The issue came up Wednesday evening when engineer and former professor Scott Hanselman wrote a post titled, “I’d like to use the web my way, thank you very much Quora.” The post pointed out that the company has started redirecting mobile users who end up on Quora webpages to download the company’s mobile app before reading answers.

And indeed, it’s an incredibly annoying tactic. Search for any topic (like, “best Star Wars movie“) and include “Quora” in the query, and try to read the resulting page on your mobile device. You can’t. The page tells you to download the app to read further, and will only let you see the first answer until you do so. On desktop, you’re asked to create an account and log in before reading. Not such a great user experience.

And then Y Combinator founder and startup legend Paul Graham weighed in on Hacker News, writing that Quora co-founder and ex-Facebook CTO Adam D’Angelo is trying too hard to gain new users the way he learned at Facebook, not understanding that Quora users are a different breed. He argued against the company’s policy of making users create accounts to read answers and comment on the site:

It may be a mistake to alienate the sort of people Quora has been alienating by doing this, even if they end up numerically ahead in the short term. I’m one of them. Quora has now spent several years training me to be bummed out every time I click on a link to their site.

Quora hasn’t responded with any comment yet as to how long the “download the app” screen has been in place, or why they require users to make accounts. But it’s not too hard to see why they’re doing this: the company has raised a lot of funding ($50 million just this past summer), and it needs to see growth. While it saw early success from its high quality questions and answers on the site, it can’t become a profitable business with just a handful of readers.

A similar thing happened last summer with Twitter and its developers over API restrictions. It happened in December with Instagram and its terms of service debacle after joining up with Facebook. And now, Quora is in the limelight.

“We want to get to be 100 times bigger than we are today,” D’Angelo told Om in a January interview. So how does the company get there?

Quora has tried a lot of different tactics in its quest for growth in the past year: adding a standalone blogging platform, rewarding users who write the best and most plentiful answers, letting people embed quotes across the web, and adding an Android app.

So getting people to download the company’s app and requiring account? Not too surprising. But at some point, Quora needs to make sure that it strikes the best balance possible between demanding investors and loyal users.

Update at 10:36 PM: Quora has released a blog post explaining the rationale behind asking users to log into the site before viewing answers on desktop, explaining that logging in and participating in the discussion is a key component of the Quora product and helps keep the quality of discussion high.

However, the company wrote that it will be changing how posts can be shared, allowing users to share out Quora content to social network users who will be able to read without logging in. The full post and explanation can be found online here.

Quora business executive Marc Bodnick also provided GigaOM a statement regarding mobile viewership, explaining why Quora readers are prompted to download the company’s native apps to read:

“We’ve worked hard to create the best mobile experience with our Android and iOS apps, and we encourage users to download them for the optimal mobile experience. We are always listening to the feedback of our community, and will continue to iterate the way that we help people discover the best Quora experience on any device.”

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If you are wondering why these retail chains are sleeping with the enemy, the answer is foot traffic. If people are coming to stores to pick up their packages, there is some likelihood that they might pick up other goods. Groceries or Big Gulps, sure, but paper goods and electronics, too. Isn’t that what Amazon is for?

This local-locker move by Amazon is one of the reasons Silicon Valley has been abuzz about a Canadian startup, BufferBox, based in Waterloo, Ontario. It is a simple idea: There will a locker at a certain retail location, which will become your address and you can ship your packages there. Once you get your package, you get an email with a PIN number and that is what you need to open the locker and get your package. BufferBox take a cut of the delivery costs. It is targeting the growing number of people who typically are unable to receive their packages at home during the day when the postal delivery person or the UPS dude calls.

It was started by University of Waterloo, Ontario, students Aditya Bali, Jay Shah and Mike McCauley in 2011, and it was part of the recent graduate class of YCombinator. It has a few lockers in and around the Toronto area. The company has raised nearly $3 million in angel funding. Paul Graham has been high on this company and rumors are that even Jeff Bezos was pretty enamored with them. Mike Issac in a post mentioned that BufferBox lives in a crowded market – ShopRunner and Kiala (in Europe) are two competitors to the upstart. Then there is MissNev, a company we recently wrote about. However, it is Amazon, the 800-pound gorilla, that BufferBox has to worry about.

