Here are a few of the bigger UI changes: As you can see in the screenshot, there’s a new set of horizontal tabs to better filter content. Xobni is also now surfacing links exchanged between contacts for the first time — previously, there was just a way to do this for files exchanged. Also new, the Twitter extension element now includes a direct message (DM) option. LinkedIn support has been improved, as has some of the analytics.

There are a half dozen or so other enhancements to the client such as extensions now being resizable, and better drag and drop support. There’s also finally a way for users to easily open a folder that emails reside in. Basically, if you’re addicted to Xobni, there’s a lot of little tweaks (and some bigger ones) to try out.

But again, the big news is that Xobni is opening premium extensions to users — and not just business users, all Xobni users. If Xobni is able to effectively convince users to buy these (as well as get more beyond just Salesforce), it could be a decent new revenue stream for the company. Back in July, the company introduced ‘Xobni Plus’, the premium version of their product. Revenue streams can be addicting when turned on, it seems.

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Earlier tonight, Xobni quietly released, at least to some users, a new version of its Outlook plug-in that brings Twitter streams into your email in an intelligent way. Instead of acting like any other Twitter client and showing you the full stream of everyone you follow, it shows you only the recent Tweets of the person whose email you are reading, whether or not you follow them on Twitter. (A Xobni blog post went up briefly about it and then was taken down, but not before I was able to grab the screenshot at right).

Instead of replicating Twitter outright, it shows you the Tweets in the context of an email to help you learn more about the person with whom you are communicating. This is consistent with the way Xobni brings up similar information about a contact from Facebook or LinkedIn or Skype. If you don’t know the person, it gives you some more context. If you do, it gives you something personal to talk about. (Threadsy, which launched at this year’s TC50, also shows Tweets in context alongside emails).

With both the full Facebook stream and now Twitter built into the product, chances are you’ll see what each contact has been doing recently. Xobni also lets you reply via Twitter, and follow a contact from within its application.

One of Xobni’s investors is Vinod Khosla, who told me a few weeks ago that Xobni is getting “great traction.” I’ve since heard that the product is approaching 3 million downloads.

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In venture capital, Vinod Khosla likes to go his own way, which is why he’s been so successful. He was the founding CEO of Sun Microsystems, and then moved to venture capital and became a star partner at Kleiner Perkins, where he backed Juniper Networks, Cerent (sold to Cisco for $7 billion) and NexGen (sold to AMD and formed the basis for its challenge to Intel). About five years ago, after becoming a billionaire, he left Kleiner and started Khosla Ventures to invest his own money. He was mostly drawn to clean tech at a time before it was popular, but still kept his hand in Web and other tech startups (Aliph|Jawbone, iSkoot, RingCentral, Tapulous, iLike, Slide, Xobni). Khosla Ventures already has more than 50 companies in its portfolio (see slides below).

Earlier this month, Khosla raised $1.1 billion for two new funds, taking money from outside investors for the first time. I spoke with Khosla on the phone about his new fund, his approach to investing, clean tech and more.  He compares Web startups to water startups, dismisses entrepreneurs who think about exits before building value, and contends that cleantech companies can command as high margins as hardware or software companies.  “It’s a business strategy decision,” he explains.”

In the interview, Khosla talks about his investments in Aliph, RingCentral, eASIC, iSkoot, and Xobni. In terms of what he’s looking for, he declares “we love material science.” And in his seed fund, in particular, he says, “We’re not looking for completeness in things. We’re not looking for business plans. We are not looking for meeting every fiduciary requirement of an investor. We are looking for great technical ideas and great technologists.”

The 25-minute interview and full transcript are below. I’ve bolded parts for emphasis.

Interview Transcript

Mr. SCHONFELD: Well thanks for taking the time to speak to me. You just recently raised a pretty large fund or actually a couple of funds, right, $1.1 billion for two new funds. And I believe this is the first time you really took outside money. Can you talk a little bit about that whole fund-raising process and why you decided to reach to outside investors?

Mr. KHOSLA: I think my general feeling is the scale of the opportunity we see is pretty large. You know, when I started doing things on my own, I was figuring – remember it was a very nascent market. And there was a lot that was unknown about the renewable marketplace in 2004, early 2003 when I was planning on it. The world does change for the better. Much larger opportunity set and it probably requires, you know – there’s more opportunity than I would have thought five years ago.

Mr. SCHONFELD: Right. Now, you have been really focusing on this area specifically for five years. While still, you’re still making an investment in more traditional web companies and the type of technology companies you’ve been investing in for years. But can you just tell me a little about the difference in the dynamics between the companies that are renewable energy companies versus the companies that our readers probably are more familiar with, web companies and hardware and even chip companies.

Mr. KHOSLA: Yeah, still…

Mr. SCHONFELD: There seems to be a disconnect, even in the Valley, between the cultures of these two types of tech companies.

Mr. KHOSLA: You know, I find that a pretty narrow view on behalf of people who sort of repeat that, I’ll call it a platitude for now. In the following sense, if you look at a venture firm like Kleiner Perkins and look at their portfolio, I would guess that 20 percent of the portfolio —and this is before renewables—ends up in things that are purely capital-intensive like biotech. 20 percent ends up in really capital-intensive stuff like biotech. 20 percent ends up in capital-light things like a Web start-up, let’s say, taking less than $30 million. So, 20 percent will take less than 30, 20 percent will take more than 300. And then the remaining 60 percent ends up in the middle taking, oh, you know, the bulk of the portfolio in venture takes between $30 million and $75 million or a hundred million. I think the profile in renewables will look exactly the same. And so, if you’re a broad-based venture firm and you do biotech and you do some of the capital-intensive projects, your renewable portfolio will not look that different.

Not everything in the world is building power plants or build biofuel facilities. There are plenty of things that are in the middle.

So if you’re doing LED lighting, it is just like a chip start-up. If you’re doing a new air-conditioner, it’s like a small equipment start-up, or telecom gear start-up. If you’re doing water, it’s like a Web start-up, at least the ones we’ve done.

Mr. SCHONFELD: How is a water startup like a Web company?

Mr. KHOSLA: Well, for 15, 20 million dollars, they’ll have products in the marketplace and be able to be cash flow positive. Less than $25 million, I would guess, because they’re making membranes. Then you make a membrane, they put it into existing systems. Now, they could have a capital-intensive model and build a desalination plant but they’re not going to. They’re going to build a membrane that goes into existing desalination plants. And so, it’s a very simple model and in all those – in almost all these cases that opportunity exists. Even in the extensive biofuels area, where you’d think it’d be very capital-intensive, you know, it’s easy to cut deals like LS9 announced one with Proctor & Gamble. That’s publicly announced. You can look that up, and make sure it is capital-light. There are companies that are pursuing licensing strategies that are also relatively capital-light.

MR. SCHONFELD: Already you have what, about 50 companies in your Khosla Ventures portfolio, somewhere around there? MR. KHOSLA: More than that. I don’t know the exact count but yes, more. Well above 50.

MR. SCHONFELD: So the new fund will be used for follow-on investments to the existing portfolio as well as new ventures or is it – or the existing portfolio is already taken care of with the capital allocated to the previous funds? MR. KHOSLA: Well, both of the funds will be new investments. But there are provisions for existing portfolio companies to get in, you know, we’re not going into the details but the bulk of the funds will be new investments.

MR. SCHONFELD: And do you see going forward the mix being pretty much the same? It seems like it’s two thirds clean tech and one third more traditional tech. MR. KHOSLA: Yeah. We do expect the mix in the future to look similar to the mix we’ve had in the past.

MR. SCHONFELD: Let’s take both of these techs one at a time. So, the Clean Tech companies are – are these located all over the place? Are these Silicon Valley companies and what’s your criteria for investing in these companies? I mean, at first glance a lot of these companies seem like material science companies or companies that other investors maybe wouldn’t even look at or would pass on because it’s not – it’s not a familiar model to them, right? So, you’ve invested in a lot of technology companies. Obviously, the problems they’re trying to address are large, but in terms of the actual business model and economic models of these companies, where’s the leverage?

MR. KHOSLA: Well, you know, first because it’s a diverse area and there’s no one business model. There will be a range of business models that will be used and will make sense and just like any other tech start-up, these companies are run by entrepreneurs who are pretty damned adaptive. You know, they’ll move pretty quick and adapt to whatever the environment says.

MR. KHOSLA: If the market changes, the money is available or the money is tight, they adapt to that. These things entrepreneurs do all the time. You saw that in the dot-com thing. There were people who could use a hundred million in the dot-com, and people who could adapt and go back to running on a million dollars a year. We saw that in dot-com companies and I think the same is going to be true in this space. And because the space is so large you’ll see a lot of diversity in the range of business models. I forgot the first part of your question.

MR. SCHONFELD: I can rephrase it. What are you looking for when you’re going to make investments in this area, what are the key…

Mr. KHOSLA: To your question, we love material science. We love serious technology innovations and there is a strong bias towards large technology innovations that are sort of disruptive to the current market. And that is very much a charter of what we are doing and we don’t mind larger technology risks especially in the smaller seed fund, which is really geared towards science experiments, which other people generally, as you say, won’t do.

The main fund will look like any venture fund and we’ll invest like any other. We’ll do seed, A and B and C investments. And there the risks probably will be a little less of the speculative stuff the seed fund might do. And I agree with you, there will be fewer people in the domain of the seed fund but the seed fund will do things that take a million dollars here, our $2 million there to roll out a really radical technology idea. And then it becomes a regular business plan.

In that stage, in the seed fund, we’re not looking for completeness in things. We’re not looking for business plans. We are not looking for meeting every fiduciary requirement of an investor. We are looking for great technical ideas and great technologists and yes, lots of PhDs in hard-core science disciplines.

