EmSense marks Foundry Group's third investment in our Human-Computer Interaction (HCI) theme (joining Smith & Tinker and Oblong), as well as our second investment in a company whose technical founders, including CTO Hans Lee, hail from the MIT Media Lab, a place chock-full of big-brained wizards who can do magical things with technology. In our previous blog posts about HCI we've alluded to the idea that computers might one day react to our thoughts. In fact, that has been possible in the lab for years, and the technology that enables this is now leaving the labs and is being deployed in the real world.

EmSense's technology is based on rigorous EEG neuroscience applied to thousands of participants and uses an elegant headset that enables non-invasive tracking of brainwaves and other biometric information including temperature, motion, eye movement, pulse and breathing data. The portability and scalability of the EmSense headsets facilitates multiple-response testing of an audience's reaction to a media experience anywhere in the world.

Now that you've made it to the fourth paragraph of this post, you might still be asking, OK, but what does EmSense actually do? In the wide world of media, which for EmSense includes everything from advertising to video games to politics, marketers, brand managers and political candidates all want hard data on how an audience will respond to their product, be it a TV commercial or a first-person shooter.

The focus group, user-testing and surveys have traditionally been the means to gather these data, but such methods typically rely on the audience explicitly answering questions about their reaction to the media they've just experienced. Certainly, much of this information is useful and actionable, but, it isn't always reliable, for all the reasons that humans aren't always reliable witnesses, nor does it track these reactions in a way that can be directly correlated to a distinct moment during a media experience. EmSense's technology, which correlates brainwave data and other biometric data, enables a reliable and (most importantly) a quantitative way to measure an audience's cognitive and emotional engagement throughout an experience. We're big believers in the market potential of technologies that make the formerly unmeasureable measurable, and therefore bring the power of analytics to decision-making processes that previously relied more on gut than brains, more on art than science.

One of things that attracted us to EmSense was the fact that they already have customers across the media spectrum, including advertising, consumer products, politics and gaming. In fact, Coca-Cola engaged EmSense to help them decide which two TV ads they should run in the Super Bowl. Not only did EmSense help them winnow down the list of candidate ads, the data from the finalist ads was used to make final edit decisions in the spots that ultimately aired.

In addition to EmSense's technology credentials stemming from their MIT Media Lab DNA and their enviable early customer list, the company's executive team really stands out - CEO Keith Winter's background includes executive level roles at Exponential, Electronic Arts and Disney Interactive, Chief Analytics Officer Elissa Moses formerly ran Global Consumer Strategy at Philips, Chief Science Officer Michael Lee spent a decade at HP Labs, and board member and angel investor Tim Koogle is well known for his role as Yahoo's first CEO.

We are excited to join the EmSense team at this stage in their development as a company. With their initial customer success well demonstrated in multiple markets, they are poised to further accelerate their growth, and we are delighted to be backing them and assisting them in the next phase of their journey.

Brad wrote about the financing and Zynga's progress on his blog in a post titled Doubling Down.  There were numerous other articles and blog posts about the financing today, including extensive ones in the Wall Street Journal and TechCrunch.

While none of us attended CU, we’ve all adopted it as our “other school” and have become very involved with several different groups.

Silicon Flatirons – One of the most active entrepreneurial groups was born out of the law school. Yes, the law school. It’s called the Silicon Flatirons and it is made up of business leaders, financiers, academics, entrepreneurs and other folks interested in building a nerve center of thought leadership in issues in technology. The program was created by Phil Weiser, one of the most forward-thinking legal scholars in the country. In addition to having nationally-known guest lecturers, roundtable and educational programs for the community at large, the center has begun an ambitious program that will focus on entrepreneurship activities in the Boulder area. Specifically, a separate board on entrepreneurship has been created and we are quite active with it, with Jason serving as chairperson. Recent achievements include the creation of an “entrepreneurs unplugged” program whereby successful and nationally known entrepreneurs are interviewed in an “inside the actors studio” type format. Anyone in the community is free to attend. This board is also focusing on developing a campus-wide business plan competition as well as building out entrepreneurial-based curriculum for engineering, business and law students.

Deming Center for Entrepreneurship– Though its graduate program is relatively small, the Leeds School of Business at the University of Colorado at Boulder has consistently been recognized for having one of the top entrepreneurial programs in the nation. The Deming Center for Entrepreneurship serves as the business school’s hub of entrepreneurial programs and activity. Led by executive director Paul Jerde, the center benefits from an active advisory board of successful entrepreneurs, executives and venture investors. Chris has served on the center’s board for the past seven years. The Deming Center’s program combines an integrated academic curriculum with a “connected learning environment” that engages the broader entrepreneurial community to provide students with hands-on learning and mentorship. Fitting for an organization based in Boulder, the Deming Center’s programs have been at the forefront of integrating environmental sustainability with entrepreneurship. Examples of the center’s leadership include its international Cleantech Venture Challenge, the Sustainable Opportunities Summit, and Sustainable Venturing Initiative, as well as more traditional activities such as hosting the Mountain regional finals of the international Venture Capital Investment Competition and a number of internal business plan competitions.

Bard Center – Established through a grant from Denver businessman Richard Bard and his wife Pamela, the Bard Center for Entrepreneurship at CU Denver offers graduate level courses in business and entrepreneurship to students enrolled in the CU Denver system. Since its founding in 1996, the Bard Center has seen almost 2,000 students enroll in classes through the program and has awarded just under 500 certificates of entrepreneurship. The center is supported by a strong board of advisors, including Seth. In addition to the academic programs it runs, the Bard Center also sponsors a large business plan competition and supports a small venture fund to invest in student-initiated businesses. Under the stewardship of Kathy Kuntz (blog, LinkedIn) look for the Bard Center to continue to expand its influence in the Denver entrepreneurial scene.

