VentureBeat

Video games are becoming an addiction for venture capitalists.

Fluid Entertainment, a kid-oriented online video game company, is near a test launch of its massively multiplayer online game and it is the latest to benefit from a round of VC money. The company’s game has relatively simple Flash-based graphics for children ages six to 11 and has an environmentally conscious theme, said Greg Jones, CEO of the Mill Valley, Calif.-based company.

The company has raised $3.2 million in a first round of venture funding from Trinity Ventures and a small amount from the Band of Angels. The funds were raised last August, but the 14-employee company has no immediate need to raise more, Jones said.

Fluid was founded many years ago by Scott Matthews to make games for a variety of publishers such as Electronic Arts. But Matthews always wanted to make his own original game and recruited Jones and Internet marketing veteran Jen Chapin to develop an online game.

Tim McAdam (pictured below), a partner at Trinity, said the investment in Fluid is the fourth major video game investment by his firm. Others include PlayFirst, a publisher of casual games; Hidden City games, maker of trading card games such as Bella Sara; and online games company Trion World Network. He said in an interview that Fluid fits in with the venture company’s belief that casual online PC games are a nascent opportunity.

“The niche here is where Webkinz and Club Penguin have done a good job getting traction with young kids with older technology,” he said. “This will focus on next-generation social play. We think Fluid can be a game changer, no pun intended.”

He added: “There will be a tsunami of interest around virtual goods. You are starting to see it already in games like World of Warcraft, Second Life, and Yaya Online. We believe a combination of subscription, virtual goods, and real-world goods is a way to build a large company over three to five years.”

Jones said that the company is very close to an open beta of its online game and that it will launch in the summer of this year. He said the company will describe the game in the next several weeks.

“We’re not trying to build World of Warcraft,” he said, referring to the hardcore fantasy role-playing online game with 10 million subscribers. “We layer in a meaningful purpose to the game that affects real world behavior around environmentalism and sustainability.”

Young kids haven’t participated in online games due to parental fears of online predators, lack of credit cards, and the lack of targeted content. But competitors who have gotten over those barriers include, as McAdam mentioned, Club Penguin, which Disney bought last year for $700 million, and Webkinz. Runescape, a free online role-playing game, generates $60 million a year in revenue through various alternative models such as micro-transactions.

Jones said that he was aware of the two-part sales process that requires buy-in from kids and parents alike. Kids have to see the games as fun and parents have to see it as safe and worth the price.

Jones said he has been an angel investor for five years. Before that, he started and ran the WorldRes hotel reservation web site.

Pluggd, a Seattle company that lets you search audio and video files for words or themes, has raised just under $6 million in financing.

Pluggd is a hot company because it does something well that few others have been able to match. You can search for “iPhone,” and Pluggd will give you a heat map showing all the places in the video file where iPhone is mentioned or even themes related to the iPhone. Click on image below for a demo.

See our previous coverage of the company.

Intel Capital, the venture arm of chip company Intel, led the round. Intel had earlier invested in the company’s seed round. Other investors include DFJ Frontier, Labrador Ventures and the Band of Angels. We’re hearing the company received an acquisition offer, but turned it down after receiving multiple favorable offers from venture capital firms.

The company is moving quickly. Last time we covered the company, it searched only audio files. Now it searches video.

It also offers a widget to search audio and video on third-party sites.

Other companies offer competing technology, but none distribute the same heat-map precision features. One is YuMe, of Redwood City, Calif., which also uses speech-recognition technology to allow advertisers to decide which videos to advertise on. That company employs people in India to make sure that videos are about what they say they are. It has received more than $7 million in funding from Khosla Ventures, Accel Partners, and BV Capital and others. Another is EveryZing, which raised $10 million in June.

Pluggd and YuMe were both voted “best in show” at July’s Under the Radar event.

Here’s the latest action:

Digg, the news-ranking site, signs big advertising deal with Microsoft — It is similar to the one signed by Facebook with Microsoft, says co-founder Kevin Rose.

