Performance marketing has been both a very lucrative side of internet advertising but also a bit of the wild west, where rules are made to be stretched or broken (with alarming regularity). And while the simplicity of pay for performance has been attractive to many advertisers, diligence has been required to monitor the quality of the traffic and leads generated by performance marketers. In particular, control of creative assets and their appropriate use has been a concern for many advertisers. In addition, existing performance marketing platforms have been limited solely to online assets.

Enter Integrate – a platform that simplifies the execution of performance marketing campaigns and allows advertisers unprecedented control over their campaigns. Integrate places transparency into the marketplace for both publishers and buyers, allowing both to review one another’s business data before making an informed decision to work together. In addition, algorithms are built into Integrate to monitor deceitful practices that have previously plagued the industry. The Integrate platform provides legitimacy and basic regulation to an industry that has seriously lacked it. As a result, since its inception earlier this year, Integrate has attracted some of the largest internet performance advertisers as well as a number of well known retailers and brands who had not previously been significant buyers of performance based leads.

Today we’re announcing a $4.25M financing for the company that we believe will push its growth trajectory even higher. It joins a handful of adtech related investments in the Foundry portfolio (coming soon: my Foundry Unified Theory of AdTech Investing) that together are enabling online advertisers to better target specific users (AdMeld and Triggit), more effectively place media (Integrate and Trada) and access new publishers (Lijit) and media (Medialets).

Integrate was founded by Hart Cunningham and Jeremy Bloom, with whom I’ve had the fortune to work with over the last 5 months as this investment came together. These guys eat, breathe and sleep (literally – I think they have a cot in the office) performance marketing. I have a deep appreciation for passionate entrepreneurs and Jeremy and Hart fit this mold to a tee.

We’re looking forward to telling you more about Integrate as we continue to build and enhance the platform and add more and more advertisers and publishers to the Integrate platform.

Some additional coverage of the financing:
TechCrunch,
Mashable

Yesterday I had a long conversation with an entrepreneur about the relative value of time versus money in start-ups. Our conclusion:

Time is more valuable than money

Of course both are critical assets of any business – particularly an early stage business – but often companies make the wrong trade of time vs. money. This happens in dozens of different ways at businesses every day and ranges from big decisions on accelerating hiring to small ones like how to prioritize product features. I’m not suggesting that companies should run out and double their engineering teams (which would presumably accelerate the timing of their product at the expense of cash burn) but I am saying that in many companies the fundamental understanding of the time/money equation is tilted in the wrong direction.

Worth thinking about for your business as well.

In the world of start-ups, HR is at the bottom of the bottom of the heap of priorities most companies are working on. The vast majority of companies think about HR as a process and compliance function, outsource it to 3rd party providers (payroll, benefits, etc.) and doing their best to forget about it. If there’s any focus on HR as a function it is around recruiting (also typically outsourced and generally treated as very episodic). Sure – there’s plenty of talk about "culture" – of success, of working hard, of some other superlative that’s not particularly interesting or differentiating ("we want to hire great people and expect them to be hard working and successful!" duh) – but little real work done to actually execute against that and almost never someone made responsible for achieving success in people management.

I have to admit that I hadn’t spent much (any?) time thinking about this for most of my career. Companies figured out how to make sure that everyone got paid and for the most part HR was completely forgotten about. But more recently Ive been realizing that HR is an important competency for start-up businesses. The proper sourcing, onboarding, continued training, assessment and in particular the management and retention of employees can set your company apart from your competitors and put you on a course for success vs. failure.

We’ve had a number of companies in our portfolio take the HR function extremely seriously with great results. They key is the elevating HR to an executive function, hiring someone outstanding to take on the roll, and empowering that person to make real changes in your organization. This shouldn’t be a process person. They need to be the go-to person for people facing organizational challenges, having issues working with other managers or problems getting resources for the projects that the company has prioritized. They should report to the CEO (not the CFO) and be included in all senior management meetings, etc. Finding this person isn’t easy, since many HR people have been trained to be nothing more than mere paper shufflers (sorry to the competent HR professionals out there, but you all know what I’m talking about). Empowering this person won’t be easy either – most of us have been trained to marginalize HR and not view HR professionals as peers (this relates to the last problem of finding great HR pros – most of us have never worked with one and don’t know how impactfull they can be).

Most companies pay lip service to how important their people are and how their team sets them apart. It’s worth thinking about how you prioritize this part of your business and who you have managing it.

[Cross  posted from a piece I put up on the Foundry Group blog earlier today]

Our goal for Gluecon has always been to make it *the* gathering place for developers working on the connective technologies that hold the web and IT infrastructure together – from web services to SOA to APIs and cloud computing. Eric Norlin – our partner in Gluecon, Defrag and now Blur – has helped bring together technology leaders for an in depth (and proudly geeky) conversation around the changing landscape of these technologies and the applications they support.

