WSJ - 2011/2012 Top 50 Start-ups

By COLLEEN DEBAISE And SCOTT AUSTIN Venture capitalists are betting that the next Google Inc. GOOG -0.20%or Facebook Inc. will have a name like Xactly, Chegg or Zoosk.

In what may be a sign of a re-inflating Web bubble, The Wall Street Journal's second annual ranking of 50 venture-capital-backed companies shows investors are chasing after Internet firms, many with a consumer focus. Makers of Web-based software like Xactly Corp., e-commerce sites like Chegg Inc. and social services like Zoosk Inc. pepper the list. It also features four online publishers and two makers of social-networking tools for businesses. Bloomberg News Chegg Inc., a textbook-rental service, moved up one notch on the list to No. 31. . Even those firms in fields without a particular tech focus, such as health care or business services, have incorporated social-networking or mobile technology into their offerings or business models. To be eligible for the ranking—compiled by research firm VentureSource, a unit of Wall Street Journal owner News Corp NWS -0.25%.—companies must have received an equity round of financing in the past three years and be valued at less than $1 billion, as the aim is to identify lesser-known contenders. That excludes a number of prominent companies, including Facebook, Twitter and Groupon Inc. Some 5,743 candidates were considered. The Wall Street Journal's list of the top 50 startup companies of 2011 is just out. Colleen DeBaise takes a look at the three firms that topped the list and the reasons came out ahead of the pack. . For the second straight year, a health-care company tops the list: Castlight Health Inc., a San Francisco firm whose technology allows consumers to run side-by-side comparisons of out-of-pocket medical expenses. The three-year-old company, formerly known as Ventana Health Services Inc., was No. 14 on last year's list. It takes the top spot from Pacific Biosciences Inc., a genetic-sequencing technology firm that went public in October. Start-ups with potential for technological breakthroughs in health care, mobile communications and business software topped The Wall Street Journal's second annual Next Big Thing list. Castlight, like others on the list, is trying to modernize various aspects of health care, an area that is benefiting from federal stimulus spending. No. 18 PatientSafe Solutions Inc. has designed a patient-safety system for Apple Inc.'s AAPL -0.61%iPod Touch, while No. 32 Everyday Health Inc. runs a network of health websites. Castlight scored high marks for raising $80 million from some big-name investors, including Oak Investment Partners and U.S. Venture Partners.and Venrock Many companies on the list are in the long-established IT category that venture capitalists have traditionally put their money into. For instance, the top 10 include companies that provide wireless infrastructure or data-management services. Xirrus Inc. earned the No. 2 spot. The provider of Wi-Fi technology made the cut in part because founder Dirk Gates previously took another high-tech start-up, Xircom Inc., public and then sold it to Intel Corp. INTC +0.92% No. 3 on the list, Xactly, a software-as-a-service company that provides sales-compensation tools, has partnered with heavyweights Microsoft Corp., MSFT +1.40%Oracle Corp. ORCL -0.14%and Salesforce.com Inc., CRM +0.13%which invested in the company last June. Several consumer Internet start-ups moved up the list, or joined it for the first time, showing the surge in valuations for anything dot-com. Among those moving higher: No. 8 Glam Media Inc., a publisher of lifestyle websites; No. 12 Etsy Inc., an online crafts market; No. 29 Zoosk, a social-dating site; and No. 31 Chegg, a textbook-rental service. The Next Big Thing 2011 Revisiting Last Year's Top 50 Venture-Backed Companies Veteran Investor Defends Start-Up Boom Which VC Firms Hold Top Bragging Rights? Methodology of Top 50 List Two firms that make social-networking tools for businesses made the list. No. 26 Jive Software Inc. is backed in part by Kleiner Perkins Caufield & Byers, which invested in Facebook and Twitter. No. 46 Yammer Inc.'s investors include Founders Fund, which bet early on Facebook, and Charles River Ventures, one of Twitter's first backers. Some companies on last year's list performed well enough to make the cut again this year, but lost ground in the rankings relative to their peers, highlighting the competitive nature of the survey. Solar-cell producer Suniva Inc. received better scores than last year but fell to No. 38 from No. 15. Silver Peak Systems Inc., a maker of data-center appliances, hasn't announced new equity funding since a $21 million round in early 2008, and slid to No. 44 from No. 20 partly as a result. Another company, Fusion-io Inc., a Salt Lake City-based maker of flash-memory drives, raised $45 million in new funding shortly after ranking at No. 2 last year, but it's now at No. 20 because its valuation grew more slowly than others on the list. On Wednesday, Fusion-io filed for a $150 million IPO. —Riva Richmond contributed to this article. Write to Colleen DeBaise at colleen.debaise@wsj.com and Scott Austin at scott.austin@dowjones.com

