All Things Digital

BoomTown has officially selected The Mechanical Zoo–a super-secret-shhh-onthedownlow start-up that already got tons of attention due to its passel of ex-Googlers and its mashup plan to mix social and search–as its next candidate for excessive Web 2.0 funding.

And, according to several sources, the San Francisco-based company is working on closing a mega-Series-A round right now, with all the usual big VC suspects in the running.

The Mechanical Zoo has already raised $750,000 in seed funding from angel investors and has access to other funding from institutional investors.

I am not sure as yet how much and at what valuation any new round will be pegged, but sources said it is likely to be larger than is typical this early in the game.

Why? Well, a hot concept and the fact that The Mechanical Zoo has the fancy team of pedigreed geeks–including former Google (GOOG) News product head Nathan Stoll and CEO Max Ventilla, another ex-Googler, along with other prominent techies.

Its first product offering is an invitation-only alpha version of a “subjective search” application that is inexplicably called Aardvark (see the graphic below; click on it to make it larger).

The motto on the site says: “Just ask. Someone knows. Aardvark connects you on the spot.”

It also notes:

“For information you can trust, a person is better than a webpage.

Tap into the knowledge and experience of the tens of thousands of people in your network–friends, people your friends trust, classmates and co-workers.

Send Aardvark a message by IM or Email and Aardvark will find the one person who can help you out, in the moment.”

The Mechanical Zoo site says its first product will be released this fall.

Please see this disclosure related to me and Google.

In a much-expected financing, LinkedIn has joined the big funding club (Slide, Spot Runner) of late, by raising $53 million at a startling $1 billion valuation.

Why go public when you can just pretend?

Actually, unlike a lot of Web 2.0 start-ups, the professional networking site, which had 23 million active monthly members in June, has been profitable since 2006.

According to execs, it has revenues of about $100 million a year, from premium subscriptions and job listings, as well was advertising and corporate sales.

The new slug of cash comes from new investor Bain Capital Ventures, along with existing investors Sequoia Capital, Greylock Partners, and Bessemer Ventures.

LinkedIn had previously raised $27 million for a total of $80 million. Yipes!

“This additional funding will give us even more flexibility to execute on our vision for millions of professionals to increase their effectiveness by using LinkedIn to build relationships and exchange knowledge, opportunities and advice,” wrote LinkedIn CEO Dan Nye (pictured here) in a blog post tonight.

In an interview with LinkedIn’s founding CEO and Chairman Reid Hoffman (pictured here) today, he told BoomTown that the money raised would be used for corporate development and acquisitions.

“We’ll be doing small technology acquisitions to improve our service,” said Hoffman. He also noted that it was unlikely the company would be doing an IPO in the immediate future, which has been bandied about.

“We have no immediate plans” for a public offering, said Hoffman. “We still have a lot of ground to cover to grow.”

Comparing the the business-oriented LinkedIn professional network with hot social networks like Facebook, Hoffman noted: “They have page views and time on the site and are looking for a scalable economic model and we have an economic model and will focus on growing usage.”

LinkedIn certainly has been growing its coffers. It raised $5.2 million in its first round, $10 million in its second and $12.8 million in its third.

Here is a video of LinkedIn’s investors trying mightily to play down the $1 billion valuation, while also pumping it up.

You gotta love the cheerleading of Greylock’s David Sze, Bessemer’s David Cowan and Mark Kvamme of Sequoia, along with new investor Jeffrey Glass of Bain (who will join LinkedIn’s board as an observer):

While Wetpaint’s $25 million new round of funding was leaked to one and all under embargo until 12:01 am EST today–including BoomTown, so don’t assume any of us report our little hearts out on all these bits of news–what the press release did not disclose, sources said, was an intriguing new investor: Fidelity Investments.

What’s interesting about this wrinkle is that it is yet another validation in the Web 2.0 world from a large traditional institutional investor.

Fidelity, with T. Rowe Price, already plunked down big bucks to invest in widget king Slide in January.

Seattle-based Wetpaint, which allows users to make wikis and social-networking sites easily, has raised about $40 million in total so far. New investor DAG Ventures led the current round, which included investors from two previous rounds (Frazier Technology Ventures, Trinity Ventures and Accel Partners).

BoomTown could not determine exactly how much Fidelity kicked in to Wetpaint in this round, although it did pony up almost half the new $50 million Slide investment.

