When veteran entrepreneur Andy Kieffer tired of the Silicon Valley rat race, he didn’t move to Portland, Austin, San Diego, or any other family-friendly, up-and-coming startup ecosystem. He and his wife packed their home and their two small kids and moved to the last place anyone ever expected, Guadalajara, Mexico, with designs on building one from scratch. This was five years ago.

With no language skills or local connections, Kieffer started a small development shop called Agave Lab, hiring local talent – which he found in abundance at a fraction of California’s going rate – and began building apps on spec for old friends in the US. The cost: $30k plus a little equity. His team has built early versions of TastemakerX, TEDx Guadalajara, ClientVoice, and Puppy & Kitty Time, among other products.

In the years since, Kieffer has had a front row seat for the rise of the Aztec Tiger and has played an active role in the emergence of a national angel and venture capital ecosystem and the birth of a culture of internet entrepreneurship.

“If you want to predict the future in the Mexican tech sector, take the previous 15 years of what happened in the Bay Area, and compress it into a single year, and then watch it happen in fast forward,” Kieffer says.

Having sold Kleiner Perkins-backed Visible Path to Hoovers (now Dun and Bradstreet) and held senior positions in multiple other venture-backed startups over his 10-plus years in the Valley, Kieffer is one of the more experienced and credible entrepreneurs in Guadalajara. When he’s not angel investing and developing his own pet projects (more on his latest product below) Kieffer spends time mentoring founders and advising less sophisticated angel investors on the Silicon Valley model.

For the founders, he’s focused on encouraging action and developing a plan to de-risk a potential seed investment. For the investors, he’s often educating them on common deal structures and terms, as well as breaking down the logic of handing tens to hundreds of thousands of dollars to a team of twenty-somethings with little more than an idea and an impressive resume.

“Everyone here wants to be a ‘startup guy’ but they don’t know exactly what it is and how to do it,” Kieffer says. “I’ve been trying to advance the model, ‘we don’t invest in ideas, we invest in success.’ I ask founders what they could accomplish in three months to validate their idea. Sometimes it’s getting 200 active users, or getting their first 10 paying customers. Then I say, ‘Build it on nights and weekends. If you prove that it works, and you’re willing to do the work, I’ll fund you.’ That way I’m investing in traction and in execution. The model is catching on with others.”

Once he funds a company, they typically move into his 7,000 square foot office for an initial incubation phase. There they get access to the Agave Lab team and to a community of fellow portfolio entrepreneurs who are cranking away to solving both global and Mexico-specific problems. The office also has a pool, and is the scene of regular parties bringing together the greater Guadalajara tech community.

Kieffer is far from the only outsider focused on Mexico’s burgeoning community of internet entrepreneurs. Dave McClure’s 500 Startups partnered with Mexican.VC last summer to launch an offshoot of its accelerator program in Mexico City. And other local and international investors are banking that Mexico will steam roll the rest of Latin America and possibly give the rest of the emerging markets a run for their money over the next decade.

As much as Kieffer is an investor, advisor, and advocate for Mexican entrepreneurship, he says he’s a builder first and foremost. Unsatisfied with building apps on spec for others, he has recently been hacking away on several of his own ideas as well.

“It’s something that was made easier by being in Mexico,” Kieffer says. ”It’s hard to develop two to four products at seed stage in the Bay Area and filter your winners, because step one is raise $1.5 million and build a team. Here I can build a [minimum viable product] for a few grand and test to see what works.”

Kieffer is launching ShotStrip today, an iOS and HTML5-mobile Web app that allows users to combine up to six photos of an event or experience and share them as a single interactive “Strip,” or mini-photo album.

“I’m kind of embarrassed to say that it’s a photo sharing app, because I know the whole category has become the butt of everyone’s jokes,” Kieffer says. “But I really think there’s a hole in the market between Instagram and Vine for telling stories using photos. I built this for myself and when I couldn’t stop using it I knew I was onto something.”

The concept makes sense, on the surface. It can be genuinely difficult to capture the essence of an event with a single photo, but sending or sharing separate photos across social media leaves them disconnected. But the competitive landscape in the photo-sharing space is brutal on the best of days. Users are genuinely fatigued with the number of new products in this space, most of which are either offer little differentiation from the competition, or lack the network of users required to make joining a new platform interesting. And even if Keiffer can save a few hundred grand in product development costs by building in Mexico, the hurdle for monetizing social and photo platforms is stratospheric.

Kieffer and his team hope to combat this by adding a number of interesting features to the ShotStrip platform that make it highly interactive. In addition to offering standard commenting and social sharing features, Strip creators can invite others to contribute to an existing strip, making the end result a collaborative visual story. Users can scroll vertically a feed of Strips, similar to Instagram or Vine, but can then scroll horizontally to preview the six photos in a single Strips, or mini-album. Clicking on a Strip expands it into a full-screen view and gives access to commenting and sharing tools.

ShotStrip allows asynchronous following, so that users users can follow their friends or strangers who set their feeds to public. The platform also offers a Featured stream of the best Strips of the moment, curated by members of the ShotStrip team, and a Popular stream for those Strips getting the most likes and shares.

In its first three weeks after the soft launch with no marketing or press, ShotStrip is already in the Top 100 free apps on the iOS App Store. The gross numbers – 2,000 users and 4,000 photos uploaded, each of which have been doubling weekly – are nominal, but the organic growth suggests that the idea may have legs.

Kieffer and his team are still experimenting with the product – it needs some polish around the edges – and looking to build a community of active users before thinking about monetization or fundraising. As far as where he’ll look for capital when the time comes, it’s telling that Kieffer incorporated ShotStrip as a US C-corporation. While it’s only wise to keep all his options open, it also speaks to his desire to keep one foot safely north of the border.

The Mexico startup ecosystem is still in a very nascent stage, but the opportunity in the country is massive. With readily available and affordable local talent, and no shortage of (increasingly sophisticated) money eager to be deployed in the technology sector, the country has a number of structural advantages over other ambitious, but less-well situated global markets.

“Mark my words, everything that has happened in the US startup ecosystem will happen in Mexico, just five years later and at 100 times the speed,” Kieffer says. “The big elephant in the room is we don’t have a Google that everyone can look at as a success story. Once that happens, I think this place is going to go crazy. There’s just so much conservative money sitting on the sidelines looking for proof of concept.”

But Mexico doesn’t need photo sharing apps. Its needs are more foundational, like payment and fulfillment solutions, given that most people in the country don’t have credit cards and there is no reliable postal service. But with these shortcomings come massive opportunities for those ambitious enough to build something from scratch.

Kieffer says, “When my friends from the US visit, they alway ask, ‘how the hell did you do this?’ My answer is, ‘I just went to the airport and got on a plane.’ People are averse to risk, afraid of change – and narco-terrorism.”

