LONGREADS

Ultra-Orthodox Jews Take a Hard Line on the Internet at Rally of 40,000 Men (And Me) In which our intrepid reporter sneaks into Citi Field in drag. 

Faith, Hope, and Singularity: Entering the Matrix with New York’s Futurist Set It's the end of the world as we know it, and they feel fine.

The Battle Over Revenge Porn: Can Hunter Moore, the Web’s Vilest Entrepreneur, Be Stopped? Victims and hackers are on the case.

Meet Betabeat's 2012 Tech Insurgents Ambiable agitator Anil Dash, Tumblr's Mad Man Rick Webb, and the merry pranksters of OkFocus.

Jonah Peretti’s Meme Streak Making viral happen inside the factory at BuzzFeed.

THE YEAR IN HEADLINES

Uber Bulldozes Its Way into New York City's Taxi Market Before all the bureaucratic setbacks, CEO Travis Kalanick revealed his grand plan.

Flash Dance! Luxury Flash Sales Sites Regroup After Layoffs Can Gilt Groupe cross the IPO finish line without scuffing the lacquer on its Louboutins?

How to Avoid Being Pushed Out of the Company You Founded Insiders dish on Naveen Selvadurai's defoundering.

Records Point to Credit Card Fraud by Silicon Swindler Shirley Hornstein She used her friend's credit card to buy a plane ticket in her name. Twice. 

Investors Wonder About the Future of TechStars New York Will TechStars New York maintain its prominence?

OP-EDS

We Need to Make Tech Uncool Again A call to arms for the idealistic nerd in us all.

Friends Investing in Friends: When It Comes to Startups, Is the Fix Already In? Is Startupland an insider’s game?

Everything You Ever Wanted to Know About Why We’re Definitely in a Bubble The social media bubble is real, and it's spectacular.   

Social Media Companies Have Absolutely No Idea How to Handle the Gaza Conflict War in the time of social graphs.

Area Blogger Worried People Will Think Reality Show Is Real A little perspective on Bravo's version of Silicon Valley.

TINY GEMS

Diary of Two Snapchat Addicts We just can't help ourselves.

Google Says ‘Gchat’ Is Not a Word Ubiquitous noun/verb is totally unofficial.

What Y Combinator Startups Actually Do, Based on Their (Unpronounceable) Names Zapier: Birchbox for swords?

Tortoise & Blonde Thought ‘We Want To Sit On Your Face’ Was a Good Idea for a Slogan "This was a family decision."

In Which We Went to Bravo’s Casting Call for the Real Wantrepreneurs of Silicon Alley The first tech party where someone tried to yank up our skirt! 

Mr. Wanamaker.

DIVERSITY. Black Techies Meetup is tonight. "This meetup exists because I was damn tired of being the only black person at other tech meetups," says Tumblr dev Kyle Wanamaker. "We aim to be a network of developers in NYC interested in becoming better, learning from each other and networking. Developers of all skill levels are welcome, from experienced hardcore, neckbeard hackers, to n00bs. If you want to be awesome, or more awesome, I hope you can find yourself at home here." 7 p.m., at Tumblr's HQ.

HOLIDAY GIVING. "Reqoop, an NYC-based startup that enables shoppers to share discoveries they make from brick-and-mortar stores, while they’re out shopping, and earn rewards for sharing their finds...  just kicked off a campaign to help raise funds for goods for good, a NYC & Malawai-based organization that takes excess and surplus goods, like fabrics and school and health supplies, and creates opportunities for communities in Malawi (goods4good.org). The campaign is called "Snap for Good" and it's pretty straightforward: for every style find that shoppers snap using the Reqoop app while they're out shopping in December, we will donate $1 to goods for good. We're hoping to raise $2,000."

UPDATE. General Assembly-based Bubble has made some updates to its app. "We're taking Bubbles (hashtags) and attaching them to interests to let you follow them in a different way, by discovering what everyone is sharing about that interest," founder Lee Hnetinka wrote to Betabeat in an email. "So maybe you like Dubset? Join the Bubble for it and whenever someone shares a song they're listening with the hashtag #dubset, you'll be able to discover it."

TRACKIN UR MEDIAS. "Adaptly helps companies advertise on social networks not just for clicks, but to increase engagement. Today it unveiled its new standard for how that is measured. Adaptly Momentum tracks over 160+ interaction criteria across all major social networks so its clients can measure the effect of paid, earned and owned media."