As we move towards our third year running Gluecon we’re extremely pleased to announce a hugely important sponsorship with Alcatel-Lucent. ALU will become the Community Underwriter for the conference. This partnership will really change the face of Glue and open up even more opportunities for companies to participate. For starters, ALU is underwriting the ability for 15 companies to demo at Glue. These companies will be selected completely on merit by a selection committee that includes:

Eric Norlin
Chris Shipley (Guidewire Group)
Mathew Ingram (MESH and GigaOm)
John Musser (Programmable Web)
Laura Merling (Alcatel-Lucent)
Alex Williams (ReadWriteWeb)
Jeff Lawson (Twillio)
Jeff Hammond (Forrester)
Ian Gl;azer (Gartner)
Ben Kepes (Diversity.net)
Krish Subramanian (CloudAve)
Vinod Kurpad (Best Buy)
Seth Levine (Foundry Group)

To quote from Eric’s blog on this announcement:

I’m excited because I feel like we have the ability to really change the game with this one. If you take away the company specific conference (Google i/o, Twitter, F8), there really just aren’t that many national-level gathering spots for developers in the cloud/API space. There are a lot of “business level” and “workshop” conferences that happen around cloud computing, but we’re talking DEVELOPERS.

And even where there are developer gatherings in the cloud/API space, the ability to pay has always been a limiting factor for startups and companies wanting tho show their wares and exhibit.

That ends with Gluecon 2011. With Gluecon 2011 developers in the cloud/API space have the ability to participate in a pure meritocracy. Wow the selection committee and you’re in.

At the end of the day, what I want to see is 500+ developers coming to Gluecon to build apps, figure out cloud infrastructure, scaling, security, and solve the tough problems around API construction, usage and maintenance.

If you’re a company interested in participating, click here for more details.

See you at Gluecon 2011!

Someone asked me this week for some qualitative data on the factors that lead Boulder to emerge over the past 5 or so years as one of the country’s top markets for start-ups. It’s a great question and I know that there are many other cities that are trying to follow Boulder’s example. I thought it was worth posting these thoughts – I’m sure others will have things to add to this.

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The quantitative data are pretty boring – Colorado has stayed very consistent in terms of overall venture investment activity (~ $600M/year putting us clearly in the 2^nd tier of venture markets). In fact an increasing percentage of this funding has come from out of state investors (93% in the last year I saw data for – 09’).

Given this it’s an interesting question why Boulder is considered such a great startup market (as I think you know, BusinessWeek voted Boulder the most entrepreneurial city in America, the NYT did a great story on Boulder, Fox Business was just out here, etc.). There are a couple of keys to this success in my view.

Boulder has many leaders. I said this in a post in response to a Forbes article last week on Boulder/Foundry, but Foundry, while active, isn’t the center of Boulder entrepreneurial activity. No one is and that’s one of the keys to Boulder’s success. For sure my partners and I do a ton to support and promote Boulder, but we have people like Robert Reich who started the NewTech Meetup here (attracts 400+ people monthly to their event); Andrew Hyde who organized TedXBoulder (great event, tons of stuff on that on the web), StartUp Weekend (which started in Boulder), Boulder.me (recruiting event in Boulder) and Ignite Boulder (sells out the largest space in town every time he does it); Joe Pezzillo who organizes a bunch of iPhone developer stuff locally; Eric Norlin who along with us brings the Defrag and Glue conferences (ok – he doesn’t live here, but he organizes great events here); and of course David Cohen who started TechStars here (and you know that story). You get the point – I think THE key to Boulder’s success is that we have many many pillars of the tech community.

Boulder rocks. Seriously – who wouldn’t want to live in Boulder? I say that only partially in jest. We import a lot of talent (Boulder has the highest per capita number of engineers of any city in the country, for example). We have great natural assets and we’re not afraid to use them. I regularly pitch people on moving to Boulder and it’s an easy sell. Everyone here is in shape, has tons of interests outside of work and you’re minutes from cycling, mountain biking, trail running, skiing, etc. To be sure there are plenty of great cities in the country, but we Boulder is definitely among the great places to live in the US (in my opinion!).

TechStars. I don’t think you can underestimate the effect TechStars has had on the Boulder community. It galvanized a group of tech professionals as mentors. It brought a bunch of young talent and energy to town (many of whom stayed to build their businesses here after the TechStars summer) and it helped raise Boulder’s national profile.

Openness. I could have put this under “Boulder rocks” but one of the truly great things about Boulder is how open and helpful people here are. There’s little to no BS around making sure you’re doing better than everyone else and it’s considered an expectation of people in this community that you give back. To other entrepreneurs. To your favorite charity. To programs like TechStars. It’s had a huge effect on this ecosystem.

