November 29, 2021

Countries Seek Entrepreneurs From Silicon Valley

That sassy invitation is directed at the thousands of foreigners having trouble getting temporary visas, known as H-1b’s, to work in the United States. Canada’s new so-called start-up visa offers them the prospect of permanent residency and with it, the country’s relatively low business taxes and public health insurance.

Canada is not alone in reaching out to foreign entrepreneurs. In a bid to create their own versions of Silicon Valley, Britain and Australia have dangled start-up visas like this too. Chile is even offering seed money to lure foreigners to come to Santiago and get their start-ups off the ground.

But the seductions of this Silicon Valley are hard to resist for the men and women who dream of building the next Google (or at least being the next Google acquisition). This is where they want to be.

“It’s like being in Florence during the Renaissance,” is how Xavier Lasa, a Spanish computer coder, put it recently. He sounded dead serious. He had come to Mountain View, just south of San Francisco, on a short-term business visa to join a technology incubator program called 500 Startups. He was building a tool for brands to advertise on the Web.

Like many foreign tech entrepreneurs angling to stay here, he had his eyes on Washington, not Ottawa. The landmark immigration bill that the full Senate is to take up next week includes a provision that Silicon Valley investors have pressed hard for: a new visa category for entrepreneurs who have persuaded American investors to back them with at least $100,000 in financing.

Never mind that immigrants don’t need special visas to be entrepreneurial; research shows that they are far more likely than native-born Americans to start businesses. Start-up visas are an easy political sell, which also explains Canada’s latest gamble.

When Canada’s immigration minister, Jason T. Kenney, came to visit 500 Startups recently, on a gloriously sunny Friday afternoon, he got a taste of what attracts foreigners. Dave McClure, a co-founder of the incubator, took him straight to the wall-to-wall 12th-floor window.

“Facebook is that way,” Mr. McClure said, pointing to the 360-degree view. “You can see Apple over there.”

“There’s Sand Hill Road,” he continued cheerfully, motioning toward the wide boulevard lined on both sides with big-name venture capital firms. “Stanford is just up that way.”

The room was full of foreign entrepreneurs, huddled over laptops or sketching out business plans on whiteboards.

Julian Garcia, a programmer from Chile who was building a tool for marketers to target potential customers by location, explained his view of the Valley. “Here, you build something incredible, in two years, you get acquired.”

Aditya Sahay, the founder of a men’s fashion site, from India, retorted, “Even if you build something not incredible, you still get acquired — in four months!”

Mr. Kenney kept his game face on as Mr. McClure waxed about the attractions of the Valley. In an interview later, he said he was certain that some of the foreign entrepreneurs, uncertain about their immigration status in the United States, could be tempted by, say, Manitoba. He called them “a captive audience,” and said he hoped to take advantage of what could be a short window of opportunity for his country while Congress argues over how to fix its own immigration law.

The new Canadian visa is not for tech entrepreneurs per se, but the venture capital requirements favor technology start-ups over more traditional immigrant businesses, like corner shops and restaurants. And the offer is far more generous than its American counterpart.

Anyone with one year of college and 75,000 Canadian dollars from an approved Canadian angel investor, or 200,000 Canadian dollars from an approved Canadian venture capitalist, can apply for the visa. Applicants need to be able to speak basic English or French. They need not prove they will create any jobs.

Mr. Kenney said he believed that investors, rather than workers in his ministry, were more capable of vetting who would be good for his country.

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Yahoo to Buy Tumblr for $1.1 Billion

The deal, which is expected to be announced as soon as Monday, would be the largest acquisition of a social networking company in years, surpassing Facebook’s $1 billion purchase of Instagram last year.

For Yahoo and its chief executive, Marissa Mayer, buying Tumblr would be a bold move as she tries to breathe new life into the company. The deal, the seventh since Ms. Mayer defected from Google last summer to take over the company, would be her biggest yet. It is meant to give her company more appeal to young people, and to make up for years of missing out on the revolutions in social networking and mobile devices. Tumblr has over 108 million blogs, with many highly active users.

Yet even with all those users, a basic question about Tumblr and other social media sites remains open: Can they make money?

Founded six years ago, Tumblr has attracted a loyal following and raised millions from big-name investors. Still, it has not proved that it can be profitable, nor that it can succeed on mobile devices, which are becoming the gateway to the Internet. Even Facebook faces continued pressure from investors to show it can increase its profits and adapt to the mobile world.

“The challenge has always been, how do you monetize eyeballs?” said Charlene Li, the founder of the Altimeter Group, a consulting firm. “Services like Instagram and Facebook always focus on the user experience first. Once that loyalty is there, they figure out how to carefully, ideally, make money on it.”

A Yahoo spokeswoman declined to comment. A representative for Tumblr did not respond to requests for comment.

If the deal is approved, Ms. Mayer will face the challenge of successfully managing the takeover, given Yahoo’s notorious reputation for paying big money for start-ups and then letting the prizes wither. Previous acquisitions by Yahoo, like the purchase of Flickr for $35 million and a $3.6 billion deal for GeoCities, an early pioneer in social networking, have been either shut down or neglected within the company.