WHO IS HIRING. Charlie O'Donnell seeks an intern for his newsletter, This Week in the NYC Innovation Community, which he sends out every week. He imagines about five to seven hours a week. "It will be paid, but not terribly much," he writes. Go work at betaworks! Bit.ly seeks a "sales research associate," and News.me seeks a senior iOS developer and Python engineer.

One kind of pink slip can lead to another

Betabeat has been covering the layoffs at BuyWithMe since Wednesday, when more than half the staff, at least 100 people,  were laid off without warning or severance. There has been almost no word from the company or its management. As a result, we've had to rely mostly on anonymous sources who know bits and pieces. But over the last 24 hours, we've been able to put together some big pieces of the puzzle.

The statement released yesterday by CEO James Crowley, that the company was reorganizing to best serve its clients and customers, was disingenuous at best.  Numerous sources Betabeat spoke with confirmed that BuyWithMe is looking to be acquired by a larger player in the daily deal space, and has been for some time now. The layoffs were intended to make it a more attractive purchase.

How did BuyWithMe end up in such dire straights? Betabeat has heard from a source that not only did the company purchase six smaller startups in the last six months, burning through some of its capital, but it also took out a $10 million debt round from its backers that was never disclosed to the press. That goes a long way towards explaining how the company got to where it is today.

BuyWithMe was at one point regarded as the number three player in the daily deal space, talked about in the same breath as giants like Groupon and Living Social. But as thousands of clones started popping up in the industry, margins shrank and customer acquisition costs went through the roof. Consolidation and rapid growth became the name of the game.

In December of 2010 CEO Cheryl Rosner stepped down. Many hoped Chief Product Officer David Wolfe, former CTO of Napster, would get the nod, but instead an outsider, James J. Crowley, was brought in. Mr. Crowley had experience with big exits, having taken a company public in the dot-com days and overseen two big acquisitions over the last decade.

Mr. Crowley's first job was a roadshow, pitching investors on a Series C round of venture capital that would raise around $100 million dollars and value BuyWithMe at around $500 million. But while Mr. Crowley's track record looked good on paper, sources say he was a poor public speaker, and failed to convince any big funds to invest at that price.

Insiders say there was interest in partnerships from big firms like Amazon and Google, who were trying to get into the daily deal game themselves, and looking for companies with boots on the ground to source offers. But BuyWithMe declined those partnerships, despite the fact they would have generated substantial revenue, hoping to keep its brand autonomous and aiming for that big exit.

Everything changed June, 2, 2011, when Groupon filed for its IPO, and its financials became public for the first time. The biggest player in the space had long claimed to be profitable, but turned out to be losing hundreds of millions of dollars each year. Suddenly the emperor had no clothes, and all the companies who had been positioning themselves as players in the same space had a much harder case to make when it came to their value.

In the meantime, BuyWithMe had been losing steam. Industry insiders say that by the beginning of this summer, while it was still being talked about as a top player, it had in reality fallen to around the seventh biggest player in the nation. Copycats were everywhere. BuyWithMe tried to ramp up, buying six companies in six months to juice their growth. But sources inside the company said it wasn't working.

At the same time, the macro picture was getting dark. The IPO window that seemed to be opening for tech companies with the debut of Pandora and LinkedIn had snapped firmly shut again. In July, BuyWithMe purchased Edhance, a discount site aimed at college students. Insider say this was the most costly of BuyWithMe's acquisitions, but came with great technology that Edhance has developed. To help fund the purchase, BuyWithMe took out a $10 million debt round, which was never disclosed to the public.

BuyWithMe continued to purchase companies, acquiring Scoop St. the next month and TownHog in September. These were cheap deals, made possible by the fact that many daily deal clones were struggling themselves. But it was quickly becoming apparent that BuyWithMe was not going to be able to raise a new round of venture, and that an IPO was impossible. With about six months left before they burned through their cash, a sale became the only option.

To sell the company at a premium, BuyWithMe decided to lay off everyone who was non-"performing". Essentially this meant stripping the company down to its sales force, who generated revenue, and the executive team, who of course got a free pass. Founder Andrew Moss reportedly wanted to move most employees from full time to contract, saying a mass firing was like cutting off the legs to save the body. But source say he was overruled by the rest of the board, which includes CEO James Crowley and partners from BuyWithMe's backers, Bain Capital and Matrix Partners.

