Friday, September 28, 2007

WSJ: 3Com to be bought by Bain Capital and Huawei Technologies of China for $2B

The Wall Street Journal is reporting this morning that Marlborough-based 3Com (founded in Silicon Valley in 1979 by Bob Metcalfe, now a VC at Polaris) will be sold to Bain Capital and Huawei Technologies, a Chinese networking firm. The price could be a little north of $2 billion. From Dana Cimilluca's story:

    Canada's Nortel Networks was interested in 3Com, people close to the process have said. Nortel may have walked away because Bain secured the partnership of Huawei.

    The reason why Huawei was crucial for Bain is that it has a non-compete with 3Com's crown jewel, a Chinese networking operation called H3C, which itself used to be a joint venture between 3Com and Huawei. If Nortel had won the auction, for example, it would have faced the prospect of competing against Huawei in short order.

    Most of the rest of the value of 3Com is in its Tipping Point unit, which provides network security gear. 3Com has said it would sell shares of Tipping Point to the public; that plan would probably be scrapped as part of the buyout agreement.

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Thursday, September 27, 2007

Still no official word...

...but the blog Northeast Venture Capital Funding is reporting that General Catalyst's fifth fund with top out at $600 million, with $200 million of that dedicated to later-stage investments.

(I'd posted on this earlier.)

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More gPhone Buzz, in BusinessWeek

BusinessWeek says that software developers are angling for partnerships with Google that would give them a prominent spot on the forthcoming gPhone. That includes Burlington-based Nuance Communications, the (almost totally silent) speech-recognition giant.

Update: BusinessWeek has another piece, titled, 'Will a Google Phone Change the Game?' From Roger Crockett's story:

    Wireless industry consultants and marketing executives with knowledge of Google's plans say it has been showing prototypes of a new phone to handset manufacturers and network operators for a couple of months. Its plans have been kept top secret, but Google is expected to tap a company on the Pacific Rim that specializes in mobile design and manufacturing to build a handset to its specs. Google could then apply its expertise in operating software and user applications, says Paul Catalano, a partner at consultancy RelevantC Business Group (RCBG). Google officials won't talk about phones, and industry sources don't expect one before the second half of 2008.

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Wednesday, September 26, 2007

Movies in Massachusetts

I went to a lunch today at the Boston Harbor Hotel, which featured Nick Paleologos, Executive Director of the Massachusetts Film Office, as a speaker. Paleologos talked about how new tax incentives for film production, put into place in January of 2006, have made the Bay State a popular destination for film crews. (There is now a 25 percent tax credit for all spending movie productions do in the state.)

Some of my rough notes from Paleologos' talk:

    - Three movies currently shooting in the state: 'Pink Panther 2,' 'Bachelor #2,' and 'The Women.' ('Pink Panther 2' had been considering shooting in Rhode Island. The movie is set in Paris.... which looks a lot like Cranston.)

    - Louisiana was the first state to start offering tax credits for film productions

    - Paleologos traces movie shoots in Boston back to the original 'Thomas Crown Affair,' starring Steve McQueen and Faye Dunaway, which was made in the late 1960s

    - Before the tax credit, there were five major movies shot in Massachusetts in seven years; after it, there have been six made here in two years. And many of that earlier crop spent as little time and money as possible in Massachusetts..."Perfect Storm' cost $140 million to make, but only $3 million was spent in the state. 'The Departed' cost $90 million, but only $6 million was spent here. More recently, Massachusetts has been getting a much bigger chunk... of the $30 million budget of 'Gone Baby Gone,' half was spent here. The movie '21,' about the MIT poker team (and starring Kevin Spacey, Laurence Fishburne, and Kate Bosworth), spent $30 million of its $42 million budget in the state.

    - There are two big challenges going forward. One is "meeting the crew demands," Paleologos said. Next year, there could be four or five movies shooting here simulteously, which will require lots of local workers. The second will be a soundstage, to allow more indoor shooting to be done here (and bring more film production to Massachusetts in the winter months.)

    - David Kirkpatrick, formerly president of Paramount Pictures, was at the lunch, and he chimed in on Challenge #2. Kirkpatrick is part of a group that's trying to bring a large production facility to Plymouth. He said they're doing a feasibility study now, and the best-case is that a facility would be open in 3.5 years, at the earliest. Kirkpatrick also talked a bit about trying to create an incubator there for visual effects talent, so that grads from local universities would have opportunities to work here, rather than having to relocate to the Left Coast. (The biggest visual effects shop in the state, North Adams-based Kleiser-Walczak, is fairly small, but works on many big-budget projects.)

    - Production Guide magazine put Massachusetts in the #2 position on a recent list of the five best states to make movies in (one notch down from New Mexico, but a notch above Connecticut, which offers a 30 percent tax credit.)

    Basically, Paleologos gave the impression that film production is one area where Massachusetts is aggressively marketing itself, and trying to make it economically appealing to come here...with a big assist from the Governor and the legislature.

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Tuesday, September 25, 2007

MIT's Business Plan Competition: From $10K to $300K?

MIT's annual Entrepreneurship Competition started in 1990, with $10,000 of prize money... so for a long while, it was known as the $10K competition. In 1996, the purse grew to $50,000, and then to $100,000 last year.

The competition has a pretty good track record for spawning companies. While some never make it past the embryonic stage, Akamai Technologies was a finalist in 1998. Direct Hit won the competition in 1998, and then was acquired two years later for half a billion dollars. In 1995, Harmonix (makers of the hit videogame "Guitar Hero," now owned by MTV Networks) was a finalist.

