Self-Finance or Raise Money? A Quandary for Start-Ups

But while Mr. Stanek and Mr. Moore went after roughly the same market at roughly the same time, they differed in one critical aspect: how they financed their dreams. One quickly raised more than $50 million, while the other mostly self-financed, thus creating a rare opportunity to assess the difference venture capital can make and bring new perspective to an age-old debate.

When Mr. Stanek, a Czech entrepreneur, founded GoodData in San Francisco in 2007, he already had plenty of experience with venture capital. He had sold a venture-backed software development tools company, NetBeans, to Sun Microsystems in 1999 for a little more than $10 million. And in 2006, he sold Systinet, a Web-service company, to Mercury Interactive for $105 million.

After financing the first year of GoodData’s software development with several hundred thousand dollars from his Systinet sale, Mr. Stanek began to seek investors. Eventually, he brought in $53.5 million from the likes of O’Reilly AlphaTech Ventures and Andreessen Horowitz. “We spent three years building a product and we are still building big pieces. That was funded by the V.C.’s and myself,” said Mr. Stanek, 47. “It’s like the printing business. I have to spend money on my printing machine. There’s an initial large investment, and then once you have the printing press running, it’s very predictable. So if we wanted to create a dominant large company, we didn’t have a choice.”

By contrast, before starting RJMetrics, the co-founders, Robert Moore and Jake Stein, worked as junior analysts at a New York venture capital firm, Insight Venture Partners, where they came across entrepreneurs who had built profitable businesses without a lot of capital and put off fund-raising as long as possible. “What happens in those situations is those entrepreneurs do extremely well personally,” said Mr. Moore, 29.

When they started RJMetrics in late 2008, Mr. Moore and Mr. Stein invested $10,000 of their own money. Mr. Moore wrote the first version of the company’s software in his attic in Collingswood, N.J. They did not hire their first employee until 2010, and they moved to an office in Philadelphia, where costs are far less than in New York or San Francisco.

By the time they did raise some money, in early 2012, they had 100 customers and annual revenue of about $1 million. “That put us in excellent negotiating position, because we had a proof point that other companies at our stage didn’t have,” Mr. Moore said. The owners raised $1.2 million, almost all from RJMetrics customers.

The two approaches have created very different companies. RJMetrics signed its first paying customer to a rudimentary prototype just three months after it started. To build revenue, it had to hope for good word of mouth (which it got) because it did not have a sales staff. But bootstrapping, or self-financing, did allow the founders to keep a large percentage of the company’s equity and to avoid the distortion that can come from having money and the demanding investors who supply it.

The venture capital industry views bootstrapping in the face of a big market opportunity as false economy. John O’Farrell, a partner at Andreessen Horowitz, said that it generally took an investment of $75 million to take a software company from start-up to initial public offering. “If you want to capture a big open market, you want to bring in money to grab land,” he said. “If you bootstrap, the tendency is to try to get profitable early so you don’t need to put in more money, but you end up missing a big opportunity.”

GoodData’s war chest allowed Mr. Stanek to staff up for the land grab. The company now has about 250 employees, half dedicated to the product and half charged with sales and marketing. RJMetrics, on the other hand, has 26 employees, more than half of them working in product development and only four on sales and marketing. The company’s first director of marketing started in February.

Inevitably, the companies have gravitated toward different markets. While RJMetrics has gone after small and midsize companies, GoodData has pursued Fortune 2000 clients that demand robust products and have the money to pay for them. RJMetrics had about $1 million in revenue in 2011 and about $2 million in 2012, according to Mr. Moore. Mr. Stanek declined to specify his company’s revenue, but he noted that last year GoodData signed 42 contracts that were each worth more than $100,000 a year, which would suggest an annual run rate of at least $4 million.

DealBook: Entrepreneurs Help Build Start-Ups by the Batch

Peter DaSilva for The New York TimesRon Palmeri and Allison Rhodes Messner of MkII Ventures.

Just two years after its conception, Prism Skylabs has made enormous strides.

The 20-person company, based in San Francisco, uses video surveillance equipment to give retailers Web-like data on customer behavior in their brick-and-mortar stores. It has secured more than $8 million in financing from investors like Pacific Partners and Andreessen Horowitz and has contracts with 70 retailers.

But like many start-ups finding success in Silicon Valley and across the country, Prism Skylabs is not the brainchild of a rookie entrepreneur who risked everything. One of its founders is Ron Palmeri, a longtime Silicon Valley executive. He is among a growing group of professed company builders who are parlaying past successes — along with their own capital and thick Rolodexes — into operating companies and venture funds that work on multiple companies at the same time.

“There’s a group of us who are serial entrepreneurs who know a lot about building something and scaling it,” said Mr. Palmeri, who previously worked with CNET’s founder, Halsey Minor, at Minor Ventures. Minor Ventures used this model to build companies like GrandCentral, now Google Voice, and OpenDNS.

In 2010, Mr. Palmeri started his own operating company, MkII Ventures, with Allison Rhodes Messner, formerly of OpenDNS. The company is working on building out four different ideas.

The concept — often referred to as parallel entrepreneurship — is not entirely new. Back in the dot-com days there was CMGI, which once had a market value of more than $40 billion before dying a slow death and eventually being absorbed by one of its portfolio companies. Idealab, based in Pasadena, Calif., has been doing this for more than a decade, though with mixed results.

What is new is the number of prominent entrepreneurs and investors who are now going this route rather than staking their fortunes on single follow-up acts or taking less active roles as angel investors or venture capitalists.

“Venture doesn’t allow us to explore, only to accept and deny,” said Michael Jones, chief executive of Science, a builder platform in Santa Monica, Calif. He and a longtime entrepreneur, Peter Pham, started Science in 2011 with $10 million in venture backing, followed by $30 million from the Hearst Corporation.

Most of these investors-cum-inventors are motivated by personal passion to create companies. Under this model, entrepreneurs often tap their own networks and wallets to finance their ideas.

“I don’t have any hobbies,” said Max Levchin, a co-founder and former chief technology officer of PayPal. “This is what I do.”

His first version of this model, MRL Ventures, helped start the mobile business-rating platform Yelp and created Slide, a personal-media sharing service that Google bought for a reported $182 million but has since shut down. His new project, called Hard, Valuable, Fun, or HVF, will focus on a few big ideas with longer time frames.

Like Mr. Levchin, many of the builders came out of the recent wave of technology successes. Garrett Camp, a co-founder of StumbleUpon and Uber, has started Expa to develop new products and services and build teams to scale them. In Chicago, two Groupon founders, Brad Keywell and Eric Lefkofsky, put $200 million, primarily their own money, into Lightbank, an operating company. Lightbank has a staff of 20 and 60 projects in its portfolio, including Belly, a loyalty platform, and Frank & Oak, an online men’s clothing retailer.

