In conjunction with the company’s developer conference, PayPal announced a slew of news and product releases this week, including a new micropayments product and an apps platform for businesses. But tucked away in a release was another piece of news from PayPal that could be huge. PayPal just released a new version of its popular iPhone app that allows users to find businesses near their immediate location that accept PayPal as a form of payment. Launching in San Francisco initially, the feature encourages merchants to attract nearby customers to their stores by posting deals and promotions to the app as an incentive for customers to visit their businesses.

Customers can search by category and location, and find and select stores, services, or special offers. Users can pick up the goods or services in person, but pay the merchant using their PayPal app. Users can also use tags from Bling Nation, a startup that has partnered with PayPal to use the startup’s mobile payment chips to deduct funds from a PayPal account.

One of the big selling points around using PayPal for merchants is the ability to offer deals as an incentive to drive buyers to a store or restaurant. Whether it be Groupon-like daily deals or just ordinary coupons, there’s no doubt that deals do help drive online to offline sales.

PayPal President Scott Thompson tells TechCrunch (see video below) that eventually this local feature will have “ubiquity,” meaning you’ll be able to access these merchant listings and pay with PayPal wherever you are in the world. Local is one of the key parts of PayPal’s future strategy, says Thompson. He’s confident that has the world becomes more connected, eventually all local merchants will accept PayPal as a payments option for in-store purchases.

For PayPal, local payments certainly makes sense. Online to offline sales is a big part of local commerce, and if PayPal can become a payments mechanism in the local market, it could be pay off in revenue for the company.

One competitor worth noting in the local payments space is Google Checkout. While Google Checkout doesn’t have as extensive of a reach as PayPal, Google Checkout has an ace in the hole when it comes to Google Places. Google Places allows local businesses to claim and edit a page, post realtime updates (eg, "happy hour tonight"), post reviews, create a custom QR code, and even offer coupons. And Google indexes and highlights these pages in search results, most recently launching a more integrated placement of Places page within Google search.

Google could easily turn on a transaction (such as a daily deal) for these merchants, and use Google
Checkout as the payments mechanism. The same experience could extend to mobile phones.

The advantage Google has over PayPal is that with Places, these relationships with local merchants are already built into the search giants business. At last count a few months ago, Google had Places pages in place for over 4 million businesses but I’m sure this number is higher. PayPal on the other hand will have to forge new relationships with all these local businesses to get them on board with their payments platform. Not only do they have to find the businesses, but PayPal has to teach them how to use their mobile apps as a payment mechanism. Scaling PayPal’s local feature will be a huge endeavor for the company, which is why PayPal is testing the feature out in a limited market in the San Francisco.

This why it makes sense for PayPal to form partnerships on its local endeavor. Google is an unlikely partner considering that the company already has its own payments platform. Facebook Places could be a potential partner (PayPal is already a micropayments partner for the social network’s virtual currency platform Credits). Facebook is rumored to be turning on a deals feature for Places and PayPal could be a way to process these payments. And Groupon is rumored to be brokering a payments deal with PayPal as well.

So while Google Checkout still doesn’t have the sort of users numbers that PayPal does in the payments area, Google has much more in the war chest in terms of local. With local up for grabs, the battle between the two payments platform just got a whole lot more interesting.

I read blog posts by Don Dodge and Glenn Kelman today about people jumping from Google to Facebook and it got me thinking about entrepreneurs.

Most people have an aversion to risk, my college economics professor told me. Which means they have to be rewarded to take on that risk. The higher the risk, the higher the possible payout has to be for people to jump.

We make risk/reward decisions every day, all day. Do I go skiing, and enjoy the rush of flying downhill even though there’s a small chance I’ll blow out a knee? Should I go to college or just get a job and start earning money now? Should I eat the high fiber and generally healthy thing on the menu, or go for the cheeseburger? Should I hit the restroom before the movie starts? Etc.

Every time we do something, or don’t do something, there’s a risk/reward algorithm being calculated in our brain.

Entrepreneurs, though, are all screwed up. They don’t need to be rewarded for risk, because they actually get utility out of risk itself. In other words, they like adventure.

