SendGrid CEO Jim Franklin

This is a big deal because most mobile app users expect to communicate via their apps. What’s the good of foursquare if you can’t alert the world that you ousted Joe Schmoe as mayor of your Dunkin Donuts? The new MbaaS integrations are all available now, according to Boulder, Colo.-based SendGrid.

One of the key advantages of SendGrid, developers say, is it lessens their overall reliance on Amazon Web Services for capabilities above and beyond basic compute and storage functionality.

That’s increasingly important for developers who don’t want to be overly reliant on a particular vendor’s cloud.  SendGrid’s biggest rival is Amazon Simple Email Service (SeS) and by using SendGrid developers can distinguish between their infrastructure provider and their mail service provider. “That’s key because it can take you six months to migrate an app off of Amazon if you need to,” said Mark Geene, CEO of Cloud Elements, a Denver area systems integrator specializing in cloud development projects.

SendGrid CEO Jim Franklin says he hears that sort of thing a lot. ”One of the strengths of SendGrid is it’s easy-on, easy-off. We make it very easy contractually and technically to sign up and to leave,” he said.

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Twilio will now be able to handle messages in dozens of languages including Arabic, Chinese, Japanese, Greek and Russian. Previously, Twilio allowed customers to send text messages to just the U.S., Canada and UK.

The San Francisco-based company already supports international voice calls and had hoped offering SMS around the world would be as easy as voice. But extending text messaging support proved to be a lot harder than first imagined, said Patrick Malatack, product manager for Twilio.

He said the voice industry is more mature and requires fewer carrier relationships to connect calls. But with SMS service, Twilio had to increase its carrier support from dozens to more than 1,000 operators. The company also had to come up with its own routing logic to find the most efficient route for text messages.

Malatack said SMS support will help a lot of existing customers including messaging services and companies that use Twilio for business processes. He said users will now be able to send text messages just as easily as they make calls. Pricing varies by country but generally, many SMS messages can be sent for one cent per message.

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At least that’s the theory. Bed Battles is one of many projects coming out of this weekend’s Hack & Jill hackathon in New York. The project was still in development when I stumbled across it on Twitter Saturday afternoon, so I couldn’t really test it in action yet. But the concept alone sounded too much fun to not at least mention here: Gamification as a way to make something as unpleasant as getting up early less of a drag? Count me in.

Hack and Jill by the way has an interesting concept. From its website:

“Hack’n Jill brings together equal numbers of men and women for a day of hacking. Our theme is #HackYourSummer. Think about what makes summer great — from going out and being active to chilling at home with friends — and be inspired to make it even better.”

Check out all of the Hack and Jill projects here.

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Dave McClure speaking at the US Embassy in Mexico City. Photo by David E. Weekly

It’s around 8:30 on a warm Friday night in Mexico City, and we’re all milling around a podium set up in the lobby of the private residence of the U.S. Ambassador to Mexico, Earl Anthony Wayne. Dozens of Mexico’s tech entrepreneurs and investing elite are mingling with more than 40 members of Geeks on a Plane, a traveling tech-revue of sorts organized by the Silicon Valley investment group, 500 Startups. Just outside the lobby, an expansive manicured lawn leads up to a massive, high rock wall. Guards with bullet-proof vests ushered the group through the fortress gate only about an hour before.

The Ambassador gives his polished remarks, followed by one of Mexico’s rare venture capitalists. Now it’s time for Dave McClure, the investor behind the two-year old fund and accelerator group 500 Startups, to say a few words. He is decidedly non-descript – glasses that are thick, jeans that sag, a t-shirt that says “500 Startups: We’re kind of a big deal,” flip-flops, and a black blazer as a gesture to the formal occasion (“hiding his hillbilly” as he calls it). McClure is a throwback to a Silicon Valley of the time before the brogrammers.

