Nextburgh

What Pittsburgh Shares with Silicon Valley: A Strong Sense of Community

2009-12-29T13:42:00+00:00

As I’ve talked about why I think Pittsburgh is well situated to be a strong entrepreneurial hub, I think I may have spent too much time talking about how Pittsburgh is different from Silicon Valley and not enough time talking about how it is similar.

There are a myriad of reasons Silicon Valley is what it is today, but the ones that I always thought were fundamental was having a top-tier engineering school to serve as an anchor and a strong entrepreneurial community.

Almost every successful entrepreneur will tell you that they were successful in large part because of the help they got from the previous generation, and as a result have this duty to give back to the next generation. The thing about Silicon Valley is that this is so strongly baked into the culture there, creating a very strong sense of community. As @venturehacks put it, “It's almost a law that cashed-out entrepreneurs in Silicon Valley have to start angel investing. Not years after their exit — right away.” The result of this, of course, is that it creates a very strong network effect; as I’ve said before, building a successful business is a terribly difficult thing, but the Silicon Valley community creates a strong support network to nurture nascent companies into mature and successful ones.

This sense of community and openness was really on display when I spent a week in San Francisco this past August. During that time, I called a number of successful folks in the community and almost every single one made time to sit down and talk that week. (In fact, I think the only two who didn’t were both out of town). We spent over an hour with each one discussing our business, and they happily offered feedback, made introductions and pointed us at potential partners. In every case, I had this feeling that they genuinely wanted to help us; that they wanted to see us succeed, even though we had never met them prior to setting up the meeting. We asked each for 30 minutes, and I think our shortest meeting was 75 minutes.

I spent the following week in Pittsburgh, and interestingly my experience was almost identical. I met around 10 different folks involved in the entrepreneurial community here and was greeted with open arms. Everyone I met with was helpful and again I had that feeling that they wanted me to succeed. I think one thing that Pittsburgh has even more than Silicon Valley is immense pride in the city. The community, though much smaller, is perhaps even stronger here because of that deep-rooted desire to see Pittsburgh succeed.

Of course, that’s no surprise to anyone who has spent any time in Pittsburgh, but I think sometimes without the contrast it goes unappreciated. We have a great community in New York, but there’s still just a different vibe in Pittsburgh – and in Silicon Valley. When combined with other building blocks, I think that’s a big reason why Pittsburgh will be able to transform itself in the long run.

NavPrescience: Making your GPS a bit smarter

2009-10-17T16:55:37+00:00

After the break, CEO Brian Ziebart presented NavPrescience, a CMU spin-off. Brian says that current GPS systems are “stupid” in that they are, by definition, “slow to learn or understand”. NavPrescience is taking navigation to the next level by predicting and personalizing your routes. Their technology has roots in training automated military vehicles, and they eventually hope to “be the Intel Inside of GPS systems”.

I just experienced this problem myself: Every time I drive from my home in Brooklyn to Pittsburgh (or NJ), it wants to take me through Manhattan because it is technically shorter and faster. Anyone who has ever driven through the Holland Tunnel at all, let alone on a Friday or Saturday evening, knows full well that will never be the fastest route (and certainly not the least stressful).

NavPrescience has an exclusive license for patent-pending predictive and personalized navigation technology. The first part is predictive location-based services. If you’re currently on the highway but haven’t put your destination in, it will suggest locations such as coffee shops where you typically go from here, not where you are here. The personalization understands the types of routes you prefer such as avoiding highways or certain types of roads. It can weigh a route based on the stress, skill, cost and time. (And I’m sure everyone wants their GPS to remember their reference for not driving through the ghetto).

Obviously, if they can penetrate the market there is a big opportunity here. Brian says that they can achieve $36m in revenue by being adopted by just 2.5% of the current GPS-enabled mobile devices. Their model is to be a value-added part of the technology stack. They are hoping that users will be willing to pay a nominal fee on a monthly basis for these features, of which they will see $1. There are also opportunities to improve advertising relevancy based on the predictive features, thus opening up new revenue streams there.

