Well, I figured I’d announce it here on my blog and on the nextNY blog…

VentBox is live and kicking in version 2.0!

Kyle worked his butt off with this new design to get it out the door in time. His contributions to the code base were also invaluable, and we’re excited that he’ll be sticking around… GREAT WORK!

But what are you still doing here on this blog?? Go check out the new and improved, VentBox.com!

I’m a huge fan of Interactive advertising, not just Internet advertising.  I believe there is a difference between the two, almost in parrallel to saying that a ‘square is a rectangle, but a rectangle is not a square.‘  Interactive encompasses anything digital (in-game advertising, RSS, digital OOH, mobile, etc), whereas Internet advertising is just that, Internet.

Piper Jaffray, a leading middle market investment bank released a research report back in February entitled, “The User Revolution” which had some solid statistics for the Interactive advertising world.  This world is growing and eventually will dominate all media forms as traditional media (TV, Radio, Print, OOH) are all becoming digital/Interactive.

High level details of the reports:

• 1.  Global online advertising revenue to reach $81.1 billion by 2011.
  
• 2.  Communitainment: Internet has increasingly become a principal medium for community, communication and entertainment — three areas that have collided and are impacting each other’s growth — generating a new type of activity: communitainment. Communitainment is taking time away from other, traditional, types of content consumption on the Internet.
  
• 3.  Usites — The increasing popular category of user generated sites, which we are calling Usites, are driving traffic away from other destinations and pose a challenge to the advertisers and publishers.
  
• 4.  The Internet is now a mainstream medium: The web is the leading medium at work and the second leading medium at home behind television.
  
• 5.  Internet usage patterns are changing, favoring Usites, communitainment sites, search, and away from traditional portals.
  
• 6.  User Generated Brands. The consumers are taking control of content consumption and branding.
  
• 7.  Media Fragmentation: Advertisers increasingly will need to buy more inventory, from nearly all types of media, especially the Internet, to have the desired impact.
  
• 8.  The Golden Search: search has become the new portal.
  
• 9.  Google’s dominance is likely to expand, partly fueled by a wide variety of non-search related products that create a virtuous cycle of brand affinity for Google.
  
• 10. Video ads will be the driver of the next major growth in brand advertising and getting additional dollars shifted from traditional media to online.
  
• 11. Ad networks are experiencing increased demand due to increasing Internet fragmentation, desire for more targeted inventory, increasing usage of networks for branding and increased site visibility.
  
• 12. Agencies are rapidly evolving into more sophisticated, technology-savvy entities that combine best of breed offerings.

There is a chart that is referenced on Influx Insights blog this morning from this report as well that shows that 40% of people are willing to give up TV for Internet, up 14% since 2001.  This isn’t as high as I’d like to see, but certainly an improvement.  For one, I know that I spend a lot of time consuming Interactive media, and only a small percentage consuming television and print.

As people consumer more Interactive media, things will become much more efficient (technology gets involved) and amazing opportunities are created.  The Brickhouse at Yahoo, Next New Networks, Haystack, and other emerging Interactive companies will innovate and create tomorrow’s media channels.

My iPod, a 20-gigabyte fourth-generation model that was perpetually enclosed in a hot pink iSkin, died several months ago. I'd had it for over two years, and I certainly did take it to the gym when I shouldn't have (running with a hard drive-equipped iPod can really take a toll on its lifespan, in case you didn't know). So I suppose it had reasonably reached the end of its lifespan.

Since then, I've been operating solely with a little silver clip-on Shuffle. It's much better for working out, and I've been enjoying the autofill function for re-discovering music that I hadn't listened to in ages (New Pornographers, anyone?) At the same time, however, I'm hoping to get myself a new "real" iPod at some point. Last night I was on a train from New Jersey back to Manhattan and suddenly I really wanted to listen to the Shins' Wincing the Night Away. But oops, there weren't any songs from it on the Shuffle. So that minor inconvenience ended up making me consider why I've put off buying a new iPod for the past few months.

And the reason why? Steve Jobs is making me afraid to buy an iPod. I am wholeheartedly convinced that if I buy a new iPod, within a week Mr. Jobs will make a grandiose surprise appearance, rub his hands together, and announce that a completely new iteration of the iPod has been released and anyone who has an old one can just suck it. The thing is, I recently learned that I'm not the only one. I have a handful of friends who similarly relate to me that their iPods have died and they're putting off on getting new ones. The video iPod has been pretty standard for long enough now, they say, and consequently they think it's about time that we'll be seeing a totally new one that will render the current "generation" thoroughly obsolete. I kind of see where they're coming from. I bought my old 4G when that round of iPods was brand new, and I'm glad I hadn't gotten one of the older ones. Hello, click wheel!

So who's to blame? Is it Jobs himself, or is it the legions of Apple rumormongers who continually convince us that the release of a touchscreen, 100GB, Beatles-edition iPod is absolutely imminent? Or is it the good old American ethic of thriftiness telling us "no, don't get it, save the money now and wait for something better?"

I call it the Jobsian Dilemma.

Twitter would have me believe that just about everyone who's involved with any kind of new media or geek culture is in Austin for SXSW right now. It's probably right. I, however, am sitting in a Lower East Side café with some folks from nextNY who are trying to get a Coworking sort of thing together. I've been here working on a feature story that just got finished. It's been fun.

That being said, I've realized that I probably have an unhealthy addiction to green tea and all its delicious derivatives. I've drank green tea for a while, but I didn't start going for the unsweetened stuff until December, and I'm tempted to attribute the 3-4 cups I down every day to the fact that I haven't (yet) been sick this winter. Antioxidants, right? Then I got into green tea ice cream, and the frozen yogurt from Pinkberry (with kiwi chunks mixed in). Now I've discovered the cold-weather equivalent: green tea lattes. I ordered one at this café, and it literally tastes just like green tea ice cream, except warm. I think the obsession has just been taken a step further.

I guess there are worse things I could be addicted to drinking.

Generally speaking, tax and liability drive the choice of entity.

Taxation

From a tax perspective, all of the entities except for C-Corps are known as "pass-through" entities, where any income and losses show up on the owners' tax returns. With a C-Corp, taxes are paid by the corporation itself, independent of the individual owners. If you anticipate huge tax losses early on, one of these pass-through entities can be desirable (unless you anticipate taking VC money soon). In some cases, you can even allocate the income and losses differently if you have one owner who can take advantage of the tax loss while the other does not. (There are limitations on the tax losses you can claim with a pass-through entity - the At-Risk rule and limitations of Passive Activity losses -  but these are not relevant for now. I'll try to discuss this more in-depth in a future post.)

Liability

Corporate forms can also provide liability shields. Partners are personally liable for any debts and torts of the partnership.  In a corporation (S-Corp or C-Corp) or LLC, the owners are not liable.  Obviously, the nature of the business is relevant here. If you are forming an entity to write a book (assuming libel is not an issue), then a simple 50/50 partnership under law (i.e., with no explicit agreement) may be ok. If you're manufacturing and selling a physical product, you want to be sure to choose a corporate form that shields liability.

Differences between the entities

Though the primary difference between an S-Corp and a C-Corp is the pass-through tax treatment, there are also limitations on availability and capital structure an S-Corp. An S-Corp is only available if there are less than 100 owners and no foreign owners. Additionally, an S-Corp can only issue one class of stock and cannot issue options.

Like an S-Corp, an LLC provides flow-through tax treatment and limited liability for the owners. The LLC form also brings more flexibility in that you can essentially put anything in the corporate charter, but this comes at a greater cost in negotiating the agreement (and since it's not standard may incur more legal costs in the long run if you want to change things).

A brief overview of the advantages and disadvantages of these three entity types:

	C-Corp	S-Corp	LLC
Limited Liability	yes	yes	yes
Pass-through tax	no	yes	yes
Simplicity / Control	yes	yes	no
Limitations on availability	no	yes	no
Limitations on capital structure	no	yes	no
Ability to take public	yes	sort of	no
Flexibility in charter docs	no	no	yes

Summary

If you're actively seeking VC funding (VCs will only invest in C-Corps) and don't anticipate significant tax losses (which is probably the case with many technical startups), then C-Corp is usually a good choice. If you want to take advantage of the pass-through taxation, Imke has a good discussion on choosing between an LLC and an S-Corp.  Partnerships are ok initially, but best avoided given the lack of a liability shield.

Disclaimer: it should go without saying, but this post is for informational purposes and should not be considered legal advice.

After speaking with various entrepreneurs from different industries here in New York, one topic that comes up over and over again is that of “New York.” There are mixed feelings about creating a business here as some people think that San Francisco (and surrounding areas) is the Mecca. For an early stage software company, that may be true, but not everyone here in New York is building software, actually, far less than in San Francisco. If you have a business model that includes advertising, creating the next fashion label, writing a book and trying to find a publisher, or using technology as an enabler to do things, New York may be the best place for you to plant your roots.

I’ve been around throughout the bust/boom of the dot com era, worked on early projects that never got off the ground (but learned a tremendous amount), created value for shareholders in subsequent projects, and in most cases, had to find my way around this amazing city as an early stage entrepreneur with limited resources (pre-funding, seed funding, Series A, etc). On the side, I do quite a bit of consulting and advising to entrepreneurs and in the following paragraphs, I may give out some of my secret sauce, but after thinking about the power of letting it be free and to help many other entrepeneurs, it was a no brainer to let it out.

One of the first things people ask me is, “where do I find office space, now that I have a company.” I feel that many entrepreneurs jump the gun here and try and get space well before they need to do so. Why create overhead for yourself when that money can best be used elsewhere? One of the best deals here in New York is Sunshine Suites, recently featured in a BusinessWeek article about alternative office space. They have an extremely collaborative environment, but separate enough that you have your own area with walls around. There are shared facilities such as photocopying machines, printers, faxes, and great conference rooms, and with their pricing, an early stage seed funded company could exist there (~$300-800/mo).

If you do not have the resource to afford the above pricing (which many companies do not, or do not want to spend on space), there are always Internet enabled café’s that just cost a latte, or you can go and check out some co-working spaces that foster community conversation. One of my favorite spaces to work in is down in the West Village, called Soy Luck Club. While I am not a vegetarian, I do enjoy my Soy once in a while and their Soy peanut butter and banana sandwich is fantastic. I have worked there many days and utilize their free WiFi which is generally pretty good. Starbucks is always another option, however, if you find yourself going more than a few times per month, it makes sense to subscribe to T-Mobile’s plan so you only pay $39.99 for Internet… and you do not have to order the food there (to keep costs lower). I actually have a Starbucks/T-Mobile account even now as I find myself on the road quite often and need to have access to email and there is generally always a Starbucks within reach.

For meetings, there are a few places of choice that I like to visit. If they are ‘light’ meetings that do not go into too much confidential detail, I prefer to head over to Le Pain Quotidien which is by my apartment on 77th between 2/3rd Ave. There are many scattered throughout the city and they offer a relaxed atmosphere that fosters communication and has some great green-tea and hearty snacks.

If it’s a power breakfast meeting or needs to be more formal, I’m a huge fan of Pershing Square Café on 42nd Street, right by Grand Central. This is a hot spot for many investment bankers, venture capitalists, ad agency folks, and media types – and I am always bound to run into someone else I know there. The place heats up from 6:30am-9:00am and doesn’t take reservations so make sure to arrive early to put your name down and to get situated.

For lunch, if you’re meeting for financing and looking to impress, I find the Blue Water Grill in Union Square to be a good bet. It’s a very upscale place with generally a ‘jacket/blazer’ crowd, and allows you to talk fairly privately. The menu is obviously more expensive than a pizza or hamburger joint, but will not break the bank as long as you do not go here too often. It’s also extremely convenient as many Subway lines come in the vicinity of Union Square (4/5/6/L/ others). If you want to still be in the Union Square area, but want something much more low-key (a brainstorming session with your founders/employees), check out Piola (great find Andrew!) on 12th which is a pizza bar.

Now that we’ve got places to work and meet/eat out of the way, you probably may need legal counsel or accounting help. I have recently met Ms. Imke Ratschko who works with early stage businesses in business formation (LLC or S-Corp type questions and Founders Agreements, etc) and is located down in the Wall Street area. I have worked with the extremely large law offices such as Wilmer Hale, Greenburg Traurig, and others – but for simple things like company formation, founders agreements, shareholders agreements, you may be better off working with a boutique or sole practitioner who has had a lot of experience as it’ll generally be cheaper. I have found early stage lawyers to cost around $225-400/hr and the larger firms well above $500/hr. It adds up fast… and some early stage lawyers will work project based, not hourly. If you want to setup a business without using a direct legal associate, you can turn to BizFilings.com – and have done that personally in the past for three ventures. There are pros and cons to doing this, but most of all, it saves a bit financially.

Once you’ve got your legal structure taken care of, you may be looking for outside financing. There are a few offices here in New York that may be of assistance such as the all-stars over at Union Square Ventures, First Round Capital, SJF Ventures, Vantage Point, and others, but also investment banking boutiques like Tipping Point Capital. While not every startup needs an investment banker (and most investment banks wont work with one as the money raise is too low), boutiques like Tipping Point can help the company grow by filling in holes where the company is weak.

If you’re a social butterfly and looking to mingle with other entrepreneurs, check out nextNY, a group of digital media folks and entrepreneurs who get together monthly at different locations around the city to not just drink alcohol, but to chat about certain topics and network. The NY Tech Meetup is also another fun scene which features folks from the all-mighty Google to the little startup in the corner, but Scott and his team keep the NY Tech Meetup moving and growing with over 250-300 folks coming out for each event. If you’re a Web 2.0 fan, Peter puts on a great Web 2.0 Meetup, so check that out as well.