National Center for Women & Information Technology – Funded by NSF, Microsoft, Avaya, Pfizer, Bank of America, and a number of other members of its workforce alliance, the National Center for Women & Information Technology is the pre-eminent national organization working to engage women more actively in the field of information technology and computer science. NCWIT believes that inspiring more women to choose careers in IT isn't about gender parity; it's a compelling issue of innovation, competitiveness, and workforce sustainability. NCWIT is housed in CU’s new ATLAS Building and has quickly become an important national program at CU engaged in promoting innovation in the computer science field. Brad has been chairman of NCWIT for the past three years.

All of us believe that a strong local university that has a culture of entrepreneurship is a key component of any local entrepreneurial ecosystem. We are proud of our involvement in the CU entrepreneurial ecosystem and hope to continue to engage it and help improve it over the coming years.

We are extremely pleased to announce our investment in Topspin Media's Series B financing. Topspin is a media technology company headquartered in Santa Monica, California, dedicated to developing leading-edge marketing software and services that help artists and their partners build businesses and brands. Topspin's platform helps artists manage their media catalogs and other assets, connect with fans and generate demand for their music.

Had our investment closed a couple of weeks earlier, we wouldn't have been able to talk about it immediately, but the company recently un-stealthed themselves in true rock & roll style by appearing on the cover of the June 28th issue of Billboard magazine.

As most folks who know Foundry Group already know (via numerous blog posts, emails and Facebook messages promoting their band, Soul Patch), both Ryan and Jason are avid, life-long musicians, and have played music together since they met in 2000. Since that time they've also been the "music guys" on the investment team, looking at every music-related opportunity that came their way.

Over the past eight years of looking at music-related investment opportunities, Ryan and Jason didn't make a single investment until now, though they carefully followed the progress of startups and incumbents alike over the years and brainstormed frequently on the forces at work that were reshaping the industry. From this Ryan and Jason created a blueprint of what the future of the music business might look like. In some ways, the bar for making a music-related investment was even higher than it was for other markets, because they didn't want to let their passion for music cloud their judgment about a business's long-term potential. Given the violent and ongoing disruption in the recorded music industry unleashed at the turn-of-the-millennium thanks to the rise of the mp3 format, p2p networks , broadband deployment, aggressively litigious record labels and the iPod and iTunes Music Store, it was nearly impossible to get comfortable with any business that wanted to play in the music arena, particularly if it required licensing of music catalogs for download or streaming rights or anything else that pushed copyright holders outside of their comfort zone.

In VC, as in life, timing is everything, and, and it is often said that being early is the same as being wrong, so we have stayed out of the digital music fray until now. In fact, Topspin co-founders Shamal Ranasinghe and Peter Gotcher had been kicking around the Topspin idea for many years, but shelved it until 2007, when they finally felt like the world might be ready for a company like Topspin. They raised a Series A round from Redpoint Ventures and then, in April 2008, landed former Yahoo! Music GM Ian Rogers as CEO.

Topspin has assembled a phenomenal team of music technology veterans to execute on their mission. Topspin Chairman Peter Gotcher was founder and CEO of Digidesign, the company that created the Pro Tools audio workstation platform, which revolutionized the recording industry. He sits on the board of Dolby Corporation and was also a founding venture partner with Redpoint Ventures and led investments in pioneering music-tech companies such as Line6, MusicMatch and Pandora. Chief Product Officer Shamal Ranasinghe worked on one of the first mp3 jukeboxes at RealNetworks and has defined product vision at MusicMatch and Yahoo! Music. Finally, CEO Ian Rogers was GM of Yahoo! Music, where he landed via the acquisition of MediaCode, where he had been President and CTO. Ian has also worked on the label-side of the business as President of New Media at Grand Royal, and also did a stint at Nullsoft, creators of WinAmp and SHOUTcast. With a pedigree like this, it was easy to get excited about the team behind Topspin. To top it all off, Ryan has known Peter and Shamal for about a decade and actually introduced them to one another many years ago.

We think the timing is finally right for a company like Topspin to have a major impact in the music world. The distribution of digital music has finally gone mainstream, with Apple's iTunes Music Store beating out bricks-and-mortar giant Wal-Mart as the largest music retailer on the planet. Apple's success in this regard is no panacea, but it has paved the way for other online retailers, and we are now seeing a second phase emerge with more educated consumers beginning to reject DRM and move their purchasing to higher-quality DRM-free MP3s offered by the likes of Amazon.

But this shift really just sets the stage for the continued evolution of the business of being an artist in this new era. Thanks to technology, the physical world scarcity model has been upended. The costs of recording and producing world-class music are nearly zero (though, arguably, talent is still required) and the costs of distribution are also near zero, which has eroded the traditional advantages enjoyed by the major labels: exclusive access to high-end studios, a lock on physical distribution and marketing through proprietary access to radio and MTV, channels which are becoming decreasingly important. As music futurist Gerd Leonhard aptly puts it, in the broadband age, marketing is distribution.

A new, more artist-centric model will emerge, one in which the key factor for success rests completely on the ability of artists to engage directly with their fans and to seek out and discover new fans, something Seth Godin calls permission marketing. To do this well, artists, or their managers, agents and record labels need access to a platform that would be considered an "enterprise-grade" CMS/CRM suite complete with campaign management, a flexible e-commerce engine and deep closed-loop loop analytics, verticalized for the special needs of recording artists, one that provides artists and their partners with the means to conduct and grow their businesses online.

We believe Topspin is uniquely suited to deliver on this vision. Building the technology to do this is no simple task, and Topspin is by no means simply a marketing services play, but rather is a technology platform company that fits neatly in our Glue theme and has the elusive combination of technical depth and ideal management DNA to make an enormous impact in the music industry. And we're honored that Topspin chose Foundry Group as an investor, given that this team had no shortage of options when it came to raising their Series B.

Data sharing between two services is no big deal. It happens every day using RSS, Atom, XMPP, and open APIs. Two years ago this was still a novel idea and the power of an API could project a company like Twitter into geek mainstream overnight since it was easy to write a web app that could read and write from it. Or you could grab someone’s RSS feed and go to town with it. A ping server was really helpful here – rather than having to constantly check everyone’s RSS feeds, you could check the ping server and when something you cared about changed, go to the RSS feed.

