On Saturday at the SXSW Interactive conference in Austin, the company is set to announce the creation of a $3-million fund that founder Ian McFarland said is just the first stage of what they plan to be a $30 million fund over the next seven years.

“We want to apply lean principles to building our fund,” said McFarland. “For the first year, we’re keeping it as a smaller experiment… We want to have a great track record this year and [then grow].”

The fund is aiming to do about ten investments, with none exceeding $500,000, and it plans to co-invest with others, McFarland said. He added that portfolio companies stand to benefit from Neo’s deep understanding of the lean startup philosophy, as well as its connection to a global community of lean developers and product managers. Ries himself is the company’s General Partner and Joi Ito, director of the MIT Media Lab, is Chairman.

While the company has a particular familiarity with the social space because a few members formerly worked at Friendster, McFarland said it will look to invest in startups across different verticals. What matters is that the startup demonstrates an awareness and understanding of lean startup principles, he said.

A year ago at SXSW, the company, a subsidiary of the Japanese company Digital Garage (which is providing financial support for the new fund), launched as New Context. In November, it changed its name to Neo and announced a rebranding. At the time, McFarland told my colleague Eliza Kern, “We’re trying to establish the global brand in the lean startup space.”

As Eliza reported, in the past year, Neo has purchased several startups to build the company, including Cubox, a Ruby on Rails development team led by Evan Henshaw-Plath, who was the lead architect at Odeo, which later became Twitter; New York-based Proof Innovation Labs; Ruby on Rails software company EdgeCase; and Pivotal Lab’s Singapore branch.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Crowdfunding’s rapid growth and future opportunity
• Facebook’s IPO filing: ideas and implications
• What the VC Industry Upheaval Means For Startups

On Wednesday, New York-based SecondMarket announced that it is partnering with AngelList to let qualified investors on its site invest in companies raising pre-Series A rounds of financing. According to SecondMarket, startups will be dual-listed on both sites to enable its investors to invest as little as $1,000 in a company.

“Historically speaking, angel investing has been very inefficient and it has been very, very opaque,” SecondMarket founder and CEO Barry Silbert said in a video explaining the new partnership. “We’re changing that by democratizing investing by enabling an investor to invest a small dollar amount into these companies. Plus, by investing across a broad range of companies, they get a diversified portfolio of investments.”

SecondMarket, which has traditionally supported trading of secondary shares in private companies, declined to share how many AngelList companies would be participating in the partnership. But it said that companies would include those in a range of industries, including finance, education, science and advertising.

As part of the deal, SecondMarket said it will create a dedicated fund for each company that will purchase shares in the startup, creating an indirect ownership stake for its users.

The partnership comes at an interesting time for both companies. In the past few months, SecondMarket, which lost a big chunk of its commissions after Facebook’s IPO, has been adding new options for investors, including the ability to invest in new asset classes, like digital health and film. And, last week, TechCrunch reported that AngelList is raising a round of financing for itself at a valuation some say could exceed $150 million.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Crowdfunding’s rapid growth and future opportunity
• Facebook’s IPO filing: ideas and implications
• What the VC Industry Upheaval Means For Startups

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Ups and downs for cleantech in Q1
• The fourth quarter of 2012 in cleantech
• Cloud computing infrastructure: 2012 and beyond

As part of a broader plan to bring new opportunities to accredited investors on its site, the New York-based online trading platform is partnering with digital health academy Startup Health for the month of December to educate members about health tech and allow them to make primary investments in health tech companies as well as a new fund for Startup Health.

The companies themselves declined to share details on the investment opportunities but according to a document available to investors on SecondMarket, Startup Health is looking for funding for a $7.5 million Innovation Fund to support 100 digital health and wellness entrepreneurs enrolled in its accelerator-like startup academy. The new fund will own 2 to 10 percent equity in each company supported by it.