And so it was on Wednesday that 100 employees were laid off with no warning and no severance. Several large firms are still in talk to acquire BuyWithMe, and the company is now a lean property, consisting largely of a sales force, the technology from Edhance, and $30 million in venture backing which needs to be repaid. From a business perspective, it was probably the wisest course of action. But the human toll, and the way in which it was executed, are a grim reminder of what happens when the bubble bursts on an over-hyped industry.

Mr. Hnetinka. (source: twttr)

Betabeat first met Lee Hnetinka, the enterprising former Hamptons broker who taught himself web design while making websites for rentals, at South By Southwest. He was promoting his first startup, Leetto, a location-based network that had something to do with local advertising and deals. "We kinda wanted to do something based around location. We wanted to do a lot. That was part of the problem--we had no real focus," he said. "When I wanted to explain it I couldn't really do it in one sentence."

Lesson learned. After sinking $100,000 of his savings into the now-defunct project, Mr. Hnetinka is back with a second product--a dead simple web and iOS app called Bubble, derived from the concept of hashtags. It's an asynchronous chat room for people talking about the same subject, or working in the same coworking space, and it's heavily integrated with Twitter--so if you work in General Assembly and you want to share the blog post you just wrote, you could post in the General Assembly Bubble and tweet the post at the same time. "I kind of basically, what I did was, I kind of fired everyone," Mr. Hnetinka said. "And me and one of the guys were like, what is something that we really care about and we want to build?"

He and his co-founder conceived of Bubble after overhearing an adjacent conversation at GA. Two girls working nearby: "Did you post it on Facebook? Did you post it on Twitter?" Mr. Hnetinka thought to himself, you want to share something with people who will look at it and like it. Why don't you share it with the people here? Something like the coworking space's Superheroes listserv, but outside the dreaded inbox.

As for the name, Mr. Hnetinka is aware of the obvious joke. But the name was perfect, he felt, and a survey of friends and advisers came back positive. (Mr. Hnetinka declined to comment when we asked if he was seeking funding, but mentioned he had gotten advice from a VC.)

From our end, Bubble looks good. Unlike Leetto, which on Crunchbase was described only as "a location network, a magical new way to connect with people, places and things," we understand what it does and why people might want to use it. "Best lesson ever," he said of Leetto's failure in an email.

Reap what you incubate.

Betabeat is of the opinion that there will soon be a wave of start-ups who's early funding, be it a friends and family or a seed stage round, is going to run out. A few of these companies will have enough traction to raise an A round, slightly more will pivot to another model, but most will be forced to call it quits. As Shair Goldman and Chris Dixon point out after our last Seed Stage Slaughter post, this is how the venture capital system is meant to work. But what that ignores is that this will be happening at a much higher volume than any time in the last ten years.

As Xconomy pointed out in a post today, the number of tech incubators has practically doubled, from 34 in 2010 to 64 in 2011. And that likely doesn't count all the accelerators and other similar programs that aren't officially "incubators". Xconomy reports this as a good thing, offering a a guide for start-ups eager to apply to programs for the low low price of $149.

We're all for more entrepreneurs getting the chance to build their businesses and love seeing programs connect up and comers with seasoned mentors. But the number of incubators was also a pretty clear reflection of the bubble in early stage funding that peaked in 2010 and early 2011. A lot of the early stage funding for companies coming out of those programs came from less savvy angels who had made their money on wall street and in real estate. If the stock market continues its gyrations, you can bet those backers will be part of the herd fleeing to safe, liquid asset classes like Bitcoin (jk, obvi).

The upside in all of this, of course, is that tech talent from failed start-ups will be consolidated behind the winning companies. The VC model assumes 1 out of 10 ideas will work as a business, if that, and a flood of dumb angel money and incubators artificially keeps a ton of bad companies alive. When they perish, the top firms who are starved for talent will have a chance to swell their ranks and really grow at scale.

In an interview with the Wall Street Journal's Stacey Delo this week, Mr. Thiel once again, with the same straight face repeats his stance, assuring Ms. Delo that not only are we not in a tech bubble, but that we aren't even close. First, he says, there's the matter of the public's distance from the tech sector (thanks to the lack of IPOs). Another difference between this boom and the last? The parties.

“It doesn’t feel anything like that. You don’t have the same ebullience, you don’t have the crazy launch parties. . . It's more sort of this very austere, determined atmosphere one has in Silicon Valley where this is the only thing that's working, you have to get it to work."

We're guessing he hasn't been invited to any firebreathing Pivot Parties then.

But investors eagerly snapped up shares of "content farm" king Demand Media Wednesday. Then on Thursday LinkedIn, the smaller, more professional social network, made its IPO intentions official.

