The name “ai” is a combination of the Japanese word for “love” and a pun on the English word “eye.” A board member includes Takashi Usuki. The venture is vaguely aimed at developing next-generation Internet services.

Kutaragi owns about 90 percent of the company while Usuki has 10 percent. The startup has $223,000 in capital. That’s all the details out so far.

Kutaragi retired in 2007 after more than 30 years at Sony. He started an earlier startup, Cellius, in January 2007 with $821,000 in funding. The venture was 51-percent owned by Namco Bandai and 49-percent owned by Sony’s game division. That startup was aimed at making apps for Sony’s Cell microprocessor, which is used in the PlayStation 3 and other computing platforms.

The San Francisco-based startup lets brands and labels like Universal Music Group and the NBA deliver video content to fans. Kyte says what makes it stand out from enterprise-focused competitors like Brightcove is that it integrates more social functionality like Twitter, chat, and location-sensitive features that tell you about nearby events.

“We really feel that to be relevant today, you have to be more than an online video platform. You have to address how consumers really use the web by providing interactive social capabilities,” said Gannon Hall, the chief operating officer at Kyte.

The company has 45 people and has raised $23.3 million from investors including Steamboat Ventures and Swedish mobile operator TeliaSonera. Hall said the company isn’t planning on raising any funding anytime soon and is focused on building up its sales and marketing teams.

If you’re a good writer with an interest in technology, consider working for one of the most influential business blogs — with syndication across outlets like the New York Times — that hosts exciting events to debate the most disruptive technologies of the day, including DEMO (the leading launchpad event for emerging technology products), MobileBeat, GamesBeat and most recently GreenBeat (our inaugural conference on the Smart Grid taking place next week, featuring Nobel Prize-winner Al Gore and the energy industry’s other movers and shakers.)

Right now, we’re looking for fearless scribes to cover the revolutions happening in mobile and social media.

If you’re interested or would like more information, please contact us at jobs@venturebeat.com with the subject line “Writer.”

As someone who has both sought venture capital and distributed it, I’m lucky to have a pretty unique perspective on what works and doesn’t work.

As I mentioned in the first part of this list, the mistakes don’t seem to change over time. And people who make them often walk away not only empty handed, but clueless about what killed their chances of getting funding.

What follows are four additional problems I see all the time:

Have a big monthly burn.

This depends on the type of business, but most software companies nowadays can be built with almost no expenses except wages – and even then, the founders should be taking a nominal salary until there’s revenue.

Huge expenses at the beginning are scary because expenses only go up. An angel-funded business lives and dies on how fast you can get to profitability, so big expenses means you’re already behind.

This is especially true of founders’ salaries. An angel wants to fund a company, not put money directly in founders’ pockets. If the founders aren’t willing to put in money now (in exchange for far more money later of course!), that’s already a bad sign that either they’re not committed to the venture or that they’re not in a good place in their personal lives to be taking a chance on a startup.

So how do you address expenses?

• Break out: wages, overhead, COGS at least. I don’t want to see every line-item, but wages show founder’s draw, overhead is the biggest barrier to profitability, and COGS helps me understand how many customers you need before you’re not burning cash. If any one of those is out of whack, then we can dig in.
• Explicitly talk about how founders will be deferring cash for themselves. The more committed you are, the happier I am. Once the company is profitable, I don’t care if the founders make good money.
• If you do need to spend big money, justify. For example, is this one-time R&D that gives you an unfair market advantage? Good. I this for inventory? Good. Is this for in-house servers because you don’t trust Amazon? Bad. Is this for A+ office space because you think it will impress customers? Bad.

Pretend this isn’t risky.

You’re at the earliest, riskiest stage of a business. Every choice is suspect, every plan is really a guess – and there’s a great chance the angel is going to lose all her money.

Pretending otherwise comes off as naive (at best) or ignorant (at worst).

There’s a difference between being confident in your ideas and in the clarity of the market opportunity, and coming off like this is going to be easy.

Remember, angels know this is a crap-shoot, and we’re here anyway! So of course it’s OK that it’s risky. The thing I want to hear from you is what you’re doing to address risk. The worst thing you can do is ignore that it exists, because then I think you don’t know the risk exists – and that means you won’t attack it. And there’s no way I invest in that.