Or just wild ideas that sort of have huge upside potential and sometimes may not need a radical technology breakthrough. So Xobni, which we did in e-mail , is an example of something that would be—in IT that fits into the seed fund because it’s a wild idea to do e-mail in this day and age. It has gotten great traction. So, that’s what we are looking for in the seed fund. In the main fund, we look for more complete management teams and more complete technology.

Mr. SCHONFELD: But for Xobni, that seems at first like the opposite of what you’d be looking for because a lot of people might think that e-mail is done although obviously, it has a lot of problems.

Mr. KHOSLA: Well, in fact I would say most people wouldn’t invest in e-mail because they think e-mail is done. In that case, it was an idea that we thought compelling and without going into the details, users have adopted it and used it enough to prove to us that it is compelling. And so all I’m saying is, we will do non-technology IT stuff in the seed area. We’ve just done another seed that I won’t mention but it’s not renewable but green, it’s just a great idea in a completely wild space that most VCs wouldn’t even think of touching. But it’s a regular technology start-up. And hey, great, so we are open minded on what we are looking for. On the green side, generally it should focus on the technology, technologist, a breakthrough innovation, not just a minor iteration.

Mr. SCHONFELD: Looking at your portfolio, overall which of the companies are the most mature? Have you had any, have there been any exits from the portfolios so far or -

Mr. KHOSLA: You know, we’ve had some – we’ve had a couple of sales and I don’t know which ones we’ve talked about publicly. They’ve been OK, good returns. So, you know, on average sort of a few times our money. Nothing I’d call a home run today but in terms of maturity, obviously, Aliph or Jawbone is a pretty exciting start-up for us. You know, a couple of, sort of nine digit revenues and cash flow positive and all the things you’d look for in a mature company. And you know, and so, eASIC is doing pretty well in semiconductors, we’re happy with that. Let’s see, iSkoot is doing really well in the mobile space. I’m trying to pick different areas.

You’ take something like RingCentral. It doesn’t need any more money or financing, it is relatively mature recurring revenue business – not really worried but you know, we could sell it tomorrow. We have not been in a rush to sell it. We don’t care about exits as much. We care about building fundamental value. So, in that sense we are a little bit different than other investors. Our focus is not on exit. In fact if you talk to any of my entrepreneurs, I’m generally saying don’t sell the company when other investors want to sell. I’d much rather focus on building long-term value in building companies rather than worrying about exists.

In fact, here is the thing, if a business plan talks about exits in the first two or three pages, I throw it out of the basket because I think, culturally it’s the wrong kind of entrepreneur for us. I literally if they talk, or mention exits in the first, say, in the executive summary or the first three pages of a business plan, it’s two strikes against them right there because I’m not interested in people where exit is top of mind. We care about building companies and building values. And that’s sort of the kind of culture we’re trying to do at Khosla Ventures.

Mr. SCHONFELD: Right, so, what advice would you have for entrepreneurs who you know are looking at different options? I mean, when is the right time to sell and when is the right time to keep going?

Mr. KHOSLA: You know, we could sell Aliph today. We could keep the cash flow positive company going. I’d rather take it towards an IPO. RingCentral is cash flow positive, going, you know, over a 100,000 small businesses as customers. We could sell it today but I still think, there’s time to generate value. It depends on what’s going on internally. If there’s good growth prospects and more value to be built then you go build that value instead of trying to get an exit. Wide Orbit is cash flow breakeven and sort of mature. You’d call it a mature company by venture standards, we’re not interested in, you know, getting out. Now having said that, if somebody comes with a great offer, we’ll always look at it. You know, we’re not opposed to exits. All I’m saying is it’s not the first thing we worry about. We worry about building value and building companies.

Mr. SCHONFELD: Right. And so what should entrepreneurs take from the fact that you were able to raise this $1.1 billion fund which I think is – it’s two funds but it was a sort of a single raise, right? Which I think is the biggest in several years. Is that just because you’re Vinod Khosla or do you see something – you see some -

Mr. KHOSLA: You know, I think the message is there are plenty of me-too two investors and there’s good investors around and money from – new money for that kind of thing is tight. But if you’re trying to do something different like we are, then investors, limited partners are willing to put up the money for it. I mean, and there’s definitely, we’re very active with new investors. We’re looking for ventures and our LPs just want us to take the risk for a file I just talked to you about. And there is appetite for risk.

Mr. SCHONFELD: Do you think that we’re going to be seeing more money flowing into venture capital? There’s been a big debate as whether there’s been a reset or not, you know, for investments going to venture capital and you know, just the whole financial crisis and how that impacted limited partners and how big institutions, you know, are rethinking their allocation to venture as an asset class. Is this an anomaly or -

Mr. KHOSLA: You know, my bet is big institutions will continue investing in venture capital but they’ll be more selective. But I don’t think, you know, frankly, we could have raised a lot more money if we wanted to if we had the people to put it to work. So I do think big institutional investors will continue to fund venture capital, but they will be much more selective and not every venture capital group will get follow-on funding. You know, it’s not too loose in my view and I think that’s going to change, and that’s a good thing.