The payouts for starting a business are just terrible when you account for risk. A tiny minority of entrepreneurs ever get rich. And the majority of entrepreneurs would probably make far more money, and have more stable personal relationships, if they just worked for someone else.

In my youth I was a corporate lawyer, making a very nice salary for representing technology startups in Silicon Valley. There was a good chance I’d make partner after 7-8 years and could be earning maybe a million dollars a year by the time I was 40. All I had to do was work hard, and bring in clients. I was good at both.

But I left the law after just three years to join a startup. And the reason I did it was adventure. I wanted to be in the game, not just watching it. My parents thought I was crazy. They still have no real idea of what I do for a living, and they were, frankly, pissed off that I spent their money getting a law degree, only to throw it away before I was 30.

But I did it anyway. And then I left that company after a year to start my own company. And I’ve never looked back since then. That first company I started made a lot of money for the venture capitalists – nearly $30 million – but next to nothing for the founders. The companies I started after that varied between failures and mediocre successes. But at no point did I ever consider getting a “real job.” That felt like a black and white world, and I wanted technicolor. Also, I hate working for other people because I’m really bad at it.

When I talk to non entrepreneurs about the startup world I often use a pirate analogy. Not because I know that much about pirates, but the the general stereotypes work well as an analogy.

Why did some people way back in the 17th century, or whenever, become pirates? The likely payoff was abysmal, I imagine. There’s a very small chance you’d make a fortune from some prize, and a very large chance you’d drown, or be hung, or shot, or whatever. And living on a small ship with a hundred other guys must have sucked, even for the captain.

But in my fantasy pirate world these guys just had really screwed up risk aversion algorithms. Unlike most of the other people they actually lusted after that risk. The potential for riches was just an argument for the venture. But the real payoff was the pirate life itself.

Also, it was nearly impossible to be an entrepreneur back then.

Now it turns out that most people in Silicon Valley are actually normal risk averse types. They carefully calculate the potential rewards of a startup before they join, taking into account stock options as well as salary. And also the resume value of a company.

Some of the richest people I know aren’t really entrepreneurs. They worked at HP and then moved to Netscape when it got hot. They made a fortune and then jumped to Google and made another fortune. And now they’re jumping to Facebook.

They may be very good engineers, or sales people, or marketing, or execs. But they ain’t entrepreneurs. They’re just resume gardening and they’re really no different from everyone else.

I don’t care if you’re a billionaire. If you haven’t started a company, really gambled your resume and your money and maybe even your marriage to just go crazy and try something on your own, you’re no pirate and you aren’t in the club.

That thrill of your first hire, when you’ve convinced some other crazy soul to join you in your almost certainly doomed project. The high from raising venture capital and starting to see your name mentioned in the press. The excitement of launch and…gulp…customers! and the feeling of truly learning something useful, you’re just not sure what it is, when the company almost inevitably crashes and burns.

Now that person is interesting. That person has stories to tell. That person is a man who has been in the arena.

There are lots of things that I will probably never experience in this life. Military combat. Being dictator of a small central American country. Dunking a basketball. Being a famous rocks star. Or walking on the Mars.

But one thing I have been, and will always be, is an entrepreneur. And damnit that feels pretty good. Because if I was a lawyer right now, even a rich lawyer, I’d always have wondered if I had what it takes to do something a little more adventurous with my life than work for someone else.

As promised, my guest on Ask a VC this week is James Chan of Neoteny Labs, an early stage investment firm with operations in Singapore. Chan isn’t some banker-fied expat, he’s a “son of Singapore’s soil” as he phrases it. He was educated in the system, served his two years in the army and got a scholarship to study in the US, part at Carnegie Mellon University and part at Stanford.

That scholarship came with a hefty price: He had to come back and work for the Singapore government for six years or pay hundreds of thousands of Singaporean dollars to get out of it. Yeesh, those are some strings, Pinnochio. The government offered to subsidize my trip to Singapore, but TechCrunch or my personal (depleted) savings account pays for 95% of my travel– the exception being when I’m paid to speak at a conference. In this case, TechCrunch picked up the tab, and hearing Chan’s story I was relieved. Even Arrington’s lock-in with AOL isn’t that long.

