VentureBeat

updated

KnowNow, a startup that sought to deliver RSS services to large companies, is looking to sell after failing to build a viable business.

The San Francisco company started winding down about two weeks ago, VentureBeat has learned, after three different CEOs took turns a the helm but failed to build a business out of the new technology.

A source close to the company says the underlying technology is valuable, and he expects a sale.

RSS grabbed a lot of attention among businesses two years ago, when techies began proselytizing the wonders of the protocol. RSS could let you subscribe to almost any kind of data. While consumers can use it to track their favorite news sources, there’s so many other uses for businesses: If your sales person kept a log of their sales, you could subscribe to their logs via RSS. If your biz development person tracked their deal progress, you pull their logs by RSS too. If your IT department logged traffic spike data, you could get that, and so on. To top it off, you could pull it all into a spreadsheet on the fly and mix it all up, giving you — at least in theory — a more efficient, quicker way to get an overview of your business and make better decisions.

Two years ago, when KnowNow raised $13 million in fresh capital to sell RSS services for the enterprise, we expressed surprise at the large amount of capital. RSS platforms should be relatively cheap to build. At the time, chief executive Todd Rulon-Miller explained KnowNow needed the cash because it was building products for companies requiring robust, secure software, such as banks. Wells Fargo, for example, bought one of KnowNow’s $75,000 sever licenses, he said. He also said at the time that KnowNow had ten other large customers and that deals would be announced, but apparently the customers never coughed up real dough. The RSS strategy, however, was just the last in a series of turns by the seven year old KnowNow, which raised more than $50 million. It was backed by big-name valley venture firm Kleiner Perkins, among others.

I’ve tried reaching KnowNow and Rulon-Miller, but have yet to hear back.

[Update: I'm told KnowNow made $7.5 million in revenue last year, though I haven't confirmed that with the company.]

NewsGator is another company seeking to serve businesses with RSS services, and appears to be doing somewhat better, having integrated with Microsoft’s Sharepoint to create an add-on product. We’re told large software company SAP recently replaced KnowNow’s product with NewsGator’s. Attensa is yet another company working in this area.

RSS services company NewsGator has gained a promising number of business clients even as its consumer-focused feed reader services face increasing competition from Google, Yahoo and others.

RSS, often called Really Simple Syndication, has proven to be a key web standard, and NewsGator is one of the many companies to benefit. RSS is a method of formatting data in a software service, such as the text or photo of a blog post, structured so that the data can be sent to and displayed by other sites.

Hoping to gain more market share both with businesses and consumers, the Denver, Colorado company has closed a $12 million round in a fifth round of financing. It previously raised $17 million.

RSS feeds can be useful for anyone from news junkies to a company’s employees — “feeds” can be aggregated from blogs, wikis and other software, to help people more quickly process large amounts of information.

NewsGator is perhaps best known for the two desktop feed readers it purchased — Windows feed reader, FeedDemon and its Mac feed reader NetNewsWire — along with related services like feed readers for mobile devices. These feed readers display a list of feeds that you choose to subscribe to, a substitute for going to each web site you want to follow each day. Although NewsGator’s feed readers have been available for years, they are facing increased competition from Bloglines and Google Reader.

NewsGator has a quality list of business clients, however. Its “Enterprise Server” lets IT departments install local versions of its software, so employees can get feeds from the web, and integrates this with the other software the employees use. NewsGator says more than a hundred mid to large-sized businesses are using this service to aggregate information from internal blogs and wikis (more here).

The company also has more than 50 media companies using its widget distribution service, including USA Today, Newsweek and the San Jose Mercury News. These widgets are distribution mechanisms for RSS feeds, where another web site can put a widget showing these feeds on their own web pages (see USA Today screenshot).

Social networking developer platforms have also opened up new opportunities for NewsGator RSS feeds and widgets to reach consumers. The company quickly jumped on the Google-led “OpenSocial” set of standards, whereby third parties can build applications that can work on any OpenSocial member network. It created a Flash widget called Didjahear!?, that displays video, photo and text content from the two million RSS feeds that NewsGator collects on the web.

This widget, the company told us last month, gathers data on what content you and your friends click on and share, within social networks that are a part of OpenSocial.

If you use NewGator to create a widget for Myspace featuring your favorite online videos of, say, soccer clips, NewsGator will learn which videos your Myspace friends clicked on, spent the most time watching and forwarded to others.

Mobius Venture Capital, which first invested by itself in 2004 (before Bloglines sold to Ask), is returning, along with Masthead Venture Partners. Vista Ventures is joining this round.

Updated

Web 2.0 start-up activity is hot, and here’s the latest data.

Venture capitalists invested $455.5 million into Web 2.0 companies in the first three quarters of the year, more than twice the amount invested over the same period last year.

This comes from the latest survey by Dow Jones VentureOne, which continues to do the best research on the Web 2.0 area. It gets help from accounting firm Ernst & Young.

Overall, more than $1.63 billion has been invested so far this year into 198 “consumer technology” companies headquartered in the U.S., but 79 of those companies were classified as “Web 2.0.” (See our earlier story here, for VentureOne’s definition of Web 2.0 — scroll to blue quote box)

Notably, the group finds investment valuations have remained fairly steady for Web 2.0 companies over the past two years. But it contradicts the moaning we hear from VCs and individual angel investors about how high valuations have become. (See chart at very bottom of the post; note that the valuations don’t include the angel rounds).

Below are charts outlining where the investments are going, and listing the biggest recipients and investors.

Btw, Intel Capital should be moving up the list as a big investor, based on the recent announcements it has made. We heard that Intel Capital’s Eghosa Omoigui, who has had his ear to the ground attending all the Web 2.0 conferences and parties over the past year, internally floated the idea of looking at an investment in YouTube back in March, but that the idea didn’t get much traction internally. Too bad. Intel is still one of the largest venture capital investors overall.

Intel yesterday also announced it is distributing SuiteTwo, an integrated Web 2.0 software suite for small and medium sized companies, in a hosted or self-hosted format. The package includes Socialtext (wiki software), Six Apart’s Movable Type (blogging software), Newsgator (RSS reader) and Simplefeed (RSS distribution).

It has wrapped them into a single sign-on software, through direct sales from Intel, but also via partners like Dell and NEC, Intel Capital’s Robert Rueckert told VentureBeat in a briefing Monday. Cost will be from $150 to $200 per seat per year.

SpikeSource, a company that helps integrate software, has guaranteed the suite works on Novell, Linux or Microsoft operating systems, and that they run on Intel servers.

(Update: We’ve confirmed with Intel has invested in all five of these companies — Socialtext, Six Apart, NewsGator, Simplefeed; however the amount remains undisclosed).

(Update II: To clarify, Intel has made equity investments in Six Apart and SpikeSource, but has only signed warranty deals with the other companies, essentially giving Intel the right to purchase equity if they meet certain performance guidlines.)

Valuations of Web 2.0 deals: