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The FINANCIAL — Matterport, a Y Combinator graduate that just raised $5.6 million in
Series A funding to produce a scanner that makes 3D models of interior
spaces more cheaply and much more quickly than before, has a novel
technology opening new possibilities in real estate, remodeling and
construction.

But it also has a classic problem–convincing potential buyers that a new type of product is worth both the money and changing the way they usually do business.

“This is an answer in search of a problem,” said Willy Shih, professor at Harvard Business School specializing in manufacturing and product development. Shih looked at Matterport briefly, at the request of a reporter, and said that he is in general very positive on the technology’s potential, but that the company will need to quickly find customers that will be testing the product and help the company refine it, something that Matterport has already started doing with prototypes.

Matt Bell, the company’s co-founder and chief executive, said that Matterport’s initial customers would be real-estate photographers. “This is the next tool that they will need to have,” he said of the product, which will cost about as much as a good DSLR camera.

But San Francisco Bay Area real-estate photographer Bryce Greenfield, who was told about the technology by a reporter, said, “I don’t think I am interested.” For him, an investment of this kind would only be warranted if real estate agents really started demanding the service, and he’s skeptical of that.

As The Wall Street Journal said, video, for example, never took off even in high-end real estate listings, even though some people thought that the visual capabilities of video reels would be effective marketing tools. “Most agents are very tight with their purse strings,” said Greenfield. He said real-estate marketing has been pretty static for a while, with photographs accompanying listings.

Matterport’s technology is different from video, because it offers precise measurements, and soon enough, the company plans to also offer interactivity, so that besides a virtual walk through a space, one will be able to add and remove objects. The company hopes to first make money by selling the scanners, and then to also lock in monthly subscriptions from users for its service of creating the 3D models and hosting them online.
The Mountain View, Calif.-based Matterport’s scanner incorporates the same sensors used in Microsoft ’s Kinect platform, which runs on the XBox to visualize users’ movements. The device, which is controlled via an Apple iPad, takes several 3D scans of an interior space that are sent to Matterport. The company uses its software algorithms to process all the information and stitch together a full 3D model of the space in minutes.

Matterport will rely on resellers, as well as companies like recently launched Floored that will buy the scanners and create sales channels on their own.

Bell said that the company doesn’t have to sell a huge number of scanners to turn a profit. In a few years, he hopes that the hardware part of the business will go away completely, he said. At that time, he hopes that 3D sensor technology will become small and cheap enough to be incorporated into smartphones and tablets, so the question of an upfront investment will go away, and the company will become a purely software and services provider.

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Article source: http://finchannel.com/Main_News/B_Schools/124704_Matterport%E2%80%99s_3-D_Scanner_Faces_Marketing_Challenge/

“Who has a party in Palo Alto?” she asks the camera, in a dig at the suburban capital of Silicon Valley that helped make the two-minute comedy, “Shit Silicon Valley Says,” a Web hit. For many of the twenty-something engineers and other professionals who play a central role in the latest Internet boom, the question is purely rhetorical.

More than ever, technology entrepreneurs, and their investors and employees, are choosing the urban charms of San Francisco over the sprawl of neighbouring Silicon Valley. In the South of Market district, the nexus of the city’s tech industry, rents are soaring and latte lines are lengthening — conjuring memories of the dot-com bubble of the late 1990s.

Late last year, the city had 34,000 tech jobs, topping the high set at the peak of the dotcom boom in 2001, according to a Jones Lang LaSalle analysis of California Employment Development Department data. Twitter, Salesforce.com, Zynga, Yelp and other sizable Internet companies now call the city home.

Half or more of graduates of the tech incubator Y Combinator, a widely watched Silicon Valley institution, now move to San Francisco, founder Paul Graham said by email. Four years ago, he said, the city lacked the seriousness of purpose that infuses Silicon Valley. “I’m suspicious when startups choose SF,” he wrote at the time. “Things have changed,” he declared recently.

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“This is really where the centre of gravity is,” agreed Y Combinator graduate Dan Siroker. He worked for Google in Mountain View but started his own business, a company that lets businesses test versions of websites, called Optimizely, in San Francisco. And the profitable company just got a round of venture funding.
That’s not to say Silicon Valley, which extends south of the city to San Jose and includes towns such as Palo Alto, Menlo Park and Cupertino, is no longer central to the tech scene.

San Francisco captured 20% of all venture capital funding in the last quarter of 2011, its best showing ever, a report by PricewaterhouseCoopers and the National Venture Capital Association based on Thomson Reuters data noted. Silicon Valley accounted for a strong 27% of all VC investment in the same period.

The new generation of Internet companies has a more real-world, and arguably more urban, outlook. Customers of car service Uber, for instance, see a map of nearby cars on their smartphone app and can call one over in minutes.

Sahil Lavingia, who dropped out of college in Los Angeles to work at Pinterest in Palo Alto, is among those attracted by the city. Last year he left Pinterest and headed north, starting his own online payment service, Gumroad, which lets sellers tweet their wares and bears the design sense that is a hallmark of the San Francisco scene.

“I moved up here for two reasons. One is that Palo Alto is really boring,” the 19-year old chief executive officer said. “For me personally, it’s boring. And two, it’s boring for other people.” To be fair, he says, San Francisco parties are boring, because the people you really want to meet are home working. But the city is international, diverse — and has the people he wants to hire.