Wetpaint, which also announced a new embeddable product called Wetpaint Injected today that sounds cool, says it will use the additional funds to goose its collaborative–or as we like to call it: wikified–social publishing platform.

RockYou, widget maker, is the latest example of a sane valuation heartbreaker, as it is undertaking efforts to secure an investment from mainstream financing firms that would value the company at between $300 million and $400 million.

First reported by Valleywag last night, the start-up, said one source, “is being squired around Wall Street” by investment behemoth Morgan Stanley (MS), in search of the same kind of deal its rival Slide got in January.

BoomTown broke the news of that deal, which nabbed Slide $50 million and a $550 million valuation with investments from blue-chip investors T. Rowe Price (TROW) and Fidelity.

Thus, RockYou’s motto: Anything Slide can do, we can do slightly smaller!

And, indeed, not to be SuperPoked by Slide CEO and Founder Max Levchin, sources said RockYou Co-Founders Jai Shen (also CTO) and Lance Tokuda (CEO) were quickly on the march for their own payday.

It is, in fact, a quest that a lot of Web 2.0 companies seem to be on, since the sector’s fearless leader–Facebook–got its $240 million and $15 billion valuation from Microsoft (MSFT) last year.

All of this frantic funding activity is, of course, this bubble’s version of going public–grab big cash investments from investment firms and hedge funds, desperate for a good bet on the sector, without the pain of public scrutiny of questionable business prospects that did in Web 1.0 shooting stars.

It’s that or get bought for an ungodly sum by equally desperate Web 1.0 companies (See: AOL+Bebo).

Sources close to RockYou, which has had acquisition feelers put out to it from larger companies in the past, said the company has had several strong offers of funding, but it is trying to select the right partners for the latest round of funding.

“We want our investors to be strategic and helpful to the company,” said one person close to RockYou.

RockYou has so far been funded by Sequoia Capital, Lightspeed Venture Partners and Partech International.

(Interestingly, Sequoia backs another instant messaging and chat widget maker, Meebo, which is reportedly seeking a $250 million valuation, which I posted about here yesterday).

To be fair, makers of highly distributed third-party apps like RockYou are garnering immense traffic and their widgets are syndicated everywhere. RockYou’s Super Wall, which lets you turbocharge your digital wall, for example, is one of the most popular on Facebook.

Other RockYou apps include: X Me, a communications tool that allows you to “Hug Her, Slap Him, Tickle Them!”; and Likeness, where you can “compare yourself with friends and movie stars like Angelina Jolie, Jessica Alba, Keira Knightley and many more.”

The company has been trying to monetize all this traffic and popularity and distribution, as well as knowledge of user behavior, by offering advertisers new forms of engagement.

But the jury is still out on these interesting but unproven efforts by all the social-networking players.

In any case, the money is apparently still flowing into these start-ups, taking a chance on them being the next big media play.

Here are two videos I made when I visited RockYou’s offices in San Mateo, Calif., last October, after I had called the widget market juvenile and faddish.

The first is my tour of the office, where I was playfully accosted by an infant–oops, a RockYou engineer–in a suit. The second is my interview with Shen and Tokuda.

It’s Bubble Time!

As BoomTown broke the news in its post earlier today, Slide grabbed a big pile of cash from new investors–$50 million from Fidelity and T. Rowe Price–which puts the value of the company at $550 million.

In our post, we said the San Francisco start-up, whose widgets are among the most popular on Facebook and MySpace, was completing a round of funding that could value it at many times a multiple of its most recent $60 million to $80 million valuation.

The investment from the pair of private equity funds gives them a 9% stake in the maker of widgets and other social-networking applications.

Allen & Co., the media-connected New York-based investment firm, helped Slide execs in raising the latest round.

Don’t think we did not notice that the venture investors already in Slide did not pony up more funds at this–let’s just say it, shall we?–crazy valuation.

But it is noticeable that such mainstream investors are jumping into the giant pool of Kool-Aid that the social-networking industry has been swimming in over the last year.

Slide’s last round–an investment of $20 million–took place in November of 2006 with investors that included Khosla Ventures, BlueRun Ventures, Founders Fund and the Mayfield Fund.

So Slide’s investors, of course, were smart to get in on the ground floor to take advantage of the bubble that is expanding at alarming rates.