According to the document, the fund had its first close in June and the portfolio already includes 13 companies out of a goal of 100. But, with an ultimate mission of helping to build 1,000 sustainable health tech companies over ten years, the digital health program plans for subsequent funds to support hundreds additional investments. Since launching in June 2011, Startup Health has enrolled 23 startups in its three-year program, which targets companies that already have some funding and momentum and provides coaching, connections and other resources.

Through the partnership, Startup Health also helped inform SecondMarket content on the health tech sector, including an online investment guide, whitepaper, articles and an upcoming webinar. So far, according to SecondMarket, the response from investors has been very positive. Since the start of the month, the site said it has seen nearly $5 million in indications of interest from investors and one investment opportunity in a health tech company has already closed.

Until four months ago, SecondMarket said it only supported trading in secondary shares, but expanded into new asset classes in response to feedback from users on its site. In November, it launched a themed-month program to educate members about the different opportunities, with the first month focusing on film. Other themes could include wine, art, education and peer-to-peer loans. The company has previously enabled participants to invest in a range of asset classes.

Jeremy Smith, SecondMarket’s chief strategy officer, said they chose to partner with Startup Health because they believe in the investment opportunity in healthcare and support Startup Health’s approach that pairs funding with mentorship and coaching.

“We think there are a lot of compelling heath tech investments out there,” he said. “Health care this time around is being disrupted in a very real way.”

Image by JCD via Shutterstock.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Facebook’s IPO filing: ideas and implications
• Connected world: the consumer technology revolution
• Web startups: How to guard against security breaches

It’s hardly a shocker that longtime tech hub Silicon Valley took the No. 1 spot. But, over the past couple of years, New York has become more of a magnet for entrepreneurs and it’s surprising to see the city lag behind not just one location, but four. As my colleague Ryan Kim reported earlier this year, East Coast industries, like media and advertising, as well as the rise of local angel investors and venture capital firms, have made the city more of a draw for entrepreneurs.

Bjoern Lasse Herrman, CEO and co-founder of the Startup Genome, said that while he and his team were also surprised that New York didn’t come in second, several factors contributed to its new position.

“The goal of the rankings were to be able to look at the ecosystems less [in terms of] the pure number of companies but from the standpoint of being able to identify specific advantages and disadvantages,” he said.

In compiling the list, the company measured the cities across several indices: startup output (the total activity of entrepreneurship in a given region, controlling for population), the availability and activity of funding sources, the performance of startups (as measured by revenue, job growth and other variables), the mindset of entrepreneurs, how quickly startups adopt new technologies, the availability of mentors and support and the talent of founders. Startup Genome relied on data from the more than 50,000 companies that have used its Startup Compass benchmarking tool, as well as surveys.

While New York may best most other cities in terms of the sheer amount of startup activity, Herrman said its “startup output” index slipped once they factored in population.  He also said that relative to other cities, New York has fewer early investors willing to fund companies in their riskiest stages — a characteristic that is typical of younger startup ecosystems, he added.

Anecdotally, from the constant stream of funding announcements, it seems as though New York has a healthy supply of angel investors and venture capital firms. But Herrman said New York’s “funding index” was lower than that for Silicon Valley, Tel Aviv and Boston, which have longtime investors and serial entrepreneurs who are now actively investing.

New York does, however, distinguish itself in other ways, Herrman said. In fact, he added, out of the top eight ecosystems, New York is the most differentiated from Silicon Valley because of its focus on advertising, e-commerce and fashion. As the company reported in an earlier study, New York also beats out other cities on another key metric: the percentage of female startup founders.

In addition to the five companies mentioned above, the report’s list of the top 10 ecosystems included Boston, London, Toronto, Vancouver and Chicago (in that order).

Image by SeanPavonePhoto via Shutterstock.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Facebook’s IPO filing: ideas and implications
• Crowdfunding’s rapid growth and future opportunity
• What the VC Industry Upheaval Means For Startups

Sorkin tries hard to make his case in a post at the NYT’s DealBook blog, arguing that the Facebook CFO was the chief architect of the social network’s gigantic public offering — which was supposed to value the company at upwards of $100 billion — and that since he was brought in specifically for his experience with the public markets, he deserves the blame for the failure of the issue. Even more than that, Sorkin argues that Ebersman effectively needs to shoulder the responsibility for the continued slide the shares have been on ever since, a drop that has cut about 50 percent from the company’s market value.