One-to-one wasn’t a problem. Many-to-one shouldn’t be a problem, but it started to be uncomfortable at scale. Web services that became popular overnight had performance issues, especially when their APIs were getting hammered. The solution for some was to simply turn off specific services when the load got high, or throttle (limit) the number of API calls in a certain time period from each individual IP address.

Hmmm. Many-to-one started to break at scale, but then it got worse. Everyone realized how important it was to have an API and allow for data portability. The many-to-one problem morphed into a many-to-many problem. With this, things started to get hairy. In addition to having to deal with performance and scale, every web service has its own special API format. If you were a new web service and wanted to talk to a bunch of other web services, you had to write a bunch of code – after understanding exactly what you wanted to do with each service.

Scale the number of web services linearly. Scale the number of users linearly. Scale the number of daily interactions linearly. You get a nice steep upward sloping geometric curve (the kind that VCs love). When the number of web services, users on a web service, or daily interactions on a web service grows geometrically, it gets really messy, really fast. Imagine Flickr, Digg, and Plaxo all trying to “talk” with each of the other’s services on behalf of each of their millions of users with no intermediary and you begin to understand the magnitude of the problem. Throttling back the number of API calls or turning off APIs isn’t the solution because it doesn’t do anything to fix the root cause of the problem.

Gnip plans to sit in the middle of this and transform all of these interactions back to many-to-one where there are many web services talking to one centralized service - Gnip. Kind of like a ping server. Kind of like a CDN (Content Distribution Network). But different. Yet equally important. Maybe more important.

Gnip’s first service is a free centralized callback server that notifies data consumers (such as Plaxo) in real-time when there is new data about their users on various data producing sites (such as Flickr and Digg). Gnip’s callback service accepts a variety of existing standards including XMPP, Atom, RSS, and REST and provides pre-written convenience libraries for the most common development languages (including PHP, Perl, Python, Ruby, and Java.) If you are a data provider, it’ll take you less than an hour to integrate; if you are a data consumer you can start receiving notifications within a day.

Gnip has a lot more coming that builds on this first service in their quest to make data portability suck less.   If you are interested in playing along, head over to the Gnip Community.

This is somewhat of a departure from the typical venture capital model, in which venture partners are often islands unto themselves - free to pursue their version of venture capital in whatever way they see fit and to whom their fellow partners function less as a sounding board and more as an arbitration panel through which they must pass deals before they can be officially approved.  While we recognize that our business will still be built on individual reputations and that it's simply not practical (or wise) to have every partner involved in every aspect of the businesses in which we have investments, we believe that our team philosophy will ultimately drive better returns for the companies in our portfolio and subsequently for our investors.  For us - who each bring different expertise and backgrounds to Foundry - this is a core operating philosophy and one that we believe characterizes the next evolution of the venture capital business.

As a practical matter, this philosophy results in different behavior than one finds in a typical venture firm.  For starters, we don't have a concept of "my" deal, and as a result we are quick to share new opportunities across the firm.  The person who is the initial contact on an investment isn't necessarily the one who ultimately takes the lead on working with that company.  Typically, we very quickly get several partners involved in potential investments - both to share opinions and feedback, but also so investments don't become sponsored in a way that makes any one person feel that he needs to lobby for "his" deal.  When we get serious about a potential investment, we strive to get the company in front of all five Foundry partners early in our evaluation process.  This surfaces potential issues early in the investment process. We often then have the partner with the greatest concerns take the lead on exploring those areas further.  This is in sharp contrast to the typical venture model where a single partner typically works on a project through the point when they decide they're serious about an investment, then brings in a partner or two for a quick second look and finally brings the company in for an up or down vote by the full partnership. (In many venture firms, it's not unusual for this full partnership meeting to be the first time any of the other partners has had an opportunity to review the investment.)  We believe that by involving the full group earlier in the decision making process we make better informed investment decisions in which each of the five of us has had meaningful input.

Our team approach doesn't end once we've made an investment.  While it's not practical for all five of us to share responsibility for every deal (and we do have individual board responsibilities), we typically have several partners involved with each of our investments.  For us, this starts with fluid information sharing at the firm (the topic of a future blog post) so that each of us knows in some detail the key priorities for our portfolio. In some cases several partners attend board meetings (one as the board member, another as a board observer).  It also means that we are thoughtful about which partner takes a given board seat and that our thinking on that may change in through the life of an investment. In fact, we've already had one example where we made a change in our board representation based on where that company was in its lifecycle and the relevance of our individual partners' skill sets.  While this won't be a frequent occurrence it underscores our belief that we best serve our investors and our companies by thinking of our investments as "Foundry" investments, rather than as individual partner investments.

We recognize that our philosophy towards managing our firm may be different from others, however we strongly believe that our team approach yields better investment decisions and broader, more meaningful impact on our portfolio of investments.

We see a future in which unconnected products like toys, games, books and movies will not be able to compete with the dynamic and exciting world of the internet. To meet this future, Smith & Tinker is creating connected entertainment products that move seamlessly back and forth from online to offline and immerse the audience in a community of fellow participants from around the world.

We should also mention that the three founders of Sling Media, Blake Krikorian, Jason Krikorian and Bhupen Shah helped us out and lent their opinions and expertise when we were performing our due diligence on the company, and that the three of them were impressed enough with what they saw that they became personal investors in the company, an endorsement that meant a lot to us at Foundry Group and to the fine folks at S&T.

We are certainly excited to be part of Smith & Tinker, led by serial entrepreneur and creative force Jordan Weisman and his co-founders Joe Lawandus and Tim Lebel, who are supported by a stellar team of employees and a great group of board directors, advisors and observers including Gilman Louie, Jim Whims, Randy Rissman, Steve Arnold, Foundry Group's Ryan McIntyre, and co-founders Jordan Weisman and Joe Lawandus.

Intrigued? We can't wait to talk more about S&T when the time is right, and we look forward to aiding and abetting them in their quest to reinvent play. This will be fun...