Because of this, Ms. Mayer will face pressure to keep Tumblr’s staff, led by its founder, the 26-year-old David Karp, who dropped out of high school as a 15-year-old programmer. It is unclear whether all of Tumblr’s 175 employees, based in New York City, will move over to Yahoo.

At the same time, analysts and investors are likely to question whether buying a site that has struggled to generate revenue makes sense.

“This is not an inexpensive acquisition, but they’re willing to pay to get back some of what they’ve lost,” said Colin Gillis, an analyst at BGC Partners. “They want to be hip.”

In her short tenure as chief executive, Ms. Mayer has bought a string of tiny start-ups. Most of those were aimed at buying engineering talent that could help freshen Yahoo’s core products, like mail, finance and sports, as well as build out new mobile services.

Ms. Mayer has had ambitions to hunt bigger game, armed with $4.3 billion in cash from selling half of Yahoo’s stake in the Chinese Internet titan Alibaba.

She has had conversations with a number of other big-ticket targets, like Foursquare, a mobile app that lets users find nearby restaurants, stores and bars, and Hulu, the video streaming service, according to people with knowledge of those discussions who were not authorized to speak publicly.

Tumblr brings something that Ms. Mayer has sought for some time: a full-fledged social network with a loyal following. The start-up claims more than 100 million blogs on its site, reaching 44 million people in the United States and 134 million around the world, according to Quantcast.

But in some ways, Yahoo isn’t pursuing users — it already claims 700 million, one of the biggest user bases on the Web — but products and services that would again make it a central destination. Once the biggest seller of display ads in the United States, Yahoo has lost market share to the likes of Google and Facebook. Its share of all digital ad revenue tumbled to 8.4 percent last year, from 15.5 percent in 2009, even as total advertising spending grew, according to eMarketer. Google now claims about 41 percent.

Andrew Ross Sorkin and Jenna Wortham contributed reporting.

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YouTube Is Said to Plan a Subscription Option

This week YouTube, the world’s largest video Web site, will announce a plan to let some video makers charge a monthly subscription to their channels. There will be paid channels for children’s programming, entertainment, music and many other topic areas, according to people with knowledge of the plan, who spoke on condition of anonymity because they had been asked by YouTube not to comment publicly yet. Some of the channels — there will be several dozen at the outset — will cost as little as $1.99 a month.

If the subscription option catches on, it could herald a huge change for the online video industry, which has subsisted almost entirely on advertising revenue. It could give producers of Web video series a second source of revenue, analogous in some ways to the flexible pay walls that some newspapers and magazines have adopted. It could also put more pressure on the cable television industry, which is fighting off fresh competition from the Web.

For now, though, it is just a test, intended in part to mollify some of the most popular contributors to the sprawling Web site. The overwhelming majority of videos on YouTube, a unit of Google, will remain free to all. But some homegrown YouTube stars, start-ups and major media companies have been frustrated by what they see as relatively low amounts of revenue coming from the ads that YouTube attaches to their videos. By enabling the subscription option, YouTube is giving them another way to profit from their work — if their fans are willing to pay to watch, that is.

Some of YouTube’s partners planned to start promoting their paid channels on Thursday, though the announcements could come sooner, in light of recent news coverage. (The Financial Times reported on Sunday that the announcements were expected as early as this week.) YouTube will process the payments through Google Wallet, the system that Google’s app store uses.

As YouTube users read about the plan on Monday, many objected to paying for something they treat as free and ubiquitous as air and water. But others said there were some channels worth paying a few bucks for.

A YouTube spokesman declined to comment on the specifics of the subscription plan. In a statement the company said, “We have nothing to announce at this time, but we’re looking into creating a subscription platform that could bring even more great content to YouTube for our users to enjoy and provide our partners with another vehicle to generate revenue from their content, beyond the rental and ad-supported models we offer.”

Paid subscriptions to YouTube channels are a long time coming; Google applied for a patent for a “self-service channel marketplace” in 2011, and the subscription plan has been an open secret in the industry almost since then.

The plan has gained momentum as Netflix, Hulu and Amazon have drawn in subscribers for their video offerings. Netflix has nearly 30 million streaming subscribers in the United States; Hulu’s paid service, Hulu Plus, has about four million. Amazon has not said how many people pay for Amazon Prime, which includes its video service, but the number is known to be in the millions.

Other companies, like AOL and Yahoo, have invested in free video programming, supported by advertisers. YouTube’s strategy stands out from all the rest; its infrastructure increasingly lets video makers be their own Netflixes and Hulus, albeit on a smaller scale. It looks more like the à la carte model of a newsstand than the bundled channel model of cable television.

YouTube pitched two options to potential partners: one version of paid channels with ads (allowing for two sources of revenue, like cable television channels have) and one version without ads. The ad-free option was appealing to programmers of children’s channels, several of which will be available soon, according to some people briefed on the plan.

“It’s a worthy experiment,” said Laura Martin, a senior analyst at Needham Company, who has advocated for dual revenue streams for all manner of media companies. She said Hulu Plus and The New York Times’s online subscriptions were two successful models for producers who might try paid channels.