A train-wreck IPO requires multiple players

The NYT columnist says that Ebersman mis-priced the offering, overestimated the amount of demand, flooded the market with extra shares at the worst possible time and since then has remained mum about how exactly he is going to fix things. At one point, Sorkin even seems to be suggesting that Ebersman should be fired for his behavior both during and after the company’s IPO, saying:

“If there is one single individual more responsible than any other for the staggering mispricing of Facebook’s I.P.O., it is Mr. Ebersman… it is remarkable that nobody — no bankers, no one at Nasdaq, no one at Facebook — has been fired for botching the offering.”

Sorkin is right about one thing: there is no question that Facebook’s IPO was a pretty high-profile train wreck in a lot of ways, a pale shadow of the superstar offering that everyone expected — or at least hoped for. Instead of rejuvenating the market for technology issues, it effectively slammed the window shut, at least for social-web IPOs (although lackluster offerings from companies like Zynga have also helped to close that window). But was that Ebersman’s fault alone? It’s difficult to see how.

It’s true that Ebersman, as the man in charge of the public issue, has to wear some of the blame for what transpired. But if the IPO was a train wreck — and there’s at least an argument to be made that it hasn’t been for Facebook itself, even if it has been for retail investors or the brokerage firms who underwrote it — then there are plenty of others who deserve some of the blame as well.

To take just one example, the Nasdaq stock market bungled the offering in a fairly spectacular fashion, as many observers have noted: it handed over one of the most high-profile issues in recent memory to a new trading system that almost completely failed to match buy and sell orders properly, creating the stock-market equivalent of a 100-car pileup that took hours (possibly even days) to clear. For any stock issuer, the signals that come from the market are a crucial indicator of demand, and the Nasdaq’s failure meant that those signals were almost completely unreadable.

Was the IPO really a failure? Not for Facebook

But more than that, the biggest culprit when it comes to the IPO’s lackluster debut — and the continued slide the shares have been under since — is the overheated hopes and dreams of the market itself leading up to the issue, compounded by the greed of the company’s financial backers, venture investors and brokerage advisors. Should Ebersman have known that demand was being overstated? Perhaps. But when the world’s largest underwriters and market experts are telling you to increase the float, do you tell them they are wrong, or do you take the advice that you are paying them hundreds of millions of dollars for?

David Ebersman may have miscalculated, but he is hardly the first CFO of a newly public company to do so, and the reality is that he was given plenty of assistance in that department. And as for not articulating how he plans to get the stock price back to where it should be — something Sorkin also castigates him for — how exactly is he supposed to do that if the price was over-inflated to begin with?

Regardless of whether Facebook managed to meet the sky-high expectations of insiders or those who bought shares in advance of the IPO, or even of retail investors who got caught up in the hype, there is an argument to be made that the company has made out pretty well from the issue, as billionaire entrepreneur Mark Cuban notes in a blog post. Facebook got $10 billion to fund the company’s growth — and it was abundantly clear from the company’s prospectus that CEO and controlling shareholder Mark Zuckerberg (for better or worse) has no intention of listening to the moaning of short-term investors.

The reality is that everyone over-estimated the demand for Facebook shares, not just David Ebersman. And everyone seems to have assumed that the euphoria about the company’s rosy future would carry the stock to unimaginable heights following the issue. The fact that much of this was based on wishful thinking and a wilful misreading of the company’s financial situation is hardly David Ebersman’s fault.

