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Archive for June, 2010

On this July 4th, let us remember and never forget our freedoms, our liberties and the founding fathers belief in the Constitution and the Bill of Rights.

Freedom is NOT Free.

God Bless our Troops and God Bless America.

Be safe, be healthy and enjoy.

Best

Steve Gerbsman

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Article from WSJ.

“An urgency to rein in budget deficits seems to be gaining some traction among American lawmakers. If so, it is none too soon. Perceptions of a large U.S. borrowing capacity are misleading.

Despite the surge in federal debt to the public during the past 18 months—to $8.6 trillion from $5.5 trillion—inflation and long-term interest rates, the typical symptoms of fiscal excess, have remained remarkably subdued. This is regrettable, because it is fostering a sense of complacency that can have dire consequences.

The roots of the apparent debt market calm are clear enough. The financial crisis, triggered by the unexpected default …”

read the full article here.

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Here is a good Techcrunch article about Foursquare.

“A months long fundraising process for Foursquare is in its last stages, we’ve heard from multiple sources, and Andreessen Horowitz looks to be preparing to check-in to Foursquare to take an investor badge.

The company has delayed committing to new venture capital as they considered buyout offers – negotiations went deep with both Yahoo and Facebook, and possibly Microsoft. The Yahoo discussions ended weeks ago, and Facebook passed on an acquisition earlier this week, we’ve heard.

That means the company is raising that big new round of financing. And a slew of venture capitalists, including Accel Partners, Andreessen Horowitz, Khosla Ventures, Redpoint Ventures, Spark Capital and First Round Capital were all rumored to competing heavily for inclusion despite the $80 million or so valuation, say our sources.

Andreessen Horowitz, despite rumors that they were pulling out of discussions with the company weeks ago over concerns that too much information was leaking to the press, is the last venture capitalist standing. The fact that founding partner Marc Andreessen is on the board of directors of Facebook, a key partner or competitor of Foursquare, may be the factor that put them over the top.

Existing investors OATV and Union Square Ventures will also participate heavily in the new round, we’ve heard. In the meantime they’ve likely already loaned additional capital to the company.”

Click here to read the original post.

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Here is an article from SF Gate.

“A federal judge dismissed Viacom Inc.’s landmark copyright lawsuit against YouTube on Wednesday, a major victory that potentially reinforces legal protections for a wide array of online companies.

The decision doesn’t necessarily spell the end of a legal drama that’s already played out for more than three years, because the New York media giant promptly promised to appeal the decision. If ultimately upheld, it may also make it more difficult for content creators to protect their work in the digital era.

The $1 billion suit was widely viewed as a test case for the safe harbor provisions of the Digital Millennium Copyright Act of 1998. The law states that Internet sites, hosts and providers generally aren’t legally liable for the behavior of their users, as long as they remove infringing or illegal content when properly notified.

In this case, YouTube users allegedly uploaded tens of thousands of unauthorized copyrighted clips from Viacom-owned television shows like “The Colbert Report” and “South Park.” The owner of MTV and Comedy Central sued YouTube in March 2007, arguing that the San Bruno company knew the clips were posted without permission and failed to take them down.

In court filings, Viacom argued that YouTube fueled its meteoric rise by fostering piracy, and cited a series of e-mails that suggested its co-founders were well aware of copyrighted material on the site. Largely because of YouTube’s rapid growth, Google Inc. bought the company less than a year after it was formed for $1.65 billion.

Obligations met

In the 30-page summary judgment issued Wednesday, however, Judge Louis Stanton of the U.S. District Court for the Southern District of New York rejected Viacom’s argument that YouTube had an obligation to remove material because of a “general awareness” that unauthorized content was posted on its site. He said the protections of the digital copyright act aren’t dependent on a publisher monitoring its service, as long as it responds appropriately when notified of copyrighted content by rights holders.

He added that YouTube had met these obligations, noting that when Viacom asked that it take down about 100,000 videos in early 2007, virtually all of them were removed by the next business day.

In granting YouTube’s motion for summary judgment, Stanton essentially said Viacom’s legal arguments were too weak for a trial to proceed.

“In the main, it’s a victory for innovation,” said Jennifer Urban, director of the Samuelson Law, Technology & Public Policy Clinic at UC Berkeley. “It’s a victory for the companies that are creating new kinds of technologies … that allow people to speak and create on the Internet.”

She added that it clearly places the onus on content owners to track and request the removal of unauthorized uses of their works, which is precisely what worries many media companies. Monitoring the Internet for infringing uses of large catalogs of movies, television shows and music is an enormous and never-ending challenge.

