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Elemental Technologies, a startup focused on faster transcoding, has raised $7.1 million from General Catalyst Partners and Voyager Capital. The company’s software uses the graphics processor rather than the CPU inside a computer to handle the work of ripping a DVD or video file to another format. It’s one of several startups using Nvidia’s GPUs for tasks once allocated to the CPU, and bolstering the idea that GPUs might be better suited than the CPU to some tasks, such as scientific computing or video transcoding. To read more check out our coverage on NewTeeVee.

With Web 2.0 fever finally starting to wane, the investor community has been pumping some serious dollars into virtual worlds and MMOGs — about $345 million in 39 virtual worlds in the first six months of 2008. And the third quarter has started off with a bang, with veteran (it was started in 2003) virtual world/online community Gaia Online announcing that it has raised $11 million in Series C funding from Institutional Venture Partners. Gaia raised $12 million last year from DAG Ventures, Benchmark Capital and Redpoint Ventures; its funding now totals $32 million. Interestingly, none of the older investors participated in the latest round. The new money indicates that the San Jose, Calif.-based company might not be profitable just yet.

Last year, when Disney acquired Club Penguin for about $700 million, the conventional wisdom was that Gaia would be the next one to get snapped up. Since then, we’ve heard rumors that the company was talking to quite a few suitors.

The reason there has been an increased investor interest in virtual worlds is because the sector captures a highly lucrative younger demographic, notably teenagers. eMarketer expects the number of teen Internet users visiting virtual worlds to rise to 20 million by 2011 — from just 8.2 million in 2007. And unlike the demographic of the traditional gaming business, which is facing a crisis of attention, teens tend to be a more engaged audience, and are more likely to participate in virtual economies and newer forms of advertising.

Gaia’s attempts at commercialization have met with some resistance from its community — read the comments in response to one of our previous posts. Nevertheless, it still has a thriving community and continues to grow at a rapid clip.

GigaOM???s Structure 08 event offered a terrific opportunity to survey the changing landscape of computing infrastructure. But as with all technology shifts, innovation won???t just belong to the big established players like VMWare, Amazon, Google, Sun Microsystems, Salesforce.com and NetSuite. With that in mind, Found|READ asked a panel of conference participants to share their thoughts via email on some of the more compelling business opportunities for startups in the cloud computing space. Specifically, we asked them:

F|R: Let’s say you’re about to start, or fund, a new business. Considering the changing landscape for computing architecture, what emerging or ignored problem in cloud computing would you target? What business or service would you launch to try to address it?

Arnie Berman, Chief Technology Strategist, Cowen and Co.:

Since Structure 08, I???ve been mulling over the following conundrum: How to give those that sign up for cloud computing services a sense of just how big (or small) their bills will be. In the wireless handset world, the advent of ???bucket pricing??? greatly helped the cause of mobile adoption. With “per-minute??? pricing plans, charges were unpredictable ??? and occasionally very painful for active callers. ???Bucket pricing??? removed the fear of getting stuck with a ridiculously large bill.

In enterprise software, the advent of monthly subscription pricing from SaaS vendors likewise disrupted the license and maintenance pricing model of conventional software. But now companies like Amazon are threatening to disrupt the monthly pricing model with a ???by-the-drink??? model, where users only pay for the computing or storage capacity they use. While the economics of a pay-as-you-go approach are extremely compelling for most users, the approach actually reintroduces an element of uncertainty, because it’s very hard to predict what your computing consumption, and therefore your spending, is going to be. In wireless handset terms, it’s like going backwards from the safe harbor of ???bucket pricing??? to risky ???per-minute??? plans again.

Here’s a graphic:

Users like saving money. But they also like predictability. This suggests that what the world needs now is a monitoring and provisioning tool: a service (or a ware) that allows users to forecast their likely usage of computing infrastructure resources that they’ll purchase ???by the drink.??? Such a tool would also help predict their likely savings, as compared to the traditional on-premises software or SaaS models. Think of this tool as a tech innovation to help measure, and manage, the business model innovation that is cloud computing.

