I’ve been an Internet email user since early 1984 when I got my first Project Athena account as an undergraduate at MIT.  Notwithstanding all the “email is dead” messages over the years, I continue to use email as my primary online communication mechanism.  There are an enormous number of things that frustrate me about email, most notably the lack of fundamental innovation in email clients and servers.  That said, as a messaging tool – it still dominates for me.

Several years ago I started saying that “my social graph is in email.”  I found it interesting that Facebook and LinkedIn used email as a primary messaging layer to remind me to come back to Facebook and LinkedIn respectively to check what was going on.  This signaled confirmation to me that these systems were making sure they were using the most persistent messaging layer to build and reinforce their social graphs.

For whatever reason, the primary email product providers have been either painfully slow at realizing this or have decided to ignore this.  Facebook and LinkedIn have benefitted massively from this, but the biggest recipient of this neglect is Twitter which has created an entirely new messaging protocol (think Twitter API as analogous to SMTP).

Suddenly, in the past year, entrepreneurs have woken up to the potential of the email social graph.  As I’ve mentioned before, we invested in Gist to directly address this opportunity.  Xobni is another well known company that is attacking this.  But another intriguing fact is the number of younger entrepreneurs that are working on this problem.  Each of the TechStars locations (Boulder and Boston) has a company that – at its core – is built around the premise of email as the original social graph.  In addition, as a mentor in the fbFund Rev 2009 program, I’ve recently started working with another company working on yet a different angle to this problem.

Now, these companies aren’t creating new email clients.  They are working on products or web services that take advantage of all the implicit information generated by your email activity.  They aren’t limited to just email (if you are a Gist user, you understand this well), but use email (name@domain.com) as a key information pivot point.  If you step back and think about it, while http://www.facebook.com/bfeld is new and full of yummy chocolaty goodness, brad@feld.com is really my “unique” identifier.

I’m not going to talk about the three new companies I’m working with on this problem yet – I’ll let them “launch” on their own timetable and I’ll talk about them when they are ready.  In the mean time, I’ve continuing to look to talk to more people that share this premise.  If that’s you, feel free to email me.

Of course, the nerds among us might argue that making a hard drive in your home accessible from the internet is “easy”. After all, all you need to do is put a NAS drive on your home network, give it a static IP address, configure port forwarding on your router/firewall appropriately and then set up a Dynamic DNS service so you can still access the device when your ISP issues your home network a new IP address. And that only makes your disk accessible remotely - nevermind if you might also want to manage the creation of user accounts and offer varying degrees of permissions and access to different users across a variety of files and folders. If that sounds easy or fun to you, then perhaps the pogoplug isn’t for you.

But for the rest of the world - those of us who would choose to simply put a slice of bread into a toaster rather than grow a field of wheat, harvest it, dry it, grind the grain into flour, culture some yeast, knead some dough, bake the bread, slice it and then toast it over an open fire, the pogoplug is a great little device that is dead-simple to setup and a pleasure to use.

Pogoplug boasts one of the simplest setup processes we’ve ever experienced for a piece of consumer electronics — even easier than the Slingbox, one of the gold standards in terms of ease of install and usability, in our minds. And while other products exist that can make a storage device LAN and WAN accessible, none go as far as the pogoplug does in truly making your local storage part of the cloud and giving you a granular level of control over how you share your data.

What does this mean? For starters, in addition to offering multi-user web access to an attached storage device, pogoplug also offers Mac, Windows and Linux client software to make the pogoplug appear as local storage on the desktop, regardless of whether the user is on a local LAN or half-way across the world. Second, pogoplug provides a great iPhone app, allowing access to files from the phone. Support for Android and other smartphones is on the way.

Third, while true storage-in-the-cloud and backup-to-the-cloud services exist, they are, relatively speaking, expensive. While a user can find a few gigs of free web-based storage, if you want more than that, the current market price appears to be, at the low end, about $10/year/gig. That’s fine if you’ve only got a dozen or so gigs worth of data. But whatt happens if you want a terabyte of web-based storage? We don’t see many users willing to pony up ten grand a year. With a pogoplug and a terabyte USB hard drive, that’s a sub $200 (one time) proposition.

Finally, and most importantly in our mind, pogoplug provides a web API to their service, allowing third party developers to build apps on top of the installed base of pogoplugs. This is what truly makes the pogoplug an important gadget - it takes a formerly marooned piece of hardware, the lowly hard drive, and makes it a full-fledged citizen of the web. We think that the folks at pogoplug and third party developers out there are going to dream up some exciting applications built on this API.

