VentureBeat

San-Francisco-based Scribd, the so-called “YouTube for documents,” has attracted a lot of attention — including plenty of suitors from Silicon Valley’s venture capital firms.

So it comes as no surprise that, shortly after launch, it has raised $3.7 million from Redpoint and original seed investor Kinsey Hills Group. Co-founder Trip Alder wouldn’t disclose precise valuation the investors placed on Scribd, but did say the rumored $17.5 million post-money valuation is just about right.

The round closed a few weeks ago, but Trip had waited for the legal work to be done before saying anything. Several top firms were interested, and the high valuation resulted from competitive bids for the deal. Venerated VC firm Sequoia Capital was among those turned down. Redpoint, Trip says, offered the right combination of track-record (Redpoint partner Geoff Yang backed Tivo, MySpace and Excite, among others) and attractive terms.

Pre-launch, the Y-Combinator graduate had tried to raise significant funds, and though Trip had expected that Y-Combinator would connect him to scores of potential investors, he says, this did not happen. Ed Kinsey and Michael Hills came to the rescue with $40,000, allowing Scribd to scale enough to go live.

Shortly after the launch, Scribd was racking up 100,000 unique visitors on a daily basis and suddenly, the previously tepid investors were banging down the door. An associate at Redpoint approached them and the rest flowed from there.

We previously covered Scribd and expected it to run afoul of hawkish publishers out to protect their copyrights, but Trip says this has not really been an issue. On average, Scirbd gets about one “takedown” notice a day, and Scribd takes down the material within 24 hours. Whether this situation will sustain itself as Scribd grows is yet to be seen. Copyrighted Harry Potter books, for some reason, are continually uploaded, and Scribd does a search each day for them preemptively.

Right now, they have limited competition. A potential competitor called Scriptovia has emerged to focus on getting high-school and college students to share their papers and lab reports, but it has not seen much action. And now that Scribd has a Facebook application, that niche might already be served.

The company intends to use the money to build out an API, expand its programming and marketing teams, and move into real offices. Until now, it has been three guys in a small apartment.

O’Reilly Media’s Web 2.0 Expo kicked off yesterday in San Francisco, with 10,000 attendees from 59 countries. VentureBeat’s Mark Coker took notes from the day.

The highlight was the evening’s Ignite event: Imagine packing a large conference room with about 600 geeks, giving ‘em all the free beer they can drink, and then entertaining them with a rapid-fire procession of sixteen fast-talking techies who each deliver a twenty-slide PowerPoint on an eclectic subject with only fifteen seconds per slide for total presentation time of five minutes. Add in a huge LCD panel television monitor on stage, facing the audience, displaying a steady flow of the audience’s raucous real-time commentary about the speaker’s performance, transmitted of course via SMS texting.

Notables:

Colin Bulthaup of Squid Labs talked about how his new venture, Potenco, aims to bring electric power to the two billion people in underdeveloped countries who lack access to the electric power grid. He told the audience that 1.6 billion people light their homes with dirty-burning kerosene lamps, which are the leading cause of tuberculosis. His solution? Generate electricity from human beings. We thought this idea had been debunked (see our post about the futile effort of capturing human energy via treadmills; see last item), but Bulthaup showcased a yo-yo-like device his new Alameda, Calif. company has developed that with a few arm pulls generates enough electricity to power interior LED residential lighting or other necessities such as cell phones. Listening to Bulthaup, we get the impression this may become a big business.

Christy Canida of Instructables, a social networking web site, demonstrated how users are using it to share how they make fun things out of ordinary household items. If you haven’t heard of this site, take a look at examples like the 14-year-olds making intricate gunnery equipment with K’Nex toys - a kind of next-generation legos for today younger generation. Notice that the YouTube video (below) by this kid got 35 comments at YouTube’s site, but that the real dialogue takes place at Instructables, where he gets 670 comments. An example of how theme-oriented sites (verticals) are taking more action from broader sites (horizontals).

Jordan Schwartz of Microsoft Corp shared his personal adventures in beekeeping and taught the audience the waggle dance, which is how bees communicate to other bees. He likened the hive mind of bees to how users of social news sites like Digg.com do their own waggle dance about stories they discover. This isn’t just an analogy. Schwartz suggests there’s some real science behind this similarity between the hive — where bees that find interesting flowers come back and report it to their buddies at the hive, who then verify it and spread the news virally — and Web behavior. See his blog.