This week, I've bumped into a few Sloan students who've suggested to me that the prize money is heading north again this as much as $300,000. One judge I spoke to said he has been hearing rumblings, too.

Bill Aulet, one of the Sloan school lecturers involved in supporting the competition, said yesterday he wasn't ready to confirm any numbers, and several other people connected to the competition didn't return my calls. Given that the most recent change to the competition was adding a new $50,000 "Development" category, which focuses on businesses that can improve low-income communities or developing countries, I'd expect the additional prize money to focus on a new category -- like energy or the environment.

Increasing the prize money three-fold wouldn't be about convincing more students to enter the competition -- just about anyone with an entrepreneurial inkling at MIT knows about it already, and has plenty of motivation to get involved. I think the increase would have three benefits:

    1. Marketing: Ensure that the competition remains prominent on the national scene...attracts more media attention...makes more prospective B-school students aware of Sloan...and brings in more venture capitalists to look at the finalists and winning companies as prospective investments.

    2. Pocket change: Give the winning companies a bit more prize money to use in their start-up stage, assuming they don't find funding quickly from VCs.

    3. Spark more entries in a particular sector, like cleantech.

With $250,000 or $300,000 in prizes, it seems like the MIT competition would be the country's biggest.... the state of New Hampshire ran a competition with $250,000 in cash prizes from 2003 to 2005, but they haven't repeated it since. Across the pond, the London Business School has a $500K competition, focused on homeland security.

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Monday, September 24, 2007

Peabody on Facebook

The buzz in the blogosphere today is about whether Microsoft or Google is about to make a big investment in Facebook, valuing the site somewhere in the neighborhood of $10 billion. The Wall Street Journal's Deal Journal blog looked to Bo Peabody (founder of Tripod, an early homepage-building site acquired by Lycos, and Village Ventures) for some perspective. A snippet:

    There are two ways to look at it. There is the purely financial decision, and the other is something different than that. If those guys were doing the risk-adjusted thing, financially they would sell. I just think that the market, if you look at the history of media, it is by nature a consolidating force. Typically things get consolidated. I don’t think that’s a great thing for consumers, but there is serious economy to ad sales. And they haven’t built a real ad sales organization. In order to do that it’s very expensive. Very expensive. Digital ad sales at the entry level are getting multiple six figure salaries. They have to think carefully about that.

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Talk Tomorrow Night at Boston-Israel Business Forum

I'm giving a talk Tuesday night, downtown, at a meeting of the Boston-Israel Business Forum.

It will not be about Middle East policy, but rather "Boston's Innovation Economy: Strengths and Challenges." The event runs from 7 to 9 PM, and there is a cover charge. But there will be a light nosh, too.

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Microsoft in Cambridge: Will Real R&D Happen There?

Xconomy has two posts about Microsoft's hiring of Reed Sturtevant to run a new "development lab and innovation group" in Cambridge, where the software giant has leased about half of One Memorial Drive. (Xconomy also offers this professional biography of Sturtevant.)

I'm still yet to be convinced that any meaningful R&D or new product development will take place in this Cambridge facility. (Though it will be the headquarters for Microsoft's SoftGrid division -- the result of the company's acquisition of Boston-based Softricity.) Microsoft is an *incredibly* centralized company, and Redmond, WA is the center of everything.

Here's a snippet from a 2005 Globe column I wrote in the wake of Microsoft's acquisition of Groove Networks:

    ''Microsoft used to believe that development was a contact sport," says Francis deSouza, an entrepreneur who sold Flash Communications to Microsoft in 1998 but left in 2001 to start another company. ''You needed people bumping into each other. In Redmond, you wanted your entire development team in the same building. Ideally, they'd be on the same floor."

    DeSouza says that Microsoft is one of the last big technology companies to really commit to setting up product development centers outside of its headquarters.

    ''The next stage of their growth will require it," he says. ''And they'll have to work at it."

    The first big development center to coalesce outside of Redmond was Microsoft's campus in Silicon Valley, which now employs about 1,200 people and combines ''long view" technology research with shorter-term product development. Boston would be lucky to have a Microsoft site that approached Silicon Valley's significance.

    So what are the signs to watch for? First is how influential Ozzie becomes within the company.

    Second is whether we start seeing top Microsoft execs from Redmond visiting Boston more often. That includes Gates, Ballmer, Jeff Raikes, who runs the Information Worker business, and Steve Sinofsky, who runs the Office division.

    ''If you bump into any of those guys at Logan, that's a good sign," says deSouza.

    Third is whether Microsoft consolidates its three locations into a nascent Boston campus. The lease on Groove's headquarters in Beverly is up next year, and it would be smart if Microsoft brought its developers together with its sales, service, and support folks. Also, Beverly isn't exactly a spot that's attractive for a newly hired programming whiz out of MIT.

    Finally, it would be a good omen if Microsoft started recruiting some pure researchers to work at its local offices, and if the next start-up Microsoft acquires is allowed to stay put, rather than be shipped out to Redmond.

Two years later, a number of those things have started to happen. Now, I'll be looking for Microsoft to:

    1. Spread the word about some interesting/important projects being cultivated here in Cambridge.

    2. Open up its Cambridge building, as it does with its campus in Mountain View, to conferences and networking events, to really weave itself into the fabric of the tech community here.

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Instead of Going Public, Adnexus Shacks Up with Bristol-Myers Squibb

Bristol-Meyers Squibb is paying $430 million in cash for Waltham-based Adnexus Therapeutics, which filed an S-1 statement just last month. The company planned to raise $86 million in an IPO, on top of $76 million it had already raised in VC money.

