London-based Torch Partners, an investment bank that advises on financing rounds and M&A, has recently been poking around the Berlin scene. And now it has revealed the formal establishment of a Berlin branch, which will open in November.

Not bad news for a scene that’s eagerly awaiting big exits for validation, and looking for easier access to the money.

“I’ve spent last 20 years in Germany and have seen how Berlin was hyped from last time we had a tech bubble,” Jens Munk, who will be heading up Torch’s Berlin branch, told me. “Now there’s a lot of different variables coming together. There’s money. More of an ecosystem has developed.”

According to Munk, a lot of young Berlin startups are displaying creativity but “nobody is helping them generate value over an extended amount of time”. And wouldn’t you know it, Torch has a “strategic long-term view on generating value”.

That’s fair enough: Torch has had a hand in the development and/or sale of such success stories as OnApp, Huddle and Just Eat, not to mention TelecityGroup, Summit Partners, Crashpadder and SkyDox.

So about those exits we’re not seeing in Berlin. Perhaps surprisingly, Munk doesn’t see that as a problem – indeed, he points out that Silicon Valley and London have headstarts of 40 and 20 years respectively. And Berlin, he says, is shedding its copycat past and creating the sort of IP that’s needed for deals to flow.

“Berlin is going to pick up and generate some pretty massive exits,” he said. “We feel the timing is right for Torch.”

Interestingly, Torch seems to be looking past the consumer-centricism that has defined the Berlin startup scene’s public face. Rupert Robson, the investment bank’s CEO, told me that he was also very intrigued by the B2B and cloud activities bubbling away there.

“We feel strengths across the piece,” Robson said. “We believe the B2B SaaS world is growing up across Europe and clearly Berlin is a leading place here. We’re very excited by what’s happening in the enterprise world, and we see Berlin is going to play an important part in that.”

Which companies are already catching Torch’s eye? Unsurprisingly, Munk and Robson were loath to name names. But I imagine we’ll find out soon enough.

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The beauty of Cloudant’s technology is it lets web and mobile companies build and deploy big data applications fairly easily without having to worry about underlying infrastructure.

Cloudant CEO Derek Schoettle

The strategic stake means that IQT will vet and promote the use of Cloudant’s NoSQL-based Cloudant Data Layer as a service by U.S. government agencies. The beauty of Cloudant’s technology is it lets web and mobile companies build and deploy big data applications fairly easily.

Cloudant raised $4 million in venture capital from Avalon Ventures in 2010, and now has additional cash from IQT. “This deal gives us three things,” Cloudant CEO Derek Schoettle told me.

“First, if  you can prove to In-Q-tel that you can solve the problems their customers have at the scale they need, it’s a high bar to get over, but once you do, you have credibility. Second, the capital will help. And third, In-Q-Tel can help get us into other [non-intelligence-related] government entities,” he said.

IQT has been on a bit of tear lately. Just two weeks ago it took a stake in 10gen, the company behind MongoDB, another NoSQL player. That investment came just days after news of an IQT investment in Huddle, the UK-based provider of cloud collaboration technology.  As Derrick Harris has reported, the Arlington, Va.-based strategic  investment company also took stakes in other database or big-data inflected companies including  Cloudera, Platfora, Digital Reasoning, Recorded Future and Palantir Technologies.

The government, clearly, has a lot of information to handle and a lot of constituencies that need to view or massage that data. And, it apparently has money to spend on technologies to solve those problems.

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The size of the investment — as you probably guessed — is not public. In-Q-Tel (aka IQT) has previously invested in companies including big data startups Digital Reasoning and Platfora. Huddle, based in London with offices in San Francisco, is already heavily used by the British government and now hopes to sign up a lot of US government work as well, CEO Alistair Mitchell told me in a recent interview.

