Lijit Networks, one of our portfolio companies, just announced today that it closed a $7.1 million financing led by Foundry Group. This financing gives Lijit the financial resources to focus its efforts on rapidly growing its already sizeable base of publisher users, launching its search-powered ad network, and further expanding Lijit’s cool people-oriented search solutions.

We’ve blogged previously about Lijit and the role it plays in what we call our implicit web theme. Foundry Group has been involved with Lijit since its formation, so we’ve witnessed everything from the birth of its idea through its technology development phase to the company’s successful market introduction.

Along the way, we’ve been impressed with the warm reception and accolades that Lijit has received from its publisher users. While much of Lijit’s historical efforts have focused on the needs of individual bloggers/publishers, the company is now in a position, both financially and technologically, to begin to offer more complex solutions that meet the needs of large publishers and publisher networks that are unaddressed by existing search tools.

Needless to say, we’re thrilled with the progress the company has made thus far and are equally bullish on the company’s prospects. Congratulations to Todd Vernon and the entire Lijit Team!

We are happy to announce that we’ve added another exciting company to our portfolio. EmSense, based in San Francisco, has created the first scalable physiological and brainwave measurement technology platform, which provides accurate and objective moment-by-moment analysis of how a large audience responds emotionally and cognitively to media messaging.

EmSense marks Foundry Group’s third investment in our Human-Computer Interaction (HCI) theme (joining Smith & Tinker and Oblong), as well as our second investment in a company whose technical founders, including CTO Hans Lee, hail from the MIT Media Lab, a place chock-full of big-brained wizards who can do magical things with technology. In our previous blog posts about HCI we’ve alluded to the idea that computers might one day react to our thoughts. In fact, that has been possible in the lab for years, and the technology that enables this is now leaving the labs and is being deployed in the real world.

EmSense’s technology is based on rigorous EEG neuroscience applied to thousands of participants and uses an elegant headset that enables non-invasive tracking of brainwaves and other biometric information including temperature, motion, eye movement, pulse and breathing data. The portability and scalability of the EmSense headsets facilitates multiple-response testing of an audience’s reaction to a media experience anywhere in the world.

Now that you’ve made it to the fourth paragraph of this post, you might still be asking, OK, but what does EmSense actually do? In the wide world of media, which for EmSense includes everything from advertising to video games to politics, marketers, brand managers and political candidates all want hard data on how an audience will respond to their product, be it a TV commercial or a first-person shooter.

The focus group, user-testing and surveys have traditionally been the means to gather these data, but such methods typically rely on the audience explicitly answering questions about their reaction to the media they’ve just experienced. Certainly, much of this information is useful and actionable, but, it isn’t always reliable, for all the reasons that humans aren’t always reliable witnesses, nor does it track these reactions in a way that can be directly correlated to a distinct moment during a media experience. EmSense’s technology, which correlates brainwave data and other biometric data, enables a reliable and (most importantly) a quantitative way to measure an audience’s cognitive and emotional engagement throughout an experience. We’re big believers in the market potential of technologies that make the formerly unmeasureable measurable, and therefore bring the power of analytics to decision-making processes that previously relied more on gut than brains, more on art than science.

One of things that attracted us to EmSense was the fact that they already have customers across the media spectrum, including advertising, consumer products, politics and gaming. In fact, Coca-Cola engaged EmSense to help them decide which two TV ads they should run in the Super Bowl. Not only did EmSense help them winnow down the list of candidate ads, the data from the finalist ads was used to make final edit decisions in the spots that ultimately aired.

In addition to EmSense’s technology credentials stemming from their MIT Media Lab DNA and their enviable early customer list, the company’s executive team really stands out – CEO Keith Winter’s background includes executive level roles at Exponential, Electronic Arts and Disney Interactive, Chief Analytics Officer Elissa Moses formerly ran Global Consumer Strategy at Philips, Chief Science Officer Michael Lee spent a decade at HP Labs, and board member and angel investor Tim Koogle is well known for his role as Yahoo’s first CEO.

We are excited to join the EmSense team at this stage in their development as a company. With their initial customer success well demonstrated in multiple markets, they are poised to further accelerate their growth, and we are delighted to be backing them and assisting them in the next phase of their journey.

Our portfolio company Zynga announced today that they have closed a $29 Million Round of Financing Led by Kleiner Perkins and IVP.   We participated in the financing alongside of our co-investors Union Square Ventures and Avalon Ventures.  Bing Gordon, a co-founder and former Chief Creative Officer of Electronic Arts and now a partner at Kleiner Perkins has joined Zynga’s board.