We included them earlier this year on our list of the ten most-promising New England life sciences start-ups, in the second edition of The Convergence Guide. (The list was compiled by Steven Dickman of CBT Advisors.)

From the AP report:

    The companies said the acquisition of Adnexus will help advance Bristol-Myers's role in biologics and includes an early stage trial for cancer treatment candidate Angiocept. Angiocept is designed to be a so-called anti-angiogenic drug, or one that tries to stop cancerous tumors from developing new blood vessels.

    The deal "is an important step in accelerating the strategic transformation of our pharmaceutical business to a biopharma business model," said Bristol-Myers Squibb Chief Executive Jim Cornelius, in a statement.

Among the local VC firms that backed Adnexus are Polaris Venture Partners, Atlas Venture, and Flagship Ventures. The company did a Series C round of $15.5 million just before filing for its IPO.

Update: Tuesday's Globe has the full story.

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Sunday, September 23, 2007

Today's Globe column: Why VCs Do (or Don't) Blog

Today's Globe column deals with the ways that blogging is changing the relationship between entrepreneurs and VCs. From the piece:

    There's a bifurcation happening in the Boston venture capital world: Some firms blog, and some don't. And the divide isn't just about being hip to the latest trend. It signifies an important shift in the way VC firms interact with entrepreneurs.

The video is below (it features Bijan Sabet of Spark Capital, Jon Radoff of GuildCafe, MIT Sloan student Sim Blaustein, and Mike Feinstein)... and after it, some additional thoughts e-mailed to me by VC bloggers Fred Wilson of Union Square Ventures and Jeffrey Bussgang of IDG Ventures.

From Fred Wilson:

    [Blogging is] a huge benefit to our business. Of course it brings incremental deal flow, but it also filters the deal flow and makes it more targeted and more relevant

    Its also a great way to bring needed attention to the companies we invest in

    And its a way to do research on new sectors and learn about other companies that compete with our companies

    And its a great way to learn about emerging technologies. Check out the comments to my andreessen post yesterday or my post on AIR last week. You can't buy that kind of education and I get it every day for free

    I could go on and on. Its the best tool for vc investing that I've ever seen and I've been in this business for more than 20 yrs

From Jeffrey Bussgang:

    - Definitely less about deal flow and more about transparency and providing accessibility, humanizing the VC process
    - Open dialog helps me keep in touch with entrepreneur’s latest issues and hot buttons
    - Provides sense of accountability to the entrepreneur community
    - Helps me understand social networking, community, blogging, and many other Web 2.0 phenomenon from a practical standpoint as a practioner, not theoretical

Interestingly, one thing I didn't mention in my column... at least one Boston firm, North Bridge Venture Partners, has an internal blog that's visible only to their partners and entrepreneurs.

(In my blogroll at right, I think I have a comprehensive list of all the Boston-area VC blogs.)

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Vanu, Inc. in the NY Times

Michael Fitzgerald has a nice profile of Vanu, Inc., the Cambridge company run by Vanu Bose (son of Dr. Amar Bose), in today's NY Times. He writes:

    Most of us don’t think of our cellphones as radios, but they are. Any wireless device uses a radio. Figuring out a way to operate the radio with software has obvious potential advantages: for one, it’s easier and cheaper to upgrade software than it is to send field technicians to cellular towers to add components. And a software-based radio — the industry calls it software-defined radio — could handle multiple cellular signals at the same time, the way a computer can run a browser, a word processor and a spreadsheet all at once.

    So, in theory, letting cellular companies accommodate new spectrum or technologies by doing software upgrades could expand coverage and services while possibly reducing what we pay for them.

Vanu raised a $8 million "angel" round in July.

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Friday, September 21, 2007

Memo to Wearable Computing Gurus: You Are Not Welcome at Logan Airport


    Star Simpson, a Massachusetts Institute of Technology student, was arrested at gunpoint Friday morning at Logan Airport when authorities suspected she had a bomb strapped to her chest.

    Simpson was wearing a black sweatshirt that had a circuit board with wires, green LED lights and a 9-volt battery attached to it. When an airport employee asked about her shirt, Simpson walked away without answering so the employee called the authorities, the Boston Globe has reported.

Here's the Globe piece.

Salon has links to WBZ video of Simpson's arraignment, and a quote from a state police major, who says the MIT sophomore is "extremely lucky she followed the instructions or deadly force would have been used. She's lucky to be in a cell as opposed to the morgue."

And BoingBoing's Xeni Jardin has a great collection of links, including a link to Simpson's homepage (which seems to be down right now.)

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New England's New Crop of Early-Stage Venture Firms

In working on my Innovation Economy column for this Sunday's Globe, I was hoping to be able to squeeze in a run-down of the newest early-stage venture capital firms in our neck of the woods.

That didn't work out. (Totally my fault: trying to fit in too much good stuff.)

So here's my list -- with much more material than I would've been able to fit into the column. If I've missed anyone who has raised a new early-stage fund in 2007, please post a comment.

Fair Haven Capital
Boston, MA
Partners: Paul Ciriello, Managing Partner; Rick Grinnell, Managing DIrector; Jim Goldinger, Managing Director; Dan Keshian, Managing Director; Cheryl Goyette, Partner and CFO
Size: $200 million
Investments so far: Everyzing (formerly Podzinger), Cocona Fabrics, Xtranormal, and one Boston company that is currently at the term sheet stage
Sweet spot for A rounds: averaging $4 million

Ciriello says the firm spun out of TD Capital Ventures; Toronto Dominion Bank is an LP in the new fund. Fair Haven will focus on consumer tech, enterprise tech, security, and materials. (Cocona is developing a new fabric derived in part from coconuts.) "We do have a bias toward eastern North American," he says.

