Enterprise 2.0 remains one of the best opportunities in the technology market today. The enterprise software incumbents are currently a full generation behind, just now entering the traditional SaaS market through acquisition (for example, Oracle’s $1.5 billion acquisition of RightNow and $1.9 billion acquisition of Taleo, and SAP’s $3.4 billion acquisition of SuccessFactors).

Meanwhile, more forward-looking software companies like Salesforce.com are realizing that the route to the enterprise now goes through the user, not the IT department. Salesforce.com has snapped up several Enterprise 2.0 companies, including Assistly, Rypple, Manymoon and Groupswim (now Chatter).

But Salesforce.com is the exception. It will be another five years before the mainstream enterprise software market wakes up to the fact that Enterprise 2.0 apps are the industry’s future. That’s plenty of time for new companies to establish market leadership and challenge the incumbents, who will either have to adapt or buy Enterprise 2.0 startups to remain competitive.

In my previous article, I described the go-to-market model of a typical Enterprise 2.0 startup in three phases: freemium, inside sales and enterprise sales.

This article is focused on phase one — freemium. In follow-up articles, I will dig into the transition to an inside sales force and then how to add a profitable direct sales force to the model. Almost all Enterprise 2.0 startups employ each of these sales strategies sequentially or in parallel at different points in their maturity.

An effective freemium go-to-market effort depends on product design, distribution and conversion.

Freemium product design 

Enterprise 2.0 starts with the premise that “users” are “consumers” first and foremost, and that they make the software purchase decisions, not the IT department. So how do you attract enterprise users?

1. Make your app fun. Employ game mechanics, from vendors like Badgeville, to drive engagement. Design an app that you’re passionate about — perhaps because it addresses one of your own needs. Give it a personality. SurveyMonkey is a good example of app personality resulting in increased market share. The last thing users are looking for is a boring software experience.

2. Study your active users. The key metric of freemium product design is active users. Instrument your app with analytics tools from vendors like Google Analytics or Flurry. The data your users generate will drive product management and usability decisions, which in turn will drive conversion and revenue. Determine the most popular features, and then remove the least popular ones. As Twitter co-founder Jack Dorsey says, “Simplification is key.”

3. Pre-populate the data. No one likes an undecorated room, and no one likes an app with no data. Incorporate data from outside sources such as Google Apps (email and contacts), Salesforce.com (accounts and status), Facebook or LinkedIn (contacts and relationships). Can you expose anonymized or aggregated data from other users? Is crowd-sourced data an option?

4. Don’t forget the APIs. Users expect freemium Enterprise 2.0 apps to work with their existing systems. Publish your own APIs and let your users build integrations and product extensions, and then publish these back to your user community.

5. Prioritize the platforms. Your app also needs to be available through web browsers, iOS and Android, at a minimum. Depending on your specific application, making it available via desktop downloads, bookmarklets, browser plugins or MS Office plugins may increase your user base. HTML5 and cross-platform development tools such as Appcelerator and Sencha can help with this.

Freemium distribution

The key metric of distribution is downloads, so make your product available everywhere your user is likely to be. In my experience, mobile apps tend to accumulate two to five times more users than web-only offerings. Venture investor Fred Wilson covered this in his blog post, “Mobile First, Web Second.”  The mobile market is much larger too. Smartphones and tablets outsold PCs by almost two times in the fourth quarter of last year.

1. Target the mobile user first. Enterprise 2.0 app developers should target the mobile user via the Apple App Store and Android Market (recently rebranded Google Play). The Amazon.com Appstore for Android is the next place to focus in terms of importance. If you have the resources, you should also consider developing for secondary app stores such as Windows Phone Marketplace or Blackberry AppWorld. Getting ranked and positively reviewed on these sites takes some effort and capital, but it’s worth it.

