Amazon and JibJab Alum Dave Schappell will launch his newest startup, TeachStreet, sometime tomorrow. They will also announce a first round of funding: $2.25 million from Madrona Ventures, Bezos Expeditions and a number of angel investors.

The company, a sort of Yelp for real world classes (cooking, dog obedience, music lessons, ballroom dance, foreign language, golf, yoga, etc.), allows instructors to upload information about classes. Users can look for available classes, and read and write reviews on the course and the instructor.

For now the site will be advertising supported. in the future TeachStreet may charge instructors for premium services. They will become particularly good at promoting quality services to users over time, Schappell says, and they can charge for that. They will also be able to direct highly targeted advertising at users - a book on dog training, for example, to users looking for dog obediance classes.

The service is launching first in the Seattle area and has 25,000 courses in 8 primary categories and 70 subcategories. Most search and browsing, however, is done through tags, which allow for the creation of literally any category of classes.

Dutch startup Libersy,which is creating a distribubted booking system for real world services, is indirectly competitive. For now, Schappell says, TeachStreet will not directly provide booking and calendaring services, but it’s a feature they’ll add in the future.

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Two independent sources tell us that the Microsoft/Xobni deal is moving along and that the two companies signed an acquisition LOI in the last week (Update: yet another source says the LOI hasn’t been signed by Xobni yet). I have not yet been able to track down the price, but a previous offer of sub-$20 million was supposedly rejected by Xobni.

Bill Gates has publicly complimented the service, calling it “the next generation of social networking.”

Xobni, which launched at the TechCrunch40 conference last year, offers an outlook plugin for Windows users that significantly improves the desktop email experience (particularly search). They recently hired notable Yahoo’er Jeff Bonforte as CEO.

The timing on this is perfect as the New York Times and others are doing their seasonal focus on the problems with email. Xobni is one of the top startups trying to fix the problem.

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Here are some slides from Pricewaterhouse Coopers and the National Venture Capital Association illustrating the trends in venture capital deals last quarter that Duncan mentioned yesterday. (Click on them for a bigger image). The overall amount venture firms invested dropped both year-over-year and quarter-over-quarter to $7.1 billion (less than any quarter in 2007, but still above the level of investment every quarter in 2006 and 2005). The average deal size is still healthy at $7.7 million. So things aren’t so bad. The concern is whether this is the beginning of a steeper decline that we will begin to see over the next few quarters, which it may very well be.

VC money going into the software sector (broadly defined) declined 9 percent quarter-over-quarter (flat year-over-year) to $1.264 billion and was about even with the amount invested in biotech ($1.267 billion). If you cut the numbers a different way and look at Internet-specific deals, those declined 7 percent from the fourth quarter of 2007 to $1.310 billion, but were slightly up year-over-year. Meanwhile, the craze over clean-tech investments looks like it may have peaked in the third quarter of 2007 when $851 million was invested. Or, at least, it is taking a breather. That number has now gone down for two quarters, and was at $625 million during the first quarter of 2008.

Finally, here is a breakdown of the money going into early-stage versus later-stage deals. About 23 percent of the money invested in the past four quarters went into seed or early-stage deals, which seems to actually be a slightly higher percentage than was typical over the previous two years.

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Today marked the fourth year of Y Combinator’s startup school, and judging by the overflowing auditorium that persisted throughout the event, it was a runaway success. A crowd of over 650 developers, writers, and entrepreneurs packed Stanford’s Kresge Auditorium for a chance to pick the mind of tech-industry greats. The annual event gives members of the startup community, particularly technically-minded ‘hackers’, a chance to learn and ask questions about venture capital, IP law, and other aspects of the startup process.

This year’s speakers: Sam Altman (Loopt), Marc Andreesesen (Ning, Netscape, Mosaic), Jeff Bezos (Amazon), Paul Buchheit (FriendFeed, Gmail), Paul Graham (Y Combinator), David Heinemeier Hansson (37Signals, Rails), David Lawee (Google, Xfire), Jack Sheridan (Wilson Sonsini Goodrich & Rosati), Greg McAdoo (Sequoia), Peter Norvig (Google), and our own Michael Arrington (TechCrunch).

Highlights:

-A young man named Brandt who couldn’t understand why Sequoia Capital and other top VCs refused to fund his adult website. Sequoia’s Greg McAdoo responded that he had a hard time picturing a porn site’s IPO.