Michael Carney

Michael Carney has spent his career exploring the world of early stage technology as an investor and entrepreneur and has participated in building companies in multiple countries within North and South America and Asia. Ultimately, he is an enthusiast of all things shiny and electronic and is inspired by those who build businesses and regularly tackle difficult problems. You can follow Michael on Twitter @mcarney.

America has more than 5 million field service workers that maintain, repair, and replace the equipment we count on each and every day. The vast majority of these employees rely on paper, carbon copies, and clipboards to manage their field operations. ServiceMax is changing this with its mobile field service management platform that has helped its more than 200 enterprise and SMB clients reduce costs by 16 percent on average, increase productivity by 31 percent, and grow revenue by 14 percent.

Today, the six year old company is introducing a new dynamic software framework called ServiceMax Infinity. The idea is to create an adaptive and evolving platform that reduces the need for replacing software and training end-users as processes evolve.

“The future of SaaS is to take data-driven insights to the next level by providing a sort of ‘perpetual software’ that suggests and empowers better business overall,” ServiceMax CEO Dave Yarnold says.

ServiceMax breaks the new platform down into three components, each of which is available independently or as part of a product suite.

The first, Service Flow Manager, is a drag-and-drop process manager allows companies to create dynamic guides for their field technicians based on corporate best practices. Such processes can include the scheduling, customer profile and service history data, inventory management, diagnostic checklists and questionnaires  manuals and diagrams, warranty guidelines, invoicing and feedback paperwork, and a variety of other elements. More importantly, once a new process is created, or an existing process modified, it can instantly be rolled out to a company’s entire staff, or select staff members, for access via their iOS, Android, or HTML5-enabled mobile device.

The newly created Service Quality Index (SQI) is an automated reporting and service benchmark product that allows companies to compare their performance against internal objectives, historical performance, and industry standards. Tying each of the above products together is the ServiceMax Insights Engine, which constantly monitors activity within the software platform to deliver actionable insights for better achieving SQI goals. The Insights Engine also allows companies to model the likely effects of possible process changes before actually implementing them in the field. Completing the loop, once validated, these changes can be quickly implemented by changing the relevant workflow in the Service Flow manager.

“Many of our members come to us for benchmarking assistance, struggling to understand how their own service metrics compare to their peers,” Technology Services Industry Association (TSIA) VP Technology Research John Ragsdale. “[The] Service Quality Index is the first attempt I’ve seen to have the application itself prescribe which metrics need a stronger focus based on the goals of the client – brilliant!”

ServiceMax is built on Salesforce’s Force.com platform offering a deep CRM integration and access to ServicePulse social tools. The new Infinity platform is available today with SaaS subscriptions running approximately $1,000 per user per year. The SQI product and Insights Engine products will be introduced at the company’s “Maximize 2013” user conference in October, and will be available on an opt-in basis.

Since naming former SuccessFactors head of global sales David Yarnold as its CEO in May 2009, ServiceMax has raised $52 million in outside funding over four financing rounds with investors including Crosslink Capital, Emergence Capital Partners, Mayfield Fund, Trinity Ventures, and Salesforce.

The company, which has 200 employees across its offices in Pleasanton, California, the UK, and India has achieved five consecutive years with greater than 100 percent revenue growth, according to its CEO. Its notable customers include Electrolux, P&G, Tyco, Schneider Electric, Pitney Bowes, Toyoda Machines, Varian Medical Systems, and Coca-Cola Enterprises (an independent bottler), among others.

ServiceMax is competing more against the homegrown culture of the service industry in which companies with less than 1,000 employees typically lack any significant automation or technology, and against competitors’ products. Occasionally, companies will cobble together a custom solution from individual scheduling and order management products, but nothing that offers anywhere near the functionality and the efficiency of ServiceMax’s offering. At the enterprise end of the market, the company is transitioning new clients off of legacy ERP solutions from SAP, Oracle, and others, but again, has no real equal in today’s modern technology landscape.

Yet, while this is undoubtedly true, it doesn’t mean that ServiceMax can’t be challenged int he market. Its far too common for emerging enterprise SaaS companies to dismiss the legacy giants as outdated unable to innovate, yet year-after-year, they continue to retain customers and build or buy new solutions to sell through their existing channels. With a massive $27 million Series D round raised in November, many people are betting that ServiceMax can continue to dominate this market. And while it may, it’s certainly not a foregone conclusion.

The service industry may not be sexy, but it’s a compelling opportunity. We all rely daily on machines and equipment that require service, including those in our homes, at our offices, in hospitals, and in countless other settings. Despite the industry’s lack of innovation, more than 40 percent of all US manufacturing sector revenue currently comes from service, a figure that has grown four times over the last three decades. Growth in service jobs made 17.6 percent of all US job growth last year, with the category adding jobs at a rate of 6.4 percent per year.

ServiceMax already has a dominant market share in this multi-billion dollar industry and today it dramatically improved its offering with a dynamic, self-tuning software framework that saves both time and money. For companies looking to maximize efficiency and satisfaction among customers and employees, this is a pretty compelling value proposition.

Michael Carney

Michael Carney has spent his career exploring the world of early stage technology as an investor and entrepreneur and has participated in building companies in multiple countries within North and South America and Asia. Ultimately, he is an enthusiast of all things shiny and electronic and is inspired by those who build businesses and regularly tackle difficult problems. You can follow Michael on Twitter @mcarney.

Few if any consumers who fell behind on their credit card payments in the early 2000s thought that half a decade later employers would use their credit report to determine their job worthiness. Few avid social media users must have realized that insurance companies, the IRS, law enforcement, and credit agencies would soon use their their data to investigate fraud, determine creditworthiness, and monitor other potentially illegal activity. History suggests they should have.

This pattern is repeating itself, with countless consumers today casually sharing highly personal health data through wearable computing hardware, cloud-based quantified self platforms, and even retail loyalty programs without so much as a thought to the potential implications. My argument isn’t one against the quantified self movement. But if history is any guide naive, blind participation without considering the implications of your data being recorded and shared with third parties is reckless.

As we document and share more of where we go, what we do, who we spend time with, what we eat, what we buy, how hard we exert ourselves, and so on, we create more data that companies can and will use to evaluate our worthiness – or lack thereof – for their products, services, and opportunities. For those of us who don’t measure up compared to the rest of the population, the outcome won’t be pretty.

It will also be our own fault. Consumers are signing up to collect and share personal data at an alarming rate via sleep monitors, pedometers and activity trackers, dietary logs, brainwave monitors, grocery and restaurant loyalty cards, credit cards, Foursquare and Facebook check-ins, and photo geotagging, among other means. As insurers, lenders, and others attempt to manage risk, they will inevitably turn alternative data sources to round out the picture of each consumer applicant – in fact, they already are.