Post and thumbnail images courtesy of Flickr user Hans Gerwitz and Shutterstock

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Law of large numbers: the issue behind Facebook’s IPO
• How consumer media will change in 2013
• Social media in Q1: commerce and discovery dominated

Given the kind of hopes and dreams — in many cases, vastly over-inflated ones — that were riding on Facebook’s initial public offering, it’s probably not surprising that the company and its young CEO would be getting a storm of criticism after the fact. Based in part on its massive valuation in private markets such as SecondMarket, Facebook was expected to go public with a market value of $100 billion or more, and many were hoping it would climb skyward from there. How could it not, with close to a billion users, and engagement rates that are off the charts?

Is Zuckerberg really “in over his hoodie?”

As it turned out, of course, that $100 billion was a pie-in-the-sky target, and Facebook stumbled out of the gate and has been falling ever since — at less than $20, the shares are almost 50 percent lower than they were when the company first went public. The skepticism dial was turned up even further when the company came out with its first quarterly report as a public entity, and many analysts saw a less-than-encouraging picture: a company with problems in mobile — which everyone seems to agree is the future of content — and some underwhelming estimates about future performance.

Within days of the earnings report, there were calls for Zuckerberg to step aside: one of the first came from Reuters blogger John Abell, who wrote a post stating: “Facebook needs a new CEO”. Abell said that Zuckerberg might be a visionary, but that’s not what Facebook needs right now:

“He needs to get out of the way –- not because we can judge him a disaster based on a single’s earnings period, but because he isn’t playing to his strength… Facebook needs its spiritual leader and chief innovator in a hoodie. But it doesn’t need him as CEO, placating investors in a collared shirt. There are plenty of people who could manage the Facebook business.”

Pando Daily founder Sarah Lacy responded to Abell with a fairly venomous post, in which she argued that Abell simply didn’t know what he was talking about. It is well known, she argued, that “founder CEOs unequivocally have the most success, and the general school of thought in the Valley [is] that you are almost always better off not ousting a founder, even if that founder is doing a horrible job” (Andreessen Horowitz, a leading example of the new breed of SV venture funds, has written about why it believes founding CEOs are almost always better). Lacy also noted, quite rightly, that Zuckerberg has helped build a $70-billion-dollar corporation, and she pointed to perhaps the most egregious case of a flawed “anyone could run that business” approach — namely Yahoo.

Not every founder is Steve Jobs — some are Jerry Yang

There’s no question that the revolving door at Yahoo is a classic case of mismanagement writ large. But one of the CEOs through that door was the company’s co-founder Jerry Yang, and he had even less success in turning Yahoo around than anyone else — which helps to make the somewhat obvious point that not everyone can be Steve Jobs, returning to save their company and transforming it into a stock-market superstar. And yet, supporters of the founder-as-CEO model seem to believe that the odds of such an outcome are higher with the founder than with someone else. That’s in part why there was so much positive response to Larry Page returning to the CEO spot at Google (although the benefits of that move are still debatable).

Certainly there are plenty of companies that were arguably mismanaged after either being acquired or having the CEO forced out, a list that would probably include MySpace and AOL. And there are companies where having a visionary at the top has clearly helped — such as Amazon with Jeff Bezos. But there are also companies where having a founder remain has caused more problems than it solves, and Research In Motion is arguably one prominent example.

Insiders and investor alike talk about how Jim Balsillie and Michael Lazaridis made sense as co-CEOs for a time at RIM, but eventually their commitment to a certain vision changed from a benefit to a gigantic flaw. The result? Billions of dollars in market value destroyed almost overnight.

To take a smaller example, Twitter swapped out co-founder Evan Williams and replaced him with Dick Costolo, someone with no personal stake in the early vision of the network. Has that been a good thing or a bad thing? It has certainly changed the orientation of the company towards revenue-generating models like advertising — a move that appears to be driven primarily by a desire to justify the company’s alleged market value. Would it have been better to stick with a founder as CEO? And if it wasn’t better for Twitter, then why is it better for Facebook?