McClure thanks the Ambassador for the special night and starts to speak. He throws down his first salvo:

“For the last two heads of states that I met with I was also wearing flip-flops, so please don’t take it as any slight. If it’s good enough for the President of Chile and good enough for Hillary Clinton, it ‘s damn well good enough for Mexico.”

McClure is trying to do something a little bit different. What Billy Beane is to baseball, McClure is to technology startups. And like Beane, he is willing to go anywhere in the world to find a slight edge to beat his richer, bigger and fancier rivals on Sand Hill Road. He is quirky, offbeat and unconventional, which is one of the reasons why entrepreneurs love him, and he’s also a marketing machine that can turn out slogans and brands like a finely-tuned copy shop on Madison Avenue.

He’s more like a man with a mission or a preacher with a sermon than an investor trying to make a living. 500 Startups partner George Kellerman describes McClure as being so driven it’s as if his bucket list has just one item: to find the undiscovered entrepreneurs across the furthest reaches of the globe.

These principles are also where Geeks on a Plane comes in. The group brings together dozens of entrepreneurs and investors on a jam-packed, brain-jolting tour to meet with the local investors and innovators in cities throughout the world. Little sleep is had and much geeking (and partying) is done.

Geeks on a Plane Latin America kicked off last Thursday night in South Beach Miami — where the Mayor of Miami-Dade County, Carlos Gimenez, presented McClure with a plaque for tech industry excellence – and continues through Mexico City, Sao Paulo, and Buenos Aires over the next week. I’m traveling with the group (yeah, I have a rough life) and will be reporting on tech innovation across Latin America.

Moneyball for startups

So how exactly does McClure plan to disrupt tech investing? The group is starting out with what McClure calls a more “scientific” and “systematic” approach: essentially, it’s a numbers game. Instead of making a few several million dollar investments into promising early startups, 500 Startups is making smaller — $50,000 to $250,000 – investments into a lot more early stage startups; hence the “500 Startups” moniker.

The idea, as McClure puts it, is to fail more cheaply. And with more bets, the odds of hitting a winner is higher. The not-often talked about dark reality of the tech entrepreneur ecosystem is that it is wrought with failure. Some 70 to 80 percent of software startups fail, but if they fail cheaply and quickly, the heartache is a bit less.

For the 20 percent of companies that do hit some kind of stride or scale, 500 Startups offers follow-on rounds. For the couple of startups that are able to break out, 500 Startups helps usher them along to the venture stage, where more traditional venture capitalists step in. McClure points to a company like TaskRabbit as an example of a company that broke out and went on to raise successive venture rounds.

500 Startups’ first fund was for $29 million and I’ve heard that the group is currently raising another larger fund. By the end of 2013, 500 Startups will likely hit its namesake and will have backed about 500 companies, estimates McClure. Already they’ve closed on almost 300 companies.

Platforms & international markets

Part of the reason that more, smaller bets could work is because $50,000 is now enough to test out a Web or mobile idea and begin the scale-up process. Five to 10 years ago, before cloud computing and Web and mobile distribution platforms like Google, Facebook, Apple and Android, the costs to build and scale a tech startup were significantly higher.

McClure’s investing thesis is all about the low cost of building on these platforms. For example, Wildfire sits atop Facebook, SendGrid is about cloud-based email, and 955dreams is a product of iOS. He once taught Stanford students how to tap into these new Web and mobile platforms through his now famous Facebook class and later went on to make investments in the Facebook Fund.

International – and underserved — markets are another investing thesis. 500 Startups is one of a few firms that is willing to go more than 30 miles away from Sand Hill Road to find a deal. The truth is that the more traditional venture guys are scared to pursue this global strategy – the lifestyle is hard (constant travel). McClure, who is married with two children, says he spends close to three to four months on the road traveling. Geeks On a Plane is a large part of this international strategy.