Company builders say they provide a missing link in the life cycle of start-ups and do so more effectively than incubators. “The primary difference is focus,” Mr. Camp said. “I plan on creating just a couple companies per year, and spending significant time with all of them.”

Hunter Walk, a former director of product management at Google, said, “What’s often needed at the early stages isn’t more capital in a vacuum, but people with operational experience who can give their full attention to these companies.” Mr. Walk is raising a venture capital fund, called Homebrew, with another former Google executive, Satya Patel.

Once an idea gains traction, builders typically turn to venture capital firms for additional financing while gradually giving individual teams more autonomy. “It’s like raising children,” Mr. Palmeri said. “There’s a point where they eventually need their own space, but you’ll continue as a trusted adviser.”

Some company builders invest in a mix of their own ideas and early-stage concepts that fit a particular theme. Others, like Mr. Palmeri’s company, focus almost exclusively on homegrown projects, though they will recruit co-founders and teams to expand the companies into independent entities.

“It’s a highly collaborative process,” Mr. Palmeri said. “By the time we look for outside funding, the idea may have taken many different shapes.”

This approach resembles product development at large companies, like Apple or Google, only on a smaller scale. “The cycle of entrepreneurship can be pretty slow, so why not work on several ideas at one time?” said John Borthwick, chief executive of Betaworks, which was founded in early 2008 and is based in New York. (The New York Times Company is an investor.)

“Over time, you can build common tools, databases, analytics — all the things that give each idea a head start in the marketplace,” Mr. Borthwick said.

One of the biggest advantages to working on several companies simultaneously is the ability to share resources.

“The dollars used in the early stages of start-ups are often highly inefficient because you spend a lot of time and money just to get the business going,” said Mr. Jones at Science. His operating company has 25 people on its staff, specializing in areas like human resources, marketing and real estate.

“The early days of a company should be spent thinking about strategy and technology, not worrying about negotiating leases,” Mr. Jones said.

When start-ups fail, he said, often it is not because the ideas are flawed but because management did not have the tools or resources to execute the idea, were pulled in too many directions or did not move fast enough. Mr. Keywell and Mr. Lefkofsky noticed the same pattern in previous companies they had started or financed.

“We decided to bring those competencies inside of Lightbank,” Mr. Keywell said. “The whole model is designed to reduce risk and increase reward.”

Though some of the large venture capital firms have invested in ideas hatched by company builders, the concept has its skeptics.

“It’s very difficult to manufacture innovation,” said Andy Rachleff, a lecturer at the Stanford Graduate School of Business, former general partner at Benchmark Capital and chief executive of Wealthfront, an online financial advisory firm. “The reason most start-ups are successful is they had great insight, and the likelihood of having that killer insight more than once in a career is exceptionally low.”

While this approach allows individual teams to focus on ideas without having to worry about the nuances of running a business, it can pull the company builders in too many directions.

In 2011, Evan Williams and Biz Stone, who founded Twitter, and Jason Goldman, another former Twitter executive, restarted Mr. Williams’s Obvious Corporation as a builder platform. Recently, however, they said they would each focus more on individual ideas rather than work on several ideas at once.

“Turns out, we like focus,” Mr. Williams wrote in an explanation on the company’s Web site.

Nevertheless, proponents of parallel entrepreneurship argue that the odds are better for those who pursue multiple ideas. “The percentage of companies that are successful should be greater than the traditional portfolio,” Mr. Jones said.

Venture partners can regard company builders as “a monstrous insurance policy,” he added. “If something goes wrong with one of our portfolio companies, we can quickly dive back in and make things work.”

DealBook: Technology Start-Ups Take Root in Berlin

BERLIN — Near the Rosenthaler Platz subway station here, signs of the city’s high-tech future blend seamlessly with its communist past.

Decrepit breweries and stables have been converted to communal offices decked out in colorful Ikea furniture. Achingly cool coffee shops with names like Betahaus and St. Oberholz are packed with programmers in their 20s and 30s hunched over shiny new laptops. And even as the city’s unemployment broadly remains high, vintage clothing stores selling patent-leather Dr. Martens boots for 180 euros, or $235, entice technology transplants from across Europe with promotions in English.

“I got sucked into Berlin,” said Henrik Berggren, a Swedish college dropout who moved here in 2011 to work on his e-book venture, ReadMill. “It became clear that this was the place to be.”

More than two decades after the fall of the Berlin Wall, the German capital has gone from a cold war relic to one of the fastest-growing start-up communities. Engineers and designers have flooded into Berlin in recent years, attracted by the underground music scene, cutting-edge art galleries, stylish bars and low rent.

Hours after landing at Tegel airport, Mr. Berggren, a bearded 33-year-old computer programmer, found an apartment with two 20-something Germans in one of the city’s trendiest neighborhoods for just 300 euros, or $390, a month. A few days later, he secured a cheap office for his four-person team, a space they shared with several other start-ups.

With the new wave of entrepreneurs, Berlin, once viewed as the poor relation to Germany’s main business centers, like Frankfurt and Hamburg, is improving its ranking in the country’s economic hierarchy.

In March, the country’s chancellor, Angela Merkel, toured several local technology firms in a show of support. The city’s politicians also are trying to make it easier for international workers to get visas by fast-tracking applications from technology professionals and other workers.

“The scene is very young,” said Alex Ljung, the co-founder of SoundCloud, a music Web site backed by the American venture capital giant Kleiner Perkins Caufield & Byers. “Berlin isn’t proven yet. It’s much like a start-up in that way.”

By Silicon Valley standards, Berlin is still a backwater.

Entrepreneurs say high-quality programmers and engineers are hard to find, and a lack of early-stage funding from venture capital firms, particularly those in Europe, has hampered companies’ growth. After getting burned by the dot-com bust, German venture capitalists have largely shied away from making big investments, preferring to finance early-stage companies with checks of less than $2 million.

The city also is trying to overcome its reputation for copying American business models rather than developing innovative ideas.

The Samwer brothers, whose Berlin start-up incubator Rocket Internet has completed a series of successful deals, sold German versions of eBay and Groupon to their more famous competitors. The brothers — Alexander, Oliver and Marc — have used the proceeds to invest in companies like Facebook and Zynga. One of their latest projects, a German rival to the online retailer Zappos, is valued at $3.7 billion.

“Previous generations of Berlin start-ups were copycats,” said Matt Cohler, a partner at the venture firm Benchmark Capital, who was one of the first employees at both LinkedIn and Facebook, and has invested in a Berlin start-up. “It was the predominant playbook.”

More important, there have been few successful exits — sales to larger companies or lucrative initial public offerings — that could cement Berlin’s place in the global start-up community. Among those deals, few break the $1 billion mark.

