VentureBeat

It’s pretty rare that venture capitalists will bet on a company that shows a hint of impropriety. Yet happens occasionally, for companies that don’t push the envelope too far.

In March, for instance, soft-porn site Zivity got $7 million from two prominent firms. The latest is PurePlay, a poker and proto-gambling site that today announces $15 million in funding from Bay Partners and prominent investors including Ron Conway, Peter Thiel and Owen Van Natta.

PurePlay doesn’t do much to distinguish itself in terms of game play: Like Yahoo Games and many other sites, it uses standard poker variants like Texas Hold’em and Omaha Hi-Lo.

What distinguishes the site is that you can actually play for, and win, money in your poker games. That makes it almost unique in the aftermath of recent legislation. Recent laws like the Unlawful Interent Gambling Act, passed in 2005 to limit online gambling, drove the betting sections of huge poker sites like PartyPoker.com out of the United States.

That initial description makes it sound like PurePlay was started to capitalize off the UIGEA. The law has been murky, and so open to infringement. Congress stopped short of defining it clearly in the 2006 law, directing the federal government instead to enforce state laws restricting such activities.

But the site was planned out and started well in advance of those laws, says CEO Jason Kellerman. The trick to PurePlay is that it works off a subscription model, with users paying set monthly fees to play, but gaining the potential to win large sums if they’re good enough to win tournaments.

That general scheme also applies to other sites, like skill-gaming portal King.com, but PurePlay caters exclusively to poker players. And the market is huge: 50 million players, of whom 40 million don’t gamble for money anyway, according to Kellerman.

For that 80 percent of the group who apparently don’t want to pay, though, there’s a hidden motivation to shell out for a subscription fee. In free games, bad play reigns — when the money is entirely virtual, players have no motivation to do well, and make stupid moves that detract from the game. With a subscription fee, players are simultaneously assured that any losses will be small, while also given a better standard of gameplay.

Of that sizable pool of gamers, PurePlay has captured about a million people. It doesn’t disclose how many are paying, but some extrapolation is possible. The company says it pays out over $125,000 each month in prizes. Subscriptions are $20 a month, so if PurePlay gives back 25 percent of its subscription fees, it has around 25,000 paying subscribers; if it gives back 50 percent, then only 12,500 subscribers, and so forth.

For the (likely) vast majority who still prefer to play for free, PurePlay runs its own ad business, which Kellerman says does quite well, generating “hundreds and hundreds of millions” of ad impressions each month. In addition, he says, user growth has been strong, with adoption rates by new visitors “fantastic.”

So if the online poker business can still be so profitable, why isn’t everyone and their brother jumping in? For starters, Kellerman says, the business of growing a poker portal isn’t easy. “It turns out the infrastructure is pretty expensive,” he told me, noting that the majority of initial investment went toward scaling up to meet demand.

Now the “vast majority” of the company’s money is pushed back into advertising. Kellerman, as well as other members of the executive team, have backgrounds in search engine optimization, meaning they pour most of their effort into low-CPA schemes like Google ads.

Of the $15 million invested into PurePlay, the company isn’t disclosing how much went into each round. It’s based in San Francisco.

1. Amazon S3, VentureBeat go down
2. Montalvo Systems vs. Intel, with chip for handheld devices
3. Fox Interactive to introduce “music Hulu for MySpace”
4. Yahoo’s board moving against Yang
5. Google searchers are wealthier, buy more online
6. Xobni hires Jeff Bonforte away from Yahoo, to be its new CEO
7. Stormfisher raises $350 million for biofuel project
8. Cable veteran Philip Balboni moving to online news site
9. Nielsen buys Audience Analytics
10. Air commuter conference coming up this spring
11. Report: Online Community Best Practices
12. Wal-Mart chooses Blu-Ray

Amazon S3, VentureBeat go down — Online data storage service S3 went down. Affected startups include SmugMug, 37Signals, Twitter and many others. Lots of coverage on Techmeme. Earlier today, VentureBeat was down because of separate hosting problems.

Montalvo Systems taking on Intel, focusing on a chip for handheld devices — It has designed a chip for smartphones, notebook computers and other portable devices, that should run software that works on Intel or AMD chips. The company’s plans have been outlined in some detail by Michael Kanellos at CNET (our previous coverage ).