Mr. SCHONFELD: And what’s your view of the IPO window? Will that ever really open up again or are there fundamental structural phenomena that is keeping it down not just the economy, but you know, everything from Sarbanes-Oxley to -

Mr. KHOSLA: I am pretty sure it will open up again. When is a little hard to predict and that’s why larger funds and deeper pockets are better for both venture funds and for entrepreneurs. I mean, today if I were an entrepreneur, I’d be very careful about only going with people with deep pockets. Because it matters. Now much more than it did before.

Mr. SCHONFELD: So if you’re giving advice to – if I’m an entrepreneur looking for different areas to go into and assuming that I can pull together a team with the required expertise, you know, what’s the counter-intuitive sort of space to go into right now? I would even say Cleantech, there’s a lot of startups out there . . . Mr. KHOSLA: You know, my advice to entrepreneurs is to go into the area of their expertise.

Mr. SCHONFELD: What’s the company that you would invest in in a second, but you haven’t really found it yet? What’s the problem that isn’t being solved by the companies that you’ve looked at that needs solving?

Mr. KHOSLA: Well, for example, storage for electricity is not a problem that has been solved. So, it is not a problem that has been solved.

Mr. SCHONFELD: For portable storage, for large…

Mr. KHOSLA: Well, both portable and stationary storage is not a problem that’s been solved. There’s lots of opportunities in bio materials so you know, in information technology there is, like low power is still a big deal. And so it’s hard to sort of single out areas and I see opportunities and interest, in business trends in almost every area.

Mr. SCHONFELD: Right. So what are your feelings about your first company, Sun Microsystems, being acquired? Mr. KHOSLA: You know, I don’t want to - I think it’s better Oracle acquired it and stayed in the Silicon Valley culture than, say, IBM acquiring it. But frankly, you know, that was a long time ago for me.

Mr. SCHONFELD: Where do these new cleantech companies fall? Are they closer to – do they look more like an industrial company when they mature or do they look closer to, you know, a hardware company or do any of these have software-type margins and how is that possible?

Mr. KHOSLA: Yes, it’s possible. You know, in each case, it’s a business strategy decision. I generally disagree with most of the very high margin opportunities. Why? Because it’s a business strategy tradeoff: the lower the margin you take, the faster you grow.

Yes, a Juniper can do 65% margin, but I tried really hard to convince them to go with 50 percent. Actually, it just increases market penetration faster. And so what are you trying to achieve?

And there are times where . . . take somebody like Infinera. I haven’t been on the board for a couple of years so my data is old. But we had a tradeoff between getting 10% margin on the chassis and 80% margin on the cards, or getting 30, 40, 50 percent margin on the total thing. And one was immediate revenue and margin, and the other was locking in lots of chassis with customers at low margin and then they kept buying line cards from you for ten years. It’s a business strategy question and it worked very well for Infinera. So I think this is a red herring.

Every one of our companies has the opportunity to go after niche markets or a large market. And the larger the market, the more aggressive you have to be.

Mr. SCHONFELD: OK, great.

Mr. KHOSLA: OK.

Mr. SCHONFELD: Thank you for taking the time. I appreciate you taking time on your schedule to talk to us.

Mr. KHOSLA: Great. Thanks a lot.

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Xobni Plus has a heavy emphasis on improving search, which is one of the key components the service has always been based around. Users will now be able to craft more advanced search queries, using either a GUI-based ‘query builder’ or Xobni’s own markup language, which lets you manually specify attributes like “attachment=yes” or “from=Jason” (Gmail offers similar search features, and they are very handy once you’ve gotten a hang of them). Other improvements include Xobni’s autosuggest feature, which can use linked Facebook and LinkedIn accounts to pair Email address with full names, as well as the ability to search within your Xobni ‘feeds’ in the sidebar.

Xobni may be calling this a ‘Plus’ version, but pretty much anyone who uses the service with any frequency is probably going to want to upgrade (I’d be surprised if the company puts much effort into adding new features to the free version after this). Xobni is expecting fairly broad uptake by its users, so it’s pricing the upgrade at a modest one-time fee of $29.95. However, the company also has more task-specific “Pro” features in the works that will likely appeal to different segments of their userbase, and it sounds like these will be more expensive (a mobile-only premium product is also in the works, with plans to release it later this summer).

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It’s been just one month since email startup Xobni got an investment from the Blackberry Partners Fund, which brought its total B round up to $10 million, and already it has a working prototype for an upcoming Blackberry app. Xobni executives were showing off the app at a Mobile Meetup in San Francisco last night, and the screenshot above found its way into my inbox (which is “xobni” spelled backwards, you know).

The app was working, and could be released sometime this summer, according to my source. The photo above shows the app on a Blackberry Bold, and appears to be showing off its contact search functionality. You type in a few letters, and it returns the contact information for every match in your inbox (even people who you haven’t necessarily added to your address book yet). I wonder what else it can do.