In 2010, Groupon bought the European rival CityDeal for around $260 million. Google acquired DailyDeal, a similar daily deals Web site from Berlin, for a reported $200 million in 2011; earlier this year, the Internet giant sold the start-up back to its founders.

“Many funds got started at the wrong time,” said Christophe Maire, an angel investor in Berlin, whose nickname is the Conductor because he has mentored, and invested in, many of the city’s new generation of young entrepreneurs.

“There’s a reluctance to back innovation.”

But as local start-ups gain global audiences — and international backing — entrepreneurs and investors are betting on Berlin. While venture capital investment in the rest of Europe has remained flat since the financial crisis began, the city attracted 173 million euros ($226 million) in venture funding last year, a 164 percent increase compared with 2009.

Big technology companies are showing interest, too. Earlier this month, the Japanese technology giant Panasonic bought Aupeo, a local audio streaming service, for an undisclosed amount. Google has invested in a local start-up hub called the Factory that is being built at a site that once was part of the Berlin Wall.

“There are billion-dollar companies just waiting to happen,” said Ciaran O’Leary, a partner in the local venture firm Early Bird, in his minimalist office in the center of the city. “Something big is going to happen. It’s just a question of time.”

Ijad Madisch knows the limits of starting a technology company in Germany.

Mr. Madisch, a Harvard-educated medical doctor, also holds a Ph.D. in virology and has studied computer science. Yet when he started working on Research Gate, a social networking site that allows scientists to share work and collaborate on projects, he faced resistance.

Returning to Hanover to be closer to his family in 2008, Mr. Madisch’s college supervisor told him to give up his pet project after he asked to work part time to focus on the start-up.

The next day, Mr. Madisch, 32, quit his job. He soon transferred to Harvard where a former boss was happy to let him work fewer hours while he pursued his business idea. Friends also put him in contact with blue-chip American venture firms, including Benchmark Capital and Accel Partners.

After securing early-stage fund-raising from West Coast backers, Mr. Madisch moved Research Gate from Boston to Berlin in 2011, and has expanded his staff tenfold in less than two years, to 120 employees. The site now connects more than 2.6 million scientists worldwide, and Mr. Madisch plans to make money by selling advertisements for academic conferences and job openings.

In an ironic twist, Mr. Madisch’s former boss, who had warned him against starting the company, is now one of the site’s most active users.

“I had to leave Germany to get back to Germany,” Mr. Madisch said in his three-floor office in central Berlin that has a large game room and sleeping pods to keep programmers fresh.

“German venture capitalists had this idea in front of them, and they didn’t do anything about it.”

For entrepreneurs, Berlin offers the infrastructure, without the costly overhead of Northern California, New York or London. Commercial rents in the once-communist side of the city are about half of that in London, allowing entrepreneurs to stretch their start-up budgets.

Three years ago, the founders of EyeEm, a mobile photo app similar to Instagram, borrowed an art gallery in a chic part of Berlin to start a global online photography competition. The showcase received more than 2,000 entries from around the world and formed the basis of their business idea.

EyeEm later replicated the exhibition in SoHo. But costs quickly rose as the founders had to fork over high rent for a trendy gallery, submit multiple forms to receive licensing permits and pay high wages to waiters and security staff.

“The cheap rent Berlin buys you time, and time is everything,” said Lorenz Aschoff, a co-founder of EyeEm, in the company’s converted loft space. “If we hadn’t received the original gallery for free, it would have killed the idea before it took off.”

As start-ups in the German capital become more established, entrepreneurs and investors alike are hoping that one of the city’s companies will turn the growing interest in Berlin into cash.

Many eyes have focused on Wooga, an online game start-up founded in 2009 that competes with Zynga for users on mobile phones and social networking sites like Facebook.

At a converted bakery colorfully adorned with characters from Wooga’s games, the company’s 250 employees from more than 35 countries busily plan their next online game.

After raising money from both European and American venture firms, Jens Begemann, Wooga’s co-founder and chief executive, said investors are slowly reconsidering untested ideas. He is focused on beefing up its games for smartphones in an effort to diversify away from sites like Facebook.

“Gaming involves combining skilled engineering with a creative atmosphere,” said Mr. Begemann, 36, in the start-up’s five-story office where programmers share ideas in an open-plan kitchen that has been designed to look like a leafy forest. “Wooga couldn’t exist in any city other than Berlin.”

Venture Capitalists Are Making Bigger Bets on Food Start-Ups

That idea is enticing a wide group of venture capitalists in Silicon Valley into making big bets on food.

In some cases, the goal is to connect restaurants with food purveyors, or to create on-demand delivery services from local farms, or ready-to-cook dinner kits. In others, the goal is to invent new foods, like creating cheese, meat and egg substitutes from plants. Since this is Silicon Valley money, though, the ultimate goal is often nothing short of grand: transforming the food industry.

“Part of the reason you’re seeing all these V.C.’s get interested in this is the food industry is not only is it massive, but like the energy industry, it is terribly broken in terms of its impact on the environment, health, animals,” said Josh Tetrick, founder and chief executive of Hampton Creek Foods, a start-up making egg alternatives.

Some investors say food-related start-ups fit into their sustainability portfolios, alongside solar energy or electric cars, because they aim to reduce the toll on the environment of producing animal products. For others, they fit alongside health investments like fitness devices and heart rate monitoring apps. Still others are eager to tackle a real-world problem, instead of building virtual farming games or figuring out ways to get people to click on ads.

“There are pretty significant environmental consequences and health issues associated with sodium or high-fructose corn syrup or eating too much red meat,” said Samir Kaul, a partner at Khosla Ventures, which has invested in a half-dozen food start-ups. “I wouldn’t bet my money that Cargill or ConAgra are going to innovate here. I think it’s going to take start-ups to do that.”

In the last year, venture capital firms in the valley have funneled about $350 million into food projects, and investment deals in the sector were 37 percent higher than the previous year, according to a recent report by CB Insights, a venture capital database. In 2008, that figure was less than $50 million.

That money is just a slice of the $30 billion that venture capitalists invest annually, but it is enough to help finance an array of food start-ups.

The venture capital firms helping to finance these businesses are some of the valley’s most prominent names, in addition to Khosla: SV Angel, Kleiner Perkins Caufield & Byers, True Ventures and the Obvious Collection. Celebrities from Hollywood (Matt Damon), pro football (Tom Brady) and the tech world more broadly (Bill Gates) have also joined in.

“Consumers are interested in sophisticated experiences that are beautifully delivered, which we’ve seen happen on the Web and with products like the iPhone,” said Tony Conrad, a partner at True Ventures, which was an early investor in the coffee company Blue Bottle. “Now, we’re seeing that happen with food and beverage.”

Still, some tech analysts and venture capitalists are skeptical that these companies, with their factories and perishable products, can reach the scale and market valuations of big Internet companies.