Jane McGonigal, a game designer at Avant Game, argued that the day we are lying on our deathbeds, we’ll measure the success of our lives by our happiness in the past. Inevitably, therefore, we’ll move away from thinking of the Web mainly as a way to be more efficient. By 2012, she predicted quality of life will become the primary metric consumers use to evaluate technologies, and referred to a rise of the positive psychology movement. She urged the techies in the crowd to focus their development efforts on technologies that hack reality to create more happiness.

Timothy Ferriss, author of a new book, The 4-Hour Work Week, shared his tips on how to eke more productivity out of a workday: Only answer your email twice a day; outsource everything possible to $5 an hour workers in India and Canada; and get rid of less profitable customers who consume a disproportionate amount of your time. His credentials? On his official web site, linked above, it’s difficult to ascertain what this self-described polymath actually does for a living, other than generating a lot of press coverage for himself by break-dancing in Taiwan, cage-fighting in Japan, and acting on a “hit” TV series in China. Nebulous credentials aside, the crowd loved him and voted him one of the two best presentations of the evening.

Web 2.0 Expo continues Monday and Tuesday.

Mark Coker is a contributing writer for VentureBeat. He’s founder of Dovetail Public Relations, a Silicon Valley technology marketing firm. He has no clients among the companies mentioned in the story, nor among their competitors. More on Mark at http://www.linkedin.com/in/markcoker

updated

Y Combinator has nailed the start-up incubator model, most likely because of its visionary leader.

Many famous incubators, from Idealab to CMGI, have come and gone over the years, and there are predictable autopsies suggesting the incubator model is flawed (see a list of articles about incubators here). Without doubt, the incubator flavor of the year is Y Combinator. Few of its companies have matured enough to judge its success, but we’re seeing promising ideas emerge. Reddit, for example, was sold to Wired parent, Conde Nast. Its guiding light is leader Paul Graham, who thinks and writes deeply (we’ve linked to him often) about start-ups, and nurtures young founders with the best practices of the day. It provides a cooperative environment, and draws people who want to help. Paul Buchheit, the creator of Google’s Gmail, has since left Google and spends a good deal of his time advising these companies, sometimes making investments.

Writewith is just the latest company to release its product: An editing tool for people wanting to collaborate on platforms such as Wordpress — perfect for us at VentureBeat and others who want a. It provides an easy way for people to draft and edit documents. Writewith lets you alert other users by email or SMS when it is their turn to edit a document. That person clicks on a link in the email and they are taken to the document. There’s also a chat box where writer and editor can correspond in real-time. We’ve tried it a bit, and it works great — there’s a dashboard that lets you see edit history. It lets you set deadlines and there’s an icon that lights up when people are working on the document at the same time. We’ll pound on it here at VentureBeat and provide a full review. (Disclosure: Eric Eldon, co-founder of Writewith, contributed an article for VentureBeat two weeks ago; otherwise there is no relationship.)

The Mercury News has a good description of how Y Combinator works:

Here’s how it works: twice a year, Y Combinator invites “hackers,” or programmers, to fill out an online application, outlining who they are and a business idea. One winning batch of teams is funded in winter and the other in summer. With Y Combinator’s help, each becomes a real company - one that is expected to create its product within three months. The amount of money Y Combinator gives each group - $5,000, plus an additional $5,000 per founder - is a pittance for what it asks in return, which is, on average, a 6 percent stake in their start-up. That money has to really stretch. Beyond their living and working expenses, it must also cover relocation costs, as the winter winners must relocate to the Bay Area and the summer winners to the Boston area.

Here is Y Combinator’s winter Class

Here are some alums.

Update: See our follow-up, which addresses the critical comments below.

Updated

Scribd, the new Silicon Valley company pitching itself as the “Youtube for documents” is getting some good traction, in part because it hosts copyrighted material.

Scribd launched three weeks ago, and is attracting 100,000 unique visitors a day. Those are the viewers. Far fewer have signed up to upload documents — about 10,000 users have uploaded 13,000 documents.