To a large extent, of course, all of this discussion is moot: thanks in part to Silicon Valley’s belief in the power of the founder as CEO, Mark Zuckerberg controls the fate of the company in a way that few others do, even Google’s co-founders. Not only does he control a majority of the stock through multiple-voting shares and proxy agreements, but he also controls the board of directors — the same board that would have to act in order to replace him as CEO. For better or worse, Facebook has become the ultimate test of the founder-as-CEO mythos. Will it become an Apple-style success story or a RIM-style cautionary tale?

Post and thumbnail images courtesy of Flickr user Jason McElweenie

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• The state of cross-platform media measurement
• Social third-quarter 2012: analysis and outlook
• How social discovery is transforming entertainment

While this isn’t series A funding, CEO and co-founder Mattias Swenson said it’s a round to “speed things up, recruit more engineers and expand.”

The company’s first seed round was completed several years ago and wasn’t very large, he said. The announcement last month was made after Betaworks and Jaffe purchased that seed position from the original investors.

Betaworks participated in the $1 million round, along with Lerer Ventures, RRE Ventures, Hank P. Vigil & Fritz Lanman, Eric Martineau-Fortin, Rob Wiesenthal, Jill Greenthal, Kinnevik.

Bloglovin initially launched in 2007 as Bloggkoll (which is Swedish for “to keep track of blogs”) and was intended to help fashion enthusiasts keep up with content on their favorite blogs. But now, the company has more than 1.5 million members worldwide who use the site to follow blogs in all kinds of areas, from fashion and food to photography and interior design.

Similiar to an RSS reader, Bloglovin aggregates content from a variety blogs and bubbles the newest content to the top. But it displays the content in a Tumblr-esque, design-centric way and allows users to participate by “like”-ing the content they like best.

The last time we talked, Swenson said the company was on track to add about five more engineers and potentially a monetization hire by the end of the year. Today, he said the company’s hiring plan is unchanged for now but they have the financial flexibility to add even more if needed. In the near future, the company plans to focus on mobile and social and, Swenson said, add a New York presence.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• The 2013 task management tools market
• Crowdfunding’s rapid growth and future opportunity
• Web startups: How to guard against security breaches

But it looks as if the landscape is shifting in his favor. Morgan Stanley said Monday that it will let its 17,000 financial advisors use Twitter (for pre-approved messages only) and LinkedIn. Goldman Sachs is searching for a “social media community manager.” And earlier this year Bloomberg featured the one investment banker authorized by Deutsche Bank to tweet.

“The walls are coming down,” says Lindzon. “The banks are reaching out to discuss best practices….The acceptance phase is upon us.”

If a new era for social media and finance really is afoot, StockTwits plans to be as prepared as possible. Today the company is rolling out a redesigned website that makes it easier for investors to follow the information and people connected to the companies they care about.

“The new design focuses on our core strength: real-time sharing around markets and tickers,” Lindzon says. “It also has much more curation around highly discussed tickers [and] a greater amount of detail and thinking around people and discovery.”

Adding a social layer to stock price and volume

Beyond the commodities of stock price and volume, Lindzon says, StockTwits gives investors a social layer through which to see what the “smart people, traders and long-term investors” are thinking. The site’s latest redesign aims to simplify the process of following and communicating with individual investors and traders, as well as following specific stocks (such as Apple or Google) and markets (equities, futures or options).

That’s a lot of information to organize, especially in real-time. But, as opposed to a single, Twitter-like stream of messages, the redesigned platform allows users to create multiple streams and “watch lists” of “ideas” (the StockTwits version of a “tweet”) organized by people, stocks and markets. It also lets users select streams of “ideas” that are trending, suggested or that include charts. Instead of separating a users’ mentions and Direct Mentions, the new site also combines all of a member’s messages into a unified inbox that alerts them when new messages appear.

As the volume of messages on the sites increases (140 percent year-to-date), the company has added “Top Filters” and “Top Contributors” to the Ticker pages to help keep them useful and relevant. StockTwits’ heatmap, which shows the chatter around the different stocks, also features prominently in the redesign.