Montalvo’s chips, however, will fundamentally differ from the latest Core or Opteron processors from Intel and AMD in that the cores on its chip won’t be symmetrical, i.e. identical to each other. Instead, Montalvo’s chips will sport a mix of high-performance cores and lower-performance cores on the same piece of silicon, similar to the Cell chip devised by IBM, Toshiba, and Sony, according to sources close to the company.

It has received more than $73 million venture and private equity firms including Bay Partners, NEA-IndoUS Ventures, U.S Venture Partners, Leapfrog Ventures, CMEA and Adams Street Partners.

Fox Interactive to introduce “music Hulu for MySpace”– The project, which is still being put together, intends to sign up all the major music labels as content providers — who would get equity. The music would be distributed on widgets and contained in a portal page, similar to video-sharing site Hulu, which Fox is a part of. The music on MySpace would be DRM-free and ad-supported. PaidContent has the scoop.

Yahoo’s board moving against Yang — Founder and chief executive Jerry Yang and a small group sympathetic members are trying to avoid a sale to Microsoft at all costs. But Yahoo Chairman Roy Bostock is leading an informal group of board members and billionaire Ron Burkle who think that Yang may be ignoring his fiduciary duty to maximize shareholder returns. The New York Post has more.

Google searchers are wealthier, buy more online — Hitwise numbers here. See chart for more.

Xobni hires Jeff Bonforte away from Yahoo, to be its new chief executive — Bonforte was previously a vice president who helped lead the growth of Yahoo Messenger. Company blog post here.

Stormfisher raises $350 million for biofuel project — It turns agriculture and food-industry byproducts into methane gas, which reduces the levels of waste in landfills. The investor is private equity firm DenHam Capital, which has already sunk many millions into biofuel projects.

Cable veteran Philip Balboni moving to online news site — He’s leaving New England Cable News to join online international news company Global News Enterprises LLC, which is slated to launch in April with more than 70 international correspondents. The new company has taken on around $8 million from angels. (Photo via Columbia University.)

Nielsen buys Audience Analytics – The web measurement company says the Provo, Utah-based startup will improve its ability to handle large quantities of audience measurement data

Air commuter conference coming up this spring — Tech commentator Esther Dyson and publisher Imaginova are teaming up to organize the fourth annual Flight School from July 4-6, an event that brings entrepreneurs together to talk about innovation in aviation and space travel. The focus is still on “air taxis” — basically, smaller planes making local flights on-request — but Flight School’s scope will be broader this year, Dyson told us. Since the conference began, air taxis have become a marketplace reality through companies like DayJet, and commercial space flight is becoming more and more practical too, Dyson said. She added: “When I was a kid, I took it from granted that I would go to the moon. Now it looks like I’m going to have to work pretty hard to get there.”

Report: Online Community Best Practices — Forrester analyst Jeremiah Owyang delivers the report (buy here). Its tagline is “Communities Are A Powerful Tool, As Long As You Put Members’ Needs First.”

Wal-Mart chooses Blu-Ray — More here. Meanwhile, Toshiba may be ready to give up on HD DVD.

Like, the San Mateo company lets you search for items to buy based on visual characteristics you’re looking for, has raised $3.3m more in financing.

Like’s chief executive Munjal Shah has proven nimble. He started two years ago with photo search, with a product originally called Riya. He then changed quickly, when he realized the market was stronger in visual search for shopping. Riya is the name of the parent company.

Like is now getting three million monthly unique visitors a month, Shah says. That’s been driven by new features, including one that lets other site owners make their own images clickable, and then searchable by Like. To do this, Web site owners add a line of javacript code to their site, and this highlights items in an image, so that you click on specific item, for example a shirt someone is wearing, and Like does a search for it.

Like has also bought Adwords beside Google search results to drive traffic. Finally, Like has worked hard to increase click-through rates in other ways. We’ll be hearing more from Like soon.

Here’s our previous coverage.

Investors include previous investors Nokia Venture Partners, Bay Partners, and Leapfrog Ventures.

Triggit offers a new, faster way for web publishers to add photos, videos widgets and links to sites like Amazon and YouTube.

Right now, web publishers like VentureBeat use the administrative section of a blog software to do these things. VentureBeat uses Wordpress, and it can take a few steps. For example, to post an image, I have to leave our page, search for the image at another site, grab it, and upload it into Wordpress. However, San Francisco-based Triggit lets you do all that directly from a toolbar within your browser — without even leaving your editor.

