Snapjoy wrote in a blog post Wednesday that it doesn’t plan to shut down its own service, but will instead combine with Dropbox to give its customers more photo options:

As a fellow Y Combinator company, we’ve always admired Dropbox and loved their product. From the moment we met the founders, it was clear we shared a common goal. By combining forces with their amazing team, we can leverage the technology and scale of their platform and focus on what matters — delivering an incredible photo experience to over 100 million people.

So what happens next? First and foremost, don’t worry — your photos are safe! Though we won’t be accepting new signups, existing users can continue to use Snapjoy to share and enjoy photos just as you do now. We’ll be in touch with more information over the coming weeks.

Snapjoy currently provides its customers with a photo library stored in the cloud, so it’s a natural fit with Dropbox’s more expansive options. Dropbox has been pushing its customers to store their photos with the service, understanding that when a customer puts photos somewhere, that customer is more likely to stay and become attached.

The companies are both alumni of Y Combinator — Dropbox is one of the most profitable alumni of the startup incubator, and Snapjoy just went through the program in the summer of 2011.

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The changes scale back how much money startup founders will receive with the YC program — $80,000, down from $150,000 — but YC said it would organize network connections with notable local investors, which is arguably what YC is all about — building connections and networking while getting critical feedback as your company gets off the ground. Sure, it’s less cash, but it seems unlikely the changes will halt the flow of applications that come to the incubator each year from startups desperate to join. And the group hopes it will decrease founder disputes without hurting any of the successful startups.

In a post, Y Combinator explained that the decision shouldn’t hurt successful startups — who can still go out and fundraise after Y Combinator — and will cut down on founder disagreements for the companies who go bust, since there will be less to fight over. The decrease in initial funding could prove tough for some hardware companies, who tend to need more cash upfront, or international founders looking to secure visas and relocate, but otherwise should be an improvement, said YC partner Harj Taggar.

“It just made the disputes more heated becasuse there’s more at stake,” he said.

Initially, all companies selected as part of a Y Combinator class were offered a convertible note for $150,000 from investors Yuri Milner and Ron Conway. While Y Combinator wasn’t directly making that investment, it explained in a blog post that it ended up taking part in the complicated process. So, YC decided to create its own investment to simply the process:

“Although we didn’t organize this program, over the years we ended up de facto managing it, and it was awkward to manage something we hadn’t started. So we decided to take control of the situation and replace it with something of our own design.”

Now, YC startups will still receive a convertible note, but only for $80,000, and it will come from $20,000 each from Milner, Andreessen Horowitz, General Catalyst, and Maverick Capital. Conway is notably absent from the list.

While upcoming classes of YC startups will likely be disappointed in the funding changes (who wouldn’t prefer twice as much money when starting a company?), the incubator has never been about making the most money possible in a few months. It’s about building connections with Silicon Valley investors, access to later funding rounds, and an alumni connection that can help with everything from finding office space to hiring programmers.

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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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As I moved from the acceleration side back to being an entrepreneur, I wanted to systematically list what I’d learned and work out what entrepreneurs could generally benefit from. I also ran a survey and a string of interviews to find the value that startups expect from accelerators — and ask why they actually got. My findings form the backbone of my book Speed Up Your Startup: What Entrepreneurs Should Learn From Accelerators To Succeed With Their Businesses. 

What I found was there are 10 primary ways accelerators add value to startups. Breaking them down, we’re able to see how that value is produced, and come up with ways to get the same advantage elsewhere. The goal is both to demystify and examine the workings of a successful accelerator, and produce recommendations that startups can act on.

Let’s take a look.

1. Generating and validating an idea and a business model. Accelerators help through expertise in the field, knowing what has worked and what hasn’t before, and what others are doing that is similar. 

2. Investing and finding more investors. There is more to startup support than money, but it helps a lot. As well as the validation offered by the previous point, investors also like the validation provided by other investors. A startup from an accelerator program has already passed a certain vetting process and is thus likelier to be interesting. This also works in the case of co-investing: many investors like co-investing with proven accelerators and VCs.

