Good Things *Can* Happen (Occasionally) When Local Companies Get Bought

Yes, I tend to view the glass as half-empty whenever Massachusetts companies are acquired by out-of-state sugar daddies.

But I acknowledge that sometimes, the companies stick around, grow here, and remain leaders in their sectors.

That seems to be the case with TripAdvisor, as Rob Weisman writes in today's Globe.

From the piece:

Where other buyers have snatched the brands and shifted management control out of state, starving the local office of resources, Expedia, based in Bellevue, Wash., has provided financial support but allowed TripAdvisor to operate autonomously from Massachusetts - a practice that TripAdvisor, in turn, has extended to its own acquisitions, such as VirtualTourist, Cruise Critic, SmarterTravel, and SeatGuru.

TripAdvisor makes the bulk of its money through advertising from travel destinations and booking sites such as Expedia, as well as its rivals Orbitz and Travelocity, to which visitors can link from TripAdvisor's site. The company posted profits of $129 million on $260 million in revenue for the 12 months ended June 30, parent Expedia reported.

"We're absolutely committed to growing TripAdvisor as fast as we can and, frankly, to throwing as much capital at TripAdvisor as we can," said Dara Khosrowshahi, chief executive of Expedia. "Very early on, when we invested in the company, they beat everything they told us they were going to do, in terms of finance and operating goals."

Here's an interview I did about a year ago with TripAdvisor co-founder Stephen Kaufer:



And last month, I bumped into Langley Steinert, the other co-founder of TripAdvisor. He's now running the automotive community site CarGurus.com, based in Cambridge. And Kaufer serves on his board.

The Thursday Night Party Report

Went out last night to two events: the opening of Prism VentureWorks' new office in Needham, and PopSignal (formerly TechCocktail) on Landsdowne Street. Prism's new space is across the hall from the US offices of Microsoft's FAST search division, and it looks like it was designed by Ari Gold of Entourage -- very sleek, very white, very LA.

I ran into blogger and Celtics fan Michael Feinstein of Sempre Management. John Landry was also there, sheepishly acknowledging that he'd been caught doing the Funky Chicken on the Jumbotron at Wednesday night's Celtics game. I-banker Paul Deninger was there... and just so's you realize how powerful he is, he pulls people aside every five minutes to whisper something in their ear.

Neil Creighton, CEO of Prism portfolio company RatePoint was there, and he explained why consumers might want to post ratings on a vendor's Web site (it gives the vendor a chance to address any complaints .... very different from posting a negative comment on Yelp or Epinions.) There was also a big contingent from LogMeIn, another Prism portfolio company that filed to go public back in January.

Out in the parking lot, Roy Hirshland mentioned that his firm, T3 Advisors, had been involved in Adobe's deal to buy a 108,000 square foot building in Waltham for its East Coast outpost. That suggests a long-term commitment on the part of the San Jose company, which had been leasing in Newton ever since it bought Macromedia (which bought Allaire Corp., oh so long ago).

At Tequila Rain on Landsdowne, I miraculously scored a parking space right out front... inside, I ran into Matt Lauzon of Paragon Lake, a Highland Capital-incubated company (they participated in the summer program last year) that's out raising its first round. Sounds like the money will likely come from a mix of East Coast and West Coast investors. Lauzon,a recent Babson grad, said he'd listed himself in the PowerPoint presentation as "Acting CEO." On the East Coast, he found, that made investors comfortable: we can bring in some adult supervision. But on the West Coast, people said, "Why just acting?"

Aaron White from the animation site DoInk.com was in the back room ... Michael Kreppein and Dave Dupre from Inquisix were there ... as were PR mavens Maura Fitzgerald and Jean Serra from Version 2.0 communications. Eric Hellweg was in attendance with a posse from Harvard Business School Publishing, and he mentioned that his band Andromeda Taxi has some big gigs this summer, opening up for Phil Lesh and the Allman Brothers. On the way out, I ran into a pair of venture capital PR folks, Matthew Burke and Karen Bonmart, both of whom were toting freebie t-shirts from TripAdvisor, which now proclaims itself the biggest Web 2.0 company in the East.

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 Kayak.com (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 Plum.com.

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.)

'Founders at Work: Stories of Startups' Early Days'

Just finished reading Jessica Livingston's 'Founders at Work' over the weekend. It's a compilation of interviews with enterpreneurs -- many of them from the Boston area.

So few books are published that deal with building companies here...and Jessica gets into the nitty-gritty: relationships with co-founders, negotiations with VCs, competing with bigger players.

The Boston entrepreneurs interviewed in the book include:

- Dan Bricklin, Software Arts (VisiCalc spreadsheet)
- Mitchell Kapor, Lotus Development Corp.
- Ray Ozzie, Groove Networks (Ray is now chief software architect of Microsoft)
- Paul Graham, Viaweb (Graham went on to start Y Combinator, the early stage venture firm in Cambridge, where Livingston works)
- Philip Greenspun, ArsDigita (now a blogger and flight instructor)
- Stephen Kaufer, TripAdvisor
- Ron Gruner, Alliant Computer Systems and Shareholder.com
- James Currier, Tickle (Tickle was founded in Boston as Emode, and then moved out to San Francisco before being acquired by Monster.com)
- Bob Davis, Lycos (now a VC at Highland Capital Partners in Lexington)

Amazingly, there's a blurb on the back cover from Bill Kaiser of the venture firm Greylock Partners, which was involved in a very public battle with ArsDigita founder Philip Greenspun (it's recounted in Greenspun's chapter, in piquant detail)

Some reaction to Sunday's column

Sunday's Innovation Economy column was headlined, 'Will Boston ever catch up?' It begins:

The explosion of consumer-oriented technologies, from YouTube to the iPhone, has been pushing the pistons of the technology economy for the past three years. That's great for California, and a real problem for Massachusetts, which has specialized in building technologies for corporate use since the mini-computer boom of the 1980s.

"The legacy here is more enterprise-focused, all the way back to Wang and Digital and Prime and Apollo," says venture capitalist Todd Dagres, referring to a crop of computer makers long dead and buried. "That was where you wanted to be in the last millennium. It's just not where the real juice is right now."

The juice, as Dagres puts it, is in all kinds of tech products for consumers, from new handheld devices and television set-top boxes to online videogames and so-called "social networking" tools like MySpace, Facebook, and Twitter, which allow people to connect and communicate with friends using free software.

...Having just boomeranged back to Cambridge after spending two years in San Francisco, the lack of consumer tech activity here is startling to me -- it's like going from a noisy, hot, crowded bar to another across the street where the bartender has plenty of time to wash glasses and gab with the three regulars perched on stools.

The folks at TripAdvisor e-mailed to note that they've had phenomenal consumer success with their Needham-based travel portal. I wrote about them in 2000 when they were just getting started and then again in 2004, when they were sold to Barry Diller's IAC. After raising just $4.5 milllion in VC money, the sale price was $200 million. Not bad. A spokesman says their profit margin is better than 50 percent, and that they're hiring like mad.

Matt Westover of Newton Peripherals e-mailed:

Having been in technology for 20 + years and spending over 12 years on the West Coast, I think there are significant opportunities in the East. The mentality of the local VC’s are different in my opinion from the West Coast VC’s and can have corresponding positive/negative effect on the young companies. We have stayed away from accepting any venture capital to date.

Nabeel Hyatt, quoted in the piece, thinks I'm being overly dire.

And Antonio Rodriguez, a serial entrepreneur who recently sold the consumer-oriented Tabblo to HP, posted this response to the piece on his blog.