News Blog

Video surveillance firm VideoIQ is set to announce on Wednesday morning a $10 million Series B funding round.

Lehman Brothers Venture Partners is leading the round, and current investors Matrix Partners and Atlas Venture are participating.

The funding will be used to help VideoIQ expand to new markets and continue product development of its IP video surveillance and video analytics products, the company says.

Bedford, Mass.-based VideoIQ was spun out of GE Security in 2007 and is headed by Scott Schnell, a former RSA executive.

Kaltura, the video company that's considered a blend of YouTube and Wikipedia, has closed a second round of funding.

The New York-based company, which has become something of a media darling, declined to disclose the amount but did say the round, led by .406 Ventures, was "significantly larger" than the $2.1 million the start-up secured from Avalon Ventures and angel investors.

Kaltura appears on its way to becoming a high-flying service. Flip through the upcoming issue of Esquire and you'll see Ron Yekutiel, the company's co-founder and CEO, modeling a suit as part of a glossy photo gallery on New York's tech-scene studs.

The breakout moment for the 20-employee company came last September, when it won the people's choice award at the TechCrunch40. Three months later, Kaltura walked away with another people's choice award in video sharing at the Mashable Open Web Awards.

It's easy to understand why the company is attracting attention. Kaltura is attempting to raise the capabilities of online video.

With the company's software tools, videographers can collaborate from anywhere in the world. The best example of how the company's wares can be used is in its deal with Wikipedia.

With Kaltura, Wikipedia contributors by the end of the year will be able to use their own clips or other media available from the Creative Commons to make mashups. Any other media wiki sites can download Kaltura's video-wiki extension for free and offer the video collaboration tools to their users.

What separates Kaltura from others offering video editing or management tools is that the software is open source. The features will grow as the community of developers grows, Yekutiel said last week at the OnHollywood conference. Thousands of developers have already accessed the company's code.

"In every major technology sector among the leaders you will find an open-source company," said Yekutiel, a former officer in the Israel Defense Forces.

But Kaltura is up against some big competitors. Brightcove and ThePlatform have been in the business of offering video tools for a while now. Brightcove has a client list packed with big media companies, such as The Wall Street Journal CBS, 20th Century Fox, and Time magazine.

Besides Wikipedia, Kaltura has a deal with Major League Baseball's Internet site, MLB.com.

"We can offer all the tools cheaper than they can," Yekutiel said. "And we're just getting started."

The Federal Communications Commission capped a subsidy program that helps fund cell phone coverage in rural areas.

In a 3-2 vote on Thursday, the FCC said it would limit payments to wireless carriers seeking funds from the Universal Service Fund to help subsidize the cost of providing cell phone service in rural areas. The USF, which is supported by a tax on long-distance and regular subscriber line charges paid by wireless, Internet, and traditional phone customers, has been temporarily capped after the program paid nearly $1.12 billion last year to phone companies operating in rural areas. In 2001, the fund paid out only $15 million. The increase in funding has led to higher taxes on phone bills for consumers.

Congress is currently working on reforming the USF. And the cap ensures that rates remain at March 2008 levels until the reform package is complete.

Regulators hope capping the fund now will help slow the increase of charges being added to consumers' phone bills. The fund was created by Congress as part of the Telecommunications Act of 1996, which essentially overhauled telecommunication law and regulations. The purpose of the fund was to ensure that all Americans had access to telecommunications services at comparable rates.

But in order to achieve this goal, funds had to be made available to subsidize service in rural parts of the country.

In many ways, the USF has been a great success. Over 80 percent of the U.S. population subscribes to a cell phone service. But there are still significant gaps in coverage, where service is not available, because it is simply too expensive for operators to put up cell towers.

While only a quarter of the U.S. population lives in a rural area, roughly 75 percent of our country's geography is rural. And the mobile nature of cell phones means that improving rural cell phone coverage is not just important for people living in remote areas of the country, but for anyone traveling through those areas as well. There have been many stories over the past several years where people have gotten lost or stranded in remote parts of the country and were not able to get help because their cell phones couldn't get a signal.

Still, regulators and large phone companies complain that the burden to fund USF has gotten too great as too many consumers have seen dramatic increases in fees tacked onto their cell phone bills. And they say that the money is not always spent on carriers that are in the most need of subsidy. Phone companies such Verizon Communications, whose customers contribute to the bulk of the fund, were pleased to see the cap in place.

