George Favvas

I’m writing this from Blogworld and New Media Expo in Las Vegas, where I was on a Reblogworld panel yesterday talking about SmartHippo.

As i write this, the tradeshow floor here at Blogworld has been open for a little over an hour. I’ve made the rounds of the various booths and come up with my best picks:

Most innovative: Zumata

Zumata is a very cool tool for blog authors. As you’re writing a blog post, it analyzes the context to automatically suggest relevant images (creative commons-licensed), tags, external links and even related blog posts, all of which can be included in your post at the click of a mouse.

Zumata has the potential to help bloggers save time, write better and more interesting posts, and gain traffic. They are not monetizing it at the moment, but I can easily see them selling sponsored content recommendations tailored to the content of a blog post.

Most promising: Crowd Science

Crowd Science is a hosted audience measurement service. If you have a web site you want to sell ads on, you’ll want to provide your advertisers with demographic and psychographic information on your visitors. Most audience measurement services rely on observing the behaviors of a panel of web surfers, but many sites do not have enough traffic volume for such a panel to be effective.

Crowd Science’s approach is to host inline surveys embedded within the web site being measured. The surveys all contain a base set of common demographic questions, which site owners can enhance with questions specific to their vertical. The surveys are only delivered to a sample of overall traffic, and once enough data has come in, site owners can use it to create a media kit with data validated by a third party.

Most interactive: Toss up between b5media and Southwest Airlines

There’s a poker game going on at the b5media booth. You get get free chips by wearing b5media schwag, yelling out “I love b5media,” or the like. When in Rome do as the Romans do. And when in Vegas, well… here’s a crappy cell-phone photo of that poker game:

It’s great to see a big company that gets social media, and it doesn’t surprise me one bit that Southwest Airlines falls into this category. Southwest is holding a “blogospondent” where participants film and post videos about Southwest. They flew the top three contestants to Vegas for Blogworld, and they now have until tomorrow to produce a video. Oh, and they handed out roasted peanuts in the a

Are you at Blogworld and do you agree or disagree with this list? What are your favorite picks from Blogworld? Leave a comment below.

This is the second installment in a series of video recaps of the second Founders and Funders event in Toronto. In part one, we talked with one of the organizers. In this second installment, we talk to one of the entrepreneurs who was at the event.

Stuart MacDonald is the founder of Tripharbor.com (Tripharbour.ca for Canadians), a recently launched vertical search engine for cruise ship vacations. Besides just letting you compare details and prices, Tripharbour also features some cool community features that let you read trip and destination reviews and make friends with others who have similar interests.

Stuart knows the online travel industry well, having previously served as SVP Packages and Chief Marketing Officer for travel behemoth Expedia. Cruise vacations is a $24 billion industry in North America, and he’s aiming for a piece of the action.

The second Toronto edition of Founders and Funders event took place last week, on June 4th. The event is organized by David Crow and Jevon McDonald.

Rather than write up a big long report, I decided to continue my experiments with video by bringing a camera along to give people who did not have the chance to attend a bit of a feel what what the event if like.

In today’s interview, David Crow introduces the idea behind Founders and Funders.

Stay tuned: This Friday I’ll be posting part two of the series, where we get to hear from one of the entrepreneurs who was at the event.

Microsoft this morning announced that it has acquired the technology and patents of Credentica, a Montreal-based provider of identity management solutions. The team, led by Stefan Brands, will join Microsoft’s Identity and Access Group.

(More blog coverage from Microsofties Kim Cameron and Adam Shostack, and on Stefan Brands‘ own blog)

Brands is the inventor of private credentials technology which allows a user to prove something about their identity without disclosing more information than is absolutely necessary. For example, a voter can prove unequivocally that they have the right to vote in the state of California, without having to disclose their name or other personal information. As more and more of our lives moves online, privacy is increasingly becoming an issue that cannot be ignored. Most solutions require that you trust a third party (such as your bank, government, or Google), while Brands’ approach uses advanced cryptographic techniques that do not re.

The technology has previously found temporary homes at now defunct DigiCash and then Zero-Knowledge Systems, neither of which were able to succeed in commercializing the patents. But our plan is to integrateMicrosoft says it plans to integrate Credentica’s U-Prove technology into both the Windows Communication Foundation (WCF) and CardSpace.

I’ve known Stefan personally for nearly a decade now, and wish him the best of luck in this new chapter of his professional life.

Update: I’ll be writing a follow up post with an interview from Stefan focusing more on the personal side of his journey as an entrepreneur. Watch my blog for more.

