Wednesday, June 25, 2008

Will Twitter Be Spark Capital's First Home Run?

You can't have a conversation with a techie without Twitter entering into it somehow. Either:

1. They've just begun Twittering
2. They're skeptical Twitter will ever make money
3. They're complaining about Twitter's frequent outages
4. They believe Twitter is the future of communications

Yesterday, Spark Capital of Boston announced that it was one of two investors in Twitter's new $15 million funding round. (Twitter's parent, Obvious Corp., is based in San Francisco.) The other investor is a dude called Jeff Bezos. PaidContent says the new round values the start-up at a shade under $100 million. TechCrunch had it last month at closer to $80 million. Clearly, they'll use some of the fresh cash to make Twitter more reliable.

Spark partner Bijan Sabet, who'll join Twitter's board, talks about the investment here. Twitter co-founder Biz Stone tells the story from his perspective on the Twitter blog.

I spoke with Sabet this afternoon, and suggested that his avid use of Twitter might've helped him get in on the deal (several other Boston VC firms were angling to invest). Sabet said it'd be self-serving to explain why he thought Obvious chose Spark to invest in this latest round, but he did mention that three other partners at Spark use Twitter; I'm not aware of any other Boston VCs who do. It's hard to imagine a Boston VC lobbying to get into this kind of deal without having some first-hand experience with the product. Sabet says that for Spark, using Twitter "made us feel comfortable that we knew what was going on, beyond just reading the business plan." When I asked again if he thought his status as a Twitter user contributed to the company choosing Spark to be part of this round, Sabet dodged the question...

Of course, the Boston VCs who lost out here will say they didn't like the valuation, or they weren't comfortable putting money into a pre-revenue company... which is their prerogative. But it's worth reading this post from Jason Calacanis about Twitter's potential to be a billion-dollar business.

Getting into this round is a big deal for Spark... an investment that could put the firm on the map. I'll be shocked if Twitter isn't acquired before 2009 is out.

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Sunday, June 22, 2008

Nuance v. Vlingo: Legal Battles in the Speech-Recognition Space

It's great to have the biggest stand-alone company in the speech recognition business here in Massachusetts: Nuance Communications. But I wonder if we're starting to see some negative effects... as Nuance seems to believe it owns all of the IP in the speech-rec field. They've been fairly litigious of late, and have yet to win a lawsuit in court.

Today's Globe column focuses on Nuance's latest lawsuit against a rival. This time, the defendant is Vlingo, a 35-person start-up in Harvard Square, co-founded by an ex-Nuance executive, Mike Phillips.

I prepared a chart that didn't run with the column, highlighting some of the other recent Nuance lawsuits. Here it is:

    2004 – Burlington-based Nuance Communications, Inc. (then known as ScanSoft, Inc.) files suit against Woburn-based VoiceSignal Technologies, Inc. for infringing a patent related to voice-controlled dialing on mobile phones, and trade secret misappropriation. In 2006, VoiceSignal sues Nuance for patent infringement related to an approach to correcting mistakes used by dictation software. In 2007, Nuance buys Voice Signal for $263 million, ending the litigation.

    2004 – Nuance sues ART Advanced Recgnition Technologies, Inc. of Israel for patent infringement over voice-controlled dialing for mobile phones. In 2005, Nuance acquires ART, ending the litigation.

    2006 – Nuance sues California-based Tellme Networks, Inc. over two patents related to directory assistance and call center technologies. Microsoft acquired Tellme in 2007, but the lawsuit is still pending.

    2006 – Nuance sues SoftMed Systems, Inc. of Maryland, alleging that SoftMed violated patents that cover centralized digital dictation systems and priority voicemail systems. The two companies later settled out of court.

    2008 – Nuance sues Vlingo, Inc. of Cambridge over a patent pertaining to adapting speech recognition software to individual users.

