because it is a practical application with genuine value, an attribute we discussed last week as being the strongest way AR can break into the mainstream.

Best of all, with games like these, kids will no longer be passively glued to their sofas as this new AR project encourages the kids of stand and use their body and arms to control the games. The Do Crew developers state that their mission with the game is help combat the growing epidemic of child obesity.

“Children will not stop watching television, and parents will not stop feeling guilt about that fact. So, where does that leave us? It leaves us with a rare opportunity to acknowledge this epidemic and treat it at the most basic level,” the site says. “The Do Crew team is dedicated to making all passive media active, and we believe that with a little technology and imagination we can reimage the personal computer or console video game system as effective electronic exercise equipment.”

Going after the children’s entertainment market could also be a boon for the augmented reality industry which has yet to find the public spotlight. Time Magazine named AR as one of the top tech trends to watch in 2010, and by engaging children, AR may be able to make significant strides towards mass public adoption and acception.

Actually, AR experiences aimed at kids are not a new concept; a LEGO Store installation that helped kids see 3D reprensentations of model kits right on their boxes, and a web-based Topps baseball card experience that made the players on the cards come alive in 3D are two of the most well known AR roll-outs to date. New projects like Do Crew are not only great for kids, but also for AR as a whole as it strives to gain credibility and traction with as wide an audience as possible.

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They seem to be becoming less popular lately, but not too long ago “stealth” startups were a growing fad in the Internet entrepreneurship sector. A team with a big idea would insist on keeping their business a secret from the public and even from investors until the last possible moment in an effort to ward off any fast moving idea vultures that might swoop in and copy their idea. Others went stealth to create a buzz around their mysterious and unknown project. Some argue, however, that being stealthy limits a startup’s opportunities for funding and feedback, among other things, so is there a better way to go about this?

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Investor and Hunch co-founder Chris Dixon wrote Tuesday about his idea that instead of going into “stealth mode,” startups should instead just try to “underhype” themselves, a process I’m going to call “flying under the radar.” I call it this because “stealth,” like “stealth bomber,” implies the ability to be undetectable and virtually invisible, while “flying under the radar,” means you are perfectly visible, but are strategically flying in a manner as to go unnoticed.

“The companies I’m referring to … are publicly launched, acquiring users and generating revenue,” writes Dixon of “underhyped” startups. “They are modeling themselves after Groupon, where the first time the VC community / tech press gets excited about them, they are already so successful that it’s hard for competitors to jump in.”

Startups that can fly under the radar get all of the benefits of stealthiness but without the costs. By quietly building a stellar product and garnering a loyal audience without tipping off the press or major VCs, startups can be assured that they are providing the best product while protecting themselves from a quick copycat company. Instead of closing your company off to a select group of individuals, these startups can be completely open to public feedback and user testing, as well as VC scrutiny, something most stealth startups can’t do.

“Unless you are extremely lucky or extremely brilliant your product won’t be a great match for your customer’s needs until you have spoken to them about it and iterated a bunch of times,” wrote Nic Brisbourne of DFJ Esprit last December. “With regard to VCs in particular, being stealthy stops them from letting you know if they have seen many other startups in your space and the extent to which your plan might or might not need to morph to become an attractive investment.”

It would seem that the costs outweigh the benefits when it comes to going stealth. In a 2006 OnStartups post, Dharmesh Shah argued that going stealth could unintentionally convey to investors that the company lacks focus, commitment, solutions, or direction. So before you decide to keep your super secret project under lock and key, think about hiding in plain sight by flying under the radar instead.

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There is a reason why lawyers go through year of school and tests to get to the jobs that they get paid so much to do – law is a complicated beast that takes a special breed to understand all the ins and outs of it. When entrepreneurs and venture capitalists meet at the bartering table to talk over the terms of their agreement, there is often too much or too little negotiation that goes on, so here’s some advice I came across that can help startup founders find the “sweet spot” for negotiations.

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Matt Bartus, a Silicon Valley-based lawyer who mainly aids startups and VCs, wrote last week on his blog A View from the Valley warning entrepreneurs new to the negotiating table to not damage their relationship with their investors by over-negotiating. According to Bartus, a surplus of startup and legal advice from blogs has clogged the minds of new entrepreneurs who think they need to nit pick over every detail of a term sheet.