3. Providing contacts and opening doors. A good investor can open doors for you that you wouldn’t even get to knock on yourself. This also goes for customers, partners, potential hires and media contacts. Accelerators that have proven successful in the past — or ones that have successful individuals behind them —are more interesting and thus have the strongest contacts.

4. Providing mentors, advisors and guidance. This is a key component of many programs. The startup world runs by advising and mentorship. Other founders share their own experiences on their blogs, in the talks they give, and in the mentorship sessions at accelerator programs. These are both networking opportunities and learning opportunities for startups, but primarily they are geared toward telling the startups what they should do to multiply their chances of success.

5. Providing hands-on help or education. If the startup needs to do something that they can’t do themselves, accelerators may either help them, train them or help find someone to do it for them. It is common for an early-stage accelerator to help in company formation, for example. Some have experts-in-residence for instance in marketing and recruiting. 

6. Helping in product development and testing. An accelerator can help shape the product while it is being developed. This depends much on the length of the program and on the program’s focus. It’s also key whether this is done within the accelerator’s core team, by their immediate network or by securing test or pilot customers and users externally.

7. Helping with product marketing and user acquisition. Accelerators are very concerned with getting real users and customers for their startups, and some help with this by providing hands-on resources for marketing. Without large marketing budgets, the most efficient way to ensure this is building products that have marketing built into their logic.

8. Providing a peer group in a high-pressure environment. Founders get best along with other founders — not because of their amicable personalities, but because they share a passion for doing something special that outsiders often may not understand. While that’s at least a generalization and at worst a cliché, having a peer group who face similar challenges can be highly motivating. Time pressure may seem like a bug, not a feature, but it’s a success factor in a startup accelerator. Deadlines are tangible measures of discipline — and enforcements of it.

9. Providing a physical location and support resources. A place to work from can be a co-working space, an office or a series of temporary gatherings. Physical resources like printers, chairs and coffee makers also make a startup’s life easier.

10. Negotiating and providing discounts, freebies and perks. This is slightly related to points 3–5, but worth underlining separately due to their potential impact. For example, Amazon Web Services partners with leading startup accelerators and offers free credits to their services, making the infrastructure choice effortless to many.

The survey confirmed this breakdown, but also unearthed some interesting differences between what startups expect from accelerators and what they actually receive from them.

Mentorship and advice from the core team, for example, had both high expectations and were deemed valuable by startups taking the survey — but customer and partner contacts in the industry didn’t fare as well.

Forty nine percent of respondents who had not participated in an accelerator reported that customer contacts would be very desirable. However, only 22 percent of the participants reported that the industry contacts provided by the accelerator had been excellent. Forty six percent reported these to have been “neutral” or “poor”. More detailed answers support this, with many founders pointing out that an accelerator would add the most value by providing partner or customer contacts. “Industry fit” was also mentioned as an important criteria when selecting an accelerator program in the first place. 

The lack of auxiliary business services – such as company formation, accounting or payroll processing – provided by the accelerator programs was a big letdown. 67 percent of respondents reported these as “poor” or “neutral”. At the same time, in non-accelerated startups, 65 percent of respondents placed these services in the top two categories of interest.

The survey was taken by 151 startups and supplemented with 33 additional interviews. More about the survey and the book is at the Speed Up Your Startup site.

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Double Robotics is one of a new generation of robotics firms that’s trying to bring the technology to the masses at a reasonable price. Its product, the ‘Double’, is a telepresence robot that uses a couple of iPads (one for control, one for the telepresence imagery) and costs $2,499, although it has a lower pre-order price of $1,999.

“[The] Double Robotics investment perfectly aligns to our strategy,” Grishin said. “It is a very consumer-oriented product with potential to fit a very wide range of applications and has already proven a strong consumer demand.”