Here’s how you can address risk while still giving the investor confidence:

• Here’s your mindset. Angels are gambling, yes, but there are different kinds of gambling. Money on the roulette table is a pure, random guess, and the house wins more often than not — that’s not the kind of bet we want to make. Instead, I want you to be a card-counting shark playing at a blackjack table with a single deck. Sure, you can still lose, sure there’s plenty of luck, but you have an unfair advantage, and I’ll bet on that. So when you’re addressing risks, think “unfair advantage” and “luck, but with a bias,” not “it’s out of my hands.”
• List the known risks so I can evaluate them. In my experience, no matter how massive the risks are, if you’re honest about them I’m very likely to believe they’re a good risk, just because I can see you’re honest and you have both eyes open.
• Show me how you’re addressing risk and reducing risk, rather than how there isn’t risk. Show me how you intend to deal with the unknown or uncontrollable, not “how in control” or “in the know” you are.
• Show me you’re open to new ideas. When we talk about risk I’ll probably have ideas too. Some of them will be stupid, but some will be useful. If we can brainstorm and categorize those, I’m comfortable.

Don’t interview me.

Most pitches come off as begging. You need money and you’ll do or say anything to get it.

But answer me this: If you don’t act like you’re valuable and that I should be thrilled for the privilege of giving you money, then why should I believe you’re valuable and that I should be thrilled for the privilege of giving you money?

This is a two-sided interview. And if you can’t walk away from this arrangement, you’re not in a negotiating position, and I can tell.

Here’s how to do it:

• There’s a difference between confidence and arrogance. The latter is a turn-off, the former is a turn-on.
• Tell me which other investors you’re talking to. Make it at least appear you’re in demand. But remember angels often know each other or can find each other, especially in the same city, so you can’t lie about anything. So don’t lie – talk to lots of angels at once.
• Interview the angel investor. Ask things like:
  • What else have you invested in? (Then follow up later; are those are good companies?)
  • Tell me your philosophy on startups. (Make sure this matches your own)
  • What companies have you founded and run? (If “none,” this person probably won’t be of much use.)
  • What will you bring to my company besides money? (Usually this answer will feel unsatisfactory to you; that’s because usually angels don’t have much to offer. If you just want money only, that’s fine of course, but if you’re expecting more — like direction or advice — grill them here. If they say “I have connections,” that’s crap. You don’t need introductions, you need action!)

Don’t have an exit strategy.

It’s too early, of course, to say exactly how this company is going to make us both rich, but I want to know the ways we can get out of this deal.

Remember, the angel is here to make money. Changing the world, thrilling customers, getting an ego-boost – that’s for founders. Investors need money, only. So you have to address how that’s going to happen.

Some founders want to be “king” instead of “rich;” no exit strategy means you might be one of those. That’s fine for you – nothing wrong with that! – but it’s not good for the angel.

Here’s what I want to see in your exit strategy:

• Explain the type of company who would purchase you, why they would and list some names.
• Give me various ways to get out, not just one.
• Tell me that if you get profitable and for whatever reason stock isn’t liquefying, that the investor has an option of just getting a good return on her money. This is usually in the form of a balloon loan or convertible warrants — in your pitch I don’t care what the mechanism is, just tell me that you’re up for that option too. After all, not all companies should or will be sold, and if you can give the investor a good return and you get to remain “king,” that’s wonderful for all parties.
• Don’t tell me about valuations or multiples. Angels already know about these things, and they probably know more than you do, which means you’re walking into a mine field. If you’re too low, your company looks worthless. If you’re too high, it makes you look silly and naive. The truth is that valuation is highly variable, and that’s OK! That’s what the angel is getting himself into, so don’t worry. Stick to the paths to success rather than absolute dollars.

Photo by SD Dirk via Flickr

Sunnyvale, Calif.-based Stretch makes image processing chips that are used in the most sophisticated security cameras. The company’s chips have been designed for a number of security cameras made by companies such as Skyvision, EverFocus, Lanner, Advantech, Euresys, Matrox, Provideo, and UDP Technologies. The chips, which are software programmable, are also used in machine vision and wireless applications.

Stretch previously raised a $15 million round in January. Bob Beachler, vice president of marketing, operations and system design at the company, said the goal is to use the money to expand operations, design its next chip, and hit profitability. He said third quarter revenue was four times bigger than revenue in the second quarter. For the fourth quarter, the company has a backlog that could support three-fold revenue growth over the third quarter.

