Google debuted Google Glasses to developers back in June 2012 at its Google I/O conference, and companies have already started thinking about how they could build a more connected internet of things and roll out specific apps for the technology. And on Wednesday, some of Silicon Valley’s most prominent investors declared their financial support.

Bill Maris, managing partner at Google Ventures, Marc Andreessen of Andreessen Horowitz, and John Doerr of Kleiner Perkins announced Wednesday that they’re together launching The Glass Collective, an effort to provide seed funding for people who are developing interesting uses for the technology.

Maris explained in a blog post why the investors think it’s important to support the idea:

“So what will the future be with Glass? Well, the truth is, no one can honestly predict where this new technology will take us. Not yet. And that’s exactly what’s exciting. We do know that smart entrepreneurs and engineers are going to develop amazing experiences through Glass. Glass will evolve quickly, just as the cell phone grew from this to this.”

However, with Google Glass not even in stores, it’s hard to imagine how normal people would use the technology every day, let alone what types of companies might emerge from a Glass-like ecosystem or how venture capitalists could profit from those companies. It’s a long-term bet on a very uncertain product, but if Glass does take off, it could be a profitable one, similar to Kleiner Perkin’s early investment in people building for the iPhone that was called the iFund.

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“More and more products are being built by having great pairings of those two players,” Abbott, the former VP of engineering at Twitter, told GigaOM founder Om Malik. Engineers need to understand a user’s experience with the app, Abbott said, but designers also have to “understand the limitations of the environment they’re building. It shouldn’t just be a great experience in one small segment,” but an app should work “whether you’re offline or have a bad connection.”

Abbott often sees a “lack of real empathy” between designers and engineers. “The tension on the design side is that it’s never good enough,” he said, “and on the engineering side he or she wants to ship…How do you get that balance? Because you still need to ship.”

Malik raised other issues about apps and empathy: “Uber managed to piss off people every single time they did something interesting — surge pricing, or charging more at the time of Hurricane Sandy…I keep saying, if we are going to build this future driven by data, how do we bring this empathy and humanity into the data?”

“We might be forced into it by some of the reactions we’re seeing to Uber,” Abbott answered. But he pointed out that, when it comes to services like Uber, the way that a user rates a driver is also unique to that user — and that brings up empathy on the user’s end. For example, Uber could infer from data on what a driver’s rating should be, based perhaps on the start and end times of a trip. “Your rating of that driver,” he said, “also ends up building an implicit rating on you, and your ability to rate.”

Check out the rest of our Structure:Data 2013 coverage here, and a video embed of the entire session follows below:

A transcription of the video follows on the next page

Go to page 2 (of 2) on GigaOM .

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Path CEO Dave Morin. Photo by Om Malik

Path, the San Francisco-based startup that offers private social networking services, has reached a settlement with the Federal Trade Commission (pending judicial approval) on alleged violations of the Children’s Online Privacy Protections Act (COPPA). As part of the settlement, the company will pay a fine of $800,000 and has purged about 3,000 accounts from the network. The settlement requires Path to establish a comprehensive privacy program and to obtain independent privacy assessments every other year for the next 20 years, the FTC said in a statement.

The discovery of the underage members came as a byproduct of the FTC investigation into the privacy fiasco over the uploading of iPhone address books to Path’s servers without the permission of the individuals. That privacy breach became a major headache for the company, including stoking  the ire of a very irate Apple. The company later changed its policies.

In a statement, the FTC said:

“Over the years the FTC has been vigilant in responding to a long list of threats to consumer privacy, whether it’s mortgage applications thrown into open trash dumpsters, kids information culled by music fan websites, or unencrypted credit card information left vulnerable to hackers,” said FTC Chairman Jon Leibowitz.  “This settlement with Path shows that no matter what new technologies emerge, the agency will continue to safeguard the privacy of Americans.”