After spending time with the company in the Fall and hanging out with them at their very crowded booth at CES in January and seeing the enthusiastic response from folks (including ourselves) who couldn’t wait to get their hands on a pogoplug, we began spending even more time in San Francisco getting to know the team behind the pogoplug and learning about their vision and product roadmap going forward.

While a great product vision is a requirement for us to get excited about making an investment, even more important is that there is a great team behind the product that is capable of fulfilling the promise of the company, and the team at Cloud Engines is as rock-solid as they come. Founders Daniel Putterman (CEO), Jed Putterman (VP Product), Brad Dietrich (CTO) and Gregory Smith (CFO) have all been founders and senior executives of successful startups well as established large companies. What’s even more impressive is that they brought the pogoplug to market having only raised money from angel investors. While this is increasingly common in the world of startup web apps, it is a decidedly rare thing to do in the world of consumer electronics.

Finally, it has been gratifying to see that other people out there think highly of the pogoplug as well: the pogoplug has received accolades from the technology press and the many gadget bloggers out there. Pogoplug was recognized with Laptop Magazine’s Editor’s Choice Award, PC Magazine’s Editor’s Choice Award and was a Popular Mechanics Editor’s Choice selection, and the device has been positively reviewed by the likes of Gizmodo, Engadget, Cnet, USA Today, Popular Science, PC World, jkOnTheRun and many more.

Today we are happy to announce that Foundry Group has made an investment in Cloud Engines, and we are looking forward to working with the team to quickly reach the day when far more cloud-based storage is available via personal hard-drives attached to pogoplugs than any service-based means.

Today we’re announcing an investment in Medialets – a company that sits right at the intersection of new advertising technologies and our glue theme. Based in New York, Medialets is a mobile analytics and advertising company that helps mobile application developers track usage and other statistics about their applications and provides technology that enables them to monetize those applications via advertising.

Medialets has built out this rich media advertising and analytics platform for iPhone and Android with support for BlackBerry, Windows Mobile, Symbian and Palm Pre coming later this year. The company develops technologies that enable publishers to measure their audience and monetize their applications through advertising and that allow brands to leverage the unique capabilities of mobile platforms in advertisements in a way that is measureable whether the device is on- or off-line.

Founded in June of 2008 by a team led by multi-time entrepreneur Eric Litman, and launched concurrently with the iPhone AppStore in July 2008, Medialets quickly became a market leader in mobile analytics and advertising. By working directly with large brand advertisers and their agencies, Medialets has pushed the bounds on mobile advertising and has used its success with advertisers and agencies to more quickly grow the use of its analytics platform. To date, the company has seen over 70M downloads of its analytics code across 14M unique devices. In March of this year the company created the world’s first shakable advertisement, and in April it announced that it had processed its billionth event through Medialytics, the company’s analytics product.

We’ve been working with the company since shortly after their launch last summer and have had the opportunity to really dig into the business with Eric and the rest of the team at Medialets. We feel fortunate that they’ve chosen to work with us as a key partner in growing the business and are excited to go public today with our investment in the company.

If you follow our themes, you know that Email and the Implicit Web are two of our favorites. Email is a long running theme of ours dating back to 1996 when we invested in Email Publishing (the company that we believe was the first known email service provider.) Over the years we’ve invested in a number of successful email related companies, including Postini, Critical Path, and Return Path.

We’ve continued to hunt for additional email-related investments. As the social web emerged, we developed a strongly held belief that your email inbox is a key source of your implied social network. With the rapid rise of Facebook, LinkedIn, and Twitter, there are now other social networks that have been created, but they still all build on and link to the implied social network that comes from your inbox.

We started talking to Gist’s CEO TA McCann last fall around the Defrag Conference. We saw an early demo of Gist, dove in and started playing with it. Gist wasn’t yet raising a financing so we had plenty of time to get to know the company and the team. We’ve looked at many other companies doing things in and around the inbox so we had plenty of points of comparison. As we got to know Gist better, we realized that in addition to being in the sweet spot of our Email theme, it was also right in the middle of our Implicit Web theme. We call this a special bonus double theme investment.

Brad will be joining the Gist board which is now our second Foundry Group investment in Seattle (the other one is Smith & Tinker); we look forward to spending more time in the Pacific Northwest.

For us, there was another important announcement at the meeting this week - that Jason has joined the board of the NVCA. This is a both an important and well deserved honor that puts Jason in a position to significantly effect our industry over the next four years of his term on the board. Jason has been involved with the NVCA for years, particularly founding and working actively with a group that put together the NVCA’s model financing docs (if you are a venture backed company that has closed a round in the last few years chances are pretty high that you benefited from this effort).