2. Focus next on the web marketplaces. Remember, your goal is downloads. Google Apps Marketplace is Google’s SMB offering. It promotes apps that are highly integrated with Google Apps (Gmail, Calendar, Sites, Docs) and has a healthy market share among small businesses. Google’s Chrome Store is geared more towards individual users, but it is also a productive distribution channel. Salesforce.com’s AppExchange, one of the original marketplaces for Enterprise 2.0 apps, is being repositioned to serve users, not just system admins, and will be another new channel.

3. Investigate the marketplaces of other leading Enterprise 2.0 apps. Examples include the Intuit Marketplace, LinkedIn Application Directory, MailChimp Integrations Directory, Splunk Partner Portal, FreshBooks Add-Ons, Box Applications, Atlassian Plugin Exchange and Heroku Add-Ons.

Freemium conversion

The key metric here is conversion rate. If you have successfully executed your product design and distribution, you should have a sizable free user base, and in my experience, one to three percent of them will convert to your paid version. Increasing your conversion rate may be the difference between success and failure, so experiment with ways to improve it.

1. Erect a paywall. The most common way to convert free users into paying customers is to erect a paywall that unlocks additional features or capacity. The analytics you collect from your early free users will give you insight into which features are considered most valuable, and thus what you should consider charging for. A single monthly price per user is the most common method of charging.

2. Offer a preview or free trial of additional features. One common way to increase your conversion rate is to entice users to upgrade by offering a preview or free trial of additional features within your app.

3. Remove barriers to conversion. One company, Atlassian, has developed a clever way to increase in-app conversion called Causium. Instead of charging users, Atlassian asks them to donate a small amount to a charity called Room to Read. The fundraising is for a good cause, but the strategy is really designed to get users to input their credit card details, thus removing a crucial barrier when you attempt to convert them to a paid subscription later.

4. Feel the love. Evernote CEO Phil Libin believes in the “NPR model.” Evernote gives users a fully functioning app for free. Libin believes that by developing a deeply loyal and happy user base, some will love the product so much that they will voluntarily pay for the premium edition. Even if your users don’t love your product as much as Libin’s, offering a fully functioning free app and then selling premium add-ons, such as integrations with existing enterprise applications, is an effective conversion strategy.

“Freemium” is an evolving term and startups are constantly experimenting and redefining the model as it applies to Enterprise 2.0. Please let me know what’s working for you. And stay tuned for my next article, which will outline the key metrics and best practices for selling Enterprise 2.0 software using an inside sales force.

Scott Irwin (@scottirwin) is a general partner at Rembrandt Venture Partners, where he focuses on Enterprise 2.0 and SaaS investments. He is very bullish on small startups’ ability to disrupt the stodgy enterprise software market.

Image courtesy of Flickr user bixentro.

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There’s been an awful lot written about Steve Jobs in the wake of the Apple co-founder’s death, and that has only increased in the wake of the new biography from Walter Isaacson, which a number of media outlets have been running excerpts from. In addition to Jobs’ opinion about topics like Google, the book also includes some comments from famous tech-industry players about Jobs, and one of them is from Microsoft Co-Founder Bill Gates — a man who was Apple’s nemesis in many ways. Gates says he liked Jobs, but that the Apple CEO “never really understood much about technology.” The Microsoft billionaire no doubt saw that as a put-down, but looked at another way, it was one of Jobs’ biggest strengths.

Although the two men apparently gained a grudging respect for each other, they couldn’t really be any more different, both as people and as CEOs and founders of technology companies. Jobs, who famously spent time in India and was a practising Buddhist, apparently told Isaacson that Gates would have been a more interesting person “if he had dropped acid or gone off to an ashram when he was younger,” while Gates told the author that Jobs was “fundamentally odd” and “weirdly flawed as a human being.” The Microsoft founder also admitted that Jobs had an “amazing instinct for what works” — while Jobs said that Gates was “basically unimaginative and has never invented anything [but] just shamelessly ripped off other people’s ideas.”