"Consumers will be happy to hear the FCC is taking control of the fund's growth," Tom Tauke, Verizon's executive vice president of public affairs, said in a statement. "This is a responsible first step. The next step is comprehensive reform of the universal service high-cost fund to make it more efficient and targeted to consumers who need it."

While AT&T's customers, like Verizon's subscribers, pay a huge chunk of the USF, it also happens to be a major recipient of these wireless subsidies, according to a story by the Associated Press. But the company had already agreed to a cap as a condition of its acquisition of Dobson Communications last year. Alltel, another major wireless operator that relies on USF funds, also agreed to a cap on the fund as a condition of its deal to be bought out by a private investment group.

Marketcetera just announced a $4 million series A round of venture funding with Shasta Ventures and Jack Selby, managing director and co-founder of Clarium Capital. There's something highly appropriate in a hedge fund investing in a software company set up to help hedge funds (and others).

Marketcetera, as I've opined before, is one of the coolest open-source companies on this planet. It provides an open-source trading platform for hedge funds and others to process and deliver trades.

Marketcetera can start with algorithmic trades for hedge funds, but that's just the beginning. As Dana at ZDNet suggests, open source is increasingly "the traditional way" that software will get done. The fact that Marketcetera is open source will help it, and certainly won't pigeon-hole where it takes the technology or its business.

Congratulations to the Marketcetera team!

For the last four months, Howard Chau has been developing a mobile application that's designed to alert people to their next calendar appointment, factoring in data like the person's physical location and traffic conditions en route to a meeting.

In the next two weeks, Chau plans to submit the GPS-based application, called Mappily, to Google in the hopes of winning its Android Developer Challenge, a developer contest with $10 million in total prize money. Because Chau only stands to win tens of thousands of dollars in the first round of the challenge, the money would just be gravy.

"It's really a way to get seen," said Chau, the 26-year-old president of Cupertino, Calif.-based Mappily, which employs three people.

Chau's plight is part of Silicon Valley's new contest within a contest to create the hottest new mobile technology.

Pulling the strings are Google and Apple, which are in a simmering battle in the handset market with respective new platforms and software development kits. (That could be especially uncomfortable, given that Google CEO Eric Schmidt sits on Apple's board of directors.) Behind the scenes are the venture capitalists, such as Kleiner Perkins Caufield & Byers, which recently established the $100 million iFund to invest in mobile applications for the iPhone. Google's Android Developer Challenge is its own version of the iFund at a 10th the size. But surely other VCs are ruminating on forming the Android Fund to rival KPCB.

Charles River Ventures, for example, has briefly considered the idea, but will likely fund Android applications from its QuickStart seed program, which grants promising upstarts a convertible note worth $250,000 to get their project off the ground, according to one partner.

With all of that money floating around, developers are rushing to build the next big widget, social network, or mapping technology for the mobile phone. Not only are developers lured by the idea of making money on the mobile phone, but they're also drawn by financial incentives coming from both camps that might seal their future.

Google's $10 million will be doled out in chunks to developers with winning mobile apps for its upcoming Android platform. That contest, which will come in two rounds with the first deadline April 14, takes a page from the XPrize Foundation and other incentive-prize competitions that have spawned innovations in flight and rocketry, and potentially, lunar rovers and energy-efficient cars.

Meanwhile, KPCB has dangled a much bigger carrot for developers trying to win big with mobile applications on the Apple iPhone. The venerable VC announced the $100 million fund in early March, when Apple unveiled its software development kit. Developers who land a deal with KPCB will not only be well-funded, they will be well-connected to Apple's platform. Apple executives at the highest levels will be consulting on the deals, according to KPCB iFund lead Matt Murphy.

KPCB has already ported a couple of its own venture-backed start-ups into the iFund, including Pelago, which makes a social-networking application.

Still, such specific funds have failed before. For example, during the dot-com boom, KPCB announced the Java Fund, and nothing huge came of that venture. For that reason, many VCs say it's a way to generate buzz more than anything else.

"Any serious VC is going to fund things on the iPhone and Android platform if it's a cool thing. In general, VCs are less excited about applications where the carrier is in control," said George Zachary, a partner at Charles River Ventures.

iPhone already established
For many developers, Apple's iPhone is more alluring as a development platform because of the established customer list. Unlike Android, the iPhone platform has hardware with millions of customers; and as a bonus, Apple-sanctioned applications go on sale in its mobile store.