TechStars: If you are a frequent reader of Brad's blog, you've probably seen some of his posts on TechStars. Brad's not the only Foundry Group partner, however, who is involved. We are all mentors along with many other local and nationally known entrepreneurs and venture capitalists. It's been great getting to know the TechStars teams and help build some interesting businesses. As part of our "evil plan" we figured that many of the teams would fall in love with Boulder and then decide to permanently relocate here. We're happy to report that our evil plan is succeeding. We think it's been important to the continued vibrancy of the Boulder community to not only grow, but to also import great entrepreneurial and software development talent. TechStars has also become a large hub of activity to stay in touch with the great Boulder community.

Boulder Open Coffee Club: Following on the success of Saul Klein's creation of the London based Open Coffee Club, we decided to give a Boulder version a try. The premise was simple: get a group of people together who were all interested in technology, entrepreneurship and the like and have coffee every other week before work. The meeting would be short on agenda (e.g. "none"), but hopefully the energy of the group would prove to make for interesting meetings. There were a couple of challenges going in: 1) it was unknown whether the idea of a regular, non-agenda meeting with a bunch of people who may have never met would attract high-quality folks and be sustainable over time and 2) Jason, who took the lead in creating the group, doesn't drink coffee. One year later, we are happy to report the BOCC is alive, well, thriving and growing in both quality and size. Jason, however, still sticks to fruit smoothies.

So what is the BOCC? It's a regular gathering place for entrepreneurs, technologists, service providers, investors and voyeurs of all the aforementioned to come hang out and chat. Sometimes, someone raises an interesting topic (are patents evil? should Microsoft buy Yahoo!?), or perhaps comes with a problem (my company is experiencing "X" what do I do now?), or maybe uses the forum as the first time they pitch their new idea in public. And, of course, it's a great place to meet new people and expand connections in the Boulder entrepreneurial ecosystem.

Perhaps the best quote from a regular BOCC attendee: "The great thing about these events is that you can just be yourself. Unlike the neighbor's barbecue party, everyone here will not only 'get you', but they'll probably even understand you, ask intelligent questions and create an engaging experience."

We are already on our third coffee shop, as we've needed to upgrade in size. We've had several folks start companies together, find folks to partner with and one company even made a software sale to Foundry to help us manage our finance department. We look forward to seeing how this group continues to grow. An interesting note is that many other places that have attempted to start similar groups have not found the support that we have found in Boulder.

Colorado Governor's Innovation Council: Last fall, Brad helped create and now co-chairs the Colorado Governor's Innovation Council.  This is a group of about 30 local computer, telecom, and software technology executives and entrepreneurs who are working with key members of Colorado's state government to help promote computer technology based innovation, entrepreneurship, and broadband throughout the state of Colorado.

Entrepreneurs Foundation of Colorado: As part of an international initiative to promote philanthropy among entrepreneurial companies, Brad co-founded the Entrepreneurs Foundation of Colorado (EFCO) early 2007.  As of today, there are 20 member companies representing around 1,000 employees, including Foundry Group.  EFCO is a great way for companies, their employees, and their investors to give back to the Colorado community. If you are interested, please see our prior posting on EFCO for details.

Startup Weekend: Startup Weekend is an experiment that started in Boulder created by Andrew Hyde. The mission of Startup Weekend is to recruit a highly motivated group of developers, business managers, startup enthusiasts, marketing gurus, graphic artists and more to a weekend event in cities around the world that builds communities, companies and projects.  The concept is to create the building blocks for applications and companies in an extremely short period of time - specifically a weekend.  It started with the supportive, creative and talented community in Boulder, which is the only city to have hosted two weekends. All of us at Foundry have been supportive of the efforts.

The widely asked question of "what does it take to have a strong startup ecosystem?" generally is responded to in a variety of ways: good schools, plenty of engineering and management talent, services support and available investment capital. However the one trait that cannot be acquired is the culture of entrepreneurship. Boulder certainly has that culture and we are happy to be a part of it. Not to be outdone, of course, is our adopted University of Colorado's role in all of this. In fact the University is a key anchor in all of this activity and in a future post we'll dive into specific initiatives that we are involved with over there.

The purpose of today’s post is to introduce one of those companies—Lijit Networks. The company fits into our Implicit Web theme, which focuses on tools and services that help users manage the information overload created by today’s Internet. The goal of the Implicit Web is to identify relevant content in a more efficient, intelligent and proactive manner and to present it in more insightful and actionable views. (You can read more about our thoughts on the Implicit Web in this previous post.)

Foundry co-led an investment in Lijit last year with Boulder Ventures shortly after we closed our fund, though our involvement with Lijit goes back to the original formation of the company. Brad Feld helped connect Todd Vernon and Stan James, Lijit’s co-founders, and led an angel round in the company prior to our raising our fund. Shortly after the angel round closed, High Country Venture invested alongside Lijit’s angel investors, giving the company plenty of capital to get to its first venture round.

We’ve known Todd, Lijit’s CEO, for over a decade (and were investors, via a prior venture fund, in another company that Todd co-founded). During that time we’ve come to appreciate Todd as having that compelling mix of proven entrepreneurial skills, a sharp mind and a combination of both technical prowess and business acumen. He’s also an all-around great person to work with. Once we closed our fund, we were delighted to invest in Lijit and back Todd again.

Lijit provides search tools to bloggers and other information publishers. These tools help readers search a blogger’s site for specific topics and content while also providing the blogger/publisher with a wealth of metrics and statistics about their readership and their interests. Even more compelling—this is where the Implicit Web theme comes in—Lijit also allows a blog’s readers to simultaneously search that publisher’s entire online ecosystem, whether it be a blogger’s blogroll or content that blogger has created elsewhere, such as bookmarks on del.icio.us, photos on Flickr, videos on YouTube, etc.

If you want an example of Lijit’s search widget, look at the upper right-hand corner of this page; the search box you see there is powered by Lijit.

The theory behind Lijit’s goal of enabling search beyond an individual publisher’s site is that content that is interesting and relevant to a reader’s search query often extends beyond that individual publisher’s site. In the blogosphere, conversations and content are often interwoven across multiple locations and, for any given blogger, his or her blogroll is a clear manifestation of affinity with other bloggers. That affinity might be a result of a similarity in the types of topics being covered, similarity in mind-set, or professional or personal relationships.