The part about ripping off other people’s ideas could also be applied to Apple, of course, at least in its early days, since much of the graphical user interface that made the company’s computers so recognizable and gained Apple designer Jef Raskin so much fame — the mouse, the desktop metaphor, the icons, file folders and pull-down menus — were based on ideas originally developed by Xerox at its Palo Alto Research Center division.

Technology is the least important thing about Apple products

But while Gates saying that Jobs “never really understood much about technology” was probably intended as a criticism, the truth is that in most cases the technology is the least important thing about Apple’s products, and probably wouldn’t appear anywhere on the list of the main reasons why devices like the iPod or the iPhone or the iPad are so appealing. Someone like Gates, who spent his youth programming and was involved in much of the code behind things like Windows, would like to believe that superior technology wins — but for most users of both software and hardware, design is what wins.

Jobs was a famous admirer of Dieter Rams, a designer for Braun who had a number of mottos and aphorisms about design — one of which was that “good design will make a product understandable.” That applies to a lot of Apple’s most famous products, which were so painstakingly designed to be usable, even when (like the original iPod shuffle) they didn’t even have a screen to tell you what was going on inside them. A video of a one-year-old child using an iPad and then trying to use the same gestures on a magazine (embedded below) went viral recently, and Daniel Donahoo at Wired pointed out that in addition to the message that much traditional media is “broken” from a usability point of view, it also reinforced just how instinctive much of Apple’s design and usability is.

When people talk about Apple’s design principles and philosophy, they often mention the unrelenting focus on simplicity (based in part on Rams’ motto: “Less, but better”). Jobs said that among the most important decisions in product design were what not to include and that this process involved “saying no to 1,000 things.” That’s a very difficult principle to adhere to at the best of times — but it’s especially hard if you are a technology geek and obsessed with all the ways in which your product is going to beat your competitors because of the cool features it has. That’s what causes the classic “feature creep” phenomenon, which often occurs when professional engineers get hold of a device.

It’s not about the features — it’s about usability

In a nutshell, that’s what accounts for much of the difference between Microsoft and Apple, or between Apple and just about everyone else — not the technology but the usability. Think about the early days of the MP3 player, before the iPod came out: I had an early device made by Archos that was a brilliant piece of technology, a laptop hard drive with a shell that turned it into a music player, and it held a then-staggering 6 gigabytes of music. It was also an ugly piece of crap in a lot of ways — it was huge and bulky and unfriendly to use, but I used it anyway. Until I saw an iPod.

Lots of people focus on how Apple’s design was similar to high-end furniture or other non-technological products, with its white or black exterior and clean lines, but the real killer appeal of the iPod or the iPhone or the iPad was how easy they are to use, and how integral that ease of use and design is to the product itself. Microsoft made plenty of MP3 players and tablets and the Zune and so on, many of which were fine from a technology point of view. But did anyone want to rush out and buy them? No. That’s not to say Apple hasn’t produced some great technology, from FireWire to the oleophobic coating on the iPhone screen — but the technology isn’t the most important part of those devices.

I’m sure when Bill Gates looks at the iPad or the iPhone, he thinks about all the features it doesn’t have, or all the things that it can’t do. But no one else thinks about those things — all they are interested in is what they can do, and how much fun it is doing them, and how appealing those devices are. And that is one of Steve Jobs’ biggest gifts to the world of technology and design.

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The move sent the stock up, as Wall Street apparently felt comfortable with where Cisco has ended up after layoffs and cutting 10 business lines, including the Flip camera division and the Eos media software division.

A successful and quick restructuring is a positive for the networking giant, but there are some cautionary notes around Cisco’s gross margins. Mark Sue with RBC Capital Markets wrote in an analyst note that Cisco said its gross margins, which have decreased from the 70 percent range to about 65 percent, will stop falling at between 62 and 60 percent. That’s not great, but it could get ugly, as Nikos Theodosopoulos, an analyst with UBS, noted. From the UBS research note:

A key risk to Cisco’s long-term GM may be Switch assumptions. Cisco expects Switch [margins] to remain above avg, which may depend on price/competitive actions by Huawei, HP, Dell, Juniper, Brocade and others. All in, we think Cisco’s position is strong, and JNPR may be most vulnerable to Cisco competitive actions near-term.