However, fear of Amazon is enough to get Google or some other giant galvanized into snapping up this startup. I have heard rumors that Google is interested in buying the company for an amount that should get the angel investors singing in the rain.  Google, which is pushing hard to get traction for its Google Checkout service, could use something like BufferBox as a way to get more businesses to use its service. For retailers, the lure of foot traffic is pretty strong.

“Amazon created a whole new opportunity for us,” McCauley told Wall Street Journal. If Google (or someone else) ends up buying the company, he (and his co-founders) can say that again!

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“Airbnb was born out of necessarity. Our rent went up. It was born out of a problem,” said Joe Gebbia, the company’s co-founder and chief product officer at GigaOM’s RoadMap conference in San Francisco Monday. “By inflating the air bed, it began that design process.”

Gebbia said that about five years ago, he and his co-founders were looking to make some extra money, and by hosting a few visitors in San Francisco, they were able to make some extra money and forge a social bond with their visitors. And then it occurred to them that the product could work for other people too.

Now, Airbnb has raised about $120 million in financing after a round last summer, when it was valued at about $1.3 billion. Gebbia says the site, which allows users to post rooms for rent and book visitors, sees more than 1,000 new listings every day. It’s booked more than 10 million nights so far.

“We started with airbeds,” he said. “And people have listed private rooms, and then… boats and treehouses and castles and villas.”

When someone listed their island in Fiji on the site for relatively decent prices, that’s when Gebbia realized Airbnb had reached a new level of business.

“I just remember sitting back in my chair, and saying, ‘this totally redefines the experience,’” he said.

Airbnb was one of the noted successes of Paul Graham’s Y Combinator incubator, and he said Graham was instrumental in pushing them in their early days to really consider who their customers were. The team was located in Mountain View at the time, but most of their customers were in New York, so they got on a flight and headed to New York, where they started talking to the people listing their homes on the site.

“Our conversations with them illuminated everything that was wrong with the product,” he said, saying it took off afterwards.

Gebbia said in the 1990s, the real consumer challenge for the internet was bringing customers online, but that’s changing now, and Airbnb is at the forefront of this change.

“Airbnb is about the nexus of the online and offline to create the perfect customer experience,” he said.

Check out the rest of our RoadMap 2012 live coverage here, and a video recording of the session follows below:

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A new book, The Launch Pad: Inside Silicon Valley’s Most Exclusive Startup Accelerator, attempts to look behind-the-secenes at the Y Combinator method, showing what it takes for startups to get from YC admission to demo day to launching a successful company. Author Randall Stross, a columnist for the New York Times and business professor at San Jose State University, received approval from Graham and the YC partners to follow the summer 2011 batch of startups from initial interviews to demo day. The book will be published Sept. 27, but we got an early look at the text.

Launch Pad doesn’t reveal many shocking secrets about the program — much of the wisdom about how YC works is probably already well-known to avid readers of Quora or Hacker News. And most of the interesting quotes from Graham on his startup philosophies come from his published essays available online.

But the book does provide an interesting glimpse into the mentorship style of the YC partners, and shows just how many companies and founders have actually successfully come through YC’s doors. To me, it’s remarkable how many of those startups struggled mightily during the first three months to come up with a solid idea, and how many pitch ideas at demo day that are only a few weeks old. The book is as much a story of the startup struggle as it is a profile of Graham or his organization.

So what are some of the interesting nuggets from the book? Here are a few that caught our eye:

