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Silicon Valley angel investor Mike Maples Jr., known for his early investments in Digg and Twitter , announced recently that his firm Maples Investments has rebranded as FLOODGATE in an effort to fulfill his experiment of becoming a "super angel" firm. The term "super angel" mostly speaks for itself: instead of carefully picking a few select companies to invest in each year, super angels broadly place more money in a larger number of early-stage startups. Sponsor By making the shift from Maples Investments to FLOODGATE, Maples is jumping into the super angel game with both feet in attempts to take the firm to "the next level." He hopes that the creation of FLOODGATE will "address a big gap in venture capital" between seed level angel investments and larger rounds from traditional VC firms. According to the newly rebranded homepage, the super angel strategy is a response the growing number of startups, the falling number of IPOs, and the rising level of VC investments - all of which make finding early-stage funding more difficult. Additionally, the site offers that super angel investments can provide more exit options. "If a business raises a small amount of initial capital, then exceeds its early milestones and decides to swing for the fences, it can then raise a larger sum at a higher price, while preserving ownership," the site says. "If the business is not ready for rapid growth, it preserves the option for an exit at around $50 million, while still delivering a high return for investors. This dual-track model is less available to companies that raise large amounts of money early." Are we witnessing the birth of a new branch of venture capital? It is interesting to consider the gap that Maples is attempting to fill; smaller individual seed level angel investments at one end, and the hundreds of millions of dollars that VC firms have been known to invest at times. It certainly seems that there is an opportunity for endowed individuals to invest at a higher level than a typical angel would, but at the same time there are smaller VC firms that focus smaller investments on young companies. Can super angels sit in the space between angels and firms that target smaller amounts at early-stage startups? Will more of the larger firms begin to invest smaller amounts instead of waiting for the companies worthy of a nine-figure investment? Will angels start investing more of their own money closer to super angel levels? Is FLOODGATE's method of casting a wide net in hopes of catching one or big fish a wise choice? Will their approach put pressure on other angels to invest more or at a higher level? It is unclear what, if anything, will happen, but what is clear is that FLOODGATE plans to push more money into the early-stage startup market, which is great news for the entrepreneurs out there looking for funding. Let us know how you feel about the idea of super angels and their effects on the VC industry in the comments below. Discuss
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"Super Angel" Firm Maples Investments Rebrands as FLOODGATE
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In the waning moments of Sunday evening (quite literally the eleventh hour), the U.S. House of Representatives passed was some are calling the most comprehensive changes to the American health care system in over 100 years. The bill passed by a narrow margin of just seven votes, and could be signed into law as early as Tuesday after the Senate passes a small amendment known as the "fix-it bill," though many changes won't be seen for several years. For entrepreneurs, startups and venture capitalists, the legislation ushers in an entirely new set of circumstances and opportunities. Sponsor By 2014, the bill requires states to set up what are known as "SHOP Exchanges," or Small Business Health Options Programs, which allows SMBs to group together when buying health insurance. "Small businesses" are defined as having fewer than 100 employees, but individual states can choose to only allow businesses with no more than 50 employees to participate for the first two years. Companies with 25 or fewer employees could potentially be eligible to receive a 35% tax credit for buying health insurance as early as this year. By 2014, those companies could see that credit rise to 50%, while even smaller companies could receive a full tax credit to provide insurance for their employees granted their average salaries are below $25,000 annually. My guess is that a majority of startups (especially smaller, younger startups strapped for cash) would fall somewhere under these tax break brackets, which could entice them to provide coverage. Having the ability to affordably provide health insurance to employees is a tool that could prove useful in attracting and maintaining a talented team at a smaller level. For companies with fewer than 50 employees, there will be no penalties for not providing insurance, but for larger companies, steep fines could be levied should they fail to purchase insurance. Some fear that this could halt companies from growing past 50 employees should they choose to not want to provide insurance, but others argue that only a small amount of the nation's small businesses would be affected. Another fear is that in the time between now and 2014, health insurance companies will drastically raise rates in an effort to shore-up as much cash as they can before the new rules kick in. Five months ago, San Francisco-based company TriNet surveyed small business executives and found that for over 75% of respondents, as much as 10% of their companies' revenues were being spent on health care. Furthermore, 63% said their rates went up by as much as 20% over the last year, so the possibility of further insurance rate hikes is unfortunately a continuing trend. So will smaller companies jump on board with health insurance or will those already participating be forced to jump off with increased rates? For their sake, I hope they have fewer than 50 employees or they could be fined as much as $2,000 per employee for not providing insurance. Representative Joe Donnelly of Indiana tried to reassure small business owners Monday morning: "I would not have supported this bill if I didn't think that it was a benefit to