Robots for the masses

I’d hesitate to call it a consumer product myself, but I can certainly see its application in many organizations. Telepresence has never been a cheap technology – though the cost is falling – and the Double’s use of iPads is a clever way to keep prices down.

And it seems to be working. In its first post-launch month, Double Robotics apparently picked up 600 pre-orders, equating to $1.2m, from buyers in 44 countries. According to Grishin, whose fund comprises his own cash, the first customers include 24 universities and 17 Fortune 500 companies.

That interest has led to scaling problems, which is where Grishin’s cash – the first to be parcelled out since the fund launched – comes in. With the first run already sold out, the fresh injection should allow the second set to be delivered early next year. It also looks like there may be further play between Grishin and Double in the future.

“We are thrilled to have Grishin Robotics and Dmitry Grishin, in particular, as our largest investor to date,” Double Robotics co-founder David Cann said. “After our public launch in August, we met with Grishin Robotics and were immediately impressed with their mission and deep knowledge of the robotics industry’s past mistakes and potential future. We look forward to working with Grishin Robotics in the years to come as we build our business.”

Here’s a reminder of what the Double looks like:

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Once Hiptype’s plugin is added to an ebook, it provides insights like reader demographics, reading behavior (where people start or stop reading; what they skip), conversion patterns (who buys an ebook after reading a free sample); and sharing and highlighting behavior (which passages readers highlight or take notes on). Publishers then log into their Hiptype accounts to see a dashboard with visualizations of the data. Hiptype also helps publishers run Facebook campaigns and target readers with personalized recommendations.

Hiptype launches in beta this week and is working with a limited number of publishers, whom 26-year-old founder and CEO James Levy (cofounder is 19-year-old Sohail Prasad) would not name — though a sample book profile for 50 Shades of Grey suggests Random House might be one early client. Other publishers — as well as self-published authors — can request access on Hiptype’s website and will be invited to join in waves. The first book is free. After that, Hiptype will charge $19 per month per book for a basic package (including data from up to 1,000 readers and basic insights and trends) or $99 per month per book for a pro package (including data from up to 500,000 readers, detailed insights and trends, ad management and personalized backlist recommendations for readers).

One possible concern is privacy. “We don’t want to discourage the conversation about privacy,” Levy said, noting that while all of the data Hiptype collects is anonymous, users can opt out completely. The company is also looking for ways it can improve its service for readers. In beta, end users have requested that Hiptype make its data available to them. For example, Levy said, a teacher could track how students are interacting with the books they’ve been assigned to read.

It doesn’t work everywhere yet

Hiptype’s largest limitation is that it doesn’t work on every platform. The plugin only works on platforms that support HTML5 and allow Javascript to be embedded within a book. Apple, which supports EPUB3 and HTML5, is in. But e-ink devices, like Kindle and Nook e-readers, web-based readers like Kindle Cloud, and desktop e-reading platforms are out.

Apple is estimated to have about 10 percent of the ebook market, with Kindle at 55 to 60 percent and Nook around 25 percent. In the case of Kindle and Nook, we don’t know how much of their usage comes from devices versus mobile apps, but for now Hiptype is missing a large portion of the ebook market.

Levy says Hiptype works on most iOS and Android e-reading apps, but wouldn’t clarify what those are beyond “some of the most popular e-reader apps on the most popular operating systems.” He says Hiptype is in discussions with ebook retailers and it’s “paramount to our success that we have an open line of communication.”

When publishers do see the data on their books, “it can be a little bit depressing,” Levy said. Publishers testing Hiptype in beta, for instance, were surprised by “how low conversion rates are” — early data suggests that only three to four percent of people who download a free ebook sample go on to buy the book — and how few people who do buy a book finish reading it. “It can be a bit of a bummer,” Levy said. “But as soon as you start measuring, you can do tests and see what moves the needle. We’re already doing research on the data we’re collecting. As data hackers, we think there are underlying patterns here even if they’re not apparent at first.”