• Forgo the hipster city: Graham tells the founders to live in Mountain View, even if it’s boring, because the proximity to YC is a key to success. He tells them they can go be hipsters in San Francisco once demo day is over.
• 24/7: Graham recommends that founders dedicate all their time to programming, sleeping, eating, and exercise. His wife and co-founder Jessica Livingston notes that a few particularly successful founders each lost 15 pounds eating Lean Cuisine and playing tennis when they weren’t working.
• Lack of ladies: Only four percent of founders through YC’s winter 2011 class were female, Livingston estimated. Only two of the 160 summer 2011 batch were female. Graham attributes this to several things, including the idea that boys are more likely to begin hacking as young children than girls are, that fewer female founders apply to the program, and that founders are most likely to co-found with friends, who are likely to be of their same gender. When the book was written, six years after YC was founded, only one group of co-founders out of more than 300 funded were entirely female.
• Jargon watch: While many people use the terms “incubator,” “accelerator,” and “seed fund” interchangeably, Graham says he prefers “seed fund.” Part of that is because he describes “incubators” as programs that offer office space, which is an idea he’s opposed to (because true hackers wouldn’t appreciate being told where to work, anyway).
• Face-to-face: Even though he works with founders building high-tech solutions, Graham is borderline obsessed with face-to-face interactions. He frowns on people Skyping into meetings, and thinks personal interaction holds founders more accountable to their work. Even demo day, where he puts founders and investors in the same room together, goes back to this belief.
• First impressions count: The point of demo day is to get investors interested enough in a startup to circle it on their list of presenters and go talk to the founders afterwards, the partners say. Many investors will use the demo presentations as time to check their Blackberrys. Many will only remember a single word from the demo, as in, “something about groceries.” The importance of making a good first impression is huge.
• Skip the cheap shots: Avoid things like using photos of beautiful women in your demo, says Graham, who says that the typically male audience will get distracted. This is the opposite approach of new investors like Dave McClure, who emphasizes doing presentations that involve one of three things: sex, money or power.
• The day after: The hacker culture of YC, which is so important to Graham, doesn’t always prepare founders for interacting with investors, who tend to look less fondly on unfinished ideas or imperfect products. This can be a surprising realization for hackers at demo day and in conversations with investors afterward.
• The odds: Participation in YC doesn’t guarantee funding success — about 12 of the 63 startups in the summer 2011 batch either didn’t try to raise funding or didn’t succeed, and seven of the 63 raised between $15,000 and $60,000. However, of the 51 companies that did receive investments, the median amount raised was $850,000 (apart from the funding offered in connection with YC.)

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Paul Graham, founder of startup incubator Y Combinator, recently made news in the tech world by warning young startups that they may have a harder time getting funding.

But a group of investors speaking at the Glimpse: Social Discovery conference on Tuesday cautioned entrepreneurs from reading too much into Facebook’s situation, noting that in the long road from founding to IPO, there’s plenty of room for smart social apps like Pinterest or Yelp to find success by replacing existing human patterns and interactions.

“The difference between behemoth Facebook and startups is huge,” said Jay Jamison, a partner at BlueRun Ventures, noting that it took Facebook eight years to get from its 2004 founding to its 2012 IPO.

“We’re looking for people creating companies today to be thinking about eight or nine years from now,” said Josh Elman, a principal at Greylock Partners.

What sets up a company to last eight years?

Investors agreed that the market for smart social apps isn’t totally saturated, pointing to services like Pinterest as examples of apps that replace existing human behavior — sharing photos of beautiful things with friends and admirers — that add to the user’s online experience, rather than necessarily replacing another service they already use.

“Some people will say that social is done,” Jamison said, bringing up the notion that Facebook, LinkedIn and Twitter have created “the big three” of social networking sites, with no room for others to join.

“I think that’s ridiculous,” Jamison said. “That’s like when, in the 80’s, we had three television networks. I believe the market in ten years will be saying, ‘There are hundreds of channels of social media tools compared to the big three we have today.’”

Elman said that for many people, LinkedIn is the way they create a resume and search for jobs, and Facebook is the way they share pictures of their kids and vacations with friends, behaviors that previously didn’t take place online.

So the message to startups looking for social success: find these types of offline behaviors, and create the online complement or substitute.

“If you can think about other human behaviors, you can think about networks and great ways to service those,” Elman said.

Disclosure: GigaOM is a sponsor of Glimpse: The Social Discovery conference.

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When Facebook’s initial public offering wasn’t the kind of high-altitude rocket many investors seemed to be hoping for, it sent shockwaves through the technology sector and the venture-capital industry that are still reverberating. Paul Graham, founder of noted startup incubator Y Combinator, has warned in a note to YC companies that they are going to have to be more cautious now, and other investors have talked about the IPO window for anything social being “slammed shut.” But has Facebook really popped a bubble, or has it just allowed some of the steam to escape from a market that was in danger of becoming overheated?