Brad wrote about the financing and Zynga’s progress on his blog in a post titled Doubling Down.  There were numerous other articles and blog posts about the financing today, including extensive ones in the Wall Street Journal and TechCrunch.

As you may have read in a prior post on Boulder’s Culture of Entrepreneurship, we feel that one ingredient necessary to create and sustain this culture is engaged university activity. We are lucky to have the University of Colorado in our backyard and fortunate that it has consistently engaged in activities that foster and create entrepreneurship initiatives.

While none of us attended CU, we’ve all adopted it as our “other school” and have become very involved with several different groups.

Silicon Flatirons – One of the most active entrepreneurial groups was born out of the law school. Yes, the law school. It’s called the Silicon Flatirons and it is made up of business leaders, financiers, academics, entrepreneurs and other folks interested in building a nerve center of thought leadership in issues in technology. The program was created by Phil Weiser, one of the most forward-thinking legal scholars in the country. In addition to having nationally-known guest lecturers, roundtable and educational programs for the community at large, the center has begun an ambitious program that will focus on entrepreneurship activities in the Boulder area. Specifically, a separate board on entrepreneurship has been created and we are quite active with it, with Jason serving as chairperson. Recent achievements include the creation of an “entrepreneurs unplugged” program whereby successful and nationally known entrepreneurs are interviewed in an “inside the actors studio” type format. Anyone in the community is free to attend. This board is also focusing on developing a campus-wide business plan competition as well as building out entrepreneurial-based curriculum for engineering, business and law students.

Deming Center for Entrepreneurship– Though its graduate program is relatively small, the Leeds School of Business at the University of Colorado at Boulder has consistently been recognized for having one of the top entrepreneurial programs in the nation. The Deming Center for Entrepreneurship serves as the business school’s hub of entrepreneurial programs and activity. Led by executive director Paul Jerde, the center benefits from an active advisory board of successful entrepreneurs, executives and venture investors. The Deming Center’s program combines an integrated academic curriculum with a “connected learning environment” that engages the broader entrepreneurial community to provide students with hands-on learning and mentorship. Fitting for an organization based in Boulder, the Deming Center’s programs have been at the forefront of integrating environmental sustainability with entrepreneurship. Examples of the center’s leadership include its international Cleantech Venture Challenge, the Sustainable Opportunities Summit, and Sustainable Venturing Initiative, as well as more traditional activities such as hosting the Mountain regional finals of the international Venture Capital Investment Competition and a number of internal business plan competitions.

Bard Center – Established through a grant from Denver businessman Richard Bard and his wife Pamela, the Bard Center for Entrepreneurship at CU Denver offers graduate level courses in business and entrepreneurship to students enrolled in the CU Denver system. Since its founding in 1996, the Bard Center has seen almost 2,000 students enroll in classes through the program and has awarded just under 500 certificates of entrepreneurship. The center is supported by a strong board of advisors, including Seth. In addition to the academic programs it runs, the Bard Center also sponsors a large business plan competition and supports a small venture fund to invest in student-initiated businesses. Under the stewardship of Kathy Kuntz (blog, LinkedIn) look for the Bard Center to continue to expand its influence in the Denver entrepreneurial scene.

National Center for Women & Information Technology – Funded by NSF, Microsoft, Avaya, Pfizer, Bank of America, and a number of other members of its workforce alliance, the National Center for Women & Information Technology is the pre-eminent national organization working to engage women more actively in the field of information technology and computer science. NCWIT believes that inspiring more women to choose careers in IT isn’t about gender parity; it’s a compelling issue of innovation, competitiveness, and workforce sustainability. NCWIT is housed in CU’s new ATLAS Building and has quickly become an important national program at CU engaged in promoting innovation in the computer science field. Brad has been chairman of NCWIT for the past three years.

All of us believe that a strong local university that has a culture of entrepreneurship is a key component of any local entrepreneurial ecosystem. We are proud of our involvement in the CU entrepreneurial ecosystem and hope to continue to engage it and help improve it over the coming years.

We are extremely pleased to announce our investment in Topspin Media’s Series B financing. Topspin is a media technology company headquartered in Santa Monica, California, dedicated to developing leading-edge marketing software and services that help artists and their partners build businesses and brands. Topspin’s platform helps artists manage their media catalogs and other assets, connect with fans and generate demand for their music.

Had our investment closed a couple of weeks earlier, we wouldn’t have been able to talk about it immediately, but the company recently un-stealthed themselves in true rock & roll style by appearing on the cover of the June 28th issue of Billboard magazine.