We’re extremely proud of Jason and the leadership he’s shown on a national level in our industry that led up to this significant honor. Please join us in congratulating him on this great achievement.

As part of this approach we look to meaningfully participate in the ongoing conversation taking place within these thematic areas. To that end we’ve teamed up with Eric Norlin to work on a few conferences that bring together thought leaders from across the technology industry.  Our first attempt at this is Defrag - a conference now in its third year that is focused on how technology has evolved to help people and organizations better organize, interpret and consume disparate information (thus the name "Defrag").  While the conference wasn’t theme specific, the conversation has tended to tie closely to our Implicit Web and Email themes.

In 2009 we’re introducing another conference to the mix that we’re calling "Glue".  If Defrag is a high level discussion about meta-information, Glue is a more nuts and bolts discussion around the actual technologies that we use to pull this information together.  As you can imagine, it also fits nicely with our Glue theme. Presuppose the notion of cloud computing/platform as a service; assume the web as a platform.  Now what?  Glue is going to bring together technologists to start to answer these questions. The discussion is generally going to be "below the browser" and if you check out the agenda you’ll see plenty of topic areas that relate to the details of the changing technology and architecture landscape. And while we’re still putting the final touches on the agenda, we can confirm that keynote speakers will include Mitch Kapor (long time software luminary and private investor) and David Heinemeier Hansson (creator of Ruby on Rails) along with many sessions that are designed to encourage meaningful interaction between conference attendees.

We hope you’ll join us at the Glue – May 12^th and 13^th at the Hyatt in Denver. Use the code "early1" to get $50 off the regular conference price of $395 (but there are a limited number of discounts available, so best to register right away).

As we detailed in our original blog post about this investment, EmSense has a broad array of customers in the advertising, consumer products, retail and video game segments, each of which is using EmSense’s tools to refine and improve the quality and effectiveness of their media, be it a video, radio or print advertisement, product package or video game title.

Last October, Tim Hong, EmSense’s SVP of Product Development and Analytics and one of the company’s co-founders, penned an illuminating article for Game Developer Magazine, entitled Shoot to Thrill, which showcases the power of EmSense’s platform when applied to measuring players’ level of engagement, cognition, adrenaline and emotion in real-time while playing first and third person shooter games on the XBox360 and Playstation 3. EmSense gathered this player data for games like Battlefield 2142, Call of Duty 3, F.E.A.R., Gear of War, Ghost Recon AW 2, Resistance: Fall of Man, Halo 2 and Half-Life 2.

In his article, Tim goes in-depth in describing concrete examples of elements of gameplay that engage (or bore) players and draws five categories of conclusions about what goes into making a great shooter. I won’t list all the examples here, but will mention a few that caught my eye.

1.                    Tutorials must be integrated into combat: simple, non-combat, non-perilous “target practice” is a sure way to bore the player.

2.                    “Cut-scenes” in transitions between levels lead to decreased player engagement, particularly when they are used to inform/instruct a player rather than entertain and further the plot.

3.                    Ultra-powerful weapons lead to a spike in player engagement, but unless there is an increased risk to the player while they are enjoying their fantastic new weapon, they will quickly tire of their new-found destructive power.

One key conclusion that can be drawn across the board, according to Tim’s research, is that games that do not do a good job of varying the intensity and engagement level during the course of a game ultimately lose players, measuring what is essentially player attenuation if intensity never relents or plateaus. Put another way, a roller coaster is fun because of the uphills and the downhills, while a single hill climb or single descent may provide a one-time adrenaline hit, but won’t lead to repeat riders. While many of these conclusions sound obvious or intuitive) to game developers and game players, EmSense provides, for the first time, an ability to document and measure these things empirically. For a more in-depth discussion of each of the examples I provided above as well as several more, dig in to the original article.

When we invest in a company at Foundry Group, one of the things we look for is a differentiated technology with broad applicability, and EmSense certainly fits the bill. As mentioned previously, EmSense’s audience engagement analytics have proven useful in refining and improving the effectiveness of various sorts of media: video games, radio advertisements and television commercials.

For example, EmSense was used to test the effectiveness of political ads during the (seemingly endless) presidential campaign last year, while early in 2008, Coca-Cola used EmSense to winnow down a slate of a dozen candidate Super Bowl ads to the two they ultimately decided to run. More recently, EmSense has been pushing its technology into testing product packaging and retail environments where participants can actually walk around in-store while wearing the EmSense headset . The Company is also exploring the use of their experience testing as applied to motion pictures. Movie trailers, in particular, are an experience ideally suited for EmSense’s analysis, given trailers’ similarity to TV commercials and video-games, both of which EmSense is well-experienced in.