Another appealing aspect of the pitch was this: some of the paid channels will be available internationally, in 10 countries to start, allowing for a vast potential audience overseas.

The subscriptions will not be for channels in the television sense of the term; rather, they will consist of libraries of videos on demand, much like the thousands of free channels already on YouTube. Some of the video makers who have worked with YouTube on the subscription option want to convert fans to paying customers; others hope to distinguish themselves by selling archives of old television episodes.

But for YouTube, at least, advertising will remain the basis of its business. The company was estimated to take in $1.3 billion in ad revenues last year, and that number could climb to $2 billion this year, according to a recent report by Pivotal Research.

YouTube executives held a promotional event for advertisers in New York last week and did not bring up the forthcoming paid channels or its past ventures into financing professionally produced channels. (It supplied an estimated $300 million to producers in 2011 and 2012, but it has backed away from that strategy of late.)

“I thought YouTube was like TV. I was wrong. It isn’t,” Robert Kyncl, the company’s global head of content, said at the event. YouTube, unlike television, is interactive, he said. “And YouTube is everywhere.”

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HuffPost Live in Deal With AXS to Put Show on Cable

The Huffington Post has found a partial home on cable television for its eight-month-old Internet channel, HuffPost Live, courtesy of Mark Cuban.

The company announced Sunday night that Mr. Cuban’s cable channel AXS TV, previously known as HDNet, would soon carry HuffPost Live’s programming for six hours a day. AXS and The Huffington Post will try to replicate some of the interactivity of the Internet channel by showing online comments on the right side of the television screen, and later by releasing an app that will encourage AXS viewers to comment on what they are watching.

The unorthodox deal may help expose HuffPost Live to more people. But it also underscores how hard it is for Internet video start-ups to find a place on cable systems, which are controlled by a handful of big companies that are reluctant to add channels.

Executives at The Huffington Post have been trying for months to have their channel picked up by cable and satellite operators, with nothing to show for it yet. Other backers of Internet channels have received lukewarm receptions at best. The most successful such channel, Glenn Beck’s TheBlaze, has been picked up by Dish Network and four small cable companies and has been encouraging fans to put pressure on other operators.

In an interview, Roy Sekoff, the president and co-creator of HuffPost Live, did not rule out full-blown cable distribution in the future. He said AXS provided “a way to get on now,” emphasizing “now.”

The telecast will start on May 13. It will be shown weekdays from 10 a.m. to 4 p.m. Eastern time (the first half of HuffPost Live’s daily output), replacing the random assortment of repeats that AXS currently schedules during the day. Mr. Sekoff said The Huffington Post was not paying for the distribution, and AXS is not paying for the programming; the arrangement is mutually beneficial, he suggested, something that Mr. Cuban affirmed in a separate interview.

“It’s an opportunity for both of us to grow our audiences during the day,” he said.

AXS has existed since last July, when Mr. Cuban teamed up with Ryan Seacrest, the talent agency Creative Artists Agency and the events company Anschutz Entertainment Group to reformat HDNet, which Mr. Cuban helped to found in 2001. In February another company, the CBS Corporation, took an equity stake in AXS and said it would provide programming and promotional opportunities.

AXS chooses not to be rated by the Nielsen Company, a reflection of the fact that it reaches a relatively small number of viewers. It is available in about 41 million of the 100 million American households that pay for television.

AXS has sought to be known for live programming, especially live concerts. HuffPost Live, on the other hand, is a Web-influenced talk show about politics, current affairs and pop culture. “But it’s still real-time and I think that’s the more important element,” Mr. Cuban said.

The deal was a byproduct of Mr. Cuban’s friendship with Tim Armstrong, the chief executive of The Huffington Post’s parent company, AOL. The two companies may split the advertising revenue that comes from the AXS version of the programming. (One possibility is interstitial ads during the breaks between segments.) HuffPost Live’s content will not change significantly, but the producers might tap into AXS’s contacts and promote AXS’s concerts.

On HuffPost Live, the hosts (there are nine currently) take turns moderating conversations, some upward of half an hour long, with guests appearing in person and via webcams. Viewers can watch the live stream, but the vast majority of views come later, when clips of the conversations are attached to articles on AOL and Huffington Post Web pages. Mr. Sekoff said there were 51 million live and recorded streams in March.

HuffPost Live loses money, but it does bring in some revenue through the ads that precede the clips. Mr. Sekoff said he wanted to pursue more advertiser integrations in the future. One early example is a video series called “Tech Game Changers,” sponsored by Verizon.

He said he was thrilled to have access to big-screen TVs through AXS, complementing the existing streams for phones and computers. “We’re not exactly sure what the future’s going to look like, but we think it’s going to look something like this,” he said.

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You’re the Boss Blog: What It Takes to Create a Start-Up Community

Richard Florida: Martin Prosperity Institute courtesy of Atlantic Cities. Richard Florida: “In the past several years we’ve seen an incredible, accelerating shift in start-up activity back to urban centers.”


The adventure of new ventures.

Entrepreneurs exist everywhere, but start-up communities don’t. Some rise up organically and others are created deliberately — or at least people try to create them deliberately. Many hope to create the next Silicon Valley.

