Tuesday, March 31, 2009

Spark to Boston: Let Us Buy You a Beer, At Least

The party thrown at Cambridge Brewing Company last night by Spark Capital was loud, crowded, and fun. You couldn't actually move around the room much, but I managed to bump into Dave Balter of BzzAgent, Doug Levin, Chris Marstall of tourfilter, Eric Giler of WiTricity, Wade Roush of Xconomy, Jon Radoff of GamerDNA, Misha Katz of AdHarmonics, Nabeel Hyatt of Conduit Labs, Jon Pierce of Betahouse, and Dennis Miller, Rob Go, Bijan Sabet, and Todd Dagres of Spark. Dagres, in a short speech to the assembled crowd, plugged Spark's investment in Twitter, as well as its new Start@Spark seed funding initiative.

What was interesting about the party, full as it was of entrepreneurs, was how few of them were Spark-backed entrepreneurs. One guy, founder of NYC-based AdMeld, took the mic for a couple minutes to talk about how Spark helped him get the company going.

In looking at Spark's portfolio this morning, what I noticed (and maybe I'm just slow to pick up on this) is that just one of their current investments, VeriVue, is located in Massachusetts. The bulk of the companies are in NYC, LA, Silicon Valley, and Texas.

So while Spark is making some great moves to be more supportive of entrepreneurship here in Boston, with Start@Spark, TechStars Boston, and the Alliance for Open Competition, the bulk of their bucks so far have gone elsewhere. This is a relatively new dynamic in venture capital... in the olden days, you'll recall that VCs often said that if they couldn't drive to a company (and get back) within a day to attend a board meeting, they wouldn't invest. Spark (which has just one office, in Boston) clearly doesn't mind racking up some frequent flier miles.

(In the photo at right is Spark founder Todd Dagres welcoming party-goers last night.)

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Rich Miner to Co-Lead Google Ventures from Cambridge

Some nifty news this morning from Google: they've formed Google Ventures, which will invest up to $100 million over the next year, according to The New York Times. Bill Maris is the managing partner of Google Ventures based in the company's Mountain View headquarters, and Rich Miner is the managing partner in the Cambridge office.

On the official Google blog, they explain:

    At its core, Google Ventures is charged with finding and helping to develop exceptional start-ups. We'll be focusing on early stage investments across a diverse range of industries, including consumer Internet, software, clean-tech, bio-tech, health care and, no doubt, other areas we haven't thought of yet. Central to our effort will be our fellow Googlers, whom we view as a critically important resource to help educate us about potential investments areas and evaluate specific companies.

Rich Miner has been an R&D exec at Avid Technology, Wildfire Communications, and Orange. He then co-founded Android, which Google acquired in 2005 -- and which led Google into the mobile phone business.

While Miner is extremely well-networked in town, it's not clear whether he's done any investing before (I never hear his name mentioned as a local angel, for instance.)

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Monday, March 30, 2009

Charles River Ventures' New Fund (and the Twitter Back-Story)

Charles River Ventures just closed a new $320 million fund, its fourteenth. The firm has had some big liquidity events over the past two years, generating about $600 million in returns, including the IPOs of local start-ups Virtusa and Netezza, and acquisitions of EqualLogic, Compete.com, and Acopia Networks.

Among CRV's more recent investments they list in the official press release are Nantero, Scribd, Vlingo, and Twitter.

Curious story about Twitter... CRV only has about $250K in that company, which has raised $55 million in total. CRV had invested in Twitter founder Evan Williams' earlier venture, Odeo, which didn't take off. Williams decided to repay the investors and go off and do Twitter. (The technology for it had been an offshoot of Odeo.) When Twitter started raising funds, Charles River put in that quarter-million early on, but hasn't participated in any rounds since, and doesn't have a board seat. (But Twitter is listed as one of CRV partner George Zachary's investments.)

Also interesting that TechCrunch lists CRV as a Menlo Park firm. While a lot of its activity has been out West, five of the eight investing partners for this new fund are based in Waltham, Mass. (all but Bill Tai, George Zachary and Saar Gur.)

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Sunday, March 29, 2009

Social Media Meets Lay-Offs; Forrester Response

My Globe column this Sunday is about some lay-offs earlier this month by Mzinga, a purveyor of social media software to businesses. From the piece:

    On March 19, about 40 employees - roughly 18 percent of the workforce - were terminated as part of the company's second round of cuts in 2009. But what was unusual about Mzinga's situation was how widely it echoed throughout the universe of bloggers and Twitter users, since so many of the company's employees and customers - and the analysts who track its ups and downs - are part of the online community that shares morsels of information and "status updates" on a moment-by-moment basis. This was a layoff for our Twittery new times.