“They sometimes feel the need to optimize every individual provision in the term sheet according to the guidelines found online,” writes Bartus. “For example, a founder recently expressed his shock to me that a VC wanted an 8% non-cumulative dividend preference on the preferred stock given the historical lows of current interest rates. He didn’t realize that dividends in fast growing companies are almost never paid, thus making this provision essentially irrelevant and just a relic of past practice.”

Bartus says that while over-negotiating and creating needless tension is a common misstep, it is just as bad to not push back enough and to accept the terms of the agreement without any discussion. When you roll over and take what they give you, you show them that you don’t stand up for yourself, damaging both your credibility and the possibility of future investments. To avoid this, he provides a few suggestions for topics that are worth debating with VCs that won’t necessarily damage your relationship.

Of the dozens of issues that could arise between VCs and entrepreneurs, Bartus provides a list of six important issues that could be discussed during negotiations, of which three he suggests actually focusing on. These include valuation and dilution, liquidation preference, board of directors and voting provisions, founder vesting, antidilution protection, and finally, exclusivity. By knowing these important issues, you can boost your credibility with the VCs and you ensure that you can get the best results from the term sheets for you, the founder.

This is exactly why hiring a lawyer with startup experience is key to doing things right. Yes, the job of the lawyer is to explain to terms to the entrepreneur so they know what they are signing up for, but mostly, that lawyer is there to take the burden of legal worries off their back. As with any position within your startup, lawyers should be chosen on merit, not based on their reputation to the founders. He recalls an issue he had when representing a VC who was dealing with a lawyer who was the father of the founder with no startup experience and who slowed the whole process down, damaging the relationship between the two parties.

Just remember the real important part of a VC/entrepreneur relationship: building and growing a great product. Hire a great lawyer with startup experience and let them do the grunt legal work so as to not divert your energy and focus from your ideas and your business.

For more legal resources geared at startups, check out our list compiled earlier this year.

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Here at ReadWriteStart, we’ve mentioned the importance of credibility as an entrepreneur when meeting with venture capitalists and potential investors, but it is also important to carry that credibility forward into your company as you interface with customers. Amid rumors that it was extorting businesses by offering to de-emphasize negative reviews in return for adverting purchases, social review site Yelp announced Monday that it would be “lifting the veil” on its review system and removing controversial features in hopes of securing customer trust.

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Yelp features a review filter that sorts through reviews of local businesses to determine which is more trustworthy and places the top ones on the business’ profile page. Some have claimed that Yelp was helping businesses pick the best reviews to show if that company was purchasing advertising on Yelp, a clear case of extortion that the company has vehemently denied, calling the claims a “conspiracy theory.”

Now when users visit a business’ Yelp profile, they can choose to look over the reviews the filter has automatically reviewed by clicking a link near the bottom of the page near the pagination links (not exactly the easiest feature to find, I had to search for “filter” to find it). Yelp has put a CAPTCHA pop-up between the profile and the filtered results to keep robots from crawling the filtered data. Perhaps this is an attempt to prevent them from figuring out how to game the system.

When I tested this new feature on one of my favorite downtown Phoenix restaurants, LoLo’s Chicken and Waffles, I saw some similarities among the 25 filtered reviews. A handful were from users who live in other states or who are what Yelp calls “less established users,” and some were either very short, or filled to the brim with Internet abbreviations and misspellings or slang. Others, whose content was hidden from view, had managed to violate Yelp’s review guidelines or terms of service, which I can assume means a variety of things including profanity or obvious spam.

Yelp is also discontinuing the use of the “Favorite Review” feature, which Yelp packed with advertising deals to businesses. Yelp CEO Jeremy Stoppelman says they decided to remove the feature in hopes of eliminating any confusion.

“Despite our best efforts to educate consumers and the small business community, myths about Yelp have persisted,” writes Stoppelman. “[The “Favorite Review” feature] led some people to the wrong conclusions about whether businesses could control the review content on their page. (They can’t.) So, to eliminate the opportunity for that misconception, we’ve eliminated the feature.”