Brad Feld, who is known for helping to turn Boulder, Colo., into a robust start-up hub, which he wrote about in his book, “Startup Communities,” said entrepreneurs lead a community’s creation and everyone else feeds it. Those feeders include government, universities, mentors, investors, service providers and large companies. Start-up communities also need a steady supply of talent — engineers, yes, but designers, scientists, sales and marketing experts, management consultants and investors, too. Another essential is density — lots of people sharing ideas and collaborating — and lots of places for entrepreneurs to network and share ideas.

One recent example of a burgeoning community is a segment of Los Angeles that is becoming known as Silicon Beach. With a steady supply of engineering, business and creative talent from Hollywood studios and major universities like U.C.L.A. and U.S.C., plus lots of meet-ups, co-working spaces and start-up events, Silicon Beach — which includes the beach communities of Santa Monica and Venice, as well as downtown L.A. and Hollywood — has become a haven for start-ups that blend technology and media, especially gaming companies.

Richard Florida, co-founder of the Atlantic Cities blog, and an urban studies professor at the University of Toronto and New York University, said Silicon Beach is part of an interesting evolution happening in entrepreneurial activity — it’s moving from the suburbs to the cities. “During the Industrial Age, a lot of activity moved to the edge of cities and to the suburbs,” he said. “And we believed then cities had been supplanted. High tech was happening in suburban areas of Silicon Valley, and outside of Boston, Seattle, in the Austin suburbs, in Research Triangle. But in the past several years we’ve seen an incredible, accelerating shift in start-up activity back to urban centers.”

Population density, he said, allows for the serendipitous encounters that inspire creativity, innovation and collaboration. “Entrepreneurs are competitive,” Mr. Florida said. “But they are also looking for people to partner with, people they resonate with.” Boulder is an unusual example of density. The city has only about 100,000 people, but Mr. Feld has hypothesized it may have more entrepreneurs per capita than any other community in the country. “The number of people working for start-ups is off the charts,” he wrote in a 2011 blog post.

According to Mr. Feld’s site, Startup Revolution, Boulder has 191 start-ups today, six accelerators, three incubators, 35 investors (including angels, seed investors, venture capitalists and corporations), five meet-up groups and a host of events like Ignite Boulder, Startup Weekend and TEDx Boulder. The area has attracted lots of engineers as well as sales, marketing, management and finance professionals.

Mr. Feld told DealBook in December that the city’s start-up community has grown because Boulder is a place where people wanted to live, so they built a life around it. But can you create a start-up community in a place like Detroit or even Las Vegas? Both cities lack density, but they do have evangelists — someone with a vision.

Detroit has Dan Gilbert, founder of Quicken Loans. In Detroit today, the median house price is less than $60,000, household income is around $25,000 and the number of people living in poverty is more than three times the national average. Talent is leaving in greater numbers than it’s arriving — which runs completely counter to what a start-up community needs. But as you can read in this recent Times story, Mr. Gilbert has already spent $1 billion to try to change all of that.

Meanwhile, Tony Hsieh, the founder of Zappos, is investing $350 million to revitalize Las Vegas, with $50 million going to tech start-ups through the VegasTech Fund. (The Times Magazine wrote about Mr. Hsieh’s efforts in 2012.) Drawing start-ups to economically challenged cities like Detroit and Las Vegas is hard enough but once there, those start-ups still face the usual challenges — finding investors, hiring talent and connecting with their communities.

Those connections are essential, said Scott Case, chief executive of Startup America Partnership, a private-sector initiative that aims to encourage the development of high-growth start-ups. Mr. Case said that is one thing his organization is focused on, recruiting and making its members visible. And that’s why the presence of accelerators and incubators, as well as events like meet-ups and pitch fests, are vital for a community’s growth.

Over the next several months this blog will take a closer look at a variety of start-up communities nationwide — those that are established and that that are emerging, or perhaps even struggling — in an effort to learn more about  what makes these places work.

Do you think it’s possible to create start-up communities deliberately? Or do they have to happen organically? And which communities would you suggest we look at?

You can follow Eilene Zimmerman on Twitter.

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Digital Domain: Bra-Selling Web Site Uses Algorithm to Determine Fit

“It occurred to me in that fitting room, as I was waiting for that saleswoman to bring me bras: Wow, this is the worst shopping experience on earth,” she said. (My wife concurs.) From her frustration that day emerged an idea for a business called TrueCo.

The history of e-commerce is marked by start-ups devising ways to sell products that were once thought of as unsuitable for sale online. Shoes were not supposed to be something customers would buy online, but then Zappos showed it could be done. The same thing was said about eyeglasses, until Warby Parker came along. But bras, which are among the most personal items someone can buy, represent the Everest of online retail challenges.

Ms. Lam’s company opened TrueCo last year along with two co-founders, Dan Dolgin and Aarthi Ramamurthy. The company, based in San Francisco, is certainly not the first to sell lingerie online. Older sites include the Web arm of Victoria’s Secret and, which was founded in 1998, near the dawn of the Age of E-Commerce.