“I don’t see a multimillion-dollar business coming out of any of these companies,” said Susan Etlinger, an analyst with the Altimeter Group, a firm that advises companies on how to use technology. “The majority of Americans will not likely be able to participate, they’re simply too expensive for them.”

Venture capitalists have strayed from pure technology to food before. Restaurant chains like Starbucks, P. F. Chang’s, Jamba Juice and, more recently, the Melt, were backed by venture capital. Recipe apps and restaurant review sites like Yelp have long been popular.

But this newest wave of start-ups is seeking to use technology to change the way people buy food, and in some cases to invent entirely new foods. Investors are also eager to profit from the movement toward eating fewer animal products and more organic food. They face a contradiction, though, because that movement also shuns processed food and is decidedly low-tech.

“It’s not Franken-food,” Mr. Kaul of Khosla Ventures said. “We’re careful not to make it sound like some science experiment, but there is technology there.”

Hampton Creek Foods, based in San Francisco, uses about a dozen plants, including peas, sorghum and a type of bean, with properties similar to eggs, to make an egg substitute.

Mr. Tetrick, its founder, started the company after working on alleviating poverty in sub-Saharan Africa. He hired a protein chemist, a food scientist, a sales executive from Heinz and a contestant from the television show “Top Chef.” Two large food companies are using the egg substitutes in cookies and mayonnaise, and he said he planned to sell them to consumers next month.

This article has been revised to reflect the following correction:

Correction: April 30, 2013

An earlier version of this article misstated the restaurant experience of Chris Muscarella, a co-founder of the site Kitchensurfing. While he has worked in restaurants, he has not been a chef. The article also referred incorrectly to the investment history of Google Ventures. It has indeed made food-related investments, providing venture capital to Blue Bottle Coffee, a specialty retailer.

Chief Tries to Infuse Yahoo With a Start-Up’s Spirit

Yahoo, an Internet pioneer, missed the boat on social networks and mobile devices as the new gateways for information and, in recent years, had been losing advertisers and employees to rivals like Facebook and Google.

Critical to Ms. Mayer’s turnaround effort is infusing fresh blood and ideas into the company by buying creative start-ups and integrating them into the company. So since she took over last July, she has been on a splashy shopping spree, spending tens of millions of dollars to acquire six start-ups.

But in many ways, it has been a tough sell.

In part, that is because of the past problems with acquisitions. Yahoo’s neglect of Flickr, a pioneering photo service that was the Instagram of its time, and Delicious, an early social bookmarking tool that predated Twitter’s rise, are prominent examples of the company’s mishandling of promising acquisitions.

These days, too, Ms. Mayer has to compete against the deep pockets of competitors like Twitter, Google and Facebook, which are also trying to buy great technologies and hire top talent.

Still, there is evidence that she is making inroads.

Increasingly, entrepreneurs say, she is getting personally involved in acquisitions, focusing particularly on mobile-minded engineers. She is also trying to reverse Yahoo’s reputation as a company that acquires talent and innovative technologies and then lets them wither.

Last month, Yahoo made headlines when it acquired Summly, a newsreading mobile app started by a 17-year-old in England, for an undisclosed sum. In October, it acquired Stamped, a mobile recommendation service.

Robby Stein, who sold Stamped to Yahoo, said he was willing to take a chance on the company given Ms. Mayer’s solid track record at Google, where she helped perfect Web search and was largely credited with the clean aesthetic of the Google home page.

“After conversations with Marissa and others, it became very clear that this was a unique moment in time where we could have a phenomenal impact and affect millions of people,” said Mr. Stein, a former Google employee himself, who worked alongside Ms. Mayer on Google’s mail products. “There are few opportunities like that.” (The New York Times Company was a small investor in Stamped.)

Mr. Stein said he was now concentrating on building a “major mobile development center in New York” for Yahoo. He is determined to imbue it with the ethos of an agile, lean start-up, not as an outpost of a large corporation.

Stamped’s offices are covered in chalkboard paint and whiteboards, for scribbling down ideas and code, and also feature a fully stocked kitchen. They are decorated with posters of software applications the employees admire and aim to compete with. The team has also installed two large television screens for testing app prototypes and has built a game room with club chairs.

“I feel remarkably empowered and able to get things done,” Mr. Stein said. “I’m supported to the fullest extent by Marissa and the executive team.”

Ms. Mayer’s other acquisitions include OnTheAir, an online video service; Snip.it, a clipping service for the Web; Propeld, a maker of location-based apps; and Jybe, a social recommendation site.

Despite the string of purchases, some say Ms. Mayer’s pitch — which could be a part of the biggest technology turnaround since Steven P. Jobs’s return to Apple in 1996 — seems as if it is still in rehearsal.

Shortly after Ms. Mayer joined the company last year, one Valley entrepreneur in acquisition talks with Facebook and Google reluctantly met with Yahoo on the counsel of advisers, who told him he owed it to investors to hear the company out.

At Facebook and Google, the offices were buzzing with activity, the reception desk checked him in using shiny new tablet computers and the executives working on the deal were so prepared they “basically knew what size underwear I wear,” said the entrepreneur, who spoke on condition of anonymity because he was still in talks to sell his company. Yahoo was completely different. He arrived to an empty parking lot and deserted offices. He checked in on dusty, clunky desktop computers that ran outdated Web browsers. Worse, company executives made it abundantly clear they had not bothered to read his résumé.

“I found it depressing,” he said. “It was disorganized, they hadn’t done basic due diligence, and offered no clear incentive to go work there.”

His conclusion: “They would have to be willing to pay me twice what anyone else was willing to pay to work there.”

Yahoo certainly has the cash, having reaped $4.3 billion from the first stage of its sale of half its stake of Alibaba back to the Chinese Internet company.

Disruptions: How Deal Makers Put a Value on Start-Ups - Disruptions

Annie Tritt for The New York Times Otis Chandler and his wife, Elizabeth Khuri Chandler, the founders of Goodreads, a social media site that recently sold for a reported $150 million.

I have a vision of how suitors decide how much to offer for a start-up they want to buy. Several executives go into a conference room. Each scribbles a number on a piece of paper and places it in a hat. Then the chief executive pulls out a number, and there it is.

It might sound like a stretch, but given the seemingly random and sometimes nonsensical amounts for which start-ups with no revenue, or no users, or even no product are bought, I might not be far off.

But let’s say there is a logical way to value a company. During Bubble 1.0 there seemed to be — at least sometimes. Tech start-ups were valued by the number of eyeballs they attracted. When Broadcast.com was acquired by Yahoo for $5.9 billion in stock in April 1999, it was estimated that the company paid $10,000 per user.

Today, when eyeballs mean much less, how do start-ups with no revenue come up with a valuation? Well, it depends on a buyer’s reason for wanting the company.

