semyendow: Top 10 Startups of 2011

What happened to startups in 2011? E-commerce and mobile payments continued to grow, and group buying startup Groupon went public. Facebook, the biggest social network around, expanded in a huge way, announcing Timeline, frictionless sharing and a settlement (finally) with the FTC. It also swallowed up many promising startups, including group messaging service Beluga, social network-enhancing service Friend.ly and software company WhoGlue.

The mixing of social gaming and mobile payments, social network alternatives to Facebook, consumer cloud storage and apps that actually make you feel productive (read: not like you're just wasting more time online) came out on top as just a few of the most important startups of this year.

This year's top 10 startups list is a combination of companies that launched in 2011, and others that gained considerable attention. We chose these startups based on how they've changed or disrupted their niches and how they've influenced trends this year and for the year to come. They are listed in no particular order. Take a look after the jump.

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Fab.com: Social Shopping That Works

Fab.com wasn't always as glamorous as it is today. The site first launched in April 2010 as Fabulis.com as a "cross between Facebook and Yelp" specifically designed for gay male consumers. Yet by February 2011, the site had come to a serious halt with 130,000 members, only 30,000 of which were active. Co-founders Jason Goldberg and Bradford Shellhammer decided to trash it and start over, retaining only the social graph and a flash sales feature that had already been working quite well called "Gay Deal of the Day." In the wake of total mainstreamification of the gay market - Glee, Lady Gaga, gay marriage becoming legal in New York and Don't Ask Don't Tell finally being repealed - the need for gay niche sites was declining. Instead of closing down the site for good, Goldberg and Shellhammer decided to reinvent it as Fab.com, a flash sales site aimed at the design-conscious shopper (who may or may not be gay and male). The experiment worked.

By September 2011, Forbes reported that member numbers were up to 600,000 and sales were in the six-figure range. Shellhammer handpicks every product that is sold on the site. It doesn't rely on email blasts or fatigue-inducing daily deals. And unlike other flash sales sites, merchants who sell on Fab.com don't lose money on their products.

To make the e-commerce experience more social, Fab.com launched its Live Feed, which aggregates everything that the site's users are buying, liking, tweeting and sharing about on the Web. The new feature is opt-in, meaning that Fab users don't one day wake up and realize that everyone in their network knows their purchasing habits. As I said in my 2012 predictions post, this social networking-turned-flash sales site will continue to grow. Fab.com's only real competitor in the flash sales market is Gilt Groupe.

Dwolla: Mobile Payments That Act Like Cash

Apparently Des Moines, Iowa, is the mobile payments capital of the U.S. It is also the home of mobile payments platform Dwolla, which has been on the RWW radar this year. Here is how it works: Sign up for Dwolla, load up your account and then head over to a retailer that's using Dwolla for mobile payments. The company says it is working on partnerships with banks and financial institutions so that money can go right from user's bank account to the retailer.

Dwolla sees itself more like Visa than a PayPal type of mobile payments solution, except it uses cash instead of credit. Its main competitor is Square, which offers Square Card Case, except that relies on a user's smartphone and the retailer's iPad cash registers. Dwolla is much simpler.

Users benefit from Dwolla's location and social features, and that it's basically digital cash rather than credit-based money. In that way, Dwolla acts like cash in your wallet, except it's digital and your wallet is your smartphone. And at the end of the day, Dwolla wants to partner with retailers to make this concept work. Its "Grid," which launched back in June, works like Facebook Connect for payments - a user's personal information is stored on Dwolla, not the merchant's servers. If a third-party app wants to connect to Dwolla, it has to first ask permission just like Facebook Connect. That's one way Dwolla makes users feel more in control of their accounts, which are also based entirely on cash. In terms of sending and receiving money from one's own bank account, Dwolla charges a 25-cents per transaction fee, which is five cents less than PayPal's 30-cents per transaction. To use Dwolla, sign up, add friends from your social network, then click on "Send Money" to get your cash into the Dwolla account of a friend.

Zaarly: Mobile Local Commerce Comes To Your Neighborhood

Zaarly is one of the few startups on our list that did in fact launch this year. It launched in May 2011, positioning itself as a mix between Craigslist "For Sale" section and an online auction house. To use it, sign up for a Zaarly account, post what it is you want to buy and how much you're willing to pay, and then sit back and wait for folks to submit bids. The kicker here is that you select the time frame for the product you want, and the distance you're willing to travel. This brings a more instantaneous element into the entire mobile local commerce experience. Zaarly shares your request to its company Facebook and Twitter pages in addition to the web and mobile versions of the site. After enough bids come in and the buyer is satisfied, they pick one and either pay with cash or the Zaarly integrated payment system.

Whereas EBay is entirely bidding based, Zaarly acts more like the local commerce facilitator. Zaarly users don't need to limit themselves to stuff, per se. They can also post about errands they need done and tasks they want someone else to do for them, from "delivering a candle" to "finding an indie music expert to make me feel cool again." The company raised $1 million in its seed round from investors such as Ashton Kutcher, Ron Conway, Paul Buchheit and Chicago's Lightbank, which also backed Groupon. In late October, it raised $14.1 million from Kleiner Perkins and Sands Capital Ventures, just to name a few.

BankSimple Finally Launches, Rebrands Itself As Just Plain "Simple"

Web-native bank BankSimple said it would launch in 2010, but waited until nearly mid-way through 2011 to send its social Web application out into the world. The idea behind BankSimple is simple: Create a Web-based bank that let users deposit checks by photographing them with its mobile app. Make cash withdrawals from ATMs anywhere without the obnoxious fees. Receive recommendations and value-added services based on the private data that you provide.