I wanted to share here some responses that I received from Forrester Research CEO Charles Rutstein; the first hint that something was going on at Mzinga appeared here, on Forrester analyst Jeremiah Owyang's blog, igniting a bit of a controversy. (Owyang had suggested that Mzinga clients and prospects put off any new deals with the company, without really explaining why.)

Here's what Rutstein sent, via e-mail:

    Q: Was Jeremiah acting as a blogger or an analyst when he wrote about Mzinga?

    A: Jeremiah is both an independent blogger and a Forrester analyst. In his blog posts about Mzinga, he erred by speculating and not applying the same standards of quality as would be required in a Forrester research report. He has publicly apologized to his readers for this oversight. Importantly, however, Jeremiah was acting as an advocate for Forrester’s clients – making them aware of information they might need to make a critical purchasing decision. And, it’s worth noting that Jeremiah’s speculation, while insufficiently researched up-front, has proven to be grounded in fact.

    Have we been in touch with Mzinga about what happened? Absolutely.

    All of us – Forrester included – are still learning how to live in the world of social media. While our experts are among the foremost in the world on these topics, we continue to learn every day.

    Q: Has the blogging incident resulted in any modifications to existing policies or new policies about engaging with social media for Forrester employees?

    A: Forrester has blogging guidelines which have been in place for some time and which have been shared with all Forrester employees. Forrester has 18 blogs which cater to the professional roles of its clients . Separately, a number of Forrester analysts maintain personal blogs which is their prerogative. We do not control what analysts write about in their personal blogs although we ask them to clearly state that their content is their own and may not necessarily reflect Forrester’s views. Naturally we ask them to respect Forrester intellectual property based on our blogging guidelines. As the web 2.0 world continues to evolve, we will continue to encourage Forrester analysts to participate thoughtfully in the community while respecting Forrester’s content and social media guidelines.

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Friday, March 27, 2009

'Entrepreneurs lift their dreams by the bootstraps'

Just a quick link to last Sunday's column on entrepreneurs who've taken the bootstrapping approach, avoiding much dependence on outside funding. From the piece:

    "Common sense would tell you that the boot-strapping approach increases when you're in a recession," since loans and venture capital may not be as readily accessible, says Babson College professor Patricia Greene. "But I always point out that this is the way lots of businesses get started. When I looked at the Inc. 500 list a few years ago, most of the companies on it had been started with between $10,000 and $50,000 in capital."

    Greene says that successful bootstrappers think endlessly about "creative ways to get money, and ways not to need so much money."

Among the companies I discuss are Cisco Brewers, Atalasoft, Karmaloop, Motivation Designs, and FitnessKeeper.

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Thursday, March 26, 2009

Another $10 Mil for Visible Measures, Boston-based Video Measurement Firm

I've been talking for the last few weeks with various folks about how *quiet* the first quarter has seemed, in terms of new VC financings and follow-on rounds. It'll be interesting to see what the MoneyTree numbers look like for this quarter.

Bucking the trend today is Visible Measures, which just raised a $10 million up round from Northgate Capital, Mohr Davidow, and General Catalyst. This is the company's third round, bringing the total raised to $29 million. Visible Measures focuses on measuring online video viewership.

CEO Brian Shin writes via e-mail:

    ...We actually didn’t need money really, but we decided that if there was interest from an outside investor to “price” the round, then we could do it now (as long as it didn’t take too much time) and we’d be better positioned to grow in a downturn.

    We’ve always felt that it was important for us to raise money before needing it, and that seems to hold true especially in a tough environment like this.

    ...Our thoughts go out to entrepreneurs and startups all over the world who are struggling now. We consider ourselves blessed to be in this position, and we take this opportunity very seriously.

I just added Brian's blog to the list at the right.

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Wednesday, March 25, 2009

Xconomy Killer? New Online Pub on the Way

Look out all you Xcommunists... there's a new online pub getting ready to launch next week.

Founded by Boston University alums Brian Johnson and Brad Perriello, the Massachusetts Medical Device Journal is a bootstrapped operation being funded by friends and family. They've got a network of freelancers lined up, including Tinker Ready, who runs the relatively-new blog Boston Health News.

More coverage of the state's perennially under-covered device sector is a good thing, I think...

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Spark's New Early-Stage Funding Initiative, Start@Spark

Cool news this morning from Spark Capital... they're launching a new seed funding program called Start@Spark that will offer fledgling companies up to $250,000. It's focused specifically on companies in the New York and Boston areas.

"Yes, we are in a global economic recession and yes the new media markets are being impacted," Spark partner Santo Politi writes in a blog post." The current environment has made it difficult for entrepreneurs seeking capital to start companies. Investors, including VCs, Angels and Strategic Investors are distracted from early stage investments due to a combination of portfolio triage, concern about capital availability, and downright confusion over where to invest. The options for starting new companies have evaporated along with financial markets and market caps.