One of the growing forms of acquisitions is an acqui-hire, in which a company is bought for its talent.

“If the company has no revenue and no users, then it comes down to the price of each engineer, which on average ranges between $750,000 to $1.5 million per person,” said Sam Hamadeh, chief executive of PrivCo, a firm that follows privately held companies, who noted that such acquisitions were up 91 percent from a year ago. “Facebook certainly pioneered and popularized this phenomenon as it made acquisitions to essentially snuff out competition.”

An investor report released by PrivCo in late March found that 12 of the acquisitions by Facebook last year were of this type. Often Facebook integrated the engineers and then shut the newly purchased company. The report also found that Twitter had acquired eight companies to get their engineering talent. Yahoo, Google, Apple, LinkedIn and Airbnb have also done transactions just for engineers.

Given Mr. Hamadeh’s estimate, we can begin to guess at a start-up’s value if it’s clearly an acqui-hire. If a company has 10 employees, no revenue and no users, it could be worth about $15 million. Throw in the cost of some office equipment, shutting down the technology and paying back investors, and it’s valued at $30 million.

Chris Dixon, a general partner at the venture firm Andreessen Horowitz, said in an interview that although some of the recent start-up acquisition prices might seem high, many are amortized over four years, which makes some deals seem more rational. “If you’re paying $1 million per engineer in an acqui-hire, that’s split up over four years and ends up equaling the salary of other engineers in the Valley,” he said.

But some of these transactions have people scratching their heads — like that of Summly, a news-reading app built by a 17-year-old with two employees, which Yahoo bought for a reported $30 million last month. As Emin Gün Sirer, an associate professor at Cornell, noted, Summly didn’t use any unique technology and has only a couple of employees.

When a company has users and it is a straight-up product acquisition, the numbers can be more difficult to figure out. Amazon recently purchased Goodreads, a social media site built around sharing books, for a sum said to be $150 million. Mailbox, which had not properly begun, sold for $100 million last month to DropBox. And, of course, there is Instagram, which was bought for $1 billion.

Thomas R. Eisenmann, a professor at the Harvard Business School, said that when companies weren’t being acquired just for their talent — like Goodreads and Instagram — three possible calculations were used to determine a valuation. The first requires exploring how much time and effort it would take to build the product from scratch and attract new users. The second is potential cash flow.

The third is “in the realm of, ‘What number do we need to put on the table to convince the management and investors to part with their dream?’ ” he said. “Often, they end up somewhere in the magic middle.”

Of course, all of this math starts to fall apart when a start-up receives an exorbitant amount of press and exposure on social networks. Then suitors become irrational, making the price people are willing to pay seem as if it were plucked out of a hat.

E-mail: bilton@nytimes.com

Montevideo Journal: Uruguay’s Video Game Start-Ups Garner Attention

But the company, a success in the fiercely competitive field of video game development, stands out from other high-tech ventures in one respect: its unconventional location, which frequently confuses people abroad. “They politely ask, ‘Where is Uruguay?’ ” said Álvaro Azofra, one of the three founders of Ironhide, the company behind Kingdom Rush, a lucratively popular game in the United States that involves a cartoonish kingdom under attack by marauding yetis and ogres.

Squeezed between Brazil and Argentina and long dependent on commodities exports, Uruguay may be better known for its flocks of sheep and herds of cattle. But attention is now shifting to the country’s growing constellation of start-ups that are engineering video games for computers and hand-held devices.

Developers point to a variety of reasons that Uruguay has been able to compete with South America’s larger economies, whether the creativity of its engineers and commercial artists or its relatively relaxed immigration rules and extensive use of computers in schools.

“It’s ironic, because historically, this is a country that hates entrepreneurship, but not the culture of entrepreneurship,” said Gonzalo Frasca, a video game theorist whose company, Powerful Robot, has developed numerous games for clients in the United States, including Legends of Ooo, based on the Cartoon Network animated television series “Adventure Time.”

Mr. Frasca, 40, contrasted the skepticism that persists in relation to private enterprise in Uruguay’s cradle-to-grave welfare state, in which companies in sectors like telecommunications, casinos and even whiskey production remain under state control, with the country’s robust tradition of creativity in the arts and sciences.

“We still have strong schools for computer science,” said Mr. Frasca, who has a doctorate in video game studies from IT University of Copenhagen and is a pioneer in Uruguay’s game industry. “When people graduate, they realize they’re in a small country where they have no choice but to engage with the rest of the world.”

While ORT, Uruguay’s largest private university, offers one of the region’s first degrees in video game design, the relaxed atmosphere of seaside Montevideo — the Uruguayan writer Eduardo Galeano once remarked that his countrymen resembled “Argentines on Valium” — can still make it seem as if it would be an unlikely place for technology start-ups to thrive.

Other parts of Latin America are nurturing their own video game development scenes. Chile, for instance, recently drew attention when Atakama Labs, a game developer based in Santiago, was acquired by the Japanese gaming company DeNA.

Gaming studios have also emerged in São Paulo and Rio de Janeiro, Brazil’s two largest cities, but developers there complain of byzantine tax regulations and labor rules that make hiring employees costlier than in some rich industrialized countries. In Argentina, dozens of game-developing start-ups have been founded in Buenos Aires.

But while Argentina has traditionally had more companies in the industry, some of the momentum is seen shifting across the border to Uruguay as Argentine ventures struggle with abrupt changes in economic policy, including the tightening of currency controls that have complicated operations for exporters.

In Latin America and beyond, developers are seeking to mimic the success of Kingdom Rush, ranked in 2012 among the top-selling paid applications for the iPhone in the United States. In addition to Ironhide and Powerful Robot, an array of other game developers operates quietly.

Some, like Trojan Chicken, a developer of educational games in Spanish for schoolchildren, benefit from the heavy presence of the state across Uruguay’s economy, which avoided the privatization wave of neighboring Latin American countries in the 1990s.

Ingenio, a state-controlled incubator for start-ups, helped finance Trojan Chicken, which has created educational games including 1811, an adventure game set in colonial Uruguay, and D.E.D., a detective game in which players solve thefts of national heritage. The games are designed to be played on the inexpensive laptops distributed to schoolchildren across Uruguay.

Nearly all of the 300,000 children in Uruguay’s public schools now have their own computers, after the authorities here began embracing One Laptop per Child, the ambitious project aimed at bringing computing to children in the developing world, in 2006. Called the Plan Ceibal here, it is financed by public money.

Miguel Brechner, the director of the Plan Ceibal, said the initiative was already serving as a catalyst for Uruguayan content developers, notably gaming and animation studios. Describing Ceibal as a “digital equality plan,” he said that “reality has shown that kids get excited about games.”