-David Hansson’s presentation, which was easily the most entertaining of the afternoon. Hansson, who created Ruby on Rails and is a founder at 37signals, espoused a pay-for-use model that stands in stark contrast to the free services that seem to define Web 2.0. As he mentioned, model hasn’t worked for everyone…

-Jeff Bezos dodging a question on Google App Engine, explaining that his company “doesn’t like to talk about other companies.”

-Paul Buchheit’s admission that he spent his last few months at Google “basically doing nothing.”

A video of the entire event can be found at Justin.tv.

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Yahoo has offered a limited release of Yahoo BrowserPlus, a software distribution framework that allows device developers to bridge the browser programming environment to any component.

Skylar Woodward explains:

Some time ago we created a platform team to focus on device software at Yahoo! and this is what has emerged amidst the quickly shifting strategy of the mothership. The 1.0 release of BrowserPlus is intended only for use by Yahoo! sites to enhance customer experiences; however, in the coming months, developers might expect the ability to use components on their own sites. (If you’re interested in this, send us feedback). In the meantime, you can hack the framework on your own system after you’ve installed it to start experimenting. You can experience BrowserPlus currently through the PhotoDropper module on Mash, though direct installs are available for mac or pc.

Ajaxian notes that there were rumors of a Yahoo Gears style project that was cancelled, but BrowserPlus seems to be the fruit of that project. Details so far a fairly light, but competition in this space provided by Yahoo will hopefully fire increased development from competing services as well.

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I can’t say we didn’t see this coming. Quirky online gift catalog site Red Envelope filed for bankruptcy on April 17, according to an SEC filing. Its assets will be purchased by Creative Catalogs in exchange for $5.7 million and the assumption of debt. Red Envelope is also getting a $4.5 million debtor-in-possession line of credit from Creative Catalogs and Granite Creek FlexCap.

Two weeks ago, Wells Fargo terminated Red Envelope’s last credit lifeline, and it started to lay off employees. This could be an early sign that other e-tailing sites may be hit hard by the economic slowdown. Or it could just mean that Red Envelope was poorly managed. Either way, Red Envelope will not emerge from the deadpool.

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San Francisco-based blogging startup Six Apart has made a significant acquisition, we heard today from someone with knowledge of the deal. “Significant” in the sense of a possible strategic shift for the company, if not in terms of deal size. It will be announced in the next few days.

Who did they acquire? Put your best guess in the comments. First comment that is correct gets a 2 GB iPod shuffle with “I Love TechCrunch” engraved on the back.

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In our new regular weekly round-up of news in Europe, here’s some of the broader stories that may be of interest.

• The European Union is never very far away from reaching for the regulation trigger, so it was refreshing this week to see that it was warning member states that people should not be criminalised for the file-sharing of copyrighted material if they are not profiting from doing so. I guess they’ve heard music is going free.

• Phorm, the “deep packet inspection” company which works with ISPs to target adverts, continued its PR woe in the UK where it has been having a torrid time trying to convince the press, government and consumers that it won’t be spying on everyone. It’s now hired a chief privacy officer to try and allay fears. In Europe we tend to be more concerned about private companies snooping on our privacy/data than governments, slightly the reverse of the general attitude in the States I believe.

• Google is rapidly becoming Britain’s biggest advertising business. It earned $803 million (about £407m) in the first three months of 2008, about 40% up on a year ago. By contrast the biggest TV broadcaster, ITV, had net advertising revenues of £1.5 billion. So Google is on track to beat it by the end of this year. In general the UK internet advertising market is at £2.8bn in 2007 up 38% on 2006.

• Everyone is expecting Finland’s Nokia to come up with an ‘iPhone killer’ with the rumoured “Tube” handset, but it had better hurry up. Nokia’s shares were hit after it said the market would shrink in value in euro terms this year for the first time.

• After the EU fined software giant Microsoft 899 million euro last February, things have cooled off a little. Until a question by EU Parliament representative about whether the EU’s legal findings against the company kicked off yet more headaches. Plus ca change!

• In the UK the head of the BBC’s new media department controls a budget of £400 million, so it’s of keen interest to everyone in the tech commmunity. The former Microsoft executive Erik Huggers is tipped to be the BBC’s new director of future media and technology, replacing Ashley Highfield, who is leaving to head the commercial web TV venture Project Kangaroo.