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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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Khosla described that initial seed fund back in 2009 as available for the “highest risk projects,” that “often cannot find any other funding.” The California pension fund committed to invest about $60 million into that first early stage seed fund. At the same time, back then Khosla Ventures also closed a more traditional $750 million fund, and these two funds were one of the first times that Khosla Ventures had used outside investors for a fund — previously Vinod Khosla had been investing his own funds.

Fast forward to late 2011, and Khosla Ventures closed on its fourth fund of $1.05 billion. When that was fund was closed, Khosla Ventures said that it would not be changing its strategy of investing, and would continue to invest in Internet, mobile and clean tech ventures “roughly in the same ratio as previous funds.” Essentially the firm was saying it’s not moving away from cleantech investing.

But the returns for most venture capitalists in cleantech have been hard. Khosla Ventures Partner Pierre Lamond told the San Jose Mercury News recently that Khosla Ventures “still invests in cleantech,” but “the firm is getting fewer pitches from cleantech entrepreneurs.” “People are shying away from cleantech and it’s clearly slowed down,” said Lamond, though he also said that there are bright spots still for batteries for electric vehicles and energy storage.

The fact that the fund is a seed fund is an indication that Khosla Ventures, like many other traditional venture investors, are now looking to find web and mobile startups at the very early stage. There’s been an increasing amount of competition at this level by incubators and accelerators, like Y Combinator and 500 Startups.

We’ll add more information about this filing for the Khosla Ventures Seed B when we know more.

Image courtesy of GigaOM.

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One of the world’s largest mobile operators, Telefónica is particularly big in Latin America, and that’s where most of its Wayra academies are already sited. There are also two academies in Spain, and further accelerators are being set up in the U.K. and Ireland.

And now it’s Germany’s turn. But why Munich rather than hot startup town Berlin? The answer appears to lie in Munich’s longer heritage as a base for established tech firms, ranging from Siemens to Microsoft.

“Munich has an entrepreneurial ecosystem with great potential which is pretty unique and fits with what we want to achieve,” Wayra Deutschland Bernhard Kirchmair told me. “We’re not focusing purely on internet technologies. Our scope is a bit broader – it’s about being wireless.”

Wayra’s looking for startups with something to offer in fields such as the cloud, social media, m-health, e-health and security. It will select up to 10 of the applicants for each six-month accelerator program, with seed funding of up to €50,000 ($66,000) for each startup. In return, Telefónica gets a 10 percent equity stake, along with first rights on future funding and on taking the resulting product to market.

Kirchmair insisted that Telefónica will treat the startups fairly when it comes to those first rights, and will adhere to market valuations. But he also pointed out how much the company can offer its prospective fledglings.

“We’re not aware of any other seed funding program by a huge corporate,” he said. “Wayra is a gateway to 300 million customers, and we also throw in out global and local marketing, advertising and press power. We can make the Wayra startups famous in a pretty short period of time.”

Of course, Wayra also provides mentoring and help with product internationalisation, and a deal struck last week between Telefónica and Microsoft also means that the startups will get subsidised Azure access and other benefits of the BizSpark program.

Once the startups have left Wayra, Telefónica will even provide Y-Combinator-style demo days and networking for alumni, VCs and angels.

Applications are being opened later this month, and will be open between 21 May and 8 July — with a ‘Campus Party’ to be held in Berlin between 21-26 August that will serve as a pitching platform. The first program will kick off in September.

The downside for some startups — certainly those in the thriving Berlin scene — is that they’d have to at least partly relocate to Munich for six months. But will they think that’s a small price to pay for going the way of Wayra?