So there you have it: the good, the bad and the ugly of Cisco’s lowered growth estimates. If Cisco can focus on its core businesses, perhaps the ugly scenario doesn’t play out and it can indeed keep gross margins in the respectable 60 percent range. Investors can mourn the loss of high growth from the network giant, but slow growth is better than no growth, especially if it can keep those margins.

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HP CEO Leo Apotheker

On Thursday Hewlett-Packard announced plans to spend some $10.25 billion in cash to acquire Autonomy, the United Kingdom–based software and services company.

Given that HP’s cash reserves currently total $12.9 billion, the deal represents a major monetary outlay that will leave the company’s wallet significantly lighter than it has been for many years. Why is HP is taking such a huge leap?

In a Q&A session with investors and analysts on Thursday, HP’s CEO, Leo Apotheker, acknowledged that the Autonomy bid is bold, but he insisted that it will pay off in the end. Here are his main reasons why:

• It’s now-or-never time for HP. Apotheker recognized that people may question why HP is making such a big bet, but according to him, drastic times call for drastic measures.
  

  This is about a transformation to position HP for the future. These changes are fundamental for the future we all want. HP is at a critical point in its existence.

• Businesses today deal with a ton of data, so Autonomy’s software to help manage that data will be in demand for years to come. None of HP’s current businesses have that kind of growth potential.
  

  Autonomy represents an opportunity for HP to accelerate our vision to . . . lead a large and growing space, which is enterprise information management. If we execute this deal it will position HP as a large and growing leader in the space.

• Margin-wise, Autonomy can hit the ground running at HP. Apotheker pointed out that Autonomy has grown its revenue at a compound annual growth rate of 55 percent, and with an operating profit of 83 percent over the past five years.
  

  We’re buying a very strong business and we believe we can extract a lot more out of this business by combining it with HP. That was the justification for the price.

• Apotheker has a soft spot for software. Apotheker joined HP as CEO nine months ago, after spending more than 20 years in various roles at SAP, the German software corporation. In the earnings call, Apotheker noted that buying Autonomy puts him in a comfortable space.
  

  As an executive who has spent most of my career primarily in software, this is a world I know very well.

On the earnings call, several people pressed Apotheker on Autonomy’s price tag — “You are paying a fantastic price,” Sanford Bernstein analyst Toni Sacconaghi said — but they seemed to agree that moving toward a higher-growth market such as enterprise software is a smart move for HP. Whether those benefits will be worth the big cost will only be seen in time.

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Ellison is most famous for co-founding Oracle, the enterprise software giant. But as evidenced by his regular appearances in such places as the Forbes list of the world’s billionaires, he’s just as notable for being an all-around mover-and-shaker in the business world at large. And it turns out, a number of the tech industry’s most accomplished people have been on Ellison’s payroll at some point.

SoftwareAdvice put together this handy infographic of Larry Ellison’s influence (click to enlarge):

Infographic design by Russell Pryor

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In order to deliver the type of user experiences enabled by these innovations software must keep pace – otherwise we will fall painfully short of capitalizing on the opportunities presented by these hardware achievements. This goes beyond the need for innovations in OSes and applications, to the underlying software that ties everything together. It’s the next great challenge faced by the mobile industry.

Software as the Connective Tissue of the Phone

When it comes to mobile software, the importance of operating systems and applications is well understood. The battle for smartphone OS market share evokes a feverish MLB pennant race, and the fact that we’re all hopelessly addicted to Angry Birds proves that mobile apps have thoroughly permeated the mainstream.

Less understood, however, is the importance of the underlying software layer; the connective tissue that ties hardware to software, such as optimizations between OS and chipset, performance advancements in web technology, and enhanced app performance. Without these efforts, gigahertz, cores and megabytes of RAM are nothing more than points on a spec sheet. In order to deliver the best possible mobile experiences, hardware and software cannot be viewed separately. They are attached at the hip, and integrating them to work in perfect unison is the key to driving mobile innovation forward.