One troubling sign, however, from these early offerings, is the lies the securities filings have revealed. The CEOs at both Demand Media and LinkedIn had proudly proclaimed to tech journalists the profits their companies had achieved. But the S-1 filings they had to make in order to IPO tell a very different tale.

In August of 2009, LinkedIn CEO Jeff Weiner told Business Insider that the company was "still profitable" and that ad sales were up 50% year over year. But in its IPO filings yesterday, LinkedIn revealed it actually lost $3.4 million in 2009.

Pre-IPO, Demand Media CEO Richard Rosenblatt was on record multiple times saying his company had always been profitable. The IPO filings revealed that in fact Demand Media's losses were mounting, climbing from $14 million in 2008 to $22 million in 2009.

"I think that they (LinkedIn certainly) would argue that they ARE and have been profitable but for the heavy investment in infrastructure that they are making to build the even more incredible company that they hope they will be one day," says Lawrence Lenihan, CEO of local VC First Mark Capital. "Unfortunately, that is not how the public markets work. This is the critical problem of American business –how can you invest for future gains without the present pains of the market valuing you less. This myopia will be our downfall unless we can create another structure that embraces that investment with trust and accountability of management for delivering those returns in the future."

It's a powerful reminder to journalists that a CEO's claim of profitability isn't worth much without the data to back it up. And for all the talk of how this tech bubble is different from the dot-com version, the first two offerings of 2011 show hot web properties with shaky financials are not a thing of the past.

bpopper [at] observer.com | @benpopper

The competition for hot deals in New York has been pushing up startup valuations and some investors are ready to see some bubbles pop, according to CNN.

An impressive list of high-profile investors see bubbles inflating in New York: Chris Dixon, angel investor and co-founder of Hunch.com, angel investor and Wine Library TV host Gary Vaynerchuck, TechStars director David Tisch, Fred Wilson of Union Square Ventures and Lawrence Lenihan, managing director of New York-based FirstMark Capital.

Most seem to hope the imbalance will start to correct itself.

"My prediction of what will happen is that there could be a meltdown in the New York tech scene," Lenihan told CNN."But it's like a forest fire: It's good, it clears out the dead wood."

The risk of a bubble is limited to angel and venture capital investors, in contrast to the dot-com burst where startups were going public and spreading risk throughout the system.

The current bubble is dangerous for two reasons, investors said.

They "disrupt market Darwinism," CNN says, which happens in a few ways. A bubble could mean entrepreneuers who don't deserve funding are getting it, for example, or that companies that would have succeeded with less money might be encouraged to grow too fast and flame out.

A spectacular bubble burst could also put the freeze on tech investing for years.

That's why investors would prefer to see some little bubbles pop—a company here or there—rather than a system-wide explosion.

Apartm.net: The Ultimate Nerd Palace

ajeffries [at] observer.com | @adrjeffries

We're gonna party like it's Geocities time!

It would be easy to assume that 1999 is the kind of year Fred Wilson would like to repeat.

In January of that year, Yahoo bought the web hosting service Geocities. Wilson and his first firm, Flatiron Ventures, were an early Geocities investor.

1999 was near the peak of the dot-com bubble, and Yahoo paid a staggering $3.57 billion for Geocities. The $8 million Wilson and Co. invested in Geocities in 1996 was worth $234 million after the Yahoo purchase.

"It was the first rocket ship ride I had in the venture business and it will always have a special place in my head and heart because of that,"Wilson wrote on his blog, A VC.

1999 popped Wilson's cherry with a big exit, but it's not a rocket ride he'd care to take again. "When I look at where we are right now, it reminds me so much of 1999 and frankly it scares me," Wilson wrote  over the weekend, continuing to hammer home the point that there is a bubble building in tech investing, especially for consumer facing web services and mobile apps.

Couldn't Wilson look at this as an opportunity? After all, in this frothy market, an investment like Foursquare could easily sell for a high price. Who wouldn't mind hitting another home run?

Wilson's issue is that he's in the game for the long run, not  a single inning. And the bubbles which produce big exits also make it hard to generate good returns over time.

"We made greater than 5x on that first fund," Wilson wrote. "Eleven years later, we will be lucky to make 2x on the $350mm second fund."

Still, Wilson says he's not going to sit by the sidelines, like he did back in 2000. He doesn't think it's possible to time the markets. The best strategy, he's now decided, is to keep a steady pace, investing slowly and carefully, trying to spread his bets out over the unpredictable cycles of tech boom and bust.