In addition to the $800,000 civil penalty, Path is prohibited from making any misrepresentations about the extent to which it maintains the privacy and confidentiality of consumers’ personal information.  The proposed settlement also requires Path to delete information collected from children under age 13 and bars future violations of COPPA.  Path has already deleted the address book information that it collected during the time period its deceptive practices were in place.

Dave Morin, Path’s founder and chief executive officer, said that the company had identified the accounts in February 2012 and by May 2012 had implemented changes to its sign-up process that automatically caught the underage sign-ups. Path discovered the issue on its own and addressed it (that is, they removed and blocked minors under the age of 13 from the service) before the FTC approached the company, Morin said. Path is currently compliant with COPPA rules. Morin said that the typical Path user is about 25 years old. The company, which has about 6 million registered users, is targeting families for using Path to share personal moments, so this particular settlement offers up a new and unique set of challenges to the company.

Morin said that the big reason the underage children were able to get into the network is because the company didn’t have requisite checks and balances in the system. In a blog post that the company shared with us, Morin explained:

Today the United States Federal Trade Commission (FTC) announced that it reached a settlement pending court approval with Path regarding alleged violations of the Children’s Online Privacy Protections Act (COPPA). The gist of the FTC’s complaint is this: early in Path’s history, children under the age of 13 were able to sign up for accounts. A very small number of affected accounts have since been closed by Path.

As you may know, we ask users’ their birthdays during the process of creating an account. However, there was a period of time where our system was not automatically rejecting people who indicated that they were under 13. Before the FTC reached out to us, we discovered and fixed this sign-up process qualification, and took further action by suspending any under age accounts that had mistakenly been allowed to be created.

We want to share our experience and learnings in the hope that others in our industry are reminded of the importance of making sure services are in full compliance with rules like COPPA. From a developer’s perspective, we understand the tendency to focus all attention on the process of building amazing new things. It wasn’t until we gave our account verification system a second look that we realized there was a problem. We hope our experience can help others as a reminder to be cautious and diligent.

Throughout this experience and now, we stand by our number one commitment to serve our users first.

Path has raised a total of $41.2 million from investors such as Index Ventures, Kleiner Perkins Caufield & Byers and Redpoint Ventures. It was rumored that Google offered a couple hundred million dollars for the company.

Updated at 2.22 Pm: Jeffrey Paul, a researcher discovered another privacy bug in Path’s software. The company says it has fixed the problem and the update has been sent to Apple.

Path’s iOS app (yes, that same Path that was caught stealing users’ entire address books last February) will use the embedded EXIF tag location information from photos in the iOS Camera Roll to geotag your posts, even when you’ve explicitly disabledLocation Services for the Path application. (The app knows, of course, that it’s not getting location data via normal means from Location Services, yet behaves this wayeven in that case.)

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Over the weekend, The New York Times columnist James Stewart blamed network effects going into reverse for the declining fortunes of the new web companies, though I don’t think his argument applies to Groupon, which has its own unique set of challenges and isn’t in the same class of companies as Facebook. Today, Wall Street Journal reports that investors like Kleiner Perkins and T. Rowe Price have taken it on the chin with their Groupon investment, but for now they remain believers in Andrew Mason and rest of the team.

The Groupon debacle is particularly telling about Silicon Valley and investors. Why? Because I don’t think it belongs in same category as Facebook and even Zynga. I am not sure it even belongs in the basket of technology stocks. Let me explain:

Some deals are too good to be true

From the day it emerged out of anonymity, Groupon was hailed as the messiah of local commerce, a company that was going to revolutionize retail and advertising. I tried very hard to understand the company and figure out its technology edge. When I saw Groupon, I saw a company that was essentially using e-mails to conduct what was essentially a coupon-clipper business. (Even Groupon Goods, the new discount goods service, reminds me of QVC more than anything else.)