"So, this must be a terrible time to fund a start-up company. Correct? Au contraire. This may be the best time in the last 8 years to start a company. While capital is scarce, the tectonic plates continue to shift creating major rifts. The walls are coming down and the barriers to entering new markets are falling along-side."

The NY Times Bits blog has a little more.

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Tuesday, March 24, 2009

Why Boston Just Might Be the Center of the Universe (At Least for Now)

Here's a talk that's not to be missed... April 16th at the Boston Public Library.

Juan Enriquez is giving a presentation titled "Financial Crises, Technology, and Why Boston Might Just be the Center of the Universe (At Least for Now)." It's part of the Ford Hall Forum series that Suffolk University puts together, and it's free.

Ever since his book, "As the Future Catches You" was published, Enriquez has been one of the most thoughtful explainers of the significance and future direction of the life sciences field. In this talk, he'll make the case that life sciences will be the "dominant language and economic driver of this century," giving Boston an edge that's ours to lose.

Enriquez was also a speaker at TED earlier this year.

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Wednesday, March 18, 2009

One Arrives, One Leaves at General Catalyst

The *huge* news for General Catalyst this week is that Facebook co-founder Chris Hughes is gonna do a stint at the Cambridge firm as an entrepreneur-in-residence.

But what hasn't been reported yet is that technologist-in-residence Charles Teague has just left the firm.

Teague is part of the Allaire Brothers mafia, having gone to college with Jeremy and J.J., and also worked at both Allaire Corp. and Onfolio, J.J.'s start-up that was snapped up by Microsoft. (Jeremy had served as a technologist-in-residence at GC before Teague, later going on to launch Brightcove.)

Teague won't talk about what he's up to post-GC, but I have a feeling it's iPhone-related. "I'm currently heads down on a project and I'm not quite ready to talk about it," he writes via e-mail. (General Catalyst also hasn't answered my inquiries about whether they're going to fund Teague's new venture.)

What's interesting about Teague is that, while still at GC, he and some friends created a free iPhone app for managing weight loss called Lose It. It's now the most popular app in the "Health and Fitness" category of the iPhone Store.

Not bad for a little side project...

Teague's blog, which has been very focused of late on iPhone apps, is here. So far as I know, he has never mentioned his involvement with Lose It or FitNow, Inc., the parent company set up to sell the app.

(In the photo, Teague is in the center, sandwiched between J.J. Allaire on the left and Sim Simeonov on the right.)

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Ray Kurzweil Documentary Will Play at Tribeca Film Fest

The documentary 'Transcendent Man,' about the futurist, inventor, and entrepreneur Ray Kurzweil, will play next month at the Tribeca Film Festival.

Here's the trailer:

Another Kurzweil-related movie, 'The Singularity is Near,' will be out in June. That's one that Kurzweil is producing himself, based on his book and co-starring his digital alter-ago, Ramona. (I wrote about it back in 2007.)

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Terrafugia: First Flight Happened on March 5th

Terrafugia, the Woburn, Mass.-based developer of "roadable aircraft" (aka flying cars), is at the Museum of Science this morning showing video of its first flight to the press. The flight took place March 5th in Plattsburgh, NY.

I wrote about the company back in October, and shot a video interview with CEO Carl Dietrich.

More pics and video are available on the company's site. The Boston Herald has a bit more.

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Sunday, March 15, 2009

Clouds Coalesce in Boston

Today's Globe column is about the cloud computing scene in Boston, including CloudSwitch, and a new investment General Catalyst is making in Good Data.

An opening quote from EMC exec Chuck Hollis:

    "Cloud computing will change how we do IT, end-to-end, over the next five years," says Chuck Hollis, vice president of global marketing at EMC, the Hopkinton-based storage firm. "It's like in the early 20th century, if you were a manufacturer, you had to build your own power plant. But eventually, you had the option to buy your electricity from the grid, and let someone else worry about how it was generated. Corporate data centers are going to have that kind of choice, too."

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Friday, March 13, 2009

CleanTech Field Trip

The New England Clean Energy Council is organizing its first major jaunt down to D.C., on April 1st and 2nd. Expected to attend, according to president Nick d'Arbeloff, are about thirty local CEOS.

d'Arbeloff says that Sen. John Kerry and Rep. Ed Markey will likely carve out time to meet with the execs, and that Carol Browner, Assistant to the President for Energy and Climate Change, will join the group for a cocktail party. They're also hoping to connect with Energy Secretary Steven Chu and the new head for the Department of Energy's Energy Efficiency and Renewable Energy department while they're in our nation's capital.