Needless to say, we are looking forward to participating in EmSense’s growth in 2009 and are encouraged by the reception they are seeing across diverse areas of application for their technology. Given the ever-growing costs associated with video game and movie development and the mandate (particularly in the present economy) to improve the efficacy of advertising and product packaging, we think EmSense has a great opportunity to become an important partner in the development, improvement and refinement of a broad spectrum of media.

1. Don’t buy a television for the next 6 months. This is certainly counter to what retailers and producers would want us to say, especially given the current state of the economy, but all the major brands are introducing exciting technologies in the first half of 2009. The TVs are thinner (some less than 1mm!), brighter (LED backlighting rocks), faster (240mhz refresh rate) and offer superior contrast ratios (1,000,000 to 1 and even higher). Next to the best of today’s generation of panels, there is no comparison. Having been to CES a few years in a row, this year seemed to demonstrate the biggest improvements on imaging. If you don’t buy a TV in this generation, hold on a couple of years until OLED TVs are commonplace and then sit a back and look at the best displays we’ve ever seen. For now, we’ll geek out on LED backlit generation two screens.
2. Everyone is trying to make things easier on consumers. It only took 20 years or so, but consumer device manufactures, both large and small are finally focusing on the consumer experience. Maybe this is the effect of Apple’s entrance into the consumer device ecosystem, but this year, in particular, showed many instances of deep thinking about usability. What was of particular interest to us were some of the startups that attended the show and instead of presenting groundbreaking technology, rather have executed on current technologies to bring the consumer a needed digital solution with the ease of use never seen before at an unexpectedly low price.
3. 3D on TV. Full HD TVs and projectors that have incredible 3D-images (glasses needed) are now consumer available. Clearly the amount of content available will drive how popular these devices become, but the technology is really impressive to experience. We played a VW racing game in 3D and would have been happy to sit there all afternoon, or at least until the inevitable headaches set in. There was also a prototype of a 3D TV that didn’t require the viewer to wear glasses. It was pretty rough, but cool at the same time. We have our doubts that the entire universe of content will ever go 3D, given how different the production tools and processes are for live-action movies and television. However, for media like video games and CG animated content which are largely “3D native” already, there should be less of a hurdle to create appropriate 3D content, and probably better justification from a user-experience perspective as well.
4. SanDisk has a power marketing department. SanDisk had their usual large presence and this year the big announcement was a 2GB Rockband-branded SD card. All for the low price of 13 bucks. Yes, you can buy a regular SD card for about 4 bucks, but why not pay an extra $9 for a cool sticker? Well done, SanDisk. Also, similarly, one can now purchase a cool looking Godfather-branded USB thumb drive, (not from SanDisk) but it does contain some Godfather content, at least. Speaking of content, SanDisk also brought out a new MP3 player for lazy people called the slotRadio. The MP3 player comes with 1000 preloaded songs based on standardized genre playlists chosen by the company, not the user. Over time, a user can order new cards to put into the MP3 player’s slot, each card having a different genre of music pre installed. The only controls on the device are play and skip (i.e. no “back”). Call this the MP3 player for people who really don’t like music.
5. It was virtually empty at the show. Okay, that is a gross overstatement, but the hotel rooms were half the price of last year and it was definitely easier to navigate on the convention floor. The folks at CES claimed there was only an 8% drop in attendance, but it felt like a lot more. Our bet is that folks who registered beforehand didn’t buy plane tickets and hotel rooms and didn’t show up. CES probably included these folks in their numbers. After all, they have booths to sell based on attendance. Some reports have the attendance at 22% down.
6. Nobu is still excellent. Enough said. Guy Savoy was also scrumptious.
7. Human Computer Interaction. We were excited to see the continual refinement and presence of next generation human computer interactions. Frequent readers to our blog will note that we are huge fans of HCI. We wouldn’t say there was anything earth shattering, but it was nice to see multi-touch and other similar technologies progress.
8. Connectivity matters. Connecting more devices to more content in more places was a big theme. On the wireless front, there was a wealth of smart phones, LG’s new Dick Tracy-esque watch cell phone, lots of in-car connectivity (satellite TV, in-dash computers with mobile Internet, etc.), and a push to deliver more relevant content (traffic, weather, sports, etc.) via traditional GPS devices. And while the idea of accessing the Internet on a TV seems a bit passé (WebTV pioneered the idea about 14 years too early), 2009 just might go down in history as the year that this idea truly came to fruition. TV manufacturers seem to have embraced the idea—we think having this built into TVs is a big step forward when it comes to the average consumer—and the wealth of newly available content like NetFlix streaming movies and Yahoo’s widgets should make for a more compelling experience than WebTV’s original email-on-your-TV proposition.