Of course, 500 Startups isn’t all about McClure. His partners travel, hustle, party and forgo sleep (almost) as much as he does. Paul Singh somehow is able to keep up with McClure’s exuberance for entrepreneurs and is leading the fund’s work in India. Bedy Yang, who tells me that she “has the best job in the world,” can speak Chinese and Spanish and is heading up investments in Latin America. Newer partners include Christen O’Brien, who leads all of the Geeks on a Plane trips, conferences and corporate partnerships and Kellerman, who has a long history with the tech industry in Japan and was once a firefighter (really).

A marketing machine and a cult of personality

500 Startups is also as much about Moneyball as it is about marketing. McClure’s partners say his penchant for naming things and branding ideas is one of his invaluable skills – 500 Startups, Geeks on a Plane, the family-tech focused Mama Bear conference, the designer’s Warm Gun conference. As a marketer at heart, McClure is able to help companies think through growth better than pretty much any investor.

He’s also honed a cult of personality around a profanity-fueled, take-no-prisoners character that yells and swears when presentations get boring and writes brightly-colored rants on the company’s blog and Twitter feed. One of the most memorable scenes from the Geeks on a Plane India trip in December was when McClure shook up a startup demo event in Bangalore by telling the unpolished, young and earnest Indian entrepreneur presenters to “stop being so f*cking boring.”

The created personality is the branded Dave McClure. The real Dave McClure is much more mellow and thoughtful. He’s also first and foremost entrepreneur-friendly. In international markets like Mexico City and Delhi, McClure likes to tell local investors that it’s their fault if the tech ecosystem isn’t producing many quality startups — it’s not the lack of entrepreneurial talent in the regions, says McClure.

Will it work?

McClure can be entrepreneur-friendly to a fault. Kellerman described him as bordering on altruistic. That’s one reason why he doesn’t have a shortage of deal flow, but that could be another reason why a Limited Partner might feel more comfortable giving funds to a more cut-throat crew.

Another question is whether or not the return on the fund’s breakouts will be high enough to make back the desired amount of money. The traditional VC model is that one or two companies out of dozens can make back the entire fund. But if the fund’s stake in the firms that make it big is too small, 500 would need many more hits to collectively win big.

McClure acknowledges the risk, but says they’ve helped solve that problem by having 500 Startups do follow-on investments as well as the initial seed stage. And McClure can point to some breakouts that they’ve ushered along through that process like TaskRabbit, Twilio, SendGrid and Wildfire. His most famous exits were personal investments including Mint.com and SlideShare.

Another potential downside could be the pace of the investments. While globetrotting, red-eye flights and constant networking and mentoring can be exhilarating, they come with sacrifices, like being away from family and mental and physical burnout. Such a rapid pace could also cut down on the time for a decent amount of due diligence. Yes, many of 500’s first seed investments are experiments, but the partners need enough time with the entrepreneurs to make a somewhat smart bet.

From here to there

McClure grew up in West Virginia and about two decades ago joined the ranks of Silicon Valley as an engineer and programmer. He ran marketing for job search engine Simply Hired and joined PayPal as its Director of Marketing in the early 2000’s, which he describes as a time where “everything was going to crap but Google and PayPal were doing pretty well.” PayPal doing pretty well meant that when he left he had some funds to use to experiment with angel investing.

In 2007 McClure gained fame when he taught a  Facebook platform class, and then went on to manage two small funds for the Founders Fund and the Facebook Fund. While he had less than $3 million to play with, he made about 43 investments. And that’s where he says he began to hone the idea of the 500 Startups model.

The bigger question is why. Why does McClure have a burning passion to scour the world for undiscovered entrepreneurs? McClure says:

“It’s because I f8cked up. I was Billy Beane. I spent 20 years in the Valley and didn’t make it. Then I discovered I was a lot better at helping other people make it.”

Today, 500 Startups is just two years old, so it’s got a bit of time before it will prove out whether its model will become the future of tech investing. But the coming Facebook IPO could actually become a transformative act for the group.