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Thursday, June 19, 2008

What Happened at Today's Panel Discussion About Non-Compete Agreements

Probably the most interesting aspect of this afternoon’s discussion of the impact that non-compete agreements have in Massachusetts, held at Harvard Law School, was the absence of any company willing to publicly defend the practice of having employees sign non-competes.

The organizers had lined up Melanie Haratunian, an Akamai executive, to represent that point of view, but she backed out earlier this week. The reason? Akamai is apparently in the midst of enforcing a non-compete agreement against a former employee, and was concerned that that employee’s counsel might be in the audience today. That, at least, was the story I was told beforehand by several of the event’s organizers; perhaps one of you can fill in the details.

Moderator John Palfrey simply said, in opening the discussion, that Akamai “had to pull out of this event due to some pending litigation related to this topic.” (When I called Akamai spokesman Jeff Young for confirmation, he said he was not aware of any such litigation.)

I wonder why, if the stalwarts of the Massachusetts innovation economy believe so strongly that non-compete agreements are essential to retaining their best people, that no one would come forward to defend that position? EMC? Nuance? Genzyme? Boston Scientific? Anyone? Anyone?

Update: Here's some video I shot:

Some notes from the discussion…

Harvard prof. Lee Fleming said that people and ideas move from states that enforce non-competes to states that don’t (think California.) His research has found that non-competes squelch employee mobility by about 20 percent, and 30 percent for experts in a given field. Fleming asked whether non-competes might stifle the reallocation of the best people to the best business opportunities.

Paul Maeder of Highland Capital Partners said that non-competes are like diabetes -– a silent killer. Before a company can get off the ground, a prospective founder thinks twice about risking a lawsuit.

One problem with the way non-compete agreements are written, said Bijan Sabet of Spark Capital, is that they often prohibit people from working in “an area deemed to be competitive,” which can be vague.

Maeder said he is seeing a lot of California start-ups crop up that aim to challenge Akamai’s business of Internet content delivery. He said that one of them “will likely become the market share leader,” and asked whether we want that successor company to be in California, or here

Rich Miner, an exec at the Cambridge office of Google, says that the company doesn’t require people to sign non-competes. At a previous company, Wildfire Communications, Miner recalled trying to hire an engineer from Comverse. Comverse decided to chase the employee and enforce the non-compete, and so Wildfire had to pay him for six or eight months before he could actually begin working.

Maeder observed that Washington State, where non-competes are enforceable, has produced two great tech companies: and Microsoft. But he noted that there had been no great operating system spin-offs from Microsoft, or online bookstore spin-offs from Amazon.

Maeder also compared non-competes to indentured servitude, and said they foster “sleepiness” here in Massachusetts. He advised employees to ask about them at the beginning of the interview process, not on the first day of work -- when it's too late to negotiate anything different (like six months instead of a year).

Maeder says that he discourages his portfolio companies from requiring employees to sign non-competes, but he said that isn’t yet a firm-wide policy at Highland. (It is, apparently, at Spark Capital.)

Maeder suggested that there are three ways to change the rules surrounding non-competes in Massachusetts:

1. Legislative fiat (“I don’t think it’s going to happen,” he said, having visited Beacon Hill recently. Miner agreed, saying that change needs to be “a grassroots effort.” He did say, though, that he mentioned the issue to Governor Deval Patrick when Patrick visited Google’s office recently.)

2. Educating employees about their impact

3. Get venture capitalists and executives who serve on boards to speak out about the issue with the companies they work with.

During the Q&A period, Steven Chow, an attorney at Burns & Levinson, recalled that he used to sue EMC on behalf of Digital Equipment over employees who were violating non-compete agreements by going to work at EMC. (Didn’t that do a good job of preserving DEC’s dominance?) He said that non-competes help “keep the cost of engineers down,” since employers don’t have to compete as aggressively on salaries.

'Twas a good discussion, but it would’ve been about 10,000 percent more interesting had someone been on the panel to defend non-competes as a tool for talent retention, or make a case that getting rid of them wouldn’t necessarily make Massachusetts more competitive.