Using relationships among information publishers to generate and filter search results is a terrific example of how the Implicit Web should work. Rather than force the reader to laboriously identify relationships between multiple blogs, search each blog individually and manually aggregate the results, Lijit automatically discovers and exposes those relationships and the resulting relevant content—all in one simple step.

Regardless of the reason for the affinity, it stands to reason that if a reader is interested in, say, AskTheVC’s coverage of venture capital term sheets, the reader may also be interested in Brad Feld’s, Seth Levine’s and Fred Wilson’s views on that same topic. Why? Because Brad, Seth and Fred are all well-known VC bloggers who openly share their opinions drawn from their experience as venture capitalists.

One could argue that an AskTheVC reader might discover Brad’s and Seth’s blogs on his own—after all, we all work together at Foundry Group, so how hard should it be to connect those dots? But for a casual reader, discovering Fred Wilson’s blog might be more difficult given the lack of an obvious direct connection. Lijit intelligently bridges that disconnect by recognizing that Fred Wilson, Brad and Seth are all members of AskTheVC’s blogroll and thus all represent potential sources of relevant, searchable content for AskTheVC’s readership.

While we think that Lijit’s better search tools are, in and of themselves, a big step forward, we also believe that they form the foundation of other equally compelling opportunities. For example, combining a map of the blogosphere’s social graph with the ability to discern the expertise of individual bloggers and publishers (after all, a broad enough reader base is unlikely to consistently search a particular site for topics outside of that blogger’s expertise) can yield interesting insights into what pockets of expertise exist and where they reside on the web. Alternatively, the same data are very relevant to identifying various affinities and interests across a wide swath of blogs and content sites for the purpose of highly targeted advertising.

If you have a blog or are a content publisher and don’t yet have Lijit’s search widget installed yet, you’re missing out—give it a try and we bet you’ll be impressed.

In early 2007, Brad was one of the founding members of the Entrepreneurs Foundation of Colorado (EFCO). EFCO was created to encourage the various constituencies of entrepreneurial companies in Colorado (including founders, employees, and investors) to incorporate philanthropy early in the creation of their companies and contribute to the long-term health and sustainability of our community. To date, eighteen entrepreneurial companies in Colorado have joined EFCO - Foundry Group makes nineteen.

The mechanics of EFCO are straightforward - companies contribute 1% of their post-Series A equity to EFCO. This is done in the form of a warrant that is only exercisable in a change of control so that there is no administrative overhead on the company. At the time of the grant, the company also allocates the future gift to a community foundation, a specific charity, or some combination. When the company has an exit event, the cash generated from this gift is distributed to the designated organizations.

The Entrepreneurs Foundation has chapters in eight other major cities around the country and one in Israel. To date there are approximately 700 member companies (representing over 20,000 employees) who have contributed over $15 million to support various charities. In Foundry Group's case, we are contributing 1% of our carried interest (the functional equivalent of 1% of our equity) to the Community Trust Endowed Fund of the Community Foundation Serving Boulder County.

In addition to the financial contribution, EFCO serves to engage all employees of an EFCO Member Company in the process of philanthropy - to the extent that they want to. In August EFCO will have its first major Entrepreneurs Foundation of Colorado Members event where it will gather as many members and their families together for a half day to learn more about local philanthropy, engage in a specific family friendly project that benefits our community, and have some fun together.

We are proud of how quickly the Colorado entrepreneurial community has embraced the Entrepreneurs Foundation of Colorado. Given that many well known venture capital firms participate in the Entrepreneurs Foundation program on a national basis, we hope others follow our lead and up the ante by participating financially.

As part of our ongoing discussion of the investment themes we focus on at Foundry Group, it is time to discuss digital life. Certainly anyone who is reading this blog post is living a digital life, and among the partners at Foundry Group, we are all gadget-lovers, early adopters of software and online services, part-time IT support staff for our own home networks, and digital media creators, curators and consumers.

Our digital life theme evolved from our own experiences as early-adopter creators and users of digital media, as well as from time spent over the years evaluating dozens of investment opportunities that we categorized as digital home, digital living room or convergence companies. After sifting through the landscape of these digital home companies for several years, we came away with only one investment: Sling Media, makers of the Slingbox.

In fact, we began calling digital home an "anti-theme", because it seemed to serve more as a filter for companies we knew we wouldn't invest in, rather than ones we would. Our investment in Sling happened precisely because Sling was quite unique and unlike any of the other digital home companies we looked at over the years. After a great outcome with our Sling Media investment, we decided it was time to take what we learned and refine our thinking behind the digital home theme and recast and refine it into the theme we now call digital life.

So what it is different about what we are calling digital life vs. what we used to call digital home? Some of it is simply a matter of timing - when we first started looking at this area in the 2000/2001 time frame, PVRs were a relatively new concept, home network deployment and broadband penetration were just starting to accelerate and the iPod was only beginning to take over the digital music world, while the cost of processors and storage needed be halved several more times by the (thus far) relentless work of Moore's Law.

Since then, we've seen a massive increase in computing power, huge growth in storage capacity (with estimates that the average household will use nearly four terabytes of space by 2010), deep penetration of broadband, a proliferation of devices capable of playing back digital media and a huge increase in the speeds of wireless LANs. So convergence is finally (sort of) here. All media and all devices have gone digital. Users want access anywhere, anytime. But managing the explosion of media assets, networks and devices remains difficult. Software and services that just work and make our lives easier in this realm are needed to help the average user cope.

Back in the day, there was also a tendency for digital home companies to either attempt to sell gadgets and set-top-boxes or provide a software layer to power said gadgets and STBs. However, both approaches met with challenges: either low-margins from attempting to sell hardware at a consumer price point or tremendously long sales cycles and shallow revenue ramps as a result of trying to sell software to the incumbents who provide devices in the home like Scientific Atlanta, Motorola, DirecTV, Sony, Phillips, D&M, etc -- none of whom has a clue when it comes to delivering a good user experience via tight software/device integration. A third approach was to increase the lifetime value of a user by tying a device to a subscription service or revenues from ongoing purchases of content to feed the device (think TiVo and iPod).