In the late 90’s, Ron Conway was just another Silicon Valley angel investor. But with the Google IPO, he was transformed into the godfather of Silicon Valley start-ups. Likewise, Facebook’s IPO could act as an accelerant for McClure’s group.

As Facebook grows and also seeks to fill the positions of departing execs, it will look around to buy companies. It’s already started to increase its acquisitions. 500 Startups has backed companies with some of the top product and design people in the Valley, and many of their companies have the Facebook platform baked into their DNA. It doesn’t hurt that McClure spent years teaching and investing in the Facebook platform effect either.

Perhaps next week’s Facebook IPO could turn out to be the fund’s undercover lynchpin to remaking the landscape of tech investing.

Disclosure: Dave McClure was compensated by GigaOmni Media with stock and cash for his consulting efforts during the early days of the company. We have not had a business relationship since the end of 2006.

Image courtesy of Steve Nagata.

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For anyone out there lucky enough not to have received one, spam texts are unwanted ads or scam promotions sent directly to your cell phone. It feels as intrusive as a stranger in your bathroom. Bloomberg reports that the volume of these messages soared 45 percent last year.

The problem is not the just invasive nature of the text but that many users also face the indignity of paying for those intrusions. Unless a user has an unlimited texting plan, she may have to pay 20 cents for every inane, unwanted text message that hits her cell phone.

And therein lies the rub. Today, free messaging services like Kik or WhatsApp mean many users may not want to pay for a text plan at all. But the requirement to pay for incoming messages means that people may feel compelled to buy the carrier plans as a form of spam insurance. Worse, the phone carriers have jacked texting plans from $5 to $20 — all this for tiny bits of data that cost virtually nothing to transport.

The Federal Trade Commission is trying to get on top of the problem and, according to Bloomberg, has prosecuted a handful of spam senders. But ironically, it’s legitimate companies like Timberland and Jiffy Lube who have paid the most in penalties — these companies are easy prey for class action lawyers who wait for them to bungle a marketing campaign and then sue for millions under the Telemarketing and Telephone Consumer Protection Act (TCPA). Companies like Twilio that offer “club-texting” services are also facing class actions.

Meanwhile, Bloomberg reports the wireless industry is looking into acquiring anti-spam services like San Francisco based Cloudmark. The industry is also grousing about the costs of investigating consumer spam complaints.

The text spam problem is real but consumers should not be in the position of paying for these privacy invasions. The FCC should force the carriers to cease charging for incoming messages until the spam menace is solved.

The reported 4.5 billion text spam messages were among the 2.3 trillion sent overall last year.

Image courtesy of Shutterstock user [Lukiyanova Natalia / frenta].

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Court filings last week reflect new developments. They show that Twilio, GroupMe and Disco can’t claim free speech as a defense, but that the companies may yet be rescued by the FCC.

The Problem

In the case of Google-owned Disco, which let users enter up to 99 phone numbers for a group message, the company’s problems began when it sent out a promotional text to every number that a user entered into the app. Even if a Disco user had yet to send a text message, everyone included in a group received a text saying “Disco is a group texting service. Standard SMS rates may apply or chat for FREE w/ our app – http://disco.com…”

Class action lawyers soon pounced. In two lawsuits filed in California last summer, cell phone owners accused Disco of violating the Telemarketing and the Telephone Consumer Protection Act (TCPA), a law that provides a fine of up to $500 for every illegal message.

Google (NSDQ: GOOG) responded by trying to have the case thrown out on free speech grounds. But last week, U.S. District Judge Yvonne Rogers refused, saying the Disco promotional message was unprotected commercial speech. And in what may be an even worse development for Google, Rogers also refused to rule that Disco was not an autodialer for the purposes of the TCPA. The app, she noted, “harvested” phone numbers and sent messages “en masse.”