Next time?

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Photos from the recent Founders Club Schmooze-Fest

Some photos from the recent Founders Club party in Boston have surfaced on Flickr. The shindig was held at the Ritz-Carlton home of Marina Hatsopoulos, founding CEO of Z Corp. I wrote about the gathering here.

In the pic at right is Acme Packet CEO Andy Ory and Mick Mountz, CEO of Kiva Systems.

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Wednesday, June 18, 2008

Take That, Larry Summers!

Tufts University's Nerd Girls are in the vanguard of a campaign to establish, once and for all, that science and engineering are cool fields that welcome smart young women.

From a Newsweek article this week:

    The Nerd Girls may not look like your stereotypical pocket-protector-loving misfits—their adviser, Karen Panetta, has a thing for pink heels—but they're part of a growing breed of young women who are claiming the nerd label for themselves. In doing so, they're challenging the notion of what a geek should look like, either by intentionally sexing up their tech personas, or by simply finding no disconnect between their geeky pursuits and more traditionally girly interests such as fashion, makeup and high heels. In fact, calling them "nerd" is no insult at all—the Nerd Girls have T shirts emblazoned with the slogan. The crew includes Cristina Sanchez, a master's student in biomedical engineering (and a former cheerleader) who can talk for hours about aerodynamics. Caitrin Eaton, a freshman, asked her boyfriend for a soldering iron last Christmas. Juniors Courtney Mario and Perry Ross giggle when they talk about what fascinated them most about "No Country for Old Men": how did the assassin's air gun work?

    These girl geeks aren't social misfits; their identities don't hinge on outsider status. They may love all things sci-tech, but first and foremost they are girls—and they've made that part of their appeal.

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Tuesday, June 17, 2008

Lawsuit to watch: Nuance sues Vlingo

Nuance, the biggest speech recognition software company in the world, is suing tiny Vlingo, a Cambridge start-up, for patent infringement. Vlingo co-founder Michael Phillips had been a Nuance employee before starting the company, which focuses on speech recognition on mobile phones. He took a year off to sit out his non-compete agreement before starting Vlingo.

From Nuance's press release about the lawsuit:

    In its complaint, Nuance states that Vlingo infringes a Nuance patent that covers a technique for adapting a speech recognition system to the speech of individuals or groups. In the claim, Nuance seeks monetary damages for infringement and injunctive relief to prevent Vlingo from continuing to infringe U.S. Patent No. 6,766,295, entitled “Adaptation of a Speech Recognition System across Multiple Remote Sessions with a Speaker.”

Update: Vlingo's PR rep just sent along this response, from CEO Dave Grannan:

    We believe this lawsuit is unfounded. Nuance has referenced a patent that has serious limitations in its coverage. The patent does not apply to vlingo’s technology; moreover, we have significant doubts regarding the patent’s validity. Vlingo’s technology is based on a license of IBM’s core speech recognition platform, which is used by hundreds of companies worldwide. Industry observers will recognize this as typical counterproductive behavior of filing frivolous lawsuits in an attempt to stifle competition. Vlingo will fight the lawsuit aggressively to its conclusion, while continuing to build on our tremendous momentum we’ve gained in less than one year since our public launch.

Some earlier video of Phillips doing a Vlingo demo is here. And Phillips is also mentioned in this Globe column.

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Monday, June 16, 2008

Time to Get Serious About Reinvigorating the Mass. Tech Economy?

Mass Insight releases a report today, produced by McKinsey & Co., on how Massachusetts can remain a leader in the IT, communications, and defense industries.

(I wrote a short sidebar in the report, focusing on what we can do to build a bridge between college students and the innovation economy here.)