I may not be the typical user here, but I’ve always preferred to pay a premium for features up-front as opposed to paying on a monthly basis. In fact, I recently purchased a GPS that was $40 more than the comparable model but included lifetime traffic services – and I’ve noticed that many of the new systems seem headed in this direction. Some psychology comes into play here – we’re prepared to spend money at the time of purchase, particularly for a consumer electronics purchase – but we’re perhaps becoming more reluctant to sign up for new recurring costs. If NavPrescience were to pursue this pricing model, it may hurt their long-term revenues somewhat but it might also bring in an influx of cash which would help them scale the business quicker and reduce the need for dilutive fundraising.

They are planning to enter the market with a two-phase strategy: to build a smaller scale, “proof of product” solution and then scale the technologies to a higher-level platform. For phase one, they are seeking $300k to build a freemium application which can be delivered to mobile phones and doesn’t necessarily require partnerships with the big GPS makers. They will use this money to hire two additional developers and to cover their infrastructural costs.

Phase two is about integrating the technology in consumer products. They are in the process of bringing in former GPS executives to help them build the partnerships necessary to gain market share. They may need a Series A round at that point to help scale the business, but based on currently revenue projections that will not be required.

LeftRight Studios: A Branded Gaming Network

2009-10-14T16:52:03+00:00

Before the break, Geraldine Yong presented LeftRight Studios. LeftRight falls into the category of advergaming and are building a network where brands can engage consumers in a more meaningful and engaging way. They previously launched SmackBots, which broke into the top 100 for action and kids games, and are launching their second game, Katch-Up, today.

Like Zynga, they are a game studio – but rather than trying to sell the game itself or rewards points to the customer, they are partnering with consumer brands to use this as a marketing vehicle. They are building a library of games which brands can use as a baseline and apply their own skins and tweaks to game play, as well as standalone games which have sponsorship and affiliate revenue opportunities.

In order to make these compelling to consumers, Geraldine said these games must be fun and multiplayer but also must reward users for playing them. She also said that leaderboards are an important element in their success. Scores and leaderboards have an uncanny way to incentivize usage, even when they are not tied to any actual “reward” – but when you can win, for example, a free year of Heinz Ketchup for playing or discounts for reaching a certain level, it can be even more compelling.

They have 2 games live today and will be launching several more by Fall 2010. The next game to be released is Boutique Star, a sort of “fashion tycoon” game which will integrate coupons, followed by Parcel Toss.

Revenue comes from three primary sources: 1) building individual branded games, 2) recurring promotions, coupons and affiliate sales in their existing games and 3) building and running a white-label network as part of a consumer marketing campaign. They expect to break to break even next year and are projecting $12m of revenue by 2014. .

My only concern is whether they will be able to scale the business well. My suggestion would be to focus on the second revenue stream and enable a self-service model and perhaps de-emphasize the one-off marketing games. Geraldine says they are a good acquisition target by a media giant or current competitor; the focus of a short-term exit is perhaps indicative of the scalability challenges they will face.

LeftRight is currently seeking $300k which they will use to aggressively launch the branded network.

Fooala: Facebook Connect meets OpenTable

2009-10-14T16:07:53+00:00

The best way I can describe Fooala, presented by CEO David Chen, is Facebook Connect meets OpenTable. They have built an open online ordering process where the order can happen contextually. I am a huge proponent of this distributed approach and inserting yourself contextually and have actually employed this in my own startup.

David says they are “selling food the right way on the Internet.” 58% of restaurant business is takeout and delivery, of which 10% comes from online orders – but only 5% of restaurants currently accept orders online. More importantly, existing closed solutions only allow orders to be taken in a single place, but traffic pales in comparison to social networks and review sites.

Fooala opens up the online ordering process, so a hungry consumer can order while on Yelp, from within the Serious Eats iPhone app, and so on. Their first partner, CollegeBite, is live today.

They are live with over 30 restaurants in Pittsburgh, and are launching pilots in Youngstown and Washington D.C. bringing the total to over 60 restaurants. They are planning to expand into specific markets with direct sales but also opening this up for online enrollment.

They will be cash flow positive by 2010 and are predicting $10m in revenue by 2011. Revenue comes from subscriptions and affiliate sales from the restaurants and are shared with the originating application who integrate the functionality through widgets or by using their API directly.