Craig Hockenberry, chief technology officer at IconFactory and a longtime Mac developer, said the iPhone offers a clear business path. His company is developing a Twitter messaging tool called Twitterific for the iPhone, among other applications. IconFactory will sell Twitterific for a one-time fee of $15 or offer a free advertising-supported version.

"We don't need outside investment, but that iFund is going to be useful for people who have big social-networking programs that need backend infrastructure," Hockenberry said. "We just want to build small, fun apps and leave it at that. Those are the ideal apps for the iPhone."

As for the Android contest, he hasn't been enticed by it because there's no hardware yet. "It's a bit of a gamble. You can maybe make a million dollars, but what if you don't? You have nothing. I think what we have going onto the iPhone, it's going to sell. People are asking for it," Hockenberry said, adding: "Nobody's got Android."

Hank Williams' company Kloudshare aims to enter the Android contest. Having raised $40 million in venture funding for ClickRadio during the dot-com boom, he said that VC money comes with too many strings. Kloudshare, based in New York, is developing an application that will help people manage data on their phone and desktop, but Williams wouldn't get more specific than that.

"The idea that Google's putting $10 million on the table, saying 'we're going to give it to the best companies by this deadline' is more direct in my mind. I would imagine Google will write more checks than the Kleiner folks."

"The money--that's a maraschino cherry," Williams said.

Still, Kloudshare will likely develop an application for the iPhone. "We figured Android was the low-hanging fruit. We want to prove that it worked on the Android platform and then go from there," he said. Williams believes that Android will likely be the operating system for the largest portion of the cell phone market, rekindling the PC vs. Apple fight. "It's going to be like the PC market, with 20 companies selling Android. One is perfect and the other is everywhere," Williams said.

To be sure, developers say Android's platform is easier to create applications for because of built-in mapping intelligence technology and so-called background processing. That's why Chau chose the Android platform, for its in-build mapping technology.

Chau said he's waiting to hear of an Apple update that will include a GPS-sensor so that he can port his application to the iPhone and boost its customer base.

"It's tempting to see that there's a lot of money out there for companies like us," Chau said.

Making a professional-sounding recording can be expensive, particularly for ensembles (like rock bands) who want to capture at least some semblance of a live performance.

Sure, you can get an decent recording with a portable stereo recorder, or a couple of inexpensive mics panned left and right and plugged directly into the mixer, but most artists want their music to sound as good as it possibly can--as good as any other artist played on the radio. That takes an array of microphones and other audio gear and somebody who knows what they're doing. In other words, money.

In the post-label world, who funds these recordings? Peter Spellman, director of career development at the Berklee School of Music, explores three fan-funded (or "crowdfunding") options in a blog posting on KnowTheMusicBiz.com.

ArtistShare, which has been around since 2002, allows fans to contribute to particular artists and receive exclusive tidbits, such as in-progress recordings.

SellaBand works more like a small-scale venture capitalist for bands: fans can "invest" $10 apiece, and when an artist reaches $50,000, Sellaband will hook them up with industry professionals, including producers and studios, to record and market an album. Revenue comes from advertisements shown next to free downloads, as well as sales of the finished album, and are split three ways between SellaBand, the "investors," and the artist.

U.K.-based Slicethepie not only allows fans to invest, but essentially asks them to do artist discovery. Fans are compensated a few cents for listening to acts and writing reviews, and bands who score the best end up in a showcase, where labels might find them and offer them a deal.

Fans can also earn money by betting on the success of artists in a stock market. The winner of the showcase gets 15,000 pounds from the organization to fund a recording, while Slicethepie receives some royalties from sales of the album. (I'm always a bit wary of showcase-type models--often bands must pay up front to participate, labels and radio stations ignore them completely, and the only party who benefits is the organizer. In this case, the entry fee for each song appears to be around 20 pounds, although the FAQ isn't entirely clear on this, and entry fees are currently being waived. Still, proceed with caution.)

Whether or not any of these particular organizations actually ends up funding the next Radiohead, it's interesting to see all this business innovation occurring outside the bounds of the traditional label system.

Radar Networks is prepping for a March public beta of Twine, a Web application that organizes information into a "semantic graph," connecting people, places, companies, products, Web pages, videos, and photos, and turning it into Semantic Web content.