small business and to mid-sized business, [and] made our companies more competitive in international markets," he said. While business owners argue the possible benefits and detriments of the new bill, venture capitalists are already looking for ways to take advantage of the changes. Dr. Bijan Salehizadeh, an investor with Highland Capital Partners , wrote recently about how he is keeping his eye out for startups that can streamline and improve on the health care industry , especially those focused on chronic disease management, practice profitability tools, and CRM for practices. "Why is it that every other category of small business in the country has figured out CRM other than physician practices? I'm talking about electronic scheduling, reminders for visits, etc. Really basic convenience oriented items that make a huge difference to patients/consumers," writes Salehizadeh. "If restaurants can do it, then doctors offices must be able to do it in 2010." One such startup looking to help small businesses deal with the shifting seas of health insurance premiums is Bloom Health . In a nutshell, Bloom allows companies to pay them a fixed rate and then Bloom offers the employees the choice of any insurance plan on the market. In other words, it lets small businesses outsource their health insurance for the security of fixed premiums. More VC firms will likely be putting money behind companies like Bloom, such as Chrysalis Ventures , whose managing director David Jones predicted this practice last July. "Whatever form health care reform takes, we believe companies that can improve the productivity and efficiency of improvement of health care services and avoidance of medical problems are going to prosper, and we're putting our money behind that belief," said Jones in an interview with the New York Times last summer. So now that the health care reform bill has passed, and sweeping changes are coming to America's businesses, what do you think? Will the benefits outweigh the costs and help smaller businesses provide for their employees? Or will larger companies pay the price for not providing insurance lest they be forced into paying for coverage? This is a truly complicated issue, and it is unclear which way things will go, so let us know what you think of it all in the comments below. Discuss
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What Does Health Care Reform Mean for Startups and VCs?
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It used to be you might need a huge thumb, like Sissy Hankshaw , to be a master of the roadways. Then, along came Craigslist's rideshare board, making it even easier to get around the world sans car. Today, Flinc has debuted at the DEMO conference in hopes of forever changing the lives of leather tramps and hitchhikers, or even the car-less simply looking for a lift, worldwide. Sponsor Flinc is following in the footsteps of another ride-share app for the iPhone that debuted at DEMO in 2008, Avego . Flinc has one major difference - it will be "the first dynamic ridesharing service that connects Internet-enabled navigation systems with smartphones", according to a tweet by the company this morning. Flinc acts as a go-between, matching potential riders with drivers by offering riders with a list of available drivers, including the price and profile for each ride. When a rider picks a driver, the driver can see on the navigation system how far out of their way they would need to go and has the option to refuse or accept the ride request. Any cost for the ride is taken care of by the app. According to the company, "flinc is a dynamic ridesharing service that can be used on smart phones or online, combining GPS and location based capabilities with social networking to offer a dynamic and automated method of transport." The only problem we see, of course, is that a service like this needs to become ubiquitous before it is even slightly useful, so it requires a leap of faith on its users' ends. Avego, which came out in 2008, says today that it has more than 7,000 "empty seats" worldwide, with 165 in Texas and 75 in Austin. But could we find a ride across town? Not really. Either way, the idea of real-time ride-sharing apps is one we love, both for its greenness and its inherent utility. What we really love about this is that it doesn't (from what little we've seen on the website) have anything to do with badges or virtual items or "checking in", like we've seen so much with so many location-based services lately. Flinc and Avego both deal with location in its most basic sense: you are in Austin, someone else is in Austin, you both want to go to Arizona, let's make it happen. Currently, the project is in initial testing stages and has yet to launch. To this end, it is asking where to go to market first, allowing potential users to suggest its launch location . Discuss
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Flinc: Become an Internet-Enabled Leather Tramp
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Back in early February, while aboard a red-eye to New York, Dave McClure wrote a long, humorous, rambling, profanity-laden rant of a blog post that focused on startup business models. While it makes for an entertaining read, McClure's post is also very insightful and makes a solid case for why startups should shift from advertising models and instead build their new businesses on subscriptions and micropayments. Earlier this month I had the chance to visit the headquarters of ZooLoo , a startup that witnessed this very shift first-hand with their own business model. Sponsor During my visit I spoke with Aaron Baer, Director of Communications at the Scottsdale-based ZooLoo, a site that provides individuals with the ability to share and manage content on their own domain. Like many startups in the past decade, ZooLoo opened for business under an advertising business model, but eventually caught on to the changing trend McClure evangelized on his blog. "[ZooLoo's original model] was an advertising platform, we had a shopping page, we would do affiliate marketing, you could buy and order prints off of our website - we had a very broad business model," says Baer. "We discovered that didn't work." They also realized that it wasn't the model their customers wanted. Under the old model, users