Between Paul Graham of YCombinator, David Cohen of TechStars, Naval Ravikant of Venture Hacks and Josh Baer of Capital Factory, yesterday afternoon's Seed Combinator SXSW panel showcased some of the pioneers of the seed fund model.

How important is it to live in SIlicon Valley?
Those in the Valley, including Graham and Ravikant, noted the wider availability of late stage funding and the breadth of mentors in the Bay. Those outside of the Valley including Baer in DC and Cohen in Boulder, maintained that you can create a startup anywhere.

How do you calculate the incubator participant's investment?
Graham explains that his $5000 investment per founder was calculated to match the same amount alloted to MIT graduate students over a 3 month period.

How do you choose the participant companies?
Said Ravikant, "Beyond having a good idea it's important that you're intelligent, energetic and that you've got integrity. Integrity is especially important. Without that you've got an intelligent and enthusiastic crook." Agreed Graham, "It's true. You need to be a good egg - someone who is willing to help other startups after they've graduated." Said Baer, " You also need to be the type of person who is willing to take advice. We've had those that are unwilling to change and that makes it tough to justify a spot."

Once the obvious questions were answered, it was interesting to hear the questions fielded from the floor. They ranged from those on mentorship and incubator logistics to the more personal/political. One particularly animated audience member asked the question: Do you fund founders over 40?

Explained Graham, "We're totally open to funding those over 40, but we honestly don't get many applications. It's a matter of social overhead. There aren't many over 40 who can afford to live like College students. And given that we prefer people who are willing to move and we prefer teams over individual founders, this makes it even more difficult." As a follow up, the audience member asked, "Why does it have to be a team? I'm over 40 and I've started a startup." Replied Ravikant, "Can you start a startup alone? Yes, of course. it's entirely possible to raise kids alone, but it's easier to do it in a marriage."

In addressing the question "Is Innovation Fair?" Keen maintains that there is no definitive answer. He says, "If you asked a peasant whether innovation was fair during the industrial revolution, he'd answer no. But history is written by innovators."

Keen explains that the voices that have legitimized change from the industrial revolution to the late 60's, have been those of the cultural elite. Professional poets, musicians, academics and writers have always had a place in creating the histories surrounding major paradigm shifts. Nevertheless, as the digital revolution rapidly destroys the barriers to creating historical narratives, a new elitism has emerged in the form of a-list bloggers, social media experts and web developers.

While digital utopians generally see technological innovations and social media as vehicles for democracy and positive solutions, Keen argues that the proponents of innovation tend to forget the victims of change.

"Innovation doesn't lead to justice and fairness. I'd argue there is a more dramatic inequality now then there ever was during the industrial revolution. We have fetishized change, but we are unfettered. If anything, the new media is less transparent and less accountable...I don't have a problem with Twitter or new media, my problem is that digital utopians have dressed up their ideology to sound like democracy...Google has become the master of seeming like an altruistic and public company and yet laughing all the way to the bank."

Keen argues that because established elites are being displaced by the digerati, the web ecosystem is suffering from a crisis in authority. He believes that a lack of thoughtful skepticism and the overwhelming emphasis on real-time sound bites rather than academic treatise is leading to the vast majority of netizens consuming only mulched versions of the truth.

Says Keen, "You can't get nuggets of truth in 30 seconds on Twitter...Skepticism requires deep thinking. We have an increasing nihilism when it comes to traditional authority and yet few of the new authorities are doing the reading or groundwork. ...When we simply assume that all traditional structures are wrong, we risk the populism of a Sarah Palin..."

As a blog with an audience of entrepreneurs, self-publishers and technologists, we know Keen won't hold you back from innovating. But he may make you question whether or not you have enough information to accurately assess your life decisions. Love him or loathe him, let us know your thoughts about Keen's assertions in the comments below.

If you were fiddling with multiple platforms to manage your finance, human resources and analytics tools before, the directory can help you fix this through third party service integration. While a number of resource lists are available for accounting and domain management services, this collection is geared specifically towards productivity and life hacking. To check it out visit thesmallbusinessweb.com.

So far the most common way to monetize these types of services is through sponsored leader boards and tips on nearby promotions. But the question remains, can local ads really sustain the entire location-based ecosystem?

Charging Rent: Location-based service MyTown allows users to buy and own their favorite locations and charge virtual rent when others check-in. If MyTown-style services introduced currency exchange like SecondLife's Linden dollar, users would be incentivized through revenue share and app developers could collect a percentage on micro-transactions.