Here’s how Triggit works. After you install the Triggit toolbar, Triggit gives you a menu option for accessing content from other web sites, including Amazon, Shopping.com, Flickr and YouTube. Select one of these options — let’s say Flickr. Triggit presents you with a popup box that lets you search for Flickr photos. Choose a photo and you’ll be able to click and drag it to anywhere on your web page. See demo video below.

The site lets you insert YouTube videos. For those interested in commercial use, it also lets you insert affiliate marketing links to Amazon and others. The obvious use case is for a niche blogger, like a landscape photographer, who wants an easy way to both insert photos and link words like “digital camera” to e-commerce sites.

The first 300 VentureBeat readers who want to try the service can sign up here — use this access code: ventureb.

The company has been testing with hundreds of users, says chief executive Zach Coelius, and some are getting clickthrough rates of ten percent and have CPMs of more than $25 dollars.

The company’s next step is to build in easy ways to place graphical ads on web pages.

To date, it has raised money from angel investors as well as half a million from Bay Partners.

Here’s the video:

With a fresh $32 million funding going to nanotechnoloy firm NanoGram, mainly for development of next-generation solar cells, it’s a good time to point out some up-and-coming technologies that work on very small scales to make photovoltaic cells more efficient.

NanoGram has already had several commercial successes, including inventions in both electronics and medicine. However, the company has of late turned its sights on boosting the efficiency of solar cells.

The company is working on ultra-thin crystalline silicon which it says will reduce the cost of silicon-based solar cells to below $1 per watt hour, a price point that is generally considered a breakthrough.

Its latest funding is notable because Nanogram had so far only taken $27 million in funding since its inception in 1996, growing to over $20 million in annual revenue. It plans to use the additional $32 million (investor details at bottom) in part toward a pilot plant for solar modules.

SunFlake A/S, a European company, makes the same claim of being able to manufacture a low-cost cell with about 30 percent efficiency, roughly double the efficiency of the average solar cell available today.

Headed by noted scientist Martin Aagesen, the company plans to make use of a type of nanowire discovered by Aagesen that he calls “nanoflakes.” Blessed with a perfect crystalline structure, nanoflakes are capable of absorbing nearly all light directed at them, according to the company.

By growing its nanowires into a low-grade silicon substrate, SunFlake will reduce the need for large amounts of high-quality polysilicon when making cells. However, it has yet to announce plans to commercially manufacture cells.

Another methods on the horizon is the use of metal oxide nanoparticals in cells. Dr. Jin Zhang of the University of California, Santa Cruz, plans to use a combination of nanoparticles and quantum dots (using nano-crystals, as SunFlake does) to make a highly efficient solar cell.

(Nanotechnology, by the way, refers the field of science that works at the atomic and molecular scale, roughly between 1 to 100 nanometers. Elements and compounds take on different characteristics when they are so tiny, and studying them is leading to new users and inventions, as we’re seeing here.)

A team led by Zhang and including other researchers from China and Mexico recently tested a prototype cell using a nanocomposite material of their own devising. The cell performed even better than the researchers expected.

“We’re manipulating the energy levels of the nanocomposite material so the electrons can work more efficiently for electricity generation,” Zhang told ScienceDaily. His research is currently supported by various governmental groups from the three countries involved.

One note when considering these up-and-coming technologies: It will probably be about five years before they hit the market in force. However, as new technologies become more common, existing cost balances between different solar technologies, like polysilicon and CIGS cells, will likely be upset.

Finally, returning to NanoGram’s funding, the company brought on new investors Global Cleantech Capital, Masdar Clean Tech Fund, Mitsui Ventures, Nagase & Company, Nanostart AG, TEL Venture Capital, and Yasuda Enterprise Development for the round. Existing investors ATA Ventures, Bay Partners, Harris & Harris, Institutional Venture Partners, Nth Power, Rockport Capital Partners, SBV Venture Partners, and Technology Partners also participated.

SocialPicks is one of many community sites for stock market investors. (Other such sites include Cake Financial, Wikinvest, Zecco, and StockPickr.) Like some of its rivals, SocialPicks has been persevering with its vision for years, but now its efforts are starting to pay off.

The company has just raised $500,000 from Bay Partners, according to a regulatory filing.