By allowing users to go under the hood and see filtered results, Yelp is, I believe, taking a significant step in the name of transparency and openness. While they aren’t revealing any special algorithms for how they determine what makes trustworthy reviews, they are responding in a timely and appropriate manner to the continued allegations of foul play. Regardless of the merit of these claims, Yelp seems bent on securing the trust of their users, a practice every startup should mimic.

Also it is important to remember that a certain level of transparency is attractive to users, but not too much. There is a boundary between what should be shared with the community and what should be deeply guarded company secrets, such as fancy algorithms or the inner workings of the site’s major functions. Users can trust a company more when they feel they have some sort of insider’s view of the company through partial transparency.

Simply blogging about the company’s activity is sometimes enough to satisfy this need, but other times is may be appropriate, as Yelp has done, to incorporate features which help to underscore the product’s attempts at truth, honesty and validity, if those are major facets of your business.

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Monday’s sudden departure of Jay Adelson as CEO of social news aggregator Digg has raised a few eyebrows in the tech community as some rumors imply that it may have been a decision made by the company’s board. Regardless of the nature of the breakup, it got me thinking about the dichotomous relationship some startups have between founders and CEOs, and which, if either, is more expendable.

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Digg was originally founded by Kevin Rose in 2004 and Adelson, who had experience as founder and CTO of a few companies in the 90s, was given the CEO role while Rose became “the face” of Digg. Many startups have used this same leadership role leaving the passionate entrepreneurial founder as a separate executive from a business-minded CEO. A similar situation has happened at Twitter, with Evan Williams becoming CEO in place of Jack Dorsey who remains as chairman of the board.

This seems to separate the single-focus CEO from a serial entrepreneur with other interests. Since founding Digg, Kevin Rose has founded Pownce and WeFollow as well as personally investing in several other companies while Jack Dorsey has used his time to found the mobile transaction platform Square.

For the majority of startups, I would think the concept of the free-wheeling founder would be less common, and other times, founders choose to also be CEOs. But in the case of the startups that have two separate people handling founder and CEO duties, who is more vital to the company?

In these cases, founders usually start their company and hire a CEO when things start to pick up and they can’t handle everything by themselves. While CEOs do lot of the corporate navigating, the founder, with his passion for the product, is often the forward facing driver of the company. With this argument, I think that losing a CEO over a founder is a better loss than vice versa.

Of course, all businesses are different, and people leave for different reasons, and decisions like this should be taken on a case-by-case basis. However, VCs often talk about how they invest in founders just as much as they do ideas, so for a company to lose that passionate individual that the investors initially trusted might send bad signals about later investments.

I’d like to hear what you think about this issue, and whether you think either a CEO or a founder is more or less likely to stay when someone needs to go. If you have personal experience with the dual relationship of CEO and founder in a startup, please share you experience in the comments below!

Photo by Jim Merithew, Wired.com

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Web-video management startup Brightcove announced Monday that it had secured an additional $12 million in venture funding and hopes to make its first public offering as soon as next year. As we reported Monday, the first quarter of 2010 saw a significant rise in IPO and M&A activity for venture-backed companies, and Brightcove seems to preparing itself for one of these options in the next year.

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Josh Hawkins, director of corporate communications for Brightcove, mentioned on the company’s blog that the new funding would be used toward “expansion in Asia and Europe, the rollout of new product lines like Brightcove Express on a worldwide basis, R&D innovation, and possible M&A activity.”

Brightcove has three offices in the U.S. as well as offices in England, Spain, Germany, China and Japan. Much of its strategy for 2010 seems to be focused on expanding its presence in these regions, possibly by using some of its fresh cash to buy out upstart companies in those areas. The Wall Street Journal reports that the company also plans to use what could be their final round of funding to build runway before going public, and that it could see revenues as high as $50 million in 2010.

The news of Brightcove’s plans to go public is further evidence of the rebounding M&A and IPO market that we mentioned on Monday, especially if investors are willing to pump money into the web-video industry which has seen less than stellar revenues. Brightcove also can serve as an excellent example for young startups looking for an IPO or buyout day of their own in the future. The company is not sitting back and hoping the day comes that it can go public or be acquired; it is making sure they have the proper capital to continue to innovate and grow its company to that point.