According to a sales rep for a midwest data co-location and analytics startup who asked to remain anonymous, regional hospitals, insurers, and grocery retailers are already investigating ways to work together to translate consumer purchase data into health risk profiling insights. Kevin Pledge, CEO of underwriting-technology consultancy Insight Decision Solutions told the Economist last year that he has forgone the use of supermarket loyalty-cards and begun paying cash for his burgers to avoid this very type of profiling. The same article mentions a life-settlements firm declining to purchase an insurance policy based on social media activity that contradicted the supposed poor health of the policy-holder.

These are far from the only example of companies reaching further into our personal data – consumer reports has a rundown of many others – but they should be enough to make us all rethink that package of bacon, those dozen Krispy Kremes, or those Marlboros. One day, the same analysis is likely to be applied to how often we exercise, the length and quality of sleep we get, our eating habits, and possibly even the health of our sex lives.

CVS, for example, has started to require its employees to submit their weight, body fat, glucose levels, and other vitals monthly or pay a fine to cover increased health insurance premiums. If that data was available for the majority of its employees via a quantified self company (or several), CVS and other employers might not even have to ask – and the seemingly fit employee with a secret pound of bacon a day habit may never know why his health insurance premiums are double those of co-workers.

For the last year, State Farm Insurance has been taking a similar approach by offering auto insurance customers discounts for installing real-time monitoring devices into their vehicles coupled with safe driving. Again, if a real-time location smartphone app – or GPS and accelerometer enabled wristband or glasses – is already tracking this data, the insurance carriers might skip the asking, and the discount, and go straight to the database to pass judgment.

One of the most frightening companies in the entire sector is LexisNexis, whose ambition, if I were to paraphrase it, is to have a comprehensive record of every piece of available information on every person in the world – including their current and past residence, spending history, banking information, health information, etc., after scary, etc. And they’re not as far away from this goal as you might think.

Perhaps most troubling was the 2009 merger between VeriChip and Steel Vault (now PositiveID), which combined the first ever human-implantable RFID microchip and the credit-scoring and identity-theft-protection website NationalCreditReport.com. We haven’t heard much from the company since and its website indicates that PositiveID has shifted its focus toward medical applications, but the concept behind the merger remains frightening yet entirely possible.

Many expect the government to protect consumers from this type of potential privacy invasions, but the legislature has demonstrated a pattern of ignoring the ethics of bleeding edge technological issues until the line has been crossed, and then typically bungling things badly on the first few attempts, before, in some cases, arriving at a generally-tenable solution. Peer-to-peer file-sharing, net neutrality, software patents, stem cell research, and the recent SOPA, CIPA debates are all areas where Congress has appeared badly out of step with the world of technology. As such, it’s foolish to leave such matters in the hands of the government.

Really, it all comes down to each individual protecting his own data by virtue of the Terms of Service, Terms of Use, and Privacy Policies that he agrees to with each application. In general, the hardware manufacturers and service providers in the quantified self space seem to have taken a fairly consumer-friendly stance initially (see select highlights below), but it’s not unheard of for company’s privacy policies and terms of use to change – see Instagram. Also, it’s rare to see a pitch from quantified self startup that doesn’t point to data monetization as part of its long term business roadmap. As consumers grow more comfortable with the idea of sharing personal information online, it’s likely these ethical boundaries will be eased.

It’s not only just the first tier company that has the potential to share consumer data, but every dashboard, analytics platform, gamification service, social sharing tool, and other related product that is granted access to the underlying service. Your personal data security is only as strong as the weakest link in your quantified self ecosystem.

It’s easy to come off sounding paranoid, and many would argue that the value received from quantified self devices and services justifies the risk. But it’s not those who consciously make that decision I’m worried about. It’s those who buy a Jawbone Up because it’s sold at the Apple Store then connect it to several Web apps because their trainer recommends them without considering long-term implications. Data is powerful, and just as it has the power to enhance our lives, in the wrong hands it can also harm us.

Below are select excerpts from the privacy policies of several popular quantified self platforms.

Jawbone Up’s TOU read:

We may share your Information with third parties to provide services on our behalf such as to process payments, or to store information collected through our site, app, and services. We may share information with a parent company, subsidiaries, joint ventures, or other companies under common control with us. We may share your personal information for the purposes of a business deal (or negotiation of a business deal) involving sale or transfer of all or a part of our business or assets. These deals can include any merger, financing, acquisition, or bankruptcy transaction or proceeding. We may disclose your personal information to (a) comply with relevant laws, regulartory (sic) requirements and to respond to lawful requests, court orders, and legal process…Even though we have taken steps to protect your personal information, you should know that neither we nor any company can fully eliminate security risks.

Nike’s Digital Privacy Policy reads:

We may transfer your information to NIKE Family service providers to conduct our business. For example, they may handle credit card processing,shipping, data management, email distribution, market research, information analysis, and promotions management. We may also share your information to administer features (e.g. music download, race registration, or workout routine)…Information that is publicly shared may be used by Nike for promotional purposes….However, like other companies, NIKE cannot guarantee 100% the security or confidentiality of the information you provide to us.

FitBit’s Privacy Policy reads:

Fitbit may disclose non-personally identifiable aggregated user data, such as aggregated gender, age, height, weight, and usage data gathered from Fitbit devices (without the inclusion of a user’s name or other identifying information) to:

• Organizations approved by Fitbit that conduct consumer research into health and wellness;
• Users of the Service for purposes of comparison of their personal health and wellness situation relative to the broader community; and
• Advertisers and other third parties for their marketing and promotional purposes.

WellnessFX’s Privacy Policy reads:

We share your information with third parties when we believe the sharing is permitted by you, reasonably necessary to offer our services, or when legally required to do so. For example, we may disclose certain Member Information, Health Provider Information and Visitor Information:

• To third party vendors who help us provide the Service or the Site or who provide additional goods and services through the Site, including without limitation, testing laboratories, phlebotomists, billing providers and benefits administrators;

RunKeeper’s Privacy Policy reads:

There are certain circumstances in which we may share your Personal Data with certain third parties without further notice to you, including as set forth below:

• Business Transfers: As we develop our business, we might sell or buy businesses or assets. In the event of a sale, merger, reorganization, dissolution or similar event relating to all or a portion of our business or assets, Personal Data may be part of the transferred assets.
• Service Providers, Agents and Related Third Parties: We sometimes hire other companies to perform certain business-related functions. Examples include mailing information, maintaining databases and processing payments. When we employ another company to perform a function of this nature, we may need to provide them with access to certain Personal Data. However, we only provide them with the information that they need to perform their specific function, and these third party service providers will only use your Personal Data to perform the services requested by us.
• Legal Requirements: We may also disclose your Personal Data if required to do so by law or in the good faith belief that such action is necessary to (i) comply with a legal obligation, (ii) protect and defend our rights or property, (iii) act in urgent circumstances to protect the personal safety of users of the Services or the public, or (iv) protect against legal liability.