“We believe that this ruling by the lower court is fundamentally flawed and contrary to the language of the Digital Millennium Copyright Act, the intent of Congress, and the views of the Supreme Court as expressed in its most recent decisions,” Viacom said. “We intend to seek to have these issues before the U.S. Court of Appeals for the Second Circuit as soon as possible.”

Content partnerships

Since the case was filed, YouTube has entered a series of partnerships with major content companies. It appeased them largely by building a sophisticated tool that detects and identifies copyrighted media.

The Viacom suit covered content on the site only before the Content ID tool was put in place in late 2007. The media company participated in tests of the system, providing thousands of content files, according to documents that were unsealed in the course of the lawsuit.”

Read more here.

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Here is a article from the VC blog at WSJ.

“At The Wall Street Journal’s ECO:nomics conference in March, famed venture capitalist John Doerr declared the clean-technology industry needs a “Netscape moment” – an IPO listing that will capture the public’s imagination and usher in a slew of other companies through an open gate to the public markets.

Several clean-tech investors were looking to solar company Solyndra Inc. as perhaps such a breakthrough. But the fact that Solyndra – which exceeded $100 million last year and has been selling panels briskly – couldn’t pull of an IPO, raises the question of what comes next.

The maker of thin-film solar panels, the first renewable-energy recipient of federal loan guarantees, cited “adverse market conditions” for its decision to pull the IPO. The move will make expansion more difficult for Solyndra, which will require hundreds of millions of dollars in capital to reach its goals.

Rather than persuade public-market investors to buy in, Solyndra opted to once again turn to its private backers for more cash, selling $175 million in secured convertible promissory notes to undisclosed existing investors. The company has already raised $970 million in equity from these backers, the second highest total ever among venture-backed companies.

A tepid IPO market is some reason to blame for Solyndra’s withdrawal. Public investors haven’t exactly embraced unprofitable, risky plays like Solyndra this year, no matter how promising. While Solyndra is selling its product and expanding, mounting losses and an auditor’s going concern statement in its IPO filing didn’t make anything easier for the Fremont, Calif.-based company.

Public investors may also be skeptical whether Solyndra can match up with publicly traded First Solar Inc., which also sells thin-film solar panels and is considered a trail blazer for the industry by many venture capitalists.

“First Solar is preventing the tech [solar] companies from going public,” said Stephen Chin, analyst with UBS AG. “None of these start-up companies like Solyndra, Nanosolar, have scale or large capacity. I think that’s the biggest hindrance. First Solar is hard to compete against,” he added. UBS owned more than 1% of First Solar shares as of end of May, according to a disclosure statement.

Indeed, Solyndra’s manufacturing costs are high at $4 per watt for the fourth fiscal quarter ended Jan. 2, 2010. First Solar, on the other hand, plans to have costs of 78 cents per watt by the end of this year. Solyndra appears to be selling at a loss, too, as its average selling price for the full year ended Jan. 2 was $3.29 per watt, down from $3.75 per watt a year earlier.

“If the more you sell, the more money you lose,” you can’t make that work, said Kevin Landis, portfolio manager for Firsthand funds, which have a stake in another solar CIGS company SoloPower Inc.

First Solar plans to have annual production capacity of about 2 gigawatts at the end of next year, compared to 300 MW promised by Solyndra. Its panels use copper indium gallium diselenide, or CIGS, as the semiconducting material, which has higher potential efficiencies than First Solar’s cadmium telluride.”

Read the full article here.

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Here is some hard IPO news from Techflash.

“Something remarkable happened last week. A Seattle area technology company actually completed an initial public offering.

Bellevue-based Moricity raised $50 million through a public offering, marking the second technology company from the state to go public in the past eight months. That’s the good news.

Now, here’s the bad news. Motricity had to slash its offering price in order to complete the deal, drastically reducing the money it raised from the initial $250 million it had projected. Even worse, shares of the mobile software company have been falling in the past two days of trading, now at about $9.05.

And Motricity isn’t the only publicly-traded company encountering troubles in the public markets. Omeros, the Seattle biotech company which went public last October, has lost 30 percent of its value since the IPO.

Going back further, Clearwire — the Kirkland mobile broadband provider that first priced shares in March 2007 — has lost 69 percent of its value since it started trading.

What does this all mean?

For one thing, there’s certainly some chatter that the IPO isn’t necessarily the best outcome for most tech companies anymore. Venture capitalist Fred Wilson wrote on his blog this weekend that he preferred a sale to an IPO in most situations.

“The cost is just too high and the benefits are just too low for most companies these days,” Wilson wrote.

Meanwhile, TechCrunch followed that up with a story titled “The Poor, Pilloried Tech IPO” in which Erick Schonfeld writes that the best and fastest growing tech companies (LinkedIn, Facebook and Skype) are avoiding the public marketplace.