With SocialPicks, you select companies you think will perform well, then track your stocks’ performance against other SocialPicks users — like choosing a fantasy sports team. SocialPicks gives you a score based on the accuracy of your “picks” as well as your average return.

But it’s not all about entertainment. You can get investment ideas by watching which SocialPicks investors and companies are performing the best. SocialPicks also searches the web for opinions from top investors and analysts so you can use this information while picking stocks.

To be fair, these social investing sites do take somewhat distinct approaches to creating communities of investors, even if they’re all basically doing the same thing. Mountain View, Calif.-based SocialPicks focuses on ranking and comparing its users with each other, whereas competitors like Wikinvest (our coverage) focus on getting users to collaboratively pool information about companies.

One of the closer competitors to SocialPicks is Cake Financial (our coverage). That company also focuses on comparing individuals, but syncs with brokerages so you can automatically see how your past performance compares against other investors.

Featured companies: BioVex, FullTurn Media, Humanetics, N Spine, Novitas Capital, Reliant Technologies, Symbios, Vaxart, Virtual Radiologic, Winston Laboratories, Zosano Pharma

EXPANDING ITEMS: Stay tuned.

Vaxart receives $3.3M for oral vaccines — San Francisco’s Vaxart, a biotech developing novel adenovirus-based vaccines, raised $2.7 million in a first funding round. Vaxart also received a $600,000 small-business innovation grant from the NIH to assist in developing the company’s vaccine platform.

Vaxart’s vaccine technology involves a non-replicating adenovirus engineered to produce a particular bacterial or viral protein, or antigen, which stimulates an immune response. The vaccine, which consists of the adenovirus and an “adjuvant” designed to enhance the immune response, is packaged in a capsule that can be taken by mouth.

Vaccines that depend on viral “vectors” like adenovirus are promising because they can produce immunity without the need to rely on attenuated or killed disease virus. When injected, however, such vaccines frequently stimulate an immune reaction to the adenovirus itself, which can negate the effect of the vaccine or subsequent booster shots. Vaxart believes that oral delivery can sidestep that problem.

The company’s early candidates include vaccines against avian flu, seasonal flu, and biowarfare agents. Investors in the round included Quantum Technology Partners, Life Science Angels, Bay Partners and Sand Hill Angels.

Reliant Tech postpones IPO — Reliant Technologies, the Mountain View, Calif., maker of laser skin treatments, postponed its IPO indefinitely, PE Hub reports. The medical-device maker had previously filed to raise up to $86.5 million in an offer of 5.4 million shares.

Reliant Tech’s postponement comes just a day after EnteroMedics, a maker of obesity-control devices, almost halved its IPO pricing. Until recently, device makers had lived a charmed life where IPOs were concerned, but it’s beginning to look as though market turmoil may be taking its toll on this sector as well. Our previous coverage of the company is here and here.

On the other hand, at least IPO investors won’t get the company confused with Reliant Pharmaceuticals anymore.

N Spine acquired by Synthes for $30M — N Spine, a San Diego maker of spinal devices, was acquired by Switzerland’s Synthes for $30 million. The release is here. N Spine shareholders also stand to receive an additional $45 million in milestone payments if development of the company’s products proceeds as planned. Our previous coverage of N Spine’s fundraising is here.

Zosano Pharma raises $45M for needle-free drugs — Fremont, Calif.-based Zosano Pharma, a specialty pharma working on needle-free drug delivery, raised $45 million in the second half of its initial venture funding. The company said it has now raised a total of $90 million. Our previous coverage of the company, which used to be called Macroflux, is here (last item).

Investors included New Enterprise Associates, Nomura Phase4 Ventures, HBM BioVentures and ProQuest Investments. Zosano’s lead candidate is a patch for delivering the drug PTH through the skin to treat osteoporosis.

OTHER HEADLINES OF NOTE:

• Virtual Radiologic prices IPO mid-range, raises up to $78M (IPO Home)
• Cancer-drug maker BioVex closes $35M round (release)
• Humanetics gets $3.8M grant for radiation countermeasures (release)
• Symbios raises almost $2M for pain-drug delivery (VentureWire, sub req’d)
• FullTurn Media launches medical-education videos, seeks $5M (VW)
• PA Early Stage Partners changes name to Novitas Capital (release)
• Specialty pharma Winston Pharma goes public via reverse merger (release)

“Platform” has become a buzzword this past year. With more and more business going online, the big Internet companies want to put logs in the fire, and make their living rooms cozy: Like never before, they’re providing third-party software developers support services and access to its users. The most prominent example is Facebook, which lets developers build applications and make money freely directly within Facebook.