The ground-zero of that trend came when Facebook got a $240 million investment from Microsoft that valued the company at $15 billion.

Of course, while garnering revenues, neither Facebook nor Slide has the kind of business yet to deserve being worth this lofty amount, except for the fact that investors are counting in its potential and recent quick growth.

Slide’s business plan includes making money from selling premium versions of its widgets, as well as selling advertisers on its large, although disparate, audience.

The company calls itself the “largest personal media network in the world, reaching more than 134 million unique global viewers each month and 30% of the U.S. Internet audience.”

But the company recently said reports had put that number at 144 million, excluding its 50 million users on Facebook. Its competitors include other widget-makers like RockYou.

Slide makes a wide range of software, called widgets, that have been attracting many millions of users each. They include everything from slide shows to a program called SuperPoke that allows a user to, well, poke another in a super way.

A lot of Slide’s current growth has been through taking advantage of the huge spike in users first at MySpace and now at Facebook, which is promising, but also not certain.

To say that we have seen this story of fast growth, insane valuations and then the inevitable drop-off would be an understatement.

But Slide Founder and CEO Max Levchin and his team consider the company to be a new kind of distributed content and application company that is not dependent on large platforms like Facebook and MySpace and has huge potential.

Minor blogging annoyance: Of course, in a fit of pique since we revealed the funding without their help, Slide hand-fed the details of the deal to the New York Times and BusinessWeek, both of which somehow forgot to link to our post that said Slide was landing the deal. (Brad, Sarah: Please, please don’t tell us you figured it all out on your own this morning over eggs.)

UPDATE: A New York Times deputy tech editor just wrote an email to tell me its reporter already had a “previously scheduled” meeting with Slide about the deal–like I said, hand-fed!–this morning, which “inspired” its post and did not know of BoomTown’s news of the funding (even though it was up since 12:06 a.m. and noticed by everyone else, including Slide). Also, they had the hand-fed details! They did! I admit it! I went hungry, since I did not agree to an embargo! “In light of this we didn’t feel that a link was warranted,” he wrote me.

But we’re not bizarrely ungenerous like that, so here is the link to the New York Times story, in which Slide’s Levchin said his company makes Facebook and MySpace worth using. (And here is the BusinessWeek link too.)

“It’s impossible for social networks focused on scaling the network itself to build all the niche applications that bring people and keep people on these sites,” Levchin said, noting Slide widgets “add the bulk of perceived value to the consumers of these Web platforms.”

He also said he would use the money to expand its repertoire, but said Slide would try to develop in-house.

But others close to Slide said this was not exactly so, and that the company would also look around for good acquisition targets, using stakes in the newly valued Slide as currency.

Please see this disclosure related to me and Google.

It’s an open secret in Silicon Valley that search giant Google grabbed YouTube from Yahoo at the last minute in a deal-making frenzy.

I didn’t mean in my last update posted earlier today to leave out that possibility happening again with regard to Facebook’s current round of funding discussions.

While Yahoo and Microsoft have been most aggressive in courting the hot social-networking site, sources close to Facebook said that Google is also part of the ongoing discussions about a new round of funding for Facebook, although it might not take the form of a large investment.

What’s of interest to Google, as well as Yahoo and Microsoft, is Facebook’s potentially large international ad-sales business, which all three would like to have.

Under a different kind of scenario, Facebook would take an investment from a range of private equity investors, do an international ad deal with Google (which might or might not make an investment in the company) and still have its U.S. ad sales served by longtime partner Microsoft.

Such an arrangement would be a blow to Microsoft, which has been seeking to get closer to Facebook, partly out of paranoia of Google and its own lack of innovation in the Web 2.0 space.

But, according to sources, that’s just what might happen given that Facebook execs are wary of linking themselves too closely with Microsoft. Plus, a stronger relationship with Google would burnish its independent credentials, which many think is critical in the next phase of Facebook’s development.

Who’s to say what’s going to happen, but it could happen rather quickly, even within the next 24 hours.

And that’s a good thing, because to my mind, Facebook’s got to get this funding roundelay behind it and get busy making its service bigger and more powerful.

It’s easy to get sucked up into the Silicon Valley reality-distortion field, and Facebook would do well to get the giant bag of cash it thinks it needs and move on.