Why, we asked initially, are people coming to a site to post documents, when all they have to do is post them on their own blog? One reason is because Scribd makes it dead simple — just like YouTube makes it easy to post videos. Whatever document you want to upload (Pdf, Powerpoint, .lit, .ps, .txt, Word, etc), Scribd throws it into a convenient Flash player format, so that it can be easily read by anyone. It converts simpler documents to HTML.

This saves hassle: If you want to load say, 30 documents online, most blogging software converts them to links that you paste into your blog, and which require visitors to download them for viewing. Scribd lets you upload readable files to its site within ten seconds. Scribd makes documents both searchable and taggable. It lets you zoom in on text. Scribe wants to foster a community around the documents (like YouTube’s community around video), with comments and ratings. Each person who posts gets their own profile (here’s the person who uploaded the Da Vinci Code, apparently copyrighted material; the person’s profile links to a 17-year-old Myspace user).

Scribd offers more features than competitor sites such as Slideshare.net, which is only for Powerpoint documents.

Adobe has not released Flash tools in a way that consumers can easily create a display player on their own blogs (perhaps because Adobe wanted to avoid cannibalizing its other product, the Pdf).

The second reason for Scribd’s popularity is apparently because you can read copyrighted material there without being tracked (posters of material do have to disclose an email address to Scribd, though that can be spoofed).

Scribd has received 30 copyright take-down notices already, according to co-founder Trip Adler. He has removed hundreds of documents, he told VentureBeat today. The problem is acute because Scribd lets you easily download the documents (there’s a prominent download button, and you can download in multiple formats: .pdf, .doc, .txt, and .mp3 files), something YouTube doesn’t let you do easily.

VentureBeat found a couple of copyrighted Harry Potter books online, and Adler said he was aware of them, but at the time hadn’t been able to take them down — he was in his car during our interview, and besides, Scribd is just three guys: “We can’t control it,” he said. He added: “We’d like them to let us know to take it down.” Adler did email us later today to say he’d taken the Potter books down, and pointed to his copyright policy, to indicate Scribd is DMCA compliant. However, another book hosted at Scribd that he was aware of, The Da Vinci Code, is still up several hours later, as of this writing. See screenshot below.

How will Scribd make money? Advertising can be targeted to the text of documents. Scribd may offer premium accounts for various services, from licensing document conversion tools to other sites (perhaps at five cents per conversion), to printing, to allowing authors to sell documents through Scribd.

Scribd is raising venture capital, and should close a round soon. It received $12,000 from Y Combinator, and $300,000 from angel investors (as reported by Techcrunch) in convertible notes, but has spent a total of only $30,000 to date, Adler said. Joining Adler is Jared Friedman, 21, and Tikhon Bernstram, 27. Adler and Friedman studied at Harvard, and they met Dernstan, from Dartmouth, at the Y Combinator school in Cambridge, Mass. last summer. Adler studied biophysics, while Friedman and Dernstan studied computer science.

Here’s a summary of the more compelling tips given by several tech industry luminaries — including Facebook’s Mark Zuckerberg, Google’s Gmail creator Paul Buchheit, Sequoia Capital venture capitalist Greg McAdoo — at the Y Combinator Startup School event at Stanford this weekend.

The event attracted more than 650 aspiring entrepreneurs. Mark Coker, a VentureBeat contributing writer, was on hand and here are his notes.

FaceBook’s Mark Zuckerberg: Hire only young technical people

FaceBook’s founder and CEO, 22-year old Mark Zuckerberg, believes his social networking platform will push the world to be a more open place. Without doubt, FaceBook is a true phenomena. According to Zuckerberg, FaceBook has over 20 million registered users, serving 1.5 billion page views daily.

Judging from whispers among the audience, while people love the service and admire his accomplishments, many find Zuckerberg arrogant. A Google search on “mark zuckerberg” and “arrogant” yields about 675 results, but surely, there must be other Mark Zuckerbergs in the world. Or maybe not.

Maybe it’s part of his charm. He’s the cute boy-wonder robo-geek who is either oblivious to how he rubs people, or he doesn’t care because he’s smarter than us.

He stepped on the stage wearing his trademark Adidas sandals (he bought ten pairs before they were discontinued).

“I want to stress the importance of being young and technical,” he stated. If you want to found a successful company, you should only hire young people with technical expertise.