From the executive summary:

    Despite the success of the technology sector, there are troubling trends that need to be addressed for Massachusetts to maintain and enhance its leadership position in high-tech and defense. First is growth, which fell to 4.3 percent annually between 2001 and 2006, only one-third the rate of the previous 5 years. Moreover, virtually all the growth over the last 10 years was productivity-driven: since 2001, information technology, communications and defense companies in Massachusetts shed a net 64,000 jobs, about a 3.5 percent drop in sector employment and nearly double the rate of job loss across the overall U.S. ITCD sector. The largest losses have been among high-value-added workers, including engineers and managers, suggesting an erosion of the Commonwealth’s tech leadership.

    Indeed, more alarming than slowed growth is the state’s declining influence in the global high-tech sector. The time when Route 128 held an equivalent position to Silicon Valley in public perception is fading from memory. Through mergers, acquisitions and attrition, the roster of Fortune 1000 tech companies headquartered in Massachusetts has fallen from nine to six since 2002. In the same period, California saw a net gain of three, bringing its total to forty-two. Massachusetts has also fallen behind in the creation of new tech companies, with the relative number of company births declining from 11.4 percent of all ITCD establishments in 2002 to 9.9 percent in 2004. While California, New York and Washington have seen increases in high-tech venture investments since 2002, VC investment in Massachusetts has continued its drop from the dot-com bubble, particularly in early-stage companies.

The report has some suggestions for new strategies... some of which you may agree with (or not). Very much worth a read if you're interested in our state's continued competitiveness.

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Patrick's Biotech Bill: The Decade of Truth

Todd Wallack has a great piece in this morning's Globe about the new $1 billion biotech stimulus initiative, which becomes law today.

Wallack writes:

    The bill includes $250 million in tax incentives for companies, $250 million in grants, and $500 million for infrastructure, much of which is earmarked for the state university system. Several local biotech companies, including Shire PLC, Genzyme Corp., Wyeth, and Organogenesis Inc., stand to directly benefit from the legislation.

    [Gov. Deval] Patrick said the legislation gives him a powerful platform to sell Massachusetts to biotech leaders - encouraging more companies to expand or set up shop here.

    "We've got an awful lot to offer," Patrick said in an interview. "We are all about selling it."

Today, biotech is a pretty small (but influential) industry in Massachusetts -- about one percent of the state's workforce. Whether this billion bucks can be invested intelligently is the question that everyone in the industry was asking this past weekend at Convergence. Not everyone's optimistic. And we're not likely to know whether this money has really moved the needle for a decade.

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Saturday, June 14, 2008

Advice From the Vineyard

I've been down at the annual Convergence Forum on Martha's Vineyard since Thursday (an event I help organize)... and the audience and the speakers have been great. Yesterday featured Mark Levin of Third Rock Ventures in conversation with Infinity Pharmaceuticals CEO Steve Holtzman (they worked together at Millennium); Alkermes chairman Richard Pops; and Oxford's Jonathan Fleming moderating a panel on "Exit Scenarios."

My favorite quote of the day, though, came from the opening panel. Dicerna CEO James Jenson had been talking about how he pitched 70 VCs on his previous company before getting funding.

"The most important thing for the entrepreneur is, don't die," he said.

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Thursday, June 12, 2008

Craig Newmark "Fireside Chat," from TieCon East

Last month, I had the chance to interview Craigslist founder Craig Newmark in front of a great big audience at the annual TieCon East entrepreneurship conference.

Craig was hugely entertaining -- he's a witty, code-writin' blend of Woody Allen, Oscar Wilde, and Groucho Marx.

Here's a podcast (in mp3 form) of the event, just posted to

We talk about:

    - Craig's pre-Craigslist career
    - How any why he started Craigslist
    - His shortcomings as a manager, and hiring Jim Buckmaster to be CEO of Craigslist
    - Whether he posts things on Craigslist
    - How Craigslist's unique culture spread around the globe
    - Why the company doesn't try to make more money from the site
    - What he does as a "customer service rep"
    - Craigslist's tempestuous relationship with eBay, which owns 28 percent of the company
    - Craig's views on the future of journalism
    - Whether he gets a newspaper at home
    - How he answers his e-mail so quickly
    - Politics (he's an Obama man)
    - His future

(Update #1: TIE has just put up a short video clip from the conversation.)

