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You can blame the popularity of YouTube for the success of Solarflare Communications. Because demand for internet video keeps on growing, the need for infrastructure to handle the growth is also on the rise.

Solarflare Communications has raised $26 million in venture capital for its high-speed networking chip business as part of an effort to create more energy-efficient data centers.

The Irvine, Calif.-based company is creating 10GBASE-T chips, which can transfer data at 10 gigabits a second over the Ethernet protocol. Such chips are used in servers and switches inside data centers to boost the transfer of data from one piece of hardware to another with the lowest power consumption.

The company is in a good spot because it is the first to capitalize on a generational shift in networking, as network speeds move from 1-gigabit-per-second to 10-gigabits, said Russell Stern, chief executive of Solarflare (pictured below).

The round includes previous investors such as Oak Investment Partners, Foundation Capital, Accel Partners and Amadeus Capital Partners. The round slightly exceeds the amount raised by rival chip company Aquantia, which raised $25 million in March.

Solarflare was started in 2001 as a chip design firm focused on 10-gigabit Ethernet networking. In 2006, it merged with Level 5 Networks in Cambridge, England. It started shipping a low-power 10GbE vNIC controller/MAC chip in February 2007.

Solarflare said it will use the new money to launch its next-generation products, including a low-power 10GBASE-T PHY. The company hopes to dominate 10-gigabit networking the way that Broadcom and Marvell have dominated 1-gigabit networking.

“The interesting thing about networking is that no player has dominated more than one generation of product,” Stern said.

The U.S. Environmental Protection Agency (EPA) reports that national energy consumption by servers and data centers could nearly double by 2011 to more than 100 billion kilowatt hours, representing a $7.4 billion annual electricity cost.

With technologies such as Solarflare’s networking chips, it becomes easier to shift data to outlying sites with greener energy sources, such as solar or wind power. The computing of data can happen at those locations in a more energy-efficient manner than inside a power-hungry data center, said Andy Hopper, a fellow at Corpus Christi College and head of the Computer Laboratory at the University of Cambridge, Cambridge, UK.

The latest investment brings the total amount raised by Solarflare (and its acquired entity, Level 5) to over $126 million in seven years. Solarflare’s partners include Accton, Citrix, Delta, Ixia, Panduit, SMC and VMware. The company has 125 employees.

The Nintendo Wii may be getting a lot of attention. But the have you heard of WeeWorld and its WeeMee’s? They’re the kind of things that make you smile. Especially for teens and young adults.

A WeeMee is a virtual avatar that you can use as your identity in the WeeWorld virtual world (unrelated to Nintendo) or while you’re chatting with someone on an instant-messenger platform. More than 21 million WeeMees have been created in the past three years and about 600,000 a month are being created, says Lauren Bieglow, general manager of the London-based company’s North American division.

That has the company looking around for funding to expand its business, she said. Today, the company is announcing that RCA is doing a repeat promotional campaign with a musical artist, Alicia Keyes. Earlier, the music company tested a WeeMee-based ad campaign for singer Avril Lavigne. Keyes will release a new video which can be used as a background in the WeeWorld virtual world, where players can create their own rooms.

Beyond the WeeWorld site, users can use WeeMees as cutesy avatars on AIM, Skype, and Windows Live Messenger. They can use them on email signatures, blogs, or as their Facebook avatars as well. The company has been funded in the past by Accel in a $15.5 million round in 2006 and Benchmark Capital in a $5.5 million round in 2005.

The company started with avatars on the message systems and then created its own social network about a year ago. The service competes with other cute avatar virtual worlds such as Habbo Hotel or Gaia Online. The average age is 19 and the largest age group of users is 16. The company makes its money through advertising deals with companies such as Procter & Gamble. You can, for instance, use Cover Girl make-up on your avatars.

The company also makes money through virtual object sales. That will shortly include the purchase of Alicia Keyes pianos, T-shirts, or CDs. In the past two months, more than 400,000 items were downloaded in the Avril Lavigne promotion. The company has 55 employees. If the company raises money, Bigelow says that it will be used for a number of different avenues of expansion.

Virtual pets are a tried and true market for those targeting young kids. Mind Candy is joining the fray against larger rivals with a kids offering of its own this week: Moshi Monsters.

That’s a big right turn for London-based Mind Candy, which started out in the adult games market.