Nevertheless, the company kept getting valued at nosebleed valuations by private investors. Some of the smartest people on the planet were extolling virtues of the company. Google offered to buy if for $6 billion. Maybe I was too old fashioned to label the company as a “technology company.” So, I abstained from writing and tuned out GroupOn. That didn’t stop the company from going public and getting valued at around $12.8 billion, making it the biggest U.S. web IPO since Google. Nothing really changed after the IPO. The more time went by, the more evident it became, at least to me, that Groupon was no technology company. That is the most crucial point of the Groupon saga.

The momentum players

Of course, the problem with Groupon is not entirely of its making. In order for a company like Groupon to get valuations befitting a high-growth technology company instead of a coupon-clipper business, there need to be compliant and willing investors. Many have their own personal compulsions. Kleiner Perkins, having lost its shirt on clean tech and energy investments, decided to double down on social and web investments — price be damned. No one can fault them trying to remake their franchise, which as PE Hub’s Connie Loizos pointed out has been under attack from Marc Andreessen’s investment outfit, A16z.

Other late-stage investors in the company felt the heat from late stage investor DST Global, a relatively new and aggressive investor with faint regard for valuation. For others, it was merely a way to play the momentum, make a quick buck and show a win, so that they can go on and raise yet another big fund.

And then there are the likes of T.Rowe Price, a giant mutual fund that was hoping that it could get a piece of these fast growers and make a killing at the IPO. Well, that plan didn’t work out, but they are still holding onto the stock. [By the way, it is the same fund that bought into Slide at a rumored $500 million valuation. Slide was sold to Google for $250 million.]

Many of these late-stage investors were trying to time the market. And as someone really smart once said — you can’t really time the market. More importantly, it doesn’t matter who you are or how fast you grow, at some point in time companies — both big and small — have to grow into their valuation. Groupon’s late stage investors are living through that harsh reality.

If it quacks like a duck….

Photo of Ducks by Daniel Alvarez via ShutterStock

Groupon isn’t the only company that uses technology but isn’t really a technology company, nonetheless enjoying investors’ decision to value it as a technology company. Just because a company uses the web and uses social networks (instead of real estate and old media) to sell things and find new audiences doesn’t mean that it should be put in the same bucket as, say, a company offering storage services to large companies, or even running world’s biggest social identity platform.

Andreessen once famously said that software will eat everything. I totally agree — but that also means that the software should make things more efficient. That makes the companies that are using software to replace the physical infrastructure (and its limitations) more profitable.

Yes, the Internet, mobile devices and social networks make it easy for these companies to grow their businesses — really really fast — but at the end of the day, if you are selling shoes, you are selling shoes. If anything, the higher growth, efficiency of infrastructure and ability to narrowly and rightfully target your customers should mean that you as a business should have higher margins than a competitive retailer. And if you do, then you should be valued higher than an offline competitor.

However, we continue to see the online-equivalents of retailers and fashion brands being accorded valuations typically reserved for high-growth technology companies. How is a company selling subscription for shoes or underwear a technology company? Many of these online companies might seem special because of there new models, but in the end they aren’t. Like ShoeDazzle that started the whole retail-as-a-subscription madness and is now selling discounted shoes, Groupon is a rude reminder of that reality.

The fact is that the very idea of what is a technology company is starting to morph. The traditional tools of valuing technology startups might not be applicable to companies like Groupon, which are like shooting stars – they grow fast and they fade faster. It means, the venture investors have to go back to the drawing board and figure out how to value the online equivalents of old-line businesses.

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Google Ventures partner Karim Faris

Egnyte netted $16 million in Series C funding to help raise its profile globally and to position itself as a leading hybrid cloud storage provider. The new cash brings its total funding to $32 million. Google Ventures, a new backer, led the round which also included funding from existing investors Kleiner Perkins Caufield & Byers and Polaris Ventures. Google Ventures partner Karim Faris will join Egnyte’s board.

The Mountain View, Calif.-based company is one of many cloud storage players, including Box, LogMeIn, OwnCloud,  trying to crack the enterprise market for cloud storage.

CEO Vineet Jain said he will use the money to make Egnyte more of a household — er boardroom — name. “There’s been a huge amount of marketing dollars spent by our friends at Box. The number one problem I need to address is that our awareness is still low compared to Box,” Jain told me in an interview.