With IQT, Huddle is working on a version of its cloud collaboration platform — which often competes with Microsoft SharePoint and Lotus Notes/Domino — that meets U.S requirements. That work is now underway at the Department of Homeland Security and the National Geospatial Agency. The US government is encouraging the use of cloud technologies with its “Cloud first initiative.“

There is burgeoning demand by companies and government agencies for secure but easy-to-use collaboration and file sync tools. Intelligence and law enforcement agencies are particularly gun-shy about letting consumer-focused services like Dropbox in the door given their requirements for data security. Huddle clearly hopes that this IQT alliance will help it prove its service to be viable for use in these organizations

“If you look at what’s out there — sort of defined by Dropbox and for the last year — all we hear about is data breaches so now there’s a bunch of vendors out there to address the business case for secure file sharing,” said Terri McClure, senior analyst for Enterprise Strategy Group.

This company is interesting because it’s already proven itself in the British government and now this deal makes it look attractive to the US government as well, she said.

Huddle netted $24 million investment in May, bringing the total investment at that time to $40 million and claims huge sales growth over the past year.

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It has been over six months since Microsoft officially became an owner of Skype, one of the biggest communication services in the world. The company has been growing quietly, thanks to its “Skype everywhere” strategy. In April 2012, Skype reached over 40 million concurrent users online, a remarkable achievement for a company that didn’t exist a decade ago. Today, the New York Times published an article that reveals some more data about Skype and outlines where its new owner, Microsoft is planning to take the company.

“In seven months, the number of people using the service each month has jumped 26 percent to nearly a quarter of a billion, affirming Skype’s status as one of the crown jewels of consumer Internet services.”

“In the last several months, Skype has cranked out versions of its calling software for Google Android smartphones, a Sony portable game console, Comcast set-top boxes and Apple mobile devices. Skype is the fourth most-downloaded free app of all time for both the iPhone and iPad.

Skype’s use has continued to grow briskly, jumping 40 percent to 100 billion minutes of calls in the first three months of this year from the same period last year.

Microsoft, has essentially taken a hands-off philosophy with Skype though it does plan to integrate the service into some of its upcoming products.

Microsoft plans to integrate Skype into Lync, a Microsoft communications product aimed at businesses.

Another priority is making Skype video conferencing work on Microsoft’s Xbox 360 console, though that product is not likely to be released this year. In a sign of the investment Microsoft is making in its new acquisition, Skype has about 400 job openings, Mr. Bates said.

So by all counts, Skype is doing fine under Microsoft ownership. The software giant has kept its paws off the baby. However, the current level of success isn’t enough to mask the fact that the company is facing increased competition from upstarts, who are using social networks and mobile to grow at breakneck speeds and are likely to strike at Skype within a few years. They are all trying to siphon attention away from the classical telephony services – phone calls, SMS and even Skype.

Future’s Not So Bright

Skype has become such a part of our daily lives that we continue to use it despite its obvious shortcomings. It is victory of utility over user experience — the Skype app’s user experience is a lot worse than it was during the early days. The app has been crammed with so many features and has lost its intuitive simplicity.

The icons in the app often remind me of those unfinished hulks of buildings one sees when traveling down a freeway in fast growing cities. The garishness of the Skype app becomes even more obvious when you start comparing it to the new, more well-designed upstarts that have entered the market to take on the big kahuna. And mobile is its Achilles heel.

Sure, if you go by the numbers, Skype looks unbeatable — much like Facebook, another company that is struggling to come to terms with mobile platforms and the need for simpler offerings. Sure it bought GroupMe, a mobile messaging app. However, its position at the top isn’t cemented. There are dozens of upstarts who want to eat into Skype’s future growth.  To understand, let’s go back to the time when Skype started.

In those early days, Skype’s initial burst of growth came because it offered two things – free calling to other Skype users and instant messaging. Instant messaging worked well on both slow and fast networks. It was something people were used to. Free calls were just the icing on the cake. The instant messaging was one feature that brought people back to the app every day. It was what kept everyone logged in. It was what gave Skype app the attention, something I have written about a number of times.

The App Crisis

Today, that same daily and constant messaging behavior is going mobile. Whether it is SMS or IM, today’s smartphone users have dozens of options to communicate. Facebook Messenger, Viber, WhatsApp – the list is endless and it keeps growing. And all these apps are vying for our attention and time. Internet users, as many companies have learned the hard way, are quite fickle, shifting loyalties very easily.  If all my friends are using WhatsApp, then I am always using WhatsApp. Or Viber for that matter.