Two years ago, Mind Candy debuted an innovative “alternate reality game” called “Perplex City.” It was the brainchild of Michael Smith, who loved a treasure hunt book dubbed “Masquerade” when he was young. His team created a game that was part fiction, part real world. It had online puzzles, collectible puzzle cards, and a $200,000 treasure hidden in the real world for the first person to solve all of the puzzles.

But Smith said in an interview that it was hard to monetize the innovative idea. Only about 50,000 people registered to play the game and collect all of the cards, while a much larger body was watching their progress online.  The company got a huge amount of buzz. Mind Candy started on a second season of the game but shifted to Moshi Monsters instead.

Moshi Monsters is aimed at ages 7 to 11. It is a virtual pet game where you adopt a cute monster and then socialize with other kids online. You can feed it, nurture it, and solve the puzzles it sends you every day. When you solve them, you earn more currency to feed your monster. As an educational title, it resembles Nintendo’s “Big Brain Academy” game for the Nintendo DS. It also has elements of “Tamagotchi” and Facebook. There are no collectible cards this time, but they may be possible in the future, along with plush toys, puzzle cards, and phone charms, Smith said.

The company has 22 employees and has raised $10 million from Accel and Index Ventures. Moshi Monsters will compete with a wide variety of kids online game sites. Those include Neopets, GoPets, Bellasara, Club Penguin, and start-ups such as Zookazoo (our coverage).

The real estate market is in serious turmoil and has likely thrown the entire economy into a recession, so you’d think a real estate search startup might not be a hot item. But you’d be wrong.

One such real estate search startup, Trulia, is not only doing fine, but usage of the site is accelerating as a result of the housing downturn, co-founder and chief executive Pete Flint tells us. Users are flocking to sites such as Trulia, because they are independent and give people more control to find exactly what they are looking for, at the right price, in troubled times.

Today, Trulia is launching a new feature to to make the service even more useful: Integration with Google Street View. The service, which you might have heard of because of the controversy that surrounds it amid privacy concerns, shows panoramic pictures of places on Google Maps that can be rotated 360 degrees. You can traverse within this view to give you the feeling as if you on the city’s street itself.

This is useful for Trulia. Imagine you are looking for a new home. Sure, you read all of the descriptions and see a few static photos, but actually looking around the entire neighborhood as it looks on any given day — from your computer — is invaluable. “[It's] literally the next best thing to walking down the street yourself,” Flint says.

Trulia worked closely with Google to implement the functionality, and both sides are pleased with the results. While there have been the aforementioned security concerns about Google Street View, this is a perfect example of why how such a feature can be practical.

Assume you are looking for a home in one of the 40 cities Google Street View currently covers. When you do a search through Trulia and find a result you like, you are taken to a page with all the detailed information you would expect to find, but also with the street view of the property embedded right in the page. It’s not simply porting in the entire Google Map and having the big bubble pop up that you might be used to seeing if you’ve used Street View before, instead a street view picture focusing on the property is placed right in front of you in its own area on the page (see above picture).

Even though chief competitor Zillow has raised a lot more money (somewhere around $87 million), Trulia has been more than holding its own, growing its audience three fold in the last twelve months and seeing revenue almost double in the last quarter. Trulia raised $18 million in funding from investors including Sequoia and Accel.

A massive shift in advertising from periodical classifieds to sites such as Trulia has also helped the site, the company wrote about in a blog post recently.

Trulia currently has over 60 million real estate properties. The company plans to add this new street view feature to all of them as Google rolls it out to more cities.

We previously covered Trulia here, and have also covered another of its competitors, Roost, here.

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The Snap Summit 2.0 conference yesterday in San Francisco was supposed to be about the new wave of social applications, but it turned into a Facebook conference.

Here’s why: The number of Facebook applications and downloads just keeps growing — at a faster rate than other social network companies are experiencing.

Dave Morin, the senior platform manager at Facebook, was the event’s main attraction. He opened his talk with a story about a woman he had met outside. She had created a Facebook application “Easter Eggs” three weeks ago. She built it in a week with the Ruby on Rails programming tools. She released it and saw it grow to more than 300,000 users. She sold the application on Tuesday. While this is an unusually good scenario, there are still many developers trying their luck: More than 100 such apps are launching every day.

And now Facebook’s going to be launching a new e-commerce technology, giving users and applications better ways to make, bill and receive payments in a “frictionless way,” meaning applications can make money beyond just through advertising.

So there’s even more reason for developers to jump in and build applications.