(Update #2: Here's my Sunday Globe column on Newmark and the growth of Craigslist.)

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Wednesday, June 11, 2008

Most recent Globe column: The A123 Systems Back-Story

My most recent Globe column delves into the back-story of A123 Systems, the Watertown battery company that is smack in the middle of the plug-in hybrid frenzy, and apparently preparing to go public (though one might ask what's taking them so long with the S-1?)

Here's the opening:

    The third time that Ric Fulop asked Howard Anderson to invest in one of his start-ups, there was no good reason for Anderson to say yes. Fulop was forming a company that would reinvent the battery, but Anderson, founder of the Boston forecasting firm the Yankee Group, had already lost millions by investing in Fulop's previous ventures.
    more stories like this

    Fulop had come to the United States from Venezuela, where he'd started two companies while still in his teens, and then dropped out of Babson College to dive head-first into the entrepreneurial mosh pit of the late 1990s.

    He started a company to stream software to PCs. He started a company to make equipment that would increase the bandwidth of high-speed Internet connections. A third start-up, Broadband2Wireless, aimed to use a network of antennas on rooftops to bring a zippier Internet access alternative to big cities.

    The three companies, which together sucked up more than $100 million in funding, all failed. Broadband2Wireless, which filed for Chapter 11 protection about a year after its founding, acquired the nickname "Broadband2Cashless."

I wrote about Broadband2Wireless here, in 2001. And I wrote about Anderson's exit from the VC world here, in 2005. (Can't seem to find the column that chronicled the death of B2W, but this one mentions the CEO's resignation.)

The weekly video for the column is here:

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Competitiveness in the New Search Economy

A provocative post this morning from Jeff Bussgang at Flybridge: is our region deficient in search engine marketing and optimization talent?

The opening:

    Ask any consumer start-up what their biggest obstacle to growth is and it's likely you'll get a consistent but surprising answer: I simply can't find enough SEM/SEO talent. It's not a shortage of programmers that are hindering start-up growth (much of the coding talent is being provided by offshore developers anyway), but rather the talent pool hasn't adjusted quickly enough to support the new Search Economy.

Jeff also offers some thoughts on how we might remedy things...

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Tuesday, June 10, 2008

Worth reading: 'How Town Hurts Gown'

Former Boston city councilor Tom Keane had an interesting piece in Sunday's Globe magazine that sounds some alarm bells. We've always assumed that our education industry has no choice but to stay here: Harvard has been in Cambridge for centuries, and it always will be.

But Keane writes:

    ...We're proud of our longstanding reputation as America's premier college town, but, in fact, only 16 of the top 125 schools in the country are located in New England, according to US News & World Report. The rest fiercely compete against us not only on the basis of class size, lab space, and faculty, but also on amenities such as dorms. Today's students are no longer satisfied with crowded quads and grungy bathrooms down the hall. Quality of life matters, and prevented from building, Boston schools have a tough time delivering.

    Equally problematic is competition from overseas. Foreign students once flocked to New England; now their numbers are down. Some are going to colleges elsewhere in the States. Others are staying home and attending newly built schools there. Our own schools are now building elsewhere as well. Emerson opened a campus in LA. MIT is building in Abu Dhabi, Harvard Medical will soon be in Dubai, and the University of Massachusetts is cutting a deal to offer courses in China. If the students aren't coming to Boston, the schools may as well go to them.

    Then there's distance learning. Most colleges now offer online courses; community colleges, in fact, report that online enrollment is growing more than five times faster than on-campus enrollment. Eventually, students and schools will figure out that much of their learning can be done without leaving home.

Definitely worth a read.

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Monday, June 9, 2008

Demand for hybrids: It's hot

This weekend, I happened to be hunting for a used hybrid online... and finding almost nothing available within 100 miles of Cambridge. (Our one vehicle right now is a great Honda Civic Hybrid, which averages about 38 mpg.)