Luke Lonergan, co-founder and CTO of Greenplum, a maker of database management software:

The hype of cloud computing is huge with promise, and there are a lot of companies trying to explore what they can do with it. It is creating a market for services around putting applications into Amazon EC2 (leased computing infrastructure) and S3 (online storage) quickly and easily. If I were a VC in the market for a cloud company right now I???d look for something that makes the path from ???application??? to ???cloud application??? much quicker — basically I???d sell shovels and alcohol to the gold miners.

As far as the characteristics required: It would be off-the-shelf service for quick experimentation, something like ???put your code or job stream here, dial in the number of units, push button to run, back comes a monitor that watches over execution, when done you get stats about efficiency, etc.??? I think the current Amazon interface is more about the rental of assets and less about the execution of the experiments themselves.

Ken Elefant, General Partner, Opus Capital:

The most successful startups will identify enterprise computing needs that are not core to their customer???s business, but are still required to support it. This means targeting companies where a business buyer is eager to bypass IT. And founders should be going after cyclical businesses with predictable spikes. These are the kinds of potential customers that can benefit the most from overflow IT provisioning offered by a cloud computing startup. For example, search companies would want their large amounts of data to be in the cloud (pictures, videos, etc.) but only if they have low latency, low cost and high availability.

But don???t be too narrow in your pursuit of suitable verticals. Small companies still need to prove they have broad market applicability ??? and, specifically ??? enterprise customers who are willing to pay. The verticals need to be large enough to warrant a venture investment. An example might be financial services, where the provisioned service or function that a cloud computing startup might offer would be risk calculations, where lots of data, low latency and high availability is essential. Financial services is also a good example of a vertical of willing buyers. I believe technology will continue to trend in favor of talented, visionary entrepreneurs, especially those who can move fast.

Internet video portal and software maker Veoh has raised $30 million from Intel Capital, Adobe Systems Inc. and Gordon Crawford, senior vice president of Capital Research Global Investors, NewTeeVee is reporting, bringing the company’s total funding to just shy of $70 million. The funding for Veoh was just one of the $60 million worth of investments unveiled by Intel Capital; the investment arm of the chip maker also led funding rounds in online security company Accertify, workforce management software maker TOA Technologies, energy efficiency and smart grid company Grid Net, online health video network HealthiNation and Latin America-focused social networking company Vostu, as well as India-based online education company Vriti Infocom and Czech Republic-based online retailer Internet Mall.

Earlier today some blogs reported that Sequoia Capital had invested in Cotendo, a content delivery company based in Israel. The reports didn’t offer much details in terms of technology and the people involved with the project.

Thanks to some helpful friends in Israel and in the CDN business, we found out that the co-founders of the company are Ronni Zehavi and David Drai. Zehavi is the CEO and Drai is the CTO of the new company. They both worked for anti-spam and security software company, Commtouch Software.

Their profiles on LinkedIn describe Cotendo as a company “developing a sophisticated innovative infrastructure which provides an efficient and low-cost CDN service. Cotendo new approach open the ability for new services which help content providers to get the maximum benefit from content acceleration.” The company has 10 employees, many of them from Commtouch. It is not clear what kind of technology they have developed and how much funding Cotendo has raised.

Entrepreneurs see their venture backers as the ones with control in the relationship, according to a recent online survey conducted by Research Data Technology for a member of the National Venture Capital Association who wishes to stay anonymous. And just as many of them may have felt about the expectations set by Mom (or Dad), VCs’ expectations are viewed as being unreasonably high.

According to an online survey of entrepreneurs at venture-backed companies, 61 percent think VCs have control in the relationship, whereas 24 percent believe the entrepreneurs do. The rest aren’t sure, or have checked their egos at the door. When it comes to expectations for the investment, 47 percent of entrepreneurs believe VCs are too aggressive and 10 percent of thinking VCs are downright unrealistic. On the other hand, 43 percent believe the VCs are setting reasonable expectations.

Unlike your family, it is possible to shop around for a VC. Entrepreneurs surveyed did just that, visiting an average of 12 firms before getting funding from (on average) three or four firms in total.

source: anonymous member of the NVCA

Virtual meeting company Unisfair has scored $10 million in funding from Sequoia Capital and Norwest Venture Partners after proving that meeting people face-to-face isn’t always necessary or cost effective. As a telecommuter, I’m duty-bound to agree, although I’d rather gouge out my eyes than attend a virtual product launch party.