Xobni, which is a plug-in for Outlook that incorporates data from various social networks, currently does not have a mobile client. But the company has hired a small team of engineers to work on mobile apps, with Blackberry being the first device to get one.

Not only is there the connection with the Blackberry Partners Fund, but I’ve been told in the past that there is about 50 percent overlap between Xobni users and Blackberry owners. (There must be an Outlook-Blackberry mental axis out there). So it makes sense to go after the Blackberry first. But the startup cannot afford to ignore the iPhone. Can it?

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With the news that Facebook is going to begin allowing developers to incorporate full streams into their applications, developers are scrambling to get their apps up to speed. This morning we got our first look at the upcoming new version of Seesmic Desktop, and now we’ve learned that Xobni, the popular Outlook plugin that helps make Email easier to manage, will be going live with a new upgrade beginning at 6 PM tonight. Because of the way Xobni is built users won’t have to download an upgrade either – all changes will be server side.

Up until now Xobni has included some basic Facebook contact information, including profile photos and status updates, but it wasn’t as comprehensive as your full Facebook news feed (you couldn’t see how your contacts were interacting with each other, for example). Now you’ll be able to see this information at a glance directly from your Outlook mail client, which is obviously far more efficient than having to manually check your Facebook page.

Unfortunately, Xobni is still available only on Windows machines, so Mac users are left in the dust.

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Smarter-email startup Xobni has raised $7 million in a B round of financing from Cisco Systems and existing investors Khosla Ventures, First Round Capital, Baseline Ventures, and Atomico. Three of the four existing investors increased their ownership stakes in the company. But Cisco led the round, highlighting the importance of enterprise e-mail for Xobni (that’s where the money is). CEO Jeff Bonforte says:

The people that use our product are professionals and corporate users (around 70% in North America), so we have always had a corporate focus (it is Outlook after all). We have been fielding a ton of demand to license our software for users in corporate environments…so we have been addressing that demand. Cisco’s participation recognizes that Xobni is being used heavily by corporate users (and professionals like lawyers, real estate agents, etc). Cisco knows those customers really well, so this is a big bonus for us to have them helping us.

Obviously, building a business around these types of users and usage is a lot more straightforward than an advertising-based web 2.0 company.

Xobni previously raised a little more than $4 million. Its last round was in March, 2007. Its e-mail plug-in has been downloaded more than 1.5 million times. Xobni was in acquisition talks with Microsoft last year, but nothing came of it. Cisco’s interest in enterprise e-mail picked up last August with its $215 million purchase of PostPath, which it folded into its WebEx business. So there might be some product integration opportunities for Xobni as well. (Read our previous coverage on Xobni here).

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Jeff Bonforte never met an API he didn’t like. The CEO of Xobni, a startup that makes an outlook plug-in that makes your e-mail smarter, has been busy getting his team of engineers to integrate every possible API they can think of into the service. Xobni already added LinkedIn last June. Today it is adding integrations with Yahoo Mail, Facebook, Skype, and Hoovers. Data from all of these services appears in the Xobni sidebar in Outlook. Let’s take them one by one.

Xobni has been working on its Yahoo Mail integration since last April. Now in the sidebar, users can search their Yahoo Mail messages and see contacts and attachments. To send or receive email through your Yahoo account, however, you still have to click through to Yahoo Mail in your browser, which is sub-optimal.

Every time someone sends you an email who is also a Facebook member, you can see in the sidebar their current Facebook status message, general profile information, their Facebook picture, and recent updates made to their profile.

The Skype feature lets you send instant messages, SMS messages, and make Skype or regular calls to contacts who are also Skype users. Again, as with Yahoo Mail, actually making a call or sending an IM automatically launches the Skype application.

Finally, the Hoover API brings up Hoover company information for each contact. That provides some helpful context when responding to business emails, although I find the LinkedIn data more useful.

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Xobni, the Y Combinator email startup that turned down an acquisition offer from Microsoft earlier this year, has just lost its VP Engineering and first employee, Gabor Cselle. Cselle joined the company in March 2007, sporting a seemingly perfect resume that included work on the Gmail team and a Master’s thesis on “Organizing Email”.

The departure may not be abrupt (Cselle won’t be leaving until the end of August), but it is unexpected, and frankly, doesn’t make much sense. Since launching at TechCrunch40, Xobni has shown impressive growth and received widespread acclaim – Bill Gates demoed the service at the Office Development Conference earlier this year.

CEO Jeff Bonforte (who joined the company only five months ago) says that Cselle simply decided that he was no longer happy at Xobni, and wanted to try building his own startup. Bonforte says that Cselle likely wants his own shot at glory, and because of Xobni’s quick rise to success, members of the team may believe that launching a startup is far easier than it really is.