Professional bra fitters have also moved online. Linda Becker, whose family owns two bra stores in New York, says she sells twice as many bras online today at as she does in her stores. Some of her online customers have previously visited one of her shops and been fitted in person. But new customers take their own measurements and work with customer service representatives on the phone. She says only 10 percent of online orders are returned.

But some customers turn out to be extremely hard to fit and it’s hard to tell why, Ms. Becker says. “That kind of customer will be impossible to fit online because the problem is unseen. There’s no way of figuring it out over the phone.”

TrueCo’s innovation is to put a batch of bras into customers’ hands so they can choose what fits best. New customers take a quiz — modeled on the ones in Cosmopolitan magazine that Ms. Lam fondly remembers filling out in high school — to collect the information needed to fit the bra properly. They are then invited to pick three bras in different styles.

TrueCo uses an algorithm to pick two additional bras to send out, based on what can be discerned from the customer’s choices. So the customer ends up with five bras to try on at home, with no obligation to buy. Most of the company’s bras are priced from $45 to $62.

The 15-question quiz asks for the customer’s band and cup size and the manufacturer of her current “best fitting (and beloved) bra,” and works from there to determine how the fit of that favorite bra could be improved. Other quiz questions include: “Do your cups runneth over?” citing things like cleavage or underarms — or “No spills, all good.” The question “What is your shape?” is followed by these choices: Well-Rounded, Bottom Happy, Taking Sides and Bottom Sides.

“We have an algorithm that defines 2,000 body types,” Ms. Lam said. TrueCo does not make customized bras for each of those 2,000 body types, however, so much of the taxonomy’s precision is lost when it must be translated into the far fewer combinations of band and cup measurements used by bra makers.

TrueCo has drawn the attention of some skeptics. Last month, a blogger at Open Source Fashion, Sindhya Valloppillil, dismissed the company’s bra-fitting algorithm as “ridiculous,” arguing that a bra must be “touched and tried on.” She mocked the credulity of TrueCo’s venture capital investors in a post titled “V.C.’s Think My Boobs Need an Algorithm.”

TrueCo actually makes no patently ridiculous claims about the algorithm, which involves matching a woman’s body type to a particular bra based partly on consistent variations among manufacturers for a given size and style. One manufacturer’s 32C may work better for breasts of a certain shape, for example, even if a woman is used to buying a 34B.

Customers buy an average of two bras from each batch of five. The company says women end up buying more of the bras chosen by the algorithm than the ones they select themselves.

But as with shoes and eyeglasses, so too with bras: it’s love at first touch and try, even in the digital age.

Randall Stross is an author based in Silicon Valley and a professor of business at San Jose State University. E-mail:

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Montevideo Journal: Uruguay’s Video Game Start-Ups Garner Attention

But the company, a success in the fiercely competitive field of video game development, stands out from other high-tech ventures in one respect: its unconventional location, which frequently confuses people abroad. “They politely ask, ‘Where is Uruguay?’ ” said Álvaro Azofra, one of the three founders of Ironhide, the company behind Kingdom Rush, a lucratively popular game in the United States that involves a cartoonish kingdom under attack by marauding yetis and ogres.

Squeezed between Brazil and Argentina and long dependent on commodities exports, Uruguay may be better known for its flocks of sheep and herds of cattle. But attention is now shifting to the country’s growing constellation of start-ups that are engineering video games for computers and hand-held devices.

Developers point to a variety of reasons that Uruguay has been able to compete with South America’s larger economies, whether the creativity of its engineers and commercial artists or its relatively relaxed immigration rules and extensive use of computers in schools.

“It’s ironic, because historically, this is a country that hates entrepreneurship, but not the culture of entrepreneurship,” said Gonzalo Frasca, a video game theorist whose company, Powerful Robot, has developed numerous games for clients in the United States, including Legends of Ooo, based on the Cartoon Network animated television series “Adventure Time.”

Mr. Frasca, 40, contrasted the skepticism that persists in relation to private enterprise in Uruguay’s cradle-to-grave welfare state, in which companies in sectors like telecommunications, casinos and even whiskey production remain under state control, with the country’s robust tradition of creativity in the arts and sciences.

“We still have strong schools for computer science,” said Mr. Frasca, who has a doctorate in video game studies from IT University of Copenhagen and is a pioneer in Uruguay’s game industry. “When people graduate, they realize they’re in a small country where they have no choice but to engage with the rest of the world.”

While ORT, Uruguay’s largest private university, offers one of the region’s first degrees in video game design, the relaxed atmosphere of seaside Montevideo — the Uruguayan writer Eduardo Galeano once remarked that his countrymen resembled “Argentines on Valium” — can still make it seem as if it would be an unlikely place for technology start-ups to thrive.

Other parts of Latin America are nurturing their own video game development scenes. Chile, for instance, recently drew attention when Atakama Labs, a game developer based in Santiago, was acquired by the Japanese gaming company DeNA.

Gaming studios have also emerged in São Paulo and Rio de Janeiro, Brazil’s two largest cities, but developers there complain of byzantine tax regulations and labor rules that make hiring employees costlier than in some rich industrialized countries. In Argentina, dozens of game-developing start-ups have been founded in Buenos Aires.