The company realizes that being able to go public is not entirely about having a steady revenue stream, but it is also about carving out a significant portion of its market by expanding its current products and creating new ones. Just last week the company announced it was launching a service to allow its customers to create iPad-compatible HTML5 based video players, keeping the company on the cutting edge of video management.

Last year rumors circulated that Google was in talks to buy Brightcove, but the rumors were later revealed to be false. It seems they weren’t far off, however, as Google just last week announced it had acquired video service Episodic. Google, which has been picking up companies left and right in 2010, could be signaling an impending consolidation within the web-video industry with their recent purchase and rumored interest in Brightcove.

Brightcove appears to be hunkered down with its new funding and is ready for future prosperity, a strategy every startup should recognize and attempt to emulate in their future rounds of funding. Followers of Internet startups have been waiting for a major IPO for a few years and Brightcove could provide that in the next twelve months.

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On Saturday Apple let the public get their hands on their newest creation, the iPad, setting off a flood of hype and media coverage which has likely yet to reach its peak. Yes, this is yet another post about the iPad, and my apologies go to those who are tired of being choked by the frenzy of stories surrounding the iPad launch, but a few things I learned from this weekend might come in handy for undecided developers.

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Personally I tried to avoid the iPad hype this weekend, and not because I’m not a fan of Apple products or because I have a specific disdain for the iPad; I tried, and failed, to avoid the hype because I believe I underestimated its potential impact. This is just part of the reason I believe any developer even contemplating the idea of making an iPad application should do it, and do it as quickly as possible. Here’s why.

There Aren’t That Many iPad Specific Apps Yet

When I first joined Facebook in 2004 it was still very small and very young and I could remember being able to page through the less than 100 groups that existed on the site. Then it was easy to either find a group you wanted to join or to create one and gain a large membership. Now, the network has hundreds of thousands, if not millions of groups and finding the ones you actually want is much harder.

The iPhone has gone through this same process. When the App Store launched, only a few thousand applications were on it, making searching for apps easy and making the potential impact of new applications much larger. Now, as we know, hundreds of thousands of applications clog the App Store and make searching and discovering new applications exponentially harder than before.

The same thing will happen to the iPad, which means now is the time to jump on the train. A current search of the App Store for iPad apps turns up just over 3,200 applications, a fraction of the number of iPhone/iPod Touch apps which will likely pass 200,000 later this year. While the iPad does run these other apps, there is a dearth of iPad apps, especially those that are not just scaled-up versions of their iPhone predecessor. The time has, obviously, never been better for app developers because right now with so few iPad apps, the probability of being discovered early is much higher.

The Apple Buying Culture Wants Your App

People don’t love Apple for their low prices; they willingly hand over hundreds, if not thousands of dollars for the company’s various products. The culture of the people who buy these products has taught them that price is not the main motivation behind why they buy something, while at the same time making them more willing to hand over their cash in micro-payments for individual games and applications.

From the iPod to the iPhone, iTunes and the App Store have bred a new a customer willing to pay $1.99 for music, or $2.99 for an app they’ve never tried without hesitation. I know I’ve done it before, and I should feel worse about it but I don’t. I’ve spent a few bucks here and there on applications that I used only a handful of times but I don’t get angry about it. Honestly, my music purchases are much farther scrutinized than my app purchases. For better or worse, we’ve been taught to accept the throwing away of a few bucks here and there, and app developers have been cashing in on that for a while now.

The other opportunity around this buying culture for the iPad is that people will likely pony up a few extra dollars for each app on average. While developing an iPad app may not be twice the effort it takes for an iPhone, the customer will likely be willing to pay $1.99 for an app that was $.99, especially just after launch. If I had an iPad right now, I’d want to test out the best applications on it, and some of those apps are likely to cost as much as $9.99, but I would likely still buy them because, hey, I just spent $500 on a device, what’s a few extra bucks?