Much of Graham’s note to Y Combinator startups and founders deals with the intricacies of venture funding — convertible notes and price caps and the potential danger of “down rounds.” But his message is fairly clear: that startups should hang onto whatever money they have already raised so far, and that they should also be very careful about trying to raise any more money at this point, because valuations are likely to have fallen. Says Graham:

If you haven’t raised money yet, lower your expectations for fundraising. How much should you lower them? We don’t know yet how hard it will be to raise money or what will happen to valuations for those who do. Which means it’s more important than ever to be flexible about the valuation you expect and the amount you want to raise

The best place to be is not to need money

As startup advisor Semil Shah noted on Twitter, there’s a reason why companies like Quora, Spotify and Pinterest all raised large amounts of cash in the weeks leading up to the Facebook IPO, when the frenzy of interest around the issue was arguably at its peak. Quora, for example, raised $50 million even though the founders admitted that they didn’t really need it — since they still had more than half their initial funding round sitting untouched in the bank. The best place to be, as Graham notes, is “not to need money.”

Union Square Ventures managing partner Fred Wilson has a somewhat different take from Graham’s in a blog post responding to the Y Combinator note, one that puts the Facebook IPO and its resulting valuation in perspective. As he points out, even after dropping 30 percent from the price it went public at, something that many have described as a disaster — or at least a severe disappointment — Facebook is still worth about $60 billion, or roughly 10 times its estimated annual revenue and 25 times its estimated free cash flow. In other words, still a pretty hefty valuation:

Clearly Facebook is a premium company and commands a premium valuation and entrepreneurs should not expect to get 10x revenues and 25x EBITDA for their companies in a sale or an IPO. But even at half those numbers there are fantastic returns for investors and entreprenuers to be had.

As many technology and investing insiders have noted, Paul Graham’s note is similar to one that legendary Silicon Valley venture fund Sequoia sent out to its portfolio companies in 2008, entitled “RIP Good Times.” Although the slideshow presentation was about the environment created by a variety of macro-economic factors, including the Wall Street derivatives debacle and an overheated housing market, the message was that companies should control their costs and manage their expectations because money was going to be tight.

Good companies will always be worth investing in

That was probably good advice, and focusing on those factors is arguably something companies should do at almost any point in an investing cycle. But as a number of people have pointed out — including internet entrepreneur Russell Fradin, former CEO of Adify — the time following that Sequoia presentation was arguably one of the best times to invest in startups in the past decade. Funds like Union Square and others have made a substantial return on companies like Twitter, Tumblr and of course Facebook itself, and many of those companies don’t seem to have had much difficulty in raising money when they needed to.

In the end, the Facebook IPO and the scepticism it has triggered about internet valuations could be a good thing, if only because it may have corrected some of the over-inflated expectations about anything connected to the social web. In a discussion on Hacker News triggered by Graham’s note, angel investor and startup founder Chris Dixon points out that investing downturns are sometimes a figment of the imagination, and that both companies and investors need to take such pronouncements with a grain of salt:

This happens every couple of years in tech. I’ve personally witnessed 3 downturns now. One was real and two were arguably the best time to start companies. Raising money might be harder, but generally only for bad companies.

Graham himself makes a similar point — namely, that there is a certain Darwinian aspect to the funding cycle. The companies that are most at risk when the financing tap gets turned down a notch, he says, are the ones who spent too much or got irrational during the good times, the ones who have “easy money built into the structure of their company” and therefore “are led to spend a lot and to pay little attention to profitability. That kind of startup gets destroyed when markets tighten up.” Graham’s advice? “Don’t be that startup.”

Post and thumbnail images courtesy of Flickr users Photo Clinique and See-ming Lee

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What I really love about ZeroCater, though, is the story: It’s all about one dude with some entrepreneurial drive that created a business by solving a problem for himself, then offering up a solution to others.

ZeroCater founder and CEO Arram Sabeti moved to the Bay Area after becoming a bit obsessed with Paul Graham’s essays. Sabeti wanted to work in startups, so he saved up some cash, got a place in the East Bay and just started looking for work. He landed at Justin.tv, where he says he handled a lot of the office management, QA and all sorts of other things that no one else wanted to do.