“Young people are just smarter,” he said with a straight face. “Why are most chess masters under 30?” he asked. “I don’t know,” he answered. “Young people just have simpler lives. We may not own a car. We may not have family.” In the absence of those distractions, he says, you can focus on big ideologies. He added, “I only own a mattress.” Later: “Simplicity in life allows you to focus on what’s important.”

He said it’s important to hire mostly coders, even in the marketing department, so if they want to change something on the web site all they have to do is log into the back-end and change copy on the fly.

The value of having coders on staff, he elaborated, is that technology is highly leveraged. “You can create an app once and people can continue to use it.”

Zuckerberg stressed the importance of rapid application development and iterations. FaceBook ships new code every night, he says.

Several more times during the talk, he spoke of how an important part of his job was thinking about philosophies.

Someone in the audience asked how Zuckerberg balances the whole work and family thing. He answered that he works all the time, and besides, he said, his girlfriend is still in school at Harvard so he’s apparently not distracted by her too much. “But now she’s moving out here so we’ll see,” he added. Presumably, this the same girlfriend Zuckerberg was with when he reportedly shut off his cell phone, delaying acquisition talks with Yahoo for a week.

Paul Buchheit: Gmail’s creator shares startup advice

As Google’s 23rd employee, Paul Buchheit was the creator and mastermind behind Gmail, arguably one of Web 2.0’s first killer apps.

His advice to entrepreneurs was to redefine their measures of success. While financial reward is nice, aspiring entrepreneurs should first and foremost seek out risk-taking opportunities where they can learn. He said startups allow employees to take on projects for which they have no qualifications. He referenced his own multi-year assignment to Gmail as a perfect example.

Buchheit, no longer employed by Google, encouraged entrepreneurs to innovate where tech giants like Google are afraid to. He cited the enormous success of YouTube. Even though YouTube launched after Google Video, he said Google Video was a bad product because Google was politically afraid to offend its media partners.

Paul Graham Asks: What’s stopping you from starting a startup?

Paul Graham made his fortune selling his ecommerce platform Viaweb to Yahoo for $49 million in 1998.

More recently, he has become something of a 21st century messiah for tech company founders. His numerous essays about tech startup strategy, along with his work as a founding partner of Y Combinator, have allowed him to influence a new post-bubble generation of software programmers. Some entrepreneurs are said to listen to recorded copies of his speeches over and over again in an attempt to internalize his gift.

Over the last few years, Graham has encountered a few prospective founders who were unwilling to accept his teachings.

His Startup School presentation answered those objections (VentureBeat has paraphrased):

Concern: Am I too young?
Answer: Don’t worry.

Concern: I’m too inexperienced.
Answer: Do it anyway.

Concern: I’m not sure I’m smart enough.
Answer: If you’re smart enough to worry about that, you’re smart enough to start a successful startup.

Concern: I appreciate the predictability of a regular job.
Answer: Envision yourself as a medieval serf who will till the same soil for the rest of your life. Mind numbing, right?

PayPal Founder Max Levchin: Imagine him as a 15-year old girl

Max Levchin was a co-founder of PayPal, which was acquired by eBay for $1.5 billion in 2002. Today, he’s founder and CEO of Slide.com, a service that reaches 50 million people per day with its hosted images and slideshows.

Levchin offered attendees a crash course in product management. Product management, he says, is 85% user interface and 15% channeling the user.

For user interface, Levchin told the audience to measure how their visitors interact with the sites. Slide.com tracks mouse clicks, mouse overs, abandonment rates, the funnel, and more. Levchin and his team mine the data for intelligence that helps guide future iterations of the site.

For channeling the user, Levchin says founders must step inside the minds of their target customers. In Levchin’s case, he says he must imagine himself as a 15-year-old girl with attention deficit disorder who’s looking for digital bling to dress up her MySpace or Zanga web page, while at the same time she’s chewing gum, talking on the phone, instant messaging with five friends, listening to music, and twirling her fingers through her hair.

Levchin cautioned his techie audience to keep their customers in mind and not go overboard with technology for technology’s sake. He pointed to the early social networking site, Friendster, which lost critical momentum when it ran into scaling problems because of a “cool” feature that calculated friend trees, and caused page load times of up to a minute. MySpace.com, by contrast, was successful because it cared less about technology and more about the user experience.