.406 Ventures
Boston, MA
Partners: Maria Cirino, Co-Founder and Managing Director (formerly of Guardent/Verisign); Larry Begley, Co-Founder and Managing Director; Liam Donohue, Co-Founder and Managing Director
Size: $125 million (could grow as large as $150 million)
Investments so far: Veracode, RatePoint, Memento
Sweet spot for A rounds: A few hundred thousand to $3 million

Cirino says, "We're very clued in to the fact that savvy entrepreneurs don't want $10 million bucks jammed down their throat when all they need is a couple. Take all the money you want? That idea is dead. Savvy entrepreneurs want to preserve their equity, and the way to do that is take as much money as you should, but as little as you can." Firm will focus on IT security and tech-driven services. "Part of what we look to do is avoid spaces that have been overheated by a lot of venture investment," she says.

Point Judith Capital
Providence, RI
Partners: Gina Raimondo, General Partner; David Martirano, General Partner; Sean Marsh, General Partner; David Mixer, Founding Partner; Michael Doyle, Venture Partner; Brad Waugh, Venture Partner; Jeff Weiss, Venture Partner
Size: $73 million (this is the firm's second fund; all others on this list are on their first)
Investments so far: Novare Surgical, Envista Corp., Music Nation
Sweet spot for A rounds: $500,000 to $3 million

Formerly an affiliate of Village Ventures. From the site, "We focus our investment activity in communications, information, Internet, and healthcare technologies." First three investments are in Silicon Valley, Beverly, MA, and New York.

DACE Ventures
Waltham, MA
Partners: David Andonian, Managing Partner; Jon Chait, Partner; Doug Chertok, Venture Partner (Chertok is based in New York)
Size: Slightly over $70 million
Investments so far: Panraven, Cityvoter, AuctionPal, LocaModa
Sweet spot for A rounds: $1 million to $3 million

"We're looking for capital-efficient, early-stage Web businesses," Andonian says. "There are not many firms filling the capital gap, as VC firms have gotten bigger and bigger." Andonian says the focus at DACE is businesses built either on the Web or on mobile platforms.

Kepha Partners
Waltham, MA
Partners: Jo Tango, Founder (formerly of Highland Capital Partners); Ed Hamilton (acting CFO)
Size: Roughly $50 million
Investments so far: PeerMeta, AutoVirt

Tango wouldn't talk to me, but this is from their site: "To deploy the vast amounts of capital the venture industry has raised, many firms are pursuing new strategies, models, countries and later-stage investments. Many are becoming venture bankers. KP has a back-to-basics approach focused on pre-seed, seed and Series A companies. We call this 'venture building,' and it is what created the venture industry in the first place." Is he hoping that people will associate his KP with that other KP on the West Coast?

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Did Robotic FX Steal Secrets from iRobot?

Burlington-based iRobot has filed a suit against a Chicago company that was founded by a former iRobot engineer, alleging that the ex-engineer took trade secrets from iRobot and used them to build a rip-off of the PackBot, a military bot iRobot designed that is being used in Iraq and Afghanistan. Last week, the Chicago company, Robotic FX, beat out iRobot to win a $280 million contract from the military.

Hiawatha Bray has a lengthy account in this morning's Globe. He writes:

    The case took another twist yesterday, when iRobot went to federal court in Boston, asking a federal judge to halt production at Robotic FX. Representatives from the Justice Department and the Army weighed in against such an injunction. The arguments played out behind closed doors because of national security considerations. But in a brief filed yesterday, US Attorney Michael Sullivan said halting production would jeopardize the lives of American soldiers in Iraq and Afghanistan.
    "The protection that the detection robots provide for our troops easily dwarfs whatever interest the public has in a private dispute between two corporations," Sullivan wrote.

Xconomy has a few blog posts:

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Wednesday, September 19, 2007

Mini-Printer Co. Gets $25 Million

Zink stands for "zero ink," and the company is developing technology for tiny portable color printers, which would work with handheld devices and phones. It is run by Polaroid alum Wendy Frey Caswell, and the technology came out of Polaroid's R&D labs. Zink plans to manufacture the special paper required for its printers, and have other electronics companies make the printers.

Sharp guy Dan Primack e-mails to let me know that Zink just closed a $25 million VC round -- about a year after a $70 million round led by Polaris fell apart. His blog post is here. Will Polaris one day regret passing? We'll see....

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Splitsville for Alnylam and Merck

Cambridge-based Alnylam Pharmaceuticals and Merck had a big-money partnership -- up to $120 million in milestone payments.

As of today, it's done with, and Alnylam CEO doesn't seem too depressed, saying the split is in Alnylam's best interests.

What do you think is happening here? Is it entirely related to Merck's acquisition of Sirna Therapeutics, an Alnylam rival that is also working on RNA interference? (Merck bought Sirna for $1.1 billion last November.) IE, why does Merck need Alnylam as a partner if they now own Sirna?

Here's an old description of the Alnylam/Merck collaboration from the Alnylam Web site (since removed):

    Alnylam and Merck are in a collaboration to develop RNAi therapeutics across a potentially broad spectrum of disease areas. Originally forged in 2003, the companies amended the terms of the collaboration in 2006 to provide Merck with a more active role in the development of RNAi therapeutic products, and Alnylam with an opportunity to receive accelerated R&D funding and the potential for significant milestones and royalty payments on commercialized products resulting from the collaborations.