Facebook now has 67 million active users. It’s like an obsession for many, despite the general skepticism about the revenue potential of social networks and the widgets that live on them.

Stanford professor BJ Fogg is actually paid to teach on the psychology of Facebook. During his talk at the Snap Summit 2.0, he recounted lessons that came from teaching students who created Facebook applications. These apps had 16 million users by the end of the ten-week class.

Fogg recounted facts well-known to insiders, but which served to remind of the astounding growth of Facebook applications in the early days — such as iLike, a music discovery app, which hit nearly a million users a week after it launched on Facebook’s developer platform in May of last year. “I would wager that no company grew so fast in history,” he said. “It was clear that something special was happening.” Read the rest of this entry »

Alfresco Software is the latest player hoping to kill high-priced software for large companies.

It’s one of a number of vendors of “content management” software. But it’s open source, and dirt cheap relative to others in the so-called enterprise content management (ECM) sector: Filenet (IBM), Interwoven, Documentum, Vignette, and Microsoft’s Sharepoint. Many of these emerged from the last Web boom, but they’re looking less dynamic these days.

Alfresco lets companies manage their documents online, and also lets them do everything from store those documents securely to keep them out of the wrong hands if they are sensitive.

The London, UK company has raised $9 million in a third round of financing led by SAP Ventures, bringing total funding to $19 million. Existing investors Accel Partners and Mayfield Fund also joined the round

Alfresco was built from scratch with Web 2.0 capabilities, including more seamless collaborative features. Employees at many large companies have started communicating through Facebook, for example, so Alfresco moved to make sure its application was built into Facebook’s platform (see screenshots, below). It has also built an application for iGoogle.

“Demand is going through the roof,” said John Powell, founder and CEO. He said the company is headed toward profitability, now that it has signed up hundreds of customers including five of the top ten investment banks, Electronic Arts, KLM and H&R Block. The company is about to hit an annual run rate of $10 million in revenue, Powell said. He adding he thinks the company will “be able to go public in 2009.”

For quite some time, renowned venture firm Kleiner Perkins Caulfield & Byers has been looking for a partner who can focus on investing in web startups, we’ve been hearing.

Now they’ve finally found somebody. Chi-Hua Chien, an associate at Accel Partners who has spearheaded a number of web-related initiatives, has joined Kleiner as a partner.

Chien will be focusing on investments in “internet applications, mobile applications, online advertising technologies, and enabling internet infrastructure,” according to an email about his departure intercepted by Megan McCarthy at Wired.

Kleiner has a profile of Chien up on their site, that says he has been on board since last year.

As an Accel associate and “venture advisor,” Chien helped bring about Accel’s investment in Facebook and AdECN — the former company recently received a huge investment from Microsoft and the latter company was acquired by it. He has also worked on the firm’s investments in BitTorrent, fbFund, Glam, Trulia, and YuMe Networks, according to the profile.

[Update II: We've learned a little more. Chien was an associate at Accel, which in Accel’s case is not a partner track position, and not a role where he could lead investments. Also, the associate role at Accel is designed as a limited-term engagement which Chien had completed. Our understanding is that he is on a full-partner track at Kleiner. Finally, see Matt's comment below, suggesting the switch was more amicable than our headline's wording implies.]

He previously held marketing and financial roles at Coremetrics, worked in corporate development at Google, business development, and had business development roles at eCoverage and Morgan Stanley’s Technology Group.

[Update I: Comment below refers to how a "partner" at Kleiner means something different from Accel. The venture world is arcane, and firms don't make it any easier because the exact nature of each partner's arrangement in a firm is usually confidential. Accel has been poached before. In 2006, Peter Fenton left Accel to join Benchmark, and Jim Goetz left to Sequoia two years before. Much has been made of Benchmark's model of extreme democracy among partners, and word was that Fenton left Accel for that reason, i.e., to be an equal partner rather than a junior partner at Accel. However, Accel has since moved to promote its junior partners more aggressively. It's not clear why Chien would have left to join Kleiner, which had been advertising for an "associate partner" position, i.e., a junior partner. We're trying to find out more.]

Silicon Valley venture firm Accel Partners has hired mobile software expert Richard Wong as a partner, the latest sign of where investors think the action will be.

Wong spent six years at OpenWave, which developed early mobile browsers (WAP), and where Wong worked with mobile companies like Sorrent, Jamdat, Infospace and Motricity in their earliest stages and saw them grow quickly. He oversaw OpenWave’s marketing efforts, and more recently was head of its product division. (Here is his bio.)