The company already fields a data center in Amsterdam and will now open a sales and marketing office in Europe as well — either in Amsterdam, Brussels or London, he said.

Jain likes to say that while most of Box’s claimed 11 million users aren’t paying customers, Egnyte’s installed base pays its way.  Box — has a huge funding advantage, and in April Egnyte launched a “Box Buster” promotion to woo paying Box customers.

Jain said the race is still on to see what company will become the “Dropbox of the enterprise.”

“I love to see these other guys fight it out on the consumer side — Apple iCloud, Google Drive and others. They’re everywhere. I’d say Dropbox [itself] is a great lead engine for us because IT hates it. It makes a mockery of their firewall,” Jain said.

If Jain can use Egnyte’s new money to get a fraction of the god-knows-how-many Dropbox customers who use that service in the office over to Egnyte, he would be well served.

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Kleiner Perkins wants arbitration because it’s a more-private process (neither facts nor discovered documents will likely find their way into the public eye) and — assuming for the sake of argument that the firm is liable — likely will result in a smaller award for Pao than a jury trial likely will produce. Kleiner Perkins tried to compel arbitration based on agreements Pao had entered into with the various corporate entities that actually managed the funds on which she worked for the firm. Pao argued — among other things — that because she sued Kleiner Perkins and not the management entities, the arbitration clauses aren’t valid in this case.

By and large, Judge Kahn bought Pao’s argument but he did allow the parties until Friday to file briefs on the issues of third-party beneficiary and equitable estoppel that could save Kleiner Perkins’ case for arbitration. Essentially, the firm will argue (and did briefly in a motion available on the San Jose Mercury News‘ coverage of the decision) that because the agreements between Pao and the fund-management entities clearly conferred benefits to Kleiner Perkins, Kleiner Perkins can enforce the agreements’ terms — including the arbitration clauses — even though it wasn’t a party to the contracts.

Equitable estoppel means many things in the world of civil litigation, but in this case it means Kleiner Perkins needs to show that Pao’s claims are so intertwined with the contracts at issue that it’s only fair if the contracts are enforced. The firm’s argument is threefold: (1) that Pao’s claims are wholly dependent on the rights laid out in the agreements; (2) that there’s considerable overlap between the managing members of Kleiner Perkins and the managing members of the funds Pao worked on; and (3) that because Pao is seeking “carried interest” conferred to her as part of the agreements, she can’t pick and choose which terms apply in this case (i.e., money owed to her) and which don’t (i.e., the arbitration clauses).

Although neither affirmative defense (a legal term meaning essentially “even if everything the plaintiff said is true, we’re not liable”) is a slam dunk, that Judge Kahn allowed for a hearing on them suggests he thinks they have some merit. The parties’ briefs are due on Friday and will be heard in court on July 20. Here’s the official statement from Kleiner Perkins on today’s ruling:

KPCB is encouraged by Judge Kahn’s willingness to hear our arguments on third party beneficiary and equitable estoppel claims.  The firm will file its motions by July 13th to be heard in a supplementary hearing on July 20th.   KPCB continues to believe it has strong arguments and precedent to move the matter to arbitration.  Ms. Pao, like other partners, signed a variety of standard agreements requiring, among other things, that all disputes be resolved through arbitration.  We expect arbitration to be a more efficient and speedier dispute resolution process than trying a matter before a jury years down the line in the San Francisco Superior Court. 

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Earlier this month solar thermal company BrightSource Energy also withdrew its IPO plans citing poor market conditions. Looks like the greentech IPO revival is just not panning out. Luca’s CEO Bob Cavnar said in a statement:

The current market, depressed natural gas prices and ongoing economic instability do not support an environment for us to complete an IPO even though we were well received by potential investors.