But while Argentina has traditionally had more companies in the industry, some of the momentum is seen shifting across the border to Uruguay as Argentine ventures struggle with abrupt changes in economic policy, including the tightening of currency controls that have complicated operations for exporters.

In Latin America and beyond, developers are seeking to mimic the success of Kingdom Rush, ranked in 2012 among the top-selling paid applications for the iPhone in the United States. In addition to Ironhide and Powerful Robot, an array of other game developers operates quietly.

Some, like Trojan Chicken, a developer of educational games in Spanish for schoolchildren, benefit from the heavy presence of the state across Uruguay’s economy, which avoided the privatization wave of neighboring Latin American countries in the 1990s.

Ingenio, a state-controlled incubator for start-ups, helped finance Trojan Chicken, which has created educational games including 1811, an adventure game set in colonial Uruguay, and D.E.D., a detective game in which players solve thefts of national heritage. The games are designed to be played on the inexpensive laptops distributed to schoolchildren across Uruguay.

Nearly all of the 300,000 children in Uruguay’s public schools now have their own computers, after the authorities here began embracing One Laptop per Child, the ambitious project aimed at bringing computing to children in the developing world, in 2006. Called the Plan Ceibal here, it is financed by public money.

Miguel Brechner, the director of the Plan Ceibal, said the initiative was already serving as a catalyst for Uruguayan content developers, notably gaming and animation studios. Describing Ceibal as a “digital equality plan,” he said that “reality has shown that kids get excited about games.”

Encompassing the video game companies, software development in Uruguay has evolved into a $600 million industry, making the country Latin America’s leader in per-capita software exports. But some here say that the industry may also be falling victim to its success, as salaries for developers rapidly climb and make it more expensive for start-ups to compete internationally.

Still, Uruguay’s immigration laws offer certain advantages in the competition for talented employees. Building on a history of attracting immigrants from Europe, engineers, animators and other foreign hires at start-ups can legally reside and work in Uruguay while their applications for work visas are being processed.

“Uruguay is a remarkably open place when it comes to attracting talent,” said Evan Henshaw-Plath, an American among the founders of the company that became Twitter. After moving to Uruguay in 2007, Mr. Henshaw-Plath founded a software development company that now has employees from countries like Poland and Ecuador.

Drawing a contrast between Uruguay and Brazil, he delights in telling a story about an American technology investor based in Japan who was about to embark on a business trip to South America aimed at finding start-ups in which to invest or to acquire outright.

Upon discovering that Brazil required Americans to go through a bureaucratic ordeal to obtain a visa, the investor canceled his trip there. Instead, he visited Uruguay, which has no such visa requirements, and eventually acquired Mr. Henshaw-Plath’s 20-person company, Cubox.

Mauricio Rabuffetti contributed reporting.

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Prototype: Milk & Honey, an Online Shoe Company Started by Sisters

FOUR years ago, Dorian Howard had one of the most glamorous jobs in the entertainment industry.

“I had the fancy title and the parking spot,” Ms. Howard said of being a vice president for production at Paramount, where she oversaw big-budget movies like “The Last Airbender,” from M. Night Shyamalan, and “G.I. Joe: The Rise of Cobra.”

But after more than a decade in the film business, Ms. Howard, 36, decided to do what a plucky heroine from one of the feel-good dramas that often came across her desk might do: give up everything — or, at least, the fancy title and the parking spot — to follow her dream.

In Ms. Howard’s case, that meant starting a business with her sister, Ilissa Howard, 39, in a field where neither had any business experience: fashion.

Make that two fields. Milk Honey Shoes, their shoe company that allows women to design their own stilettos and pumps with the click of a mouse, is also an e-commerce business despite the fact that the sisters had zero tech expertise when they began.

“We’re not start-up tech kids right out of college,” said Ilissa, who quit her job as a product developer for Toys “R” Us to go into business with her sister.

Perhaps not. But since they started the company in January 2011, sales have doubled and the business has become profitable, Dorian said. She declined to give specific numbers.

Last summer, Milk Honey was selected by Launchpad LA, a business incubator based here, to participate in its mentorship program that offers expertise and work space to promising tech start-ups.

The sisters are proof that having backgrounds that seem far removed from a new business venture can become a strength. Although Dorian jokes that studio executives don’t possess any tangible skills other than having “a Rolodex and an opinion,” her own Rolodex helped her to spread the word about Milk Honey to high-profile clients.

When the actress Ginnifer Goodwin, whom Dorian knows through the entertainment business, wore a pair of Milk Honey peep-toe platform heels to a Prada book-launch party, fashion Web sites took notice. The business relationships that Ilissa had with manufacturers in Asia helped her find a factory in China that would produce customized shoes.

“She knew how to make things, and I knew how to sell things. We figured, theoretically, that’s all we need,” Dorian said, sitting next to Ilissa in a white-board-filled conference room at the Launchpad office one recent morning.

The sisters also happen to adore shoes. In college, Ilissa returned from a semester in Florence, Italy, with 17 pairs. It was this love, combined with the frustration of not always being able to find the shoes they wanted, that led to the idea for their company.