Forbes published an article yesterday by Maureen Farrell stating that there’s a “signaling problem” for TechStars Boulder companies who don’t raise money from Foundry Group.

“… one byproduct of [Foundry Group’s] generosity for any young Boulder company is that, if it hasn’t been funded by The Foundry Group, it must explain why. Otherwise it has a signaling problem, something that happens when a VC invests in an early round but doesn’t show up for later rounds.”

And while I’m going to argue (forcefully) here that neither my partners nor I either believe this to be true or even wish for that kind of market power, I should acknowledge that I’ve heard this before. And not just in relation to TechStars companies, but for tech companies based in Boulder more generally. I’ve been in a couple of meetings where a founder has suggested that if Foundry didn’t invest, no-one would (in both cases we didn’t invest and they did indeed find another capital source). I’ve also received calls from other investors asking why Foundry had “passed” on something (although in none of those cases did I think they were fishing for a reason to pass – but rather trying to get another data point on the business). And many, many people around town talk regularly about the overall lack of venture funds in the Colorado market (which leaves Foundry at the top of a very short list of active local investors, in large part where this perception likely stems from).

I’m extremely proud of the vibrant tech ecosystem in Boulder and the role that my partners and I have played in helping shape it, however we don’t welcome the notion that Foundry somehow controls the Boulder market. Whether Foundry has this kind of negative drag on Boulder companies or TechStars is an extremely important topic to us. We spend untold time and energy helping Boulder tech companies (not just TechStars companies and certainly not limited to companies in the Foundry portfolio) be successful, and the implication that not getting funding from Foundry is a negative mark on a business is the kind of market power that we certainly DO NOT want to have.  It’s not good for Boulder, not good for Foundry and not good for other venture firms (in part because it suggests that other venture firms simply aren’t capable (or willing) to do their own work). And while all four Foundry partners are involved with TechStars, our funding support for the program (and those in other cities) comes from us personally, not from our fund (we do this in part to try to avoid the perception that TechStars is in any way captive to Foundry, which it most definitely is not).

It is my belief that this sentiment, to the extent to which it even exists, is much more perception than reality (and at that, the perception of a very limited number of people). And while writing about it might drive some traffic Forbes.com, the reality is that there’s no due diligence line item on other venture firms’ checklists for Boulder companies that says “find out why Foundry passed”. There is no signaling problem.

And the numbers support me. Strongly.

Foundry has 28 companies in our 2007 fund (we have yet to close an investment from the new fund that we announced last week). Nine of them are based in Colorado (all of those in Boulder). Since we raised Foundry Venture Capital 2007, 64 Boulder-based companies have received funding, meaning that we’ve funded approximately 14% of the local companies taking in institutional funding since we raised our fund. Furthermore, 101 different venture firms have funded Boulder-based companies during this time period – reflecting the strong national reputation that Boulder is building among technology investors. The Forbes article cites Boulder’s funding total for 2010 through 9/31 – $91M that has been invested in Boulder businesses since the beginning of the year. With $13.6M of this total, Foundry represents just under 15% of the dollars invested in Boulder in 2010. The numbers for our participation in TechStars are similar (easy to look up since TechStars openly publishes its results).  Since the founding of TechStars Boulder 39 companies have gone through the program. Of these, 22 have received outside funding and another 5 have become profitable without the need for external financing (as an aside, this is a great track record!). Foundry has funded 3 (thats 13.6% of those receiving funding and less than 8% of all the companies that went through the Boulder program).

The conclusion here is pretty straightforward – while Foundry’s presence might seem to loom large over Boulder the numbers are pretty clear – we’re in no way driving a significant percentage of the investment activity in the area.

I recognize that my partners and I carry a certain amount of weight in Boulder and are viewed as leaders of the Boulder tech community (there are many tech leaders in Boulder – it’s one of the things that makes Boulder such a fantastic entrepreneurial city). But we don’t have the corner on TechStars nor the Boulder tech market. In fact we work hard to try to avoid this. As strong supporters of the Boulder entrepreneurial ecosystem we recognize that it benefits no one for us to behave in a way that isn’t in the interest of the entire community.

While it may be a catchy title to a magazine article, it’s just not the case. Simply stated, there is no TechStars Boulder Foundry Group Signaling Problem.

A note of thanks to Emily Mendell of the NVCA for pulling the Boulder data for me from the PWC/NVCA database.