The Hype Window Is Big, But Not Too Big

The hype over the iPad has just begun, and it will only get bigger as more people discover what it can do and start being stared at by strangers on the subway. The hype will continue later when the 3G version of the iPad launches, though it will not be quite as large as this weekend’s surge. The 3G launch will likely get the media buzzing about it again, and it will help the hype live longer than normal, however, that window of excitement could close this summer.

New MacBooks and new iPhones are expected to be announced, if not launched, this summer, and they could likely steal a majority of the spotlight away from the iPad, especially if the mythological creature that is the “Verizon iPhone” does in fact become a reality. Apple will likely do everything in its power to keep the hype surrounding the iPad up until the holiday season when the company does its best business, by then, however, there will be a lot more iPad apps than there are right now.

This Thing Is Likely Bigger Than Most Expected

Originally analysts had estimated that between 200 and 300 thousand iPads would leave shelves this weekend, but Gene Munster of Piper Jaffray revised his guess to between 600 and 700 thousand after seeing the hoards of people waiting in line Saturday. Numbers aside, the impact of the device before its launch speaks volumes to its potential from here on out.

Several media companies announced they would be developing special no-Flash sites specifically for iPad browsing, and others said they would be providing HTML 5 video capability in anticipation of the device. All the while, several outlets, like WIRED and the Wall Street Journal announced they were working on iPad applications for viewing their content.

After Apple’s past success with the App Store on the iPhone and iPod Touch, it’s no surprise that these companies are jumping on board even before the iPad is in customers’ hands; they recognized the importance of early adoption and being in the store at launch. Popular technology journalists have given mostly positive reviews of the device as it seems actually seeing, holding and using the device speaks louder than just reading, or hearing about it.

Personally, I didn’t think the launch would be this big, but it has certainly been another success for Steve Jobs and Apple. That being said, the reasons to develop on the iPad pile much higher than those not to, so if you’re even considering it, do it. Do it now.

Click here to see ReadWriteWeb’s full coverage of the iPad’s launch.

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New data released from the National Venture Capital Association shows further evidence of a rebounding acquisitions and IPO market for venture-backed companies in the first quarter of 2010. We mentioned back in January about the slight uptake in activity in the final quarter of 2009, and it seems that trend has continued upward into the new year with record breaking M&A numbers and rebounding IPO data.

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In the first quarter of 2010, Thompson Reuters and the NVCA tracked a record of 111 M&A deals for venture-backed companies, an all-time quarterly high from their history of tracking deals and the largest since Q1 2008’s 109 deals. Of these deals, 31 disclosed their values for a total of over $5.5 billion, averaging over $180 million per deal. This is more than four times the average deal size seen a year ago.

Information technology companies represented nearly three quarters of the 111 M&A deals (81 total), besting life sciences and non-high technology with just 21 and 9 deals respectively. Within the IT category, software and Internet snagged 61 of the 81 deals but accounted for just over half of the disclosed value of those deals. Life sciences companies continued to rake in more serious cash at a higher rate as over $2.9 billion was spent on their 21 deals; IT companies managed just over $2.2 billion.

Though 2009 saw just 12 venture-backed IPOs, Q1 2010 has already seen 9 IPOs, the largest quarterly amount since the offering-rich 2007 which saw 86 total IPOs valued at over $10 billion. This quarter’s offerings were more evenly distributed among the sectors than the M&A figures, as IT and life sciences saw 4 and 3 IPOs respectively. NVCA president Mark Heesen says the new numbers have “engendered a cautious optimism” within the VC industry.

“The IPO volume, while not nearly enough to declare a recovery, has shown the most improvement since the financial crisis began and the pipeline of companies in registration continues to build. The record breaking number of venture-backed acquisitions is also encouraging as the quality of these transactions appears to have held strong. It is premature to suggest we have permanently turned the corner, but that corner is in sight and within reach as long as we can continue this positive upwards trajectory over the next consecutive quarters,” says Heesen.

What this all boils down to is that venture-backed companies are more likely to find merger and acquisition deals before them this year than they have in several years. Additionally, the IPO data suggests that more of these companies could be going public in 2010 than did during the 2008/2009 slump.