Encompassing the video game companies, software development in Uruguay has evolved into a $600 million industry, making the country Latin America’s leader in per-capita software exports. But some here say that the industry may also be falling victim to its success, as salaries for developers rapidly climb and make it more expensive for start-ups to compete internationally.

Still, Uruguay’s immigration laws offer certain advantages in the competition for talented employees. Building on a history of attracting immigrants from Europe, engineers, animators and other foreign hires at start-ups can legally reside and work in Uruguay while their applications for work visas are being processed.

“Uruguay is a remarkably open place when it comes to attracting talent,” said Evan Henshaw-Plath, an American among the founders of the company that became Twitter. After moving to Uruguay in 2007, Mr. Henshaw-Plath founded a software development company that now has employees from countries like Poland and Ecuador.

Drawing a contrast between Uruguay and Brazil, he delights in telling a story about an American technology investor based in Japan who was about to embark on a business trip to South America aimed at finding start-ups in which to invest or to acquire outright.

Upon discovering that Brazil required Americans to go through a bureaucratic ordeal to obtain a visa, the investor canceled his trip there. Instead, he visited Uruguay, which has no such visa requirements, and eventually acquired Mr. Henshaw-Plath’s 20-person company, Cubox.

Mauricio Rabuffetti contributed reporting.

Start-Ups Take on Special Tasks for Small Business

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Tech Start-Ups Find a Home on the Prairie

Eventually, he coaxed $1 million from a pair of local investors. His app, Dwolla, has since attracted more than 100,000 users, and now moves $30 million to $50 million in transactions a month.

So when he decided to seek a second round of financing last year, Mr. Milne, a 29-year-old college dropout, had an easier sell. This time investors courted him. This year, he announced that Dwolla had drawn $5 million more in capital from investors on both coasts, including Ashton Kutcher and a firm with Twitter and Foursquare in its portfolio.

From Des Moines to Omaha to Kansas City — a region known more for its barns than its bandwidth — a start-up tech scene is burgeoning. Dozens of new ventures are laying roots each year, investors are committing hundreds of millions of dollars to them, and state governments are teaming up with private organizations to promote the growing tech community. They are calling it — what else? — the Silicon Prairie.

Although a relatively small share of the country’s “angel investment” deals — 5.7 percent — are done in the Great Plains, the region was just one of two (the other is the Southwest) that increased its share of them from the first half of 2011 to the first half of this year, according to a report commissioned by the Angel Resource Institute, Silicon Valley Bank and CB Insights.

Fifteen to 20 start-ups, most of them tech-related, are now established each year in eastern Nebraska, a more than threefold increase from five years ago, according to the Omaha Chamber of Commerce. Today, there is more than $300 million in organized venture capital available in the state, as well as tax credits for investors; six years ago there was virtually none, according to the chamber.

Google Fiber’s first ultrafast Internet connection drew about a dozen start-ups to a neighborhood in Kansas City, Kan. And over the past seven months, about 60 start-ups have presented their ideas in Kansas City at weekly forums organized by Nate Olson, an analyst with the Ewing Marion Kauffman Foundation. In Iowa, Startup City Des Moines, an incubator financed with $700,000 in public and private money, including a quarter-million dollars from the state, received applications from 160 start-ups over the past two years. It has accepted 9 so far.

“Traditionally, you’d say, ‘Hey, if I want the safe lifestyle, I’ll stay here and I’ll do what generations before have done,’ ” said Jeff Slobotski, an Omaha native who four years ago started Silicon Prairie News, a Web site covering the region’s tech scene. Now, he continued, “there is a newer potential in terms of what can take place here and not having to hop on the first plane out of here — saying, ‘Hey, I’m going to set up shop in the Midwest in our cities and make a go at it here.’”

Still, the region’s entrepreneurs insist that they are not striving to replicate Silicon Valley or other well-known tech hubs like Boston.

“We’re creating different types of start-ups using local ingredients,” said Christian Renaud, a principal at an information technology start-up incubator here.

Among the companies that have started in the region over the past few years are Ag Local, a firm that created an online marketplace for trading meat; EyeVerify, which verifies people’s identities through eye-vein patterns; and Tikly, which created a platform for bands to sell concert tickets. But there also are many start-ups outside the information technology realm, focusing on fields like biotechnology, advanced manufacturing and medical devices.

Many entrepreneurs credit Silicon Prairie News for the region’s start-up growth. In addition to writing about start-up activity, The News also organizes conventions that connect entrepreneurs and investors. In the four years since its creation, Silicon Prairie News has covered the emergence of more than 80 companies in the region and more than 50 additional endeavors that spawned mobile or Web apps.

The Silicon Prairie still lags in national recognition as a start-up hub, however. Capital remains relatively sparse, and software engineers are in shorter supply than on the coasts.

“We’re just not aware of, potentially, the opportunities that exist in a variety of places in the middle of the country,” said Stephen T. Zarrilli, the president and chief executive of Safeguard Scientifics, a Philadelphia venture capital firm that has invested in companies across the country but not in the Great Plains.

Tech enthusiasts in the region are hoping to change that by pointing to other strengths: lower costs and a work force focused more on building strong companies than moving on to the next big thing, they say.

“In Nebraska and the Midwest in general, because the work ethic is so strong, you will find people that will work like they worked on the farm,” said Gordon Whitten, the chairman of VoterTide, an Omaha start-up that tracks and analyzes social media trends for campaigns, media companies and others.

Dwolla exemplifies both the potential and the challenges for the region’s start-ups.

Business owners here said that few people in Des Moines seemed familiar with Dwolla, which allows real-time money transfers that are less costly for merchants than credit card fees. Yet the fast-talking, matter-of-fact Mr. Milne, in his jeans and untucked shirts, has proved to be a savvy ambassador for his company and the region. He always pays with Dwolla when he can.

“How much do I owe you?” he asked a barista at a coffee shop he frequents in Des Moines, his hometown, before tapping his iPhone and watching his payment register on the shop’s touch screen.

He eagerly rattles off the advantages of building Dwolla here, where his headquarters boast all the trappings of Silicon counterculture: beer-stocked refrigerators, neon orange accent walls with well-used whiteboards tacked to them, and a legal counsel who comes to work in flip-flops.

One of the biggest boons, he said, was siphoning the expertise of executives in the city’s robust financial services sector. They advised him on structuring the company so it would not have to hold customers’ money, saving millions of dollars in licensing and bonding costs. That structure also led the company to create a unique system for transferring money without the usual days of processing delays.

“I don’t know if we would have found that relationship in the Valley,” Mr. Milne said. “We just hit so many golden-nugget opportunities in Des Moines and golden-nugget pieces of feedback.”

Bits Blog: New York Start-Ups Become Officemates in Hurricane Sandy Aftermath

As the city of New York struggles to get back online in the aftermath of Hurricane Sandy, many companies and start-ups are trying to regain their footing and restart operations.