Divx to spin off its Stage6 video-sharing site: Stage6, a site featuring user-created videos that uses technology from its publicly traded parent company Divx, has been growing so fast that Divx has experienced a sharp up-tick in operating expenses, lowering its overall operating income. So San Diego’s DivX will spin out Stage6, which will now seek venture funding. Unique visitors to Stage6 numbered 10 million in June, up from four million in April. DivX, meanwhile, focus on its core business of licensing high-resolution video creation technology to device manufacturers — TV makers, mobile phone companies and others. The Divx “codec” or video compression-decompression software library, has been downloaded over 220 million times since the start of 2003, including 70 million times in the last 12 months, the company said in a statement.

Facebook lawsuit continues — Facebook, responding to a suit filed against Facebook’s Mark Zuckerberg that alleges he stole code from an earlier company working on a similar idea, issued the following statement after a hearing: “We are pleased with the outcome of the hearing today. We continue to disagree with the allegations that Mark Zuckerberg stole any ideas or code to build Facebook. We intend to honor the judge’s request not to comment further in the media and will continue to vigorously defend this case in court.” This comes after presiding federal judge signaled he thought the suit was merely an effort to extract payment from Facebook, saying that “dorm room chitchat does not make a contract.” He gave the plaintiffs two weeks to file a revised complaint.

AideRSS puts article quality under microscope: AideRSS, of Waterloo, Ontario, is launching an online service where you can sort, track and filter RSS feeds. You can see how many times an online article has been commented on, “dugg” on Digg, tracked in Bloglines and how it has fared in a variety of other social news. VentureBeat’s RSS performance here. We played around with it and found some other features handy, like a way to import feeds from Google Reader and other feed readers so you can analyze all of your favorite blogs and web sites.

Toyota introduces a plug-in hybrid vehicle that you can plug in to an electrical outlet — It will introduce the car in Japan first, and test it in the U.S. The car will use “good enough” nickel-metal hydride (Ni-MH) batteries and have an eight-mile all-electric cruising range. (Details here)

GreenFuel Technologies, the alternative fuel company that had problems with its algae production, has raised a $5.5 million bridge loan — It is led by Access Industries, Draper Fisher Jurvetson, and Polaris Venture Partners (Bob Metcalfe’s company). Metcalfe last month became interim CEO of Cambridge-based GreenFuel after a series of setbacks sent the firm reeling, forcing layoffs and causing the company to scramble for additional financing. (Source Xconomy)

Google keeps buying stakes in Indian investing firms — Google has joined the investors of Delhi’s Band of Angels (BOA), we’re hearing from Sahad of VC Circle. Google had recently acquired 30 per cent of Ventureast TeNet Fund II for $3.75 million. Google had also previously invested as a limited partner in two early stage funds — Erasmic Venture Fund and Seed Fund. Sahad, who blogs about Indian investors, also notes that Canaan Partners, another valley firm that began investing in India lately, has invested in career-focused professional networking site TechTribe in a sub-$10 million round including Silicon Valley’s The Entrepreneur’s Fund III and Miven Venture Partners.

Tech blogger Om Malik is launching a television show with video site Revision3 — AllthingsD reporter Kara Swisher has the news. His first three interviews, to air weekly for about 10 minutes, are with RealNetworks’ Rob Glaser; Seagate’s Bill Watkins; and entrepreneur James Hong of HotorNot fame.

Therative, a Livermore, Calif., medical-device maker, raised $9 million in a third round of financing, largely to fund television ads for its consumer-oriented acne product.

Therative makes and markets a pimple-clearing device called ThermaClear, which received FDA “clearance” for direct consumer sales last year. The device releases pulses of heat designed to kill bacteria inside pimples, supposedly in a manner similar to laser treatments offered by dermatologists. The company sells ThermaClear over the Internet for $149.95.

Bessemer Venture Partners led the round, which also included Foundation Capital, RWI Ventures and Band of Angels. Therative had previously raised more than $5 million.

The company’s release is here; VentureWire has more (subscription required).