WhatsApp saw the number of messages on its platform grow from a billion messages in October 2011 to 2 billion messages in February 2012.  In the two years it has existed, Viber has signed up about 70 million users. More than 150 million calls (that last about a billion minutes) are being made on the app every month and a billion text messages are being sent every month.

Sandvine, which monitors traffic on telecom networks, in a recent report noted that in North America alone,  an average of 7.6 million WhatsApp messages were sent per day. In Asia-Pacific, WhatsApp was the tenth-ranked most used app (by bytes). Skype was at the ninth spot. Here is what they write in their report:

communications applications benefit from tipping points – once your friends are using the app, you use it too – and WhatsApp, like Skype, has emerged as the standard cross-platform communications tool on many networks (on the Asia-Pacific networks we studied, WhatsApp is used by 7-8% of active subscribers in any one hour period)

Informa, a telecom and mobile research firm, in a recent research report noted that SMS’s share of global mobile messaging traffic will fall from 64.1 percent in 2011, to 42.1 percent in 2016. At the same time, the global mobile instant messaging traffic will increase from 1.6 trillion messages in 2011 to 7.7 trillion messages in 2016, doubling its share of global messaging traffic from 17.1 percent in 2011 to 34.6 percent in 2016. Guess where all those messages are going? Yup, to apps like Viber and Whatsapp.

This is causing telecom head honchos a lot of headaches. In a speech to his shareholders, Deutsche Telekom CEO Rene Obermann made this observation:

This is due among other things to harsh competition and new Internet services which are replacing previous methods of communication. Social networks like Facebook and Twitter, communication services like Skype, WhatsApp, and many more – all have one thing in common: They are offered over the Internet and can be used via the fixed network, mobile network, or wi-fi. What is more, they appear to be free of charge.

What has that to do with Skype, you might be wondering. A lot.

It’s all about attention

Skype was a pioneer of what is now commonly known as the network effect. It was also smart to piggy back on Kazaa, a P2P file sharing network and get distributed across the web.

In order for Skype to work for you, the software depended on you to convince your friends and family to sign-up for the service, download the software and then sign-on. In other words, it used you as its sales tool. More people signed up for the network, the faster the network grew and today it has hit a point of maturity where many people already are on Skype.

And Skype came during a time before the iPhone. It had to grow at a much slower pace. Today, apps like Viber are focused entirely on smartphones and thus have access to a much bigger market. Thanks to social networks, these apps have been able to accelerate their growth and get a much larger network effect.

As these apps develop bigger networks, they start to siphon attention away from the incumbents and that includes the phone companies and Skype. I think many people might take issue with me calling Skype an incumbent, but the company is really an incumbent. Sure it doesn’t have the legacy networks but it is making money the old fashioned way – selling minutes and premium video-calling services.

Skype’s growth is also going to be impeded by one more group of competitors — the phone companies  themselves. The phone companies are so worried about the likes of Whatsapp and Viber and Skype that they are launching their own set of apps. Take Voice or VoIP apps as an example: there is Bobsled from T-Mobile. There is TeliaSonera charging about €6/month for VoIP apps. There is IP messaging app, Huddle from AT&T. And this is only the start.

So despite what you might have read this morning in the paper, let me just say – Skype’s future isn’t as secure as it seems to be. What it can do to fight this death by a thousand cuts? That’s an $8.5 billion dollar question.

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The London-based company, which provides a range of online collaboration tools and services, announced on Thursday that it had closed a series C round from investors including Jafco, DAG, Matrix and Eden. In addition, Subrah Iyar, the founder of WebEx, is participating in the round, along with Herb Madan (RouteScience).

The money will take the total the company has raised to $40 million, and comes ahead of what Mitchell told me was a concerted effort to expand with the demands of business customers.

“The headline stats are that our business has been tripling in size each year, and we’re expecting to more than triple this year,” he told me. “But the reason we’ve taken this funding now — because we didn’t need it — is because our enterprise customers, our big customers, grew fivefold last year and they’re on course to grow eightfold this year. Those are pretty extraordinary levels of growth.”