    Alnylam and Merck have initiated a pre-clinical program to develop RNAi therapeutics for spinal cord injury. The program is focused on the Nogo pathway, which plays a key role in preventing regeneration of nerves after injury, such as spinal cord injuries. An RNAi therapeutic that inhibits this pathway could potentially promote neuronal cell regeneration and reduce or prevent paralysis caused by such injuries.

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Tuesday, September 18, 2007

LocaModa Scoops Up $6.1 Million from DACE

I'm at a conference in New York this week, and yesterday one of the moderators was using Wiffiti to allow audience members to post comments or questions by sending text messages from their cell phones; they appeared on a big screen behind the stage. Turns out that Wiffiti's creator, Somerville-based LocaModa, just raised $6.1 million from DACE Ventures, the new VC firm run by David Andonian and Jon Chait. (Two other investors participated in the round, LocaModa's Series A.) Not sure if this is DACE's first investment, but it's certainly among the first.

LocaModa also has some interesting ideas about "the Web outside" -- basically, screens in public places that people can interact with using their cell phones.

Here's the PEHub item on the funding, the very Spartan DACE Web site, and LocaModa's site.

Joining DACE are investors from India and Japan. LocaModa CEO Stephen Randall writes via e-mail, "LocaModa's business is now better placed to not only grow in [the] USA but also in Asian markets, where the usage of the mobile phone is often a user’s primary interactive device."

In July, Randall was carping about the cluelessness of Boston VCs in my Globe column. Maybe this has changed his mind?

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Monday, September 17, 2007

New England Web 2.0 Companies Attract More Funding Than Their SiliValley Counterparts

'Boston is the new Silicon Valley,' declares From Paul La Monica's piece:

    According to a report released Monday, venture capitalists invested $464.2 million in 101 so-called Web 2.0 companies during the first half of 2007, a 7 percent increase from the same period a year ago and new record high. But less than 20 percent of this cash was invested in Bay Area firms.

    “Investors are looking to diversify their Web 2.0 portfolios so they are looking at new regions,” said Valerie Foo, research manager at Dow Jones VentureOne.

    So what’s hotter than the Valley? New England. This shouldn’t come as a huge surprise since the Boston area, with all its colleges and universities, has always been a training ground for engineering talent.

    While there were many more deals involving Bay Area companies in the first half of the year– only 10 New England Web 2.0 firms received a round of financing compared to 25 in the Bay Area — the New England firms received $102 million to the Bay Area’s $91 million. The big reason for New England’s surge to the top of the VC money list was due to a $30 million investment in Cambridge, Mass.-based enterprise software developer n2N Commerce.

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Sunday, September 16, 2007

Today's Globe column: Cell Towers, the Home Version

Today's column deals with a few of the local companies developing technology for femtocells -- essentially a tiny cellphone tower for your home -- and some of the VC firms backing them. From the piece:

    Plugged into your high-speed Internet connection, they'll communicate with your existing cellphone whenever you're at home, and send your calls over the Internet. The benefits are better coverage, faster data speeds, and longer battery life for your handset - since it no longer has to communicate with a cell tower that may be a mile away.

And here's Airvana CEO Randy Battat talking about'll be interesting to see whether Airvana's femtocell product looks like the prototype he has in the video, or has a flashier design (Randy is an ex-Apple exec, after all.)

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Friday, September 14, 2007

Third Rock Caps First Fund at $378 Million

Third Rock Ventures, the newest life sciences venture firm in town, has finally put out the press release announcing its new fund: $378 million.

The IN VIVO blog talks to partner Kevin Starr about the firm's focus. From that post:

    The six general partners—including former Millennium CEO Mark Levin—expect to hold key management positions at these start-ups during the first year or so. They’ll negotiate the deals, set up the shop, do the hiring, etc., etc. to assure these companies get off to the right start. “We’ll be the start-up team,” says Kevin Starr, the former chief operating officer and chief financial officer at Millennium. The partners will serve CEOs, heads of science, whatever is necessary “to make sure these companies are built the right way, have the right cultures, hire the right people, and do the right partnerships. We are going to get involved in a hands-on way.”

And Forbes also has a piece, which is pretty critical of Millennium as an investment and as a company. Matthew Herper also talks about Third Rock's strategy:

    Part of the new venture fund's approach will be to closely manage start-ups. Other VCs are backing dozens of companies a year, but Third Rock will only look at a few biotechs, each getting a few tens of millions of dollars. At that rate, it will take the fund several years to invest all the money that it has.

    Another strategy: Third Rock won't raise $50 million or $100 million worth of venture capital for a single biotech before bringing the company to the public markets, private equity or selling out to a larger drug maker. These deals are just too dilutive. Better to follow the Millennium example and start generating revenue through partnerships early.

Last month, I noted in the Globe:

    Greylock Partners of Waltham offered an assist in getting Third Rock into orbit, investing some of its own money and introducing Levin to several investors; Greylock's Bill Helman was one of the original investors in Millennium. Levin himself was a VC with Mayfield Fund in California before starting Millennium.

    "Life sciences is an area of pretty mediocre returns for venture capital," says Helman. "They have a strategy for breaking out of that." Levin didn't respond to calls seeking comment.

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How big will GC's fifth fund be?

Several Boston VCs tell me that General Catalyst's fifth fund is close to closing, and everyone I've spoken with expects it to be quite a bit bigger than the fourth fund, a $400 million war chest announced in January 2006.

One Boston VC says he's heard word from limited partners of a $450 million fund with a $250 million side fund. Another tells me he expects the total will be bigger -- in the $700 to $800 million range. A third says that one aspect of GC's story -- the founders have known each other since high school -- is reassuring to LPs, who want to be sure that a fund's partners will be able to work together smoothly over its ten-year life-span.