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Thursday, March 12, 2009

General Catalyst Invests in the Cloud

The ink is almost dry on General Catalyst's latest investment: what they're calling a "seed preferred" round of several million dollars for Good Data, a SaaS/cloud computing-oriented company focused on business intelligence and analytics. Larry Bohn is the GC partner on the deal, and angel investor John Landry is also putting in some dough.

Good Data founder and CEO Roman Stanek earlier started NetBeans (acquired by Sun) and Systinet (acquired by Mercury Interactive and HP.) The company's engineering will take place in Prague, but the business HQ will be in San Francisco.

Around the time that Good collected $2 million last year (in an earlier seed round), the company was described as being based in Cambridge (they had space at the Cambridge Innovation Center), but alas... Good Data marketing veep Sam Boonin told me that "our business model is primarily going to be working together with other SaaS companies, so we wanted to be in the Bay area." (Systinet, an earlier Stanek start-up, had a presence in Cambridge.)

Good Data was founded in mid-2007, but they acquired another Czech company that provided the core analytics engine they're using. They're building atop Amazon's EC2 cloud infrastructure. "We've got about 500 people in our [free] beta program right now," says Boonin. A commercial version should be available around May.

With regard to investing related to cloud computing, Bohn said from Prague, "You try to be early, bet on the right people, and try to get a head start." He said he'd been seeing lots of potential investments in the cloud space, but most were apps that "may not be defensible enough."

This is the second cloud-connected deal I've seen in 2009 from Boston venture capitalists. The first was CloudSwitch, which involved Atlas Venture and Matrix Partners.

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How Many Bostonians Were at the White House Last Friday? Raise Your Hands, Please

I haven't seen the complete list of people invited to the White House last Friday for a summit of young business leaders, but the group included Twitter founder Evan Williams, Donald Trump scion Ivanka Trump, ex-Google exec Chris Sacca (who was a big Obama fundraiser), and Zappos CEO Tony Hsieh. There were 25 entrepreneurs invited, all under the age of 35.

The only Bostonian I know who was there was Greg Selkoe, founder of Karmaloop, an ultrahip online apparel retailer. (The Obama t-shirt in the image is just one item you can buy from the site.)

Others on the invite list: Michael Chasen, CEO of Blackboard.com; James Gutierrez, CEO of Progresso Financiero; Catherine Levine, COO of Daily Candy; marketer Josh Spear; Jake Nickell of Threadless; Blake Mycoskie, Founder of Tom's Shoes.

Selkoe's PR rep e-mails to add that the young leaders met with officials from the Office of Public Liaison, Intergovernmental Relations, National Economic Council, Office of Energy and Climate Change, Domestic Policy Council, and New Media. "They were briefed by each of these government agencies on the Obama administration's new policies, plans for progress, and steps being taken toward economic recovery," she writes. "The White House expressed to them their desire to enlist the help of the young and the next generation of business leaders in helping contribute ideas and support for economic recovery and to help spread the word about their administration's desire to be open to new ideas, accessible, and transparent."

Interestingly, Selkoe was quoted in the NY Times this morning, defending artist Shepard Fairey (the guy behind the Obama "Hope" poster), who is facing several vandalism charges for allegedly plastering his artwork all over town.

Karmaloop is the official online outlet for Fairey merch... and yes, that Obama shirt in the picture is one of his creations...

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Wednesday, March 11, 2009

On the events radar: Mass. Innovation Nights and Foo East

I hear that last night's Web Innovators Group meeting was mobbed... more than 1000 people. Kevin Kosh from CHEN PR has some coverage, including videos.

Two other things on my radar screen for March and April:

    Bobbie Carlton e-mailed this week to let me know she is starting a new demo night in Waltham that may or may not turn out to be similar to WebInno. (At the least, it'll start off by being smaller.) The first one is April 8th.


    O'Reilly and Microsoft are putting on Foo East later this month at Microsoft's new digs in Cambridge. I believe this is the first time O'Reilly has done a Foo Camp in Boston... and the participant list looks pretty prime.

And if you're not on the list for Foo East (I'm told it's over-booked), there are three totally open BarCamp "unconferences" coming up this spring:

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Tuesday, March 10, 2009

Xconomy Q&A with Y Combinator Founder Paul Graham

This e-mail Q&A with Y Combinator founder Paul Graham, conducted by Xconomy founder Bob Buderi, is worth a read.

I found it aggravating in lots of ways, but am trying to consider if there are some useful criticisms in there.

Graham repeatedly characterizes Boston as a city of ideas, which makes it sound like the only thing here is academia and research. (Don't we occasionally turn those ideas into companies, whether Akamai or Genzyme or A123 Systems or Boston Scientific?) He makes this assertion, without backing it up with any kind of data: "Stanford students are all thinking about startups. MIT students mostly think of getting jobs at Microsoft or Google." Investors here are not more prudent, he also opines, but rather "less confident" than investors in Silicon Valley.