Safeway’s loyalty program Privacy Policy reads:

Safeway Club Card information and other personal information may be used to help make Safeway’s products, services and programs more useful to its customers. Additionally, Safeway may use personal information to provide you with newsletters, articles, product or service alerts, new product or service announcements, saving awards, event invitations, personally tailored coupons, program and promotional information and offers, and other information, which may be provided to Safeway by other companies.

[Image courtesy sinor favela / fotos voladoras]

Michael Carney

Michael Carney has spent his career exploring the world of early stage technology as an investor and entrepreneur and has participated in building companies in multiple countries within North and South America and Asia. Ultimately, he is an enthusiast of all things shiny and electronic and is inspired by those who build businesses and regularly tackle difficult problems. You can follow Michael on Twitter @mcarney.

Web security is like a generational game of leapfrog being played between malicious users on one side and site administrators and security specialists on the other. Every few years (or even months) a new class of exploit emerges against which the good guys must scramble a response.

Today, one of the most common methods of attack is Cross-Site Scripting (XSS), against which up to 70 percent of websites are thought to be vulnerable according to Kunal Anand, co-founder of Web security startup Prevoty. XSS is the execution of malicious JavaScript code by the user in Web or mobile browsers and rich clients. As the former director of technology at the BBC, director of engineering at Gravity, security engineering manager at MySpace, and a lead software architect at NASA Anand has been working at the forefront of this problem for years and may have the first viable solution in Prevoty.

XSS code can be executed in a variety of contexts, including commonly in the comments sections of many content publisher sites, within webmail, and within collaboration applications such as SharePoint. While XSS was once used mostly by cyberpunks to deface websites – like MySpace profiles – today it is being used by sophisticated hackers in more nefarious ways, such as to steal user or administrator credentials and gain deeper access to systems, where real damage can be done. Ebay for example, allows users to use Javascript and HTML to create custom listings, and is thus regularly exploited by XSS attacks. Yahoo Mail is also a common target due to the way it allows email senders to mask the content of embedded hyperlinks.

“The more freedom a site gives to a user, the greater risk the site faces of XSS attacks. But this is also one of the best ways to drive engagement,” Prevoty co-founder Julien Bellanger says. “We’re enabling companies to give unlimited freedom to their users without being at risk of XSS attacks.”

Historically the preferred defense against XSS attacks has been Web Application Firewalls (WAF), which can be likened to a bouncer at the door of a popular nightclub – if you’re not on the list, or if you don’t look the part of a club-goer (aka, authorized site visitor), you’re not let in. The problem is, looks can be deceiving and, once inside, a club or website visitor can act in unauthorized ways. Under a WAF, the only way to decipher the good from the bad is to check against a list of past-signatures, making them especially vulnerable to new attack variants, or “zero-day” exploits.

“More than half of all websites are currently extremely vulnerable to XSS,” Bellanger says. “The only ones that aren’t are extremely simple and don’t allow the user to engage by submitting content – for example Chevron.com.”

In Prevoty, Anand and Bellanger have created the equivalent of in-club security which monitors the ongoing behavior of every guest and ejects them at the first sign of trouble. The company’s SmartFilter product sits between application and the firewall to provide contextual security. Rather than simply relying on past malware definitions or heuristics, SmartFilter uses “tokenizers, parsers, and profilers that in unison have the ability to perform syntactic/semantic operations on content,” according to the company. In other words, its algorithms understand how HTML and JavaScript code behaves within application and how that impacts users. When potentially dangerous activity or code is detected, the system prevents it from running and ejects the user responsible.

SmartFilter can be deployed as a binary/virtual machine in Linux, as an IIS add-on for Microsoft, as a plugin for SharePoint 2010 and 2013 editions, as a WordPress plugin, or as a cloud-based solution with libraries developed for C#, Go, Java, PHP, Python, and Ruby. SmartFilter comes configured with standard algorithms defining unauthorized behavior, but companies can create custom rules to accept or deny certain types of links or formatting, and other potentially dangerous user actions.

Prevoty is a member of the current Spring 2013 class of the Launchpad LA accelerator and has raised $700,000 in a Seed round led by Plus Capital with participation from Double M Capital, Paige Craig, former Netscape CTO Eric Hahn, and other angels.

The company is testing per-request pricing initially with mobile carrier-like pre-purchase volume discounts. There is currently a free tier available, and paid tiers targeting mid-size and enterprise scale clients. This structure may change in the future, depending on market feedback.

It’s rare to find a Web security company in Los Angeles, but Anand and Bellanger have found it to be an advantage. In past ventures, the pair found it excessively expensive to hire good talent in the Bay Area, yet difficult to foster employee loyalty in the grass is always greener northern California market. With strong roots in LA and the quality of life advantages working well to attract NorCal talent down south to the beach, the pair have had little trouble assembling a strong team for Prevoty. At the same time, the founders view LA, New York, and the Bay Area as equal sources of potential customers, and would thus spend time traveling amongst these markets regardless of where they choose to base the company.

The questions I kept coming back to in my discussions with the founders and their investors was, if this is such a big problem, how is it that massive companies like Yahoo and Ebay – let alone paid security companies like Symantec, Barracuda, Trend Micro, Cisco, and others – have yet to solve it. The answer, according to Prevoty’s founders, is a combination a lack of focus on and understanding of this particular issue and misplaced loyalty to existing solutions into which they’ve made significant investments.

Few individuals have had more exposure to the problem than Anand, by way of his perch atop MySpace’s security division. The result appears to be entirely new type of solution for combatting XSS attacks that, at least currently, is best of breed. There’s no arguing the demand for a solution of this type. But whether Anand and Bellanger can scale this into a massive business is another question.

The Web security environment is a fast changing one, in which malicious users are constantly cooking up new exploits to address the measures introduced to stop them. Whether the small LA company can stay one step ahead, while fending off larger and more well known security industry challengers remains to be seen. In the meantime, this is one of the more exciting early stage companies I’ve seen in recent months and certainly one to keep an eye on.

Michael Carney

Michael Carney has spent his career exploring the world of early stage technology as an investor and entrepreneur and has participated in building companies in multiple countries within North and South America and Asia. Ultimately, he is an enthusiast of all things shiny and electronic and is inspired by those who build businesses and regularly tackle difficult problems. You can follow Michael on Twitter @mcarney.