We’re taking over the Hearst cafeteria twitter.com/jonsteinberg/s…

— Jon Steinberg (@jonsteinberg) October 31, 2012

The problem is, much of Lower Manhattan, where many are located, is still without power and Internet. But entrepreneurs, engineers and developers aren’t letting that stop them. They are camping out in one another’s apartments and offices in an attempt to still get a day’s work done. Of course, any place with a humming Wi-Fi connection, whether a coffee shop or an Apple Store, seems to be drawing displaced workers eager to get back into the swing of things. But camaraderie spurred by the storm seemed to knit the New York start-up scene together a bit tighter.

A few Kickstarter employees spent the day esconced in the Chelsea offices of Boxee, an Internet TV start-up, taking advantage of a speedy wireless connection and an espresso machine. Some Foursquare employees relocated to a friend’s offices in midtown Manhattan, not far from the temporary offices that BuzzFeed, a social media news site, set up in the Hearst Tower building. Actual co-working spaces, including one called the Secret Clubhouse, in the Williamsburg section of Brooklyn, were taking in stranded refugees from Gawker, Tumblr, SpokenLayer and other companies, who either could not get into the city for work or whose offices were still without power.

It’s not just technology companies who are becoming impromptu office buddies. Bill Werde, the editorial director of Billboard, posted a message on Twitter thanking QuadGraphics, a design firm, for letting his company work out of its offices for the day.

DealBook: In London, Nimble Start-Ups Offer Alternatives to Stodgy Banks

Hazel Thompson for The New York TimesAnil Stocker, a co-founder of MarketInvoice, a new financial firm based in London.

LONDON — When Hiroki Takeuchi joined McKinsey & Company in 2008, he had a front-row seat to the upheaval in finance.

After the collapse of Lehman Brothers, Mr. Takeuchi, a 26-year-old Oxford graduate, worked with some of the world’s biggest banks trying to figure out how to adjust to new regulations and a changed market. Then he quit.

For Mr. Takeuchi, memories of friends building successful start-ups at college outweighed the lucrative rewards offered by the blue-chip consulting firm. He joined forces with two McKinsey consultants, feverishly writing code out of his parents’ house on a minimal budget to create his own technology start-up.

The result was GoCardless, a London-based company that allows small businesses to set up monthly payments to suppliers at a fraction of the cost that banks charge. The business has secured $1.5 million in seed capital from a number of well-known investors, including the American early-stage venture capital firm Y Combinator.

“The whole idea of bank payments is broken,” said Mr. Takeuchi at the start-up’s office in a dilapidated building on the outskirts of London’s financial district. “There’s an opportunity here, and we’re looking to grab it.”

Hazel Thompson for The New York TimesHiroki Takeuchi, co-founder of GoCardless, a new financial firm based in London.

London’s fast-growing start-up scene is trying to disrupt the financial status quo. As consumers’ trust in banks deteriorates because of a series of recent scandals, young companies are pressing their newcomer advantage. Firms are offering services like low-cost foreign currency exchange and new ways for small business to borrow cash.

Backed by venture capital firms like Index Ventures, the financial start-ups are taking on entrenched incumbents by using technology to pare back costs and improve the customer experience. Local authorities do not directly regulate many of the firms, but the young companies often use traditional banks and other financial firms for their back-office functions, like processing payments, which are monitored by British regulators.

“Start-ups are taking advantage of London’s position as a global financial center,” said Adam Valkin, a partner at the European venture capital firm Accel Partners. “They are innovating in ways that banks just can’t do.”

The growth of finance entrepreneurs comes as London’s start-up community continues to flourish. Many parts of East London have transformed into a mini version of Silicon Valley, with the likes of Google opening shared office space to support fledgling companies. Finance, technology and fashion start-ups have been able to tap into the large talent pool of young, multilingual professionals eager to work for the firms.

Many companies are following the lead of Wonga.com, an online lender founded in 2006 that has sought to fill a void left by banks by offering short-term, high-interest loans to consumers and small businesses. The company has been criticized for charging high interest rates to vulnerable consumers. The typical annual percentage rate on the company’s loans is more than 4,000 percent, though Wonga.com says it only offers lending for a maximum of 30 days.

To cut down on costs, the start-up relies on publicly available online data to determine whether an applicant is creditworthy. Loans can take as little as 15 minutes to arrange, and the company has branched out from consumer lending into the small-business market as individuals look for alternatives to banks.

The tactics are paying off. Last year, the online lender reported a 269 percent rise in its net profit, to £45.8 million, or $73 million, after its loans increased fourfold compared with the previous year. Now, Wonga is now contemplating a multibillion-dollar initial public offering on Nasdaq, profiting from lending to consumers that are perceived as too risky for banks.

For many workers in London’s financial services sector, successes like Wonga have turned the idea of starting a business into an increasingly attractive option. With investment banking activities on the wane, job prospects in the industry have remained poor since the beginning of the financial crisis, and the financial sector here is expected to lose 25,000 jobs this year.

Anil Stocker has seen the layoffs up close.

Mr. Stocker, a 28-year-old Cambridge graduate, left Lehman Brothers a few months before it collapsed in 2008. A year later, he resigned from the American investment bank Cogent Partners to co-found MarketInvoice with two friends who worked at JPMorgan Chase and Goldman Sachs.

The start-up helps small businesses gain access to capital by selling their supplier invoices to investors at a discount.

“The finance industry will have to completely change, and we are just at the beginning,” Mr. Stocker said.

MarketInvoice wants to exploit an underserved market in the banking sector. As firms have pulled back on lending, small business have been denied credit because they are deemed too much of a financial risk.

To help these companies access cash, Mr. Stocker and his partners began an online marketplace where small businesses can auction their long-term supply contracts to money managers for the highest price. Many of these invoices can take up to 90 days to pay out, so companies are willing to sell them at a discount to get hold of short-term capital.

Starting the business has not been easy. It took MarketInvoice’s founders — who were still working for banks — almost a year to devise the business plan, and a further six months to raise $1.4 million from investors. The start-up auctioned its first supplier contract for £40,000, or $64,000, in early 2011, but only hit the £1 million mark nine months later.

“No one wanted to be the first company to use our system,” Mr. Stocker said. “At the beginning, you live or die by your reputation.”

London’s finance start-ups also are attracting entrepreneurs with a technology background.

Taavet Hinrikus, a 31-year-old Estonian who was Skype’s first employee, dreamed up his business while still working for the Internet calling service. In 2006, the company moved him to London from Tallinn, Estonia, where he rose to become Skype’s director of strategy. But Mr. Hinrikus grew frustrated after losing 5 percent of his salary to bank charges every time he moved money from Estonia to Britain.