Interesting that Graham's biggest entrepreneurial success, Viaweb, was founded in Cambridge. (Many of the Viaweb founders now work with Graham on Y Combinator.) Maybe all the reasons Boston is a bad place for start-ups were not true in the 1990s, when that company was hatched?

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Monday, March 9, 2009

Notes from the 'Future of News' Seminar at Berkman Law School

I tromped down snowy Mass Ave this afternoon to go to a two-hour seminar on "The Future of News," organized by the Berkman Center for Internet and Society at Harvard Law school. Obviously, as a long-time journalist, short-time blogger, and even-shorter-time videocaster and podcaster, I'm interested in the topic. (I was also part of the founding crew at Boston.com in 1995.)

The two guests tonight were author and consultant Jeff Jarvis and Russ Stanton, editor of the LA Times.

As has been the case with many of these discussions that I've witnessed or participated in, there was much more fretting about the current state of things than there was talk about solutions, new directions, and new business models. I said to Stanton afterward that I feel there is a dearth of attention paid to new ways newspapers can develop advertising products that satisfy their local markets; he seemed to agree.

Following are my rough notes (all paraphrased) on what Stanton and Jarvis said in their 15-minute talks; I didn't take notes on the Q&A portion. Nor did I take notes on Josh Cohen's part of the evening. Cohen is the senior business product manager for Google News, and he chimed in via video link. Unfortunately, the video dropped out before he could contribute anything of substance.

Russ Stanton:

    Launched LA Times site in late 1995…but didn’t get serious about the Web until January 2007.

    More than half the photo staff is fully trained in video… on assignment, they’re likely to shoot photo and video.

    In addition to Web and print, also thinking about TV and radio and mobile as platforms for content distribution.

    Politics blog called “Top of the Ticket,” launched last summer – run by two of the oldest members of the staff – by last November, was among the top 60 blogs on the Internet.

    Two digital experiments the Times has done: Let readers define the boundaries of their neighborhoods on a map … and “Top Dogs” – most popular breeds and names (most Chihuahuas in LA are named Princess).

    LA Times is now the fastest-growing newspaper Web site in the US. Doubled traffic in 2008. 140m page views a month, and 9 million unique visitors a month. Fourth place among newspaper web sites.

    I don’t believe that pay models or micropayments are realistic solutions.

    There are no magic bullets or quick fixes.

    With the Times' Sunday Magazine, we're focusing on households with $125K or higher income, and taking circulation down by half.

    We need to develop content people will be willing to pay for – like MLB.com, which has figured out how to mine every stat of every baseball game possible.

    Traffic dried up after we put entertainment industry coverage behind a pay wall for two years.

Jeff Jarvis:

    We used to live in a content economy. We’re now moving into a link economy.

    In a link economy, you only need one copy, and the links to it are what give it value. Content without links has no value. Content gains value as it gains links.

    Jounalists have to become aggregators and curators and community organizers. We have to become educators: when we have people helping do journalism, we have to help do it better. There’s a knowledge that we in journalism have that we’ve never shared.

    We thought we were the ecosystem of news in a community. Now, we shouldn’t even look at ourselves as the center of it. We should be at the edge.

    Glam is the #1 women’s brand online. 110 million unique visitors after three years; iVillage, the former queen, has 20 million. iVillage owns and controls content, and shoves ads at you – the old media model. We were the magnets. You came to us. Glam started a network that supports 800 sites. Less cost, more speed, less risk.

    Google created networks that allows others to succeed. My little blog has maps and videos from Google. I have Google ads; I made $4,000 in 2007 from it.

    To close things off behind a pay wall is suicidal in many ways.

    Newspapers are a horribly expensive structure. We can’t afford it anymore.

    We have a project at CUNY – New Business Models for News.

    At some point, you’ve got to turn of the presses if you want to find a sustainable new model.

    News is a process, not a product… it’s like a string with no obvious beginning or ending.

    Google puts things up as “betas.” News can be a beta – here’s what I know, here’s what I don’t know, what do you know? We never thought that way in news. We put out the paper once a day. If it was full of errors, that was a mess.

    The article itself may be an outmoded atomic unit of doing journalism. If you look at any story about the financial crisis, the background is either too much or too little. If you don’t know what a CDO is, two lines about a CDO in a story isn’t enough.

    Figure out how to make something the community wants you to make... to the point where the community takes it over (as it has with Craigslist.)

    If we invented newspapers today, they wouldn’t be on paper.

    Lucky papers will restructure contracts and go online… others will fold.