Earlier this week, the US government took its first action against the bitcoin ecosystem, freezing the US accounts of Mt. Gox, which is the largest bitcoin exchange in the world, processing 75 percent of all transactions in the last 30 days. Since that time, the questions on most people’s mind has been, what does this mean for the future of bitcoin and other virtual currencies? Is this an isolated incident based on the actions of one bitcoin exchange, or is it a harbinger of a broader offensive against the ecosystem as a whole?

A number of questions remain unanswered regarding the current Department of Homeland Security (DHS) case against Mt. Gox in particular. But contrary to the concerns of many conspiracy theorists, a paper published in March by the Financial Crimes Enforcement Network (FinCEN) makes it clear that decentralized digital currencies, such as bitcoin, are legal. (The agency also opined on other alternative currencies such as e-currencies, e-precious metals, and centralized digital currencies.)

The FinCEN paper outlines the regulations that govern the various roles of bitcoin users: “Users,” “Exchangers,” and “Administrators.” Without getting too deep into the legislative weeds, the paper explains that Users who simply utilize bitcoin to buy and sell goods and services are not subject to any specific registration, reporting, or recordkeeping requirements. It’s Exchangers and Administrators who must register as money transmission businesses (MTB) in order to operate in the United States – registration is required on a federal level (according to statutes 31 USC 5330 and 18 USC 1960) and in each individual state in which the company operates.

Under the law, Administrators are defined as “a person engaged as a business in issuing (putting into circulation) a virtual currency, and who has the authority to redeem (to withdraw from circulation) such virtual currency.” Because bitcoin cannot be redeemed, under this definition, there are no Administrators in the bitcoin ecosystem. An Exchanger, on the other hand, is “a person engaged as a business in the exchange of virtual currency for real currency, funds, or other virtual currency.” Mt. Gox, fits under this designation, as do all other exchanges operating in the US – Coinlab, Coinbase, BitInstant, Tradehill, and others.

The only grey area has to do with bitcoin miners, who can be deemed either general Users or Exchangers depending on whether they sell their currency for fiat (government backed) currency or use it to buy goods or services. In the former scenario, the miner would be subject to the same regulations as Exchangers, however in the latter they would be free from regulation.

While the government has not been kind to virtual currencies in the past, prosecuting the creators of “e-gold” and “Liberty Dollars,” the very act of FinCEN issuing its guidance acknowleges the possibility of operating a bitcoin-related business legally. While the government’s concerns in each case may boil down to tax evasion, money laundering, and facilitating the sale of illicit goods – issues that are equally applicable to bitcoin – the justification for prosecution in each case was “operating an unlicensed money transmission business.” Regardless of whether the government likes bitcoin or not, FinCEN seems to have confirmed its legality, much like DHS and Mt. Gox have demonstrated how one can run afoul of its laws.

Considering this, the general sentiment among bitcoin investors and entrepreneurs seems to be that Mt. Gox was targeted specifically for its failure to register as a MTB, not because it was the largest target and the most effective way to take out the bitcoin ecosystem. To the extent that other exchanges and intermediaries comply with these MTB registration requirements – Coinlab, Coinbase, and BitInstant, are already registered federally – there’s no indication that the government is moving against these businesses at this time.

Mt. Gox may be able to bounce back from this, depending on the extent to which its founder Mark Karpeles is jailed or fined or both, and on whether he decides to comply with MTB registration requirements or simply not operate in the US going forward. Should he choose the latter, or should Mt. Gox fail as a result of this incident, there’s no shortage of other exchanges eager to absorb its marketshare.

When we first learned news of DHS’ actions against Mt. Gox, Sarah Lacy wrote, “the coming weeks will be a crucial make or break period – likely one of many even if the wildest hopes and dreams of the currency are going to come true.” Specifically, if the currency’s value holds up, and there is no exodus of investor or entrepreneur confidence in the currency, than maybe this incident could strengthen and legitimize the ecosystem as a whole. If not, then it could be the beginning of an overall decline.

When the DHS-Mt. Gox news broke, the price of bitcoin on CoinBase was approximately $118. Today, four days later, the price is approximately $122. Similarly, we’ve seen several bitcoin-related investments announced since and the public launch of several companies. While these deals were surely inked before the incident, there appears to be no effort made to delay announcing them or to mimize the attention drawn to them. Overall, this is a positive sign for the bitcoin ecosystem as a whole.

This week’s incident made it clear that the government is looking at bitcoin closely and plans to stringently enforce its existing regulations. As such, it is going to be more expensive and more onerous to operate a compliant exchange than many thought previously – to register as a MTB in a single state can cost tens of thousands of dollars per year. This means that we can expect contraction among the exchanges and intermediaries, with only the most popular and most well funded likely to survive.

We also could see a bifurcation in the bitcoin ecosystem between those businesses operating in the US – and any other highly regulated country – and those operating in less stringent markets. Given the crypto-currency’s roots in Silk Road, the digital black market, and its value as an alternative to unstable fiat currencies this would be unlikely to kill the currency outright. But it could prevent it from being a ubiquitous global currency. The other possible outcome of the DHS action is help inform the development of competing virtual currency ecosystems, such as those growing around Ripple, litecoins, and PPCoin – all of which are far earlier stage, and smaller in scale than Bitcoin’s.

For the first time in memory, the world seems captivated with the idea of a virtual currency. Not only are many smart and credible people investing their time and money in the sector, but coverage on mainstream nightly news suggests that the curiosity of general public has been peaked. Given the size of the opportunity, investors and entrepreneurs are unlikely to abandon the effort entirely. But it’s becoming clear that to fulfill its promise, this wild west ecosystem will need to start playing by the rules.

Michael Carney

Michael Carney has spent his career exploring the world of early stage technology as an investor and entrepreneur and has participated in building companies in multiple countries within North and South America and Asia. Ultimately, he is an enthusiast of all things shiny and electronic and is inspired by those who build businesses and regularly tackle difficult problems. You can follow Michael on Twitter @mcarney.

A deal doesn’t seem imminent according to our sources, and may take the form of a strategic investment instead. But this much is true: now that Brian Lee has stopped the bleeding, everyone is trying to figure out what kind of future the once-scorching fast fashion shoe etailer has. Both the LA ecosystem and the subscription commerce industry that got its early proof points from ShoeDazzle are watching closely.

Several strategic acquirers including Aldo Shoes and Home Shopping Network (HSN) have indicated their interest in acquiring ShoeDazzle, our sources say. The biggest advantage from this type of deal would be the additional infrastructure and scale provided by a large strategic. An established legacy retailer could directly address several of the biggest obstacles to a younger company like ShoeDazzle, including costs related to customer acquisition, fulfillment, and merchandise returns. On the downside, there are culture and integration concerns to consider.