General Catalyst co-founder David Fialkow had no comment when I asked him about the new fund earlier today.

The firm dates back only to 2000; among Boston VC partnerships, it's among the most heavily-focused on video and the Net, with investments in Brightcove, Maven Networks, ViTrue, ScanScout, Visible Measures,, and Eons.

Update: An entrepreneur source e-mails to say "it's definitely north of $700." (One of his prior companies was backed by GC.)

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Thursday, September 13, 2007

For $1.99, you can get Monet to roll over in his grave

Fine art for your cell phone.

I'm sure Winslow Homer never imagined he'd read this sentence: "Text 'fog' to 69632...and the museum will send back a copy of 'The Fog Warning,' the museum’s most famous Winslow Homer painting"?

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Wednesday, September 12, 2007

Bob Coughlin in the bunker

My columnizing idol, Steve Bailey, has a great piece in the Globe this morning about the hiring process at the Mass Biotech Council. A snippet:

    [Bob] Coughlin started his new job last week, and should be celebrating and out glad-handing after landing one of the juiciest plums in the local lobbying business - a position that paid the last guy, former House Speaker Tom Finneran, a reported $500,000 a year. Instead, Coughlin is now, by necessity, deep in the bunker at the biotech council's offices in Cambridge as the state Ethics Commission investigates how the Patrick administration's point man to the biotech industry came to be its top lobbyist.

Is there a way to recover from this situation? It'll be interesting to see Coughlin and Mass Bio's plan play out...

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As the Times notes the 'graying of the Web,' Jeff Taylor's cuts staff

This NY Times piece today observes that several sites are angling to be "Facebook with wrinkles," targeting older Internet users. The first example they mention is Charlestown-based Eons, started by founder Jeff Taylor. From the piece:

    The advertisers on Eons include Humana health care insurance, Fidelity Investments and the pharmacy chain CVS. Lee Goss, president and chief operating officer of Eons Inc., which received backing from the venture capital firms Sequoia Capital and General Catalyst, said that the sites aimed at an older audience may not grow as quickly as MySpace, but could have longevity.

    “Our audience, while it is harder to attract, is more durable and sticky over time,” he said.

Good timing for some good publicity for Eons. Mass High Tech reported yesterday that Eons has laid off 35 percent of its staff in a restructuring. The operative quote from Rodney Brown's piece: "The cost structure was just too expensive for where we are in doing business," according to Taylor.

Eons has raised $32 million thus far, some of it from General Catalyst in Cambridge and Charles River Ventures in Waltham.

Taylor, 46, told the Herald that his start-up still has $15 million in the bank. The Globe notes that this is the second cutback this year. And Xconomy has some inside details from an Eons employee.

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Tuesday, September 11, 2007

Raytheon Introduces New Flash Gordon-style Ben-Gay Ray Gun

It's called the Active Denial System, and I'd like one for my next trip to the concession stand at Fenway; just watch all those people in front of you flee from the line.

From the press release:

    The Active Denial System emits a focused beam of millimeter wave energy that penetrates the skin to 1/64th of an inch, producing an intolerable heating sensation that causes targeted individuals to flee. The Advanced Concept Technology Demonstration program has conducted extensive human effects safety testing and extended user evaluations in field conditions.

It also bakes potatoes in 30 seconds or less.

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Harvard loses its main money man

The Wall Street Journal reports that Mohamed El-Erian, who oversees Harvard's $35 billion endowment, is taking off after a tenture of just a year and a half. Craig Karmin and Ian McDonald write:

    In August, Harvard said that the endowment had returned 23% for the fiscal year ending in June. That period marked Mr. El-Erian's first full year as head of Harvard Management Co., and he said he had only recently completed the hiring of a new team of investment managers. In 2005, Jack Meyer stepped down as head of Harvard Management to start the hedge fund Convexity Capital Management. Mr. Meyer took about 30 staffers from Harvard to the new Boston-based hedge fund.

    Harvard Management is considered one of the nation's most successful and trailblazing investment management firms. It has chalked up an annualized return of 15.2% over the past 10 years through June 2006, compared to an 8.9% median return for endowments and foundations over that same period, according to Wilshire Trust Universe Comparison Service.

The Globe's Steve Syre also has a blog posting about the news.

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Video from Last Night's Web Innovators Group Meeting

I brought my videocam along to Monday night's meeting of the Web Innovators Group, and here's what I shot. Interesting to note the differences in how well people do at giving brief explanations of what they're up to...

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Monday, September 10, 2007

Why OnForce is Moving to Boston

I ran into someone yesterday who mentioned that OnForce, a NYC start-up backed by General Catalyst, is in the process of moving from New York to Boston.

OnForce is basically an online marketplace for short-term technical gigs, like installing a bunch of new desktops, diagnosing printer problems, or setting up videoconferencing systems. The company's CEO, Peter Cannone, e-mailed me today, and the first thing I asked was, what's behind your decision to move to Boston?

Here's what he said:

    As we continue to build out the Company the biggest and most important short term need we have is highly skilled developers/engineers as well as product design and development folks. It was very difficult to find these folks in New York City. When we assessed a new location for our Company we thought Silicon Valley, Austin, Texas or Boston, MA. Boston MA was the clear choice for us. We have already hired some very talented folks up in Boston including a CTO and a Director of Product Development. Many of these folks are working in temporary space in Cambridge. As a validation of the decision one of my Board Members Marty Abbott previous CTO of EBAY who is very knowledgeable about locations of marketplace companies like OnForce was very supportive of the Boston move. Having [General Catalyst] close by also makes available additional resources which we can take advantage of. They are great VC firm. We will be opening the office in Lexington MA in early October and hopefully transitioning most of our employees from NYC by year end.