Cselle’s blog post on his depature seems to confirm this, at least in part:

“Ever since reading a biography of Bill Gates when I was 14 years old, I’ve wanted to be a founder of a company that makes a difference. I’ve wanted to build a workplace where people can be creative, productive, and happy, and a product that delights users and improves their lives. I feel like the time is now.”

Cselle may be itching to try his own luck, but Bonforte’s explanation still doesn’t sit well with us. Microsoft just threw $20 million at the company, which it turned down, likely in hopes of a better offer somewhere down the road. Why wouldn’t Cselle wait for his payday and then jump ship to start his own company?

We’ve heard that Cselle has been unhappy at the company for months, but we haven’t been able to reach him for any further details (we’ll update the post as soon as we do). In his blog post, he says that after leaving Xobni in August, he’s going to travel the world, raising money along the way for a new email startup.

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Xobni, the email startup that we’ve described as “The Superplugin for Outlook”, has partnered with LinkedIn to automatically pull contact information from the popular professional network. Xobni will now draw from public profiles on the LinkedIn network, displaying information about contacts’ employers, job titles, and pictures as part of the plugin’s sidebar.

Xobni’s sidebar helps manage Outlook email boxes by automatically threading email conversations, sorting attachments, and creating a network of related contacts within your inbox. Since its launch at TechCrunch40, the company has seen remarkable success. Earlier this year Bill Gates demoed the product at the Office Developers Conference, calling it “very, very, cool” – so cool, in fact, that Microsoft extended an offer to acquire the company for $20 million. After weeks of rumors, Xobni walked away from the deal, fearing it would just get swallowed up and forgotten in the Microsoft machine.

The partnership with LinkedIn makes Xobni even more useful. It’s too bad Xobni users are still limited to Outlook and Microsoft Windows (though there’s a web-based version for Yahoo Mail on the way). Hey guys, where’s the Mac Mail version? Seriously.

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It might not be as sexy as Xobni, but Outlook users who find that plugin useful should check out ClearContext Personal. It too intends to make email more manageable, albeit with a greater focus on projects than people (you won’t find any attempt to turn email contacts into a social network here).

ClearContext Personal has a number of tricks up its sleeve. First, it analyzes 30-40 characteristics of each message that hits your inbox to determine its priority. Messages deemed important, semi-important, or unimportant are color coded as such, and you can sort by this prioritization so that all your most important emails show up on top.

You can also organize your messages into topics and then view all of the contacts and attachments from messages within these topics. Attachments can be seen in a panel below your messages or viewed in a fullscreen attachment explorer that allows for file previews.

To help users deal with an overload of social network notifications, ClearContext automatically places these notification messages into special folders. It then summarizes the type of notifications you have received so that you don’t have to view them one-by-one. In a panel below your inbox, for example, you can view how many friend requests, messages, confirmations, and invitations you have received on Facebook. If you go into the special Facebook folder, you can choose to view notifications by these types. Similar functionality is available for LinkedIn, and ClearContext can be extended with other services that offer their own filters via a simple XML file.

There’s a handful of other features, such as a panel for keeping track of your threaded conversations, as you would in Gmail. An “unsubscribe” button also lets you opt out of future replies to a thread (for when people get a little too comfortable hitting the “reply all” button).

The first 200 users who sign up with the code “techcrunch” will be invited to download the plugin, which launches in private beta today. A batch of randomly-selected users will also get free licenses to ClearContext’s paid project management plugin, as well as invites to the upcoming professional version of its personal software, which offers some extra bells and whistles.

For other innovations in email, see Xoopit and Zenbe.

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Zaplets was an email product that put synchronized applications into email messages. The goal was to reduce email back and forth around things like scheduling meetings, coordinating events, etc. Any time an email turned into a thread, Zaplets may be more useful – all those responses would be brought right back into the original email. The Zaplet automatically updated itself in the original email, so long threads were avoided.

If Zaplets launched today, they’d call them email widgets.

Zaplets parent company, FireDrop, raised over $100 million from a slew of investors, including Kleiner Perkins Caufield & Byers. Their 2000 Series D round alone was reportedly $90 million. USA Today called it “one of the Valley’s most sizzling start-ups.” Dave Winer, by contrast, failed to find it interesting. As an aside, I remember being in their offices and seeing a demo of the product, but I can’t remember why (I had my own company then, and certainly wasn’t running around getting startup demos). I liked it.

But Zaplets were not to be it seems. Eventually Firedrop shut down, the employees dispersed and the assets eventually made their way to MetricStream.

Xobni CEO Jeff Bonforte says the Zaplet idea was a good one, just too early. And that’s why they’ve acquired much of the intellectual property of FireDrop from MetricStream. He won’t say what they paid, but hinted that it was in the low hundreds of thousands of dollars for the portfolio of ten key patents.

Bonforte says reducing email threads down to a single active message is a key factor in solving the email problem I wrote about last month. And he thinks Xobni will eventually be able to do that with the IP they’ve just acquired.

Some screen shots of the old Zaplet website are below.