“We really saw things pick up in the second half of the year,” Beachler said. “We are definitely seeing signs of a recovery, and we see growth in overseas markets.”

As government agencies use stimulus money to build new facilities, they have to invest in better security cameras. That’s one reason the market is growing. On top of that, companies are replacing tape-based cameras with digital video cameras that can record data on hard drives and transfer it over the web. The round was led by existing investors Worldview Technology Partners, Oak Investment Partners, and Menlo Ventures. Before this round, Stretch had raised $116 million.

Founded in 2002, the company has 60 employees and more than 20 patents awarded. It competes with Texas Instruments, Maxim and Cavium Networks. Maxim recently bought Mobilygen, while Cavium bought W&W Communications. Beachler noted that the ranks of rivals are thinning. One competitor, Stream Processors, is shutting its doors this month.

Mobile stores created using Webshere are supposed to be full-featured stores that include some mobile-specific features. Customers can compare different products side-by-side, see what’s currently in stock, make a purchase, and then follow a map to the nearest store where they can pick up what they just bought. It’s an approach that seems logical, and perhaps even inevitable, as more and more online activity occurs on smartphones. IBM says this is further proof of its embrace of mobile technology, following the announcement of a $100 million mobile research effort in June. (Unfortunately, I don’t have any sample screenshots to show off, but a company spokesperson says we’ll get a demo video in the morning.)

Websphere Commerce 7 is available now, with pricing starting at $30,000. Other new features include integration with social networking sites, so you can send a product review and link to (say) Facebook with just one click; improved customer analytics; and a starter store for selling products to businesses (as opposed to your standard online store, which sells to consumers).

[photo: pocketpicks]

Social games have exploded on Facebook this year. But the games have been casual, holding the interest of users for just minutes a day. Ohai wants to take social games to the next generation by launching a massively multiplayer online (MMO) game that will have synchronous play, meaning live games with constant movement and action.

Susan Wu, co-founder and chief executive of San Francisco-based Ohai, said in an interview that she hopes that by launching City of Eternals on its own web site and on Facebook, the company will attract players who would never otherwise play an MMO. She also said that Ohai intends to make its games addictive enough to generate a lot more revenue each month than typical social games, which generate sales of a few dollars a month.

It’s an interesting gamble, since Facebook games are dominated by Zynga and Playfish, whose games have tens of millions of players. But it only makes sense that there should be more to Facebook games than farming carrots (Zynga’s hit FarmVille title) or running restaurants (Playfish’s Restaurant City).

“There is a huge market left untapped for MMOs that can be played by everyone,” Wu said in an interview. “It’s the next leap in social gaming. To date, MMOs have been pretty inaccessible.”

Ohai’s game is accessible in part because it runs on Flash and doesn’t have complex 3-D graphics like many hardcore MMOs that require expensive computers. The two-dimensional vampire game is synchronous, meaning players can move about simultaneously in a live world rather than take one turn at a time.

It runs at a fast speed in a small browser window on a Facebook page. That’s no small achievement, since the game has to handle as much as 5,000 web-based transactions per 100 players.

The game is set in New Valencia, a modern-day vampire city in the Pacific Northwest and it has a complex story with more than 20 different missions. Users can create their own vampire characters, customizing the look and clothing to their own tastes. The players can fight supernatural creatures in combat zones and level up, earning goods along the way. You start the game with an apartment that you can decorate. You can grow things to buy or sell, adopt a trade, and join one of four vampire houses, or clans. You can enlist your friends as minions in a vampire army. A lot of these features are standard in social role-playing games. But there’s a lot more room to explore in City of Eternals, which has a sizable map with a growing list of locations to visit.

The game is free to play. But if they want a better experiences, players can pay for virtual goods for anywhere from 2 cents to $20. Users can earn or purchase Ohai coins, which can be used to make the goods purchases.

The game is social because of the integration with Facebook. It is integrated with Facebook Connect and Twitter. In the middle of the game, you can use a mouse to hover over a vampire character, and it will show the user’s Facebook name and picture. You can then send them a Facebook friend request. Normally, in MMOs, there’s no easy way to find out the identity of another player, except through direct communication. You can do that via text chat in City of Eternals as well, but there is no voice chat at the moment.

