Author: Gregory T. Huang

Gregory T. Huang wrote:

Portland, OR-based Platial, a social mapping startup, is shutting its doors, according to a blog post on the site. The news was reported yesterday by paidContent, TechCrunch, GigaOm, and others. Platial was backed by Kleiner Perkins, Keynote Ventures, Ron Conway, and other investors.

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Gregory T. Huang wrote:

Google’s acquisition of Seattle-based photo editing company Picnik is the deal of the year—and maybe more—for the local tech startup community. It just closed this morning, and terms aren’t being disclosed, but suffice to say Picnik’s leadership and team of 20-odd employees will make out pretty well. What’s more, the acquisition adds a bookend to the company’s storied history, from a bootstrapped startup that never needed outside venture capital to become a profitable Web traffic machine. (Eat your hearts out, VCs.)

Picnik was founded in late 2005, became profitable in late 2008, and formed key partnerships with sites like Flickr, Facebook, and MySpace, on its way to having millions of users and more than a billion photos uploaded. The startup’s revenue model is a paid subscription service that gives consumers access to premium photo-editing tools.

Jonathan Sposato, Picnik’s chief executive, spoke with me in-depth today about the deal and what it means for his company, the tech community, and the M&A market. His startup perspective on “how Google works” is particularly interesting, as is his take on the importance of the culture fit between Picnik and Mountain View, CA-based Google. (One of Sposato’s previous startups, Phatbits, was also acquired by Google in 2005, and he worked there for almost a year before joining Picnik in its early days.)

Here’s an edited transcript of our conversation:

Xconomy: So how did the Google deal come about?

Jonathan Sposato: We’ve always kept a dialogue going with various companies. We’re high-profile, and we get lots of traffic. So the big companies are always, always talking with us in some shape or form. With this particular round, there was a lot of buzz starting to build around Picnik around mid-year/summer of ‘09. As some of the conversations got more codified, it became clear that Google was going to be the most interesting and fun option for us down the road. Also, some amount of my own past at Google—that both Google and Jonathan were known quantities to each other—had a very positive impact.

X: Were there other serious suitors when it came down to crunch time?

JS: There were. [Even as of recently.]

X: And how well did you guys make out?

JS: I can’t talk about the deal considerations. This is really the best deal—the return on everyone’s time and energy and money in for the three of us (the principals) is fantastic. In terms of deal size, it’s made us all very happy. Everyone on the Picnik team, down to the line-level folks, are very, very happy. They see a very nice financial result hitting their pockets as well. That has been a very satisfying feeling.

X: How long are the golden handcuffs on you? (Sposato has told us before about his desire not to work for The Man.)

JS: I wouldn’t put it that way. I, and everyone on the team, are very interested in giving Google a really, really great deal. The kinds of exciting things that Picnik and Google both bring to the table are going to be pretty darn amazing. I can’t think of a better synergy here. I would also say I’ve been really touched by the support of folks at Google. This is a homecoming of sorts. It’s been very heartwarming to hear from folks at Google who’ve been highly supportive. We’re really pumped.

X: So this acquisition feels different from the Phatbits acquisition?

JS: Every deal is different. This is, in every way, very different from Phatbits. That was a smaller company, it didn’t have the scale and traffic that Picnik does. The one constancy, where I could benefit with my previous experience, was that I know how Google works. They are an …Next Page »

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Gregory T. Huang wrote:

Well, this is no big surprise. Seattle-based Picnik was on everybody’s list as a local tech company with great potential to be acquired. The photo-editing startup announced today it has been bought by Google. Terms of the deal weren’t given, but this is big news for a startup community that hasn’t seen a major tech exit in some time. One question is how many other suitors were trying to acquire Picnik.

A blog on the company’s site says, “What does this mean for Picnik? It means we can think BIG. Google processes petabytes of data every day, and with their worldwide infrastructure and world-class team, it is truly the best home we could have found. Under the Google roof we’ll reach more people than ever before, impacting more lives and making more photos more awesome.”