We also heard of a wild-card private equity rollup proposal involving ShoeDazzle, at least two other domestic and international companies in the space, and $150 million or so to make it all happen. With ShoeDazzle being the most established company in this rumored deal and itself being on shaky ground, the notion of integrating additional teams, brands, markets, and so on was apparently too much to make this one doable and this option has apparently been shelved.

The remaining option is an acquisition by another ecommerce player, most likely JustFab. We’ve heard that similar talks between the two companies have occurred on multiple occasions in the past, and now the timing could finally be right. Even though the two subscription shoe companies are crosstown rivals with a healthy distaste for one another, a deal makes the most sense out of all possible transactions. Not only is JustFab healthy enough and well enough capitalized to complete the deal – it crossed a $100 million revenue run rate late last year and raised a whopping $76 million in July – but it would presumably be the only deal that would give Lee the freedom to exit and focus full time on his other startup, The Honest Company. Lee, however, denies that running both companies is unsustainable.

The combined JustFab+ShoeDazzle would likely see a significant reduction in its customer acquisition costs. There would also be savings in terms of reducing duplicate overhead and through increased order volumes. Whether JustFab would keep the ShoeDazzle brand alive and target different demographics, or absorb the brand and members is less clear. Our sources say that if a deal between JustFab and ShoeDazzle is going to happen, expect it to close in the next 60 to 90 days.

Negotiations – and we use that term loosely – have been taking place at valuations between $50 million to $100 million, according to some sources, while others put the numbers higher. The range could vary significantly depending on the nature of the acquirer and the structure of the eventual transaction. Either way, it’s likely to fall short of the $240 million valuation ShoeDazzle garnered in its last round of financing, a $40 million Series C in May 2011. It wouldn’t be the outcome that ShoeDazzle’s founders and investors – not to mention the LA ecosystem – anticipated just 18 months ago when everyone thought they had a massive winner on their hands. But a deal in the near term may actually represent the best possible outcome, given the options that remain. But regardless of expectations, nine figure exits don’t grow on trees and it’s tough to write one off as an outright failure.

None of this should be overly surprising, given the challenges the company has faced, and for the most part, survived in the last 12 months, as well as the challenges that still lay ahead in a brutally competitive market. For a while, the Brian Lee-founded company was the highest-profile startup in Los Angeles, raising $66 million dollars from leading VCs and generating revenue and user growth curves that resembled a Mt. Everest peak. Then Lee Left, and his successor, Bill Strauss, launched an ill-advised business model change which all but killed the hot company. Revenue and membership fell sharply, and talent began to run for the exits.

According to both Lee and industry observers, ShoeDazzle has stabilized considerably he and founding president MJ Eng returned to the company in November. The company is not growing at anywhere near the rate it once was, if at all, but it’s no longer hemorrhaging users, revenue, or cash like it was at the end of the Strauss era either. The company’s currently the solid number two in the market according to our sources, with less revenue than JustFab and but significantly more than its nearest challenger BeachMint.

During our recent fireside chat with Brian Lee, he denied looking for an exit – both personally and for the company – and made a case for why he still sees a billion dollar opportunity ahead of ShoeDazzle. But this is what CEOs do. Lee acknowledged that the company would need to raise additional funding to grow and complete the turnaround, a daunting task in today’s ecommerce-phobic market, particularly for a struggling company that raised its last round at a $240 million valuation.

It’s never easy to know when to pull the ripcord and look for an exit. This is even more so when you’re a prominent and very public founder who’s staked their reputation to the success of a company. Brian Lee is nothing if not competitive and prideful in all the ways you want a founder to be. He’s absolutely not looking for an easy way out, but at the same time, if he thinks now is the right time for an exit, don’t expect him to hang on out of sentimentality. With the search and subsequent negotiations already dragging on for more than six months, if a transaction is coming it shouldn’t be long now.

[Brian Lee and ShoeDazzle lead investor Andreessen Horowitz declined to comment for this story. Andreessen Horowitz partners Marc Andreessen, Jeff Jordan, and Chris Dixon are individual investors in PandoDaily.]

Michael Carney

Michael Carney has spent his career exploring the world of early stage technology as an investor and entrepreneur and has participated in building companies in multiple countries within North and South America and Asia. Ultimately, he is an enthusiast of all things shiny and electronic and is inspired by those who build businesses and regularly tackle difficult problems. You can follow Michael on Twitter @mcarney.

Customer loyalty programs and gift cards are essentially broken – for every merchant not named Starbucks, that is. Nearly 25 percent of the coffee house’s revenue comes from the purchase of food and beverages using pre-paid gift and loyalty cards (or apps). For everyone else, it’s nearly impossible to get a consumer to register a gift card or provide complete and accurate identity information when they do.

The rub is, every time a consumer refills one of these cards, she’s giving the company an interest free loan. And every time a user then makes a purchase using a registered card, she’s providing the company with invaluable customer behavior data – when, where, and what do we buy, and thus how can the company convince us to do so more often. Any merchant would kill for this info, but most struggle to get it. Starbucks not only has massive scale and reach, but also had to develop its own payments architecture to integrate these cards with its POS system. Few other merchants have come close to duplicating this feat.

That is until online-to-offline commerce and payments startup Marqeta solve this problem with its multi-retailer loyalty card platform, +M. Today, Marqeta is announcing $14 million in Series B financing from Greylock IL, Granite Ventures, Commerce Ventures, and other angel and strategic investors, as well as the mother of all partnerships. While the company’s February integrations with Jamba Juice and 1-800 Flowers have proven to be big wins for its business, today’s announcement that Marqeta is now powering the Facebook Card has the potential to be a game changer. I mean, there’s nowhere else you can go to immediately get access to 1 billion consumers, and their real identities.

The key to landing the Facebook partnership is Marqeta’s +M Platform which allows multiple loyalty accounts to function on a single card. The Marqeta API allows retailers to manage gifting, loyalty, promotions, cash back offers, charitable donations, and other incentive structures through a simple turnkey solution. As a result, a Facebook user who receives gifts from multiple merchants can redeem all those gifts offline using a single card. Users don’t need to sign up to receive a Facebook Card. Rather, one will be sent in the mail once they receive their first gift. All future gifts will be added to that same card.

“With each of our relationships, we’ve deliberately targeted specific demographics, and we have many more relationships coming,” Marqeta founder and CEO Jason Gardner says.

One of the biggest problems with traditional loyalty and gift cards is anonymity. Users either don’t register their cards, or do so with fictitious or incomplete identity information. Without this information, merchants cannot capture customer behavior data with each transaction for use in future marketing efforts. By connecting all these cards to a Facebook account – with the platform’s now famous “real identity” policy – this is no longer an issue.