Ohai has a real opportunity here for a few reasons. Vampire games were once the most popular app on Facebook. One of them was created by Blake Commagere, who joined Ohai as a co-founder but has since left. Now, vampire games are nowhere to be found on Facebook’s top 15 leading apps, according to AppData. So Ohai’s game has a chance to pull in desperate vampire fans. Its timing is also good given the popularity of vampire shows like True Blood, Underworld, and Twilight, Wu said. In that sense, City of Eternals can tap into the growing popular interest in the romance, action and dark humor of vampires.

There are also no popular synchronous MMO games on Facebook. Asynchronous role-playing mafia games, where players take turns one at a time, are popular. It may very well be that social gamers don’t really want to play synchronous games, which in some ways are more demanding of the user’s attention.

But that’s a test for Ohai. Synchronous MMOs aimed at hardcore gamers are wildly popular on stand-alone web sites. World of Warcraft has 12 million paying subscribers for its fantasy role-playing game, but there is no equivalent of it on Facebook, largely because typical PC-based MMOs are built by teams with scores of people working for years. Gaming on Facebook is just a couple of years old.

Wu, whose resume includes being a professional Quake 2 gamer and former partner at Charles River Ventures, started the company in the fall of 2008 and recruited a top team of game veterans. As co-founders she enlisted Commagere, Scott Hartsman of Sony Online, and Don Neufeld of Sony Online Entertainment. Both Commagere and Hartsman have left. Wu said that was a “natural evolution” of a startup.

With just three engineers on a team of 12, the company managed to build its first MMO in just nine months. Neufeld, who has worked on 15 MMOs in his career, said the team built a game platform that can be deployed quickly. Ohai plans to go into production on its second game next month and take much less time to finish the game. The plan is to create games that operate as efficiently as web services.

Ohai built the game in Adobe Flash 3D and created bite-sized entertainment that players can play in short bursts of time. There are 10,000 alpha users now who play an average of 65 minutes a day and log in as many as 10 times daily. So the average game sessions are short, in contrast to most hardcore MMOs like EverQuest. Players can enter the game at a variety of points, depending on what they want to do. They don’t have to waste time traveling from one part of the game world to another.

Ohai raised $6 million in January from August Capital and Rustic Canyon Ventures. Wu believes that Facebook games last a short time and don’t generate much more than a couple of bucks a month per user, whereas quality MMOs like World of Warcraft can generate a lot more money.

“Our goal is to take over the MMO universe,” Wu said.

[Pictured: Ohai's Franky Aguilar, Susan Wu, Don Neufeld, and Chris Olson]

Adobe

The news follows several other unpleasant announcements from Adobe over the past year. The company already announced plans to cut 600 jobs a year ago, and in July it reportedly shut down North American operations for a week. In both cases, sluggish sales of Adobe’s flagship product, Creative Suite 4, were blamed as the main culprit. More recently, Adobe has reported that profits are still down.

The layoffs were reported in TechCrunch and confirmed in a regulatory filing that Adobe made today. In an email, the company says it’s “restructuring its business to align costs with its fiscal 2010 operating plan and budget, the company’s three-year strategic priorities and the realities of the business environment, as well as to ensure its ability to continue investing in long-term growth opportunities.”

As far as those long-term investments go, in September Adobe announced plans to acquire analytics company Omniture for $1.8 billion, although it’s cutting Omniture’s workforce by 9 percent too.

Some positive news in the land of VC –

John Doerr not up to run for governor – After San Francisco mayor Gavin Newsom withdrew from the race for California’s top job, the San Francisco Chronicle ran an article examining Doerr’s potential to pull the state’s Democrats together. Doerr, one of the star speakers at our upcoming GreenBeat conference, has put the word out that it’s no No NO.

But it’s yes yes yes that you can still get tickets for GreenBeat.

Obama’s people promise to speed up $7.2 billion in broadband grants – Officials at the Commerce and Agriculture Departments are working to “get the funds out the do0r faster” and create jobs. They’re also considering paying for rural lines that could be shared by multiple companies, rather than allowing mini-monopolies on those lines.

Finding flu vaccine information in one easy Googly place – google.com/flushot is your one-stop shop for finding vaccination locations and other information. Thanks again, 20 Percent Time.