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The threat of rampant piracy — the downloading and re-distribution of what the content industries claim are billions of dollars worth of intellectual property — is continually raised to justify ever-more-draconian laws such as the recently proposed SOPA and PIPA bills. While they have been shelved (at least for now), the pressure on legislators to come up with new variations continues, as does the pressure to launch federal cases against service providers like Megaupload or Hotfile. Y Combinator founder Paul Graham argues that this phenomenon isn’t the natural order of things, but stems from the failure of those content industries to adapt to the new realities of the internet. He is right — as long as they continue to resist, the battle will go on.

Graham compares what the movie studios and record labels and other entertainment and media conglomerates are trying to do with someone trying to charge money for the air — a reference to an old folk tale about a student who was sued by a restaurant owner for stealing the smell of his food (according to the story, the judge ordered the student to repay the man with the sound of some jingling coins). Their control over the packaging and distribution platforms that we used to take for granted gave them the ability to do that, Graham says, but that is no longer the case:

The record labels and movie studios used to distribute what they made like air shipped through tubes on a moon base. But with the arrival of networks, it’s as if we’ve moved to a planet with a breathable atmosphere. Data moves like smells now. And through a combination of wishful thinking and short-term greed, the labels and studios have put themselves in the position of the food shop owner…

This metaphor may not be exact, but Graham’s point is well taken: The environment in which content-owning companies of all kinds are operating now has irrevocably changed, and so the business models and processes must change as well — and the points at which we see friction are when these industries try to apply the old model to the new reality. So geo-blocking of sporting events and time -windowing and other tools that used to define markets for video run headlong into the desire of someone like Union Square Ventures partner Fred Wilson to watch a Knicks basketball game, and “piracy” is the result. But piracy is just a symptom of a broader problem.

The game has changed, and playing the old game is not working

So should these industries just give their content away for free? Of course not. But Graham argues that there needs to be a realization that the game has changed, and therefore different rules are required, instead of just repeated attempts to get the courts and governments to reinforce the old rules. As he puts it:

Should people not be able to charge for content? There’s not a single yes or no answer to that question. People should be able to charge for content when it works to charge for content. But by “works” I mean something more subtle than “when they can get away with it.” I mean when people can charge for content without warping society in order to do it.

As a number of observers have pointed out, including author Matt Mason in his book The Pirate’s Dilemma, piracy in virtually any industry is a sign that there is something wrong with the fundamentals of that market — in effect, it means that potential customers are finding it more worth their while to pirate something than to pay for it. And if examples like comedian Louis CK’s recent download experiment have shown anything, it’s that people will pay for something if they value it highly enough, and if you make it as easy as possible — even if the option exists to get the same content for nothing.

Musician Jonathan Coulton has shown that it is possible to make a good living from music even if you give it all away under a Creative Commons license, as Techdirt has noted a number of times (fellow musician Neil Young recently said that “piracy is the new radio”). And Coulton had some fascinating comments to make in a recent interview about the value of the internet vs. the value of the content industries:

[I]f as a consequence of letting [the internet] do what it wants, we destroy a number of industries, including the record business, and maybe even including the rock star business, I think that humanity will be better off. I, for one, think that the internet is one of the greatest human achievements, ever. It’s an amazing tool and we have only just begun to explore the possibilities. To me, it feels like it’s a part of our evolution as a species. I value it as much as I value the Bill of Rights.

That’s probably not a common viewpoint, but it is a far more optimistic one than the doom-and-gloom message from the content industries, or the repetition of absurd claims about how much value is theoretically being destroyed by piracy (for more on that, see Rhapsody founder Rob Reid’s recent TED talk about the “$8-billion iPod”). In the end, as Brad Burnham of Union Square argued during the SOPA and PIPA battle, the internet isn’t just a tool, it’s actually a belief system — and the central principle is that the kind of behavior the internet empowers is fundamentally good for society.

The ironic thing is that content companies would probably create even more lasting value if they tried to adapt to those principles instead of fighting them.

Post and thumbnail images courtesy of Flickr users Paul Sapiano and http://www.flickr.com/photos/yanrf/1408711192/“>Refracted Moments

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