While at Justin.tv he handled daily lunch orders for the startup, which was routinely the most problematic part of his job. From talking to other folks in similar positions, he found out he wasn’t alone — dealing with catering was a huge pain for everyone who handle such things. So he took on another startup client and began outsourcing his expertise to Justin.tv as well.

At first, ZeroCater was just Sabeti, a bunch of hustle, and a spreadsheet with about 500 columns in it. Then he brought on CTO Bill Moorier to build some code to automate some things. Like invoicing, for instance: Prior to getting a software platform in place for managing accounts, Sabeti was spending some 20 hours a week just filing invoices for various companies he worked with. With that simplified, the business began to operate a lot more smoothly and started to grow.

ZeroCater was part of last spring’s YCombinator class and raised $1.5 million last summer from investors like Keith Rabois, SV Angel, Start Fund, Stewart Alsop, Justin.tv founders Justin Kan and Emmett Shear, Alexander Goldstein and Starling Ventures. With financing in hand, it’s been aggressively expanding within the Bay Area: In the past eight months, ZeroCater has grown from three employees to 15, with six account managers and two salespeople now on board.

That’s translated into some real business, as ZeroCater is expanding beyond just word-of-mouth marketing and serving startups, and branching out into other verticals. It serves about 175 companies a month, offering a rotating menu from various caterers, restaurants and food trucks around San Francisco. Those companies range in size and in the volume of business they drive: Some are multinational corporations that you know and love, while others are startups you’ve never heard of; some order just a few meals a month, while others get food catered everyday. For taking care of all their catered food needs, ZeroCater charges just a 7 percent convenience fee on all orders.

On the vendor side, working with ZeroCater means regular business for a number of food service operators that otherwise would be reliant on the whims and fancy of the general public. In exchange for volume discounts, ZeroCater provides a steady stream of orders for a number of local businesses.

While ZeroCater has cut its teeth serving the Bay Area, Sabeti tells me he hopes to take this business worldwide. And there’s plenty of interest: ZeroCater has a waiting list of more than 165 companies in major metropolitan areas around the country. ZeroCater’s next market has yet to be determined, but it’s clear that the lunch problem is pretty universal, whether it’s a matter of feeding a 15-person startup or a large financial services company.

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It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long.

Simple as that message is, it is something of a forgotten lesson in modern times. Companies big and small keep confusing who they serve and why they are in business. In the recent past, I have become critical of Google for I believe the company is doing unnatural things that don’t serve their customers. In a recent conversation with Outlook India magazine, I pointed out that:

I believe that companies have a DNA and you have to be true to your DNA. Google is one of those companies whose DNA is to help you find information. In doing all these social and privacy changes, they are doing unnatural things. I don’t think their Google Plus enhanced search is a good thing. It’s actually terrible.

The whole concept of best search engine has been thrown out of the window because Google is trying to fit itself into this vision of a social networking-enabled company and is chasing Facebook. It has forgotten its core values and their privacy decision is also part of that whole failing to understand their core values. I think this is where they are going wrong. It is like people not paying attention to customers. Their customers are now advertisers and not us people. That’s the difference between the Google when it started and the Google today. Their priority list is completely different.

I was reminded of that when I read this letter from James Whittaker, who by the way is a Microsoft-ie going back to Microsoft after finding utopia at Google — only to realize it was a mirage.

The Google I left was an advertising company with a single corporate-mandated focus…Social became state-owned, a corporate mandate called Google+. It was an ominous name invoking the feeling that Google alone wasn’t enough. Search had to be social. Android had to be social. You Tube, once joyous in their independence, had to be … well, you get the point. Even worse was that innovation had to be social. Ideas that failed to put Google+ at the center of the universe were a distraction.

And these have done nothing to improve the core search experience. Paul Graham, the co-founder of YCombinator put it best when he said:

Google search results used to look like the output of a Unix utility. Now if I accidentally put the cursor in the wrong place, anything might happen.

As I wrote earlier, Google’s problem is with me-too-ism. I was reminded of that when I read this quote from Sir Jonathan Ive, the Apple design boss, who recently told This Is London:

That’s quite unusual, most of our competitors are interesting in doing something different, or want to appear new – I think those are completely the wrong goals. A product has to be genuinely better. This requires real discipline, and that’s what drives us – a sincere, genuine appetite to do something that is better. Committees just don’t work, and it’s not about price, schedule or a bizarre marketing goal to appear different – they are corporate goals with scant regard for people who use the product.