Ilissa, slender and 5-foot-9, says she has always struggled to find heels that don’t make her feel like a giraffe. And Dorian says that she was once “standing in the Saks department store in New York City, which has its own ZIP code, and I couldn’t find what I was looking for.”

So why not create a company where “you’re no longer stuck with the options that the ladies footwear buyer from a department store provides for you?” Dorian said. “You want that three-inch, raised, suede pump? We’ll make it for you.”

The huge growth of e-commerce, and the success of the online shoe company Zappos, fueled their decision to create not just a shoe company but an Internet-based one.

Then came the matter of building it. First, Ilissa met with cobblers in Hong Kong who helped her create a model for making customized shoes in a “scalable way,” Dorian said. In other words, the designs could not be so complicated and different from one another that orders would be hard to fill one by one.

Then the women worked with tech teams to build a Web site that allows shoppers to assemble their shoes on a screen. After selecting the basic model (pump, loafer, wedge, etc.), customers can pick a material and color (say, red pressed snakeskin), add features like a back strap, and pick a heel height. A representative is available to answer questions online or by telephone.

Customers can also make an appointment to try on shoe samples at the Milk Honey showroom in Los Angeles. And yes, the company accepts returns.

NONE of this comes cheap, however. The shoes and boots range from $190 to $310.

Meghan Cleary, the author of “Shoe Are You?,” a guide to women’s shoes and what they say about their wearers, says customized shoes is a “niche market” that is growing.

“Customers are really demanding something specialized, made just for them, or tailored just for them,” she said. “So Milk Honey, along with a few other companies like Shoes of Prey, really tap into that.”

Even big shoe companies, like Converse and Nike, allow customers to come up with new variations of, say, the Converse All Star.

The Howard sisters certainly have high hopes for the future of customized fashions. Having used savings from their previous careers to finance their start-up, they are now looking for investors.

How is the pitch process going?

“I love it,” Dorian said. “I spent my entire career selling my passion. For me, it used to be screenplays and movies. Now it just turned into shoes.”


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Searching for Capital: The State of Small-Business Lending

Searching for Capital

A broker assesses the small-business lending market.

As we begin the New Year, I thought I would share some perspectives on where I think we stand in terms of access to capital and what I think will happen with small-business lending in 2013.

In part, my perspective comes from reading various reports about the state of small-business lending. These reports, however, don’t tell the whole story. For example, the Small Business Administration releases numbers that apply only to S.B.A.-backed loans. And the data that comes from the Federal Deposit Insurance Corporation about bank lending activity includes credit card loans. Meanwhile, the alternative lenders don’t release any aggregate numbers at all.

This makes it hard to get a clear picture of what’s happening. Obviously, no one person or company has a handle on all of the credit markets, but as a loan broker, I speak every day to business owners who are trying to borrow money and bankers who say they want to lend it. Here is what I see happening on the front lines.

If you’re trying to start a business today, you can almost forget about going to a bank for financing. This situation hasn’t changed much in the past year, and we don’t see it changing any time soon — with a few exceptions. If you are opening a franchise outlet that is on the approved S.B.A. list or if you have solid personal collateral outside of your new business, you’ve got a shot.

In 2012, frustrations about the difficulties involved in financing start-ups resulted in a lot of political capital being focused on one possible solution, crowdfunding. Unfortunately, crowdfunding hasn’t taken off yet, and I don’t think it will in 2013. It will take time to iron out the kinks and figure out how to make it work — how to strike the right balance between helping companies and protecting investors.

On a happier note, things have definitely gotten better for companies that are clearly creditworthy. In 2012, if you owned an existing business and you had collateral, cash flow and good credit scores, it was a good time to borrow money at low rates. And I think that will continue for some time. Banks are now hunting eagerly for these borrowers.

The problem is that there are not nearly enough of them. And that’s why a group of alternative lenders — including factors and merchant-cash advance lenders — are lined up and ready to supply money to most of the rest of us. The challenge is that these borrowers face high rates that make it tough to grow and expand as much as they would like.

The alternative financing industry is growing rapidly and, I believe, will continue to grow in 2013. These lenders are extremely entrepreneurial and are leaving the banks behind with their speed and use of technology. Many are backed by premier investment banks and Silicon Valley venture capital powerhouses — investors who understand that entrepreneurs and small-business owners are throwing up their hands in frustration over how long it can take to get a loan from a bank, especially if the loan is backed by the S.B.A. More and more businesses are willing to pay the price of the alternative lenders just to be able to get their capital and move on.

There are some indications that the price of alternative lending may be coming down a bit as the industry gets more competitive. I expect this to continue in 2013. That said, there is still a wide discrepancy in pricing between bank loans and alternative loans.

Despite the growth of alternative financing, we have heard little from Washington about the challenges small-business owners face when borrowing money. For reasons I still don’t understand, access to capital for small-businesses was pretty much a nonissue in last year’s presidential campaign. When we do hear from Washington in 2013, I expect the conversation will be mostly about the S.B.A., which is fine as far as it goes. I am all for the S.B.A., but as I have written previously, it represents a tiny piece of the overall puzzle – and should be thought of as such.