By ANGUS LOTEN How did last year's contenders in the "Next Big Thing" list fare after they were revealed in March 2011? The Full Rankings Start-ups with potential for technological breakthroughs topped The Wall Street Journal's third annual "Next Big Thing" list. The Wall Street Journal's third annual ranking of the top 50 venture-capital-backed companies shows a crop of contenders that overall are focused less on online consumers than in years' past. Emily Maltby has details on The News Hub. Photo: Cheezburger Inc. . During a period of world-wide financial instability—from the nation's downbeat economic news to the European debt crisis—most of the companies on the 2011 list have remained unscathed, if not prosperous. Six of the companies, or about 12% of the list, held initial public offerings, while another two filed papers to go public. Four companies were acquired, and the other 38 are still privately backed, including No. 1 Castlight Health Inc., a medical-software firm. At least one company didn't have such a positive fate, however—No. 50 Aprius Inc. shut its doors, underscoring the difficulties for venture capitalists in predicting which start-ups have the greatest potential to succeed. About three-quarters of venture-backed firms in the U.S. don't return investors' capital, according to recent research. With prices for flash memory falling, Aprius struggled to find a market for its main product, a device whose selling point was bringing down the cost of flash storage for servers. Since launching in 2007, Aprius had raised $31 million in funding. Among the most high-profile IPOs from the ranking was No. 20 Fusion-io Inc., FIO +4.78%a maker of flash-memory drives for servers whose chief scientist is Apple Inc. AAPL -0.61%co-founder Steve Wozniak. The company, which made the list two years in a row, held its IPO in June 2011. The stock has since risen about 71%, pushing its market capitalization to about $2.85 billion. The Wall Street Journal reveals its third annual ranking of the top 50 start-ups in the U.S. backed by venture capitalists. More on The Next Big Thing 2012 Read more on our selected startups and how we arrived at the rankings: Looking for the 'Next Big Thing'? Ranking the Top 50 Start-Ups Internet Funding Boom Ends as Fast as It Began Picking the Winners Media Firm Specializes in Humor Web Sites Genband's Technology Makes It a Winner The Methodology Behind 'The Next Big Thing' . Outperforming Fusion-io on the stock market is No. 49 ServiceNow Inc., NOW +3.78%which held one of the first tech IPOs since Facebook Inc.'s FB +1.34%offering. The cloud-computing company's shares have nearly quadrupled since the June IPO, giving it a value of almost $5 billion. Other IPOs include No. 10 Imperva Inc., IMPV -0.80%a provider of data security and audit systems; No. 16 Active Network Inc., ACTV +1.94%which offers an online registration platform; No. 26 Jive Software Inc., JIVE -0.06%provider of social-networking software for businesses; and No. 40 ExactTarget Inc., ET +3.63%an email marketing provider. Last month, payroll software firm Workday Inc., No. 24 on last year's list, filed for a $400 million IPO after revenue more than doubled to $119.5 million for the first six months of the year. And cancer-drug developer OncoMed Pharmaceuticals Inc., ranked No. 41, filed for a $115 million IPO in May. The Top 10 Venture-Backed Companies A closer look at the companies that topped this year's Next Big Thing list. These companies weren't the only ones poised to deliver investment returns to their venture-capital investors in the past year. Four of the firms on last year's list were acquired, including Yammer Inc., Aster Data Systems Inc., TxVia Inc. and Xsigo Systems Inc. In the biggest deal, No. 46 Yammer, a maker of business social-networking software and a competitor of Jive Software, agreed in June to be acquired by Microsoft Corp. MSFT +1.40%for $1.2 billion in cash. Yammer raised about $142 million from venture-capital investors. Other deal prices were closer to earth. In March 2011, San Carlos, Calif.-based data analytics firm Aster Data Systems, ranked No. 7, was acquired by Teradata Corp. TDC +1.05%for $263 million. In April this year, TxVia, a New York-based payments technology company, which ranked No. 48, was acquired by Google to boost its mobile payment tool, dubbed Google Wallet. The terms of the sale weren't disclosed. Three months later, Oracle acquired Xsigo, ranked No. 33, a hardware and software maker for data centers, for an undisclosed price. As many as 28 of the 50 top venture-backed firms in 2011 have since raised additional equity financing, according to Dow Jones VentureSource, which, like The Wall Street Journal, is owned by News Corp. NWSA -0.15%Those funded companies include Castlight Health, which in May announced $100 million in new financing, the most raised by any of the top ranked firms in the past year. Coming in a close second, Workday Inc. closed $85 million in a funding round in October led by T. Rowe Price TROW +1.95%and Morgan Stanley Investment Management. —Scott Denne contributed to this article. Write to Angus Loten at angus.loten@wsj.com