You’ll notice that this company does not neatly fall into one of our typical investment themes. In addition, it’s focused on a single vertical market, which is a characteristic that we usually avoid when investing. That being said, we were very comfortable with Firstdocs given our previous success with the legal-focused e-Discovery provider, Stratify, the large size of the legal market, as well as Jason Mendelson’s Law Firm 2.0 philosophy.

We believe there is a large market for on-demand business solutions directed at law firms and legal departments. Both law firms and legal departments are constantly seeking ways to lower costs without suffering a drop in the quality of work produced. Legal departments are finding themselves overly constrained with regulatory and corporate compliance tasks. These burdens have increased as a result of Sarbanes-Oxley and are likely to become heavier and more time intensive with the regulations almost certain to result from the current economic crisis. At the same time, law firms are under intense pressure to decrease billings to their clients, while the cost structures of these firms have continued to bloat .

Many legal tasks, while costly, are essentially repetitions of work done previously. Tasks such as venture financings, sales contracts, non-disclosure agreements, discovery requests and many others are currently handed down to junior associates costing $200-$400 dollars per hour for work that could be largely automated.

Despite this pricing pressure, law firms around the country continue to increase hourly rates; in some cases these rates are over $1200 an hour. The rates increase as competition for top lawyers increases. While this happens, however, clients either leave the firms or begin to farm out less sophisticated tasks to other service providers. In the end, the law firms are losing hours by increasing rates and at some point, this business model cannot continue. FirstDocs allows these law firms to automate many tasks, increase margins and work for lower hourly rates and / or provide fixed fee offerings to their clients.

In-house legal departments can use the FirstDocs solution to gain real control of their document creation and review processes. Many of the functions that require copious amounts of legal review can be largely automated such as NDAs, discovery requests and sales contracts. Furthermore, different authorities can be allocated to different individuals within an organization allowing for more or less flexibility, all the while maintaining good corporate governance hygiene.

FirstDocs initial product, Secure GC, version 1.0 has already been released to customers. Secure GC offers on-demand services that are fast, flexible, and extensible solutions to managing a transactional legal practice which supports the entire transactional process from document origination through expiration. It offers the authorship of structured and highly specified contracts and can assimilate litigation, M&A, and legacy document contents. Secure GC imports, interprets, and negotiates counterparty contracts.

We are excited to join the FirstDocs team and look forward to assisting them in the next phase of their journey.

We invested in Topspin Media last summer, and they’ve been busy cranking out multiple releases of their Artist Manager platform while simultaneously supporting numerous album releases from established and new artists who have adopted Topspin’s technology to enable them to release their music direct-to-fan. As a reminder, Topspin provides advanced marketing tools and services to enable recording artists to build successful brands and businesses online.

Many musicians chose to release their music using Topspin’s platform in 2008.   The two highest-profile releases to date have been David Byrne and Brian Eno’s Everything That Happens Will Happen Today and Paul McCartney’s The Fireman. The Fireman’s Electric Arguments made The AMG Top 50 Album list for 2008, while the Byrne/Eno album (one of my personal favorites of the year) wound up on a boatload of year’s best lists, published by the likes of AMG, Sound Opinions, Rolling Stone, Pitchfork, Uncut and the NPR Listeners.

Of course, Topspin’s platform is not just for established artists — some great new artists chose to release their music on Topspin in 2008, including White Denim, Spinnerette and Imaad Wasif. Yet another release worthy of mention (because it was a first) was Arcade Fire’s release of their documentary, the first direct-to-fan video release and the first-ever better-than-DVD-quality direct-to-fan release as well. If you want to dig deeper, see Topspin’s blog for a more detailed rundown of their 2008 activities.

There’s a long list of artists launching their music via Topspin in 2009 that we’d love to talk about, but we’ve been sworn to secrecy until each one goes live. Watch the Topspin blog for the release announcements when they happen.

In the meantime, Topspin is going out on the road in January, and may be coming to a city near you. If you’ll be in Vegas attending CES this week, Topspin’s CEO Ian Rogers will be on Billboard’s Digital Music Live Music 2.0 panel on Wednesday morning and on a CES Issues and Attitudes Session Panel on technology and independent musicians on Thursday afternoon. And since it wouldn’t be Vegas without a party, Topspin is hosting a meetup at T&T’s in the Luxor on Wednesday evening, so come join the fun and meet the Topspin crew as well as several of Foundry Group’s partners, who will be in attendance. Finally, if you can’t make it to Sin City in January, but you happen to be in Europe, Topspin is hosting a meetup in Cannes during the MIDEM conference.