There are also plenty of reasons San Francisco is not a great place for business, starting with taxes. Among them is the city’s unusual 1.5% local payroll tax, which the business community views as a jobs killer.

Mayor Ed Lee, last year helped shield companies going public from the brunt of city taxes, and thus narrowly avoided losing Twitter to suburbia. Now he wants to swap a payroll tax for a revenue tax or other alternative.

“It’s all about compromise, and the good news is all of the constituencies are working together,” said Ron Conway, an angel investor known for seeding hundreds of earlystage companies.

Mr. Conway moved back to San Francisco from the Valley eight years ago for personal reasons. His business followed suit — now 60% of the roughly 200 companies his SVAngel portfolio holds are based in the city. Five year ago, three-quarters were in Silicon Valley.

But local progressives — the ultra-liberals who give the city its far-left reputation — have vociferously opposed the tax breaks, arguing that the payroll tax reflects the cost of city services and that newcomers should not be favoured over the people who give San Francisco its character.

The city turned more politically progressive after the “unchecked excesses” of the dot-com boom a decade ago, said Aaron Peskin, a former head of the Board of Supervisors, San Francisco’s city council. “I’m always amazed by human beings’ ability to conveniently repress recent history,” he said.

The last tech boom created jobs — and ill will, he noted. “When you are not taking care of people and families who have lived here for generations and made this the city that it is, it’s a little lopsided.”

Politics aside, high rents could eventually be problematic for businesses, too. Class B offices, including the industrial-looking lofts that tech startups love, currently go for around $43 a square foot and are climbing, Colliers International, a real estate broker said. The square-foot rate is double that in 2003, though still comfortably below the 2001 peak of $65.

Silicon Valley still has major advantages as a location, including wide-open tracts that can accommodate large corporate campuses. “As startups get beyond startup stage and start hiring people, they look to move out of San Francisco,” said Chuck Reed, mayor of Silicon Valley capital San Jose, where Cisco Systems Inc.’s campus stretches along several stops of the city’s lightrail system.

© Thomson Reuters 2012

Article source: http://business.financialpost.com/2012/06/11/startups-flock-to-san-francisco/

Dropbox: The Inside Story Of Tech’s Hottest Startup

Victoria Barret
Forbes Staff

Will Facebook’s IPO Mark The Beginning Of The End?

Eric Savitz
Forbes Staff

Y Combinator Start-Ups: Guess Which Will Be Worth A Billion

Nicole Perlroth
Forbes Staff

Real estate can tell you a lot about people and markets.

Hundreds of Web-savvy startups have sprung up in San Francisco’s oldest buildings in the South of Market district (called “SOMA” for shorthand). So behind that sleek new Apple iPhone whatever-it-does application are a bunch of software developers crowded into a brick building that 100 years ago housed a meat warehouse, a button factory, or maybe a flophouse. Best of all (for those who enjoy irony), that same startup labored, even spent a few grand, to make sure their former warehouse looks nothing like: an office.

Original bricks are a must, according to Hugh Scott and Travis James who help run the technology practice at real estate firm Jones Lang LaSalle. “The funkier the better,” says Scott. This duo have spent the past decade landing homes for startups in the Bay area.

Exposed pipes are another top request. These used to be out of cheap necessity, in buildings where landlords were too stingy to shell out for even ceilings. But now tenants are willing to pay for what used to be done out of thrift. Scott and James have seen several tenants add $15 to $20 a square foot to their costs of moving in by asking that the ceilings be ripped out and the pipes cleaned to get that cheap chic look. For landlords, ceiling-free space is commanding a 10-20% premium.

One highly sought-after space was previously the storage closet for the nightclub below. What’s hipper than having your startup next to a night club? (Hint: the answer rhymes with “hip club”.)

Dogs are another a must-have accessory for today’s startups. This request tends to rule out any buildings owned by real estate investment trusts, which typically put “no pets” clauses in contracts.

Commercial rents in most cities are below 2007 levels. Meanwhile SOMA is commanding a hefty premium. Rents have jumped 35% just in the last two years, with some deals hovering around $50 per square foot — matching rates in Palo Alto’s most desired corridors, including the famous Sand Hill Road.

“Most spaces are seeing upwards of four offers,” says James, before smiling suddenly as a text message comes in and he adds: “We submitted an offer sheet for a place last Wednesday. Heard back yesterday, and now I’m hearing we’ve got just 24 hours to make a decision.” James sprints back and forth between downtown San Francisco and Palo Alto, alternatively finessing newly-picky landlords and networking with venture capitalists in the hopes meeting up and coming startups.

While rents here are soaring, they’re still not near the last bubble’s levels. That could mean this is less of a bubble, or simply reflect new buildings that have sprung up in SOMA. Scott and James aren’t sure. Another intriguing difference this time around: rents might be a leading indicator instead of lagging when it comes to the performance of tech’s all-encompassing NASDAQ stock index. Take a look (rent rates provided by Jones Lang LaSalle):

Some companies, notably Facebook, Dropbox, and Airbnb, have so far managed to avoid the headaches of going public while still raising IPO-size amounts, from venture capitalists. Social networking tool company Jive landed $120 million in its December IPO. Dropbox meanwhile scored twice that, $250 million, in its private funding round months earlier. If there is froth this time, it isn’t showing up in the NASDAQ.

Article source: http://www.forbes.com/sites/victoriabarret/2012/01/17/what-san-francisco-real-estate-tells-us-about-this-technology-boom/