The Go team says its big programming frustration has been the slowness of existing languages. Go changes that by compiling (i.e., turning programming code into an executable file) complex programs in a few seconds or less. Other features include the ability to use multicore processors to perform parallel tasks, and “garbage collection,” a system for managing memory issues.

Go started out as one of Google’s “20 percent projects,” ideas outside their regular job that Googlers are given time to pursue, but it has now graduated into a full-blown project, according to CNET. The language is still too young for the company to use in any of its core products, but it could eventually be used for server software and software in the browser.

Here’s a demo video.

Telecom analyst Mark McKechnie from research firm Broadpoint AmTech told Bloomberg reporters that Verizon began sales with 200,000 units in stock last weekend, and that most stores had sold roughly half their stock. That multiplies to 100,000 units sold. (Mark is not pictured at right. These guys just had the best Droid team spirit in a Google image search.)

The number is impressive, but the sales it doesn’t touch Apple’s million-unit first weekend for the most recent model iPhone — and remember, the Droid phone, which is the first device using Google’s Android 2.0 operating system, had literally been advertised as the anti-iPhone

Consultant Michael Cote, whose Cote Collaborative works on market strategies with handset makers and wireless carriers, says McKechnie, with all due respect, “is off by a factor of four.” 400,000 units puts the Droid to within striking distance of the iPhone for the next round of updates for both phones. That would be cool, because admit it, watching the iPhone beat up all other phones on the planet combined was getting pretty dull.

Now, the more extreme wing of the party is getting into the act, with the so called “tea partiers” who rained fire and brimstone on the Democrats’ health care reform efforts this summer turning their attention to the climate package — a trend spotted recently by Mother Jones magazine.

The same people who coined and flogged the phrase “death panels” and championed Obama’s congressional hecklers (Rep. Joe Wilson, we’re looking at you), are turning their considerable wrath against the bill, which (very roughly) would establish a carbon cap-and-trade system in the U.S., limit greenhouse gas emissions and set quotas for renewable energy generation.

A new viral video, titled “Not Evil, Just Wrong,” billed as a rebuttal to Al Gore’s Oscar-winning “An Inconvenient Truth,” is making the rounds on the internet, circulated by conservative organizations like Focus on the Family, the Heritage Foundation and others. Calling itself a warning against “global warming hysteria,” the film paints climate bill supporters as extremists who are actively shutting down businesses and laying off workers in the name of environmental protection. Here’s a taste:

In addition to pulling at viewers’ purse strings, it taps several other patently tea-party tactics: Portraying environmentalism as a Hollywood, liberal, radical scheme — even trotting out electric-car enthusiast Ed Begley Jr. and GreenPeace; oddly, it chooses DDT as an example of the eco-elite (a caste defined by Gore) manipulating science to serve their ends. Apparently the World Health Organization lifted its ban on DDT, but remains blacklisted. And of course it caps it all off by inspiring disbelief in the very notion that global warming exists.

The next step for “Not Evil, Just Wrong” and its cohort is to encourage local tea party screenings. On the movie’s web site, you can buy a “Platinum Party Pack” that includes screen initations, t-shirts, posters, a small red carpet and a copy of the film for only $99.95. The group behind it claims that 400,000 viewers tuned into the online debut. But now that the initial fervor is over, they might have to turn to new strategies and slogans.

In the meantime, the Climate Bill itself is continuing its journey through the Senate, now with the full weight of the Obama administration behind it. But it’s not all smooth sailing. Moderate opponent Max Baucus (D-Mont.) threw up what could be a major roadblock today, calling for stringent trade protections so that climate measures won’t hurt domestic business.

One thing has become clear — whether it’s in a rightist movie or a moderate Democrat’s objection — when it comes to the Climate Bill: it’s the economy, stupid.

VentureBeat is hosting GreenBeat, the seminal executive conference on the Smart Grid, on Nov. 18-19, featuring keynotes from Nobel Prize winner Al Gore, Google CEO Eric Schmidt and Kleiner Perkins’ John Doerr. Register for your ticket today at GreenBeat2009.com.