    There is no orderly transition, where print hands off to digital on January 20th [as with the Presidency]. There is destruction in the middle.

There seemed to my eyes to be more Twitterers in the audience than bloggers... here are some of the tweets. And here's some great coverage from the Nieman Foundation at Harvard, including video.

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Your Ideas: Three Stories I'm Working On

Would love to hear from you... I'm looking for New England examples and data points related to the three story ideas below. And also any other stories that you think *need* to be told, right now.

Feel free to post in the comments, or e-mail me. As always, I'm happy to protect your anonymity.

    - Bootstrapping on the rise. I'm interested in great examples of companies that have avoided VC investment and grown big... or are doing so right now. What advice do people have about the bootstrapping approach?

    - Down rounds. The only thing entrepreneurs fear more than a down round is not being able to raise their next round at all. What's happening in 2009 in this delicate dance between entrepreneurs and VCs on valuation? Are there some cases where, if a company doesn't accept the lower valuation, they wind up not putting that next round together at all...?

    - Cleantech/Web 2.0 death pool. I suspect we'll see at least one flame-out in 2009 in the cleantech and Web 2.0 sectors locally. Both have been *heavily* invested in over the last three to four years. Who's it gonna be? Which VC firms are most exposed?

Sunday, March 8, 2009

The World is All A-Twitter

Today's Globe column is on Twitter, which has had a pretty amazing couple of weeks.

Founder Evan Williams is profiled in the NY Times' "The Boss" column today. Williams was also at the White House this past week week, for a summit of young business leaders, and was interviewed by Charlie Rose last month. Jon Stewart and Samantha Bee also mocked the company recently on 'The Daily Show.'

All without a business plan that they've chosen to announce yet. And all without a PR firm, according to Twitter board member Bijan Sabet, a partner at Spark Capital in Boston.

I sat down with Sabet on Friday for a quick chat. He'd just returned from a Twitter board meeting in San Francisco. Like his colleague Todd Dagres, he's a bit bemused by how much interest there is in what Twitter's business model will be. He gave me the impression that it'll start rolling out this year, though it's still undetermined exactly when.

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Friday, March 6, 2009

Brainstorming About Better Branding, with the Boston History & Innovation Collaborative

I went to a trustees' meeting of the Boston History & Innovation Collaborative early this morning, at the invitation of executive director Bob Krim. There were some really great people in the room, like Janice Bourque (who used to run the Mass Biotech Council and is now at Comerica Bank), Globe columnist and author Ellen Goodman, and Bink Garrison of Vertex Pharmaceuticals. It was held at the Boston Convention and Expo Center, and Jim Rooney, who runs the joint, was in attendance, too.

The goal of the meeting was to do a bit of brainstorming about how Boston (and Massachusetts, and New England) can better spread the message about the innovative stuff that happens here, across all realms: technology, culture, finance, law, life sciences, etc.

(Greg Bialecki, the secretary of housing and economic development for Massachusetts, was supposed to open the meeting, but he was a last-minute no-show. Too bad.)

I gave a short talk in which I tried to address these issues:

    - Let's not think about branding. That sounds expensive, and like it should involve an ad agency that we hire to create a logo. Instead, let's think about how we *communicate* the message of what great, innovative work we do here... and that we welcome all kinds of people to be part of it.

    - Let's try to think about New England as a whole, rather than just about Boston... or Portsmouth, NH... or Burlington, VT. When compared to California, our entire region is still pretty small.

    - My "big picture" one-liner about what we do here is that "we bring breakthroughs out of the lab and into the marketplace."

    - Our communications initiatives should be free or cheap... distributed and not centrally coordinated... digital... and take advantage of lots of groups and individuals doing different things that they feel are important.

    - This stuff is important to do even in a downturn. Massachusetts and New England have a history of rebirth. (Just visit any old mill building that's now home to start-up companies.) We'll be back, and the US economy will be back. Even when the future seems bleak, people here are working on incredible new ideas.

    - We talk to ourselves too much, with economic impact studies and reports and press releases and trade association meetings. We don't talk enough to people who aren't already part of the Boston business world, or people who are just passing through (like students!)

    - That said, the two groups I think we should spend the most time communicating with are companies outside of the region that might want to have an R&D headquarters or US headquarters here (like Novartis or Microsoft in Cambridge), and the students who come here to get an education. How do we persuade the smartest students to stick around, start companies, and join fast-growing ventures or long-established entities here?

    - What are some of the free things we ought to think about as part of this communications campaign? I suggested YouTube profiles of New England entrepreneurs, perhaps produced by TV journalism students locally... Live Webcasts with the Nobel laureates and MacArthur "genius grant" winners in our region...a wiki that woud list all of the New England VC firms and angel investors, and their areas of focus...a Google calendar page with all of the important local conferences... and a page of talking points for executives to use when they talk about our region, including data points about innovation here, some of the history (telephone invented here, first e-mail sent here, first anesthetic tested here, first venture capital fund established here, etc.), and enough background about today's important companies so they could effectively "tell the story" about the area, not just their particular company.