As a final word of product development advice, Levchin encouraged founders to think about the Bible’s seven deadly sins - especially greed, sloth, envy, pride and gluttony. These characteristics, he said, describe many of the primal motivations for users.

Ali and Hadi Partovi: Brotherly super duo provide tips

For those who say lightning never strikes twice, they haven’t met the Partovi twins. Ali founded LinkExchage, which was acquired in 1998 by Microsoft for $250 million. Hadi founded TellMe, recently acquired by Microsoft for a rumored $800 million. The brothers now jointly run the music discovery service iLike, and its popular independent music web site, GarageBand.

The Partovi brothers’ presentation focused on the do’s and don’ts of startup success.

They said the best businesses are easily scalable, so that a doubling of revenues won’t require a doubling of expenses.

Founders should create naturally viral businesses, like the invitation automation service eVite.com, in which one user’s use of the service causes others to use it.

The sites should also exhibit network effects, so as the number of customers increases, the overall value to all customers increases.

The brothers encouraged founders to listen closely to their customers, and cited online shoe seller Zappos.com, as a strong example of a company which cares about customer experience. Zappos requires all new employees, even senior executives, to man customer service phones for at least four weeks as part of their training.

The brothers warned founders to maintain a razor sharp focus on their company’s primary purpose. Ideas are a dime a dozen, they said. Founders should pick one thing and do it well. They cited eBay’s acquisition of Skype as an endeavor that could spread the company too thin, and distract it from its main auction business.

They said companies must make hiring a top priority, and should cultivate and protect their company culture. Perhaps just as important, founders should learn to quickly fire bad hires, because a single bad hire can poison morale.

Lotus Founder Mitch Kapor: Don’t forget culture and diversity

Over his 30+ year career, Mitch Kapor has shown an uncanny knack for identifying disruptive waves of technology innovation early.

He created Lotus Development, one of the first spreadsheet companies. He was an early investor in UUNet, one of the first Internet service providers, as well as in Real Networks and Linden Lab, operator of Second Life.

Kapor also stressed the importance of creating a great company culture. He said founders set the culture, and it’s important to understand every action or inaction of the founders sends a message to employees. Hire great people, embrace diversity and resist trying to fit every employee into the same cookie-cutter mold, he said.

Kapor, who once worked at Valley VC firm, Accel Partners, advised entrepreneurs to tread cautiously with venture capitalists, and to understand where their interests are aligned and where they diverge.

Venture funds typically invest in a portfolio of 30 companies. They expect one or two big winners to supply the majority of the portfolio’s returns. Kapor says this can lead VCs to pressure their portfolio companies to go for the home run and risk striking out completely, when more sensible logic might dictate swinging for a single or a double instead.

Sequoia Capital’s Greg McAdoo: What VCs want in a start-up

Sequoia Capital is one of Silicon Valley’s oldest and most respected venture firms, investing in 550 companies, including Google, Yahoo, and Cisco.

McAdoo stressed the importance of clarity of purpose. Founders should articulate their vision for the company in a single sentence. When Cisco approached Sequoia, for example, they didn’t say, “We build routers.” Instead, they said, “Cisco Systems networks networks.”

McAdoo underscored the importance of the founders understanding their audience. He said good founders also exhibit intellectual honesty about the strengths and limitations of their technology, their management team and their competitors.

McAdoo said it’s impossible for a single company to create major waves of technology disruption, but stressed founders’ businesses should be built to ride the waves. Founders should also identify the trajectories of other trends that will impact the business, whether technology or political (such as likely changes to copyright law).

McAdoo says Sequoia prefers to invest in companies whose target customers have their “hair on fire,” meaning they’re desperate for an immediate solution, and don’t care if the fire hose comes in red or purple.

Asked if Sequoia funds companies outside of major tech regions, such as the Midwest, McAdoo said yes, but the firm prefers its funded companies locate in either Silicon Valley or Boston’s 128 corridor. Hiring is easier in the tech hot spots, and the support ecosystems are better adapted to meet the unique needs of tech startups.

Mark Coker is a contributing writer for VentureBeat. He’s founder of Dovetail Public Relations, a Silicon Valley technology marketing firm. He has no clients among the companies mentioned in the story, nor among their competitors. More on Mark at http://www.linkedin.com/in/markcoker