Today, Rob Weisman of the Globe has a great story about how the demand for new hybrids is also insane. From the piece:

    "We can't get them in fast enough," said auto dealer Herb Chambers, owner of Herb Chambers Cos., based in Somerville. Chambers said hybrid orders are running ahead of last year at his Massachusetts and Rhode Island dealerships. "We could sell six or eight times as many Priuses if we could get the product from the manufacturer," he said.

    Industry analysts attribute the backup to supply-chain problems. Manufacturers have finally deployed hybrid technology on a wider scale, but they have failed to create a global supplier and transport network that can get parts to assembly lines and vehicles to dealerships in time to satisfy consumers spooked by $4-a-gallon gas prices.

Here's a fun historical piece I wrote for Salon four years ago about why GM thought hybrids weren't worth investing in.

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Thursday, June 5, 2008

Enterprise 2.0 and Enterprise 2Open

Two related events happen in Boston next week, at the Westin Waterfront.

The main show is Enterprise 2.0, which focuses on how Web 2.0 and social networking technologies are being used by companies. The three themes are cloud computing and software-as-a-service, search 2.0, and social networking in the enterprise. Speakers include Rob Carter, chief information officer at FedEx, Rishi Chandra, product manager for Google Enterprise, and local videoblogging guru Chris Brogan.

There's also a free unconference event on Tuesday, where anyone is welcome to present and participate (but you do have to pre-register.)

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Edocs founder Kevin Laracey shacks up with Sigma

Sigma + Partners, the Boston VC firm, just announced they've added Kevin Laracey, formerly founder and CEO of edocs, as a venture partner.

Edocs was acquired by Siebel Systems back in 2004, for somewhere between $115 million (the amount reported initially) and $145 million (the amount Sigma lists on Laracey's bio -- which could include later incentive payments for hitting certain milestones).

That means that the company, which made Web-based account management and billing software, was a middling success for its investors. Edocs raised $80 million in VC from Sigma, Charles River Ventures, JAFCO Ventures, and others. So it was slightly less than a 2x deal when Seibel acquired it.

As with all newly-minted VCs, it'll be interesting to see Laracey's first few deals...

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Monday, June 2, 2008

Sunday's Globe column: Y Combinator & New England VCs

Yesterday's Globe column explored the question of why start-ups that go through the Y Combinator "boot camp" seem to get funded by west coast VCs, but not VCs here in New England.

Probably it is the youth and inexperience of the founders. Twenty-somethings often fail the first time they try to start a company. (Of course, when they succeed, look out: Microsoft, Yahoo, Facebook, Google, Apple, iRobot, etc.)

Massachusetts venture capitalists, Y Combinator co-founder Paul Graham told me recently, think "like bureaucrats."

"Bad VCs think about covering their a**es if things go wrong. They want to minimize the downside. Good VCs chase high returns," he says.

"Silicon Valley investors know about Y Combinator and take it more seriously. They're much more curious about new things." In Silicon Valley, firms send partners to the YC demo days, where start-ups show what they've been working on. Here in Boston, he says, they send associates.

"I worry about the future of the city," says Graham. "What makes Boston not just Baltimore is technology. If Boston falls behind in investing, the city will fall behind." Each year, the Y Combinator team questions whether they should continue to hold their summer program in Cambridge, but Graham says, "I think we'll keep doing it in Boston." Getting investment from East Coast VCs isn't essential to the program's success, he adds, because the summer crop of start-ups also take a trip west to pitch investors there. (No YC company has yet gotten investment from a Boston-area investor.)

He gets more into these issues, and his advice for entrepreneurs, in the video clip below:

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Ideas Boston / 10.30.08

Registration just opened for this fall's Ideas Boston conference, on October 30th.

Speakers this year include roboticist Joseph Ayers from Northeastern, information visualization guru Martin Wattenberg of IBM, digital artist John Maeda of MIT/RISD, and climate scientist Daniel Schrag from Harvard.

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