Then we started brainstorming. My notes aren't comprehensive, but...

Bink said that Boston is "the garden." Ellen Goodman says that we are "the crossroads of the next big idea"... "where the next big idea incubates, becomes reality." Jacquie Kay said that we're all about collaboration. Someone (my notes don't say whom) suggested we are "the intellectual mountaintop for resources for the future." Sounds pretty Olympian!

Carlos Martinez-Vela from the John Adams Innovation Institute said that what is great about Boston is that it's not just tech. We have the Boston Symphony and Newbury Street... culture and style.

People seemed to like my idea about creating a one-page list of "talking points" for CEOs, so they could become informal ambassadors for the region as they travel around the globe.

I mentioned the success that One in 3 Boston, a campaign to encourage young professionals to stay in Boston, has had with its Facebook group. I suggested we ought to have one or more Facebook groups for people who care about innovation in the region. Perhaps one for the Boston History & Innovation Collaborative, in fact...

Bink suggested that the TED Conference disseminates new ideas really well through the short videos of presentations given there. I noted that Ideas Boston is a local event similar to TED, but that the videos don't seem to be readily available. Maybe there's some way someone can help with getting all of those up on YouTube? (Disclosure: I've been an informal advisor to Ideas Boston.)

Janice Bourque had a phenomenal idea about creating a focus group of college and grad school super-stars. She suggested we find all of the people who've won important awards and competitions recently (such as the MIT $100K business plan competition, for instance) and get them together in a room. Ask them: How do they want to be communicated with? What are the tools that they use? What do they know about the business community and culture here? What don't they know?

Janey Bishoff, who helped organize the meeting, put up some thought-provoking quotes around the room. One was, "A crisis is a terrible thing to waste."

I agree.

How will we gauge our success? What if you typed "innovation" into Google and some site related to this campaign of ours, or a New England company or academic institution, showed up? What if, when you asked someone on an airplane about their perceptions of New England, the word innovation was part of their reply (rather than just Red Sox, lobster, and Paul Revere)?

Here's an earlier blog post on this topic, with more than 30 comments on it. Feel free to add your ideas here... or there...

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Wednesday, March 4, 2009

R.I.P. Zero Stage Capital

Cambridge-based early-stage investor Zero Stage Capital has been functionally defunct for a few years now, but Venture Wire today has the official obituary. (Thanks to Keith Cline for the link.)

Jonathan Matsey of Venture Wire writes:

    ...[S]everal other companies from Zero Stage's portfolio are still privately held: cytometer maker CompuCyte Inc., site management company First Service Networks Inc., spinal device maker HydroCision Inc., motion technology company InterSense Inc., college administration system manager Jenzabar Inc., solar technology company Konarka Technologies Inc., kiosk software developer NetKey Inc., pollution control company Powerspan Corp. and DNA analysis company U.S. Genomics Inc.

    One LP says returns from one of the life science and IT firm's funds were "a disaster."

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Monday, March 2, 2009

Next week at the Four Seasons: GoingGreen Boston

AlwaysOn is holding their first GoingGreen conference in Boston next week, after putting on one of the energy/environment-focused events in San Francisco last fall.

Looks like everyone in New England cleantech will be there, from Secretary of Energy/Environment Ian Bowles to the CEOs of 1366 Technologies, Ze-Gen, Mascoma, Oasys Water, and GreatPoint Energy. (Even tech prognosticator George Gilder will be there. Has he turned into a cleantech guru?)

Yes, it's a bit pricey: $1675. But the price goes up the longer you wait...

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How the VC Scene in Boston is Changing

Sunday's Globe column dealt with the shrinkage of Boston's VC universe. Column got snipped quite a bit, so I'm publishing the full version below, along with the video.

Venture capital sector makes adjustments

For Boston’s venture capital community, headquartered on the placid plateau of Mount Money in Waltham, 2009 will be a year of wrenching change. The stream of capital flowing to venture capital firms, who invest it in innovative-but-risky private companies, is turning to a rivulet – and that means the firms themselves will have to get smaller.

“Last year, our industry raised about $28 billion in new investment capital,” says Michael Greeley, chairman of the New England Venture Capital Association and managing director of Flybridge Capital Partners in Boston. “I think we’ll raise between $8 billion and $12 billion this year, nationally. That’s a dramatic reduction. My sense is that the average fund size will be cut in half, and they’ll have to cut the number of partners who work for them as a result.”