The largest banks continue to tout their small-business lending records, but the numbers they provide to back this up are less than convincing. We regularly speak with small-business development officers at these banks who are ready to throw up their hands in frustration at their inability to get their clients the help they need. My expectation is that this will not change much in 2013, as the bigger banks simply aren’t equipped to handle small-business lending and Washington puts little pressure on them to figure it out. Community banks, meanwhile, continue to be friends of small businesses, and relationship banking continues to be critical in completing loans.

I hope that in 2013 we will find ways to break the gridlock. While the economists say the recession is over, many of us in the small-business community are still reeling from the aftershocks. My hope is that in 2013 we will find new ways to get lower priced capital into the hands of more small-business owners and entrepreneurs.

Ami Kassar founded MultiFunding, which is based near Philadelphia and helps small businesses find the right sources of financing for their companies.

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Oliver Luckett of theAudience, Building Online Fan Bases

Raised in Mississippi and with the accent to prove it, Mr. Luckett, 38, is known for zooming around town in an Aston Martin — that is, when he’s not jetting off to places like Iceland, where he was last December to compete against Bjork in a gingerbread house-building contest. He lost, despite help from a buddy in Disneyland’s research and design lab.

With his new company — a social media start-up called theAudience — Mr. Luckett promises nothing short of rewiring celebrity economics, and he abruptly dismisses skeptics. “Get on my train,” he likes to say, his blue eyes blazing. “We’re leaving now.” Yet he can also be a big softy known for his striped-sock collection. During a business meeting not so long ago, he veered into an emotional story about coming out of the closet and started to weep.

Just another showy show-business personality? Some people think so. But many of the entertainment factory’s most powerful forces — William Morris Endeavor, Lionsgate, Universal Pictures — and one tech superstar, Sean Parker, are taking him very, very seriously.

About two years ago, Mr. Luckett left a senior position at Walt Disney, where he managed the social media presence of Cinderella and her cartoon friends, to do the same for actors and musicians. For each client, theAudience works to build a network of fans across the likes of Facebook, Twitter, YouTube and Google Plus and to keep those followers engaged by posting a steady stream of catchy pictures, comments and videos.

THEAUDIENCE, part of a stampede of start-ups aiming to exploit the intersection of celebrity and social media, also sells its services directly to movie marketers, record labels and concert promoters. It did stealth work on behalf of the hit movie “Ted,” for instance, and the Coachella music festival. Mr. Luckett refuses to identify his clients, but he says theAudience publishes thousands of items a month on behalf of about 300 accounts, reaching a total of 800 million fans.

Movie and music executives say theAudience’s clients include Mark Wahlberg, Charlize Theron, Jack Black, Eddie Murphy, Hugh Jackman, Usher, Pitbull and LMFAO.

Celebrities seizing opportunities to promote themselves? As Captain Renault would say, “I’m shocked, shocked.” But theAudience illustrates something important about where Hollywood is headed. After largely ignoring social media — allowing fake Facebook pages to proliferate, sticking with tried-and-true publicity stops like “Entertainment Tonight” — stars and agents are realizing en masse that they need to get on that train.

There is intense downward pressure on artist salaries in all corners of entertainment. Movie attendance over the summer hit a 20-year low. The Web has decimated the music industry. DVRs are roiling television. William Morris Endeavor, a founding investor in theAudience, sees the assertive cultivation of social media networks as one way to shift power back to stars.

To agents, the metrics of theAudience offer crucial leverage: If you cast Ms. Theron in a movie, she comes with an ability to fill seats through her social network, and we can prove it with data. Oh, and she needs to be paid more because of that. The same leverage holds true for sealing endorsement deals, which is where celebrities, and their agency backers, increasingly make their real money.

“That is absolutely part of the conversation now,” says Ari Emanuel, the co-chief executive of William Morris Endeavor. “We all use all the tools we have.”

If you were wondering how Rihanna was cast in “Battleship,” it was lost on no one at Universal that she came with 26 million Twitter followers.

Ultimately, Mr. Emanuel and others look at social media networks as a new type of cable channel, and theAudience is helping celebrities to program theirs. Consider it as the Web equivalent of OWN, Oprah Winfrey’s channel; she maintains control of what goes on it, but she hires people to make it happen.

“The real value of these networks is in programming,” says Mr. Parker, the Napster founder who also played a big role in Facebook’s world domination. “If you can aggregate effectively, you can start to imagine social media a little bit more like traditional media.”

Mr. Luckett has a long history with start-ups, including Revver, a video sharing site that was precursor to YouTube. He says theAudience recently obtained $20 million in an additional round of financing from Guggenheim Partners; Intertainment Media; Participant Media; the Founders Fund, which is Mr. Parker’s investment company; and the Capricorn Investment Group, the investment arm of Jeffrey Skoll, the first president of eBay.

“A lot of celebrities are overwhelmed with the demands of social media, and theAudience, which has some extremely smart executives, is one of the companies filling the void,” said Danielle De Palma, senior vice president for digital marketing at Lionsgate, which hired Mr. Luckett to work on “The Hunger Games.”

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