In addition, the company raised $13 million in Series B funding from Velocity Interactive, Draper Fisher Jurvetson, and Vulcan Capital. The new capital will go toward building out the back-end infrastructure, which can be substantial as Semantic Web applications process and store large amounts of data, as well as adding staff as the business scales up, says Radar Networks founder Nova Spivack said. The company raised $5 million in Series A funding in April of 2006 from Vulcan Capital, Leapfrog, and angel investor Ron Conway.

Twine has been in private beta with a few hundred users since November 2007. "We have 30,000 users on a wait list, and we will let them in 1,000 at a time in our first week in the market," Spivack said. "The next phase will give us tons of feedback, and we will continue to fix things and add new features, but a lot of it is there already and you can get a feel for where it is headed."

"Twine is a new service for knowledge networking, sharing, organizing and in finding information from people you trust," Spivack explained when the application was first introduced in October 2007. "Unlike a social network that is about who you know, Twine is more about what you know."

He also describes Twine as "Web 2.0 with a brain," and as a milestone in making the Semantic Web useful to end users. (See my earlier post on Twine.)

Twine will be ad-supported, with limits on storage and the number of advanced features for the free version. A subscription-based, premium-content service is also planned.

Twine isn't the first application to apply Semantic Web principles, extracting meaning, and classifying and relating data with or without using Semantic Web standards such as RDF, OWL and SPARQL (the query language for RDF).

AdaptiveBlue's BlueOrganizer, for example, knows about thinks like music, books, wine and travel destinations, but doesn't use RDF or other Semantic Web standards. Metaweb Technologies' Freebase is a like an open public almanac that includes structured information on topics such as movies, music, people and locations./p>

See also Paul Miller's ZDNet take on Radar Networks' news.

Calling all entrepreneurs: follow the money.

If you did, that road down the IT path would likely lead you to clean-tech and Internet-specific businesses, according to results of the 2007 MoneyTree Report released Friday by PricewaterhouseCoopers and the National Venture Capital Association.

U.S. venture capitalists invested a total of $29.4 billion in 2007, up 10.8 percent from the previous year. That marked the fourth consecutive year of growth. The number of deals reached 3,813 last year, a modest rise of 5 percent over a year earlier.

Clean-technology companies attracted $2.2 billion in investments last year, a 47 percent jump over the prior year. And the number of clean-tech deals rose by 58 percent to 202 venture financings last year, compared with 2006 .

Internet companies, which rely on a business model that's largely dependent on the Internet, also attracted a substantial slice of venture funding last year, according to the report. This sector attracted $4.6 billion in funding, accounting for a 12 percent increase over the previous year.

The software sector, which historically grabs the largest slice of venture funding, had less than spectacular year in 2007. Funding levels for the software sector remained virtually flat, rising to $5.3 billion with 905 deals, compared with $5.1 billion for 920 deals in 2006.

"Software is still the largest segment for funding, even though it is flattening out," said Deepak Kamra, a venture capitalist with Canaan Partners. "Within software, software as a service and open source are doing well. Open source is a cheaper way for companies to develop applications."

Venture capitalists get their investment back through an IPO or sale of their portfolio company. Last year, venture capitalists were able to ride the IPO ride on several notable deals.

"The market was good for IPOs in 2007, but now we're concerned about the IPO market shutting down," Deepak said. "Ultimately, the IPO market will come back."

SolFocus, a solar technology company that was incubated at the Palo Alto Research Center (now an offshoot of Xerox), has raised $52 million more dollars to help it launch in Europe.

The company, which had previously raised $27 million, specializes in solar concentrators, which direct more sunlight onto solar cells that would ordinarily fall on them. The more sunlight, the more electricity the solar cell can generate. The more electricity a cell can generate, the more economical solar energy--which generally still costs about twice as much as regular grid power--becomes.

SolFocus' concentrators magnify the light 500 times. Several companies make solar concentrators, and SolFocus' figures are in the general ballpark of efficiency. Some, such as GreenVolts, claim higher efficiency, but others sport lower. Buyers, though, are also concerned about durability and maintenance. Concentrators move with the sun to maximize output.

The company's products are aimed at the commercial market, such as retail stores or office parks. Placed on a roof, solar concentrators can cool off a building and generate power on-site. SolFocus also intends to build large-scale power generation, where a field of panels could generate several hundred megawatts of power.

SolFocus Europe will concentrate on the European market, which is larger than the U.S. solar market. The company will also start to develop products for the solar thermal market. In solar thermal technology, heat from the sun is converted to electricity. SolFocus' original products work with photovoltaic panels, which convert light to electricity.