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Some startups, however, are still making it happen. Microblogging service Tumblr, for example, just closed Series B round of financing, with Union Square Ventures and Spark Capital leading the $4.5 million round.
Tumblr is in a tight spot; it sits somewhere between Twitter and Wordpress, trying to carve a niche that admittedly makes sense (very simple blogging platform) but it's also a niche that might not exist in a couple of years, in the same way that handhelds (without GSM) pretty much ceased to exist as a category. The competition is fierce, the future is unsure, and even the vastly popular Twitter is having a tough time thinking of a business strategy for their service.