Twilio, GroupMe and the FCC

Disco is not the only group messaging service ensnared in class action misery over “SMS Spam”. Last year, GroupMe and Twilio (which provides the back-end “short codes” that power group messaging) were also tagged by a TCPA lawsuit in the same court.

That lawsuit says the companies should pay not just for unauthorized promotional messages but also for messages that users sent to friends who had not opted-in to the service. The case provides the example of a user who received dozens of unwanted texts after he was added to a group called “Poker.”

In response, Twilio and GroupMe asked the court to suspend the case until the FCC decides if “club texting” services should be considered as a form of telemarketing. In January, the court agreed to the stay.

GroupMe is arguing in part that its messages are not telemarketing if users have given oral consent for others to use their numbers. Meanwhile, Twilio says that the FCC shoudl classify it as a “common carrier” that is immune from liability (in the same way that AT&T (NYSE: T) is not responsible for obscene phone calls).

The most recent development in the case is a filing last week from GroupMe which asks the court to reject the plaintiffs’ request to lift the stay. The plaintiffs have argued that a recent FCC decision means they can go forward against GroupMe even though the agency is still deciding the “common carrier” question.

A Headache for Both App Makers and Advertisers

These lawsuits are spooking app makers and the text messaging industry as a whole, according to Derek Johnson of Tatango, a company that offers help with SMS marketing. Johnson says that opportunistic class action lawyers are targeting app makers because they have deeper pockets than the consumers who are sometimes the ones to blame for violating the TCPA.

“There’s tons of apps and websites that use these apps to send messages. The average [settlement] is $275 per message. It’s just going to get worse.”

A court search shows that no law suits have been filed against popular messaging services Kik, Whatsapp or PingMe.

But in addition to the lawsuits against the app makers, lawyers are also targeting advertisers who trip over the TCPA in their SMS marketing campaigns. In recent years, everyone from Burger King to NASCAR to Timberland to publisher Simon & Schuster (NYSE: CBS) have paid out millions to settle class action suits. In February, Payless shoes stopped accepting claims for a marketing campaign that sent texts such as “PSST …Payless Insider, Ur the 1st to know BOGO starts TODAY 9/29!”

Johnson says the lawsuits in the media may be just the tip of the iceberg.

“I would bet that the majority of text message spam cases never make it to a class action lawsuit and get settled before taking it that far.”

What Next

In the case of Disco, the judge’s refusal to dismiss the complaint means the class action will continue to move towards a trial unless Google decides to settle. Disco itself appears to have been shut down last when Google folded a unit called Slide that had created the messaging service. (Google is likely ruing its decision to acquire Slide — the company’s other legacy is another lawsuit
in which virtual pet owners are suing over the shuttering of Slide’s SuperPoke Pets.)

Meanwhile, GroupMe and Twilio will continue to cross their fingers for a favorable FCC ruling to deliver them from class action hell. After the GroupMe lawsuit appeared last year, an industry source told Business Insider, “This is a company-killing lawsuit.” GroupMe is expecting the FCC to ask for comments on its “club texting” petition in the next 60 days.

In the bigger picture, the lawsuits are a cautionary tale for both advertisers and app makers. While invasion of privacy lawsuits are becoming almost commonplace, “text spam” appears to be especially sensitive because it is so intrusive and because many cell phone users now pay for incoming messages.

Finally, the existence of the TCPA and its potential $500 a message penalty means violations carry a nasty bite. Opt-in should be the watchword for all app makers and advertisers near the space.

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1: The social aspect is big

Many participants, and they varied from undergrads to folks in their 40s and 50s, came to see what others are up to, and to network.

Marsh Sutherland, CEO and co-founder of Referral Bonus, loves hackathons because, he said, they make his “brain tingle and adrenaline pump,” and he bonds with new friends. And, he said, “I help create something I’m proud of.”

Andres Douglas, a Boston-based developer who has participated in Facebook hackathons, Music Hack Day and TechCrunch Disrupt events, agreed that it’s all about the people. “It’s great getting to work with new people. It’s kind of like dating. We came with two [team members] and added two here,” he said.

