Given the example, it may well depend on the description/vision of the startup… Here's what I initially thought, seeing each name:
upaper – what is it? also, seems to fade into the background… Maybe intentionally? Upside down, it's jededn, which might be Creole for "I turn people into zombies". Am I close?
Upaper – digital newspaper for Universities and colleges… Sort of a wordpress/Vignette for Academia? Alternately, a newspaper dedicated to the individual – YOU are the paper?
uPaper – the world's smallest paper products manufacturer, you enable nanobots to take notes when their extremely low power near field comm system is on the blink. Or something. Maybe you meant to be all Apple about it, and just misspelled iPaper?
None of the above is meant to mock, or deride any startup named "upaper", or any variation thereof. Just feedback on my initial impressions.
Ultimately, the best spelling/capitalization will depend a lot on how you wish the name to be read… But take it from the founder of NaviDate – when you need to start doing fancy capitalization to get your name across, it might be worth taking the time to think of better names. 😉