Fooala is currently looking for seed funding to expand the business.

CloudFab: Physical customization as a service

2009-10-14T15:37:00+00:00

Nick Pinkston opened the day speaking about CloudFab. Consumers are starting to demand customized experiences. Digital customization is everywhere, in part because it’s so easy, but there’s also been a trend towards customization of physical goods such as NikeID and Build-a-Bear. At the same time, many of these manufacturing machines are running at just 60% of their capacity. CloudFab hopes to solve this with a platform which will allow consumers take advantage of “cloud fabrication”.

In the future, we’ll all have 3D printers and will “build” our mobile phone instead of ordering it. While that may not happen all that soon, CloudFab can offer us effectively the same thing today - the opportunity to “print” a 3D model and letting a supplier with extra capacity bid on the order.

Nick cited the World of Warcraft example, where Blizzard wanted to sell branded toys from the game but had little success selling generic toys. What they realized is that one of the reason gamers were so passionate about the game was their ability to really customize their characters. Now, Blizzard is able to sell physical toys modeled after the actual characters created by the gamers instead of some generic model.

CloudFab has launched a private beta which it will expand to the public and add features to over time. They are planning on launching a full platform in Jan 2010. In June 2010, they are planning on launching a Software Development Kit which will allow others to create a World of Warcraft-like “creator” that can plug into the platform and generate the order request right there.

CloudFab’s competitive advantage in the market is that they do not have to maintain and upgrade the physical fabrication machines. This also allows them to offer a wider array of production capabilities and leverage the free capacity instead of having their own machines which may sit idle.

They expect to be cash-flow positive next year. They recently closed an angel round but are still looking to bring on additional investors who can help them accelerate growth.

AlphaLab Demo Day coverage (Summer/Fall 2009)

2009-10-14T14:58:00+00:00

As promised, I will be getting coverage up from each of the six companies presenting at today’s AlphaLab Demo Day, and will update links below as I get the stories up.

CloudFab
Fooala
LeftRight Studios
NavPrescience
Vivo
Zipano

All in all, I’ve been very impressed so far.

Also, just another reminder that you have one week left to apply for the next AlphaLab class!

Apply for the fourth AlphaLab class by October 20th

2009-10-10T00:55:43+00:00

AlphaLab, the early-stage incubator created by Innovation Works, has opened up applications for the fourth session that begins in January. AlphaLab runs a 20-week program that includes funding (up to $25,000 seed investment), free office space and business & strategy mentoring.

The team over there (Jim, Meredith and Mike, among others) are doing great things and the program has really emerged as a central piece for early-stage entrepreneurship in Pittsburgh. Aside from working with 8-10 companies in a year-round cycle (other incubators often have one or possibly two sessions per year while AlphaLab runs three), they host various events for the community in their awesome South Side offices.

I’ve mentioned the third class briefly and hope to provide more coverage of next week’s demo day. The Resumator founder Don Charlton, a graduate of the second AlphaLab class and who I profiled previously, said his company “owes much of its success to the great mentorship [he] received at AlphaLab.”

If you have a dream and need guidance and a little money to get it off the ground, I would highly encourage you to consider applying for this Winter 2010 session. The deadline is October 20 – so you have a little over a week to get your applications in. If you have any questions about the process or other requirements, you can contact Meredith Benedict at mbenedict@alphalab.org or by phone at 412-535-8294.

Google acquires reCAPTCHA to help it read books

2009-09-16T22:04:50+00:00

Pittsburgh-based reCAPTCHA has been acquired by Google for an undisclosed amount. (I’m trying to see if I can dig up the numbers).

reCAPTCHA, which started as a project of the School of Computer Science at Carnegie Mellon, is a free CAPTCHA service that helps to digitize books, newspapers and old time radio shows. CAPTCHAs are images with letters that humans can (usually) recognize but computers cannot – and thus are used to test whether a real human is filling out the form. Rather than using randomly generated images, however, reCAPTCHA shows words from these books and newspapers that could not be recognized by a computer, effectively building a crowdsourced OCR system. So, when you’re buying tickets from, say, Ticketmaster (one of about 100,000 sites using reCAPTCHA), you’re helping a computer better understand that text.