Tuángòu: Scoop St. founder Justin Tsang admits that his group buying company is inspired by the Chinese practice of tuángòu or flash mob-style shopping. As a teen, Tsang would organize a group online in order to arrive at a store and barter for a group purchasing discount. The same concept can be monetized in niche shopping sites as users could organize large discount purchases via location-based app. Developers could either charge for the app as a subscription-based directory or charge the store owner for directory listings and referrals.

Gifting: Rather than earning badges, Gowalla users pick up and receive virtual items. If startups charged for virtual gifts, users could geocache items for their friends to be unlocked on-site. Better yet, imagine arriving to work on your birthday and finding a friend has geo-cached an album download or video file. Pending approval and check-in by the recipient, these services could form the basis of a lucrative treasure hunt / gifting business.

We know we're just skimming the surface here. If you've got more ideas on how startups can monetize location-based services, let us know in the comments below.

Says Cleveland, "Sales and Marketing are vastly different functions that require substantially different personalities, skills, and decades of experience to master...A CEO who doesn't understand this basic fact, or doesn't believe it, is not a CEO I want to invest in."

Explains Cleveland, a sales person understands the inner workings of B2B deal probabilities and the short term requirements to increase deal flow. Meanwhile, marketing people look at the landscape from a longterm perspective and lay the groundwork for sales through analyst, media and web leads generation. Essentially, sales people are great oral one-on-one communicators and marketers are great written mass communicators.

He writes, " I have found that the CEO who makes this serious mistake hasn't worked with someone who is an excellent Marketer and therefore discounts the role it plays." With expertise in the Software as a Service space, it's interesting that Cleveland believes the marketing role is the one that gets tacked on at the last minute. While sales offers obvious measurement through direct revenue generation, marketing tends to have a less clear set of metrics.

Cleveland explains that "today's head of Marketing must be an excellent demand creator (the "owner" of future revenue) through sales-ready leads." Essentially he believes that the marketer's job is to increase perceived value and generate demand on a massive scale in order to grease the wheels of the sales team.

Said band lyricist John Perry Barlow, "What people today are beginning to realize is what became obvious to us back then--the important correlation is the one between familiarity and value, not scarcity and value. Adam Smith taught that the scarcer you make something, the more valuable it becomes...The Internet doesn't behave that way...If I give my song away to 20 people, and they give it to 20 people, pretty soon everybody knows me, and my value as a creator is dramatically enhanced."

The freemium model was implemented with the assumption that merchandise and concert sales would follow. Although the band sought legal action for commercial bootlegging, the group knew that attempting to hold back regular fans from making personal recordings would not only be foolish, but it would be impossible. Instead, an open recording policy for concerts not only pleased Deadheads, but it paved the way for some of the band's best advocates to recruit others. It's estimated that recordings for 2,200 of the 2,350 Grateful Dead concerts exist and many of them are available online. Given the fact that all of these recordings required no overhead from the band, it was a great way to crowdsource distribution and increase influence. The group even went so far as to reserve an on-site spot for tapers in a special section behind the soundboard.

This reserved space can be likened to a consumer-facing startup community's willingness to offer viral tools such as blogging buttons, bookmarking widgets, Facebook fan pages and Twitter integration. The idea here is that a company reserves a space for free distribution in order to gain mindshare and find a conversion funnel for paying customers. In the startup world, the point of conversion has always been up for debate.

Said investor and entrepreneur Dave McClure, "There is a role for freemium, but unless you missed the TPS report the FREE part is only a loss-leader for the MEE-YUM part -- it's a test-drive before you buy something. If your users are just kicking the tires then you need to kick them to the curb eventually."

That being said, as proven by the Grateful Dead, freemium content and permission to redistribute can trigger a mechanism for broad influence. Because influence generates perceived value, startups may find it easier to overcome barriers for customer acquisition by offering limited teaser content. After all, if the Grateful Dead can overcome wallet friction from more than 40 years of psychedelic drug users, surely a groundbreaking experience can rally loyal (and paying) fans.

Photo Credit: Jim Marshall from the Grateful Dead Archives

Having first presented the video at this year's TED Conference, Sivers make the case that instead of the first mover / leader being the catalyst of a movement, it is in fact the first follower that rallies others.

Says Sivers, "Being a first follower is an under-appreciated form of leadership. The first follower transforms a lone nut into a leader. If the leader is the flint, the first follower is the spark that makes the fire. "

For entrepreneurs, it means that the key to virality isn't just building a great product. It's about having the right early adopters to teach others how to use the product and become comfortable with the novelty of something new. Sivers explains that it's the early adopters that others follow and not the trailblazing / seemingly crazy leader. In other words, it's important to respect your earliest users and give them the mechanisms to make their support public.