This is a great sign for startups because when more companies are being bought or are going public, that means the economy is starting to turn around and that VCs will likely be more willing to invest in new companies. As we mentioned back in January, VCs were expected to spend more in Q1 2010 after raising an increased amount of funds in the final quarter of 2009. VC spending data on this first quarter should be out in the next few weeks from the NVCA, so stick around to see how those figures hashed out.

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Okay, so you’ll have to file this one under “future weekend reading” because this book isn’t out yet, but I thought I would provide a bit of a heads-up post in anticipation of what should be a very interesting read. Delivering Happiness: A Path to Profits, Passion, and Purpose is written by Tony Hsieh (pronounced “Shay”), CEO of online shoe retailer Zappos, and lands in bookstores in early June. Hsieh helped to create one of the most successful online retailers which was well known for its stellar customer service and which eventually was acquired by Amazon.

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Hsieh’s methods at Zappos turned convential wisdom on its head and helped land the company on Fortune Magazine’s list of the best companies to work for in 2009 just before its billion dollar acquisition. Before Zappos, Hsieh was responsible for co-founding LinkExchange which sold to Microsoft for $265 million, and now for his third venture, Hsieh is authoring a book to share his experiences and methodology.

“I wanted to write a book to talk about the journey that I took in life in terms of what would bring myself long-term happiness, and what I accidentally discovered is that you can actually take concepts from happiness and apply it to businesses,” says Hsieh in a video promo for his book. “Part of the goal of the book is letting people know that there is another way you can make yourself happy, make employees happy, make customers happy and still make money.”

Hsieh recently pimped his upcoming book at SXSW with a promotional bus and managed to run into Leo Laporte’s live stream parade to chat about his book. He also snagged a few moments from the eternally busy Robert Scoble to talk about about personal and professional happiness. The tech world is buzzing about Hsieh’s upcoming book, as Kevin Rose, Tim Ferriss and even Aston Kutcher have been looking over pre-release copies.

For more information about the book and its author Tony Hsieh, check out the book’s homepage and be sure to check back here for a review in June when the book goes on sale.

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We’ve talked now and then about college programs that are making strides to provide students with entrepreneurial training, but the Harvard Business School (HBS) has so far not come up in our discussions. This might seem odd that one of the top businesses schools in the nation doesn’t gather much attention from things like The Princeton Review’s ranking of entrepreneurial programs, but one HBS grad may have an answer to that puzzle.

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Stu Wall, co-founder of the startup Postabon with an MBA from Harvard, recently wrote about some of the reasons that he thinks cause MBAs to make mistakes when trying to form a startup. The biggest obstacle in their way is that through their years of education, MBA students are taught to meticulously plan their businesses, but nothing can substitute from actually getting your hands dirty.

“With three months and ~$10K, we created a bare-minimum website and iPhone app that allowed us to iterate daily based on consumer feedback. No amount of time in Baker Library would have substituted,” writes Wall. “Building a product will allow you to identify a viable strategy, iterate, and prove your team can win. Research, formatting and nicely worded emails are a prerequisite but by no means a differentiator.”

Does this mean that no startup ever got funded without a working demo or beta phase product? Probably not, but the point here is that the amount of discovery and business education you give yourself by actually building a product and testing it trumps anything you can learn from a lecture or a book.

I would assume that at some point during his Harvard MBA education Wall had some sort of “lab” experience in which he was tasked with actually creating a business, but I can’t be sure. If he did, it may not be likely that the experiments they ran were in the realm of startups, but they could have been. The point is, Wall seemed to learn a lot more about forming a startup simply by doing than he thinks he did from school.

Another pitfall he sees with MBA students is that the culture implanted into the minds of most business school students doesn’t jive well with startup culture. By this he means that MBAs spend tens of thousands of dollars on an education as an investment toward a future with a high paying career, but that startup culture is a different kind of road to success than they may have expected.

“By the time we’re thinking about career decisions, many have a ‘what will you do for me’ attitude,” writes Wall. “Entrepreneurship is the truest form of meritocracy where ‘credentialing’ counts for nothing. Be humble and cognizant of your weaknesses, and put your passion for idea show (as opposed to your $$ aspirations).”