There you have it.

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Let's Fix What's Not Working

Usually, when I do fireside chat conversations at events, I'm the interviewer. Yesterday, at the Vilna Shul on Beacon Hill, I was the interviewee and Doug Levin, CEO of Black Duck Software, was flinging the questions.

One thing he focused on, given the subject matter of yesterday morning's column ("Why Facebook Went West") was the differences between the tech economies here and in Silicon Valley.

I know that there's a feeling that we should stop obsessing about this... every time I make an East-West comparison in print or on this blog, I get e-mails and comments. To which I say, if you're not #1, and you've got a competitive spirit, it's natural to think about what you can be doing better.

Two people who were in the audience yesterday, David Aronoff of IDG Ventures and Chris Herot of Zingdom, posted some thoughts about the issue. (Dan Bricklin also has a post and a podcast recording of the event.)

As I see it, there are five things that aren't working:

    1. Our big companies locally don't seem to spawn enough start-ups.
    2. Boston doesn't yet have a truly vibrant blogosphere that can help bring attention to new products/companies
    3. Investors here can have blinders on when it comes to consumer-focused technologies, or anything that seems wacky at first (let's start a Web site that provides free hosting for videos, and has no business model, and let's call it YouTube)
    4. Graduating students (or drop-outs like Facebook founder Mark Zuckerberg) sometimes don't feel like there's enough of a vibrant community here that will support their ideas/start-ups
    5. We don't have any big consumer device or consumer Internet companies locally.

Problem #1 will get solved, in part, if we get rid of non-compete agreements in Massachusetts. Let's make it as easy as possible for a smart person with a great idea to leave EMC, Analog Devices, Akamai, or Nuance and start a new company.

Problem #2 is getting solved -- slowly. But I'd challenge more entrepreneurs, VCs, and big company executives to start blogging (even if it's just once a week) about what you're interested in, cool companies you've seen, or new products you're playing with. In the Valley, one thing that can give new companies momentum is bloggers talking about, experimenting with, and evaluating their new sites or products. I don't think Flickr or Twitter would've been successful were it not for blogger support.

Problem #3 is hard to solve. We do have some VC firms and angel investors making risky bets. If they blogged about their riskiest deals, their most out-there bets, I think that'd be a positive thing (and it'd help with Problem #2). So I'm giving VCs permission to crow about the edgiest stuff they're doing. This does not mean explaining to us why your new enterprise software company is really a Web 2.0 company in disguise.

Problem #4 is getting solved; Chris, in his post, lists a bunch of new events that have been started in the past year or two, most of which are extremely open to anyone who wants to come. But there's more we could do. So two challenges to you:

    1. If your company benefits from having a vibrant innovation economy in our region, you ought to host (or co-host/sponsor/support) at least one event a year that is open to anybody, and will help foster connections and conversations about innovation. It might be a gathering about how the Internet is changing PR (which I suggested last week to my friends at Schwartz PR) or an unconference about video or a breakfast panel about reputation systems in e-commerce. But it needs to be open and free. Think about the BU student or recent MIT grad who is starting a company that you'd like to do business with at some point, and make it possible for them to attend. Publicize the event on sites like Mark's Guide or Upcoming.

    2. Established entrepreneurs, investors, attorneys, PR folks need to make themselves accessible to younger, less-established entrepreneurs. This might mean giving talks at local universities...judging business plan competitions...attending conferences on campus. This next generation of entrepreneurs needs your help, and the benefit of your connections.

Problem #5 will get solved if we work on Problems #1-#4.

So let's start working, shall we?

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Sunday, September 9, 2007

Today's Globe column: Why Facebook Went West

Ever since I moved back to Boston from San Francisco, I've been wondering about the story behind why Facebook was started at Harvard but has been based in Palo Alto, CA ever since the summer of 2004. So that's the topic of today's Globe column. Here's the opener:

    In April of 2004, two Harvard undergrads walked into the Charles Hotel for a meeting with a venture capitalist. What happened next either highlights Boston's deficiencies as a greenhouse for a new generation of Web start-ups, or illustrates the incredible magnetism of Silicon Valley - or a bit of both.

I didn't get to talk with Facebook CEO Mark Zuckerberg for the piece, unfortunately, but pretty much everyone I spoke to said that he had his heart set on going to Silicon Valley for the summer after his sophomore year. (I do believe that for aspiring techies, Silicon Valley exerts a powerful pull the way Hollywood does for aspiring actors.) Scott Tobin of Battery Ventures, the one VC firm I could find that was aware of Facebook in early 2004, wrote in an e-mail:

    Zuckerberg was into going out to Palo Alto for the summer if I remember correctly, however it’s impossible to tell if whether he had influential advisors in NY or Boston working with him & suggesting to him that Boston was his place – that he would have considered doing so.

Peter Thiel, co-founder of PayPal and the first investor in Facebook, said:

    I think there was a sense that it made sense to start an Internet company from California. It was seen as a friendlier environment. It is really amazing that people in Boston missed out on it, even though it was a very risky deal, with lots of open questions.

David Sze, a partner at Greylock, said, "There is definitely an ecosystem advantage [in Silicon Valley]. There isn't a history for consumer Internet on the east coast, and I think Mark sensed that and wanted to have every advantage."