The move is significant because one of Accel’s partners, Peter Fenton, left last year to Benchmark Capital. Fenton, a successful investor, focused on software, but not mobile software. Accel’s decision to hire Wong suggests it sees more promise in the wireless broadband going forward, although the firm said Wong isn’t meant to be seen as a direct replacement for Fenton. Wong, 37, worked earlier for Covad, a broadband provider. In a phone call with VentureBeat yesterday, he said he is most interested in latest wave of mobile technology, namely the transition to “rich media,” or AJAX and Flash-based programming, which improves a mobile user’s experience.

It is the latest move by Accel to shore up its staff. After Fenton left, Accel promoted Kevin Efrusy and Ping Li from to general partners. In November, it hired Richard Yanowitch as venture partner.

Wetpaint, the Seattle start-up that lets people build Wikis — or sites where multiple people can edit the same pages — has raised $9.5 million to grab more market share.

The move comes after Google bought popular Wiki site, Jotspot, last year and closed that company to new users. VentureBeat tried out various Wikis last year, and found Jotspot the most intuitive. Wetpaint is easy to use, but we didn’t like the loud advertising present on the site — so passed on using it. But with Jotspot gone for now (presumably, Google will relaunch it in some fashion), and players like Socialtext increasingly focused on selling its wiki software to company users, Wetpaint is among the more convenient Wiki softwares for individual projects.

The question is whether $9.5 million is really necessary for a software that is so cheap to make and distribute. It had already raised $5.25 million (past coverage here).

Wetpaint told VentureBeat its users have generated more than 150,000 Wikis in six months, and that the company has struck partnerships with big media companies. AOL, ABC, CBS, American Express Publishing, T-Mobile and HTC have created community sites for their active users, though it’s uncertain how lucrative these deals will be.

Accel Partners, backers of Facebook and Glam, two other sites that rely on advertising for their business model, led the new investment. Existing investors Trinity Ventures and Frazier Technology Ventures joined the investment.

Plenty of rumors have circulated about BitTorrent, the popular San Francisco file-sharing company, speculating on its latest funding round and the fate of its brilliant chief executive.

Here’s word from the horse’s mouth: BitTorrent has raised $20 million in its second round of capital, led by Silicon Valley firm Accel Partners, the company told VentureBeat earlier Thursday. Existing investor DCM participated. And while we don’t know what will happen with Bram Cohen, we came away from a conversation with the company thinking he may be stepping down as CEO soon.

BitTorrent is a hot company because it’s at the center of a revolution in video file-sharing. It is controversial because it is still a distributor of predominantly pirated video. Its peer-to-peer technology defies centralized control, and so controlling piracy on its platform is a hard thing to do — but it is working on it nonetheless. BitTorrent has millions of users, and says its traffic accounts for as much as 40 percent of all worldwide Internet traffic.

BitTorrent is also working with the Motion Picture Association of America (MPAA) to remove copyright infringing content from its independent website. Over 20 film studios and television networks, including 20th Century Fox, MTV Networks, Paramount Pictures and Warner Bros. Home Entertainment, expect to publish thousands of movies and TV shows on BitTorrent.com, the company says.

As VentureBeat reported earlier, Ping Li, a venture capitalist at Accel led the investment. In that earlier piece, we wrote about the challenges BitTorrent still faces in becoming an easy, useful consumer-oriented site. Those challenges remain.

Separately, we asked BitTorrent’s director of communications, Lily Lin, about reports that there is an executive search underway to replace Bram Cohen as chief executive. She said everyone knows BitTorrent had become a large company, with 35 employees, but then she repeated what she told us Wednesday, that Bram was “here to stay.” We noted she was not saying he was CEO to stay. She paused, and said again, “he’s here to stay.”

So with the clues, we now believe Cohen will stay at the company but will step down as CEO. She referred to a bigger company, a hint that organization was needed. This Wired piece from more than a year ago suggests organizing people may not be Cohen’s forte. It is a snippet from a part about his wife’s view of him:

She pats her husband affectionately on the head: “My sweet little autistic nerd boy.” (Cohen in fact has Asperger’s syndrome, a condition on the mild end of the autism spectrum that gives him almost superhuman powers of concentration but can make it difficult for him to relate to other people.)

We may be wrong. Who cares about titles, right? Cohen could stay CEO, and the search may be on for a chief operating officer who effectively runs the company. Doesn’t really make a difference.