Immediate benefits of intelligent integration include better graphical frame rates in games, faster web page downloads and smoother rendering and scrolling. These are just a sampling of the user experience improvements that will help mobile devices keep up with ever-increasing consumer expectations.

Innovating for the Future of the Mobile Web

All too often, the primary focus is on what the consumer wants today. It is our job to anticipate what the consumer will want tomorrow and innovate accordingly.

While today’s consumers are still largely enamored with the simple inclusion of mobile browsers, tomorrow’s expectations will include desktop-level browser performance, Web pages and apps running on par with native apps and smooth HD multimedia streaming like the desktop equivalent. This is possible via complex but informed optimizations to the HTTP networking layer, HTML5 browser core, and JavaScript engine. While powerful processors will strongly influence robust Web experiences, the mobile software layer is significantly impacting how we get the most out of mobile hardware and continue to innovate on behalf of the consumer experience.

While HTML5 will play an important role in the evolution of the mobile Web, it won’t come to fruition until mobile devices support the specification fully, from web and enterprise apps to entertainment and browsing. Forward-thinking developers making the transition to HTML5-based web apps stand to reap the benefits. The HTML5 family of standards runs faster, more efficiently and with greater capabilities when the hardware and software have been tightly integrated.

The biggest remaining hurdle is ensuring that the same array of device capabilities, such as camera access, is available to Web apps as their native counterparts. To this end, companies like Qualcomm are enabling a rich set of device APIs within the browser so that Web apps have that same detailed control and usage of the device’s hardware.

Collaboration Is Key

The mobile industry is built on partnerships within the diverse lines of business that make up the ecosystem and we must continue to work closely together to make these advancements a reality — from ensuring common device APIs are defined, implemented, and utilized to working hand in hand across the mobile ecosystem to deliver web experiences that go beyond what we ever experienced on a PC. All stand to benefit greatly by software’s ongoing impact on mobile, and efficient collaboration will expedite that process. Ultimately, intelligent and tight OS integration within the chip provides time to market advantages for OEMs who will see their devices running faster, smoother and more efficiently.

Enhancing mobile software is not a trickle down process. It starts with the seamless hardware integration and ends with developers bringing the experience to life. If we are serious about a future where mobile phones are responsible for tasks currently held by computers we need to embrace the role of software in overall mobile performance and continue strongly supporting the software developers that are driving innovation.

Rob Chandhok is president of Qualcomm Internet Services and helps drive software strategy for Qualcomm’s client and server platforms. He and other mobile industry thought leaders will be discussing these topics and more June 1-2 at Uplinq 2011 in San Diego. His Twitter handle is @robchandhok

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Damian Kimmelman, founder and CEO of DueDil, a financial information startup that’s shutting down its social invite program as it opens up its beta to more people, said the company saw its invite pool swell by a third thanks to folks sharing email addresses of their friends. But most important was the psychological effect Kimmelman felt it has on the invitees. In an IM conversation, he said it helps prioritize users when you can only let a few people into a beta at one time and he added, “[A]lso you are a free service, but you kinda want people to value the service from day 1.”

He added that it was a short-term thing and only four or five people seemed upset enough to complain about the process.

Apparently, his experience may become the norm. Justin Britten, founder of Prefinery, a company that helps startups manage their beta process, said via email that at this time, 45 of the companies using its software have turned on social invites since the company released the functionality in February. The feature encourages applicants to share news of the beta they just applied to on social networks including Facebook, Twitter, and Reddit. They can also pass a unique link generated for them via email. Britten writes:

In this time, 45 betas have enabled the social sharing feature, and of these 45 betas, a total of 2,125 testers across all 45 betas have shared their unique share link with their friends for a total of 28,214 unique clicks. These same 45 betas had a total of 6,827 testers over this period, meaning that 31% of all testers (2,125 of 6,827) were willing to share the beta with their friends on their social networks! This willingness is huge!!