Chan didn’t wind up serving all of it, thanks to Joi Ito who met Chan and decided he had to have him for Neoteny Labs’ man-on-the-ground and helped negotiate an out in the contract with a deferred payment plan. But Chan’s experience in the government gave him an appreciation for the strengths and weaknesses of Singapore’s astoundingly practical and far-reaching government machine.

Chan uses that unique mash-up of East-West experiences to answer reader questions about investing in Southeast Asia– and where to find the best chili crab in Singapore. Next week, our interview with one of Indonesia’s only early stage fund, East Ventures.

Halloween is an exhibitionist’s paradise, and nowhere do more (safe for work) exhibitionists congregate than in online communities like DailyBooth, a site which asks users to upload photo booth style pictures of themselves.

The YCombinator-funded DailyBooth has decided to get into the Halloween spirit this year (or is just really good at spotting opportunities for marketing itself) and is running a program that allows users to strut their Halloween stuff using the hashtag #trickortreat.

There’s already a critical mass of users sharing and a commenting on each other’s pics this Halloween Eve, and the momentum has inevitably spread to Twitter. And while the #trickortreat photos do include the ubiquitous assortment of sexy witches and sexy vampires, some of the DailyBooth users have gotten really creative (I’m looking at you Mr.iPad) and I’m including some of my favorites below.

You can view more costumes in realtime here; Link to your favorite (or your own) costumes in the comments.

Pics via Yourallcats, ijerr, Californiasonhermind, B_RAINpwns, meganwitkus, moonless_night and dalehaines.

Nearly a year ago, Microsoft pulled together a group of reporters for Bing Fall Release event. The highlight of the presentation was a demo showing off some nifty new features in Bing Maps. The problem? All of this stuff required Microsoft’s Silverlight browser plug-in to work. I berated the company for once again pushing users towards a more proprietary web. So today it’s time to laud them, as they seem to be backing away from that strategy.

During last week’s Professional Developers Conference (PDC), ZDNet’s Mary-Jo Foley asked Bob Muglia, Microsoft’s SVP of the Server and Tools Business, why the company failed to highlight Silverlight in a meaningful way this year. His answer was rather surprising.

"Silverlight is our development platform for Windows Phone,” he said. And while he said that the technology has some “sweet spots” for media applications (presumably like Netflix, which uses Silverlight on the web), its role as a vehicle for delivering a cross-platform runtime appears to be over. “Our strategy has shifted,” is how Muglia put it.

Instead, as they made clear during PDC, Microsoft is putting their weight behind HTML5 going forward. Hallelujah.

Microsoft’s new IE9 web browser (which is in public beta testing) will be a big part of this strategy. And presumably, a lot of the things that currently require Silverlight, like some of those nifty Bing Maps features, will move to HTML5 going forward. Again, that’s great news.

So why is Microsoft doing this? It seems that Microsoft sees the writing on the wall. They likely know that’s it’s going to be much harder to make a dent in the new developer world order with Silverlight, which still has a relatively small market penetration and no penetration in mobile, than with HTML5, which is (or shortly will be) everywhere — including all of Apple’s devices.

“HTML is the only true cross platform solution for everything, including (Apple's) iOS platform," Muglia told Foley.

This is a very different tone than Muglia had just a year ago, when he and then Microsoft Chief Software Architect Ray Ozzie were out on the circuit drumming up support for Silverlight with hopes that it would become a new de-facto standard like Adobe’s Flash. It’s not clear if Ozzie’s imminent departure from the company has anything to do with this change of tone or vice versa.

Regardless, Silverlight will now be mainly known as the development platform for Windows Phone going forward. In other words, the way to make native apps for those devices. But for just about everything else, it will be HTML5 or bust. And that’s great news for all end users. It’s one less plug-in to download. And it’s another step towards a unified web.

During the “Back to the Mac” event two weeks ago, Steve Jobs made a particularly witty remark as he unveiled the MacBook Air, one that made the audience chuckle in laughter:

"We asked ourselves, what would happen if a MacBook and an iPad hooked up? Well, this is the result, we think it's the future of notebooks."