Huddle’s customer profile has altered over the last few years, moving from small businesses to a range of huge clients including both the U.K. and U.S. governments, as well as large corporations such as Diageo and HTC. That trend, said Mitchell, was now playing out in a serious way as top level executives started to invest in cloud services for their companies.

“Up until two or three years ago, the cloud has been growing with pockets of use and early adopters,” he said. “In the last 6 months, the CIO community has suddenly woken up and said that cloud, collaboration and content are three of the biggest problems they need to solve. We’ve now got to the point where, for example, we took a call the other day from an organization that said ‘we’ve got 2,000 users — can we scale up to 85,000?’”

Huddle already expanded its offering for large companies earlier this year, but it has also been expanding its product line with efforts like Huddle Sync, which not only allows users to carry and edit files across all sorts of hardware platforms and devices — but also knows what documents you should be working on before you do.

It plans to use the money to expand, particular in the U.S., where the company has just opened up a new office in New York. While the round is large for a series C, it is substantially less than one of its main rivals, Box.com, which pulled in a blockbuster $81 million round last winter. And then, of course, there’s always Microsoft’s SharePoint, which has a dominant role in this sector.

“The content collaboration space is about $25 billion in annual turnover,” said Mitchell. “But if you added up all of the social guys, all of the cloud storage guys, that probably comes to 5 percent of the market in their current form. Ninety five percent of the market is in the big, old boys — so we’re going for the 95 percent. SharePoint accounts for $10 billion of the $25 billion, nearly half of the market.”

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Now collaboration outfit Huddle is launching its own spin on the idea, with Huddle Sync — a system that grants its users access to shared, synced folders and gives the data to them wherever they are.

The London-based company, which we highlighted last year as one of Europe’s 20 most exciting startups, already offers its users — spread across 100,000 businesses — access to a range of collaboration software. But now it’s adding a virtual folder option that means Huddle workers can keep all sorts of documents up to date and automatically synced between their computers, phones or tablets.

Yes, it’s partially a defensive move against Dropbox’s Teams product, which has been making inroads into lots of companies off the back of the tool’s popularity with consumers. And it’s also a way of heading off threats from bigger players too, including the perennially-rumored Google Drive.

But it’s also taking on a different approach to the issue of synchronization because of its focus on business customers, as CEO Alastair Mitchell explained to me over breakfast last week.

He suggests that there is a significant difference between consumer-style sync — which is largely about accessing one person’s files across different devices — and enterprise-wide sync — which largely revolves around accessing other people’s information. And because enterprise-wide sync is essentially a shared drive that spans an entire organization, there’s a rather large technical problem to surmount: with terabytes of files potentially at your fingertips, how can you sync the whole thing?

The reality is that it’s not only impossible to sync everything, it’s also unnecessary.

Rather than simply pull the data down from the cloud whenever you need it, Huddle Sync runs a smart learning algorithm to find out which files you are most likely to be interested in and then it pushes them to you — saving you time, energy and preventing a company’s network from getting munged by vast amounts of constant synchronization.

Mitchell believes that the process is unique — it has filed for a patent on the algorithm — and over time hopes it can improve to become an utterly failsafe predictor of not only what you’re working on, but what you might need to work on in the future. Interesting move from the fast-growing startup, which also became one of the British government’s approved cloud software providers this week.

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Now the business is going even further, with a new “unlimited” offering deliberately designed to reel in more major customers — and hopefully erasing the barriers between workers who are inside the huddle and those left on the outside.

Huddle’s Unlimited Enterprise offering, which is being announced today, allows businesses to invite any number of extra read-only users into an existing Huddle workspace for no extra cost. Essentially, this means those who already license a Huddle for a number of workers can also open files to occasional or lower-level contributors without any hassle.

It might sound minor, but it’s incredibly useful for big businesses who have a lot of workers, suppliers or contractors who only need a small degree of access, and for whom a full Huddle account would be undesirable, unnecessary or pointlessly expensive.

The move, according to CEO Alastair Mitchell, came from the realization that many of Huddle’s biggest customers had significant numbers of potential users who existed outside the firewall, but still needed occasional access to material inside it.