Another, older company that has helped pioneered this model is Salesforce. Tomorrow, Bay Partners and Bessemer Venture Partners will announce a fund of at least $25 million for startups that develop applications on Force.com, Saleforce’s software platform to help businesses to build their own applications and host them with Salesforce (our previous mention here).

As you’ll see from Saleforce’s stock price since going public three years ago, its story has been rewarded by Wall Street (image via Yahoo Finance). It’s stock is at an all-time high.

The two venture firms believe startups that develop applications using Force.com may be able to provider cheaper, easier-to-use applications to larger businesses, especially to mid-sized businesses that get ignored in favor of Fortune 500 client companies by business-software giants such as Oracle and SAP. Many of these mid-sized businesses, often defined as having between 50 and 500 employees, instead build their own software or do without.

Bay Partners has already bet on Facebook’s platform, announcing AppFactory in July, a program for providing seed-stage funding to startups that build Facebook applications (our coverage).

Bay Partners is optimist about Force.com because some of its portfolio companies have already used Salesforce’s AppExchange to connect with clients and grow their revenue streams. One such company is Eloqua, a startup that provides software that helps salespeople and marketers in a company coordinate their efforts to gain customers — it is making more than $10 million in revenues, the firm tells us.

Salesforce will advise the two firms on investments, providing background information and assistance with due diligence.

Silicon Valley venture capital firm Bay Partners said it wants to write checks of between $25,000 and $250,000 to developers writing applications for Facebook’s platform.

This is like candy to some developers, who will enjoy nothing more than getting paid to write an application for the popular social network — where million users are selecting new applications ranging from photo-editors from photo-editor to music players at a rapid rate.

The project is remarkable because it suggests the firm believes these applications may grow into major companies simply by gorging on the massive 29 million userbase of Facebook as a testing ground. Bay’s program, called AppFactory, will invest in “tens” of companies using a fast-track approval process very similar to Charles River Venture’s Quickstart program. The program also write quick, early checks of up to $250,000, on the understanding the entrepreneur would come back to seek more funding if their project begins to look promising. Increasingly, venture firms are doing this to get early ownership of companies. CRV’s program focuses solely on convertibles — which are loans to companies that transform into equity holdings when the company goes on to raise a new round of capital. Bay Partners said it is flexible, offering convertibles and straight equity investments.

Bay said it is collaborating with Ajaxian.com, which has an active community of Ajax developers, as part of its effort to create an ecosystem that helps developers get started more quickly.

Seattle-based Yapta, a service that informs you when the price of plane tickets you want drops, has raised $2.3 million.

The company is one of many trying to provide ways for people to save money on airfare, but its approach is a bit different: Yapta lets you bookmark, or “tag” individual flights and will e-mail you immediately when any of them become cheaper.

Sites like Kayak and Sidestep let you search hundreds of travel sites for the cheapest flights. Farecast, however, is the closest to offering something similar. It lets you track specific flights you’re interested in, and make predictions about whether prices are headed up or down.

Yapta works through a downloadable plug-in for Internet Explorer (support for FireFox is on the way). Once it is installed, whenever you select a flight from Travelocity, Expedia, Orbitz, or one of the eight US airlines Yapta supports, a button that says “Tag with Yapta” appears below the price. Clicking this will add the flight to a list you can access later on Yapta’s site. Yapta then automatically checks the airfare multiple times per day for all of the flight’s you’ve tagged, so if any of prices drop, it will let you know before it’s too late. If the price goes down after you’ve made the purchase, Yapta will inform you of this, as well, and will tell you how to get a refund or travel voucher from the airline.

Yapta is aimed at the “value-conscious business travelers,” that book their own flights online, and says that its service has saved its users an average of $109 dollars over three months. It intends to make money through targeted advertising and, down the road, a premium service that will allow you to purchase your tickets without leaving its page.

The funding round was led by First Round Capital, and included investments from Voyager Capital, Swiftsure Capital and Bay Partners and brings the total invested to $3 million.