Marqeta-powered cards achieve the Holy Grail of connecting the online to offline and fully closing the marketing and redemption loop. With a customer relationship built on the foundation of real identity, merchants can better convert one-time customers into repeat business. And while Facebook chose to implement the +M Platform via an old-world plastic card, the technology is equally applicable to a mobile app, a biometric reader, or other input technologies.

The three year old startup previously raised $7.3 million in Seed and Series A funding which Gardner says was used to build out the complicated technology required to manage multiple merchants on a single card.

“It seems simple to take in a credit card swipe and generate a receipt from one of a few merchants,” the CEO says. “What’s very hard is the logic that goes into making decisions around a swipe event and generating that receipt micro-seconds.”

This latest round of funding will be used to build out infrastructure, personnel, sales, and marketing, Gardner says. The Marqeta team has already grown to 37 people between California and Florida.

This is Gardner’s second payments company, his first being PropertyBridge, a multi-family real estate rent processing platform that sold to Moneygram International. Marqeta COO Eric Bachman has previously held senior executive roles for Golden Gateway Financial, U.S. Bank, Wells Fargo, NextCard, BankServ, CES and others. In other words, there’s a reason this team been able to solve such a massive problem that demands combining payments, commerce, and consumer marketing.

“When we initially invested two years ago, these guys stood out from the crowd of payments and deals companies because of their payments backgrounds,” Granite Ventures managing director Chris McKay says. “The platform also had fundamental technology and represented a real exchange of value between merchant and consumer. We thought of them sort of as an anti-Groupon.”

Where competitors have failed in the past is in trying to co-mingle various merchants’ cash in a single account, McKay says, something Marqeta does not do. With no direct competitors today in the “pay for return on your capital” space, according to McKay the biggest remaining challenge for the three year old company is scale and exposure. Payments, after all, is a volume game.

While it would be great to sell directly to merchants, Groupon, LivingSocial, and the other “feet on the street” local sales companies have proven this model unsustainable. Partnering with Facebook as a means of reaching hundreds of thousands if not millions of small business around the world is a far more efficient strategy, but one with its own risks. Not only is Marqeta giving up a piece of its pie to the partnership, but it also risks becoming too reliant on a single partner or platform. Look no further than Zynga to see how quickly that can go wrong. There’s likely a happy medium to be reached, but that will have to come with scale and defensibility.

Marqeta is in a good place today. The company has built highly-defensible IP and thus attracted several large partners who are eager to leverage its technology. There remain challenges including both raising awareness among merchants and combatting consumer concerns over privacy and security. The good news is that Facebook’s mighty marking engine and a bank account full of cash can overcome a lot of problems.

Michael Carney

Michael Carney has spent his career exploring the world of early stage technology as an investor and entrepreneur and has participated in building companies in multiple countries within North and South America and Asia. Ultimately, he is an enthusiast of all things shiny and electronic and is inspired by those who build businesses and regularly tackle difficult problems. You can follow Michael on Twitter @mcarney.

It’s not everyday that you hear of a company manages to quietly raise two venture rounds from A-list investors while spending two years developing its technology in stealth mode. But that is exactly the story behind big data analytics and business insights (BI) startup EdgeSpring, which today publicly launched its product and announced $11 million in Seed and Series A funding from Kleiner Perkins Caufield & Byers (KPCB) and Lightspeed Venture Partners.

Founded by former Salesforce, IBM and Oracle execs, EdgeSpring is among a new class of BI solution that eliminates the need for expensive and bottleneck-inducing IT and data-scientists to manage requests from everyday business users. Rather, the company offers the lamen a next-gen search-based solution that relies on artificial intelligence, compression technology, and schema–free visualizations to anticipate the questions a user may ask and then deliver actionable responses in near real-time. The aim is to make it possible for the marketing or finance exec to draw insights from data of any size or structure.

“From day one, our vision was to democratize information access in the enterprise,” EdgeSpring founder and CEO Vijay Chakravarthy says.

EdgeSpring is available as a cloud-based or on-premise solution. The platform offers integrations with SQL, Hive, salesforce.com, and other data sources, making it relatively straightforward to import large volumes of data from across a business.

It seems that every company has collected massive amounts of data about its business, a situation that’s only accelerating with the rapidly declining cost of data storage and the parallel increase in new data being created. The issue becomes how to make value of these mountains of information. When the data set grows beyond the size that can be reasonably be managed through spreadsheets, charts, and manual queries – something that is no longer realistic for all but the smallest and most unsophisticated businesses – companies turn to BI tools that can bridge the speed and scale gap.

As Lightspeed managing director Ravi Mhatre wrote recently:

I believe that to harness the power of this data revolution and gain a competitive edge, companies need to be able to do more than create and query their big data stores. They need to focus on making this big data fast, intuitive and easy to manipulate in new and interesting ways.

While the term “big data” is arguably overhyped, the innovation that many companies in this category are driving is real. A 2012 IDC research report on the business analytics software industry indicated that the market grew 14.1 percent in 2011 and should reach $50.7 billion in gross sales by 2016. EdgeSpring is part of this revolution, but is certainly not alone. Other exciting companies include Qliktech, Tableau, and Chiliad among dozens of others.

Since introducing its product into private beta several months ago, the company has added numerous enterprise customers including AppSense, Demandbase, Docusign, Equinix, Lithium, Netflix, Pandora, SpruceMedia, and Xactly, among others.

In addition to its commercial product, EdgeSpring has also been developing a Crunchbase visualization, CrunchEdge, as a public demo of its platform’s capabilities. CrunchEdge will be available at the beginning of June, allowing users to analyze and manipulate the startup and venture capital data according to various visualizations, filters, and associations. Having demoed the product, I can confidently say that it will add a level of clarity and insight never before available, and could dramatically impact the way that investors, entrepreneurs, and even journalists look at the startup ecosystem.

With the constant introduction of new and more powerful analytics tools, the value of business data is growing by the day. EdgeSpring has come out of its stealth period with an novel product and an equally impressive list of investors and early customers. In a competitive market, the company now faces the challenge of both selling enterprise customers on its value and keeping up with the fierce competition within the category.

Michael Carney

Michael Carney has spent his career exploring the world of early stage technology as an investor and entrepreneur and has participated in building companies in multiple countries within North and South America and Asia. Ultimately, he is an enthusiast of all things shiny and electronic and is inspired by those who build businesses and regularly tackle difficult problems. You can follow Michael on Twitter @mcarney.

It’s been an eventful last 12 months for cloud ERP (enterprise resource planning) company Plex Systems, with the company completing a private equity buyout, closing a $30 million growth stage venture round from Accel Partners (a PandoDaily investor), and the introduction of a new CEO – in that order. Each of the moves was highly strategic, according to current management, with the goal of positioning the company to extend its substantial lead in the massive but underserved manufacturing sector.