Last month, we reported that Picnik had surpassed the 1-billion-photos-edited mark and was ahead of Flickr’s growth curve before the latter merged with Yahoo Photos. It will be interesting to see how Picnik’s subsequent growth compares to Flickr now that it will be integrated with Google. An interesting point here is that the integration between Picnik and Flickr, which was crucial to Picnik’s growth, is certainly threatened by the Google acquisition—since Flickr is the archrival of Google’s Picasa photo service.

Picnik CEO Jonathan Sposato has previous connections to Google. The Mountain View, CA, search giant bought Sposato’s previous startup, Phatbits, in 2005 (the software became Google Gadgets). Sposato stayed on and worked from Google’s offices in Kirkland, WA, for just under a year before leaving to join Picnik, which had been started by Sposato’s friends Mike Harrington and Darrin Massena in late 2005. It’s clear that Google keeps a close eye on its alums’ companies.

One thing that makes Picnik stand out is that it was bootstrapped and never took outside funding—venture capital or otherwise. The company has been cash-flow positive since November 2008. Last spring, Sposato told me, “What is the point of having your own startup if you have to work for The Man again?” (It’ll be interesting to hear his thoughts on joining Google once again.)

And something else Sposato told me last year has added significance now. “Our mission statement is to make ‘Picnik’ an Internet verb,” Sposato said. “Think of it as the Google of photos.”

The company will be moving, but not very far from its Belltown office. Picnik says its team, which currently numbers 20 employees, will continue working on Picnik from Google’s Seattle offices (presumably in Fremont, just a few miles away), and that “nothing is changing right away.”

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Gregory T. Huang wrote:

Startups almost never end up doing what they started out doing. The key is, can they adjust to the market and find enough paying customers before they run out of money? Here’s an interesting case study in the making: Napera Networks.

The computer-network security startup, based in Mercer Island, WA—are there any other startups there?—is announcing a new product direction and strategy today. Napera is rolling out network management software that is based entirely in the Internet “cloud,” and will be sold to small-to-medium-sized businesses through a software-as-a-service model. The software, called PC Security Informer, helps IT administrators efficiently manage the security of employees’ computers—dealing proactively with things like anti-virus updates, spyware removal, and firewall breaches.

It sounds pretty straightforward, but the key opportunity is that most smaller companies (with a couple hundred employees or fewer) don’t want to spend a lot of money on complex security systems from Microsoft, Cisco, or Computer Associates (CA), for example. Napera says it offers an easier and cheaper solution to the basic problem of businesses’ machines being insecure.

“We’ve wrapped it in a very Web 2.0-like wrapper,” says Todd Hooper, the CEO and co-founder of Napera. “If you can use Facebook, you can use our apps.”

Hooper, an expert in network security, co-founded Napera in late 2006. Before that, he had co-founded Momentum Pty, an Internet security consultancy in Australia, and audio software firm Trillium Lane Labs, and had been vice president of business development at Seattle-based WatchGuard Technologies.

What’s interesting is not necessarily whether Napera’s technology is really better than that of its competitors, but that the company has found a way to evolve from a …Next Page »

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Gregory T. Huang wrote:

Smilebox is turning into an intriguing story of a young company grappling with the challenges of expanding to new markets and geographies. The Redmond, WA-based company just raised $2 million from its existing investors, as we reported yesterday, and the money is being used to fuel its expansion to Europe, starting with the U.K., Germany, and France.

I spoke with CEO and founder Andrew Wright this morning about his company’s plans, and how it’s doing in a tough environment for consumer tech companies. He confirmed that the $2 million is a follow-on to Smilebox’s $7 million Series B round from December 2007. And that the money was raised to expand to the European market. The new effort is being headed by Yannis Dosios, a marketing executive and four-year veteran of Smilebox. Dosios is now based in Athens, Greece (his home country).

Smilebox is a photo services company that helps consumers do things like share pictures and videos across social media and blogs, manage and print photos through retail chains, and create greeting cards and DVDs using their personal digital media. The key to all of this is that Smilebox provides about 1,000 original templates for designing scrapbooks, photo albums, and so forth. The company says 10 million customers have installed Smilebox. (The software is a hybrid between an application that sits on your hard drive like iTunes or Windows Media Player, and a pure Web service like Google search, though Wright says it’s mostly the latter.)