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But the deeper that Xobni got into the discussions, the less comfortable it felt about its eventual fate inside the Microsoft machine. The fear was that Xobni would end up nothing more than a feature of Outlook. Microsoft wanted the entire team to move up to Redmond, and was vague in its answers about what it had planned for that team, or the product. In the end, the body language just wasn’t there.

Xobni offers a plug-in for Outlook that makes it smarter and easier to use by giving you handy stats in a sidebar and showing you how your contacts are connected to each other. But the company has greater aspirations than to become a feature of Outlook, as its internal integration with Yahoo Mail suggests. The service is still in private beta, and is approaching 50,000 registered users.

Was Xobni crazy to walk away, or did it make the right move in the long run?

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Now the company has a working prototype that works with the No. 2 most-used e-mail on the planet: Yahoo Mail. The Yahoo Mail product has not been released yet, and is not even in beta. It is just a working demo on Internet Explorer at this point. (First screen shot below). Every time you click on an email inside Yahoo Mail, a sidebar on the right shows you a graph of total emails you’ve received that day, how many you’ve received or sent to that particular person in the past, as well as links to previous conversations and files you’ve exchanged with that person through email. It also shows you any other contacts that might be connected to that person because they were CCed on a previous email.

But not only does Xobni work in Yahoo Mail, it also integrates with Outlook. So in that Xobni pane under “conversations”, you can also see any previous emails that you had with that contact in Outlook (assuming you have the Xobni plug-in for Outlook installed). Similarly, conversations with that contact that happened on Yahoo are visible in the Xobni sidebar inside Outlook as well (second screen shot below). Xobni constantly syncs Yahoo Mail and Outlook contacts, and you can see both of them in one view on the Web (third screen shot below). And, this is the nice part, you can search both Yahoo and Outlook e-mails using the Xobni search box, even from within the browser.

No word on when this might actually launch, but it makes sense for Xobni to move beyond Outlook. The fact that it is looking to Yahoo first is also no surprise, since new CEO Jeff Bonforte (personal friend alert) used to head up the IM group at Yahoo under Brad Garlinghouse. And, should anyone from Microsoft stop by the Xobni offices, well, that’s the kind of demo that gets deals done. Outlook-Yahoo Mail integration would no doubt be high on any post-merger check-list. And it looks like Xobni already has a headstart on it.

Xobni is still in private beta. If you want to try it (for Outlook only), the first 200 people to register here with the code “techcrunch200″ will get in.

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Bill Gates has publicly complimented the service, calling it “the next generation of social networking.”

Xobni, which launched at the TechCrunch40 conference last year, offers an outlook plugin for Windows users that significantly improves the desktop email experience (particularly search). They recently hired notable Yahoo’er Jeff Bonforte as CEO.

The timing on this is perfect as the New York Times and others are doing their seasonal focus on the problems with email. Xobni is one of the top startups trying to fix the problem.

Update: yet another source says the LOI hasn’t been signed by Xobni yet

Update 2: Xobni won’t return my emails, but they’ve told a source the following, passed on to us: “we’re staying an independent company and will be exiting beta soon.”

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Microsoft may have first approached the company months ago and floated an offer of sub $20 million, which was apparently rejected. But the company, which recently hired notable Yahoo’er Jeff Bonforte as CEO, is now back at the table with Microsoft corporate development.

Xobni currently only works with Outlook, although the company has said they will extend to integrate with other email clients, instant messaging applications, and social networks in the future. The current product creates an information profile for each person you interact with, and surfaces historical information that is relevant to what you are working on. Xobni displays contact information, threaded conversations, attachments, related people, email usage statistics, and information from the web. See our post from January with a more detailed overview of the service.

The company was founded in 2006 by Adam Smith and Matt Brezina, with early funding from Y Combinator. Other investors include Khosla Ventures, First Round Capital, Ron Conway and Baseline Ventures, Atomico Investments, Paul Buchheit, Ariel Poler, Saar Gur, and Tom Pinckney.

Xobni has not yet responded to our request for comment.

Update: Zoli Erdos points out that Bill Gates loves Zobni:

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As head of social search, Bonforte oversaw Yahoo Answers and Delicious before those businesses were recently absorbed by other groups. His real accomplishment at Yahoo, though, was prior to that, as the VP in charge of Yahoo Messenger!, working for Brad Garlinghouse. Under Bonforte, Yahoo Messenger! surpassed AIM in number of users for the first time, revenues went up sixfold, and he also introduced all those funky avatars to the product. Before Yahoo, he did a stint as president of Michael Robertson’s SipPhone, where he developed the Skype-like Gizmo Project on the sly. And during the go-go 1990s, he founded i-drive, one of the first online storage services (it went belly up—a good idea that was too early). At Xobni, his experience with both Yahoo! Messenger and search should serve him well.

