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Kenneth Musante

Facebook Cleaning Out New York Companies

Facebook’s plan to scour New York startups for fresh talent seems to be paying off.

Turns out the social network’s recently announced messaging system update, which integrates Facebook messages, email, and SMS was the direct result of a New York talent hunting trip a few months ago.

New York startup Zenbe announced Tuesday that Facebook had acquired its email product, along with three engineers. Zenbe shut down its service on Oct. 8. The company says it will be focusing on a Facebook-based photo sharing app called Shindig.

Zenbe is the fourth New York talent acquisition that Facebook has made since August. The Palo Alto-based social networking giant bought out location-based check-in service Hot Potato in August for $10 million to get founder Justin Shaffer, who went on to spearhead the Facebook Groups overhaul.

Facebook struck again on Oct. 29, buying out New York-based file sharing service Drop.io to acquire founder Sam Lessin. And news broke last week that Facebook had nabbed senior Foursquare engineer Nathan Folkman.

GroupMe in $30M Bid War

New York-based group texting startup GroupMe is caught in the middle of an East Coast vs. West Coast venture capital brawl, pushing it’s valuation north of $30 million, according to a report.

Bidding from the West Coast included big names Sequoia, Andresseen Horowitz, and Khosla Ventures, while East Coast bidders included General Catalyst, Flybridge, and Union Square Ventures, according to the Silicon Alley Insider.

GroupMe lets users create mobile groups of users that can be contacted with a single phone number. Groups can be created around friends and family members, or around shared interests and events. The company demoed its service back in October at the New York Tech Meetup alongside bootstrapped competitor Fast Society with entertaining results.

An unnamed source quoted by SAI described GroupMe’s growth as “nuts – thousands of percent.”

Union Square Ventures pulled out of the bidding part way through over concerns that GroupMe’s service could overlap with another portfolio company, Twitter.

The microblogging giant actually considered purchasing GroupMe outright, but backed off as the price rose. Instead, Twitter decided to build its own version of the service internally.

According to reports, the California-based Khosla Ventures is prepared to up the ante yet again by valuing GroupMe at $33 million. Just a year ago, GroupMe received $700,000 in its first round of funding.

Bloomberg Breaks Ground on Bronx Incubator Space

The Bronx is getting it’s first city-sponsored startup incubator. Mayor Michael Bloomberg broke ground on the Sunshine Bronx Business Incubator on Wednesday, which will be able to service 400 entrepreneurs over the next three years.

The facility located in the BankNote Building at 890 Garrison Avenue in Hunts Point will follow the model set by the city-sponsored tech incubator at 160 Varick Street, and the media/freelancer space Hive @ 55 in Lower Manhattan. Read more

Facebook Buys, Kills Drop.io

Facebook has purchased most of Brooklyn-based startup Drop.io in what appears to be a move to hire its CEO Sam Lessin.

Drop.io, a service that let users quickly and privately share files, ended its free service this weekend, and paid accounts will last until Dec. 15, according to a company blog post. All files will be accessible until the Dec. 15 deadline. After that deadline, the company plans to delete all its stored data.

“We can confirm that we recently completed a small talent acquisition for drop.io and acquired most of the company’s assets. We’re thrilled that Sam Lessin will be joining us at Facebook,” said a Facebook spokesperson in a statement.

Drop.io explicitly stated that “no user data or content will be transferred to Facebook,” indicating that like Facebook’s buyout of Hot Potato earlier this year, the social network was strictly after executives. And they paid a pretty penny for Lessin.

Drop.io valued itself at $5.99 million, and raised $4.85 million earlier this year, according to an SEC filing. The terms of the Facebook buyout were not disclosed.

Fast Society Lands “Sick” Sponsorship Deal with CMJ Festival

Fast Society, the bootstrapped mobile group messaging service whose dev team took potshots at rival GroupMe last week, made good use of it’s personal connections, and landed it’s first big sponsorship deal with the CMJ Music Festival in New York City.

With an anticipated 500,000 attendees, the CMJ Music Marathon and Film Festival should give the Fast Society startup its first mass-user test. Fast Society was designed with time-limited events in-mind, according to co-founder Matthew Rosenberg, and allows users to create SMS messaging and conference calling groups with expiration dates. The CMJ festival lasts through October 23rd.

Fast Society poked fun at venture-backed competitor GroupMe at the New York Tech Meetup last Wednesday, when the two of them presented back-to-back demos.

As part of the partnership, Fast Society users will be able to access a CMJ concert schedule and maps to different venues around the city. When asked how his unfunded startup could get such a sweet sponsorship deal, Rosenberg pointed out the team’s personal connections to the CMJ community.

“We hustle our faces off. We made a sick deal for placement that was dirt cheap because we made the right friends. We are throwing sick parties because we made the right friends. We are on the ground working hard everyday because we are New Yorkers, and that is what New Yorkers do,” he said, according to TechCrunch.

When Startups Collide

What to you get when you take two startup teams working on the same type of mobile messaging service, and put them on stage in front of about 1,000 techno geeks? You get to see each team’s personality come through. That’s what happened at the New York Tech Meetup’s October event on Tuesday.

GroupMe, a service which lets users create group phone numbers for texting and conference calling, was immediately followed by startup group Onebluebrick, whose Fast Society service does pretty much the same thing. The only apparent differentiating factor was that Fast Society’s groups were designed to be temporary.

Meetup organizer Nate Westheimer introduced the pair with some inspirational comments ” People really shouldn’t worry about competition,” he said. “When it comes down to it, the success or failure of your startup is about how you execute your own plan.”