Prosper.com

That’s a relatively small amount compared to the $41 million that the San Francisco company has raised in all, but the new money is also noteworthy because it comes from Nigel W. Morris, co-founder of Capital One, a major credit card and banking company. (Prosper shared the investment size with us, even though it’s not in the press release linked above.) Morris made the investment through his firm QED Investors, and is joining Prosper’s board of directors.

Companies like Prosper allow individuals to make loans to each other online. Users post requests for loans of between $1,000 and $25,000, with the maximum interest rate they’re willing to pay, as well as the personal history behind the loan. Then lenders can bid on the loans. As part of efforts for greater financial oversight, federal regulators shut down peer-to-peer lending sites last fall, but Prosper reopened earlier this year, and now says its marketplace has 870,000 loans.

Competitor Lending Club raised $12 million in March, and has raised more than $22 million in all.

One such company offering these tools is Kaon Interactive, a Boston area company that specializes in 3D interactive sales and marketing solutions. Their v-brief platform gives presentations the extra spark they need to make an impression. The company was founded in 1996 with an undisclosed amount of funding and is quickly becoming an attractive resource to product manufacturers, distributors and retailers looking to deliver interactivity to customers. Some noteworthy customers include: Dell, IBM, Cisco.

While there are plenty of companies offering 3D software for presentations including Dryfork, which allows the presenter to integrate 2D, 3D, and video media in a single presentation, but only Kaon provides the ability to deliver presentations via the web. Today, Kaon announced the launch of Kaon V-Stream, a way for sales and marketing professionals to deliver presentations via the web, independent of the user’s local hardware. In the past, one could only view these presentations via Kaon’s v-OSK, a touch screen appliance, because of the size and complexity of the content. Now, with Kaon V-Stream these presentations can be delivered anytime anywhere as long as there is an Internet connection and access to a web-browser.

For example, a company with a large product portfolio might find it difficult to constantly keep products relevant and timely to customers. With Kaon, the company can produce interactive 3D presentations across their whole product line leveraged by their sales team for both online and offline use. That makes it easier for marketers and sales teams to create captive 3D virtual product demonstrations, interactive flow diagrams, videos, data sheets, slide presentations, and more, which are all needed for today’s elusive audience.

What’s the worst presentation you ever sat through? Bet it wasn’t developed through Kaon.

At its core, iControl makes software — software that plugs into the security hardware made by companies like General Electric, Honeywell and ADT, and manages data being channeled back via a network of sensors placed around the home. It even works with devices used for medical monitoring. Now it will also manage and display energy consumption data beamed back to a central hub by appliances and the like.

Its strategy is to team up with more big names on both the security and home networking sides of the business. GE, ADT, Cisco Systems and Comcast (all companies looking to get in on the Smart Grid and energy efficiency trends) have invested in the Palo Alto, Calif. company so far, but it is avidly looking to expand its reach.

Security might be providing iControl an entry into the energy arena, where it hopes to branch out with a software offering tailored to utilities that communicates with Zigbee-enabled smart meters (advanced meters equipped with radios capable of wirelessly transmitting energy consumption data). But it might meet with some stiff competition in this area — the home energy efficiency and monitoring space is getting pretty crowded, as noted in yesterday’s article on open-source home area network company People Power.

On one hand, consumers are faced with more choices than ever when picking a service to keep tabs on energy use and electricity bills in real time. OpenPeak, Tendril, Silver Spring’s Greenbox, Control 4, Google PowerMeter, Microsoft Hohm — the list goes on and on. On the other hand, only a limited number of consumers are interested in monitoring their energy use. The mismatch between supply and demand will no doubt result in a rash of consolidation in coming months and doesn’t bode well for late entries like iControl.

That said, if the company can attract enough interest and revenue with its broader security and home management offerings, it could keep its energy management operations on life support long enough to grow and gain some traction.

It is also planning to charge less for its energy management system than most of its competitors, only $50 compared to the $114 for AlertMe’s system and $200 for Control 4’s.

iControl is generously funded, having raised $43.5 million over the last three years from investors including Charles River Ventures, Intel Capital, Kleiner Perkins Caufield & Byers, and iFund.

VentureBeat is hosting GreenBeat, the seminal executive conference on the Smart Grid, on Nov. 18-19, featuring keynotes from Nobel Prize winner Al Gore, Google CEO Eric Schmidt and Kleiner Perkins’ John Doerr. Register for your ticket today at GreenBeat2009.com.