Xobni launched at TechCrunch40 (read our review). It is a 14-person YCombinator startup that raised a $4.2 million Series A last year from Atomico Investments, First Round Capital, Khosla Ventures, and Ron Conway’s Baseline Ventures. The VP of engineering, Gabor Cselle, worked on Gmail and did his Masters thesis on inbox organization (I’m not joking). Xobni offers a plug-in for Outlook that helps you sort through your inbox. Click on a person, and you can see all your threaded conversations with them, as well as any attachments they may have sent in the past. “It makes email, in general, work the way your brain does,” says Bonforte. Bill Gates is also a fan.

When Bonforte first met the Xobni founders a few months ago, he brought them into Yahoo to talk to other executives there. They made a lasting impression on him at least. “We weren’t looking for a CEO,” says co-founder Matt Brezina, “but any time we find good people we ask, How can we get them?” Co-founder Adam Smith will relinquish the CEO title, but both he and Brezina will remain very much involved in running the company.

Although Bonforte has only good things to say about Yahoo, I haven’t heard him sound so excited in years. “Just fixing Outlook is a huge opportunity,” he says. “The inbox is still fatally flawed. It is hard to find stuff, hard to find people, hard to understand the network of relationships in your inbox.” Xobni addresses all of those issues.

And what about Xobni’s business model? It is still up in the air, but there are many avenues to explore: selling premium services on top of Outlook such as file transfers, adding people search, adding voice, integration with enterprise apps like Salesforce, Oracle, and PeopleSoft. Bonforte is a creative guy. He’ll figure something out.

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Being the only guy with Outlook in the office, it’s been a personal favorite of mine. Xobni’s sidebar has improved Outlook for me by offering faster search, and automatic organization of my email and contacts. Their search function alone has saved me time by just being faster and more comprehensive than Outlook’s native search. Emails can be searched as independent threads or viewed in the context of a contact’s profile (pictured right). The profile shows basic contact info (automatically updated) and a full history of threaded conversations, files, and people they’re connected to (the email “social graph”).

Today Xobni is greatly expanding their closed beta by adding everyone on the waiting list (14,000 people). They will also be giving each registered user 5 invites to give to their friends. However, 200 TechCrunch readers can download the program by entering a special invite code , ‘techcrunch’, here as well.

The latest version is the product of three more months of work, which includes speeding up the algorithms, usability improvements, and the beginning of web integration. No, it’s not the anticipated webmail version of the tool, yet. Xobni’s first step is to search the web (via Yahoo) while you search your email in an effort to find more information about what your query and provide a possible revenue source through referrals.

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Y Combinator primarily invests in software and web services. Twice a year (Fall and Spring), teams submit applications about their ideas, focusing less on business models and more on vision and the founders themselves. Summer teams interview during the Spring in San Francisco, while Winter teams interview during the Fall in Cambridge. If selected, the Summer teams work in Cambridge, while the Winter teams work out of the Bay Area. The last application drive was Oct 18th, with interviews happening this past weekend. Startups are usually funded 3 months living expenses, or $6,000 a person. Y Combinator’s investment is not so much in money as it is in the experience and connections the group provides to the teams, often shared over their weekly dinners. The money teams get is a bare minimum, often stretched by living and working in an apartment or moving in with friends and family. The young teams (usually around 23 yrs. old) may be under-funded compared to investments by other funds, but companies such as Thinkature and JumpChat have shown themselves formidable competitors to larger startups.

While the Y Combinator team ponders what they saw in last weekend’s interviews for the next round of funding, we thought now would be a good time to take a look at the last batch of Y Combinator companies. Many of these companies are still in heavy development, but if you’re wondering what kinds of services are receiving funding from this innovative fund – here are some short introductions.

JamGlue – An online application to mix and share music tracks online. The site features an online audio editor that allows you to clip tracks, control their speed and volume, and nest tracks in other mashups. They are currently in private beta.

JumpChat – A platform bridging mobile text messages, email, and IM communication without needing to download anything. Users can send mass messages on any of the platforms and JumpChat will send it to the platform the receiver activates. They are currently focusing on mass mobile messaging, where users can shoot off mass messages to the groups they define.

LikeBetter – An online personality test game, where you look at two photos and choose which one you “Like Better”. After a few responses, Like Better makes some guesses about your personality, ranging from political preferences to your income bracket. They also have a “bizzaro” version called HateMore.

Pollground – A social polling site. Pollground allows you to easily create surveys and allow the “wisdom of the crowd” to answer your questions. Questions and comments can be posted anonymously.

Shoutfit – A “fashion related community”. More to come in the future.

Talkito – A service that enables its users to meet and chat when they visit the same websites.

Thinkature – This recently launched online collaboration environment allows users to chat and draw diagrams on a shared whiteboard. See our review of Thinkature yesterday.

Xobni – An Outlook plugin that tracks all kinds of email analytics. They’ll track all kinds of email time and quantity analytics tied to specific contacts, threads, or times of day.

“Social Documents” (name TBA) – A site that promises to be the YouTube of documents. They allow you to transcode doc, text, and html files into pdfs, and share an embeddable version online. They will be launching within the next couple of weeks.

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