5 Hot Start-Ups Big Tech Is Betting On

NEW YORK ( TheStreet) -- Tuesday evening, executives from several big-ticker tech firms met with President Obama to speak about innovation, job creation and Startup America, the President's new entrepreneur-fostering program backed by Hewlett Packard ( HPQ), IBM ( IBM), Intel ( INTC) and Facebook.

The initiative is designed to boost innovation and growth among private U.S. businesses by bringing together tech veterans like AOL ( INTC) co-founder Steve Case and CEOs, venture capital firms, universities and foundations.
President Obama delivers his the State of the Union address.

For tech giants like Intel, which committed $200 million to American technology companies through its Intel Capital investment arm, investing in small business is nothing new. Last year, the fund invested $327 million in 119 companies.

But the government's commitment to spur entrepreneurs as a mean of creating jobs is what makes the Startup America initiative different, said Keith Larson, a vice president at Intel Capital.

"People are starting to figure out that entrepreneurism is fundamental in helping move us out of an economic crisis," he said. "The fact that the administration picked up on that up and moved the ball forward is a really productive thing."

Large corporations have emerged as important sources of funding for start-ups. Last year, corporate venture capital made up 14.3% of all venture investments, up from 13.3% in the prior year, according to the National Venture Capital Association.

Read on for profiles of several cutting-edge start-ups that some of tech's biggest names are advising and investing in.


Corporate Investors: Google

What it Does: Mobile gaming

SCVNGR, a location-based game for mobile phones, closed a $15 million venture funding round last month from investors including Google ( GOOG). The round values the Cambridge, Mass.-based company, whose name is pronounced "Scavenger," at close to $100 million, according to reports.

SCVNGR differs from apps like Foursquare because of its focus on completing physical challenges -- like uploading a photo of yourself at a coffee shop or creating an origami sculpture out of a burrito wrapper at a Mexican restaurant -- rather than simply opening the program to "check-in."

The game, founded by Seth Priebatsch when he was a freshman at Princeton University, has landed dozens of partnerships with corporations including HP, Motorola ( MMI) and Kodak ( EK), who all have developed challenges for the platform.

SCVNGR is just one app in a market poised for significant growth. Revenue in the app market is expected to exceed $15 billion this year, up from $5.2 billion in 2010, according to research firm Gartner.

Google has invested in apps before, including social gaming start-up Ngmoco, which was acquired by Japanese gaming company DeNA last year for $400 million -- one of the largest deals ever involving an iPhone application developer.

The search giant also said that it is hiring dozens of engineers and product managers to develop apps in-house for the Android operating system in a move to counter Apple's ( AAPL) App Store dominance.

Apple has 350,000 apps in its App Store, compared to Android, which has around 100,000 apps.


Corporate Partners: RIM, Thomson Reuters, Royal Bank of Canada

What it Does: Mobile commerce

Digby, an Austin, Texas start-up, powers mobile commerce for a host of big retailers including 1-800-Flowers ( FLWS), Costco ( COST) and The Home Depot ( HD).

The company designs mobile-optimized Web sites and apps for the iPhone, Blackberry and Android.

The market for these types of sites is vast.

While more than half of consumers are likely to buy from a retailer that has a mobile site, fewer than 5% of retailers have such a site, according to social marketing consultancy Brand Anywhere and market research firm Luth Research.

Only a small number of consumers use their phones to shop, but this number is growing quickly: About 11% of shoppers made a purchase on their phone during the 2010 holiday season, up from 2% last year, according ForeSee Results.

Digby has raised $5.5 million from Blackberry Venture Partners, a firm backed by Research in Motion ( RIMM), Thomson Reuters ( TRI) and Royal Bank of Canada ( RY).

Blackberry Partners invests exclusively in companies within the mobile and connected device space, but doesn't commit its start-ups to focus on Blackberry.


Corporate Partner: IBM (has given mentorship, but not investment)

What it Does: Parking management

Streetline, a San Francisco-based start-up that helps cities collect information about real-time parking data, was named the "world's smartest startup" last year by IBM.

More than 30% of traffic in a city is caused by people looking for parking, according to Streetline. The company's goal is to reduce traffic congestion, cut carbon emissions and decrease noise, pollution and wasted energy by making it easier for drivers to find parking spots.

Cities that work with Streetline -- including Los Angeles, New York and Washington D.C. -- install low-power sensors in parking spots that detect if the space is occupied. (The sensors can also be installed in parking meters to know if the meter has been fed and identify violators.)

Streetline is integrated within existing parking management systems, allowing city officials to see the data in real-time and to more fairly enforce parking regulations.

The company has also entered into the consumer market, developing the Parker iPhone app to help users find parking spaces. The app displays how many spaces are open on nearby blocks, and includes the spot's time limit and pricing. Available now in Los Angeles, the app is set to be rolled out in other cities that work with Streetline later this year.

IBM chose to partner with Streetline because of its focus on efficient use of energy and resources, said Mike Riegel, IBM's vice president for independent software vendors, start-ups, developers and academic programs. The company is interested in working with firms linked to IBM's Smarter Planet initiative, which promotes improving environmental protection, healthcare, energy consumption and education.

While IBM's venture capital group does not manage a portfolio of start-ups, it focuses on identifying businesses of interest who receive access to Big Blue's resources and mentorship opportunities.


Corporate Partner: Intel

What it Does: Smart grid software

Nexant, a San Francisco-based company, raised a $50 million round of founding in November from investors including Intel. The company offers consulting services and software to help clients -- major utility companies, government agencies and large corporations -- use energy more efficiently.

As global data center energy consumption grows, utilities are looking at technologies like Nexant that help meter energy use and foster significant energy savings to take pressure off grids, said Steve Eichenlaub, a managing director at Intel Capital.

Intel has also invested in a second smart grid firm, Grid Net.

The idea of more efficient data centers attracted mainstream media attention in September when Greenpeace criticized Facebook for building a structure in Oregon that runs on coal rather than renewable energy.

Many large tech companies, including Google and Cisco ( CSCO), have jumped on the smart grid trend, which has seen widespread political and regulatory support. The U.S. Department of Energy is investing $4 billion to encourage smart grid deployment, and President Obama has called for the installation of 40 million smart meters in American homes and businesses.

Investment in clean technology comprised 17% of all venture dollars deployed in 2010, as investments topped $3.7 billion in 267 deals during 2010, according to the National Venture Capital Association.

Perfect Market

Corporate Partner: Comcast

What it Does: Online advertising

Perfect Market, a Pasadena, Calif.-based start-up that helps newspapers make more money from their content, recently closed a $9 million funding round led by Comcast ( CMCSA) Interactive Capital.

The company works with publishers like The Los Angeles Times, The Chicago Times and The Orlando Sentinel to help them optimize their content for online search engines. Perfect Market helps formulate a customized version of an article with advertising targeted at the relevant audience, as well as report data that lets publishers know how their pages are performing.

Perfect Market's content attracts about 30 million monthly page views.

Perfect Market has raised around $30 million in total funding from The Tribune Company, Rustic Canyon Partners, Trinity Ventures and Idealab.

--Written by Olivia Oran in New York.

>To follow the writer on Twitter, go to http://twitter.com/Ozoran.

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