I mention the large number of local companies now building Facebook apps in the story....while I don't want to try to be comprehensive here, there are apps from (just launched today - a nifty one that lets you spin an animated Globe and then answer travel trivia), Tourfilter, Fafarazzi, TripAdvisor, StyleFeeder, OurStage, Finetune, GoLoco, Geezeo, and

The video that accompanies this week's column is an interview with Stephen Kaufer, co-founder and CEO of TripAdvisor, a Web 2.0 company founded here in Boston that stayed. In it, he talks about raising money, building a team, and staying flexible enough to find a business model that would work. (TripAdvisor was acquired a few years back by InterActiveCorp for $200 million.)

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Friday, September 7, 2007

Alnylam to explore micro-RNAs in joint venture

The New York Times reports on a new joint venture involving Cambridge's Alnylam Pharmaceuticals and ISIS Pharmaceuticals of California, which will explore the therapeutic potential of micro-RNAs. Andrew Pollack writes:

    Micro-RNAs, virtually unheard of a few years ago, are tiny snippets of RNA — the chemical cousin of the genetic material DNA — that have been found to play a major role in controlling biological processes. Scientists have identified about 500 different micro-RNAs that are made by human cells, and these snippets in turn appear to influence the activity of thousands of genes.

    Studies have already linked micro-RNAs to cancer, viral infections, immune disorders and other diseases. So blocking specific micro-RNAs — or perhaps stimulating them — could theoretically provide a powerful way to treat diseases.

    ...The new company, called Regulus Therapeutics, will be equally owned by Isis and Alnylam but will have its own management and board.

Regulus, according to the press release, will be based in Carlsbad, California.

And here's a bit of astronomical trivia: Alnilam (with an "i") is the name of the middle star in Orion's belt. Regulus is the brightest star in the constellation Leo.

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Thursday, September 6, 2007

Boston's First Tech Cocktail

I stopped by the first TECH cocktail gathering held in Boston tonight. It took place at the club Tequila Rain, in the shadow of Fenway Park.

It felt like a success .... a really friendly mix of venture capitalists (Jon Karlen from IDG Ventures, Mike Werner from Flagship, Tali Rapaport from Matrix, David Beisel from Venrock), B-school students, big company people (Don Dodge from Microsoft and some fellow from Teradyne), and Internet entrepreneurs (Evan Schumacher from, Jon Radoff from Guild Cafe, Stephen DiMarco from Compete.) David Tamés was there snapping pics, which I'm sure will be available somewhere, soon.

One of the first people I ran into was Kiki Mills, executive director of MITX... who said the scene reminded her of the "Cyberbrews" that MITX used to hold back in the dot-com era. Of course, back then, all the companies were building e-commerce sites.

The big difference is that now, everybody's building Facebook apps.

Sadly, I had to leave before the party broke up ... early morning flight tomorrow.

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Tuesday, September 4, 2007

How Boston VCs Think

Eric Janszen of sent along this cartoon today.

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From the Globe: 'Biotech council's direction dismays some members'

Todd Wallack's piece this morning is worth a read if you work in life sciences. The opening:

    As the Massachusetts Biotechnology Council's new leader faces ethics questions, some members say they have become disenchanted with the trade group, including its increasing focus on lobbying, a high staff turnover rate, and the low number of top executives serving on its board.

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This Thursday: Warring Web 2.0 Booze-Fests

David L. of 93South notes that this Thursday marks the start of the fall Web 2.0 schmoozing season in Boston: O'Reilly's Ignite, an evening of demos that it is holding for the second time here, coincides with the first Tech Cocktail Boston.

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Sunday, September 2, 2007

Today's Globe column: Google's prototype phones spotted in Cambridge

As soon as I moved back to Boston in mid-July, I started noticing that a lot of entrepreneurs were brandishing their new iPhones as status symbols. But an even rarer status symbol, I discovered, was being able to claim that you'd seen a prototype of Google's new cell phone, some of the software for which is being developed in Google's Cambridge R&D office. That's the topic of today's Globe column.

In today's Innovation Economy video, I talk about the phone, and interview the founders of two local start-ups working on cool new cell phone apps, Veveo and Vlingo. Veveo is doing video search; Vlingo (once known as Mobeus) is doing speech recognition.

I'd also gotten a tip a few weeks ago that Google will triple its space in Kendall Square and move from One Broadway (the Cambridge Innovation Center) to Cambridge Center (above the Marriott); while I'd planned to include that info as an aside in this Sunday's column, the BBJ published something first. Then, Watha wrote a short piece in the Globe yesterday.

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Go West, Young Start-Up

I can't explain why this speech from Y Combinator founder Paul Graham aggravates me.

Graham writes:

    There is now a whole neighborhood of [Y Combinator funded start-ups] in San Franscisco. If you move there, the peer pressure that made you work harder all summer will continue to operate.

Wait, I know why it aggravates me. There are three reasons.

Graham's company, the pioneering online shopping start-up Viaweb, was based in Cambridge until it was sold to Yahoo for $49 million. It had just 21 employees.

Second reason is that Y Combinator holds a summer camp for start-ups it funds in Cambridge, and a winter university for them in Silicon Valley.

What's the difference between a summer camp and a university? Almost no one sticks around in the place where their summer camp is located after camp is over...but lots of people stick around after they've graduated from college.

Reason #3: while I wish that Graham and Y Combinator would be more encouraging about planting a start-up in the Boston area, most of their companies could be described as Web 2.0 apps, destined to be acquired by someone else. (Google, Yahoo, eBay, etc.) And I must acknowledge that it can be easier to get the attention of the relevant acquirers if you're in the Valley.

Your thoughts?

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