While the "location optional" feel of BankSimple seemed great, in the wake of Occupy Wall Street and people transitioning back to local credit unions, the idea of putting all of your money into the cloud felt a bit less appealing. The service finally launched in late September, but raised concerns about the security and potential sale of customer data. In November, BankSimple rebranded to just "Simple" and officially opened for business. It is not actually a bank, but it does work with FDIC-insured banks that handle a user's money.

Next page: The next five top startups of 2011

Path: If You're Serious About Not Being On Facebook

In the second to last month of 2010, former Facebook Platform Manager Dave Morin, Napster Co-Founder Shawn Fanning and quite a few star investors launched Path.com, the social network that isn't about size, popularity or social status. Friend lists are small and personal. Path notifies you immediately when someone looks at a photo of something you post. It is essentially a "path" of your life as you go, which is essentially what Facebook Timeline wants to be. Except on Path, things stay small. The company calls itself an app that helps you "share life with the ones you love" by streaming your life, taking you on one big ego trip.

As Jon Mitchell wrote in his smartly titled post "Path, Timeline and Worship of the Self," the big difference between Path and Facebook Timeline is that Path is closed, though you can choose to syndicate your content to Facebook or Twitter. Some have said that Path is what Facebook should be, a space for real friends not thousands of Facebook "friends" that you've met twice. In the wake of social Web overload, could Path be the way to bring some balance to your socially networked life?

Pinterest: Start Pinning Pretty Pictures And Forget About Socializing

2011 was a big year for visual social bookmarking site Pinterest, which is growing at rapid speed. It launched in March 2010. During the week ending December 17, the site received 11 million visits, which is 40 times what it received six months prior. We first wrote about it in September 2011 just as it was gaining speed on the social Web. The concept is quite simple: Users sign up for the site and then add the Pinterest bookmarklet to the browser. Find an image on the web and then "pin it" to the site based on category and a brief description. Users with the iPhone app can snap a photo and do the same thing. Pinterest's user interface is wholly visual. Sites like Delicious and Q&A social network Quora are starting to look like Pinterest, too. Ben Silbermann, a West Des Moines native and the CEO of Pinterest, noted that the first people to understand and use the site were women in the Midwest. Pinterest is growing larger everyday. Don't be surprised if you see a steady stream of email invites continuing well into the new year.

SCVNGR: The Gamification Of Location-Based Commerce

We've been keeping a close eye on SCVNGR since 2010. A Google Ventures-backed mobile location startup launched in 2010, initially vowed to beat Facebook Places. The now 22-year-old founder Seth Priebatsch launched SCVNGR as the game layer on location. Initially, it was a consumer product, but has since changed the mobile payments game all together with its game dynamics. Earlier this year it launched LevelUp, a platform that brought together gameification and daily deals, allowing users to receive better deals so long as they keep using the system and unlock levels with merchants as they go. The LevelUp app gives its users a personalized QR code that ties to debit/credit cards that are already in the system, but not on the device itself. Bringing together mobile payments to location-based games is unique from both Foursquare and the now-defunct Gowalla. We'll keep a close eye on SCVNGR in the coming year.

Evernote: How To Organize Your Life

Evernote CEO Phil Libin said that only 13% of its users had the Evernote Web version, which indicates one thing and one thing only: It's all about the app. Initially only a product used by professionals, Evernote has expanded to many new users, including students. Evernote added ways to share with individuals over Facebook and email, the former of which felt pretty slow in coming. Evernote made its Windows app more social, updated its Chrome extension for better web clipping, added audio for Macs and greatly improved its Android app. When it scored $50 million in new funding from Sequoia Capital, Libin boldly declared that the company would be around for another 100 years. Evernote updated its iOS app with rich text editing within notes, mobile access to shared notebooks, search features and a new way to look the app using a passcode.

Everything seemed to be going well for Evernote this year until the introduction of its Evernote Hello app, which is supposed to help users remember people they meet in real life by taking their picture. Unfortunately, it's only available for iOS and it assumes that the user is willing to hand over his or her phone to a stranger. ReadWriteWeb's Joe Brockmeier notes that this could be awesome, if "Evernote is using Hello as a prelude to acing contact management features into Evernote." If it does, this could be a great way to manage contacts. Even better, it could collaborate with LinkedIn's CardMuncher iPhone app to sync everything up. Next up, Evernote wants to conquer the world of "Read Later" apps; it just added its "Clearly" clean-reading extension to Firefox. We named Evernote one of the top 10 consumer Web products of 2011. It is certainly one to watch in 2012.

Dropbox: Consumer Cloud File Sharing At Its Best

Last but not least is Dropbox. It is a concept so simple that you'd think someone else would have thought of it sooner. Basically, Dropbox is a folder that syncs to the Internet, and allows for super easy file sharing between users. Gone are the days of YouSendIt megafiles. Just go for Dropbox. BusinessInsider named it the world's 5th most valuable startup, but is it? A complaint against Evernote was filed with the FTC, stating that Evernote misled users about its security and privacy, which is sure to scare any startup. But despite this little roadblock, Dropbox has nailed down its place as a key player in the consumer cloud right alongside iCloud.

Do you agree with our picks? Did we miss anything? Let us know in the comments below.

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