• The iPhone in Europe is a “patchy” success. So far it’s officially available in France, England, Germany, Austria, and Ireland. Demand has been strongest in England. French sales have been just okay. Germany, however, is cool on the Jesus phone. One third of the iPhones sold in Europe are unlocked after purchase.
They may also be being sold at a loss. And is Orange testing a 3G iPhone v2.0 with GPS in France? And maybe it’ll launch in Russia soon? I predict a lot of unlocking…. Luckily we’ll soon be able to use them on flights in Europe.

• And in other news TechCrunch UK is bringing 20 UK startups to ‘press the flesh’ in Silicon Valley this week. So at least were bringing a bit of Europe to you. Much easier!

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Encyclopedia Britannica is used in often case studies as a definitive example of how new technology can disrupt a business. Everything was great for the nearly 250 year old privately held company until the Internet came around and category five hurricaned on their parade. According to Comscore, for every page viewed on Brittanica.com, 184 pages are viewed on Wikipedia (3.8 billion v. 21 million pave views per month). In short, they are a classic example of the Innovator’s Dilemma (see also the Music Industry).

You can purchase the 32 volume Britannica, which has 65,000 articles and 44 million words, for just $1,400. Or you can access it on the web for $70 per year.

And now, you can get access to the online version for free through a new program called Britannica Webshare - provided that you are a “web publisher.” The definition of a web publisher is rather squishy: “This program is intended for people who publish with some regularity on the Internet, be they bloggers, webmasters, or writers. We reserve the right to deny participation to anyone who in our judgment doesn’t qualify.” Basically, you sign up, tell them about your site URL and a description, and they review it and decide if you’ll get in. I wonder if Facebook, MySpace and Twitter users are eligible? They all certainly “publish with some regularity on the Internet.”

Once you’re in, you get to link to the full version of articles - people clicking the link can read that article but they can’t go and read other parts of the Britannica site. Participants can also embed widgets like the following:

Half Pregnant

Britannica is doing a lot of things right - a relatively small staff of a hundred or so editors manages 4,000 unpaid (I believe) contributors who are recognized experts in their field. But, like the music labels, they still somehow feel as though people should pay to consume their content. And that means search engines can’t index their content. And that means they don’t exist.

Instead of going free and opening up to all, they’re using the new program to simply price discriminate. Give people who may link to the site free access. Everyone else has to pay. So in effect they’re aiming to be half pregnant - they want the benefits of web linking but don’t want to give up the subscription fees from the fools who continue to pay them.

As an outsider, Britannica’s future is clear. Eventually, and if they don’t go out of business first, they’ll be forced to make all their content freely available on the Internet, and will probably create a wiki-like format that allows user editing. Their differentiating factor from Wikipedia will be that they have experts guiding articles, so they’ll have a claim to be more authoritative. This is, by the way, the business model of Citizendium, created by Wikipedia co-founder Larry Sanger in 2006.

The sooner they do that the more likely they’ll be around for the long term. Perhaps they can even continue to sell those 32 volume sets to a few libraries. But it’s hard to give up that online subscription revenue. When this fails, they’ll try something else.

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According to a new report from Thomson Reuters and PricewaterhouseCoopers, venture capital investment in the United States headed south in the first quarter of 2008.

The report found that venture outlays dropped 8.5 percent to $7.1 billion in the three months ending March 31 from the $7.8 billion invested in the previous quarter, resulting in the lowest quarter since Q4 2006. Funding for early and late stage companies declined in the first quarter, though funding rose for expansion-stage companies.

The Boston Globe noted that the VC slow-down was in line with the declining US economy, and quotes Nina Saberi, managing general partner for Castile Ventures saying that new startups are being hit the hardest:

“We see from early-stage investments that the economic slowdown has had an impact”….She cited an inhospitable climate for initial public offerings and a tougher market for acquisitions, two routes for cashing out of investment.

The first quarter of the calendar year is usually the quietest so part of the decline may be seasonal, and yet it would appear that the venture capital market, and in turn new stage web investments will not be immune from the increasingly dire American economy. It’s not all doom and gloom: money is still being invested as we report here daily at TechCrunch, but the exuberance in the market over the last 12-24 months has now peaked. The only question now: how far will it drop, and at what rate?

(via Venture Beat)

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