This technology and approach will be used in other Google products such as Google Books and Google News Archive.

Having the text version of documents is important because plain text can be searched, easily rendered on mobile devices and displayed to visually impaired users. So we'll be applying the technology within Google not only to increase fraud and spam protection for Google products but also to improve our books and newspaper scanning process.

Congratulations to the reCAPTCHA team!

What is Avere building with its $15m war chest?

2009-09-03T16:41:06+00:00

Ron Bianchini and Michael Kazar started Spinnaker Network Solutions, which was acquired by NetApp in November 2003 for $300m. Spinnaker’s flagship product was SpinServer, a clustered file system that allowed 512 servers to provide 11,000 terabytes (11 petabytes!) to appear as a single file system. By many accounts, SpinServer “was a dead product once NetApp got a hold of it”, and many users reported a complete lack of support for the product.

In 2008, Ron and Michael started a new company, Avere Systems. Avere is still in semi-stealth mode, revealing only that they are developing “NAS solutions that would allow enterprises to scale storage network performance independently of capacity.” Rebecca Thompson, VP of Marketing, said they weren’t ready to talk, but StorageMojo did some digging which may help shed some light.

The title of their SNW talk SSD or HDD? How to Get the Benefits of Both with Dynamic Tiering offers some clues.

At the web site they have a picture of what might be a 2-3u rackmount box. So they aren’t a strict software play, although “tin-wrapped” software is something many customers find appealing.

They are also showing at SC09, the supercomputing show. That suggests a focus on bandwidth rather than IOPS as well as the less lucrative research markets.

Avere has already raised a whopping $15m in November 2008 from Norwest and Menlo Ventures, both of which had previously invested in Spinnaker. (Both of these firms list Avere in their portfolio, but this amount hasn’t been disclosed to my knowledge outside of the SEC filing).

Obviously, given their industry experience and past success, it’s not a surprise that Ron and Michael were able to raise a significant sum of money. At the same time, this is a lot of money for a Series A and certainly suggests to me that the idea has a hardware component to it (that is, something more than just off-the-rack NAS storage).

The Register believes that they have “developed a system which attempts to combine the performance of solid state drives with the low cost of hard disk drives in an architecture that dynamically tiers data onto the most appropriate media”. That said, I don’t see much evidence for this beyond what StorageMojo dug up – so that’s probably just a guess, albeit an educated one.

So, what is Avere up to?

ShowClix secures additional funding from Pittsburgh Equity Partners

2009-08-27T19:02:20+00:00

As reported recently, ShowClix has raised an undisclosed round of funding from Pittsburgh Equity Partners.

ShowClix is an online ticketing company that provides performing arts centers, nightclubs, live music venues, and colleges and universities an affordable way to sell event tickets online, over the telephone or in-person through a point-of-sale/box office system. Live Nation Entertainment, the result of a merger between Ticketmaster and Live Nation earlier this year, is obviously the 500 lb. gorilla in the market. Even with this additional funding, ShowClix has an uphill battle to fight – but it’s not like there’s a lot of love lost for Ticketmaster. It seems like they are on the right path, focusing right now on affordable solutions for smaller, less traditional venues.

According to ShowClix co-founder Joshua Dziabiak, the round "ultimately totaled between $750k and $1.5m", though as of last week it looks like $570k (out of $850 total) had been secured. Unfortunately, we don't know more than this - the filing does not reveal who the other investors were, if any.

They intend on using the money to aggressively expand headcount, "hiring account managers, sales people, customer service reps and a COO" by the end of the year, as well as relocate from their Oakmont offices.

This is, to my knowledge, the first investment made by Pittsburgh Equity Partners. PEP is an early-stage venture firm that come out of a competition created by Innovation Works, Carnegie Mellon, Pitt, and the PA Dept of Community & Economic Development.

It is not clear whether Innovation Works, who has put in $400k collectively in previous rounds, has participated in this round - but given their goal of creating jobs in the region, it certainly wouldn't surprise me.