Thanks Nate, that’s the kind of positive talk we like. It can be easy to fall into the trap of worrying about competition instead of worrying about your own startup. Anyway, now that the positivity is over with, bring on the competitors!

GroupMe’s demo was pretty straightforward. Co-founders Jared Hecht and Steve Martocci showed how to create a group number, send messages, and start a conference call. All very slick, very controlled. Lots of applause at the appropriate moments. Then the Fast Society team took the stage, and the one-upmanship began.

Onebluebrick co-founder Matthew Rosenberg threw formality out the window, and started the Fast Society demo by gathering volunteers to perform a live test of the service.

He then took a jab at GroupMe when showed off Fast Society’s user interface. “This is not just hacked together, this is beautiful. We spend time working on this,” he said, referring to the fact that GroupMe

Read more

Attn Hackers: New York Wants YOU

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Techies at New York startups such as Foursquare, Etsy, Meetup and Gilt Groupe are looking for other techies to visit New York and stay in their apartments as part of a new program called Adopt A Hacker. It’s couch surfing for nerds!

In a bid to lure more talent to the Big Apple, out-of-towners can apply to stay on the couches of folks like Kyle Barry, a developer with online craft marketplace Etsy, or Katelyn Friedson, technical product manager with online ad exchange ContextWeb.

Hosts donate their time and their couches for free, but visitors must submit an application form. The program is only open to non-New York City residents. Sorry local nerds.

Hacker visitors sign into the site via Facebook Connect, fill out an application with their skills, background, interests, and social network links. The Adopt A Hacker matching engine then matches them up with potential “Hacker Hosts” who have done the same, and who have mutual social network connections. Once hosts approve their matches, potential visitors get a emails listing their would-be host.

The Adopt A Hacker program was built over a 52 hour period by Jonathan Wegener, co-creator of the Exit Strategy NYC mobile app, and Ben Fisher, co-founder of Lean Startup Machine, along with Aaron Knight, Michael Tseng, Nick Khuu, Michael DeFranco, Heather John, and Ariel Zavala as part of the Startup Weekend program.

The NY Startup Scene: All Grown Up

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You don’t have to fly to California anymore to find a hot startup culture… there’s one right here in New York.

In the wake of the dot com implosion of the late 1990s, New York has grown into a complete tech startup ecosystem, with advertising, media, software and venture capital resources, according to the Wall Street Journal.

The city is starting to spawn second-generation startups. For example, Google’s acquisition of New York-based advertising company DoubleClick in 2007 made millions for co-founders who have turned around and founded or funded new companies. For example co-founder Kevin Ryan sank capital into job search site TheLadders.com and members only shopping site the Gilt Groupe.

New York startups tend to run on tighter, more efficient budgets. Even though the cost of living in New York is one of the highest in the world, startup costs for businesses are actually relatively low compared to other cities.

According to a study released in June, public financing options and the availability of free office space make New York a pretty cheap place to run a business when compared to Silicon Valley.

New York City is also overflowing with startup capital, according to a recent report from the Business Insider. (Sidenote: Kevin Ryan is a principal investor in BI’s parent company)

Not only is there tech venture capital from groups such as Union Square Ventures, but a lot of hedge fund people disillusioned with the financial markets by the recent recession are looking for new ways to invest their money. For guys used to billions, seed capital for a startup (usually $1 million or less) is chump change.

The problem for a startup in New York may actually be too much capital. Overvaluation by an investor unfamiliar with tech startups might actually make it tougher to get a second round of funding.

TechStars Incubator Coming to NYC

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Young startups in the Big Apple are about to get a boost from Colorado-based startup incubator TechStars.

New York City will join Boulder, Colo., Seattle, and Boston as the fourth city to play host to the group’s mentorship and seed stage investment program.

TechStars is now accepting applications for the 2011 New York program, which starts in January. The three month boot camp seeds participating startups with capital (up to $18,000), provides shared office space, and connects founders with established tech mentors. To help fund future programs, TechStars takes a 6% equity stake in company.

“TechStars is built on a mentorship-driven approach and in New York, the biggest city in the world, there are lots of amazing mentors,” according to an announcement on the TechStars web site.

The NYC program boasts an impressive lineup of high profile mentors, including Foursquare co-founder Dennis Crowley, Tumblr founder David Karp, and Union Square Ventures financier Fred Wilson.

TechStars founder and CEO David Cohen is moving to the city to oversee the new program, while seed stage investor David Tisch is slated to manage.

Over the years, the program has yeilded some impressive results. TechStars graduate Socialthing, a social site aggregation tool, was acquired by AOL in 2008, and mass emailing service SendGrid raised more than $5 million in VC funding in 2009.

The application deadline for the 2011 NYC program is November 21.

NYU to launch $20M venture fund

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nyu.jpg New York University announced Monday that it plans to launch a $20 million venture capital fund designed to help commercialize new technologies developed at the University.

The school named Frank Rimalovski, co-founder of New Jersey-based New Venture Partners, as fund manager. Rimalovski will form entrepreneurial teams and negotiate partnerships with early stage investors for promising technologies developed by faculty, researchers, and students.

“Many [faculty members and students] are eager to expand on NYU’s existing track record of finding expression for research, ideas, and innovations outside the university setting; this fund will give many of them a pathway to achieve that goal,” said NYU Provost David McLaughlin in a statement.

Profits from successful spinoffs and business sales will be rolled back into the fund and reinvested in other projects. Investments made by the fund will range from $100,000 to $1 million, and will usually fall on top of funding from other investors.

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