San Francisco’s BitTorrent used to enjoy all the buzz surrounding video downloading. Its peer-to-peer file sharing technology allowed for cheap, easy distribution at a time when video streaming technologies were nascent. That’s changed, despite its announcement today of deals struck with major studios.

Today, it will unveil deals with Paramount, MTV Networks, 20th Century Fox and some other studios. Users will be able to purchase or rent movies from these sources, in a video store to be launched in February. The deals follows BitTorrent’s earlier deal with Warner Bros.

Trouble is, BitTorrent has never gained mass appeal among regular consumers. It is best as a back-end distribution protocol. Now major retailers have entered the market, from Apple, which offers its own movie downloading service, to AT&T, Amazon.com, Microsoft and WalMart (see news yesterday), offering similar services — all making it easy for regular folk to watch movies from their TV screens. You’d think BitTorrent would be more focused on becoming the distribution partner for some of these players, rather than try to become the consumer destination. There’s a summary story in the Mercury News today, which suggests consumers using BitTorrent’s service will be able to play downloaded videos only on their computers — though the company says it will try to change that, to allow watching videos in their living rooms.

There are rumors that chief executive Bram Cohen has departed, and that the company has raised at least $15 million in a venture round from Accel Partners, and existing backer Doll Capital Management (which invested $8.75M in BitTorrent more than a year ago). VentrueBeat has confirmed that Accel’s Ping Li is the point person on the deal. Stay tuned.

Update: BitTorrent tells VentureBeat there’s nothing to the rumor about Bram departing; he’s there to stay, a spokeswoman said.

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Zimbra, the open source messaging software company, has just announced that it has sold four million Zimbra mailboxes, an impressive milestone for the three year old San Mateo company.

Zimbra, you’ll recall, gives you an email platform that implements the latest AJAX majic. It started last year by letting you do things like pull up Google maps by scrolling your mouse over an address written in the e-mail, or pop up your calendar when you mouse over a date in an e-mail, or a day of the week — avoiding the need to clunkily switch back and forth from your e-mail and your calendar.

It is one thing to look good, quite another to execute. Since then, it has come out with Zimlets, which let developers do even more. This has proven unexpectedly popular with Internet service providers, Satish Dharmaraj told us today. “I can’t believe what we sold this quarter,” he said. He wouldn’t provide revenue numbers.

He said service providers are hosting Zimbra’s email service for individuals and small and medium sized companies.

The providers like Zimbra because it is “skinnable,” meaning it can be tailored for a consumer feel, or for a business feel. Service providers can choose to monetize the email service by running Google Adwords or Adsense, for example. Zimbra gives them a way to make a cut if a user clicks an ad from within their email to buy an iTunes song for 99 cents, or a book from Amazon. Like Gmail, Zimbra indexes every word within an email, and so knows what is being written, and can offer relevant advertising or other services — depending on what the service provider wants.

Before and after Zimbra’s launch, there have been numerous companies seeking to improve on Microsoft or other email services.

Zimbra’s product is compatible with Microsoft Outlook and other popular e-mail platforms, such as Apple Mail. Zimbra really runs the back-end of the e-mail service, making it a competitor to Microsoft’s e-mail server offering, called Exchange. But Zimbra can keep the familiar “front-end” part of Microsoft’s e-mail platform, which users interact with, called Outlook.

Zimbra has been selling its high-end “enterprise” mailboxes at $28 a pop, but these are meant to compete with Exchange and have the bells and whistles. Most of Zimbra’s uptake has come through service providers serving individuals, however. Those service providers can have up to 20 million users, and Zimbra gives them a major discount based on volume. (In other words, you can’t multiply 4 million by $28 to get Zimbra’s revenue; not even close.)

Besides service providers, Zimbra adopters have included dozens of universities and other companies, such as Digg.com and Times of India (the announcement lists many more). As noted before, Zimbra has raised at least $30 million from Benchmark, Accel, Redpoint and others over three rounds.

Just ten days after two co-founders of San Francisco pricing software company Rapt sued its venture backers, the case has been settled.

We thought it would be quick (see our original story here), because high-profile venture firm Accel Partners, and another valley firm, Levensohn Venture Partners, likely wanted to get it over with. But terms of the settlement were undisclosed, according to PE Week, which covered the suit and first reported the settlement Friday.

The two co-founders Adam Galper and Paul Dagum had sued for breach of fiduciary duty and fraud.