Cavnar also said “we believe there are more attractive opportunities for us to finance our growth strategy.” Which points to one of the problems with this crop of greentech IPO-hopefuls: they’ve been looking to go public as a fund raising mechanism. And their lack of revenues and profits just might not be attractive enough to investors.

Luca filed to go public back in the Summer of 2011 and planned to raise as much as $125 million. But the company is in an early commercial stage and only generated $1.06 million in operating revenues for 2011, with a net loss of $18.02 million in 2011. Luca says in its S-1 that “as of December 31, 2011, we had an accumulated deficit of approximately $81.9 million.”

If the tech ever is moved to a large scale it could be interesting. Essentially there are tiny microbes already found in the water of coal beds, and Luca identifies these environments and boosts the conditions to get the microbes to produce as much methane as possible. Then Luca collects the gas — called gas farming — and sells it.

There are companies already targeting farming natural gas from coal beds, but Luca says its technology, which it developed in 2003, is a whole lot cheaper than the standard. Luca said last year that it will be selling the natural gas into the $700 billion global natural gas market.

Investors in Luca Technologies include Kleiner Perkins Caufield & Byers, Oxford Bioscience Partners, mRNA Fund, and BASF Venture Capital.

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What’s nice about the Karma app is that users can send gifts almost instantaneously, without having to enter their billing information before doing so. You also don’t need to have the address or contact info of the recipient — they enter that information when they choose to accept a gift.

It also allows users to send a personalized note to people they’re gifting, either by SMS, posted on their Facebook walls, or by email. Those receiving gifts can even choose between options or swap out something they’ve been given if they’re not thrilled with what was initially gifted to them.

One of the more interesting aspects about the Karma mobile experience isn’t just that it makes gifting by phone ultra-easy, but that it helps to highlight the news around friends and family that actually matters. There’s so much noise on Facebook that it’s difficult to tell now when a friend is having a birthday, or if someone got engaged or is having a baby. The Karma app, by contrast, uses semantic analysis to determine events that are worth gifting people for.

Karma was founded by Lee Linden and Ben Lewis, co-founders of Tapjoy, which was acquired by Offerpal Media after reaching more than $100 million in revenue. According to SEC filings, Karma has raised $2.3 million through last November, although Linden disputes that figure, saying the firm has raised more (but less than $5 million in total). Backers include Kleiner Perkins Caufield & Byers, Sequoia Capital, and Evan Williams and Biz Stone’s Obvious Corp.

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Depending on what numbers you believe, cloud is a big opportunity that nearly every VC, including Kleiner Perkins, is already attacking. Market Research Media expects the cloud computing category to grow at 30 percent CAGR and will hit $270 billion worldwide in 2020.

Bloomberg quoted Kleiner Perkins partner Matt Murphy saying the partners are “intrigued by the idea” of such a fund. Whether they actually follow through on the notion, the company has already backed a number of cloud startups. It most recently participated in a $20 million C Series round for AppDynamics , an application performance management company which Murphy said was well suited for cloud computing environments. The firm also staked big-time cloud-based game maker Zynga and Groupon

Given that most startups claim some sort of cloud computing angle, it’s hard to tell anymore what is not a cloud company but some try. Last month, researcher CB Insights estimated that cloud companies represented at least a quarter of all VC web investment deals.

At that time, CB Insights Co-Founder Jonathan Sherry there was “steady uptick of venture investment into cloud-based software and services [in 2011].  In Q4, cloud-based companies comprised 26.5% of internet deal volume and 34.5% of  internet investment dollars.  Dollar share skewed higher than deal share due to mega deals including Dropbox and Box.net.”

It probably helped Kleiner’s cloud appetite that Michael Abbott joined the company as senior partner in January. Abbott was formerly VP of engineering for Twitter. KPCB currently categorizes its investments in four focus areas: Greentech, China, digital and life sciences.

It doesn’t ease confusion that even traditional software companies are adding cloud capabilities to their existing on-premises software portfolios. Does a smattering of cloud added to an existing product line make it a cloud company? You tell me.

Photo courtesy of Flickr user 401K

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