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Augmented reality (AR) has a long way to go before it achieves widespread acceptance and exposure to the public, but thankfully, many of the leading companies are continuing to make large strides towards this goal with commercialization of applications and the growing popularity of AR advertising. Earlier this month, metaio, one of leading vendors of AR software and services, updated its iPhone application junaio to version 2.0 in an effort to keep up with the growing AR browser market, but it is a truly useful implementation of AR in this app that will help the emerging technology reach more users.

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Previously, the junaio app was its own social network that allowed users to create AR scenes by importing 3D models into still images captured from the phone’s camera, but with the latest version of the software, junaio is now competing with Layar and Wikitude and others in the AR browser space. A few weeks after releasing the updated application, junaio announced it had formed a partnership with BART, San Francisco’s Bay Area Rapid Transit system, to bring live train data to the app.

Subway maps have been one of the more popular implementations of AR on mobile phones, especially with Paris-based developers Presselite and their popular, award-winning Metro Paris Subway application. With this latest release, junaio is taking advantage of the API provided by BART to not only place locations of nearby stations in a user’s field of vision, but also estimated arrival time of trains at each station displayed live in real-time in the AR point-of-view.

The AR community needs more partnerships like this to be formed; it is practical applications like this that will push AR into the mainstream. There are a dozen different ways to find the nearest pizza place via an AR app on mobile devices, and frankly, that’s getting a little old. It’s not enough to just point me toward something, and I don’t think that will be enough to convince enough of the general public to embrace the technology.

Desktop-based webcam AR is way ahead of mobile AR in terms of providing practical applications. Examples include the USPS virtual box that helps customers determine which size box to use for shipping; the virtual mirror technology which helps customers try on sunglasses, hairstyles, clothing, makeup, shoes, etc.; and more recently, Samsung’s TV sizer AR experience that lets users see what a new TV might look like mounted on their wall (see video below).

These are the kinds of applications that are helping AR kick the reputation of being a gimmicky novelty technology and instead build one of practicality and usefulness. If mobile AR solutions are going to continue to gain corporate ads and sponsorships, they will need to find innovative ways other than pointing things out to survive in the long run.

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Back in February at the Future of Web Apps (FOWA) conference in Miami, Union Square Ventures‘ Fred Wilson presented on his 10 Golden Principles of Successful Web Apps. For those not fortunate enough to attend the conference, a video and transcript of the talk and subsequent Q&A session with Wilson is now available online for the general public to learn what one of the leading east coast investors advises startups do to succeed on the Web.

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So what does Wilson say is the single most important feature of the Web apps that win? Speed. He says that while more dedicated users will provide some leeway for speed issues, the average user (his go-to users are his wife and kids) will make quick and lasting judgements of a Web app based on its speed.

“When we see some of our portfolio company’s applications getting bogged down, we also note that they don’t grow as quickly,” Wilson said. “There is real empirical evidence that substantiates the fact that speed is more than a feature. It’s a requirement.”

This reminds me of an idea I’ve been pondering from time to time about Web apps, and that’s the perception of speed. The design of a Web app can go a long way in how users perceive its speed. Luke Andrews of Dabble DB spoke about this very topic at last year’s mesh conference, a Canadian Web conference.

In his talk, Andrews mentioned how Google just feels faster than Yahoo because the homepage isn’t as busy with supplementary items. When the design of a Web app is slick, clean and uncluttered, it translates as speed in our brains. If you saw a Corvette sitting at a red light next to a boxy station wagon, you would assume the Corvette is the faster car just by looking at it (even though the engine could be poorly maintained and slower than the possibly souped up station wagon).

Aside from a well designed site, Web apps can also implement small features to their site to bump the perception of speed. Another item Andrews pointed out in his talk was how when we as humans are asked a question, before we begin to respond, we make it clear that we have acknowledged the question with either a nod or a stroking of our beard. Web apps need to do the same thing; if something takes some computing time to complete, let users know with a “Loading…” animation.

By providing users with an immediate visual response to their input, you boost their perception of the speed of your Web app, but nothing can truly substitute the real thing. Clean design and well thought out UI can only go so far, so as Fred Wilson advises, make sure speed is not just a feature, but a requirement.

Photo by Flickr user Nathan Bittinger.

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