When we invested in Sling, we had been looking at companies that fell into the above three basic buckets for several years. Sling had a refreshing approach - sell a gadget and make nice margins, without charging ongoing service fees -- a good thing from our point of view since we think the consumer suffers from subscription fatigue. And Sling's pioneering concept of place-shifting was an elegantly backwards way at looking at looking at the problem: instead of trying to get content off the PC and onto the living room TV and stereo, Sling decided to do the reverse and focus on getting the living room entertainment center onto the PC and smartphone, regardless of the user's location.

Breaking into the living room continues to be a challenge even for the behemoths. Microsoft has had relatively little luck in this area with their Media Center PC, though clearly the horse they are riding into the living room now is the Xbox, with the folks at Sony and Nintendo also playing here with their respective consoles. Even Apple, the king of digital media devices, has only dipped their toe in the water with the Apple TV, which is clearly a first-gen (and tentative) step into the dangerous waters of the living room.

Our experience with Sling provided us with some guideposts as we refined our thinking around digital life: focusing exclusively on the living room as the center of the digital home was going to be extremely difficult for most startups given the power of the incumbents who control the devices that live there. And it is no picnic for the incumbents either, as mentioned previously.

Another big observation from our work with Sling is that the user experience has to be great from the moment the box is opened: unpacking the product, setting it up, installing the software and day-to-day use has to be brain-dead simple and a pleasure to use, or the thing won't enjoy widespread adoption. And with the current state of the art in home networking technology, this is very difficult for any vendor to achieve.

Furthermore, in most cases, trying to build a device is a tough road to hoe for a startup, for the reasons mentioned previously. So within this somewhat broad definition of digital life, what are the kinds of things we are interested in at Foundry Group?

In general, we will be intrigued by software and services (and occasionally, but not very often, devices) which work well with the existing entertainment infrastructure in the home and which help a user cope with managing the complexity behind their growing mountain of digital media and menagerie of devices. These solutions should work wherever a user may be and allow them to consume, create and share the media which comprise their digital lives. Finally, these products must be extremely well designed and brain-dead simple to use. The usability bar for digital life products is very high -- they should work automagically and be easy for technophobes to embrace, or their adoption will be permanently impaired.

In the Foundry Group portfolio, Memeo is currently the standards-bearer of the digital life theme. We've explained in detail in a previous post why we are excited about our investment in Memeo, but put briefly, Memeo deals with the rapidly-growing mountain of digital content each of us must manage by providing content-aware and multi-device capable continuous backup, data synchronization and sharing. These simple but powerful tools might have previously been considered professional grade or enterprise-class solutions, but just like terabyte NAS or real-time encoding and streaming of HD video, they are making their way downstream into the consumer market.

So if you're building a company focused on improving our digital life, please let us know, we'd enjoy hearing from you. We love playing with new toys and thinking about what the next important company in this ecosystem might be. Worst case scenario, you'll get some product feedback and perhaps a few new users.

Several of us at Foundry Group have been deeply involved with the email industry as insiders and investors at a number of email-related companies, including early email service providers (Email Publishing and MessageMedia), email hosting companies (Critical Path), email security companies (Postini), and email delivery assurance companies (Return Path). Email has been a successful theme in our historical investments over the past dozen years, and we believe it has an equally bright future.

So, perhaps we’re biased. Nonetheless, not many people would dispute the critical role that email plays in our daily lives.

Nowhere is that truer than within the enterprise. Knowledge workers (the cornerstone of the U.S. economy’s future) live and breathe email. Our email is where we start our workday, and it’s usually the last thing we look at before we leave the office. In between, whether we’re sitting at our desks or out of the office but still glued to our cell phones and wireless email, much of our day revolves around our inbox.

And yet, for all our dependency on email, email tools have evolved little since the day they left the mainframe world. Remember the early networked email systems? Microsoft Outlook 2007—the de facto enterprise email client—certainly has more bells and whistles than the first email clients such as cc:Mail, but the interface and, more importantly, its substantive capabilities really haven’t changed:

   Send. Receive. Read. Store.

The first email clients did all that when they were first introduced, and all email clients/servers created since have faithfully replicated that paradigm with little variation. The biggest “advance” since the advent of client-side email has been the integration of contact management and calendaring with email.

Why haven’t enterprise email solutions evolved? Certainly, the pervasiveness and the role of email have changed dramatically since then. The sheer volume of email that the typical knowledge worker deals with is well beyond what we could have imagined in the early days of email. And more than simple communications, the email infrastructure is now being used for more than just email—it’s a collaboration tool, a document exchange mechanism, and even a de facto file storage system (to many this is a huge problem in itself). Email is the core, and without doubt knowledge workers need a new generation of tools to manage it effectively and get the most out of it.

However, we believe the next generation of email is about more than individual productivity. The amount of explicit and implicit data, knowledge, and relationship information stored in a typical corporate email store is staggering. Take, for example, just the enterprise social graph data in Exchange. With the right analysis, one can determine not only who knows whom (within or outside of the enterprise), but also the length, depth, frequency and velocity of that communication and relationship. Indirect connections between multiple individuals (akin to what LinkedIn does) can be discovered but without requiring any explicit user data entry or behavior modification. The ability to piece all of this together—across an entire organization—is a very powerful concept.

Beyond the enterprise social graph, think of the implications for knowledge management if the enterprise could effectively tap into the email store (using tools such as content analysis and unstructured data management) to discern and expose expertise across its workforce. Past knowledge management approaches have often suffered because they depended on individual users to explicitly enter data or take actions beyond their normal day-to-day routine, with little immediate benefit to them. What if knowledge management was instead seamlessly driven by our existing behavior?

Unfortunately, the lack of innovation in enterprise email has left us with inadequate tools to manage the massive amount of information that resides in and passes through our inboxes. And, more importantly, it has locked some of the enterprise’s richest data just beyond our reach.