The message is exactly the same – you need to know your customer. Period. Or as outgoing Goldman Sachs banker Greg Smith says

Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist.

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Y Combinator founder Paul Graham

In the Y Combinator world, as formulated by co-founder Paul Graham, the young, visionary, technical startup founder is king. And after YC graduates’ oversubscribed funding rounds, promising products, and increasingly frequent acquisitions by Google and Facebook, Silicon Valley seems eager to remake itself in Y Combinator’s image.

Archangel Ron Conway, who said he’s put money into 500 companies over the last 12 years, kicked off the day with an optimistic and generous recruiting speech: He said he believes every “entrepreneur who has the guts to start a company” should get funding, and added “I believe the more angels we have in Silicon Valley the better.”

Conway, along with well-known angels such as Ariel Poler, Mitch Kapor and Naval Ravikant, spoke of the joy of enabling smart and passionate founders to build great things. “You listen to those people tell you what it’s going to be like in the future,” said Conway, speaking of early meetings with the founders of Google, Facebook and Twitter. “I’m completely addicted to it.”

Be All You Can Be

The angels’ testimonials depicted a world of investing that anyone could break into with the right mix of smarts, humility and luck. Five years ago, “I was a washed up enterprise software guy from Austin, Texas,” said Mike Maples of Floodgate, now one of the most active and influential “superangels.” After he moved to Silicon Valley and spent 90 days sharing meals with the smartest people he could get meetings with, Maples landed his first investment in Odeo, the company that eventually gave birth to Twitter. And it all flowed from there.

Even Greg McAdoo, of the legendary VC firm Sequoia Capital (which is closely affiliated with Y Combinator) fluffed the egos of would-be angels, saying two-thirds of his firm’s early stage investments include angels. He encouraged angel investors to contact him, take him out for coffee, and talk about the industry or potential deals early on in the process. (While McAdoo said he would pick up the tab for this hypothetical coffee date, he wasn’t quite so generous as to give out his email address, instead inviting those present to get introduced to him by a Sequoia portfolio company founder.)

Engineering a New Kind of Funding

Graham took the session in a practical direction, proposing that the seed funding deal of the future would take on a new structure to better suit startup founders. “The way of the future,” Graham said of funding rounds, “is no fixed amount, no fixed closing date, and no lead.” He said the best Y Combinator companies are already taking funding on a rolling basis, because it requires less reliance on a lead investor, takes less time out of product development, and gives investors less room to drag things along or collude.

“The meta-trend is founders are going to be more powerful than investors,” said Graham. “If you want to know what the future of investing is going to be like, think what would the founders want it to be like.”

Startup lawyer John Bautista, a partner at Orrick who works on many Y Combinator deals, attested that he’s already seeing many startups closing rolling funding rounds, and that these convertible debt deals are structured favorably to angels, giving them the right to earn a return on their shares if the company is sold or update their terms if more money is raised later.

Are Talent Acquisitions Evil?

Thankfully, Y Combinator is not a cult, and it brought in Michael Arrington of TechCrunch as a counterpoint early in its program to rant about “dipsh*t” Y Combinator companies that sell out early, denying the world and investors the chance to be true game-changers. For good measure, he called out superangels for being complacent with their small successes and making companies like Facebook stronger through talent acquisitions.

But Arrington left shortly after his talk, giving 10 more angel investing believers such as Maples and Aydin Senkut the chance to convert the wannabe angels gathered. Paul Buchheit, the creator of Gmail who himself was brought to Facebook with its talent acquisition of his company FriendFeed, said in response to Arrington’s critique, “Talent acquisitions are very controversial, but all of [the ones I've invested in] got a 2, 3 4 or even 5x return. I can live with that.” Besides, acquisitions of young companies tend to be better for everyone involved, as compared to later-stage deals, said Geoff Ralston, who recently sold Lala to Apple. Integrations of billion-dollar companies almost never work, he said.

Loopt CEO Sam Altman, speaking on behalf of his Y Combinator peers, got the last word. He warned the angels-in-training: “It’s important that you pick the winners, but it’s absolutely necessary that the winners pick you.”