There’s a bigger problem going on here for the venture capitalists, which historically have relied on IPOs to produce some of their biggest returns.

As we’ve reported before, the Seattle VCs have missed out on these results. The pipeline right now for prospective IPO candidates from Washington is pretty dry. (Bellevue-based Intelius has filed to go public with the SEC but has not updated the S-1 since last October).

And even when a Washington company does break out of the mold and goes public, they have not had connections to the Seattle VC community.

(Interestingly, of the three Washington tech companies that have gone public in the past three years, only Omeros boasts a Seattle venture firm (Arch Venture Partners) among its top backers).

The lack of IPOs speaks to an issue that we’ve discussed in the past, and was a topic of discussion at last week’s TechFlash Town Hall on venture capital and bootstrapping.”

Read the whole article here.

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Here is a SF gate story that talks about high-tech growth.

“The technology industry is playing the white knight of San Francisco’s struggling office market, as startups and growing companies ink deals and scour the market for space emptied out by the financial meltdown.

Many of the tenants are swelling homegrown businesses like Twitter, while others are relocating from Silicon Valley or outside the Bay Area. As of June 15, 83 technology companies were in the market, seeking 1.5 million square feet of space, up 51 percent since the financial crash in fall 2008, according to brokerage firm Jones Lang LaSalle, which regularly tracks the market.

To be sure, that demand alone won’t turn around a market facing more than 13 million square feet of total vacancy, according to a first-quarter research report from Cassidy Turley BT Commercial. But it’s a big step in the right direction for San Francisco’s office market and employment.

“The greatest areas of job growth in San Francisco and the drivers for economic activity across a whole host of related sectors will come from those innovative industries,” said Michael Cohen, director of the mayor’s office of economic development.

One of the largest potential deals in the market is Zynga, the maker of popular social-networking games like FarmVille and Mafia Wars. The company is looking for anywhere from 150,000 square feet to 300,000 square feet of space, according to various industry sources, who asked to remain anonymous because disclosure of such information could affect their business.

Zynga was on the verge of signing a lease for approximately 140,000 square feet last fall, but that deal fell apart.

“Zynga doesn’t have an update on our expansion plans right now,” a spokeswoman said in an e-mail response to a Chronicle inquiry.

Expansion

Twitter, the popular microblogging service, expanded its San Francisco space by nearly six times in the past year. It had been looking for still more space, as much as an additional 100,000 square feet, but that effort seems to have gone quiet, sources say.

An especially encouraging trend for San Francisco business boosters, who have long lamented the exodus of companies to surrounding regions, is the relocation of a handful of Silicon Valley firms to the city in recent months.

Industry blog TechCrunch and video-streaming site MetaCafe moved up from Palo Alto, while Webcasting service Ustream and tech-consulting firm Encover Inc. arrived from Mountain View. Mobile application company Booyah Inc., also of Palo Alto, recently signed a lease to shift its headquarters to San Francisco.

In addition, gaming companies like Playdom Inc. and Playfish opened satellite offices in San Francisco, and Yammer Inc. moved to the city from Los Angeles. Meanwhile, there are a handful of out-of-state, and even out-of-country, companies touring space in the market right now, sources say.

Real estate and technology observers believe San Francisco is becoming a more attractive place to start a company or move to for a variety of reasons, including: South of Market rents that are about half of Palo Alto’s right now, the desire to cluster near success stories like Zynga and Twitter and the broader shift to the Web 2.0 world.

As Internet companies become as focused on social media and entertainment as they are on underlying technology, they want to locate near a different set of partners, customers and talent pools, several executives said.

It’s all about layering

“Tech is still the core of what we do, but you’ve got to add layers on top of this,” said David Rice, chief operating officer of MetaCafe Inc.

The company’s new address, at 128 King St., with exposed brick and a view of AT&T Park that puts their previous business-park space to shame, made it easier to tap into marketing, media and advertising expertise in the city, he said.

Other companies’ leaders say they opted for San Francisco because that’s where today’s engineering talent wants to be as well.

When David Sacks, chief executive of Yammer, asked his developers whether they should relocate the microblogging service for businesses to Palo Alto or San Francisco, the latter won hands down. This represents a distinct shift from a decade earlier when he was chief operating officer of PayPal in Palo Alto.

“There’s a lot more engineering talent living in San Francisco now,” he said. “The balance of power may have shifted.”

Web 2.0 firms also don’t need the massive research and development facilities required by the computer manufacturers and chipmakers that gave rise to Silicon Valley.

“Companies like Twitter can have incredible reach with a relatively small workforce,” said Kelly Pretzer, director of new media for the mayor’s office of economic development. “San Francisco has been able to complement that development in the industry nicely.”

Read more here.

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