Today, the 18-year-old Michigan-based company put in place what it hopes is the final piece of this reinvention puzzle with the addition of former Eloqua chief marketing officer and Taleo head of global marketing Heidi Melin as its new CMO. Melin, who also held positions at Polycom, Hyperion, and PeopleSoft, is an enterprise veteran in every sense of the word and is a major score for any company.

Melin’s decision to join Plex is unsurprising, given that it’s her former Taleo and PeopleSoft colleague Jason Blessing who was appointed CEO of the company in January. Together the two will look to improve on the company’s more than $50 million in 2012 revenue and 30 percent annual revenue growth rate – a particularly healthy number for a late stage SaaS company. Plex is operating profitably, according to Blessing, however the CEO is actively investing all profits into new growth initiatives.

To do this, the Plex will need to refine its messaging and more effectively articulate its value proposition, according to Melin. The company already serves 350 large enterprise customers, primarily in North America, with a presence in the motor vehicles, aerospace, defense, electronics, and, most recently, food and beverage industries.

One thing Plex has going for it is that manufacturing has been one of the last industries to shift to cloud-based ERP systems, meaning that there’s miles and miles of greenfield territory to prospect. Plex is already the only manufacturing-focused native cloud ERP system. And while the product has expanded to offer finance, HR, and CRM solutions, the fact that it was founded by manufacturing industry insiders led them to solve the most difficult challenges of this mission-critical business area first – production, quality control, and inventory management, among others.

“Plex is changing global manufacturing just as cloud solutions have transformed sales, marketing and human capital management in other industries,” said Melin.

Since raising the Accel round last fall, Plex has grown from 260 to 307 employees with its global headquarters outside of Detroit and a European base in Germany. The biggest misconception of Plex, according to Blessing, is that it operates in a niche space. Contrary to popular perception, the ERP market is roughly $30 billion in size, and Plex’s solution is applicable to $15 to $20 billion of that, according to the CEO. Legacy solutions from Oracle, SAP, Infor, and QAD
, among other make up the bulk of the existing competition. But the biggest threat from these outdated platforms is the sunk cost fallacy and the psychological burden of switching.

Plex, a SaaS product that does not require expensive software or hardware purchases, really several generations ahead of these competitors. The company’s challenge is to better educate the market on the value it offers and to get in front of as many such prospects as possible while the market is maturing. In both cases, the addition of Melin should be just what the doctor ordered.

With US manufacturing coming back into vogue, there is no shortage of opportunity for Plex. Unsurprisingly, the company has been mentioned as a likely IPO candidate, and its current revenue and growth figures stack up nicely against other successful SaaS listings. Given all the upheaval inside the executive suite, it’s unlikely that we’ll see a listing from Plex in the immediate future, but this company is likely one to keep an eye on.

Michael Carney

Michael Carney has spent his career exploring the world of early stage technology as an investor and entrepreneur and has participated in building companies in multiple countries within North and South America and Asia. Ultimately, he is an enthusiast of all things shiny and electronic and is inspired by those who build businesses and regularly tackle difficult problems. You can follow Michael on Twitter @mcarney.

Ticketfly has built a reputation for itself as an ally to small- and medium-sized venue owners by offering technology tools that go well beyond ticket sales. The three-year-old startup leveraged the popularity of its  social marketing and publishing tools to grow its client base by 128 percent in 2012 to 822 event promoters and venues, across 44 US states. Ticket sales grew by 57 percent over the same period to reaching 4.1 million for the year.

Today, Ticketfly is releasing its Fanbase customer analytics suite that will allow venues and promoters to identify, engage, and reward their best customers. The genesis for this new product was the realization that just 7 percent of consumers accounted for 24 percent of ticket orders in 2012, and 30 percent of ticket revenue. In other words, Pareto’s 80/20 law holds true for the value of event goers and Ticketfly would be well served to help its clients better target this market.

Fanbase relies on a proprietary ranking algorithm to combine a dozen factors including attendance, purchase history, and social sharing data to create a dynamic ranking of top fans on a per venue, event, genre, and individual performer basis. With this data, promoters can better target and engage their most valuable customers.

This data can be valuable to create buzz ahead of an upcoming event through exclusive pre-sales or premium seating and merchandise rewards promotions. At the same time, by knowing fan preferences and engagement levels venues can more effectively liquidate otherwise difficult to move ticket inventory – all while rewarding loyalty. Fanbase beta users reported an increase in email marketing open rates from 25 percent – the industry average – to 40 percent with new the customer analytics tools.

Philadelphia and Wilmington, Delaware venue owner World Cafe Live is one of a select group of customers who have been beta testing the new platform for the last six weeks. With two venues, each with two event spaces and a restaurant, World Cafe holds nearly 1,000 events per year, with 350 nights booked in 2012.

Despite this schedule, the company’s event promotions and marketing team consists of just four full time individuals. Prior to joining Ticketfly, the team was “grasping in the dark,” according to box office manager Sarah Marasco, particularly when hosting a performer for the first time, heaven forbid venturing into a new genre.

“Fanbase gives fans a voice and gives venues new insight into who their best customers are,” s Marasco says. “People will like the interactive nature of Fanbase; they can show how much they love their favorite venue and be rewarded for their loyalty. This is the future of concert promotion.”

Ticketfly has raised $37 million, with the latest of its three financings being a $22 million Series C round completed in July 2012. The company’s backers include SAP Ventures, Northgate Capital, Cross Creek Capital, High Peaks Venture Partners, Contour Venture Partners, Mohr Davidow Ventures, and Roger Ehrenberg.

As Ticketfly continues to compete against entrenched incumbents like Ticketmaster, particularly in the long tail and remnant inventory categories, its ancillary services provide a point of differentiation. Today’s addition of Fanbase to the existing social analytics and publishing dashboards mean that client venues now have access to a comprehensive marketing optimization platform.

The challenge for the company continues to be expanding beyond its mid-tier and long-tail niche of venues between 200 to 2,000 in capacity to tackle the amphitheaters and arenas where the real money lies. As the company’s tools continue to grow in sophistication, and its client-first reputation grows in parallel, it may have an opportunity to move up market.

In the meantime, Ticketfly can find consolation in the little-discussed fact that the small venues are the best place to take in a show.

Michael Carney

Michael Carney has spent his career exploring the world of early stage technology as an investor and entrepreneur and has participated in building companies in multiple countries within North and South America and Asia. Ultimately, he is an enthusiast of all things shiny and electronic and is inspired by those who build businesses and regularly tackle difficult problems. You can follow Michael on Twitter @mcarney.