were presented with two options: a free basic service, and a premium service with more features in an "all or nothing," fashion. Customers complained that they wanted to upgrade and purchase premium services, but that they weren't willing to pony up the full price for a bunch of other features they didn't want. In January, ZooLoo fundamentally changed their business model by creating a storefront through which customers could pick and choose features on a micropayment level. Now if a user wants to purchase their own domain name, but doesn't want to pay for ZooLoo's SEO services, they can do that instead of being forced into picking from a tiered package. While customer feedback was a substantial motivator for the change, Baer says that potential investors also played a role in the addition of the storefront. "The investors said, 'You have a solid product, but I want to see you find a better way to package it, and a better way to sell it'," he says. And the change worked. Since adding their micropayment storefront, ZooLoo has seen an increase in purchases of their premium services. The company is making more money marketing virtual goods in a micropayment system than they were when they bundled everything together at a higher price and relied on advertising and affiliate marketing. This is the exact paradigm shift in online marketing that Dave McClure preaches in his post mentioned earlier. "Gradually we are discovering that the default revenue model on the internet should probably be the simplest one," writes McClure. "That is: basic transactions for physical or digital goods, and recurring transactions (aka subscriptions) for repeat usage." Without repeat usage, McClure says that the biggest obstacle in the way of getting users on board with micropayments is that they forget their password. Honestly, if I was asked to login to my Amazon or PayPal accounts right now, I would be playing a guessing game with a handful of passwords because I don't use those services too often. But for iTunes , Google and Facebook - the services McClure says will be the leaders in eCommerce login in five years - I use those every day, and surely remember my password. ZooLoo realizes this too, which is why they foster repeat usage by connecting their services with Twitter, Facebook, and other popular online social networks. Users can also log into ZooLoo using Facebook Connect, which eliminates the problem of remembering a less frequently used password. ZooLoo and Baer are fully on board with this emerging model, and suggest others hop on as well. "There is this social media bubble forming where all these services are saying, 'We're free, come use us!', but eventually those services need to make money," says Baer. "We think micropayments are the next big thing." Photo by Flickr user r-z . Discuss
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Micropayments and Subscriptions: How Business Models for Startups are Shifting
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Everyone has been talking about how this year's SXSW will be the "year of location" as Foursquare and Austin-based Gowalla go head-to-head in a location-based battle royale . Location, however, is not the only emerging technology that will be on display in Austin; American auto maker Chevrolet announced it will be debuting new augmented reality promotions at SXSW this year. Sponsor Festival attendees can download the Chevy iReveal application on the iPhone which will allow them to participate in a scavenger hunt-like game that blends augmented reality with location-based functions. A map in the application shows the location of Chevy vehicle promotions around Austin where users can "unlock" the ability to view 360-degree 3D models of the cars in an AR view using the phone's camera. Using AR to promote vehicles with 3D models is nothing new, but this is one of the first versions to reach consumers on their phones. The automotive industry has been one of the leading areas pushing desktop webcam-based AR experiences that have allowed users to interact with 3D models of cars from their homes. This new promotion from Chevy is unique in that it allows customers to have the same experience on their iPhones. According to the App Store, AR iPhone application developer acrossair has produced the application for Chevrolet. The interesting thing about this experience is the way it blends the dichotomous features of mobile and webcam-based AR. The 3D model manipulation we are used to seeing on the desktop is wisely mixed with the location-based map info seen in most mobile AR applications. By taking the best of both worlds, acrossair and Chevrolet have opened the door to a new breed of mobile AR advertisements. Augmented reality isn't the only emerging technology Chevrolet is experimenting with at SXSW; quick response (QR) codes, which are like a technological cousin of AR, are a large part of the company's promotions as well. When investigating Chevrolet's latest cars, users can photograph QR codes placed strategically on the cars to learn more about specific parts of the car. A QR code placed on the hood, for example, will launch information about the car's engine. Christopher Barger, Director of Global Communications and Technology for General Motors, is excited about the future of QR codes and AR for the automotive industry. "Imagine using Quick Response Codes to download the price and options for a vehicle on a dealer lot right to your cell phone. Or, imagine using augmented reality to virtually preview different colors of the Camaro in your own driveway," Barger says. "We are just scratching the surface of what's possible with mobile technologies and social media applications." Chevrolet is also teaming up with Gowalla to provide location-based advertisements to people checking in at SXSW. One promotion they are offering is a shuttle ride from the airport in one of their new cars to select users that check in at the airport, so don't forget to fire up Gowalla when you land in Austin. For more information about mobile and desktop AR advertising, be sure to check out our report on the subject coming soon! Discuss
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Chevrolet Blends Mobile and Desktop Augmented Reality at SXSW
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