Traders use StockTwits on the side

In May, the company says it had more than 400,000 unique users to both StockTwits and the Chart.ly websites, a 100 percent increase from the previous May. It also says engagement is up 125 percent from last May, with the average registered user spending more than 32 minutes per visit. StockTwits has also cut deals with Yahoo Finance, CNN Money and other sites to power a box showing tweets about trending stocks, and has signed on about 170 public companies (many of which pay for a investor relations marketing service).

Still, though engagement and usage are climbing, Lindzon acknowledges that there are plenty of people who work in the finance industry who can’t use the platform because their institutions won’t let them. Some of the resistance is real (because of regulatory compliance issues), he says, but some of it has to do with entrenched ways of doing business.

“[Traders] email us and tell us they love what we’re doing but can’t use the product,” he says. Some already use the site “subversive[ly] on the side” with non-work devices, but with many, “it’s a waiting game.”

Still, anticipating the needs of financial institutions that could eventually want to use social media to distribute research, StockTwits is starting to build in features that ensure compliance and legality. For example, a StockTwits Pro feature currently in beta with a few dozen analysts makes sure that a link providing all of an analyst’s financial disclosures travels along with any tweet he or she sends from StockTwits. (Analysts can link Twitter accounts to StockTwits to send messages to both StockTwits users and the larger Twittersphere.) The Pro package also gives analysts the compliance-friendly ability to archive messages.

Social platforms provide new trust system

StockTwits isn’t just getting ready for the day when banks are really willing to embrace social media. Lindzon is looking to a time when social platforms have helped remake banking and finance. As the rise of crowdfunding, social financial platforms and alternative payment services like Kickstarter, AngelList, Dwolla and PayPal show, financing is increasingly taking place outside realm of traditional institutions. And that isn’t a trend that’s expected to let up any time soon.

“The banks are broken. We don’t trust the banks [and] they’re never going to get our trust back,” he says. But platforms like AngelList, LinkedIn and StockTwits, provide a “new way to network [and] meet people you’re going to invest with.”

“It’s a whole new trust system being built,” he says.

Disclosure: StockTwits is backed by True Ventures, a venture capital firm that is an investor in the parent company of this blog, GigaOM. Om Malik, founder of GigaOM, is also a venture partner at True.

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Social media in Q1: commerce and discovery dominated
• Facebook’s IPO filing: ideas and implications
• Examining the rise of crowd labor platforms in 2012

It will be “something that looks more like Salesforce than Facebook,” Fred Wilson, managing partner of Union Square Ventures, said Friday at the F.ounders conference at the Nasdaq headquarters New York. He added that investors will likely feel more comfortable with an enterprise-like business that has a more sustainable and predictable business.

Eric Hippeau with Lerer Ventures said he thinks there are a few companies big enough to go public, particularly in the media and e-commerce areas. And Google Venture’s Rich Miner said potential IPO candidates are those with solid business models, good growth and revenue. But even companies that might be a little less predictable but are in highly disruptive spaces (such as mobile) are possibilities, Miner said.

Asked about how secondary markets (that let pre-IPO companies sell stock) change the game for investors, Goldman Sachs’ Anthony Soto said they provide liquidity that wouldn’t otherwise exist. But he warned that secondary trades don’t accurately reflect the value the company would get in the public markets because there’s limited supply and demand, and those markets exist outside the environment of SEC regulation.

At a F.ounders event Thursday night, Soto also commented on the likelihood of more tech IPOs this year, saying that he doesn’t expect to see another Internet IPO until after Labor Day.

To the room full of tech startup founders, Wilson said they should think about whether they want to run their companies for 15 to 20 years or exit and move on to something new. “If you want to make a company your life’s work, then be a public company,” he said, “If you’re looking for exits… I don’t think the public markets are the way to go.”

Related research and analysis from GigaOM Pro:
Subscriber content. Sign up for a free trial.

• Facebook’s IPO filing: ideas and implications
• The future of mobile: a segment analysis by GigaOM Pro
• Social third-quarter 2012: analysis and outlook