Still, many people must attend product launches, trade shows and job fairs for a living and doing it online is far cheaper (and greener) than trucking around the world with a trade show booth or the latest company literature. Unisfair doesn’t disclose revenue, but says it grew 350 percent last year after what might be considered a slow start. Founded in 2002, Unisfair decided to go with a virtual-environment product delivered using the software as a service model. Competitors at the time were promoting teleconferencing and online trade shows, but Guy Piekarz, CEO of Unisfair, says now he’s certain his company made the right choice with virtual meetings.

Thanks to the media and corporate attention given to virtual worlds such as Second Life, the idea of virtual trade shows isn’t that far-fetched. But in Unisfair’s secured version of a trade show the avatars can’t fly and the environment isn’t, er, prone to attacks from the air. That’s a plus for Unisfair’s enterprise customers, which include the likes of Cisco Systems, National Instruments and Cognos.

A chance meeting with Safi Qureshey, one of the early pioneers of PC revolution, took me on a trip down memory lane, back to the go-go days of early 1990s when PC stocks generated as much enthusiasm amongst investors as Google (GOOG) does today.

Qureshey was one of the three co-founders of AST Research, a PC hardware company whose star shined as brightly as the established brands such as IBM (IBM), Compaq and Hewlett Packard (HPQ). In 11 years it went from a startup to a Fortune 500 company, only to vanish in the mists of time, as the direct sales model of Dell (DELL) took over the PC industry.

A soft-spoken man, Qureshey knew that Intel’s decision to standardize the PC business around its motherboards would eventually turn the business into box-making exercise, one that left little room for innovation and profits for anyone other than Intel (INTC) and Microsoft (MSFT).

With the passing years, Qureshey and AST faded from my memory. All I remembered was that he was one of the first tech entrepreneurs I interviewed for a small New York-based weekly newspaper. The generosity of time he accorded this lowly scribe was a memory that stayed with me.

Today, we reminisced about the go-go years of PC industry when we got together to discuss his new company, Quartics. The naiveté of my youth has been replaced by gray in the temples and the cynicism of middle age. The PC has matured as well, but Qureshey is out to prove that there is life in the aging platform.

His Irvine, Calif.-based chip maker has come up with a range of media co-processing chips that do one simple task - take video signals from your personal computer and make them play back on any television. “Your PC is your IP set top box,” he says.

The chip - it costs around $20 - sits inside a small box (media connector) that is then attached to a TV via cables used to typically connect a DVD player to a television. It has the ability to boost the video signals to match the quality of standard TV signals. (A high-definition version of the chip should be rolling out soon.)

The media connector — it costs between $150 and $200 — comes with a software called Blink, which is installed on a PC. It can then take any type of Internet video signal — streams of Cricket games, Internet videos or “Desperate Housewives” on ABC.com — and send it to a TV via a wireless connection.

A small remote controls the media connector box and allows you to surf and switch the Internet channels on your PC. Blink, which looks like a cross between Joost and Veoh TV, is actually quite clever and simple to use.

While several companies are trying to develop these media connectors — Apple, Microsoft, Divx, Sling, Mediagate — Quartics is primarily a chip company and has no interest in making the boxes. It is backed by the likes of Foundation Capital and Integral Capital Partners and has raised around $35 million in venture backing thus far.

“We are giving away the reference design and software to our partners,” Qureshey says. The company is working with various device makers including Addlogix and Oki to bring these low-cost media connectors to market. It is also working with some Chinese TV makers to embed its chips directly into TV sets as well.

Qureshey points out that TV content makers are embracing streaming over the Internet because it allows them to bypass distribution partners such as cable operators, and instead build an advertising-supported business model. However, Internet-based video needs to come to the big screen. “We are offering the simplest way to bridge the last ten feet problem.”

So far, it has been hard to get Internet video onto the big screen. There have been kludgy attempts including the clumsy Media Center PCs. The Apple TV comes close to an elegant solution, but it’s too limited by access to content.

Quartics’ solution seems like a good idea whose time has come — now all Qureshey has to do is ensure that media connector boxes come to market at a price affordable enough to sell millions of units.