After meeting fellow compatriots in London who wanted to transfer cash back Estonia, Mr. Hinrikus created a system in which individuals could move money to each other’s accounts. By agreeing to swap currencies at a set rate, Mr. Hinrikus said he saved thousands of dollars in bank fees.

“We had to find our own way to avoid the charges,” he said.

With his business partner, Kristo Kaarmann, a former management consultant, Mr. Hinrikus built a Web site that connects people looking to exchange British pounds with euros. Their start-up, called TransferWise, acts as an intermediary for the money transfers and has expanded into other European currencies.

Not everything has gone to plan. The start-up had to wait 18 months to receive its license to operate from British regulators.

Yet in its first 12 months, Mr. Hinrikus said TransferWise has helped people to exchange around $10 million of foreign currencies that has avoided costly bank charges. The start-up also has raised $1.3 million in seed capital from investors, including PayPal’s co-founder Max Levchin.

“Banks aren’t doing a good job at innovating for consumers,” said Robert Dighero, a partner in the London-based venture capital firm Passion Capital. “Start-ups are nibbling away at some of their most profitable businesses.”

Computer Security Start-Ups Catch Venture Capitalists’ Eyes

The organizations attacked by pranksters, criminal syndicates or foreign governments include Google, LinkedIn and the Central Intelligence Agency.

Big companies are expected to spend $32.8 billion on computer security this year, up 9 percent from last year. Small and medium-size businesses will spend more on security than on other information technology purchases in the next three years, according to the research firm International Data Corporation.

Yet here in Silicon Valley, with all the feverish talk of innovation and billion-dollar start-ups, few entrepreneurs and venture capitalists have been eager to take on the security juggernauts Symantec and McAfee — and in many cases cybercriminals — for a piece of that action.

That has started to change. In the last 12 months, the initial public offerings of once obscure security start-ups have outperformed offerings from household names like Facebook and Zynga. Imperva, a data security company that went public last year, finished 2011 among the year’s top offerings. Its shares jumped nearly 30 percent on their first day of trading, and remain 37 percent above the offering price. Zynga’s stock, by comparison, has plunged 73 percent since its offering last December.

Shares of Splunk, a data security company, jumped nearly 65 percent from its offering in April. It raised $331 million in a secondary offering. Most recently, shares of Palo Alto Networks, a security start-up, climbed 26 percent when they started trading in July.

The reason for the enthusiasm? “People are starting to realize that the billions of dollars that have been invested into traditional network security is not working for them anymore,” said Ted Schlein, a partner at Kleiner Perkins Caufield & Byers, the venture capital firm.

Security start-ups have also become red-hot takeover targets. Apple, which has avoided big-ticket deals, agreed to acquire AuthenTec for $356 million last month in its second-largest acquisition to date. And last year, the EMC Corporation, which already owned RSA, acquired NetWitness. The price was never disclosed but people close to the acquisition talks say NetWitness sold for $400 million, more than 10 times its 12-month trailing revenue.

Venture capitalists have taken notice.

Last year, they collectively poured $935 million into tech security companies, nearly double the $498 million they invested during 2010, according to a MoneyTree report compiled by PricewaterhouseCoopers, the National Venture Capital Association and Thomson Reuters.

“We’re seeing a flow of new entrepreneurs interested in the space,” said Asheem Chandna, a venture capitalist at Greylock who invested in Imperva and Palo Alto Networks.

The rise of security start-ups is the product of a confluence of new technology, fear and people with a lot of money to invest. Major technological shifts, like the move to mobile devices and cloud storage, have redirected and increased the flow of information — for both employees and hackers.

Hackers are becoming more sophisticated, too. Last year was the year of the “Advanced Persistent Threat,” or A.P.T., a computer attack in which hackers spend time researching a target and its intellectual property, figuring out who has access to it, and deploying any means necessary to steal it.

RSA was the victim of such an attack last year. So were the military contractors Lockheed Martin and Northrop Grumman. Speaking at a security conference last year, Timothy McKnight, Northrop Grumman’s chief security officer, said the company was fending off several such attacks a day.

“The vast majority of companies have already been breached,” Shawn Henry, the F.B.I.’s former top computer security official, said in a recent interview. “I’ve looked at all sectors and the depth, penetration and breadth of these attacks are substantial.”

The bulk of the attacks go undisclosed, either because companies don’t know they have been hit or because they fear what disclosure will mean for their stock prices. But the attacks that have surfaced have become headline-grabbing events, exposing the vulnerability of technology firms, government agencies and the security companies that people assumed were well protected.

Patrick Morley, chief executive of Bit9, a start-up that blocks malware, says the steady stream of “bad news” has been a boon for business.

Bit9 was founded a decade ago but was largely unknown until 2010, when Google’s password system was breached and top-level executives started to pay attention. “In boardrooms, executives lifted their heads and asked, ‘Are we O.K.?’ ” Mr. Morley said.

“We’ve grown 100 percent every year for the past two years. Before that, we didn’t see that kind of growth,” he said.

Bit9, which roughly tripled its client base in two years, announced last week that it had raised $34.5 million in an investment round led by Sequoia Capital, the venture capital firm.

Mr. Chandna of Greylock said the bulk of security start-ups that solicit his firm fall into one of four categories: mobile security, authentication, intrusion detection and “big data” security companies.

Several recently secured millions in financing. Lookout, a firm that blocks malware and spyware on consumers’ mobile devices, raised $78 million from top-tier firms like Accel Partners and Andreessen Horowitz. A range of new start-ups market a similar service to businesses that now must deal with the headache of employees’ bringing their iPhones and iPads to work and carting confidential intellectual property around with them.

Zenprise, a start-up that brings business-level security to consumer phones, recently raised $65 million. Appthority, a one-year-old start-up that tracks suspicious behavior by mobile apps, raised $6.5 million from Venrock, U.S. Venture Partners and others last May. Solera Networks, a security start-up that tracks intrusions in real time, has raised over $50 million from Intel Capital and others, and many say it is ripe for a nine-figure acquisition.

Investing in security can entail unusual challenges. In some cases, venture capitalists have received death threats from online criminals. In others, criminals have shut down their sites altogether.

Ray Rothrock, an investment partner at Venrock, said he had received threatening e-mails from such people. On occasion, his firm has hired security guards to protect its offices.

Blue Security, an Israeli start-up backed by Benchmark Capital and others, was forced to shut down its antispam service in 2006 after criminals responded to its filtering technology with an aggressive counterattack.

Spammers flooded its database servers with so much traffic that it took down Blue Security — and thousands of other Web sites with it — to the point that Internet service providers refused to host the service and it was forced to close.

“The thing about security investments is that sometimes you don’t know where you’re going to land in terms of attracting attention from the bad guys,” Mr. Rothrock said. But, he said, the risks are still worth the rewards. “Security is a growing market and it will grow forever.”