I hope that this was helpful to you – there are obviously many more people and companies within the NY early stage scene that exist, but it’s impossible to write about everyone. In full disclosure, I have worked with some of the folks listed, and haven’t worked with others. None of the companies above have incentivized or paid me to write them into this article and this was purely done to help other entrepreneurs get through the early stages of their companies here in the Big Apple. Keep on innovating in NY!

Big thanks to everyone for coming out last night and making the event a great success. Great discussion was held between entrepreneurs, technologists, angel/venture investors and like-minded individuals. Charlie O'Donnell led the discussion and was helped by a number of distinguished guests: Saul Schapiro - New York Empire Development Corp, Jerry Colonna - Investor, Dennis Crowley - Dodgeball,

Last night NextNY had an event called NYCHub to talk about ideas for improving NY as a center for technology and entrepreneurship. Just to get down my initial thoughts, it seems that the challenges boil down to two main areas:

• Money: New York startups suffer from an extreme lack of funding options. Companies face a much higher hurdle here, and only those businesses with a proven business model that have already gained traction stand a chance. Creative, risky or visionary concepts that could succeed out west will not get funded here. Right now, onvestors simply do not take startups seriously. This is something that needs to change.
• Community & Culture: There need to be better ways to connect with other talented, entrepreneurial, and creative people. While there’s an abundance of talent, it’s very siloed, and people from one industry don’t interact with others. Aside from NextNY, there aren’t many great places to connect with people. Furthermore, there are fewer role models, success stories and mentors for up-and-comers to look up to. There’s a general lack of awareness of technology entrepreneurship as a viable life choice and as a pathway to success, compared to other big industries here, such as finance, fashion or advertising. Because of this lack of awareness, tech people are very risk-averse and prefer to work on Wall Street. It’s also difficult to get legal services, office space, or other resources for equity. These social and community aspects are definitely within the power of a group such as NextNY to change–whether through publicity, larger events that cross the silos of industry, having more networking events, and aggressively promoting NY success stories.

Nobody mentioned real estate as a problem, and significantly, nobody mentioned any problem connecting with clients/customers or making sales. An abundance of businesses to sell to is definitely one of NY’s advantages. Also, there are already a lot of people in NY developing innovative products and ideas, but they’re either below the radar, or exist within large business such as NYTimes Digital, R/GA, InterActiveCorp, Google, NBC, Goldman Sachs, Reuters and others.

I actually think this all comes down to mindset. Out west you if you’re doing something cool, new or creative, people might be interested. They may even want to help. Here everything is met with extreme skepticism. “What’s the point of doing that? What’s the business model? Why don’t you work on Wall Street like everyone else?”

Update, further thoughts:

• Having a vibrant tech community makes working at one individual startup much less risky. If the company you started or joined fails, there will be another one around to jump to.
• Many of New York’s key industries face competition due to new technology, especially television, newspapers, and media. NY businesses seem to have a ‘fat and happy’ attitude that they have the natural right to be at the top. But they’re going to need innovation here if they want to keep NY as a center for those businesses. There will be other Craigslists and YouTubes destroying other industries in the future, and the centers of those businesses will move out west if NY remains complacent.
• A lot of the participants at today’s meeting felt that technology was just a support function for their business, and could be entirely outsourced overseas. I think it works for some businesses, but not all See my thoughts on when offshore outsourcing works and when it fails. I’ve met with too many entrepreneurs whose whole businesses are being stalled because of the technology side. And the people they do find have the old-school ‘long project with waterfall process’ mentality, rather than a quick, agile, and creative development process. They’re getting average work, and not hitting the high notes.
• A few big successes can change help change the culture. The current boom was started practically by two companies, Google and YouTube.
• The film and TV industry in NY has the same kind of startup mentality as technology in the West Coast. People are willing to make creative bets on risky projects, because that’s how the whole industry works. And it’s easy to get people to work for you for free. What’s the business model of a TV show? The same as for most Web 2.0 companies–attract an audience and sell advertising. I think there is a good chance NY will be come a major center of online video content. (That’s why I’m involved in this business)
• New York has a large and vibrant interactive industry. Companies such as R/GA, Digitas, Grey, and Ruder Finn routinely execute technology projects for their clients. There’s a pool of high quality designers, usability experts, online marketing strategists, and programmers working on such projects. They have a clear idea of what companies want from working with them regularly. But there’s little connection between this industry and the tech industry itself. If the boom comes back to New York in full force, a lot of entrepreneurs will emerge from these companies.
• NY interactive firms are also a good channel for selling technology products to large companies, because these firms routinely recommend products and services to their clients. It sounds ridiculous that big companies ask their design firms to specify what technologies their intranets should use, to implement social networking on their sites, or to choose mobile marketing technology providers, but that’s what happens.