Of these 28,214 clicks, a total of 789 people actually applied for access to the said beta after clicking on their friend’s unique share link, yielding a conversion rate of approximately 2.8 percent.

This was so successful Prefinery has elected to enable its sharing feature by default; few betas choose to disable the feature, according to Britten. Another way to look at this, however, is that in attempting to beta test an app, the tester is willing to sell out his friends in hopes that almost three people out of every hundred that he or she shares it with will also be interested enough to also try to sign up.

I’m in the cranky camp on this one, but since it’s driving value for entrepreneurs using it, I suppose I should just get used to being asked to fork over my friends in exchange for earlier access to the next hot startup. I don’t have to do it, but I do worry that an increasing part of being an early adopter seems to be a willingness to shill. I’m not ready to live in a world where, as Jeff Hammerbacher, an early Facebook employee and entrepreneur, said in a BusinessWeek article, “The best minds of my generation are thinking about how to make people click ads. That sucks.” This viral world makes me somewhat sick.

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There’s been a lot of sturm und drang recently about the lawsuit that some bloggers have launched against The Huffington Post, arguing they deserve to be compensated for their writing, despite having agreed to provide their work knowing full well they wouldn’t be paid. Many of those commenting on the issue can’t seem to understand why someone would choose to write for free, and I’ve been trying to come up with an analogy that would help. I came across a blog post about a completely unrelated topic and it hit me: Blogging for free is a lot like writing open-source software.

The post in question, which I came across on Hacker News, is by a programmer named Ollie Rattue and is entitled “Anarchism, Capitalism, Altruism: Why Do I Open Source?” It has nothing whatsoever to do with The Huffington Post, but is about the author’s experiences and releasing various software projects as open source — meaning they are free for anyone to use. He describes how he was working on a recent project and thought to himself:

I wasn’t being paid by a client. Although satisfying, the work wasn’t challenging or particularly interesting. So why was I doing it? Is this altruism at its purest or am I doing this for selfish reasons?

Rattue says he came to the conclusion that he gets a number of benefits out of creating open-source software in his free time outside his regular job, including:

• It improves the work. Though he knew the code base for a specific project, Rattue says because he was open sourcing it, “I added clear comments and references [and] by coding for someone else I actually produced a better product.” Writing for outlets such as The Huffington Post, even for free, can do the same for bloggers and authors.
• It enhances the brand. Rattue says working on open source “sends a signal to the world that you are an expert in your field… I get my work in front of more people, always putting my face and name on the product to increase my personal brand.” Writers are having to become brands as well, and many of the bloggers who wrote for The Huffington Post — including Tasini — did so to enhance their brand. Says Rattue:
  

  I like to think that someone who stumbles across my small corner of the internet would get a sense that I am committed and know my stuff based on my free apps, code, and my blog. My passion is my biggest sales tool. Open source demonstrates it.

• There’s positive feedback. Working on open source was satisfying in part because of the responses to it, Rattue says. “I like to be able to look at my buzz page and see a whole list of positive comments. I like that someone knew me at a conference and thanked me for saving them time. Open source opens you up to respect and criticism from our peers.” The exact same could be said for blogging.

The world of open-source programming is complex, with different licenses and approaches that aren’t really worth getting into (you can read more about them here if you’re interested). But in a nutshell, open-source software is designed to allow anyone to use free of charge, provided they agree not to sell it. Some licenses require that if a licensee develops a related piece of software with the code, they must release that as open source as well, but other licenses do not.

The analogy with writing for outlets like Huffington Post isn’t perfect, but it has a lot of similarities. As founder Arianna Huffington noted in her response to the Tasini lawsuit, writers for the site maintain the rights to their content; in other words, they can post it wherever they like, and make money from it in other ways if they wish. The site also doesn’t collect money from those who read this freely-submitted content, although it does make money from the ads that run alongside the content.