Over the past five or so years, the Internet has radically changed the way most industries (from content, to music, to travel) function. Central to this wave of change is a shift of power from large institutions to consumers. The financial industry is one of the last bastions where old-school business models still reign supreme.

But that’s changing.

Sites like SmartHippo empower consumers with tools and the information on the best available rates that they previously did not have access to. Peer to peer (P2P) lending sites such as Prosper and Lending Club empower consumers to bypass banks and lend directly to each other, with the promise of better rates on both sides of the equation. Where technology now provides a scalable way for consumers to exchange information and capital between themselves, the middlemen of the past are no longer as relevant.

Needless to say I’m a but fan of P2P lenders so I was quick to sign up with IOU Central was the first Canadian company to launch in the space. (I tried signing up with Prosper, but the site is restricted to US residents with a Social Security Number.) Lo and behold I logged into IOU Central today to start using the site only to be greeted by the message that “IOU Central is now operating with limited functionality.” Translation: No new loans on IOU Central, at least for now. Startup North was the first to report on this here.

I just spoke with Phil Marleau, their President and CEO, and he told me the action was taken at the request of the Autorité des marchés financiers, Quebec’s securities regulator. The agency is infamous for its impotence in front of real issues that should be under its control, such as its abysmal failure to help the 1,600 investors who lost $130 million in the Mount Real scam back in 2005.

He told me the AMF paid a visit to IOU Central yesterday and asked them to halt operations. It turns out that individuals using the site to lend money are making an investment, so IOU could be construed as selling securities.

“The important thing is that we’re working with the regulators and want to comply,” Marleau said.

According to Marleau, IOU Central had received legal advice stating they did not have to be regulated. This was based on the fact that their model was closely based on the way Prosper and Lending Club operate in the U.S., as well as Zopa in the UK. Based on this legal advice, IOU Central did not bother to even brief regulators on what they were doing.

Canada’s other P2P lender, CommunityLend, hit the scene with a lot of noise when they announced in December they had raised $2.5 million in financing. However, they have yet to have launched, citing the needs to properly address regulatory compliance issues first.

When IOU Central launched earlier this month, it looked like they had come out of nowhere and one-upped CommunityLend. CommunityLend must be gloating now.

“Our approach has been to build a viable and sustainable company, that will appeal to Canadians, and their desire for security with anything financial,” Colin Henderson, CommunityLend’s CTO told me via email. “There are no shortcuts with peoples money, and we have been working hard with the regulators for over 8 months, on over 40 Licences to ensure we can satisfy the needs of Canadians, by the time we launch.”

Marleau, to his credit, at least put on positive spin on the events: “When we’re back up, it’s going to be a better model. Because we’ll be regulated and that adds credibility and confidence.”

Here’s hoping it happens quickly. Canada’s financial system, an oligopoly if I’ve ever seen one, badly needs some shaking up.

January’s a busy month for Montreal techno-geeks. Here are some of the events going on:

• January 8: Montreal Tech Entrepreneur Breakfast
• January 8: MySQL Montreal meetup by Morgan Tocker of MySQL (7pm at our offices)
• January 9: Yulblog, a casual get-together of Montreal bloggers (6pm 8pm at La Quincaillerie on Mont-Royal)
• January 15: Montreal On Rails
• January 23: StartupCamp Montreal
• January 28-30: Demo ‘08. Okay, this is not actually happening in Montreal, but Montreal startup StandoutJobs will be launching there.

Speaking of web building, here’s a video about just that subject:

There’s a debate brewing on the state of startup funding in Canada.

This got me wondering how many startup entrepreneurs think their bottleneck is a lack of financing when in actuality it’s not (or doesn’t have to be). I was reminded of this Business 2.0 article from 2005 in which entrepreneur Joe Kraus compared the costs involved in launching Excite in 1995 with what it cost to launch Jotspot exactly a decade later.

It took $3 million to take Excite from concept to launch, versus $100k for Jotspot exactly one decade later. I thought it would be interesting to extract some of his comments and see what has changed just three years later:

1. Hardware has become insanely cheap. As Kraus recalls, Excite ran on Sun servers that cost as much as $60,000 a pop. “Today JotSpot runs on commodity hardware–Intel chips inside boxes with no corporate logo, made by companies no one’s heard of.” And instead of $60,000, those anonymous boxes cost $1,000 each.

2008 Update: Even cheaper today with Amazon S3.

2. Infrastructure software is even cheaper. Excite paid a vast amount of money to companies such as Oracle just to license the software needed to build its service. “We must have spent $250,000 before we’d written a line of code,” Kraus says. But now open-source–Apache, Linux, MySQL, Tomcat, and so on–has reduced that cost to zero.