As most folks who know Foundry Group already know (via numerous blog posts, emails and Facebook messages promoting their band, Soul Patch), both Ryan and Jason are avid, life-long musicians, and have played music together since they met in 2000. Since that time they’ve also been the “music guys” on the investment team, looking at every music-related opportunity that came their way.

Over the past eight years of looking at music-related investment opportunities, Ryan and Jason didn’t make a single investment until now, though they carefully followed the progress of startups and incumbents alike over the years and brainstormed frequently on the forces at work that were reshaping the industry. From this Ryan and Jason created a blueprint of what the future of the music business might look like. In some ways, the bar for making a music-related investment was even higher than it was for other markets, because they didn’t want to let their passion for music cloud their judgment about a business’s long-term potential. Given the violent and ongoing disruption in the recorded music industry unleashed at the turn-of-the-millennium thanks to the rise of the mp3 format, p2p networks , broadband deployment, aggressively litigious record labels and the iPod and iTunes Music Store, it was nearly impossible to get comfortable with any business that wanted to play in the music arena, particularly if it required licensing of music catalogs for download or streaming rights or anything else that pushed copyright holders outside of their comfort zone.

In VC, as in life, timing is everything, and, and it is often said that being early is the same as being wrong, so we have stayed out of the digital music fray until now. In fact, Topspin co-founders Shamal Ranasinghe and Peter Gotcher had been kicking around the Topspin idea for many years, but shelved it until 2007, when they finally felt like the world might be ready for a company like Topspin. They raised a Series A round from Redpoint Ventures and then, in April 2008, landed former Yahoo! Music GM Ian Rogers as CEO.

Topspin has assembled a phenomenal team of music technology veterans to execute on their mission. Topspin Chairman Peter Gotcher was founder and CEO of Digidesign, the company that created the Pro Tools audio workstation platform, which revolutionized the recording industry. He sits on the board of Dolby Corporation and was also a founding venture partner with Redpoint Ventures and led investments in pioneering music-tech companies such as Line6, MusicMatch and Pandora. Chief Product Officer Shamal Ranasinghe worked on one of the first mp3 jukeboxes at RealNetworks and has defined product vision at MusicMatch and Yahoo! Music. Finally, CEO Ian Rogers was GM of Yahoo! Music, where he landed via the acquisition of MediaCode, where he had been President and CTO. Ian has also worked on the label-side of the business as President of New Media at Grand Royal, and also did a stint at Nullsoft, creators of WinAmp and SHOUTcast. With a pedigree like this, it was easy to get excited about the team behind Topspin. To top it all off, Ryan has known Peter and Shamal for about a decade and actually introduced them to one another many years ago.

We think the timing is finally right for a company like Topspin to have a major impact in the music world. The distribution of digital music has finally gone mainstream, with Apple’s iTunes Music Store beating out bricks-and-mortar giant Wal-Mart as the largest music retailer on the planet. Apple’s success in this regard is no panacea, but it has paved the way for other online retailers, and we are now seeing a second phase emerge with more educated consumers beginning to reject DRM and move their purchasing to higher-quality DRM-free MP3s offered by the likes of Amazon.

But this shift really just sets the stage for the continued evolution of the business of being an artist in this new era. Thanks to technology, the physical world scarcity model has been upended. The costs of recording and producing world-class music are nearly zero (though, arguably, talent is still required) and the costs of distribution are also near zero, which has eroded the traditional advantages enjoyed by the major labels: exclusive access to high-end studios, a lock on physical distribution and marketing through proprietary access to radio and MTV, channels which are becoming decreasingly important. As music futurist Gerd Leonhard aptly puts it, in the broadband age, marketing is distribution.

A new, more artist-centric model will emerge, one in which the key factor for success rests completely on the ability of artists to engage directly with their fans and to seek out and discover new fans, something Seth Godin calls permission marketing. To do this well, artists, or their managers, agents and record labels need access to a platform that would be considered an “enterprise-grade” CMS/CRM suite complete with campaign management, a flexible e-commerce engine and deep closed-loop loop analytics, verticalized for the special needs of recording artists, one that provides artists and their partners with the means to conduct and grow their businesses online.

We believe Topspin is uniquely suited to deliver on this vision. Building the technology to do this is no simple task, and Topspin is by no means simply a marketing services play, but rather is a technology platform company that fits neatly in our Glue theme and has the elusive combination of technical depth and ideal management DNA to make an enormous impact in the music industry. And we’re honored that Topspin chose Foundry Group as an investor, given that this team had no shortage of options when it came to raising their Series B.