A tech incubator becomes a hub of collaboration

In 2008, before most people knew what a tweet was, Iain Dodsworth, a programmer in London, cobbled together a software tool that reorganized his jumbled Twitter stream into neat columns. He named it TweetDeck.

Within a few months, it gained the kind of momentum most entrepreneurs only dream about. Tech bloggers praised it, and users flocked to it. Ashton Kutcher posted a video online showing him and his wife, Demi Moore, using the service.

It wasn’t long before inquiries from investors began pouring in.

“It was fairly scary,” he said. “I was a one-man company being thrown offers left, right and center from people I didn’t know.” But then Dodsworth received a message from a company he did recognize: Betaworks, a New York City technology firm known for its eye for emerging Web services.

“Money is nice, but I actually needed expertise more than anything else,” he said. “Betaworks had a track record in this field back when no one had a track record in this field.”

In the two years since then, Betaworks has become prominent in New York technology circles for helping entrepreneurs fine-tune and expand their companies. The company has guided some entrepreneurs to lucrative sales and helped others raise cash from notable New York and Silicon Valley investment firms.

Such incubators are familiar in more established tech hubs. Silicon Valley, for example, has the technology incubator Y Combinator, and Pasadena has Idealab.

“Historically, there have been more biotech incubators in New York than other technology incubators,” said Jonathan Bowles, the director of the Center for an Urban Future, which has studied the economic development of New York and other cities.

He added, “New York has long lacked local investors who are also rooted here and committed to building a sustainable technology community. Betaworks is starting to fill a void that’s been lacking in New York since the ’90s.”

Birth of the tech giant

The company was founded by John Borthwick and Andrew Weissman, who worked at AOL in the ’90s.

“I was there when AOL bought CompuServe and Netscape and did the first content deal with Amazon,” said Weissman, chief operating officer. “You could start to see these new ways pieces of the Internet were coming together.”

He said he watched as one AOL project, MapQuest, gradually lost market share. Google Maps grew faster because it allowed other companies to add information to a map or use the service in other tools. “You could just see that model was going to be big,” “We said, ‘We think this is it, and we want to invest in these kinds of companies.”

A little over three years ago, the two decided they wanted to create their own company aimed at that very idea. Thanks to tools like Amazon Web Services, Twitter and Google Apps, developers could more easily build and scale Web tools.

“We knew there was a big fundamental change happening on the Internet,” said Borthwick, Betaworks’ chief executive. “And we knew it was going to be social.”

They spent nine months deliberating over how to structure their company before settling on a hybrid of an investment firm and an incubator.

“The venture capital structure is banking on finding that one super-duper winner, and there’s nothing wrong with that,” said Borthwick. “But our goal is to create a network of companies with lots of connections between them that increases the likelihood of success between all of them.”

It’s not hard to see that spirit at work. The two dozen companies under Betaworks’ umbrella make a point of using one another’s creations and often incorporate them into their own services.

At a recent meeting at Betaworks, about three dozen employees of Betaworks and its portfolio of companies crowded into a room, trading feedback, updates and the occasional good-natured zinger about their various products.

Betaworks has developed some Web tools from scratch, like Bit.ly, a URL shortener, and Chartbeat, a real-time Web analytics service. But the company is looking for entrepreneurs who have more than a vision.

“Anyone who shows up with an idea on a napkin, we’re going to tell them, “Thanks, but go build a prototype,” Weissman said.

Betaworks, he said, will focus on five to 10 companies a year. The company has taken on some investors, most recently raising $20 million. The New York Times Company invested in that round of financing.

Betaworks leaves a mark

Investors rely on the keen eye of Betaworks to provide a window into the next wave of promising Web companies, said Jim Robinson, a partner at RRE Ventures, a technology investment firm.

“It’s a great sifter and feeder system for us,” he said. “We’re able to see these interesting companies when they’re young and track them as they develop.”
The best marker of Betaworks’ success is Summize, a small start-up that allowed users to search through Twitter’s ever-flowing stream of posts. Betaworks first invested in the company in December 2007 and continued helping to develop it. Twitter bought the service in July 2008 for a reported $15 million. Betaworks created Bit.ly at the request of its portfolio of companies that wanted a secure, reliable way to shorten unwieldy Web addresses.

As the service quickly ballooned beyond the network of Betaworks companies,  Borthwick and Weissman raised $3.5 million in venture financing for the company and spun out into a stand-alone business, although its team still works in Betaworks’ office. “It may look like the incubators of yesteryear in here,” said Borthwick, gesturing to the scribbled-on chalkboards, the cushy lounge chairs and the fishtank shaped like the MTV logo.

“We don’t operate anything like a factory,” Borthwick said. He further added, “There’s no production line, and we’re not trying to blow out 40 companies this year.”