There is always a strategic intent with the things that Apple says at product launches, especially when they come from Steve Jobs. This is because Apple cares deeply about the perception of its products. By intimating that the Air is the future, and that it blends the best of the MacBook Pro and iPad, Apple is signaling a lot. There is no doubt that this first phase in "hooking up" between the MacBook and iPad foretells a deeply converged future on many levels.

iOS and OS X Aren’t Hooking Up

Often when people visualize the convergence of the iPad and MacBook lines, they wonder whether a unified operating system will take over, which somehow blends the best of both the touch and "mouse" metaphors.

This is unrealistic and silly. Though iOS is OS X's little cousin—both use different APIs and layers, but reside on top of UNIX—merging them makes little sense from an end-user perspective. iOS and OS X serve different use-cases, applications, and markets, and the touch metaphor on a MacBook simply wouldn't serve a user well in the majority of cases. And running multiple browser tabs and multitasking between 8 open applications requires a much more immersive experience than iOS may ever provide.

But despite the fundamental difference in how we interact with a MacBook and iPad, Jobs made sure to deeply blend how we view the two products at the marketing level, by touting attributes like the Air's ability to turn on instantly, and last 30 days without a charge.

Why the Hardware is Rapidly Intersecting

One reason why Steve Jobs wants us to think about the MacBook Air as an extension of the iPad, is because there is a hardware convergence happening under the hood. The MacBook Air benchmarks were the most telling sign that this is occurring. Apple was able to double the system performance of the MacBook Air, despite using the same 3 year-old CPU technology from Intel—Intel Core 2 Duo processors running at pokey speeds.

Though profound this isn't surprising—the Air uses flash instead of spinning disks, and SSD technology dramatically cuts data transfer bottlenecks for applications that are I/O (Input/Output) constrained. And guess what? Most simple computing tasks are memory and IO-constrained. This fact helps the flash-based Air operate on par with Apple's high end MacBook Pro line, except under taxing CPU-intensive scenarios such as video rendering.

So let's get this straight: Apple is using several year old technology, and the Air's system performance screams. This is nothing short of incredible proof that after a certain threshold, CPU advancements are only adding incremental benefit to 90% of what the user cares about today.

Instead, performance is more dependent on graphics processing than ever. This is why Apple designed the Lion OS to heavily focus on OpenCL, which leverages parallel constructs within the GPU to extend its utility to non-graphics tasks. And a big reason why Apple didn't go with Intel's newer CPU line is they lack support for OpenCL, and Apple is probably designing new applications like iLife 11 to take advantage of OpenCL’s power.

The fact that Apple's sexiest new Notebook didn't go with Intel's latest technology is damning for Intel and is the best signal yet of how innovation in PCs is getting blown away by what's happening in the mobile ecosystem. Right now, benchmarks show that the fastest ARM-based smartphone CPUs are only about 25% as fast as the Core 2 Duo that Apple is using in the MacBook Air. But this delta will compress fast.

In about 2-3 years we will be seeing integrated chipsets make their way up the food chain, and potentially fit in notebook-class form factors. Multicore ARM solutions, based on ARM-15, will make this a reality in about 2 cycles of Moore's Law.

Skeptics will say “no way — never, not with the need for Flash”. I agree that Flash is probably here to stay on desktops. But all the pressure on Adobe to make Flash better is, ever so slowly, improving how rendering and compositing are done in hardware. And even in the midst of their darkest public battle last Spring, Apple and Adobe were cooperating in getting Flash acceleration to work on desktop Macs. In the future, it's conceivable that Flash could be the only remaining bottleneck that prevents Apple from using an embedded SoC in a MacBook Air. But hardware acceleration for Flash is approaching which can solve this dilemma.

All of this rapid advancement in what’s under the hood has huge ramifications for the future of the MacBook Air and iPad. Anyone want a MacBook Air that is several pounds, Runs OS X, lasts for 30 hours, has a detachable keyboard, and then converts to an iPad running iOS once the screen is removed?

I am not saying that Apple is going to make this device, nor that it's even in their best interest to pursue one-size-fits-all form factors. But there is no denying that the hardware is converging, and the "Back to the Mac" theme of Apple's latest event deeply intimated this.

The Mac Store’s Incredible Network Effect

The remaining puzzle piece in the intersection of the MacBook and iPad is all about the applications—both end-user discovery & distribution and developer support. The iOS storefront was the genius behind the iPhone becoming a low friction distribution warehouse for content.