“We have a personalized content platform,” says Wright, who previously worked at RealNetworks and Microsoft. Smilebox’s ideas and products apply globally, he says. But on a regional level, it has to market them properly and develop content that relates to local consumers stylistically and culturally. That means understanding U.K. holidays as compared to the U.S. or Germany, for example, and designing localized templates around that.

Of course, Smilebox faces big challenges in getting established in Europe, especially as a small company. It will take time to understand each country’s culture, educate the market on what Smilebox provides, and build relationships with local partners. “I’m a content network. It’s like launching a broadcast TV channel. The good news is it’s hard to do, so if you do it, you build barriers to entry,” Wright says. “It’s not easy for other people to duplicate what we’ve done.”

Nevertheless, the company faces competition from the likes of Shutterfly, Snapfish, Hallmark, and Photobucket. (And it has some similarities with startups like Animoto and Picnik, but those are focused on professional slide shows and photo editing, respectively.) But so far, so good. Wright says Smilebox was cash flow positive for the fourth quarter of last year, and that its revenues were “up well over 100 percent” for 2009 compared with the previous year.

Smilebox was founded in 2005 and has raised a total of $16 million from Frazier Technology Ventures, Bessemer Venture Partners, and angel investors including Rob Glaser, Paul Thelen, and Richard Wolpert. Last summer, the company acquired Preclick, which was based in New Jersey and the Seattle area, to tap into what Wright calls “high demand” for printing pictures at retailers like Wal-Mart and Sam’s Club. Smilebox now has just over 50 employees and is looking to hire eight to 10 new staff in Europe by the end of this year, Wright says.

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Gregory T. Huang wrote:

Microsoft showed up in three deals this past week, involving healthcare-IT, Web search, and software patents. Other than that, the Northwest deals scene felt a little too quiet for its own good.

—Redmond, WA-based Smilebox raised $2 million in equity financing, according to a filing with the SEC. The investors weren’t disclosed, and Smilebox hasn’t officially confirmed the funding yet. Smilebox, which provides software and photo-related services for making electronic greeting cards, scrapbooks, and photo albums, is backed by Frazier Technology Ventures, Bessemer Venture Partners, and a number of prominent angel investors.

—Portland, OR-based Monsoon is being acquired by Alibris, a California-based online marketplace for new and used books, music, and movies. Financial terms weren’t given, but the deal is for cash and stock. Monsoon makes software and tools for managing and processing online selling. Alibris works with and also competes with Seattle-based Amazon.com and other big retailers.

—Microsoft (NASDAQ: MSFT) said it has signed a patent cross-license agreement with Amazon (NASDAQ: AMZN) that gives each company some access to the other’s intellectual property portfolio. The agreement covers technologies including Amazon’s Kindle e-book reader and its use of Linux-based servers, and Amazon apparently will pay Microsoft an undisclosed amount under the agreement. The wording of the announcement has fueled rumors that the deal was made to avoid patent litigation over open-source software that might infringe on Microsoft’s IP.

—Seattle-based Yapta formed a partnership with Kayak, the travel search site based in Connecticut. Terms of the deal weren’t given, but Kayak will power the flight search on Yapta.com, while considering how to pair Yapta’s airfare-tracking service with its own search results.

—It’s not a new deal, but Ryan reported on how the integration of Andover, MA-based Sentillion is going over at Microsoft. The Redmond, WA, software giant completed its acquisition of Sentillion early this month (for an undisclosed price), and is using the technology to make its healthcare software more user-friendly and practical for busy doctors and nurses.

—The search partnership between Microsoft and Yahoo has been approved by U.S. and European regulators. Essentially, Microsoft’s Bing will be the unified search engine, while Yahoo will handle search advertising sales. The alliance was first announced last July, and it is seen as a strong effort to compete more effectively against Google in search and online ads.

—Just for the record, Seattle-based Cozi confirmed that it recently raised $5 million in equity funding from a new (unnamed) strategic investor. Cozi makes Web-based software to help families organize and schedule their activities and chores, and communicate better. CEO Robbie Cape affirmed the company’s advertising business model is going strong. Cozi had previously raised a total of about $16 million from angel investors and partners.

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