Says Sivers, "We're told we all need to be leaders, but that would be really ineffective. The best way to make a movement, if you really care, is to courageously follow and show others how to follow. When you find a lone nut doing something great, have the guts to be the first person to stand up and join in."

We've seen our fair share of angel investors, early executives and engineers follow a lone nut and build successful businesses. As an entrepreneur, who do you credit as your first follower and what efforts have you made to ensure that the act of following is made public?

Says Ellis, "While this seems like an important goal from the beginning, it's not. If the value of your core product is weak, doubling the percentage of users that get there won't help much. And it will actually hurt you because every unit of effort put into optimization is one less unit that you can put into improving your core product. Products that don't become a "must have" almost always fail."

Ellis suggests that startups wait to optimize until at least 40% of those randomly surveyed admit that they'd feel a loss without your product. In addition to this suggestion he urges entrepreneurs to be deliberate in both their testing and their analytics programs. The idea here is that instead of having your development team churn out new wireframes every other week, you should prioritize those elements that are both easy to test and more likely to produce results. Essentially you need to form a hypotheses and avoid overburdening designers. If you don't take this to heart, your tests are unlikely to yield early results and your team will have little incentive to continue in this process of iteration.

Finally, Ellis urges startup founders to consider their most passionate users before changing things. Testing conversion funnels is great when it yields improvements, but if you're scaring away existing members and customers it's counter-productive. Ask your earliest advocates and users to prioritize the best parts of the experience. From here you can learn how to capture that experience in messaging and tweak only those parts of the site that are a perceived issue.

Says Wang, "From an investor's perspective, while moving away from the traditional full-blown financing documents entails giving up a number of rights and protections, when taken across numerous transactions, the benefits of spending less time and money on the documents outweigh the cost of sacrificing these additional rights and protections.  Moreover, I don't believe there's anything included (or excluded) in these documents that will be wildly controversial." Should there be any controversy, Wang plans on open sourcing the documents for discussion in the near future.

While entrepreneurs may use the documents at their own risk, some of the endorsers of the resource include Charles River Ventures, Ron Conway with SV Angel, First Round Capital and Polaris Ventures.

To download all four documents entrepreneurs can visit seriesseed.com. For additional resources on how to actually get to this portion of the investment process, early-stage companies should consult Venture Hacks' series entitled Term Sheet Hacks.

He writes, "In reality, the capital markets in NYC are flooded with Wall Streeters turned venture capitalists. These are people who know how to analyze and pick in assets, not people who know how to build companies. These are people who do dumb s@#$ like ask about pricing for a premium version of a genuinely novel product (in a category with no existing market) that hasn't even launched yet...in the first meeting."

On top of the shortage of experienced tech VCs, Mireles complains that New York has a weak angel network with only a few groups to pitch. Because of this, entrepreneurs only have a few shots to get their pitch right and they've got little opportunity to drive competition when negotiating deals. Mireles believes the result is lower valuations and slower deal cycles. He also believes that because Wall Street has skewed programmer expectations in regards to salaries, it's very difficult to find talent who will take a pay cut in exchange for equity. A month ago Venture Hacks' Naval Ravikant also made the case for startups to move to the Valley. Nevertheless, Hunch cofounder Caterina Fake makes the case for New York adding that the city needs a billion dollar company exit in order to free up some talent and resources.

While we've seen our fair share of non-Valley startups succeed and grow, it's interesting to see so many tout the opportunities of the region. Having covered so many startups, we know that you can pen a deal through your global and online network. But is it possible that just as certain employees and partnerships are more appropriate for a particular stage of the product lifestyle, are certain locales more appropriate as well? Let us know your thoughts in the comments below.

Photo Credit: Epicharmus / Michael

As of today Waggoner may not have the opportunity to change tactics. The developer wrote a blog post detailing a cease and desist letter sent by Shankman's lawyer. As a community with your finger on the pulse of tech launches and entrepreneurial resources, we want to know whether or not you believe Shankman's takedown notice is warranted. Let us know in the comments below.

Union Square Ventures' Andrew Parker recently started a Got It Wrong Series on his Gong Show blog where he identifies his own mistakes and mis-judgements about the industry.

1. Privacy: Parker was adamant about user privacy and assumed that others were the same. He watched as personal finance site Mint, Loopt and Twitter gained ground despite the expectation that privacy concerns would prove to be a bigger barrier to adoption.

2. Mobile Browsers: In 2006 Parker told investor Fred Wilson that he did not expect the mobile browsing experience to catch up to the laptop in the next 5 years. He believed that the form factor of handheld devices was to small to make it easy to reformat pages on the fly, design mobile web pages and zoom into regular pages. Parker admits he was proven wrong by the iPhone.