In much the same way, the Mac Store is Apple's umbrella strategy to encourage developers of long-tail content to have an easy landing pad on the Mac, developers who are already building apps on top of iOS.

Interestingly, the Mac Store allows Apple to do the reverse of what Microsoft is doing with Windows Phone 7: whereas Microsoft can leverage .NET familiarity to encourage the desktop dev community to write apps for WM7, Apple will use its iOS franchise to kick-start a vibrant ecosystem of Mac developers.

But there's also something more magical that this network-effect provides for Apple: by specifying that developers use Apple's tools, namely Xcode and LLVM, Apple gains a layer of control in how this hardware convergence plays out.

How so? Apple can have developers simply flip a recompile switch and upload universal versions of apps to the Mac App Store, which work on both ARM and x86. In this way, Apple is setting up a distribution mechanism to host and install code which will allow them to transition hardware seamlessly.

This is the ultimate in streamlined distribution, since a developer can focus on one unified environment based around Cocoa Touch and Objective-C, along with a set of UI / UX constraints. Apple then abstracts all this from the user, independent of the hardware.

Apple Hates Control and Loves Optionality

If it's not completely clear yet, Apple is setting the stage to be processor and component agnostic. This not only allows them the above-mentioned architecture-neutrality, but also affords them incredible pricing power, and ensures they can tap into consistent component supply, which will be a critical challenge as they lock up an even bigger slice of the supply chain.

Apple can build an A4-variant themselves, or they can partner up with one of many vendors. If Intel starts innovating again, that's an easy choice for Apple. If nVidia, with its graphics pedigree, emerges as a winner in combining GPUs with ARM-based CPUs, Apple can partner more deeply or buy the company. Or Apple might decide to stick with x86, but use GPU/CPU technology from AMD.

It's all about optionality. And Apple is building that into its long-term strategy, by combining its rapidly expanding footprint in mobile hardware / software with its iOS developer mind-share to rev its Mac franchise into much higher gear.

Wow Hooking Up Feels Amazing – When’s Our Next Date?

I believe it’s pretty clear: Apple wants to use OS X, running on an incredibly battery efficient MacBook Air-like form factor, as a bottoms-up strategy to attract loyal iOS fans over to the Mac franchise. After all, there are around 150M users of iOS worldwide. Apple knows that iOS is a secret weapon to bring both consumers and corporate users to higher end Mac products. And the marketing around the Back to the Mac event is just a precursor for Apple's underlying strategy in mixing these two worlds.

Behind-the-scenes, Steve Jobs is setting up all the pieces for Apple to converge these product lines. But it's all about optionality for Apple. When and how they choose to get there is up to them. And my guess is Steve Jobs is going to do so in a way that continues to make the Apple experience a superior one for you, its loyal customer.

This just landed in our inbox: a pitch for a new URL shortener with the slightly amusing name Bu.tt, which is of course described by its creator – John McKinnon – as a shortening service that “kicks it”.

If you think bit.ly or TinyURL or whichever service you fancy just seems too serious for certain linking occasions, Bu.tt is one way to get the job done.

And because it’s so cheeky (wink, wink, nudge, nudge), it’s bound to get you some attention, too. Say, isn’t that the reason why we share links in the first place?

Case in point: http://bu.tt/erface.

At the Security Innovation Network (SINET) Showcase at The National Press Club in Washington, D.C., this week, Michael Chertoff, former Secretary of the Department of Homeland Security, presented a dire assessment of the cyber-security threat facing our nation. He discussed how rogue governments and hackers are quietly infiltrating our computer systems and the disasters that can be perpetuated—like those you see on the TV show "24".  Chertoff worries that these risks haven't yet gripped the public imagination; that it may take a "digital 9-11" to get businesses, consumers, and governments to fortify their defenses.

The most troublesome thing I learned by talking with a who's who of our nation's security community was that our government doesn't believe it has the ability to defend us from the rapidly evolving threats. Yes, the National Security Agency and some branches of government have brilliant computer scientists working for them and can defend their own systems; but the rest of us are our own. The Government simply can't innovate fast enough to keep pace with the pervasive threats and dynamics of the internet or Silicon Valley's rapidly changing technologies. Indeed, as George Hoyem, a partner at the CIA-backed venture fund In-Q-Tel, noted, there has been a 571 percent growth in malware since 2006; today, 60 percent of all websites are infected.