In a similar way, there are companies such as MySQL — which was acquired by Sun Microsystems for $1 billion in 2008 — that are corporate entities, even though much of what they sell is based on open-source software. Red Hat has built a billion-dollar business on support and other services related to open-source software. One could argue that The Huffington Post does something similar: it produces its own content, but it also aggregates and distributes free content, and that is a value-added service.

And there will always be people who are willing to write for free — whether they are doing it on their own blogs, for Wikipedia, or for a site like The Huffington Post — just as there will always be people who are willing to create open-source software. Would it nice if everyone could get paid a handsome salary for everything they do? Sure. But one of the strengths of the web is that it allows other methods of compensation to flourish, and the HuffPo is just another example of that in action.

Post and thumbnail photos courtesy of Flickr user Lordcolus

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On Friday, Kno Inc., the Santa Clara, Calif.-based, e-learning startup, scrapped its plans to make a signature tablet device and announced a new, singular focus as an educational software company.

In a short interview this morning, Kno CEO Osman Rashid told me he’s “extremely excited” about shifting from hardware to software. But after talking to him for 15 minutes, I still couldn’t get a clear sense of what the company’s new focus was beyond “software.”

Looking at a brief history of the company, it’s easy to see why we have a hard time getting excited about it, despite what its co-founder has to say.

• May 2009: Kno is founded (as Kakai Inc.) by former Chegg CEO Osman Rashid and semiconductor industry veteran Babur Habib, who have known each other since the ninth grade.
• December 24, 2009: Kakai closes a $7.5 million series A funding round led by Andreessen Horowitz, with reported participation from First Round Capital and Ron Conway. At this point, the company is still in “deep stealth mode.”
• June 2010: Operating under a new moniker, Kno (short for “knowledge”) officially previews its product: an educational software platform and e-reader device. Kno claims its device will be beta-testing in students’ hands by late 2010.
• September 9, 2010: Kno closes a $46 million Series B funding round led by Andreessen Horowitz with the participation of Silicon Valley Bank and TriplePoint. Kno also vows to have its “first customer ship later this year.”
• November 8, 2010: Kno prices its tablets at $599 for a single-screen device and $899 for a dual-screen device. The company also announces it will start accepting “a limited number ” of pre-orders, and again promises to ship devices by the end of the year.
• February 3, 2011: Anecdotal reports emerge that the majority of Kno’s pre-order shipments never made it to customers. Kno confirms a delay, but provides no more information.
• February 17, 2011: Kno reportedly tells pre-order customers that shipments may not arrive until mid-April 2011.
• February 21, 2011: Rumors emerge that Kno is shopping around its tablet hardware business.
• April 7, 2011: Kno officially shutters its hardware business and offers full refunds to everyone who has received a Kno tablet. Company announced $30 million in funding led by Intel Capital.

We are not surprised by the company’s decision to hightail it from the hardware market. As Om wrote last year: “My inner cynic believes that the very adaptability of the iPad is going to be the single biggest challenge for Kno, which in my opinion is going to need a lot of money to realize its eventual ambitions.”

It looks like we weren’t that far off the mark. The $30 million Series C funding round announced today brings Kno’s total investment to $85 million — a pretty hefty sum for a software startup that has yet to ship its first product. It is hard to pin down the company’s valuation, but given that the latest funding round is some 30 percent smaller than Kno’s Series B investment, one has to wonder if the company’s post-money valuation has taken a hit.

Rashid was short on answers during our conversation, other than to say several times that Kno will make “product announcements in a couple weeks.” When I asked when Kno’s products will come to market or if the company will have a product for the iPad, Rashid told me, “We’ll have to let our [OEM] partners answer that.” How will Kno’s offering be different from e-books sold by Amazon, Google, and others? “This will become very clear in the coming weeks.” Does the Intel investment mean Kno’s software will run on MeeGo? “Working with Intel… may include MeeGo.”

I want to root for this company — the textbook industry has long been in need of a major overhaul — but at this point, it’s hard to say which way Kno will go.

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