Aaron Roth, a senior at the University of Pennsylvania, said he loves the enforced focus of the event.  ”You’re working with a team to create something new and great, in a short period of time, and work continuously through the night,” he said.

2: Don’t underestimate the thrill of adventure

There is huge appeal in trying out new things.  ”If you’re a developer, this may mean learning a new language, using a new set of APIs or building a product that’s different from your ‘day-job,’” said Jeffrey Peden, founder and CEO of CraveLabs, a Cambridge,Mass.-based maker of social network marketing tools. The same motivation holds with marketers and sales people, he said. They all want to try something new.

Cheryl Tom, whose day job is as a Montreal-based director of front-end development for CrowdTwist.com, said she welcomes the opportunity to hone her skillset and add new expertise. This weekend she learned Facebook and Twilio APIs.

3: They’re great talent pools

Several attendees that are already in established businesses use hackathons to check out prospective programmers and developers. Said Peden: “There is no better way to evaluate folks than to see how they go through a 30-hour, start-to-finish marathon of trying to build something — and it’s not something you can just show up at the end to discover.”

Several attendees said they’d received feelers from prospective employers.

4: They’re addictive

Nearly every AngelHack attendee seemed to be a hackathon veteran.  Sutherland has participated in several Boston Startup Weekends and is helping to build a similar event in Spokane, Wash.

Patrick Leahy, a business student at Penn’s Wharton School, may be an extreme example. On January 13, he was in the 48-hour PennApps 2012 hackathon. On February 27 it was the 72-hour paid hackathon for Wharton MBAs. This weekend was AngelHack. And Tuesday he’ll be aboard the StartupBus Boston for a 73-hour traveling hackathon to South by Southwest.

5: People like prizes

For all the talk of camaraderie and collaboration, free pizza, Red Bull and beer — there are also prizes. Teams get cash money for the best use of APIs from sponsors — Microsoft Bing, Box, Viximo, Twilio — and others.  There’s a free Geeks on a Plane trip. And tickets to the upcoming GigaOM Structure:Data conference.

Asked if the prizes mattered, Penn’s Roth said: “Oh, yeah. Big time.”

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This should help give rise to even more VoIP apps that can offer free or cheap Wi-Fi calling and even replace traditional phones. But it can also can help transform existing apps that want to add voice interactivity.

This is a natural extension of Twilio’s goal of providing communications tools to developers so they don’t have to have deep telecom skills. The company started out hooking into the old copper-based phone system to help developers add voice and SMS. Last year, it added the ability to support VoIP calls but that was from the browser. Now, it’s extending support for VoIP calls to mobile developers, starting with iOS devs.

“I think this is going to be even bigger (than the previous VoIP Twilio service) because there are so many compelling use cases and activities around mobile application development,” Thomas Schiavone, Product Manager at Twilio told me.

Schiavone said the SDK could be used in gaming apps to help competing players communicate in real time or through voice messages. Or a commerce company could use it to add customer service support to their shopping apps. Perhaps, a developer could build a social phone connected to Facebook and Twitter that allows people to just dial using names. A call center could just arm its workers with an app and an iPad to handle calls. Twilio Client for iOS offers support for presence detection and also has tap-to-call features within apps that can feed information to CRM, advertising or analytic partners.

So far, 2,000 of Twilio’s 75,000 developers have signed up for Twilio’s mobile SDK beta program. Pricing will remain the same as the previous VoIP offering: a quarter of a cent per minute. Not every app will be able to add this functionality but it’s going to be interesting to see what kind of added pressure this pust on the existing mobile voice business of carriers. Operators are already seeing more pressure from VoIP alternatives and they’re testing out their own VoIP options. Now, there’s going to be even more need to figure out how to move forward in a world in which all kinds of apps will have cheap VoIP calling.

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