The experts agreed that we need private industry to step in and help solve the world's cyber-security problems.  But we can't count on the big companies—they can't innovate as fast as startups can.  So our entrepreneurs need to lead the charge. And many are doing just that.  Robert Ackerman, managing director at Allegiance Capital, said that in 1981 more than 70 percent of research and development in security technology was done by companies with 25,000 employees or more, and less than 5 percent was done by companies with fewer than 1000 employees. Today, the large companies perform 38% of the R&D, and companies with fewer than 1000 employees do about 25%.

But here's the big obstacle: when it comes to Government—which is one of the biggest markets for security technologies, the deck is stacked against the entrepreneur. Nearly all big government contracts go to large contractors. These contracts run not in the millions of dollars, but in billions.  And we don't get billions of dollars of value—if we're lucky, we get some clunky old systems that entrepreneurs could have delivered much better versions of in a fraction of the time and a tiny fraction of the cost. Because these contracts are so big, they require many levels of approval—usually by Congress. It typically takes 3-4 years for government to award these.  Companies have to go through a grueling "certification" process to get approved to bid, and it costs millions of dollars to prepare proposals and to lobby government officials and political leaders. Startups can't wait this long or afford the cost of bidding.

The chasm between government and entrepreneur couldn't be wider. All of the government officials I talked to were open to change and seemed eager to embrace new technologies; yet they had no idea where to start or how to get around their own bureaucracy.

Silicon Valley and Washington, D.C., are located three thousand miles apart in space and light years apart in concept. Technology managers in government don't know where to find the entrepreneurs who are ready and able to build innovative solutions.  And when they do come across them, they don't have mechanisms to fund, support, or purchase technology from startups. So government managers are forced to deal only with the big contractors—who have a greater incentive to add staff (and so increase billing) than to cut costs through innovation. Not only are we wasting billions of dollars, but our nation's defense industrial base is neglecting the vast majority of innovation from early stage and emerging growth companies.

What should the government do to remove the obstacles? There were some great ideas discussed, by people like Curtis Carlson, CEO of SRI International; Dean DeBiase, of Reboot Partners; Asheem Chandna of Greylock Partners; and SINET's founder Robert Rodriguez:

1.      Overhaul the acquisition and procurement process to level the playing field for small companies: it must be made easier for startups to bid for government contracts and the selection criteria balanced to weigh equally the risk of technology obsolescence with the risk of a startup's failing. Procurement times should be reduced to months rather than years; some projects should be done in smaller steps so that the big guys aren't the only ones qualified to complete them.

2.      Increase awareness between technology buyers, builders, investors, and researchers. The SINET event was billed as the first of its kind. In Silicon Valley, such networking events—between entrepreneurs, investors, buyers, and academics—take place at least every week. Why not bring government technologists to Silicon Valley and other tech centers on a frequent basis? They will understand what is happening in the tech world, and entrepreneurs will get the chance to learn what problems need to be solved and to meet the people they can sell their solutions to.

3.      Provide tax incentives for security innovations—R&D tax breaks, similar to the high-efficiency-energy tax breaks for consumers.

4.      Provide seed funding for startups. One of the reasons for which Silicon Valley has so many Web 2.0-type startups, is that successful entrepreneurs, who have made their fortunes, are playing the role of Angel and VC. They provide funding and mentorship. Why not provide government technology managers with the ability to fund and mentor the startups that they believe can solve critical problems?

One more great idea (not from SINET, but reported by Rob Pegoraro, of The Washington Post) is from Internet pioneer Vint Cerf. Vint advocates the creation of a “cyber fire department”—a recognized, trusted, public entity that companies can call upon when they need help. This would function as Sandia National Laboratories did in battling the Conficker worm.

Bottom line: until changes begin to occur on a national scale, U.S. cyber-security will remain a global backwater in the continually innovating domain that is cyberspace.

Editor's note: Guest writer Vivek Wadhwa is an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Director of Research at the Center for Entrepreneurship and Research Commercialization at Duke University. You can follow him on Twitter at @vwadhwa and find his research at www.wadhwa.com.