2008 Update: Zero is still zero, although the tools you can get for that price have improved.

3. The labor market has gone global. In the 1990s, only monster companies like IBM had tapped into offshoring. Today JotSpot, using Elance and RentACoder, has programmers on the payroll in Germany, India, Romania, and Russia–at a fraction of what they’d cost in the Valley.

2008 Update: Still holds true as ever. If you’re still at the stage where your concept is not yet proven in the marketplace and you’re raising money to hire a bunch of local developers, you probably don’t get it.

4. Search has rewritten the rules of marketing. Before Google, advertising on the Web was all about big marketers paying big bucks to reach as many eyeballs as possible. “But now,” Kraus says, “pay-per-click advertising, placed in an automated fashion, with no money spent on creative, lets me reach small or medium-size markets incredibly efficiently.”

2008 Update: Search Engine Marketing is no longer the panacea. In fact, in can be downright dangerous to rely on it exclusively as competition for your keywords and even Adwords’ algorithm itself are out of your control and can have a significant effect on your campaigns. Today’s successful startups are ones that harness communities, and hence thrive on the fact that their very own customers refer others to the site.

$100k is still a chunk of money, but it’s arguably within the reach of entrepreneurs with a bit of creativity.

Venture Capital still does and always will have a role to play. But I’ve seen entrepreneurs spend a year trying unsuccessfully to raise capital for a new concept, time they may have been able to better spend getting much further along their product roadmap before seeking out external funding. (OK, I’ve been that entrepreneur.)

What do you think? Post your feedback in the comments below.

I thought I would update my readers with details on what some bloggers and media are saying about SmartHippo, our community site where people help each other find the best mortgage rates. If you’re interested in what we’re doing, please subscribe to the SmartHippo blog.

• “One hopeful developer is George Favvas, who wants to make an application to promote his start-up, SmartHippo.com, which lets homebuyers compare mortgage rates between banks. ‘What we’re doing is inherently social, using the power of community to share information,’ Favvas said. ‘We want to let users be advocates for an application that fills a need.’”
  Montreal Gazette
  

• “What a huge step for consumers to be able to see the feedback on these companies, or just to have any information on these companies that are calling them.”
  Leadcritic
  

• “I know the banks could use a good kick in the pants (I use a local credit union, myself) and maybe an angry herd of consumer hippos could be just the ticket.”
  Blognation
  

• “Especially with the recent mortgage crisis in the US people are more cautious than ever about the rates that they are able to receive and maybe even a bit distrustful of the lending companies. This is the first website of its kind to offer a place to compare and contrast lenders.”
  KillerStartups
  
• “There’s a strong imbalance in the information that each side has, and my friends at SmartHippo have just launched a site to help correct that imbalance. If you’re getting a mortgage, or just want to compare, check these folks out. I really like what they’re doing and where they’re going.”
  Emergent Chaos
  
• “Encore en construction, (SmartHippo) ne s’adresse, pour le moment, qu’aux consommateurs américains. Plus précisément, à ceux qui désirent comparer différents taux hypothécaires obtenus par des gens dans la même situation qu’eux. Grâce à cela, ils seront mieux informés au moment de négocier leur propre hypothèque.”
  La Presse (article in French)
  

Here’s a video interview I did with Vinny Lingham in the DemoPit at the TechCrunch40 conference last month. Vinny was at the conference demoing Synthasite, a web-based web site builder.

I also asked Vinny, whose company is based in South Africa, about some of the challenges of building a tech company outside of Silicon Valley:

The US is not the only market in this world. You’ve got 6 billion people in this world. Focus on multiple languages, multiple currencies in your application. Really try to globalize your business, because in that way you’re not dependent on one particular market to make your business a success.

Synthasite launches its beta on November 5th.

I’m at the TechCrunch40 conference today (where we coincidentally launched the SmartHippo beta) and caught the tail end of a presentation by Facebook founder Mark Zuckerberg. Zuckerberg announced a $10 million dollar fund, founded by Facebook’s investors, earmarked for companies building Facebook applications.

What’s interesting and unique is that these will not be traditional debt or equity deals, but actual grants that don’t need to be paid back. Accel Partners and Founders Fund, the investors behind the fund, will get a right of first refusal on any future financing deals — a more than reasonable price to pay.

Facebook has already shown a commitment to the developer community by launching the Facebook platform; now they’re providing developers not only the tools but also the funding to build their applications.

Deal size will range from $25,000 to $250,000 and the selection criteria is based on how “innovative and disruptive” the applications are.