SlimDevices to release latest Squeezebox — The come-out-of-nowhere Mountain View start-up sells a device that lets you play your music anywhere in the house, and hooks up with all kinds of services, from Pandora to Rhapsody. Its latest one will sell for $2,000 device; the NYT has the scoop. This scrappy company is run by 20-somthing Sean Adams, and to our knowledge he has made do with a mere $330,000 from angels (though he may have raised more without us knowing).

ChaCha a new search engine, with guides — That’s right. This company is just like Google, only it pays its employees or contractors to help you refine your search. On the good side, this a really useful service, and we hope ChaCha will stay in business. But that is the mind-boggling part for us. Read the story in the Mercury News. Maybe we’re missing something, but if this service is really for free, how is the company going to make money? Yes, there may be search result advertising (including vidoes while you wait), but we don’t see how that will cover the costs. We tried it out, but got tired waiting for a response (ChaCha is supposed to average about a minute, but we gave up after five minutes waiting for answer we posed about how much venture money start-up Rojo had raised; it was listed on both VentureBeat and Gigaom, but ChaCha didn’t find it). And we were annoyed by the site, which made regular “swooshing” sounds, though don’t understand why (was it the ads?). Don’t want to be quick to criticize; we’re just raising these questions given the prominent coverage in media articles where the cost question isn’t really dealt with.

Band of Angels for India — The Band of Angels in Silicon Valley, a network of individuals who band together to invest in start-ups, has been fixture for years. They told us a few years ago they had no plans to go international. So now there is a Band of Angels in India, led by the same guy Alok Mittal, who also happens to run the new office in India for Silicon Valley venture firm Canaan Partners. See more at Gigaom.

Digg to respond to criticism about clique influence — Responding to criticism that a small group of influential “Diggers” are controlling what news gets to the site’s home page, Digg chief exec Kevin Rose says he’s found a way to counterbalance their influence. He said a new algorithm will “look at the unique digging diversity of the individuals digging the story. Users that follow a gaming pattern will have less promotion weight. This doesn’t mean that the story won’t be promoted, it just means that a more diverse pool of individuals will be [needed] to deem the story homepage-worthy.”

Has eBay become the investment bank for Web 2.0? — With Web calendar company Kiko being bought on eBay for $250,000 by another company Tucows, this is a question being posed lately about eBay being posed lately. Om first joked about eBay setting a new floor on investment banking fees about a few days ago. Now Techcrunch is talking about it as a serious way for Web 2.0 companies to be bought. There are more showing up. Indeed, why don’t companies place a permanent listing at eBay, disclosing the lowest price they’d agree to be sold for — even if they aren’t desperate for a sale yet? They can keep changing the offer price, depending on their own assessment of their promise. In Kiko’s case, of course, the company had run out of steam, and wanted to make whatever it could from a sale of its assets. And Tucows, which wanted a basic calendar company for its own use, made the move. Tucows probably wouldn’t have found out about Kiko without eBay. Conclusion: The risks associated with starting a Web company, already reduced because of the very low costs involved, have just gotten even lower. Maybe that’s why you see even more Web calendars still launching (the company hassome differentiating features such as voice-enabled entries, and new ways of synching.)

Woz’s book, and Steve Jobs’ change of heart — Valleyway runs with some news that it concedes might be a tad old; but we hadn’t seen it. It is about Woz’s book, and why the Apple co-founder couldn’t get his former colleague, Apple chief executive Steve Jobs, to write a foreward. Perhaps no one saw news about the book until now because the latest, from the DailyNews, has a much more colorful quote from Wozniak:

“We wanted him to do a foreword, but he declined,” Wozniak tells Jacob Bernstein this week in WWDScoop, the new magazine from Women’s Wear Daily. “He felt the book sort of portrayed me as a good guy and him as an a-hole.”

Among other anti-Jobs anecdotes, Wozniak recalls in the book that when he invented a universal remote control and sent it to Jobs, he threw it against a wall, stuck it in a box, and mailed it back. “Steve had a fit about it,” Wozniak tells Bernstein. “He was under the impression that I’d left Apple in a very negative mode.”