In contrast to enterprise email, mainstream Web applications and platforms have experienced hyper-evolution. Indexed search has existed on the Web since [1993]. Outlook/Exchange users, however, had to wait until 2007 for that native capability. (Never mind that this newly-added capability is slower and less useful than Lookout Software’s Outlook plug-in for indexed search, which Microsoft acquired and shelved in July 2004.)

Social networking sites like Facebook and MySpace have garnered popularity in good part because they recognize that the social graph is what matters. Companies such as Salesforce.com have thrived because they view themselves not just as an application but as a platform to facilitate the gathering, organization and integration of data across disparate sources and applications and because they recognize that data are more useful and actionable when freed rather than trapped.

Fortunately for all of us knowledge workers, there’s hope. Xobni’s approach to exposing the meta-data in Outlook is a good leap forward (albeit, only part of what we think is the solution). Clear Context is promising tools to help email users manage their inboxes more effectively. And even Microsoft, with its announcement that it will be opening its entire set of APIs for Exchange and Outlook 2007, is showing a glimmer that maybe they now understand that Exchange wants to be a platform, not an application.

With folks like Om Malik and Microsoft insider Don Dodge and mainstream media like the New York Times shining a spotlight on the email inbox as the next beach head for social networking, it’s inevitable in the consumer space. Similarly, in enterprise we think that the next generation of email is going to make today’s technology look as antiquated as the GNU Emacs that many of us email old-timers used for our first email interface. Let’s just hope it doesn’t take too long.

For those of you who don't know, Ryan and I met in 2000 while at the California offices of Mobius Venture Capital, became quick friends and even started a band or two. (Shameless Plug Alert: Our band Soul Patch has recently released a new album. Check out the web site and buy on CDBaby, iTunes and Amazon. Become a fan on Facebook!). When the concept of the Foundry Group was born, one thing that the five of us agreed on was the need for one (and only one) office.

It didn't take us long to decide that both the Boulder and Foundry Group opportunities were what we wanted to pursue with our careers, so, after a combined 27 years in Northern California, we sold our homes in the Bay Area and moved to Boulder in mid 2006. We've now been here almost 2 years. What have we learned?

Boulder is an entrepreneurially vibrant community. We were both surprised and encouraged by the sheer amount of startup activity there is in Boulder. It's not just a by-product of having several good universities nearby; rather it's really part of the culture and fabric of the community. I'd compare this to Ann Arbor, MI, where I went to school. Many people compare Ann Arbor to Boulder (without the mountains). While I see plenty of similarities, Ann Arbor is missing the ingrained culture of entrepreneurship (and associated risk profile) although it may have similar engineering and management talent.

Boulder is a supportive community. There really is a sense of community here. While there is a ton of activity, I don't know if we've ever been to place that is as supportive in each other's efforts. Instead of competition, there is collaboration. Whether it's the Boulder NewTech Meetup, the Boulder OpenCoffee Club, Boulder Software Club, or TechStars, there is a general sense of community and responsibility to help the entrepreneurial community grow. I can't say that I ever felt that sense of responsibility and "giving back" in the Silicon Valley that I feel here.

Boulder makes nationwide travel much easier. As national investors, it's much easier for us to travel anywhere in the US from a central location like Denver. We've even been able to take day trips to New York, an impossible feat from the Bay Area, at least without a private jet. While an East Coast day trip is not the most fun one can have, our families appreciate us being home at night. And getting back and forth to Los Angeles and San Francisco, where we travel most frequently, is a relatively painless and efficient experience.

Speaking of travel, both Ryan and I (coincidentally) live on the same block in a neighborhood a few blocks away from our office. Our "commute" to the office is infinitely easier than our prior commutes in the Bay Area. The time saved can be spent on work or play, but either way, it's not spent in the car. (For those voyeurs among you, you can check out our neighborhood by going to Google Maps and clicking "Street View".

Being in Boulder helps focus our West Coast activities. There is no doubt that the volume of startup activity in the Bay Area dwarfs that of Boulder, and we have often been asked if we are concerned that we are missing out on opportunities by not having an office in the Valley. On the contrary, we consider being outside of the (sometimes provincial) echo-chamber of Silicon Valley to be genuinely useful. After experiencing life as VCs in the Valley for several years, we experienced a very real "time tax", which resulted from taking meetings with entrepreneurs and executives we knew we were unlikely to invest in, but we felt were ultimately necessary to participate in in order to maintain our relationships with friends and colleagues in the area. Not being in California every day means we can opt out of that process. With our new location in Boulder, we still have our great networks and deal flow in California, but we have removed the Sand Hill Road friction from our day-to-day lives. When we do go to California to look at deals, meet with entrepreneurs or attend board meetings, we are better focused at the matters at hand and tend to have higher quality meetings, since those meetings have passed the "is it worth hopping on an airplane to meet face to face?" test.

Boulder's culture encourages a healthy work-life balance. Boulder has an incredible amount to offer with easy access to mountains, hiking trails and natural beauty. People actually have time and focus to concentrate on things outside of work. It's definitely a slightly saner pace. It's not that people don't work hard - they do - but there is a certain amount of balance that isn't completely explainable unless you live here. For us, it's meant that the hours we do work are more efficient and our brains are sharper.

So is Boulder utopia? No, nothing is. Ryan and I will "forever" tease our partners who told us that winters were mild in Boulder. Upon our arrival, we had the "opportunity" to experience the worst winter "ever" in 2006-2007. We're also being told this winter is "below average," which means that we've clearly brought bad luck with us. Either that or we were sold a bill of goods. More on that next year, I suppose. Also, we both miss some of the culinary options of the Bay Area, but we'd be in the same situation if we lived anywhere else but New York or Los Angeles (with apologies to Chicago). Finally, we must mention that the Denver Airport has the worst parking facilities in the world. They are regularly full, making for some tense moments pre-departure.

But in general, Boulder is a great place to live, work, play and (in Ryan's case) raise kids. We've embraced our new hometown, and we look forward to continuing our integration into the community, both from professional and personal standpoints.