3. Taste-maker Risk: Parker explains that certain sites succeed on the ability to popularize content from taste-makers. When he first saw the Huffington Post close a $5 million dollar round he was unsure of the investment thesis. Says Parker, "In hindsight, I think I have a blind spot when it comes to first-party content and editorial choices in web services.  The taste-maker risk is a risk, but it's not nearly as important as I thought it was, and additionally, it's a risk that smart technologists can navigate well."

To keep an eye on the series visit Thegongshow.tumblr.com.

1. Don't Over Shop: Although a healthy interest from a number of players is important for leverage, shopping around too much has its downside. Says Suster, "There is a fatigue factor.  If deals drift, people start whisper campaigns.  It is a tight-knit industry.  Like it or not everybody knows each other. " If you haven't closed a deal in a timely manner others may assume something negative is holding you back.

2. Don't Grind Every Detail: Know the important points that you want to negotiate and stick to them. He writes that you shouldn't get caught up in inconsequential details as they'll potentially add weeks to the legal process and you'll risk creating ill will with your newfound partners.

3. Don't Be Complacent: Suster suggests that you hold all those involved to their deadlines and ensure that lawyers get the documents out when promised. If someone is behind, call them and let them know you are both interested and that you're willing to fly out and meet them or take calls in the middle of the night to acommodate them.

4. Get People In Person: Put yourself, your negotiating partner, both sides of lawyers and the other party in a room to hash out the details. Suster stresses that it's important to create goals for what you want to accomplish and take breaks to gain consent from any higher authorities.

1. Wealthy Families: This funder behind the funders is not surprising. Cheng explains that single family trusts and foundations are the original investors in a number of firms including J.D. Rockefeller's contributions to Venrock. In other words, your startup money moves from the affluent, to VCs and finally to you.

2. University Endowments: Alumni gifts play a huge roll in the investment landscape. When universities receive an alumni gift designated for endowment, that gift is often reinvested to raise additional funds and then used for school activities. Wikipedia has a fantastic list of U.S. universities ranked by endowment with Harvard, Yale, Stanford, Princeton and MIT at the top.

3. Pension Funds: Those family members that work in government agencies or major corporations and encourage you to pursue a career path with a pension and benefits might actually be enabling your startup dream. Explains Cheng, "A portion of these funds are often allocated to the private equity asset class.  Major states investing in this asset class include New York, New Jersey, California and Oregon.  Major corporations like AT&T and General Motors have also been active investors."

Photo Courtesy of Photos8.com

Says Johnson, "When I started, people asked me why anyone would want to read an amateur review. Now the environment has changed and there's even pay-per-post happening across the net. Virtual Tourist is travel-specific and you increase relevancy by picking a niche topic on which to base your community. With Lunch I'm trying to solve something new." Johnson spoke to ReadWriteWeb about some of the ways he's managed to ensure that his community is more than just search engine bait.

2. Opinion History: Johnson explains that just because people share common interests it does not mean that they share common opinions. Even at ReadWriteWeb we've seen Republicans and Democrats converge on the same comment thread in completely different ways. Lunch lets users view opinion ratings, past reviews and popularity rankings. From there you decide whether or not to follow others or look for additional commentary.

3. Top Review Ratings: The Lunch users rate each other and can review that history of rating over time. Ratings can be about a specific topic, on a specific review and on a specific user. In some cases a contributor with lackluster cooking reviews produces one standout piece about a specific type of food. It's important to be able to find those gems and weed out the reviews that are less relevant to you as a community member.

4. Existing Networks: Lunch allows users to pull information from their social graph via Facebook Connect in order to follow existing friends. Users can track topic reviews, member reviews and article reviews created by friends. I was actually surprised to see how little I had in common with my own social graph in terms of topic interest; however, where we converged was our opinions on other reviewers.

5. Frequent Contributors: By listing the top contributors to a community, Lunch is able to ascertain those with the most interest in a specific topic area. Johnson gives the example of Wikipedia's community as one where frequent contributors are also an indication of topic-based expertise. Explains Johnson, in Wikipedia, a community member that takes ownership of a page and can be seen as one of the page's top contributors (without deletions) is likely to offer more relevant content than those that do not contribute often. Coupled with opinion ratings this adds an additional level of user legitimacy.

While Johnson continues in his quest to thwart spammers and trolls, his site is already flourishing. For those attending SXSW Interactive, he is hosting a March 16 panel entitled, Trolls Suck, where he will continue to explore ways to ensure that thoughtful online contributors remain the majority in community sites.