“Once you’re talking about a company of 6,000 to 10,000 people, cloud software is a really interesting proposition,” he told me. “The usage becomes very different. You have lots of users who don’t need to hook into the system the whole time.”

In particular, he suggests governmental organizations could find it very useful to give read-only access to large numbers of users — something he backs up by proudly proclaiming Huddle is “the largest cloud deployment in the U.K. government.”

Limited access “is one of the biggest issues in collaboration,” he claims. “The first problem is not being able to access the content at all, the second is that you can’t use the software because you haven’t got a license. This solves those problems.”

The idea is to help the company, which has offices in London and San Francisco and plans to push forward with a new Boston base in the coming months, take on rivals like Microsoft’s Sharepoint, Box and Jive.

It’s certainly a better idea than the tacky stunts previously deployed by the company to attract attention — like when it sent an entire marching band to hijack Microsoft’s Sharepoint Conference.

Hopefully, Huddle is learning that delivering a better product to users wins over gimmicks every time.

It could be for a big year for the company, which we labelled “one to watch” in our recent list of Europe’s 20 best startups. The forthcoming Boston office is an attempt to help expand in the U.S. market, which is massively important for software as a service businesses. Indeed, it now generates 55 percent of Huddle’s new leads.

So far, it has taken $14 million in funding from Eden Ventures (Apertio, Blinkbox) and Matrix Partners (Gilt Groupe, Aruba Networks), but grabbing that chance could require some extra money, even for a business which is said to be raking in $25 million annually.

Mitchell was coy about fundraising, but did admit it was a distinct possibility.

“There’s a lot of demand for our business from investors,” he said. “We might well raise more this year, but don’t need to.”

Image courtesy of Flickr uservisualpanic

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That’s why Buffer is doing something different. The startup, whose app enables users to easily schedule Tweets and Facebook posts to be posted at a later time, has raised new seed funding. But for Buffer, the fact that it has taken on $400,000 is secondary to explaining how it all happened — and the company’s hope is that other startups can learn from the experience.

Pulling back the curtain on seed funding

Buffer on Tuesday published a detailed blog post that details exactly how founder Joel Gascoigne and co-founder Leo Widrich met each of their 19 new seed investors (including Guy Kawasaki, AngelList designer Graham Jenkin, Huddle co-founder Andy McLoughlin, and AngelPad’s Thomas Korte and Gokul Rajaram) and why they decided to take on each investment. A typical paragraph begins with, “It was a sunny day in October when we sat down in a Starbucks in San Francisco with Andy…” It’s a fun read and could be especially helpful for other startup founders interested in how the funding process happens.

From left: Buffer founder Joel Gascione, co-founder Leo Widrich, and engineer Tom Moor

“As a company, we always want to be very transparent,” Widrich said in an interview Tuesday. “So instead of the typical funding announcement, we decided to write this story where we explain every story behind every investor. We wanted to help people understand the fundraising process. There’s really no reason to be secretive about it.”

The Silicon Valley advantage

It was just five months ago that Gascione and Widrich moved from Birmingham, UK to San Francisco to turn Buffer, which had profitable operations as a “lifestyle business,” into a full-on company. Since then, the app has grown its user base from around 20,000 to 85,000, seen a huge uptick in engagement, and Buffer has added a third full-time employee. Right now, Buffer is making some $20,000 in revenue per month.

For Buffer, being in the Bay Area was a hugely important step for enabling this growth, and for helping its founders forge key relationships in the tech world. Widrich said:

“The most interesting thing about Silicon Valley is the aspect of serendipity. Here, if you keep your mind open and your eyes open, you can connect with anyone. Being here has been a fabulous way to get in touch with people.”

Unfortunately, due to an inability to secure H-1B visas, the Buffer guys are moving from San Francisco to Hong Kong this week. The company will use the new funds to hire more people, but in true lean startup form, all Buffer’s operations will be virtual. “We basically pulled up Google Maps and said, ‘Where in the world do we want to go?’” Widrich said. “Hong Kong sounded pretty cool.” Indeed — it’s a pretty cool time for startup founders in general, and for Buffer especially it should be an exciting road ahead.

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