A few days ago I received an email asking me if I had a “rule of thumb for determining when a start-up can no longer be considered a start-up”. The sender proposed a few potential answers but I thought this one might be a good one to put out there for feedback from readers. His suggestions were:

*Two consecutive  quarters of positive free cash flow?
*Drop pooled benefits company like Administaff for in-house benefits administration?
*Anything > C round, seeking to lever w/ mezz debt or file S-1?
*Name of company becomes a verb in our lexicon?
*Receive gov’t stimulus funding?
*Oprah uses your product?

For a long time I’ve asked entrepreneurs at what point their company no longer felt like it was a start-up. The answers were remarkably consistent, although I don’t think exactly answer the question in the way that was meant above. In any event, most founders tell me that around 30 employees is when their start-up companies start to feel like real businesses (or at least feel “different” – I think largely stemming from the fact that around 30 employees is the time when a CEO no longer really feels like the know all of the people that work for them). Of course depending on their funding and growth expectations this can happen at many points on a company’s growth curve and spending money (i.e., hiring employees” is not the mark of a business), so I feel that a better metric is probably the right one. Or more likely several better metrics.

Thoughts?

For a long time my hometown of Boulder, Colorado has been known as a great place to live but more recently Boulder is taking on a reputation as a great place to start a company as well. And the rest of the country is starting to take notice (see BusinessWeek, HuffPo and the NY Times). Today Fox Business News did a few live segments from Boulder highlighting some of the people and institutions that are helping create great entrepreneurs and great companies here. I was fortunate enough to be interviewed live along with Lijit CEO Todd Vernon (Foundry is an investor in Lijit). I have to say it was a little nerve wracking to be doing a live feed (this occurred to me about 30 seconds before going on air, before which time I was perfectly calm, after which time I thought my heartbeat might be visible through my shirt). In the end it was super fun and great visibility for Boulder.

This is totally off topic, but every time I tell people this story they love it and say they’ve never heard of this idea before so I thought I’d post it here. I didn’t make this method up (I can’t remember who told me about it, but living in the cycling capital of the US – Boulder, CO – it could have been any one of a hundred different people). We taught our two daughters how to ride using this method when they were around 4 and will have one more shot at it in the near future with our 3 year old son. The idea behind this method is that kids know how to pedal (they’ve been doing that just fine with training wheels) – what you really need to work on is balance and the easies way to do that is to take away all the other distractions so they can just focus on that one thing. Once they have that down they’ll be good to go. Both of our girls learned to ride using the method below in a few hours start to finish (where finish = riding around the block for the next hour by themselves).

Bike prep – Take the bike your child has been riding and remove the training wheels. Now take the pedals off and lower the seat so your child’s feet can very comfortably touch the ground when they are seated on the bike (the bike shouldn’t have to lean over at all for them to do this and they should be able to sit on the seat and touch the ground flat-footed).

Find the right training ground – You’ll need to find a concrete (NOT GRASS!) area for your kids to practice. It should be straight, have no bumps or obstacles and be slightly inclined (very, very slightly). 50 feet should do it.

Learning balance – Starting on the uphill side of your training area, have your child push off on their own down the road. You shouldn’t need to run beside them and you should definitely not hold or touch the bike at all. Their balance will be off and they’ll need to use their feet often to keep upright, which will be easy to do with the bike configured with a low seat and w/o pedals to get in their way.

Repeat – It may take a few times, but your child should start getting the hang of this relatively quickly. As the frequency with which they need to put their feet down decreases, encourage them to lift their feet off the ground a bit more. As they get more comfortable with it you may want to slightly raise the seat so the act of lifting their feet off the ground doesn’t throw their balance off.

Ready for pedals? The step above may take a bit and, of course, you’ll want to be giving plenty of encouragement. Our daughters thought this was a blast (I think they thought it was funny to ride without pedals). We let them do it for a while – making sure they were completely comfortable with balancing their bike. Once your child gets the hang of it, put the pedals back on the bike, but keep the seat low so they’ll have no trouble getting a foot down in case they need to. In our case, our kids took off around the block the very first time they tried to ride with the pedals back on. In other cases you may want to run the incline a few times while they pedal so they have the hang of it.

The best part of this method is that neither my wife nor I ran behind a bike holding onto the seat a single time. Seriously – not once. The kids had fun and they felt a great sense of accomplishment learning to ride so quickly. Two years later they are trail riding (this is Colorado, mind you).

I spent a couple of days last week out in the Twin Cities at the RAIN Makers Conference. I have to say I was pretty impressed (and surprised) by the strength of the entrepreneurial community in Minneapolis/St. Paul. I’ve known a few of the key guys from that community for a few years through Defrag and Glue but it was great to see how many people are really involved (there were something like 250 people at the conference). I shot an interview with Jeff from Tech[dot]MN that I thought I’d repost here.

Seth Levine – RAIN Makers Conference from TECHdotMN on Vimeo.