The shrinkage of Boston’s VC sector will be tough for the VCs, obviously, and also for entrepreneurs who ascend Mount Money with their PowerPoint presentations, looking for funding to launch a company or keep one going. But it could also have a silver lining.

Here’s what’s happening.

Two local VC firms have already put together smaller investment pools than they’d hoped for. Atlas Venture, in Waltham, had aimed to raise about $400 million but wound up with $283 million; as a result, last month Atlas jettisoned two of its partners and shifted two others to less active roles. Boston-based Bain Capital Ventures will likely wind up raising between $475 million and $550 million for its latest fund, rather than the $750 million it had set out to collect. Money in a venture capital fund is typically invested over the course of a decade.

Kodiak Venture Partners of Waltham has reduced the number of investors on its roster and is shifting its focus toward life sciences and medical technology as part of an attempt to burnish its appeal to would-be investors. Andrey Zarur, a partner there, says Kodiak isn’t out looking for new money right now, but plans to be at some point in the future.

“Kodiak just hasn’t had enough liquidity events to make their limited partners say, ‘I’m ready to step up again,’” says Howard Anderson, an MIT lecturer and former venture capitalist. (Limited partner is the term for the university endowments, wealthy individuals, and pension funds that funnel money into venture capital.) One example Anderson cites is Egenera, Inc., a Marlborough company selling technology for data centers that raised $176 million but never managed to go public. Anderson should know: his old firm, YankeeTek Ventures, was an early investor in Egenera.

Many other local VC firms are on the road, talking to prospective sugar daddies. Some have been at it longer than others. Among the firms trying to scare up more money in 2009 are Boston Millennia Partners, Highland Capital Partners, Polaris Venture Partners, Prism VentureWorks, Oxford BioScience Partners, Charles River Ventures, and North Bridge Venture Partners. New firms, like Genovation Capital and a medical device oriented fund called Makaira Venture Partners, are also out trying to raise their first funds.

Venture capitalists are prohibited by the Securities and Exchange Commission from discussing their fund-raising activities. But one partner at a Boston area VC firm that’s trying to put together its next fund told me last week that fundraising is happening “on a molasses pace,” adding that “universally, everyone is going to be lower than what they’d hoped to raise.”

One reason that the limited partners are avoiding commitments to new VC funds is that many of them have formulas for how they allocate their assets. If a certain percentage is devoted to bonds, a certain percentage to stocks, and a certain percentage to venture capital and private equity, for instance, things start to look out of whack when the stock portion of the portfolio plunges and the value of the VC portion stays roughly the same. (The valuations of the private companies in a venture capital firm’s portfolio isn’t updated very frequently, unlike publicly-traded stocks.)

If a limited partner needs to get their mix of asset allocation back in order, investing in new VC funds simply doesn’t happen. (Some limited partners, including the endowment managers at Harvard, Duke, and Columbia, are actually trying to sell the stakes in VC funds they already own – but there are few buyers.)

And investors who can’t get their money into the best-performing venture firms may simply be disappointed with the financial returns they get. “I’ve heard limited partners say that the VC business, in some cases, is like getting Treasury bill returns with venture capital levels of risk,” says Michael Feinstein, an ex-VC. “If you look at the median venture capital return over the past eight years, it’s about one percent a year.”

Josh Lerner, a Harvard Business School professor who studies the venture capital industry, describes what’s happening among limited partners as “a changing of the guard.” University endowments and U.S.-based pension funds are becoming smaller players in new venture capital funds, Lerner says. But what’s not clear is who will take up the slack – though sovereign wealth funds and pension funds from Australia are two potential candidates. “We can see who’s going out,” Lerner says, “but not who’s going in.”

The upshot is that VC firms will be managing smaller funds, and some firms will go out of business. Anderson, who refers to Atlas’ situation as a harbinger of things to come, predicts that some funds that aren’t in the 25 percent when it comes to delivering financial returns will simply fade into the sunset. “Everyone will swear to be in that top quartile, but this isn’t Lake Wobegon – not everyone is above average,” he says.

Fewer firms and smaller funds will obviously mean fewer jobs for venture capitalists and the staffers who support them. It’ll undoubtedly get harder for start-ups to raise money. It will take longer, and those that do manage to attract an initial jolt of capital will get less of it than before.

“There just won’t be as much money flying around,” says Todd Dagres, founder of Spark Capital in Boston. “And there’s good in that. If you can raise money for your start-up now, there’s going to be a lot more uniqueness value than there used to be.” In other words, entrepreneurs will run up against fewer well-funded competitors than they once did. That could help the entrepreneurs and their backers both.

Still, a contracting VC universe isn’t going to be as fun to inhabit as an expanding one – at least for most people, at least in the near-term.

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