Since the launch of the Foundry Group blog, we've written at length about our thematic investing style, some of the specific themes we are looking at (HCI, Glue and Implicit Web), our backgrounds and our view of how geography factors into our investment criteria. We have yet to write about any of the companies we've actually invested in thus far - something we plan to do regularly in this space.

Not all of our portfolio companies are ready for us to start making noise about them, which is hard for us since we are passionate about the entrepreneurs and companies we back. But for those companies that are publically launched and have announced our investment, it is high time we start talking about them. Over the next several weeks you can expect to see posts from us on each of the investments we've made so far (at least the ones we can talk about) - a trend we'll continue as we add new companies to the portfolio.

Today's post introduces Memeo, one of the handful of investments we made shortly after we closed our fund in November last year. I wrote in detail about our motivations behind investing in Memeo on my personal blog in January, so I'll just provide a short summary here.

Since we've been busy talking about investment themes, it is worth mentioning that Memeo fits into a theme we call Digital Life (a theme that we haven't blogged about yet, but one which we'll talk more about in a future post) For the purpose of understanding our Memeo investment it's enough to simply understand that the Digital Life theme encompasses technologies and products that include digital media, consumer electronics, so-called digital home applications and the software and services that help consumers deal with the ever-growing number of devices and technologies they must manage on a day-to-day basis. An example of a previous investment we made in the Digital Life theme is place-shifting pioneer Sling Media, makers of the Slingbox, who were acquired by EchoStar last year for $380m.

Memeo has built an intelligent media-management technology platform that is aware that different media types (photos, videos, audio, etc) need to be handled differently, that the number of devices (laptops, phones, cameras, networked media-players, etc) and destinations (web-drives, NAS storage, USB thumb drives, etc) are only going to increase over time, and that users will need increasingly sophisticated (yet easy to use) tools that will help them protect, manage, synchronize and share their media. The elegance of Memeo's platform is that it recognizes that backup, data synchronization and sharing are all just different facets of the same thing: digital media management. This awareness has enabled Memeo to deliver a suite of products that are simple to use, intuitive and work "automagically", something we look for when evaluating a new product or technology.

Memeo's first product, memeoAutoBackup, is an award-winning real-time, continuous backup solution for both Windows and Mac OS. They've partnered with major hard drive vendors like Western Digital, Seagate and Buffalo, and are now bundled on the majority of hard drives shipped in North America. They then followed with a second product, memeoAutoSync, which keeps a user's files and folders synced across multiple devices and destinations, and a third, memeo Internet Disk, allowing backup and sharing of files and photos to an internet-based drive. Finally, Memeo will soon be releasing a beta version of their next-generation product, memeoShare, which will enable simple sharing of files among multiple users, which will showcase the full power and flexibility of the Memeo platform.

Needless to say, we are extremely excited about our investment in Memeo, we are avid users of memeoAutoBackup and memeoAutoSync, and we can't wait to get our hands on the beta version of memeoShare the moment it launches. So head on over to memeo.com and try their great software for yourself, we think you'll be impressed with its simplicity and power.

Brad started his career as an entrepreneur in 1987 by creating a very creatively named company, Feld Technologies, with a partner in Boston. Feld Technologies was funded with ten bucks and was acquired in 1993 by a public company called AmeriData Technologies. While at AmeriData, Brad started making angel investments and was a seed investor in successful companies such as NetGenesis (IPO), Critical Path (IPO), and Harmonix (acquired by MTV.) In 1995 Brad moved to Boulder, Colorado, and shortly thereafter connected with the guys at Softbank who were aggressively investing in the first wave of Internet-related companies. Brad worked as an affiliate of Softbank until 1997 when - with three other partners - he co-founded the firm that became Mobius Venture Capital.

In 1999, Brad met Chris Wand. At the time Chris ran corporate development for First Virtual Holdings - an early Internet public company. First Virtual Holdings acquired a company called Email Publishing that Brad was chairman of and then morphed into MessageMedia, an early leader in the email service provider market. Shortly after the deal closed, Brad recruited Chris to join him in expanding the Boulder office of Mobius.

In 2000, Ryan McIntyre joined the Mobius California office. Ryan was one of the co-founders of Excite in 1993 and was involved in the very beginning of the first iteration of Internet search. Ryan left Excite in 1999 about a year after the Excite@Home merger was announced.  While contemplating the next company to start, he ended up joining Mobius.

Shortly thereafter, Mobius recruited Jason Mendelson to join the firm as its general counsel. Jason started out life as a software consultant for Anderson Consulting, lost his mind, and decided to become a lawyer, joined Cooley's California office, and found himself doing a lot of work for Mobius. Jason joined Mobius in 2000, took over all back office responsibility in 2004, and started making and managing investments at that time as well.

While Ryan and Jason both started in the VC business at the peak of the bubble (Ryan fondly describes this time period as "the point in the party where the kegs had run dry and the cops had just shown up"), Seth Levine joined Mobius on September 6, 2001. Brad and Chris met Seth through their close friend and colleague Mike Platt, a managing partner at Cooley's Boulder office, demonstrating that lawyers can actually be useful for something (although we always liked Jason, even when he was a lawyer). Seth had just come off a stint running several divisions for FirstWorld Communications - a company that went public two days before the NASDAQ hit its peak in 2001.

As both entrepreneurs and investors, we have had vibrant and exciting careers, having worked actively to create companies through one of the most exciting times in recent history (1994 - 2000) and one of the most difficult times as well (2001 - 2003). While we have had both great success and dismal failure, we believe that the best years of our working careers are still ahead of us. As such, we have decided to embark on creating a new early-stage venture capital firm with the goal of creating many new important companies over the next 20 to 30 years.

One of the impetuses for the creation of Foundry Group and a fundamental tenet of our philosophy is our strong love of what we do. We believe that the great company creators of modern times deeply enjoyed their work and we - in the words of one of our wives - have found a special segment of the universe to live in where "our work is our play." It may sound trite, but we really enjoy hanging out with each other and this personal dynamic makes the work even more fun.